BLACK SHEEP COTTAGES LIMITED

Executive Summary

Black Sheep Cottages Limited faces substantial financial distress characterized by negative net assets and significant liquidity shortfalls, indicating a high risk of insolvency without corrective action. However, the presence of substantial fixed assets and timely statutory compliance provide limited mitigation. Careful scrutiny of debt structure and operational viability is essential for evaluating investment risk.

BLACK SHEEP COTTAGES LIMITED - Analysis Report

Company Number: 14014917

Analysis Date: 2025-07-29 16:59 UTC

1. Risk Rating: HIGH
   Justification: The company exhibits a significant and persistent negative net asset position and a large deficit in net current assets, indicating severe solvency and liquidity risks. Current liabilities vastly exceed current assets, and shareholders' funds are deeply negative, suggesting an inability to meet short-term obligations without additional financing or asset liquidation.

2. Key Concerns:

• Severe Liquidity Shortfall: Net current liabilities exceed £550k in the latest year, with cash reserves minimal at £7,605, raising immediate concerns about the company’s ability to cover short-term debts of over £560k.
• Negative Equity Position: Shareholders' funds have declined to -£44,224, indicating accumulated losses or funding shortfalls and suggesting that the business is technically insolvent on a balance sheet basis.
• High Leverage and Debt Obligations: Total creditors due within one year and beyond exceed £700k (including a long-term bank loan of £155k), which is disproportionate to the asset base and cash resources, increasing financial risk.

3. Positive Indicators:

• Tangible Fixed Asset Base: The company holds land and buildings valued at £665,356, a significant fixed asset that could potentially be leveraged or sold to improve liquidity.
• No Overdue Filings: Accounts and confirmation statements are filed on time, indicating compliance with statutory requirements and good governance in this aspect.
• Experienced Directors: The presence of a director with accounting expertise (Joel Richard Trott) may benefit financial oversight and future planning.

4. Due Diligence Notes:

• Investigate the nature and terms of the creditors—especially the large current liabilities—to assess if any are related party loans, secured debts, or trade payables.
• Examine the cash flow forecasts and management plans to address the liquidity deficit and negative net assets.
• Review any contingent liabilities or pending litigation that could further impact financial stability.
• Confirm the valuation and marketability of the fixed assets, and whether they are currently encumbered by security interests.
• Assess the business model’s sustainability and revenue generation capacity given the company’s significant losses and small scale of operations.
• Consider the impact of the company being relatively new (incorporated 2022) and whether it is still in a startup or investment phase.