Company Number: 12732236

Analysis Date: 2025-07-20 11:34 UTC

1. Risk Rating: HIGH

The company demonstrates significant solvency risk, with persistent and growing negative net assets and shareholders' funds. Current liabilities and total liabilities substantially exceed current assets and total assets respectively, indicating an inability to meet obligations without external support.

2. Key Concerns:

• Negative Net Assets: As of 31 December 2024, the company had net liabilities of approximately £1.07 million, worsening from prior years, signaling an eroding equity base and potential insolvency threat if losses continue.

• Large Long-Term Creditors: The company owes over £2.5 million to group undertakings, a substantial long-term liability that raises concerns about financial dependence on related parties and potential repayment risk.

• Operating Lease Commitments: The company faces significant non-cancellable operating lease obligations exceeding £2.9 million spread over multiple years, which may strain cash flows, especially given the negative equity position.

3. Positive Indicators:

• Current Asset Improvement: Current assets nearly doubled in 2024 (£755k) compared to 2023 (£376k), including a notable increase in cash balances (£91k vs £21k), which improves short-term liquidity.

• Net Current Assets Positive: Despite overall negative net assets, the company maintains positive net current assets (£421k), indicating some working capital buffer to cover short-term liabilities.

• Going Concern Support: Directors’ statement confirms ongoing financial support from the parent company (Berbere SRL), which is crucial for continued operations and meeting commitments.

4. Due Diligence Notes:

• Examine Terms of Group Borrowings: Investigate the nature, terms, and conditions of the £2.5 million owed to group undertakings to assess repayment risk, interest obligations, and potential for restructuring.

• Lease Commitments Impact: Assess the impact of the substantial lease commitments on future cash flows and profitability, including any potential for renegotiation or subleasing.

• Profitability and Cash Flow Trends: Obtain detailed income statements and cash flow statements (not filed due to small company exemption) to understand operational performance, margin trends, and actual cash generation.

• Parent Company Financials: Review Berbere SRL’s consolidated financial statements to evaluate the parent’s capacity and willingness to continue supporting the UK entity.

• Director and Governance Review: Confirm no director disqualifications or compliance issues; current directors appear stable with no negative records indicated.

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