Company Number: 13952265

Analysis Date: 2025-07-20 15:07 UTC

1. Credit Opinion: DECLINE

Babul's (Teesdale) Limited presents significant credit risk at this stage. Although the company is active and relatively new (incorporated in 2022), its latest accounts as of 31 March 2024 show a negative net asset position (£-16,033) and a substantial net current liability of £-38,471. This indicates an erosion of equity and working capital deficiency, which undermines its ability to service debt or meet short-term obligations reliably. The sharp increase in current liabilities from £26,421 in 2023 to £125,527 in 2024, notably including taxation and social security costs (£80,145), without corresponding growth in current assets, raises concerns about liquidity management and financial stability. The director has not provided a profit and loss account publicly, limiting insight into profitability trends. The company operates in the hospitality sector (public houses, bars, licensed restaurants), an industry sensitive to economic cycles, which adds operational risk. Given these factors, the company currently lacks the financial strength and cash flow resilience needed to support new credit facilities without additional security or intervention.

2. Financial Strength:

The balance sheet highlights deteriorating financial health. Tangible fixed assets increased moderately (net book value £22,438 vs £17,849 prior year), showing some investment in fixtures and equipment. However, the equity base has turned negative due to accumulated losses reflected in the profit and loss reserve (£-26,033). Current liabilities have surged nearly fivefold, mainly driven by tax and social security liabilities, suggesting possible cash flow timing issues or undercapitalization. The company’s shareholders funds have swung from £27,144 positive in 2023 to £-16,033 negative in 2024, indicating financial stress and potential insolvency risk if the trend continues.

3. Cash Flow Assessment:

Cash at bank improved significantly to £60,169 from £5,651, which is a positive indicator, but this is offset by a large increase in creditors falling due within one year (£125,527). Negative net current assets (£-38,471) imply a working capital shortfall. Debtors decreased slightly but remain at £23,578, a moderate level that could be converted into cash if collectible. The large tax and social security creditor balance suggests possible arrears or deferred payments, which can strain liquidity further. Overall, cash flow appears constrained, and the company may face difficulty meeting immediate liabilities without additional financing or improved cash management.

4. Monitoring Points:

• Liquidity position and management of current liabilities, particularly tax and social security obligations.
• Profitability trends when full profit and loss data becomes available.
• Cash flow cycles, focusing on debtor collection and creditor payment terms.
• Any additional capital injections or shareholder support given the negative equity.
• Impact of market conditions on hospitality sector performance.
• Director’s strategy to restore positive net assets and working capital.