Company Number: SC685137

Analysis Date: 2025-07-29 16:26 UTC

1. Risk Rating: HIGH
   Graceolive Limited exhibits significant solvency and liquidity concerns, manifested by large negative net current assets across multiple years and a steep decline in net assets from £33,233 in 2023 to £12,096 in 2024. The company's current liabilities have nearly doubled from 2023 to 2024, far exceeding current assets, which indicates difficulty meeting short-term obligations.

2. Key Concerns:

• Severe Working Capital Deficit: Negative net current assets of £273,074 in 2024, worsening from £67,715 deficit in the previous year, implies cash flow stress and potential for default on short-term liabilities.
• High Borrowings and Rising Debt: Long-term borrowings increased substantially to £398,726 in 2024 from £222,107 in 2023, with no corresponding equity growth, signaling increased leverage risk.
• Declining Net Assets and Retained Earnings: Net assets have dropped by over 60% year-on-year, and retained earnings are negative, suggesting ongoing losses or depletion of reserves, which undermines financial stability.

3. Positive Indicators:

• Investment Property Value Growth: The carrying value of investment properties more than doubled from £342,000 in 2023 to £711,752 in 2024, potentially indicating asset appreciation or capital investment which could support future revenue.
• No Overdue Filings: Both accounts and confirmation statements are filed on time, demonstrating regulatory compliance and good governance in terms of statutory obligations.
• Stable Management: The same two directors have been in place since incorporation with no disqualifications or governance flags noted.

4. Due Diligence Notes:

• Investigate the nature and terms of the other borrowings totaling £398,726, including interest rates, covenants, maturity profiles, and security arrangements.
• Assess cash flow forecasts and the company’s ability to service both short-term and long-term debts given the current liquidity position.
• Review valuation methodology and external verification for investment properties, noting that the latest valuation was not performed by an independent valuer.
• Understand the operational business model and revenue streams to determine sustainability given the negative retained earnings and shrinking net assets.
• Examine related party transactions, particularly loans/advances to directors which appear substantial and increasing, to evaluate potential risks or conflicts of interest.