ROTUNDA TRADING LTD

Executive Summary

Rotunda Trading Ltd shows significant financial weakness with negative net assets and large current liabilities exceeding current assets. The company is reliant on interest-free related party loans with no fixed repayment terms, raising concerns about its standalone repayment capacity and liquidity. Without operational improvement or sustained financial support from directors, credit risk is elevated, leading to a decline recommendation for new credit facilities.

ROTUNDA TRADING LTD - Analysis Report

Company Number: SC682634

Analysis Date: 2025-07-29 20:33 UTC

1. Credit Opinion: DECLINE
   Rotunda Trading Ltd exhibits significant financial distress, evidenced by net liabilities of £438,612 at the year-end 2023, worsening from a £265,608 deficit in 2022. The company's current liabilities exceed current assets by £484,024, reflecting poor short-term liquidity. Furthermore, the business relies heavily on interest-free, unsecured related party loans with no fixed repayment terms, undermining its financial independence and increasing risk exposure. Despite directors’ stated ongoing support, this reliance indicates insufficient internal cash generation and weak operational cash flows. Given this, the company’s capacity to service external debt or absorb financial shocks is doubtful.

2. Financial Strength:
   The balance sheet is weak with negative net assets, driven by a substantial creditor balance (£536,290) mostly owed to parent and related parties. Fixed assets of £57,607 provide limited collateral value relative to liabilities. The company’s equity base is minimal (£1 share capital) and eroded by accumulated losses (~£438,613). Tangible asset depreciation and declining debtors (from £81,696 to £51,009) further suggest no improvement in asset quality or working capital management. The financial structure is fragile, dependent on group funding rather than independent profitability or capital reserves.

3. Cash Flow Assessment:
   Reported cash at bank is negligible (£1,257), reflecting very tight liquidity. The company operates with net current liabilities, indicating that current assets are insufficient to cover short-term debts. The absence of fixed repayment terms on related party loans provides some short-term flexibility but poses a risk of abrupt demands if funding support changes. The steep reduction in employee numbers (from 24 to 2) may indicate cost-cutting but also a contraction of business activity which could negatively impact cash generation going forward.

4. Monitoring Points:

• Continued directors’ financial support: Confirm ongoing funding commitments and monitor any changes in related party loan arrangements.
• Liquidity metrics: Track monthly cash balances and working capital fluctuations.
• Profitability trends: Watch for signs of operational improvement or further losses in future accounts.
• Creditor aging: Ensure trade creditors and related party balances are managed to avoid insolvency triggers.
• Employee headcount and operational scale: Changes here could signal strategic shifts affecting credit risk.