CWTCH PATTERNS LTD

Executive Summary

Cwtch Patterns Ltd is a micro-entity showing a modest recovery from prior negative equity to a slightly positive net asset position as of May 2024. While the company is compliant with filing requirements and maintains an active business presence, its limited equity base combined with significant long-term liabilities and single-person operation introduces medium risk, warranting further due diligence on liabilities and cash flow stability.

CWTCH PATTERNS LTD - Analysis Report

Company Number: 13382863

Analysis Date: 2025-07-29 14:25 UTC

1. Risk Rating: MEDIUM

The company shows a recent turnaround from net liabilities to a modest positive net asset position, which reduces immediate solvency concerns. However, the presence of significant long-term liabilities (£10,000) and low equity (£239) in a micro-entity with limited capital and a single employee points to cautious risk. The limited scale and narrow financial base suggest potential vulnerability to cash flow shocks or operational disruptions.

2. Key Concerns:

• High Long-Term Liabilities Relative to Equity: The company has £10,000 in creditors due after more than one year against very low shareholders' funds of £239, indicating a leveraged position that could pressure solvency if income declines.
• Negative Equity History: Prior years showed net liabilities and negative shareholders’ funds, which may reflect past operational losses or capital erosion.
• Single Director and Employee: Operational dependence on one individual (the director) who is also the sole employee may pose sustainability risks and governance concerns, particularly if key person risk materializes.

3. Positive Indicators:

• Improved Net Asset Position in Latest Year: The company moved from negative equity in previous years to positive net assets (£239) at 31 May 2024, suggesting some financial improvement.
• No Overdue Filings: Both accounts and confirmation statements are up to date, demonstrating compliance with statutory filing requirements.
• Stable Industry Classification and Active Website: The business operates in niche creative textile manufacturing with an active online presence, indicating ongoing operations and market engagement.

4. Due Diligence Notes:

• Examine Nature and Terms of Long-Term Liabilities: Clarify the composition, repayment terms, and covenants associated with the £10,000 creditors due after more than one year to assess refinancing or default risks.
• Review Cash Flow and Profitability Trends: As filings are limited to micro-entity accounts, seek additional management accounts or bank statements to evaluate operational cash flow sufficiency and sustainability.
• Assess Operational Dependency: Investigate contingency plans or succession considerations given the single director/employee structure, including any plans for scaling or diversification.
• Verify Completeness and Accuracy of Financials: Given the absence of an audit and micro-entity accounting exemptions, confirm that reported figures accurately reflect the company’s financial position.