Company Number: 12640343

Analysis Date: 2025-07-20 14:50 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   PALM RE TRADING LIMITED shows a mixed financial profile. While net assets are strong and increasing (£843k in 2025 vs £838k in 2024), the company’s liquidity position is weak, with significant negative net current assets (£-156k in 2025). The company has turned a small profit in 2025 (£5k) after a substantial loss in 2024 (£211k loss), indicating some operational improvement. However, the large fixed asset base relative to low turnover (£150k) and negative working capital suggest potential cash flow constraints and limited short-term financial flexibility. Approval is recommended subject to close monitoring of liquidity and cash conversion.

2. Financial Strength:
   The company’s balance sheet is asset-rich with fixed assets of approximately £999k, which have increased from £850k the prior year. Shareholders’ funds remain robust at £843k, indicating solid equity backing. However, current liabilities have grown substantially to £230k, exceeding current assets of £74k, leading to negative working capital. This implies reliance on long-term financing or asset liquidation to meet short-term obligations. The micro-entity status and limited number of employees (2) suggest a small operational scale.

3. Cash Flow Assessment:
   Current ratio is below 0.5 (Current Assets £74,678 / Current Liabilities £230,482), highlighting a liquidity risk. Negative net current assets point to potential difficulties in meeting immediate creditor demands from operational cash flows. The company’s turnover is modest (£150k), and profit margins are thin. Cash and equivalents are not separately disclosed but are likely low given the current asset figure. Working capital management and cash flow forecasting need strengthening to ensure ongoing debt servicing capability.

4. Monitoring Points:

• Liquidity ratios: current ratio and quick ratio should be monitored quarterly.
• Profitability trends: assess if the company can sustain and grow profits beyond the small gain in 2025.
• Turnover growth: watch for improvements in revenue to support cash flows.
• Debtor and creditor days: ensure receivables are collected promptly and payables managed carefully.
• Asset impairment risk: evaluate if large fixed assets are generating returns or create balance sheet risk.
• Director’s conduct and any changes in management or ownership structure.