NORTHWEST DRINKS LTD
Company number 08431597 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Credit Analysis: NORTHWEST DRINKS LTD
1. Credit Opinion: DECLINE
Reasoning: This application must be declined due to fundamental balance sheet insolvency and severe liquidity constraints. The company has negative net assets of £45,430 and negative shareholders' funds of £65,430, with current liabilities exceeding current assets by £57,720. Critically, the directors themselves have acknowledged material uncertainties regarding the company's ability to continue as a going concern. The financial trajectory shows sustained deterioration since 2019, with no credible path to recovery evident in the filed accounts.
2. Financial Strength: WEAK - INSOLVENT
Balance Sheet Position (YE 28 March 2025):
| Metric | 2025 | 2024 | Movement |
|---|---|---|---|
| Fixed Assets | £15,310 | £9,478 | +£5,832 |
| Current Assets | £66,309 | £109,274 | -£42,965 |
| Current Liabilities | £124,029 | £144,977 | -£20,948 |
| Net Current Assets | -£57,720 | -£35,703 | -£22,017 |
| Net Assets | -£45,430 | -£38,683 | -£6,747 |
| Shareholders' Funds | -£65,430 | -£58,683 | -£6,747 |
Key Concerns:
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Balance Sheet Insolvency: The company has been technically insolvent since at least 2021, with accumulated losses of £65,430 against share capital of only £20,000. Net liabilities have deepened from -£27,198 (2021) to -£45,430 (2025).
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Working Capital Deficit: Net current liabilities have worsened dramatically from -£35,703 to -£57,720 in one year. The company cannot meet its short-term obligations from current assets.
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Asset Quality: Current assets are dominated by stock (£52,000 of £66,309 total), which is inherently illiquid and subject to markdown risk in the wholesale alcohol sector. Trade debtors have collapsed from £65,021 to £14,309, suggesting either significantly reduced sales or aggressive collections.
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Historical Decline: Shareholders' funds have fallen from a positive £30,237 in 2019 to -£65,430 in 2025 – a £95,667 erosion over six years.
3. Cash Flow Assessment: CRITICAL
Liquidity Analysis:
- Current Ratio: 0.53x (2025) vs 0.75x (2024) – substantially below the 1.0x minimum threshold and deteriorating
- Quick Ratio: Estimated 0.11x (excluding £52,000 stock) – the company has virtually no liquid assets to cover immediate obligations
Working Capital Breakdown (2025):
| Item | Amount | Comment |
|---|---|---|
| Trade Debtors | £14,309 | Down 78% from £65,021 – concerning revenue signal |
| Stock | £52,000 | Up 17% from £44,253 – potential overstocking |
| Trade Creditors | £39,723 | Down from £66,398 – possible supplier pressure |
| Bank Overdrafts/Loans | £36,016 | Up 51% from £23,866 – increasing reliance on debt |
| Tax & Social Security | £37,466 | Up from £33,551 – growing arrears concern |
Critical Observations:
- The company is funding operations through short-term bank borrowings and creditor stretch, not through operating cash generation.
- Bank overdrafts/loans increasing from £23,866 to £36,016 within current liabilities, plus £3,020 falling due after one year (down from £12,458), suggests refinancing of long-term debt into short-term facilities – a structural weakening.
- Tax and social security liabilities of £37,466 represent a priority claim that could crystallise rapidly.
- The dramatic reduction in trade debtors without a corresponding reduction in stock may indicate contracting turnover or aggressive debtor collection to fund operations.
4. Monitoring Points
Should any exposure exist or be considered despite the decline recommendation, the following require ongoing surveillance:
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Going Concern Status: The explicit material uncertainty disclosure requires quarterly review. Any withdrawal of director support or creditor pressure could trigger formal insolvency.
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Trade Debtor Trend: The 78% drop requires explanation – if revenue has fallen proportionally, the business model may be unsustainable at current overhead levels.
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Bank Facility Terms: Monitor whether bank facilities are being renewed, their terms, and whether personal guarantees from directors are in place. The shift from long-term to short-term bank debt is concerning.
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HMRC Position: Tax liabilities of £37,466 represent a potential trigger for winding-up petitions. Monitor for any enforcement action.
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Creditor Payment Days: Track whether trade creditors are being extended beyond normal terms, which would indicate cash flow distress.
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Stock Quality: At £52,000, stock represents 78% of current assets. Any obsolescence or markdown would eliminate remaining liquidity.
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Employee Numbers: Reduction from 9 to 6 employees may indicate cost-cutting but also reduced capacity to generate revenue.
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Director Loans: Assess whether directors are withdrawing or injecting funds. No director loan disclosure in filed accounts requires clarification.
Additional Risk Factors
- Sector Risk: Wholesale alcohol distribution operates on thin margins and is sensitive to duty increases and economic downturns affecting discretionary spending.
- Capital Structure: With only £20,000 share capital supporting accumulated losses of £65,430, there is no equity cushion for creditors.
- Filing: Accounts filed under small companies regime with audit exemption – limited financial transparency available for creditor assessment.