SIPANDWAFFLE LIMITED

Executive Summary

SIPANDWAFFLE LIMITED is currently experiencing liquidity challenges and negative net assets, primarily due to high current liabilities and low cash reserves. While operational compliance is maintained, the company needs urgent cash flow and capital structure improvements to stabilize financial health. Proactive management of inventory, financing, and costs will be critical to reversing the current financial distress.

SIPANDWAFFLE LIMITED - Analysis Report

Company Number: 14152062

Analysis Date: 2025-07-29 14:33 UTC

Financial Health Assessment for SIPANDWAFFLE LIMITED

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1. Financial Health Score: D

Explanation:
The company shows symptoms of financial distress, with negative net current assets and net assets in the latest financial year. While the company is active and filing on time, the liquidity position is weak, indicating potential cash flow challenges. The score reflects concerns about short-term solvency and capital erosion, though with some underlying operational activity and no overdue filings.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	48,766	75	Significant increase mainly due to inventory.
Cash at Bank and in Hand	819	75	Very low cash balance, potential liquidity risk.
Current Liabilities	54,079	63	Sharp increase, mostly loans from directors.
Net Current Assets (Working Capital)	-5,313	12	Negative working capital signals liquidity strain.
Net Assets (Equity)	-5,311	14	Negative net assets imply capital erosion.
Shareholders' Funds	-5,313	14	Reflects accumulated losses or financial stress.
Average Number of Employees	4	4	Stable staffing levels, small team.

Interpretation of Metrics:

• Liquidity (Cash and Working Capital): The company’s cash reserves are minimal (£819), and current liabilities exceed current assets by £5,313, indicating a "symptom of distress" akin to a patient with low blood pressure—insufficient liquidity to meet short-term obligations comfortably.

• Capital Structure: Negative net assets and shareholders' funds suggest the company’s finances are "unhealthy," reflecting accumulated losses or liabilities exceeding assets. This is analogous to a patient whose vital organ functions are compromised.

• Inventory: Large inventory (£47,947) relative to cash and liabilities suggests potential stockpiling or slow-moving goods, which could be tying up cash and increasing risk if the inventory cannot be converted into cash quickly.

• Loans from Directors: The significant increase in current liabilities is primarily due to director loans (£52,607), indicating reliance on internal funding to sustain operations. This is like a patient relying on external support to keep vital functions going.

• Employee Levels: Stable employee count suggests no immediate operational downsizing, which can be positive if managed alongside financial stress.

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3. Diagnosis

SIPANDWAFFLE LIMITED is currently facing liquidity difficulties and capital depletion. The company's working capital has deteriorated significantly within the last year, moving from a positive £12 to a negative £5,313. This suggests the business is spending faster than it can generate cash or is unable to convert inventory into cash quickly enough. The reliance on director loans to cover liabilities points to a fragile financial state where external or more permanent financing solutions may be needed.

Despite the negative net assets, the company remains active and compliant with filing deadlines, indicating ongoing operations and management awareness. However, the "symptoms" of financial strain—low cash, negative working capital, and reliance on director funding—pose risks to the company's sustainability if not addressed promptly.

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4. Recommendations

1. Improve Cash Flow Management:

   • Accelerate inventory turnover by promoting sales or discounting slow-moving stock to convert assets into cash.
   • Tighten credit control to improve debtor collections if applicable.
   • Monitor and manage operating expenses closely to conserve cash.

2. Address Capital Structure:

   • Consider recapitalization options such as equity injection from shareholders or external investors to restore positive net assets.
   • Negotiate terms on director loans to possibly convert them into equity or extend repayment to ease short-term pressure.

3. Financial Monitoring:

   • Implement regular cash flow forecasting to anticipate liquidity shortages early.
   • Maintain strict budgeting discipline and monthly financial reviews.

4. Explore Financing Alternatives:

   • Seek bank overdraft facilities or short-term loans with manageable terms to support working capital.
   • Investigate government grants or support schemes for retail food businesses.

5. Operational Efficiency:

   • Review procurement and stock management processes to reduce inventory holding costs.
   • Evaluate sales strategies to increase turnover and enhance profitability.

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