ENCAPSULATION SOLUTIONS LTD

Executive Summary

Encapsulation Solutions Ltd currently demonstrates weak financial health with persistent negative net assets and liquidity shortfalls. The company’s high leverage and minimal cash reserves limit its ability to meet short-term obligations, resulting in a high credit risk profile. Without material improvement in financial metrics or capital support, extending credit is not recommended at this time.

ENCAPSULATION SOLUTIONS LTD - Analysis Report

Company Number: 12388261

Analysis Date: 2025-07-29 14:45 UTC

1. Credit Opinion: DECLINE
   Encapsulation Solutions Ltd shows significant negative net assets (£-14,495) and recurring net liabilities, indicating a weak capital structure and insolvency risk. The company’s current liabilities far exceed current assets, with a current ratio below 1 (current assets £3,384 vs current liabilities £4,660), highlighting liquidity stress. The company is overdue on filing its accounts, which raises governance and compliance concerns. Although the director states going concern basis in accounts, the financial profile shows limited capacity to service debt or absorb shocks. Without substantial capital injection or turnaround evidence, the credit risk is high.

2. Financial Strength:
   The balance sheet is under strain with net liabilities worsening from £-19,100 (2022) to £-14,495 (2023), though slightly improved. Share capital increased significantly from £100 to £5,100, indicating some recent equity injection, but retained losses remain large at £-19,595. The company relies heavily on borrowings (£13,219 non-current and £1,500 current loans), suggesting high leverage. Fixed assets are negligible or unreported, so asset backing for loans is limited. Overall, the financial position is fragile with weak equity and high debt levels.

3. Cash Flow Assessment:
   Cash at bank is minimal (£71), and trade debtors are modest (£3,313) with some concentration in “other debtors” (£1,500). The working capital deficit (£4,660 current liabilities vs £3,384 current assets) indicates ongoing liquidity challenges. The company’s ability to generate positive cash flow from operations is uncertain and likely strained given the ongoing losses and creditor pressure. The significant current borrowings that reduced from £13,219 to £1,500 suggest some repayment or refinancing but still represent a near-term repayment obligation. Liquidity risk is elevated.

4. Monitoring Points:

• Timely filing of overdue accounts and continued compliance to avoid penalties
• Trends in net liabilities and retained losses to monitor improvement or deterioration
• Cash flow generation and debtor collection efficiency
• Changes in borrowing structure and repayment capacity
• Any capital injections or owner support to strengthen equity base
• Operational performance and revenue growth given the company's specialized cleaning niche