RENOVO SERVICES LTD

Executive Summary

Renovo Services Ltd has demonstrated a positive financial turnaround with improved net assets due to capital injection, stabilizing its balance sheet. While the company shows potential to service its debt, liquidity remains tight with modest cash reserves and elevated current liabilities. Conditional credit approval is advised, contingent upon close monitoring of working capital management and cash flow stability.

RENOVO SERVICES LTD - Analysis Report

Company Number: SC675389

Analysis Date: 2025-07-29 13:03 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Renovo Services Ltd shows a significant turnaround in financial position over the last two years, moving from negative net assets in 2022 to positive net assets in 2023. The company is active, with no overdue filings, and is operating in the metal product repair sector. However, current liabilities remain relatively high compared to current assets, and cash balances are low. The recent capital injection (increase in share capital from £2 to £30,002) has strengthened the balance sheet but the liquidity position is tight. Approval is recommended with conditions including close monitoring of working capital management and cash flow to ensure ongoing debt servicing capability.

2. Financial Strength:

• Net Assets improved markedly from -£29,227 in 2022 to £31,841 in 2023, driven largely by share capital injection (£30,000 increase).
• Fixed assets slightly decreased reflecting depreciation and minimal additions, suggesting stable investment in plant and equipment.
• The company’s balance sheet is now positive with shareholders’ funds reflecting equity rather than accumulated losses.
• Current liabilities have decreased notably but remain substantial at £78,640 versus current assets of £83,768, resulting in a modest net current asset position (£5,128).
• The company remains small in scale but has corrected prior losses and improved equity base, indicating potential for financial stability if operational performance is maintained.

3. Cash Flow Assessment:

• Cash at bank is low (£3,466), indicating limited liquidity buffer.
• Debtors have increased to £41,297, which may reflect growing sales but also poses a risk if collection is delayed.
• Stocks and work in progress have nearly doubled to £39,005, requiring careful management to avoid cash flow strain.
• Current liabilities are still significant, demanding efficient working capital turnover.
• The modest positive net current assets imply a narrow margin for error in meeting short-term obligations; cash flow forecasting and debtor collection efficiency are critical areas to monitor.

4. Monitoring Points:

• Working capital ratios: Monitor the current ratio and quick ratio regularly to ensure liquidity remains adequate.
• Debtor aging: Ensure receivables are collected timely to avoid cash flow pressure.
• Cash flow forecasts: Review cash flow projections monthly to anticipate any liquidity shortfalls.
• Profitability trends: Track operating margins and net profit to confirm earnings growth supports debt servicing.
• Capital structure: Watch for further equity injections or debt increases that could affect leverage and repayment capacity.