Credit Analysis: CARMICHAEL-BROWNS LIMITED

1. Credit Opinion: DECLINE

Reasoning: This company presents unacceptable credit risk. The business is balance sheet insolvent with accumulated losses of £109,663, has virtually no cash (£282), and has disposed of all tangible fixed assets in the latest period. Net current liabilities stand at £-109,161, meaning the company cannot cover its short-term obligations from current assets. The five-year trend of deteriorating net assets and persistent losses indicates structural financial distress rather than a temporary downturn. No reasonable prospect of debt recovery exists for new creditors.

2. Financial Strength

Balance Sheet Position: Severely Weak

Key Concerns:

• Technical Insolvency: The company has maintained negative net assets since FY2020, with accumulated losses deepening each year. This represents five consecutive years of balance sheet insolvency.

• Complete Asset Strip: All tangible fixed assets (£97,832 cost value) were disposed of in FY2025, including freehold property, plant & machinery, motor vehicles, fixtures, and computer equipment. The company now holds zero fixed assets—this is highly unusual and suggests either cessation of trading operations or a fundamental restructuring.

• Capital Erosion: Share capital remains at a nominal £502, whilst the P&L reserve has deteriorated to (£109,663). The business is entirely dependent on creditor funding, predominantly the directors' loan accounts.

• Historical Trajectory: Net assets peaked at £65,816 in 2019 before collapsing into negative territory. The deterioration from a positive position to (£109,161) represents a £174,977 swing over six years.

3. Cash Flow Assessment

Liquidity Position: Critical

*Improvement driven by reduction in directors' loan accounts rather than operational improvement.

Critical Observations:

• Cash Depletion: Cash has fallen to £282—essentially nil for an operating company. This is insufficient to meet any meaningful payment obligations and raises immediate going concern questions.

• Director Funding Dependency: Directors' loan accounts comprise 87.8% of current liabilities (£112,371 of £127,882). While the director reduced their loan from £172,972, this repayment has drained cash reserves entirely. The company cannot function without continued director support.

• Debtors Composition: Trade debtors of £8,330 plus an intercompany loan of £8,517 represent the primary current assets. The intercompany balance (£8,517) is new and may not be readily realisable.

• Creditor Position: Trade creditors have increased from £3,169 to £13,375—a 322% increase suggesting potential difficulty paying suppliers. A CIS (Construction Industry Scheme) liability of £390 has appeared, consistent with solar installation activities.

• Working Capital Deficit: The £109,161 deficit means the company cannot cover short-term obligations from current assets. Any unexpected expenditure or payment delay would create immediate insolvency risk.

4. Monitoring Points

If any existing exposure exists, the following require urgent attention:

Immediate Red Flags: - ☐ Going Concern Viability: With £282 cash and no fixed assets, request management's going concern assessment and cash flow projections - ☐ Asset Disposal Rationale: Clarify why all fixed assets were disposed—determine if this represents cessation of trading, asset stripping, or legitimate restructuring - ☐ Director Loan Repayment: The director withdrew £60,601 from their loan account (reducing from £172,972 to £112,371) whilst the company holds only £282 cash—assess whether this constitutes preference or wrongful trading risk - ☐ Intercompany Loan: The new £8,517 intercompany debtor requires identification of the related party and recoverability assessment

Ongoing Surveillance: - ☐ Filing Compliance: Next accounts due by 31 December 2027—monitor for late filing which may indicate further deterioration - ☐ Employee Count: Reduced from 2 to 1 employee—assess operational capacity - ☐ Stock Elimination: Stocks reduced from £3,500 to nil—determine if this reflects business wind-down - ☐ VAT Position: VAT debtor eliminated (£3,213 to nil) but VAT creditor appeared (£184)—inconsistent position requiring explanation - ☐ CIS Registration: Confirms construction-related activity (solar installation)—monitor for compliance with CIS obligations

Sector Considerations: - Solar installation businesses face regulatory risk (changes to feed-in tariffs, planning requirements) - Working capital intensive sector with upfront material costs - Competition from larger operators with stronger balance sheets