CONTAGIOUS (UK) LIMITED
Company number SC223455 · 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 Analysis: CONTAGIOUS (UK) LIMITED
1. Credit Opinion: CONDITIONAL
Reasoning: The company demonstrates material financial deterioration in FY2025, with net assets declining by 33% (£123,601 loss reflected in P&L reserve) and a 26% reduction in headcount from 39 to 29 employees. While the balance sheet remains solvent with positive net current assets of £228,764 and no long-term debt, the trajectory is concerning. The significant contraction in trade debtors (down 47%) and trade creditors (down 59%) strongly suggests revenue decline. Credit facilities should only be considered with enhanced monitoring, appropriate covenants, and potentially personal guarantees from the PSCs.
2. Financial Strength
Balance Sheet Summary:
| Metric | FY2025 | FY2024 | Movement |
|---|---|---|---|
| Net Assets | £249,750 | £373,351 | -33% |
| Net Current Assets | £228,764 | £350,938 | -35% |
| Shareholders' Funds | £249,750 | £373,351 | -33% |
Key Observations:
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Accumulated losses: The P&L reserve declined from £373,251 to £249,650, indicating a loss of approximately £123,601 for the year. This is significant relative to the company's asset base.
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Current ratio: 1.49x (2025: £694,106/£465,342) vs 1.46x (2024: £1,117,349/£766,411). Marginal improvement but both years remain at acceptable levels.
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Debt reduction: Long-term bank loans cleared entirely (£10,481 to £0). Current bank borrowings stable at £10,490.
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Minimal share capital: Only £67 allotted, meaning virtually all equity reserves are retained earnings—no buffer from share premium.
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Intercompany exposure: Amounts owed by subsidiaries of £179,082 (down from £385,201) represent 26% of total debtors. Recovery risk exists if subsidiaries face similar pressures.
Assessment: The balance sheet remains solvent but has weakened materially. The company has limited tangible asset backing (NBV £12,527), meaning creditors rely heavily on debtor realisation and future trading performance.
3. Cash Flow Assessment
Liquidity Position:
- Cash improved modestly from £161,208 to £189,446 (+17.4%), which is a positive indicator.
- However, this improvement must be viewed against the significant contraction in working capital components:
- Trade debtors: £464,346 → £247,467 (-46.7%)
- Trade creditors: £164,504 → £67,976 (-58.7%)
- Other creditors: £473,349 → £281,221 (-40.6%)
Working Capital Concerns:
The simultaneous reduction in both debtors and creditors suggests a shrinking business—lower revenue generation is flowing through to lower trade payables. The working capital cycle has contracted, but this appears driven by reduced activity rather than improved efficiency.
New Commitment Risk:
Operating lease commitments of £79,143 have appeared (previously £0), indicating new lease obligations. This represents a material future cash outflow commitment—approximately £6,600/month—that will pressure cash flow going forward.
Assessment: While currently liquid, the cash position masks an underlying contraction. The new lease commitments add fixed cost obligations to a business that appears to be downsizing. Free cash flow generation capacity is uncertain given the reported loss.
4. Monitoring Points
| Metric | Target/Concern | Rationale |
|---|---|---|
| Revenue trend | Request management accounts | Debtors decline suggests significant revenue contraction—need to confirm |
| Profitability | Return to breakeven minimum | £123k loss is unsustainable relative to equity base |
| Debtor days | Monitor for further decline | Trade debtors halved; continued erosion signals further revenue drop |
| Cash buffer | Minimum £150k | Current £189k provides limited runway given cost base |
| Lease obligations | Track compliance | New £79k commitment adds fixed cost pressure |
| Director stability | Watch for further resignations | Two directors resigned in recent months (Milne Dec 2025, Dobson Mar 2026) |
| Intercompany balances | Assess recoverability | £179k owed by subsidiaries—confirm creditworthiness of these entities |
| Corporation tax | £17,108 overdue | Outstanding tax liability requires monitoring |
| Headcount | Stabilisation signal | 26% workforce reduction is significant—further cuts would impair delivery capacity |
Additional Conditions for Credit Approval: - Personal guarantees from Messrs Chapman (50-75% ownership) and Griffiths (25-50% ownership) - Quarterly management accounts to track revenue trajectory - Financial covenant requiring minimum net current assets of £200k - Confirmation regarding subsidiary financial health given intercompany exposure