CREDO TECHNOLOGY SERVICES UK LTD

Executive Summary

CREDO TECHNOLOGY SERVICES UK LTD shows signs of financial recovery with improved liquidity and working capital but remains burdened by negative equity due to accumulated losses. The company’s financial health is fair, with no immediate liquidity distress but vulnerability from long-term debt. Focus on strengthening equity, managing debt, and improving profitability will be key to securing a healthier financial future.

CREDO TECHNOLOGY SERVICES UK LTD - Analysis Report

Company Number: 13815731

Analysis Date: 2025-07-29 14:26 UTC

Financial Health Assessment of CREDO TECHNOLOGY SERVICES UK LTD

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1. Financial Health Score: C (Fair)

Explanation: The company shows signs of recovery from previous financial distress but remains in a fragile state with net liabilities on the balance sheet. There is improvement in liquidity and working capital, but persistent negative equity suggests caution.

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2. Key Vital Signs

Metric	2023	2022	Interpretation
Cash at Bank	£38,249	£21,459	Healthy increase in cash reserves; positive sign.
Current Liabilities	£3,167	(£25) (negative figure)	Current liabilities appear minimal and manageable.
Net Current Assets	£35,082	£21,484	Strong working capital; good short-term liquidity.
Creditors Due After 1 Year	£37,322	£32,378	Significant long-term liabilities owed to parent.
Net Assets (Equity)	(£2,240) (negative)	(£10,894) (negative)	Negative net worth but improving trend.
Shareholders' Funds	(£2,340) (negative)	(£10,994) (negative)	Reflects accumulated losses; gradual improvement.

• Cash Flow Vital Sign: Cash balance has nearly doubled year-on-year, indicating improved operational cash flow or financing.
• Working Capital: Positive and increasing net current assets indicate the company can meet short-term obligations without distress.
• Leverage: Long-term liabilities (parent company loan) remain substantial, causing net liabilities and negative equity.
• Profitability: Not directly reported, but accumulated losses imply ongoing losses since inception.

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3. Diagnosis

The company presents the "symptoms" of a young enterprise emerging from early-stage financial distress. The negative shareholders' funds indicate accumulated losses that have eroded equity, a common "chronic condition" in start-ups during initial years. However, the increasing cash reserves and net current assets show improved liquidity—akin to a patient recovering strength after illness.

The long-term debt owed to the parent company acts like a long-term "loan" or "mortgage" on the business, which, while manageable currently, could pose risks if not reduced or restructured.

The balance sheet shows no signs of immediate liquidity crisis ("healthy pulse" of cash and working capital), but the "underlying condition" of negative net assets means the company is still vulnerable to shocks or downturns.

The turnover recognition policy and accounting standards followed are appropriate and conservative, providing a reliable snapshot of financial health.

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4. Recommendations

• Address Negative Equity: Explore options to improve equity, such as capital injections or converting parent company debt into equity to strengthen the financial "immune system."
• Debt Management: Engage with the parent company regarding long-term liabilities to negotiate repayment terms or restructuring, reducing financial strain.
• Cash Flow Monitoring: Continue to monitor cash flows closely to maintain healthy liquidity and avoid symptoms of cash flow distress.
• Profitability Focus: Implement measures to enhance profitability, such as optimizing costs or increasing revenue streams, to heal accumulated losses.
• Financial Reporting: Maintain timely and transparent filing to support stakeholder confidence and facilitate early detection of financial health changes.
• Strategic Planning: Develop a medium-term plan focusing on sustainable growth and debt reduction to ensure long-term financial vitality.

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