Credit Analysis: MOJO LTD (05187660)

1. Credit Opinion: CONDITIONAL

Reasoning: MOJO LTD presents a mixed credit profile. While the latest year-end (January 2025) shows a return to positive net assets of £28,891 after a prior-year deficit of (£2,665), this improvement is largely driven by a dramatic increase in debtors rather than cash generation. Cash has fallen from £88,715 to £11,635, and the debtor book has grown from £5,861 to £59,982 — with £53,174 classified as amounts due from group undertakings and "other debtors," raising serious questions about asset quality and collectibility. The company's 10-year history reveals persistent financial instability, with negative net assets in 7 of the past 10 years. Any credit facility should be subject to stringent conditions including covenants around related-party exposures and cash flow monitoring.

2. Financial Strength

Balance Sheet Volatility — Significant Concern

The company's net asset position has been highly erratic over the past decade:

The pattern of oscillation between positive and negative net assets suggests a business that lacks structural financial stability. The company has been technically insolvent (negative net assets) in 7 of the last 10 years, which would typically constrain lending capacity.

Capital Structure: - Share capital remains at just £100 — no equity injection to support the business - P&L reserve has moved from (£2,765) to £28,791, reflecting accumulated profits - No evidence of external equity investment; the business appears to rely on director loans and group undertakings for funding

Leverage Concerns: - Total liabilities of £62,561 (including long-term) against total assets of £76,817 gives a debt-to-asset ratio of approximately 81% - Long-term bank loans of £4,000 remain on the balance sheet - The apparent deleveraging from £107,301 to £58,561 in current liabilities is largely explained by the repayment of director loans (£15,517) and reduction in group undertaking debts (£40,066 down to £66), rather than operational debt reduction

3. Cash Flow Assessment

Liquidity Position — Weakening Despite Balance Sheet Improvement

Working Capital: - Current assets: £76,817 - Current liabilities: £58,561 - Net current assets: £18,256 (improved from £8,625 deficit in 2024)

While working capital is now positive, the composition is concerning:

Critical Observations:

1. Cash Drain: Cash has fallen by £77,080 (87% decline). The primary uses appear to be repayment of director loans (£15,517), reduction in group undertaking payables (£40,000), and reduction in long-term bank debt (£8,000). This represents a deliberate de-leveraging but has left the company with minimal liquidity.

2. Debtor Quality Risk: £53,174 of the £59,982 debtor balance relates to group undertakings and "other debtors." These are not trade debtors and may be difficult to realise. The sudden appearance of these balances warrants investigation — they could represent intercompany funding arrangements rather than genuine receivables.

3. Tax Liability: Taxes and social security have increased from £28,549 to £41,715 — a 46% increase. This represents a significant creditor and potential cash drain if not being managed through HMRC time-to-pay arrangements.

4. Current Ratio: 76,817 ÷ 58,561 = 1.31 — marginally adequate but heavily reliant on uncertain debtor balances.

5. Quick Ratio (excluding inventory and group/other debtors): (11,635 + 295 + 6,513) ÷ 58,561 = 0.31 — critically low, indicating the company cannot meet short-term obligations from liquid assets.

4. Monitoring Points

Key Monitoring Recommendations:

1. Intercompany Exposures: Request full details of the £22,500 due from group undertakings and £30,674 other debtors — repayment terms, counterparty creditworthiness, and whether these are truly recoverable within 12 months.

2. Tax Position: Confirm whether the £41,715 tax liability is subject to any HMRC time-to-pay arrangement and obtain clearance certificates where applicable.

3. Cash Flow Forecasting: Given the critically low quick ratio, request 12-month cash flow projections to assess whether the business can service any new debt obligations.

4. Group Structure: Obtain a group structure chart to understand the relationship with related entities and assess contagion risk.

5. Trading Performance: The P&L has not been filed (permitted under small companies regime). Request management accounts to verify the business is trading profitably and not relying on balance sheet adjustments.

6. Debtor Ageing: Request aged debtor analysis, particularly for the £53,174 in group/other debtors.

7. Director Character: Note the director name discrepancy (Jacobs vs Elliott in the accounts sign-off). Clarify the current directorship position.