R H FARNHAM LTD

Executive Summary

R H Farnham Ltd has shown a marked improvement in financial position during the latest year, recovering from two years of negative net assets and working capital deficits. While liquidity and solvency risks remain moderate due to limited working capital and new bank borrowing, there are no regulatory or compliance concerns. Further review of cash flow sustainability and debt obligations is recommended to confirm the company’s operational stability.

R H FARNHAM LTD - Analysis Report

Company Number: 13556750

Analysis Date: 2025-07-20 18:28 UTC

1. Risk Rating: MEDIUM

Justification: R H Farnham Ltd shows a recent turnaround in financial position with net assets improving from negative (£11,875 in 2023) to positive £9,176 in 2024. However, the company remains small and relatively new (incorporated 2021) with modest working capital and a history of net current liabilities. The presence of bank loans and fluctuating creditors alongside limited cash reserves suggests moderate liquidity and solvency risks. There are no indications of regulatory or compliance issues.

2. Key Concerns:

• Historical negative net assets and net current liabilities in the previous two years indicate past financial stress and potential solvency concerns before the recent recovery.
• Working capital remains limited (£4,799 in 2024) with current liabilities still substantial (£31,606), which may strain cash flow if business conditions worsen.
• Increasing reliance on bank loans (from none in 2023 to £3,045 in 2024) could increase financial risk if earnings or cash flows are insufficient to service debt.

3. Positive Indicators:

• Return to positive net assets and net current assets in the latest year demonstrates improved financial health and potentially better operational performance.
• Cash balance has more than doubled from £8,359 in 2023 to £17,230 in 2024, enhancing liquidity.
• Director ownership is 75-100%, which may align management incentives with company success and stability.
• No overdue filings or regulatory compliance issues reported; company is active and up to date with accounts and confirmation statements.

4. Due Diligence Notes:

• Investigate the nature and terms of the bank loan introduced in 2024, including repayment schedule and covenants.
• Review profit and loss trends and cash flow statements (not filed here) to assess operational sustainability and ability to generate positive cash flows consistently.
• Assess customer concentration and debtor ageing given significant reduction in debtors from £26,016 in 2023 to £15,725 in 2024, to evaluate credit risk and cash conversion reliability.
• Confirm whether improvements in net assets are from operational profitability or capital injections from the shareholder.
• Verify ongoing business strategy in the hairdressing and beauty treatment industry and any market or competitive risks.