CLEARNOTION LIMITED
Company number 08317533 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Credit Assessment: CLEARNOTION LIMITED
1. Credit Opinion: CONDITIONAL APPROVE
Reasoning: Clearnotion Limited presents a fundamentally sound credit profile with strong liquidity, positive financial trajectory, and no long-term debt obligations. The cash position of £221,817 significantly exceeds total liabilities of £47,474, providing substantial debt service capacity. However, the conditional rating reflects key person dependency (sole director/shareholder) and a historical earnings dip in 2021 that warrants explanation. The company's recovery from that position to current strength is encouraging, but the concentrated control structure and limited disclosure (filleted accounts) reduce transparency. Any credit facility should include change-of-control provisions and key person insurance requirements.
2. Financial Strength
Balance Sheet Summary (2024): - Net Assets: £185,345 (up from £131,313 in 2023, +41.1%) - Shareholders' Funds: £185,345 (entirely retained earnings + £1 share capital) - Gearing: Effectively nil — no long-term debt visible on the balance sheet
Trajectory Analysis:
| Year | Net Assets | Cash | Liabilities | Net Assets Growth |
|---|---|---|---|---|
| 2024 | £185,345 | £221,817 | £47,474 | +41.1% |
| 2023 | £131,313 | £220,063 | £93,838 | +96.8% |
| 2022 | £66,709 | £224,102 | £158,493 | +2,444% |
| 2021 | £2,622 | £105,032 | £113,543 | -97.5% |
| 2020 | £104,043 | £68,298 | £61,013 | -26.3% |
The balance sheet has undergone significant rehabilitation since the 2021 nadir. Net assets have grown from £2,622 to £185,345 over three years — a recovery of approximately £183k. This suggests either substantial retained profits or capital contributions, though without a P&L (permitted exemption for small companies), the exact source is unclear.
Concern: The 2021 collapse to near-zero net assets warrants investigation. This coincided with the pandemic period and may reflect a large dividend extraction, a trading loss, or a combination. Understanding the cause is important for assessing whether similar volatility could recur.
Asset Composition: The business is extremely asset-light with only £1,703 in tangible assets (likely IT equipment). Cash represents 95.8% of total assets, which is both a strength (liquidity) and a concern (potential for rapid extraction by the sole shareholder).
3. Cash Flow Assessment
Liquidity Position: - Current Ratio: 4.9:1 (£231,567 / £47,474) - Quick Ratio: 4.9:1 (effectively identical given minimal debtors) - Cash as % of Current Liabilities: 467%
Working Capital: Net current assets of £184,093 provide an exceptionally comfortable buffer. The company could settle all current liabilities from cash alone nearly five times over.
Cash Flow Observations: - Cash has remained remarkably stable at £220-224k across 2022-2024, suggesting steady profitability with potential dividend extraction maintaining cash at a target level - The implied retained profit for 2024 is approximately £54,032 (£185,344 - £131,312 in retained earnings), though dividends may have been paid from this figure - No long-term creditors visible — the entire liability structure is current
Debt Service Capacity: Based on the implied profitability and cash reserves, the company has strong capacity to service additional debt. Even a conservative estimate of £50-60k annual profit would support meaningful credit facilities.
4. Monitoring Points
| Metric | Current Position | Watch Threshold | Rationale |
|---|---|---|---|
| Cash Balance | £221,817 | Below £100k | Cash is the primary asset; significant depletion could indicate trading difficulties or dividend extraction |
| Net Current Assets | £184,093 | Below £75k | Working capital erosion would signal deteriorating short-term financial health |
| Current Ratio | 4.9:1 | Below 2.0:1 | Early warning of liquidity pressure |
| Retained Earnings | £185,344 | Declining trend | Would indicate trading losses or aggressive dividend policy |
| Filing Compliance | Current | Any overdue filings | Late filings may signal financial distress or management issues |
| Director Changes | Single director | Any resignation/appointment | Key person risk — sole director departure would create operational uncertainty |
Additional Conditions for Credit Facility: 1. Key Person Insurance: Required given sole director dependency 2. Change of Control Covenant: Trigger event if Mr Tuck ceases to hold >50% shareholding 3. Negative Pledge: Restriction on additional borrowings without consent 4. Dividend Restriction: Limit dividend extraction to maintain minimum net assets threshold 5. Annual Accounts Submission: Require full (non-filleted) accounts for monitoring purposes