IKOYI SPACES LIMITED

Executive Summary

IKOYI SPACES LIMITED shows signs of financial strain with negative net assets and working capital deficits, despite a robust cash reserve supported by its parent company. The company’s financial health score is D, indicating fragile conditions requiring active management of receivables, payables, and funding sources. With focused improvements in cash flow management and reduced reliance on related party loans, the company can strengthen its financial position and sustain growth.

IKOYI SPACES LIMITED - Analysis Report

Company Number: 13558052

Analysis Date: 2025-07-19 12:32 UTC

Financial Health Assessment for IKOYI SPACES LIMITED

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1. Financial Health Score: D

Explanation:
The company exhibits several warning signs typical of financial strain, such as negative net assets, negative working capital, and reliance on significant related party funding. Despite maintaining a healthy cash reserve, the overall financial structure and liquidity position indicate distress symptoms that require prompt management attention. The score "D" reflects a fragile financial condition with potential going concern risks if current trends continue without improvement.

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2. Key Vital Signs

Metric	Latest Value (31 Aug 2023)	Interpretation
Net Current Assets (Working Capital)	£-51,131	Negative working capital indicates inability to cover short-term liabilities with current assets; a symptom of liquidity stress.
Net Assets / Shareholders' Funds	£-21,159	Negative net assets mean total liabilities exceed total assets; this points to an overall balance sheet weakness.
Cash Balance	£659,262	Strong cash reserve is a vital sign of liquidity health, providing a buffer against operational cash demands.
Debtors	£163,867	Elevated trade and other receivables compared to prior years; may signal extended credit terms or slow collections.
Current Liabilities	£922,303	High current liabilities relative to assets heighten liquidity risk; majority relates to related party and other creditors.
Tangible Fixed Assets	£29,973	Growing fixed assets suggest investment in operations and capacity, positive for medium-term growth.
Related Party Loan	£392,450	Significant interest-free loan from parent company; reliance on this funding is a symptom of external support dependency.
Employee Count	18 (average monthly)	Rapid growth from 2 to 18 employees indicates business expansion but also increased operating costs.

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3. Diagnosis

Underlying Financial Condition:
IKOYI SPACES LIMITED is showing symptoms consistent with an early-stage growth company but with financial distress signals. The company has been trading for just over two years and incurred initial start-up costs reflected in negative equity. The substantial cash balance is a positive "healthy pulse," suggesting good cash inflows or recent funding injections, yet the negative working capital and shareholders’ funds reflect underlying balance sheet weakness.

The heavy current liabilities, especially the large amount owed to related parties and other creditors, may indicate short-term funding pressure. The reliance on an interest-free loan from the parent company (Ikoyi Group Limited) is critical to maintaining operations and liquidity but also suggests the company is not yet self-sustaining financially.

The increase in debtors and stock points to operational scaling but also potential risks in cash conversion cycles. If receivables or stock turnover slows, liquidity could deteriorate further. The fixed asset investment is positive, indicating infrastructure build-out, but this also ties up capital.

Going Concern Considerations:
Directors acknowledge going concern status based on ongoing parent company support and cash reserves. However, the negative net assets and working capital deficit are symptoms that require careful monitoring. Without continued funding or improvement in profitability and working capital management, the company risks financial strain.

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4. Recommendations

To improve financial wellness and address distress symptoms, I recommend the following actions:

1. Improve Working Capital Management

   • Accelerate debtor collections to reduce receivables aging and improve cash inflows.
   • Review stock management to avoid overstocking and free up cash.
   • Negotiate longer payment terms with creditors where possible to better align cash outflows.

2. Reduce Dependency on Related Party Funding

   • Develop a plan for gradual repayment of the interest-free loan from the parent company to strengthen independence.
   • Explore alternative financing options like trade credit, small business loans, or equity injections to diversify funding sources.

3. Enhance Profitability and Cash Flow

   • Focus on increasing turnover and gross margins, especially through pricing strategies and cost control in the licensed restaurant business.
   • Control operating expenses linked to staff growth to ensure scalability is matched by revenue growth.

4. Regular Financial Monitoring and Forecasting

   • Implement monthly cash flow forecasting and financial reporting to detect early warning signs before they become critical.
   • Monitor key ratios like current ratio, quick ratio, and net asset position quarterly.

5. Governance and Strategic Planning

   • Engage directors and management in strategic planning to align operations with financial realities and growth ambitions.
   • Consider seeking external financial advisory support to assist in turnaround or growth financing strategies.

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Medical Analogy Summary

IKOYI SPACES LIMITED’s financial statements reveal symptoms akin to a patient with "liquidity distress" and "balance sheet weakness" despite a "healthy cash pulse." The company currently relies on a "lifeline" from its parent company to maintain "circulation" (cash flow). Without intervention to improve "circulatory efficiency" (working capital management) and reduce "dependency on external support," the company risks developing chronic financial illness.

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