Credit Assessment: PENDULUM SOURCING SOLUTIONS LIMITED

1. Credit Opinion: DECLINE

This application must be declined. The company is recorded as Dissolved at Companies House, meaning it no longer exists as a legal entity capable of entering into credit agreements. Even disregarding the dissolved status, the financial position is fundamentally unsound — the business has been balance-sheet insolvent for the majority of its 18-year existence, with net liabilities of £26,353 against negligible assets of £3,278 as at 31 May 2024. There is no realistic prospect of debt recovery from this entity.

2. Financial Strength

Assessment: Critically Weak / Insolvent

The balance sheet tells a clear and concerning story:

Key observations: - Persistent insolvency: The company has been balance-sheet insolvent in 8 of the 10 years for which data is available. The brief positive period (2018-2020) appears to have been an anomaly rather than a sustainable turnaround. - Minimal capital base: Share capital stands at just £100, with accumulated losses of £26,453 in the P&L reserve, eroding any shareholder equity. - Asset depletion: Total assets have fallen from £10,522 (2022) to £3,278 (2024), suggesting the business is running down its asset base. - No recovery trajectory: The most recent year shows a £10,143 deterioration in net assets, moving in the wrong direction.

The 2018-2020 positive period warrants scrutiny — without turnover data for those years, it is difficult to determine whether this reflected genuine trading improvement or balance sheet adjustments. The subsequent rapid reversal to deep insolvency suggests the former position was not supported by sustainable cash generation.

3. Cash Flow Assessment

Assessment: Severely Constrained / Non-viable

Limited data is available on turnover (only £97,870 and £97,691 for 2021 and 2022 respectively), but what we can observe is concerning:

• Liability coverage: Total liabilities of £29,631 against total assets of just £3,278 gives an asset coverage ratio of approximately 0.11x — for every £1 owed, the company holds only 11p in assets.
• Working capital: With current liabilities significantly exceeding current assets (exact split not provided, but the overall position indicates severe working capital deficit), the company cannot meet its near-term obligations from operational resources.
• Revenue inadequacy: Even at ~£98k turnover, the business appears subscale for a manufacturing operation. The SIC code 14120 (Manufacture of workwear) typically requires meaningful capital investment and working capital for stock and debtor financing — there is no evidence the company can sustain this.
• Cash generation doubt: The consistent inability to build retained earnings or positive net assets over 18 years of trading strongly suggests the business has never generated sustainable free cash flow.

4. Monitoring Points

Given the DECLINE decision, monitoring is not applicable for new lending. However, for completeness, the following would require attention if circumstances changed:

• Company status: Confirm whether the dissolution is being processed or has been completed. A dissolved company cannot enter new obligations.
• Director conduct: The Morrisroes have operated a persistently insolvent entity. Any future applications involving these directors should be subject to enhanced scrutiny regarding potential wrongful trading under Insolvency Act 1986 s.214.
• Creditor position: If any existing exposure exists within the bank's portfolio, immediate review is required to assess recovery prospects and potential provisions.
• Connected entities: Check whether the directors have other active companies that may be receiving diverted trade or assets from this entity.

Summary Assessment