CLEMENT COURT (HR) LIMITED

Executive Summary

CLEMENT COURT (HR) LIMITED is a newly established real estate company with a significant asset base financed predominantly through secured borrowings. While net assets are positive, the company faces liquidity challenges indicated by negative working capital and minimal cash reserves. The financial outlook hinges on effective cash flow management and debt servicing to maintain solvency and build a stronger equity cushion.

CLEMENT COURT (HR) LIMITED - Analysis Report

Company Number: 14356362

Analysis Date: 2025-07-29 16:56 UTC

Financial Health Assessment for CLEMENT COURT (HR) LIMITED

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1. Financial Health Score: C

Explanation:
The company shows a foundational level of financial stability with positive net assets and shareholders’ funds but displays worrying signs in liquidity and working capital management. The presence of significant long-term borrowings secured against investment property indicates leveraged financing, which is common in real estate but requires prudent cash flow management. The negative net current assets ("working capital") signals potential short-term liquidity stress, which lowers the overall financial health score.

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2. Key Vital Signs

Metric	2023 Value (£)	Interpretation
Net Assets	10,444	Positive net worth indicates the company is solvent overall but the amount is very modest.
Working Capital (Net Current Assets)	-7,714	Negative working capital is a "symptom of distress" signaling short-term liabilities exceed assets.
Investment Property (Fixed Assets)	936,353	Significant asset base, typical for real estate operations; supports borrowing capacity.
Long-term Creditors	918,195	High level of secured debt against investment property; requires diligent servicing.
Current Liabilities	12,104	Relatively low current liabilities but larger than current assets, causing negative working capital.
Cash and Cash Equivalents	1,943	Very low cash buffer; "healthy cash flow" is minimal, increasing liquidity risk.
Debtors	2,447	Small amount of receivables, possibly rental income owed; timely collection is vital.
Shareholders’ Funds	10,444	Equity base is positive but minimal compared to asset size and borrowings.

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3. Diagnosis

Vital Signs Analysis:
CLEMENT COURT (HR) LIMITED has embarked on acquiring investment property valued at £936,353 during 2023, likely financed through a significant secured loan (£918,195). The equity contribution is minimal (£10,000 share capital plus £444 retained earnings), indicating high leverage. This is common in the real estate sector but demands vigilant liquidity management.

The negative working capital (-£7,714) is a clear "symptom of liquidity stress," suggesting the company may struggle to meet short-term obligations without additional cash inflows or refinancing. The low cash balance (£1,943) compounds this concern, indicating limited immediate liquidity.

The company's financial statements show no turnover disclosure but mention rental income as a revenue source. The absence of detailed profit and loss data limits insight into profitability and operational cash flow. However, the company has a small tax expense (£104), suggesting some profit generation or taxable income.

Underlying Issues:

• Very high leverage ratio: Borrowings nearly equal the investment property value, which creates high fixed financial obligations.
• Negative working capital: Immediate liquidity issues and potential "shortness of breath" in cash flow terms.
• Small equity base: Limited buffer to absorb financial shocks or downturns.
• Single director owning 100% control suggests decision-making is centralized, which can be both strength and risk depending on governance quality.

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4. Prognosis

If the company manages to maintain steady and timely rental income, it can service its debt and gradually build equity, improving its financial "immune system." However, failure to generate sufficient cash flow or delays in receivables could exacerbate liquidity problems, leading to potential insolvency risk.

The company is young, incorporated in September 2022, and is still establishing its financial foundation. The prognosis depends significantly on market conditions in the real estate sector, rental occupancy, and effective debt management.

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5. Recommendations

1. Improve Liquidity Management:

   • Prioritize timely collection of rent and other receivables.
   • Build a cash reserve to cover at least 3-6 months of current liabilities.
   • Explore short-term financing options or renegotiate payment terms to ease cash flow pressure.

2. Debt Monitoring and Servicing:

   • Closely monitor loan covenants and interest payments.
   • Consider refinancing options if interest rates or terms become unfavorable.

3. Increase Equity Base:

   • If possible, inject additional equity capital or retain earnings to reduce leverage and increase financial resilience.

4. Operational Efficiency:

   • Ensure property is well-maintained and occupancy levels are maximized to sustain rental income.
   • Review and control administrative and operational expenses.

5. Financial Reporting Enhancement:

   • Consider providing fuller profit and loss disclosures for better transparency and stakeholder confidence.

6. Governance and Risk Management:

   • Although single director ownership simplifies decision-making, consider independent advice or oversight to mitigate concentration risk.

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