ROAST HQ LIMITED

Executive Summary

Roast HQ Limited has demonstrated rapid growth in liquidity and working capital, improving its ability to meet short-term obligations. However, its balance sheet shows significant reliance on director loans, which presents a potential financial risk requiring close monitoring. Conditional credit approval is recommended, contingent on continued strong cash flow performance and prudent management of related-party financing.

ROAST HQ LIMITED - Analysis Report

Company Number: SC684242

Analysis Date: 2025-07-29 19:37 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Roast HQ Limited shows significant growth in assets and working capital in the latest financial year ended May 2024 compared to the previous two years, indicating improved operational scale and liquidity. However, the company carries a substantial directors' loan of over £1 million classified as a long-term creditor, which may represent related-party funding rather than external debt. This raises some concerns regarding financial independence and potential risk concentration. Given the company’s improved cash position and net current assets, credit can be approved conditionally, subject to ongoing monitoring of related-party loans and overall debt servicing ability.

2. Financial Strength:
   The balance sheet demonstrates a robust increase in current assets from £50k in 2023 to £1.45M in 2024, largely driven by cash (£1.04M) and stock (£344k), supporting operating activities. Net current assets have improved markedly to £1.17M, reflecting healthy short-term financial stability. Net assets increased from £13.5k in 2023 to £85k in 2024, although still modest relative to total liabilities, dominated by a £1.08M directors' loan (long-term creditor). The capital structure shows minimal share capital (£10) but a growing retained earnings (profit & loss account) balance. Overall, the company exhibits a strengthening financial position but with a reliance on director funding that requires scrutiny.

3. Cash Flow Assessment:
   The large cash balance of over £1 million at year-end 2024 indicates strong liquidity and ability to meet short-term obligations. Current liabilities are manageable at approximately £281k, resulting in a comfortable current ratio above 5x. Debtor levels have increased slightly but remain low relative to cash, minimizing working capital risk. The presence of stock valued at £344k suggests some inventory holding that should be monitored for turnover efficiency. The company’s ability to generate positive operational cash flow appears strong, but the impact of finance leases and director loans on cash flow must be tracked.

4. Monitoring Points:

• Review ongoing director loan balances and repayment terms to assess risk of refinancing or potential calls on liquidity.
• Monitor inventory turnover and debtor collection periods to ensure working capital efficiency is maintained.
• Track profitability trends and cash flow generation over subsequent years to confirm sustainability of recent growth.
• Evaluate the impact of any lease obligations on cash flow as these commitments mature.
• Observe any changes in ownership/control structure given multiple significant controllers.