CAPSULE VENTURES LTD

Executive Summary

Capsule Ventures Ltd is experiencing significant financial strain, primarily due to large short-term liabilities causing negative working capital and a net liability position. While its property assets are valuable, the company's liquidity is critically weak, requiring urgent restructuring and improved cash flow management to restore financial health. Immediate attention to capital strengthening and liability management is essential for a sustainable future.

CAPSULE VENTURES LTD - Analysis Report

Company Number: 13164292

Analysis Date: 2025-07-29 20:10 UTC

Financial Health Assessment: CAPSULE VENTURES LTD (As of 31 March 2025)

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1. Financial Health Score: D

Explanation:
CAPSULE VENTURES LTD exhibits signs of financial distress primarily due to significant negative working capital and a net liability position as of the latest financial year. The company’s net current assets have deteriorated sharply into negative territory (£-807,752), and net liabilities stand at £-7,691. These symptoms indicate liquidity issues and a fragile equity base. Though the company holds substantial fixed assets (£800,075), the heavy current liabilities and negative net assets weigh heavily on its financial stability. This grade reflects a need for urgent corrective action to avoid further financial deterioration.

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2. Key Vital Signs

Metric	2025 Value	Interpretation
Current Assets	£34,040	Minimal liquid and short-term assets, mainly cash (£33,342), which is healthy in isolation but insufficient to cover liabilities.
Current Liabilities	£841,792	Alarmingly high short-term obligations, nearly 25 times current assets, indicating liquidity stress.
Net Current Assets (Working Capital)	£-807,752	Negative working capital is a critical symptom of cash flow strain and inability to meet short-term debts promptly.
Net Assets (Equity)	£-7,691	Negative equity shows the company’s liabilities exceed its assets, a sign of financial distress.
Fixed Assets	£800,075	Substantial investment in tangible assets (primarily freehold property), which may not be liquid in a crisis.
Share Capital	£10	Nominal share capital indicating limited equity buffer.
Loan Facilities	£820,000	Director loans provide a lifeline but add to liabilities and future repayment obligations.
Cash Position	£33,342	Healthy cash on hand relative to current assets, but insufficient to address high liabilities.

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3. Diagnosis

• Liquidity Crisis (Symptoms of Distress):
  The company is facing a significant liquidity crunch, evidenced by negative working capital of over £800k. Current liabilities overwhelm current assets, suggesting the company may struggle to pay its short-term debts on time, a classic symptom of financial distress.

• Capital Structure and Solvency Issues:
  Negative net assets indicate that total liabilities exceed total assets, implying the company is technically insolvent on a balance sheet basis. This condition can undermine creditor confidence and restrict access to additional financing.

• Asset Base:
  The company holds substantial fixed assets valued at £800,075, mainly freehold property. While these are valuable, they are not readily convertible to cash without potential delays or loss of value, limiting their utility in alleviating liquidity problems quickly.

• Reliance on Director Loans:
  The loan facility of £820,000 from directors is a crucial source of funding but increases liabilities and future repayment pressure. The terms are flexible with low interest unless repayment is delayed beyond three months after a written demand, which provides some breathing room but is not a permanent solution.

• No Revenue Data:
  The absence of reported turnover and profit and loss information limits analysis of operational performance. The company’s financial statements comply with small company exemptions, but lack of income data obscures cash flow generation capability.

• No Employees:
  The company employed no staff during the year, indicating it may be a holding or investment company rather than an operational business, which aligns with its SIC codes related to real estate. This suggests that financial health heavily depends on property asset management and financing structure.

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4. Recommendations

• Improve Liquidity Management:
  The company should urgently address its negative working capital by restructuring short-term liabilities. This could involve negotiating extended payment terms with creditors, refinancing debt to long-term loans, or seeking additional equity injections.

• Capital Injection or Debt Restructuring:
  Given the negative equity position, raising additional share capital or converting some director loans into equity could strengthen the balance sheet and improve solvency.

• Asset Monetization or Leveraging:
  Consider leveraging the freehold property through sale and leaseback arrangements or refinancing with a mortgage to release cash to meet current liabilities.

• Enhanced Financial Reporting and Monitoring:
  Although small company exemptions apply, the directors should consider producing more detailed internal management accounts to monitor cash flows and profitability regularly, enabling timely intervention.

• Strategic Review of Business Model:
  Evaluate the company’s business strategy and revenue generation capacity, especially given the lack of employees and operational data. If the company is a property holding entity, ensure that rental income or asset appreciation strategies are optimized.

• Director Loan Management:
  Clarify and formalize the terms around director loans, including possible repayment schedules or interest charges, to reduce uncertainty and potential conflicts.

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