IDEAL EXTRACTION LTD

Executive Summary

Ideal Extraction Ltd demonstrates improving net asset position and regulatory compliance but shows a notable decline in cash reserves and reliance on director loans, which raises liquidity risk concerns. The company’s operational footprint appears stable, though working capital management merits further review to ensure ongoing solvency and financial stability.

IDEAL EXTRACTION LTD - Analysis Report

Company Number: 12890286

Analysis Date: 2025-07-20 14:00 UTC

1. Risk Rating: MEDIUM
   While the company shows positive net assets and net current assets, there are some moderate concerns regarding liquidity and reliance on director loans. The company is active, compliant with filings, and shows growth in equity, but cash reserves have dropped significantly year on year, indicating potential cash flow constraints.

2. Key Concerns:

• Liquidity Decline: Cash decreased from £790k (2023) to £323k (2024), despite net current assets increasing due to higher debtors and stock. This significant cash reduction could pressure short-term obligations.
• High Current Liabilities: Current liabilities remain substantial (£619k) relative to cash and debtors, indicating potential short-term repayment pressures.
• Director Loans: The company has sizeable director loans (£49k each) included in debtors, interest-free and repayable on demand, which could signal dependency on shareholder funding to support working capital.

3. Positive Indicators:

• Positive Net Assets and Equity Growth: Net assets increased from £202k to £308k, reflecting retained earnings or capital injection and improving financial strength.
• Compliance and Filing Status: No overdue accounts or confirmation statements, indicating good governance and regulatory compliance.
• Stable Operational Base: The company operates in a niche manufacturing sector with a growing number of employees (from 6 to 7), suggesting ongoing operational activity.

4. Due Diligence Notes:

• Investigate the causes of cash reduction and assess the company's cash flow forecast and working capital management.
• Review the terms and sustainability of director loans and the potential impact on financial stability if these are withdrawn or not repaid.
• Examine debtor quality and stock turnover to evaluate the risk of asset impairment or slow-moving inventory.
• Confirm details on lease obligations and any off-balance-sheet liabilities not disclosed in abridged accounts.