KAA RESTAURANTS LTD

Executive Summary

KAA RESTAURANTS LTD demonstrates improving net assets and elimination of long-term debt, signaling strengthened financial footing despite a negative working capital position in the latest year. Given its micro-entity scale and liquidity concerns, credit approval is recommended on a conditional basis, with close monitoring of cash flow and short-term liquidity metrics. The company’s small size and early stage of operations warrant careful oversight to ensure sustainable financial performance.

KAA RESTAURANTS LTD - Analysis Report

Company Number: SC735609

Analysis Date: 2025-07-20 13:19 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   KAA RESTAURANTS LTD shows some positive signs in net asset growth, with net assets increasing from £16,613 in 2023 to £87,628 in 2024, indicating an improvement in overall financial position. However, the micro-entity displays volatile working capital, shifting from a positive £10,048 in 2023 to a negative £3,972 in 2024, which raises concerns about short-term liquidity management. The absence of long-term debt as of 2024 is positive, but the current liabilities slightly exceed current assets, signaling potential cash flow pressures. Given the company’s short trading history (incorporated mid-2022) and the nature of the restaurant industry, which can be sensitive to economic fluctuations, credit approval should be conditional on close monitoring of liquidity and cash flow trends.

2. Financial Strength:
   The balance sheet reflects a relatively low asset base typical for a micro-entity, with fixed assets reducing from £114,500 to £91,600, possibly due to asset disposals or depreciation. The substantial improvement in net assets suggests possible capital injections or retained earnings, but given the relatively small scale, the company remains vulnerable to operational disruptions. The elimination of a previously reported long-term creditor (£107,935 in 2023) improves solvency but requires clarification—whether this was debt repayment or restructuring. Overall, equity funding dominates the capital structure, which is positive, but the modest asset base and working capital deficits limit financial flexibility.

3. Cash Flow Assessment:
   Current assets stood at £17,222 against current liabilities of £21,194 in 2024, resulting in a net current liability position, which indicates potential liquidity risk in meeting short-term obligations. The negative working capital position is a concern in the restaurant sector, where cash flow stability is critical. The average employee count of 5 suggests a small operation, potentially keeping fixed overheads low, but cash inflows must be sufficient to cover payables and operational costs. Without detailed cash flow statements, it is advisable to recommend regular cash flow reporting and possibly cash reserves or overdraft facilities to mitigate liquidity risk.

4. Monitoring Points:

• Liquidity ratios: Current ratio and quick ratio trends to ensure improvement or stability in working capital.
• Profitability and cash flow statements: To verify operational cash generation and debt servicing capacity.
• Changes in fixed assets and creditors: To understand asset disposals or debt repayments impacting financial position.
• Directors’ management actions: Capital injections, cost controls, or business development strategies to support growth and resilience.
• Compliance with filing deadlines: The company is current on filings, which is positive; continued compliance is essential.