LITTLE SICILY RESTAURANT LIMITED

Executive Summary

LITTLE SICILY RESTAURANT LIMITED shows clear symptoms of financial distress, with sharply declining net assets and negative working capital indicating liquidity challenges. Immediate action to improve cash flow, reduce costs, and possibly secure additional funding is critical to avoid further deterioration. Without intervention, the company’s financial health may worsen, risking insolvency.

LITTLE SICILY RESTAURANT LIMITED - Analysis Report

Company Number: 13790327

Analysis Date: 2025-07-29 13:31 UTC

Financial Health Assessment: LITTLE SICILY RESTAURANT LIMITED

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1. Financial Health Score: D

Explanation:
The company exhibits significant signs of financial distress. While it remains active and operational, key indicators such as declining fixed assets, sharply reduced current assets, and precarious net current asset positions suggest liquidity issues. The drastic drop in net assets from £63,567 in 2022 to £10,611 in 2023 further signals potential financial instability that needs urgent attention.

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2. Key Vital Signs

Metric	2023 Value	2022 Value	Interpretation
Fixed Assets	£69,212	£107,471	Decline of ~36%; possible asset disposals or depreciation.
Current Assets	£4,838	£19,894	Severe drop (~76%); indicates reduced cash/debtors/stock.
Current Liabilities	£63,439	£63,798	Relatively stable but high short-term obligations.
Net Current Assets (Working Capital)	-£58,601	-£43,904	Negative and worsening; indicates liquidity stress.
Total Assets less Current Liabilities	£10,611	£63,567	Significant reduction; net assets eroded by over 80%.
Shareholders’ Funds (Equity)	£10,611	£63,567	Equity sharply diminished; risk of insolvency rising.
Average Employees	7	7	Stable headcount; no reduction in workforce despite financial strain.

Interpretation of Vital Signs:

• The company shows "symptoms of distress" through deteriorating liquidity and equity.
• Negative net current assets (working capital) imply the company may struggle to meet short-term obligations without additional financing.
• Sharp decline in fixed and current assets may indicate asset sales or operational downturn.
• The stable number of employees suggests limited cost-cutting, which may exacerbate cash flow issues.

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3. Diagnosis

LITTLE SICILY RESTAURANT LIMITED is currently experiencing a fragile financial condition resembling a patient with weakening vital signs. The sharp erosion of net assets and worsening working capital position are "warning symptoms" that the business is under financial strain, possibly due to operational challenges or poor cash management.

While the company is not yet insolvent or in liquidation, the significant decline in equity and liquidity poses a risk to its ongoing viability. The unchanged high current liabilities against drastically reduced current assets reflect a "cash flow problem," potentially threatening the ability to pay creditors promptly.

The change in director in early 2025 may indicate recent management restructuring, which could be a response to these financial challenges.

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4. Recommendations

To restore financial wellness and stabilize the business, the following steps are recommended:

1. Improve Cash Flow Management

   • Tighten credit control to accelerate debtor collections.
   • Reduce inventory levels to free up cash.
   • Negotiate extended payment terms with suppliers to ease short-term liabilities.

2. Cost Rationalization

   • Review operating expenses and consider temporary workforce adjustments if feasible without harming core operations.
   • Explore cost-saving measures in supply chain and overheads.

3. Capital Injection or Financing

   • Consider equity injection from shareholders or external investors to rebuild net assets.
   • Explore short-term financing options such as overdrafts or invoice financing to address liquidity gaps.

4. Asset Review

   • Assess fixed assets for potential sale or leaseback to generate immediate cash without undermining operational capacity.

5. Strategic Business Review

   • Reevaluate business model and market positioning in the licensed restaurant sector to identify growth opportunities or necessary pivots.
   • Implement robust financial planning and forecasting to monitor future cash flow and solvency.

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