Credit Assessment: ZEPBROOK LIMITED (01610642)

1. Credit Opinion: APPROVE

Zepbrook presents as a low-risk credit prospect. The company has traded continuously for over 40 years, holds £2.8m in cash against £2.4m of current liabilities, carries minimal long-term debt (£359k), and has grown net assets from £1.35m (2013) to £3.53m (2024) through retained earnings. Accounts are audited despite small-company exemption eligibility — a voluntary governance signal we weight positively. Filings are current with no overdue returns and no director conduct issues on record.

One caveat: the company exercises its right not to file a P&L, so turnover and margin visibility is limited. For any facility of material size, we would require sight of management accounts as a condition of drawdown.

2. Financial Strength

Balance sheet (FY2024, audited):

• Gearing is negligible. Total liabilities of ~£2.79m against £3.53m net assets (0.79x), with only £359k due beyond one year. No evidence of bank debt; long-term creditors likely relate to finance leases/HP and deferred consideration.
• Equity is almost entirely retained profit (£3.47m P&L reserve vs £26k share capital) — the balance sheet has been built organically, not through shareholder injection.
• Trajectory is consistently positive. Net assets grew every year except a modest COVID-era dip (£2.93m → £2.73m, 2019–21), fully recovered by 2022. Headcount rose 32 → 36.
• FY2024 event: acquisition of a subsidiary for £2.82m (August 2024). Notably, £1.15m of the price related to surplus cash in the target, distributed to the vendors at completion — the net investment carried is £1.67m. This was funded from cash reserves plus increased creditors, which explains the cash decline and the £848k rise in current liabilities. The deal structuring (stripping surplus cash pre-completion) suggests commercially astute management.

3. Cash Flow Assessment

• Current ratio 1.71x (FY2023: 3.05x); quick ratio 1.52x; cash alone covers current liabilities 1.17x. The ratio deterioration is acquisition-driven, not trading-driven, and liquidity remains strong by any SME standard.
• Net working capital of £1.70m provides substantial headroom to absorb shocks.
• Receivables improved (£967k → £839k) while stock rose (£335k → £452k) — consistent with expanded operations rather than distress.
• Historical cash generation is the standout feature: cash has ranged between £1.5m and £3.4m across a decade, demonstrating the business consistently converts profit to cash and self-funds growth.
• The company weathered COVID — a severe stress test for an office refreshments supplier — with cash intact and only a ~£190k net asset dip. That is strong evidence of resilience.

4. Monitoring Points

1. Acquisition integration: Watch FY2025/26 accounts for deferred consideration payments, subsidiary performance, and any impairment of the £1.67m investment.
2. Working capital drift: Current liabilities rose 55% in FY2024. Confirm this normalises rather than becoming structural.
3. Group leakage: Now >75% owned by Greenworks Solutions (Holdings) Ltd, with intra-group asset transfers already evident. Monitor dividends upstreamed to the parent and related-party balances.
4. Profitability visibility: Net assets rose only ~£37k (retained) in FY2024. Without a filed P&L, obtain management accounts annually to confirm underlying trading profit, especially post-acquisition.
5. Sector exposure: Office refreshment demand remains sensitive to hybrid working patterns and food input cost inflation.
6. Parent strength: As a group subsidiary, the parent's financial health is now relevant to this credit — review Greenworks Solutions (Holdings) Ltd at renewal.