OLD BURLINGTON SPIRIT LIMITED

Executive Summary

OLD BURLINGTON SPIRIT LIMITED is a newly established licensed restaurant company showing strong short-term liquidity but experiencing early financial strain due to high long-term related party debt exceeding its asset base. The company is in a set-up phase with significant fixed asset investments but negative equity, signaling the need for capital restructuring and operational ramp-up to improve financial health. Immediate focus on cash flow management and debt restructuring will be critical to sustain ongoing viability.

OLD BURLINGTON SPIRIT LIMITED - Analysis Report

Company Number: 14954875

Analysis Date: 2025-07-29 12:11 UTC

Certainly, let's proceed with a thorough financial health assessment of OLD BURLINGTON SPIRIT LIMITED, using a medical diagnostic style approach.

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1. Financial Health Score: C

Explanation:
OLD BURLINGTON SPIRIT LIMITED shows early-stage signs of operational establishment with significant asset investment but presents a net liability position and shareholders' deficit at the end of its first extended financial period. While the company's liquidity ("cash at bank") appears robust, the overall balance sheet indicates financial stress due to high long-term liabilities exceeding total assets. This suggests a condition akin to "compensated distress"—the company can currently meet short-term demands but carries underlying financial burdens needing management attention.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Total Assets	1,280,074	Represents the company's resource base; healthy size for a new licensed restaurant.
Current Assets	997,787	Strong liquidity pool largely from cash (£959k), indicating healthy short-term cash flow.
Current Liabilities	24,346	Low short-term obligations relative to cash, showing good ability to cover immediate debts.
Net Current Assets (Working Capital)	973,441	Positive and strong; sign of healthy operational liquidity.
Long-term Liabilities	1,353,074	High non-current debts (mainly amounts owed to related parties); a symptom of financial strain.
Net Liabilities (Net Assets)	-97,346	Negative equity indicating liabilities exceed assets; a red flag for solvency concerns.
Shareholders’ Funds (Equity)	-97,346	Deficit position; shareholders’ investment and retained earnings are negative.
Share Capital	1,266	Minimal paid-in capital; reflects typical early-stage company capitalisation structure.
Intangible Assets	1,738	Small intangible assets, possibly pre-opening costs or licenses, typical at start-up phase.
Tangible Fixed Assets	280,549	Significant investment in physical assets, likely fixtures, fittings, and leasehold improvements for the restaurant.
Average Employees	0	No employees reported during the period, possibly indicating pre-operation or outsourced services.

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3. Diagnosis: Financial Condition Analysis

• Liquidity & Cash Flow:
  The company enjoys a "healthy cash flow" condition on paper, with nearly £960k cash available and current liabilities minimal. This suggests no immediate liquidity crisis and the ability to meet short-term creditor demands promptly.

• Capital Structure & Solvency:
  The "symptom of distress" is evident in the balance sheet's negative net assets and shareholders' deficit of approximately £97k. This arises primarily because long-term liabilities (£1.35m), mainly owed to related parties, exceed total assets. The company is effectively "underwater" on equity, a warning sign for creditors and investors.

• Operational Stage & Growth:
  As a newly incorporated company with no employees yet reported and significant fixed asset investments, it appears to be in a ramp-up phase—setting up premises and infrastructure before full commercial operations. The absence of an income statement prevents assessment of profitability, but accumulated losses reflected in the deficit suggest initial operational or pre-operational expenses.

• Funding & Related Party Exposure:
  The company relies heavily on loans from related parties and connected entities (£1.21m), which may provide flexible financing but also highlights dependency and potential risk if these parties withdraw support.

• Going Concern:
  The directors confirm a going concern basis, supported by cash reserves and expected future cash flows, indicating confidence in operational viability over the next 12 months.

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4. Recommendations: Prescriptions for Financial Wellness

• Optimize Capital Structure:
  Consider restructuring or refinancing long-term liabilities to reduce the burden on equity, possibly converting some debt to equity or negotiating longer repayment terms with related parties to alleviate solvency risk.

• Enhance Operational Activity:
  Initiate or accelerate revenue-generating activities to start turning fixed asset investments into cash flow, addressing the absence of operational income and improving retained earnings.

• Monitor Cash Flow Closely:
  Maintain vigilant cash flow management to preserve the "healthy cash flow" state, ensuring liquidity remains sufficient to cover both current and near-term obligations.

• Build Equity Base:
  Plan for capital injections through new share issues or external investment to improve shareholders’ funds and strengthen the balance sheet.

• Limit Related Party Exposure:
  Reduce reliance on loans from related parties by exploring external financing options or operational cash flow improvements to diversify funding sources and lower risk.

• Prepare for Employee Engagement:
  As the business ramps up, budget for staffing costs and ensure compliance with employment obligations to avoid unexpected financial pressures.

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