2 MACFARLANE LTD

Executive Summary

2 Macfarlane Ltd owns substantial fixed assets but shows significant liquidity pressure due to negative net current assets and high short-term liabilities. While the company is compliant with statutory filings and stable in asset value, cash flow constraints warrant conditional credit approval. Lending should be contingent on evidence of improved working capital management and adequate security measures to mitigate repayment risk.

2 MACFARLANE LTD - Analysis Report

Company Number: 13744981

Analysis Date: 2025-07-29 12:41 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   2 Macfarlane Ltd is an active private limited company operating in real estate letting. The company holds substantial fixed assets (~£975k), indicating ownership of property or similar long-term assets. However, it exhibits a significant working capital deficit with current liabilities (£794k) exceeding current assets (£140k) by £654k as of the latest accounts. The company also has long-term borrowings of £262k, which increases financial leverage. While net assets have slightly improved from £53k to £58k, equity (shareholders’ funds) remains modest at £100k with accumulated losses of approximately £42k. Directors have maintained timely filings with no overdue accounts or confirmation statements, showing compliance discipline. Given the negative net current assets and reliance on borrowings, credit extension should be conditional on robust cash flow projections and potentially additional security or guarantees to mitigate liquidity risk.

2. Financial Strength:
   The balance sheet is asset-heavy with nearly all value tied up in fixed assets. The tangible fixed assets have been stable in value, reflecting no impairment or disposals. However, the large negative net current assets position highlights a liquidity strain. Current liabilities decreased from £943k in 2022 to £794k in 2023, which is positive, but still significantly higher than current assets. The increase in debt due after one year (£262k) introduces medium-term financial obligations. Shareholders’ funds are thin, suggesting limited equity buffer to absorb potential losses. Overall, the company’s financial strength is moderate but constrained by liquidity risks and relatively low equity.

3. Cash Flow Assessment:
   Cash at bank is minimal (£1,051), indicating limited immediate liquidity. Debtors have increased markedly to £139k from £12k, which may reflect slower collection or larger sales on credit. The large short-term creditor balance (£794k) indicates significant payables, likely related to financing or operational expenses. Negative net current assets imply the company may face challenges meeting short-term obligations without refinancing or cash injections. There is no direct information on operating cash flow, but the financial position suggests cash flow management is critical. Close monitoring of debtor collections and creditor terms will be essential.

4. Monitoring Points:

• Working capital improvement: focus on reducing current liabilities and/or increasing current assets.
• Debtor aging and collection efficiency, given the large increase in debtors.
• Servicing of short and long-term debt, including interest and principal repayments.
• Any changes in fixed asset valuations or impairments.
• Directors’ ongoing compliance with timely filings and any changes in management or ownership structure.
• Cash flow forecasts and actual liquidity trends over the next 12 months.