DEEP RESIDENCE LTD

Executive Summary

Deep Residence Ltd shows pronounced financial stress characterized by negative net assets and a significant working capital deficit driven by substantial short-term director loans. While the company holds a stable investment property asset and maintains regulatory compliance, its liquidity position and debt structure present considerable risks to solvency. Further investigation into the directors' loans, debt covenants, and operational cash flows is essential for a comprehensive risk assessment.

DEEP RESIDENCE LTD - Analysis Report

Company Number: 13565119

Analysis Date: 2025-07-29 19:33 UTC

1. Risk Rating: HIGH
   The company exhibits significant solvency and liquidity risks with negative net assets and net current liabilities, indicating financial distress despite holding considerable fixed assets in investment property.

2. Key Concerns:

• Negative Shareholders' Funds and Net Assets: The company shows net liabilities of £12,108 at 31 August 2024, an improvement from the prior year but still negative, which signals erosion of equity and potential insolvency threat.
• Severe Working Capital Deficit: Net current liabilities stand at £262,417, driven primarily by directors' loan accounts due within one year, indicating acute liquidity pressure and a potential inability to cover short-term obligations from available cash (£7,679).
• High Secured Debt Burden: Bank loans secured against assets total £633,401, exceeding net assets, with a heavy reliance on external financing, which could pose refinancing risk if cash flows do not support debt servicing.

3. Positive Indicators:

• Stable Investment Property Valuation: The company's main fixed asset, investment property valued at £883,284, remains stable with no impairment, providing a tangible asset base that may support recovery or refinancing efforts.
• Timely Filing Compliance: The company is current with accounts and confirmation statement filings without overdue notices, reflecting adherence to regulatory compliance and governance standards.
• Director Confidence in Going Concern: Directors explicitly state no material uncertainties about going concern, suggesting management believes the business can continue, potentially supported by external funding or operational plans.

4. Due Diligence Notes:

• Investigate the nature and terms of the directors' loan accounts, including repayment schedules and any associated covenants or risk of calls for immediate repayment.
• Assess cash flow projections and rental income from the investment property to evaluate operational sustainability and debt servicing capacity.
• Review bank loan agreements for covenants, interest rates, and maturity profiles to understand refinancing risks.
• Confirm the market value and liquidity of the investment property to appraise potential asset realizations if needed.
• Examine any contingent liabilities or off-balance sheet obligations not disclosed in current accounts.