FINISTERRE UK LIMITED
Company number 04444480 · 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: FINISTERRE UK LIMITED
1. Credit Opinion: CONDITIONAL
Reasoning: The company presents a technically insolvent balance sheet with net liabilities of £2.57M and accumulated losses of £7.81M, both worsening year-on-year. However, the significant capital injection evident in 2019 (long-term creditors rising from £2.78M to £7.7M, cash increasing from £500K to £4.09M) indicates active parent company support via Fitzroy Apparel Limited. Any credit facility must therefore be conditional on parent company guarantee. Without such backing, the standalone entity would be rated DECLINE given the depth of accumulated losses and balance sheet insolvency.
The improved liquidity position and parent backing provide some comfort, but the underlying trading losses remain a serious concern requiring ongoing external financial support.
2. Financial Strength
Balance Sheet Position: Significantly Weak
| Metric | 2019 | 2018 | Movement |
|---|---|---|---|
| Net Assets | (£2,573,893) | (£1,301,676) | Worsened by £1.27M |
| Shareholders' Funds | (£7,811,297) | (£6,539,080) | Worsened by £1.27M |
| Accumulated P&L Losses | (£7,811,297) | (£6,539,080) | Deepening losses |
- Technical Insolvency: The company has negative net assets for the second consecutive year, with the deficit nearly doubling. This means total liabilities exceed total assets by £2.57M.
- Accumulated Losses: The profit and loss reserve shows £7.81M in accumulated losses, indicating sustained trading losses over multiple years. The 2019 loss alone was approximately £1.27M.
- Capital Structure: Share capital remains static at £5.06M with share premium of £180K. The entire equity base has been eroded by trading losses.
- Long-term Debt Surge: Creditors falling due after more than one year increased dramatically from £2.78M to £7.70M – an increase of £4.92M. This almost certainly represents intercompany debt from parent Fitzroy Apparel Limited, effectively a capital restructuring rather than third-party borrowing.
Assessment: The balance sheet is fundamentally impaired. The company is entirely dependent on parent company funding to continue as a going concern. Without Fitzroy Apparel's support, the business would be unable to meet its obligations.
3. Cash Flow Assessment
Liquidity Position: Improved but Debt-Dependent
| Metric | 2019 | 2018 | Movement |
|---|---|---|---|
| Cash | £4,093,212 | £499,916 | +£3.59M |
| Net Current Assets | £4,520,481 | £805,044 | +£3.72M |
| Current Ratio | 4.24x | 1.66x | Improved |
| Debtors | £671,502 | £294,402 | +128% |
Positive Indicators: - Cash position improved dramatically from £500K to £4.09M, providing a substantial liquidity buffer - Net current assets moved from £805K to £4.52M – a significant improvement in working capital - Current ratio of 4.24x indicates strong short-term liquidity coverage - Current liabilities only increased modestly from £1.22M to £1.39M
Concerning Indicators: - The cash increase is almost entirely funded by long-term debt injection from the parent, not generated from operations - Debtors more than doubled, which could indicate growth but may also signal slower customer collections or potential bad debt risk - Stocks remain high at £1.15M with only a slight decrease, suggesting possible overstocking or slow-moving inventory in a seasonal business - No profit and loss account filed, making it impossible to assess operating cash generation independently
Working Capital Assessment: While the current ratio appears healthy, the quality of working capital must be questioned. The cash is predominantly funded by parent debt rather than operating cash flow. The business model (9 retail stores plus e-commerce) requires sustained working capital for inventory and seasonal cash flow variations.
4. Monitoring Points
| Priority | Metric | Rationale |
|---|---|---|
| Critical | Parent company financial health | Entire business model depends on Fitzroy Apparel's continued support. Monitor parent's accounts and any change in ownership/strategy |
| Critical | Trading profitability | Accumulated losses of £7.81M must be reversed. Request quarterly management accounts to track progress toward breakeven |
| High | Cash burn rate | With £4.09M cash but ongoing losses, monitor how quickly cash is being consumed. Request rolling 13-week cash flow forecasts |
| High | Intercompany balances | Track the nature and terms of parent company debt. Any withdrawal of funding would immediately threaten viability |
| High | Debtors collection | 128% increase in debtors requires explanation. Monitor debtor days and aged debtor reports |
| Medium | Inventory management | £1.15M in stock for a seasonal apparel business is significant. Monitor stock turn and margin erosion from discounting |
| Medium | Store performance | 9 UK retail stores represent significant fixed cost. Monitor like-for-like sales and store-level profitability |
| Low | Filing compliance | Accounts filed on time. Continue to monitor for any filing delays which could signal distress |
Additional Considerations: - The 2019 accounts were signed off on 17 December 2020 – a significant delay from the year-end, though not technically overdue - The company uses the small companies regime and is audit-exempt, limiting the depth of financial information available - No profit and loss account has been filed, which is permitted under the small companies regime but reduces transparency - B Corp certification indicates commitment to social/environmental standards but does not guarantee financial resilience