ORCHARD PROPERTIES (MIDDLESBROUGH) LIMITED

Executive Summary

Orchard Properties Holdings Limited demonstrates stable property asset values and positive equity growth but suffers from significant net current liabilities driven by directors’ loans, creating liquidity risk. Conditional credit approval is recommended with strict monitoring of cash flow and short-term liabilities to ensure ongoing debt servicing capability. The company’s financial resilience depends on steady rental income and continued support from directors’ loans.

ORCHARD PROPERTIES HOLDINGS LIMITED - Analysis Report

Company Number: 13111212

Analysis Date: 2025-07-19 12:53 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Orchard Properties Holdings Limited operates in the real estate letting sector with a portfolio of investment properties valued at £500,000. The company has positive net assets (£108k) and shareholders’ funds, showing equity growth year-over-year. However, significant net current liabilities of £376k driven primarily by large short-term liabilities including directors’ loan accounts indicate potential liquidity constraints. The directors’ loans are interest-free and repayable on demand, which may alleviate pressure but also introduces risk if immediate repayment is requested. The company’s ability to service its short-term obligations depends on cash flow from property rental income and potential refinancing or capital injection. Given stable asset values but weak current asset coverage of current liabilities, credit approval is conditional on monitoring liquidity closely and confirmation of steady rental income or committed funding sources.

2. Financial Strength:
   The balance sheet shows a strong fixed asset base primarily comprising investment property at a fair value of £500,000, unchanged from the prior year, indicating asset value stability. The revaluation reserve of £82k supports this valuation. However, current liabilities of £421k significantly exceed current assets of £45k, resulting in a negative working capital position of £-376k. This is primarily due to directors’ loan accounts totaling around £386k, which are unsecured and interest-free but form a large portion of current liabilities. Net assets have improved from a negative £15k in 2021 to positive £108k in 2024, reflecting retained earnings growth and revaluation reserve. Overall, the company has moderate financial strength grounded in tangible property assets but faces short-term funding risk.

3. Cash Flow Assessment:
   Cash at bank increased moderately to £34k, but remains low relative to current liabilities. Debtors increased to £10.7k but remain a small component of current assets. The company has no employees and limited operational expenses, suggesting low cash outflows. The cash flow adequacy to meet current liabilities depends heavily on rental income collections and the willingness of directors to continue deferring loan repayments. The interest-free nature of director loans provides flexibility but also risk if repayment demands arise. No audit or income statement is filed, limiting visibility on operational cash flows. Liquidity remains a concern and should be monitored closely.

4. Monitoring Points:

• Liquidity ratios, especially current ratio and quick ratio, to track improvements or deterioration in working capital position.
• Directors’ loan account balances and repayment terms to assess risk of sudden cash calls.
• Rental income consistency and arrears to ensure steady cash inflow supporting operational costs and liabilities.
• Property market conditions that could affect investment property valuations and revaluation reserves.
• Timely filing of accounts and confirmation statements to ensure compliance and transparency.