CRINGLES LIMITED
Company number 03775031 · 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: CRINGLES LIMITED
1. Credit Opinion: CONDITIONAL
Reasoning: The company presents a superficially strong balance sheet with consistent net asset growth and minimal external liabilities. However, the director's overdrawn loan account of £371,731 (increasing from £345,843 in the prior year) represents a material extraction of value that significantly undermines the true equity position. This loan is larger than the company's total current liabilities and is growing, not being repaid. The interest rate charged (2.25%) appears below market rate, suggesting unfavorable terms for the company. Any credit facility should be conditional on restrictions around further director extractions and appropriate security.
2. Financial Strength
Balance Sheet Composition (Year Ending 31 July 2024):
| Item | Amount |
|---|---|
| Tangible Fixed Assets | £894,177 |
| - Freehold Land & Buildings (NBV) | £879,963 |
| Current Assets | £794,943 |
| - Debtors | £505,513 |
| - Cash | £251,840 |
| - Stocks | £37,590 |
| Current Liabilities | (£47,069) |
| Net Current Assets | £747,874 |
| Provisions | (£3,369) |
| Net Assets | £1,638,682 |
| Share Capital | £300,000 |
| Retained Earnings | £1,338,682 |
| Total Equity | £1,638,682 |
Key Observations:
-
Consistent Growth: Net assets have grown every year for the past decade, from £968,587 (2015) to £1,638,682 (2024) – an increase of approximately 69% over 9 years, demonstrating steady capital accumulation.
-
Asset Quality: The balance sheet is dominated by freehold property (£879,963 NBV), which represents 54% of total net assets. This provides tangible security but also indicates an illiquid asset base. The property is depreciated at only 2% straight line, suggesting a long useful life and potential for significant underlying value above book cost.
-
Liability Position: External liabilities are remarkably low at just £47,069. The company is essentially debt-free from third-party creditors. This provides significant headroom for additional borrowing.
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Director's Loan – Critical Concern: The overdrawn director's loan of £371,731 represents 22.7% of stated net assets. If this loan were written off, true net assets would fall to approximately £1,266,951. The loan has increased by £25,888 (7.5%) year-on-year, indicating continued extraction rather than repayment. Interest at 2.25% is concessionary and below typical commercial rates.
3. Cash Flow Assessment
Working Capital Position: - Current ratio: 16.9x – exceptionally strong on paper - Quick ratio: 16.1x – robust liquidity
However, these ratios are misleading. The £505,513 in debtors includes the £371,731 director's loan. Excluding this: - Adjusted current assets: £423,182 - Adjusted current ratio: 9.0x – still strong, but significantly lower
Cash Trajectory:
| Year | Cash | Change |
|---|---|---|
| 2015 | £294,595 | - |
| 2016 | £161,988 | -45.2% |
| 2017 | £137,673 | -15.1% |
| 2018 | £189,639 | +37.7% |
| 2019 | £326,281 | +72.0% |
| 2020 | £391,078 | +19.9% |
| 2021 | £431,776 | +10.4% |
| 2022 | £518,530 | +20.1% |
| 2023 | £298,603 | -42.4% |
| 2024 | £251,840 | -15.7% |
The significant cash decline from £518,530 (2022) to £251,840 (2024) – a 51.4% reduction over two years – coincides with the period of increasing director's loan balances. This pattern suggests cash is being extracted via the loan account rather than retained in the business.
Profitability Inference: With no P&L disclosed, retained earnings growth serves as a proxy: - FY2024 retained earnings increase: £97,510 (£1,338,682 - £1,241,172) - This represents post-tax profit retained in the business, though the total profit figure is unknown (dividends may also have been paid)
4. Monitoring Points
| Metric | Current | Watch Threshold | Rationale |
|---|---|---|---|
| Director's Loan Balance | £371,731 | Any increase | Growing extraction erodes true equity |
| Cash Position | £251,840 | Below £150,000 | Continued decline would impair liquidity |
| Current Ratio (adjusted) | 9.0x | Below 3.0x | Deterioration signals working capital stress |
| Filing Timeliness | On time | Any overdue | Late filing indicates administrative risk |
| Net Assets Trend | Growing | Declining | Would indicate trading difficulties |
Specific Conditions for Credit Approval:
- Director's Loan Restriction: No further increases to the director's loan account without lender consent. Ideally, a repayment schedule should be agreed.
- Security: First legal charge over the freehold property (book value £879,963) to provide adequate collateral.
- Financial Covenants: Minimum net assets of £1.2 million; maximum director's loan of £400,000.
- Monitoring: Annual review of filed accounts; immediate notification if director's loan exceeds agreed threshold.
Business Risk Considerations: - SIC code 55300 (recreational vehicle parks, trailer parks, camping grounds) is seasonal and potentially sensitive to consumer discretionary spending - Single-director control (Ms Gavin owns 75%+ and is sole director) creates key-person dependency - Only 2 employees – limited operational depth