Risk Assessment: OREGA CAPELLA LIMITED

1. Risk Rating: HIGH

Justification: The company faces a significant contraction in operations, having reduced from multiple serviced office centres to a single remaining site. The going concern note explicitly acknowledges a "downturn in activities" driven by structural shifts in office demand, and two centre closures have occurred. While the company remains profitable and cash-positive, the combination of sector headwinds, operational shrinkage, a £1.5m CBILS facility secured by a debenture over all assets, and declining cash reserves presents material solvency and viability concerns.

2. Key Concerns

a) Severe Operational Contraction and Going Concern Risk The accounts disclose that the company received notice of termination for two centres — one closed during the reporting period and another shortly after the year end (Aberdeen, closed September 2022). The company now operates only one remaining centre. The directors explicitly cite reduced demand for office space arising from the shift to remote/hybrid working. This represents a fundamental challenge to the business model, not a cyclical dip. A single-site operation in this sector carries significant concentration risk — loss of this lease would effectively end the trading entity.

b) CBILS Debt and Debenture over All Assets The parent company, Orega (Holdings) Limited, drew down £1.5 million under the Coronavirus Business Interruption Loan Scheme, and all subsidiaries (including Orega Capella Limited) entered into a debenture in favour of National Westminster Bank Plc, providing a fixed and floating charge over all assets — existing and future. This means the group's debt obligations rank ahead of unsecured creditors, and the company's assets are encumbered. Any enforcement action by the bank would directly impact this subsidiary's ability to continue as a going concern.

c) Declining Cash and Increasing Intercompany Debtors Cash fell from £869,388 (2021) to £566,211 (2022) — a 35% decline of approximately £303,000. Simultaneously, amounts owed by group undertakings increased from £0 to £193,000, representing 44% of total debtors. Intercompany balances of this nature are typically unsecured and may be difficult to realise independently of the group structure. If the parent or wider group experiences distress, these receivables could become impaired, further weakening the balance sheet.

3. Positive Indicators

• Profitability Maintained: The company reported a profit of £281,676 for the year ended 31 March 2022 (up from £371,490 in the prior year on a like-for-like basis excluding the capital contribution repayment). This demonstrates the remaining centre can generate positive returns.

• Positive Net Current Assets: Net current assets improved from £57,278 (2021) to £347,111 (2022), and shareholders' funds grew from £65,435 to £347,111. The current ratio appears adequate at approximately 1.53:1.

• Compliance and Governance: The company's filings are current and not overdue. The accounts received an unqualified audit opinion from Moore Kingston Smith LLP. There are no director disqualification records noted.

• Parent Company Backing: As a wholly-owned subsidiary of Orega (Holdings) Limited, the company may benefit from group support, though this is not guaranteed and the group itself carries the CBILS obligation.

• No Employees on Payroll: With zero employees, the company has minimal fixed overhead, which provides some flexibility in managing costs during revenue fluctuations.

4. Due Diligence Notes

a) Group Financial Health: The most critical area for further investigation is the financial position of Orega (Holdings) Limited and the wider group. Given the CBILS debenture structure and intercompany balances, the parent's solvency is directly relevant to this subsidiary's viability. Obtain and review the parent company's consolidated accounts.

b) Remaining Centre Viability: Determine the lease terms, location, occupancy rates, and profitability of the single remaining centre. Understand whether this centre is sustainable under current market conditions and whether the lease contains break clauses or upcoming renewal dates that could trigger further contraction.

c) Intercompany Balances: Clarify the nature and terms of the £193,000 owed by group undertakings. Is this a trading balance, a loan, or a temporary cash sweep? Understand the priority of repayment and whether this is recoverable on a standalone basis.

d) CBILS Repayment Profile: Obtain details on the CBILS repayment schedule, maturity date, and any covenant requirements. Assess whether the group is meeting its repayment obligations and whether any default risk exists.

e) Post Year-End Developments: The Aberdeen centre closed in September 2022. Understand the financial impact of this closure (any onerous lease provisions, dilapidation costs, or asset write-offs) and whether any further centre closures are anticipated.

f) Contingent Liabilities: The accounts take advantage of the FRS 102 exemption from disclosing related party transactions with the parent and wholly-owned subsidiaries. Request full details of all intercompany transactions, guarantees, and contingent liabilities.

g) Cash Trajectory: Monitor whether the cash decline has continued beyond the reporting date and whether the company is generating sufficient operating cash flow to service its obligations without group support.