CARBON FOCUS ENGINEERING LTD

Executive Summary

Carbon Focus Engineering Ltd has experienced significant financial decline over the past three years, with depleted equity and tight liquidity raising serious doubts about its ability to service additional credit. The company’s balance sheet shows increased leverage and reduced cash reserves, indicating a fragile financial position. Given these factors, credit approval is not recommended without substantial improvement or guarantees.

CARBON FOCUS ENGINEERING LTD - Analysis Report

Company Number: 13529446

Analysis Date: 2025-07-29 21:03 UTC

1. Credit Opinion: DECLINE
   Carbon Focus Engineering Ltd shows a sharp deterioration in financial health over recent years, with net assets plunging from £193k in 2021 to just £13k in 2024. The company’s net current assets have eroded significantly, and current liabilities nearly match current assets, resulting in very tight working capital. The substantial decline in equity and the high level of secured hire purchase debt raise concerns about its ability to meet debt obligations reliably. Without evidence of improved profitability or cash flow, the company carries elevated credit risk and is currently unsuitable for new credit facilities.

2. Financial Strength:
   The balance sheet reveals weakening financial strength. Fixed assets have decreased from about £85k to £37k, while net assets have reduced markedly, indicating losses or asset write-downs not offset by capital injections. Although total assets exceed liabilities, the margin has narrowed substantially. The company carries hire purchase debt secured against assets, increasing financial leverage and reducing flexibility. Shareholders’ funds have declined dramatically, suggesting capital erosion and limited buffer to absorb adverse trading shocks.

3. Cash Flow Assessment:
   Cash balances have dropped from nearly £637k in 2021 to £87k in 2024, indicating a significant drain on liquidity. Debtors have increased moderately, but trade creditors and other creditors remain high, consuming much of the current assets. Net current assets are positive but minimal (£4.6k), signifying constrained working capital and potential liquidity stress. The reliance on hire purchase financing also suggests cash flow constraints in acquiring equipment. Overall, the company’s liquidity position appears stretched with limited short-term cash reserves.

4. Monitoring Points:

• Monitor quarterly cash flow statements closely for signs of improving liquidity or further deterioration.
• Watch trade creditor days and any overdue payments as indicators of payment stress.
• Track changes in hire purchase debt and secured liabilities that may impact solvency.
• Review management’s strategy and any plans for capital infusion or operational turnaround.
• Keep an eye on order book and revenue growth to assess business trajectory and resilience.