SMITHY'S CATERING LTD

Executive Summary

SMITHY’S CATERING LTD demonstrates high financial risk characterized by persistent negative net assets and substantial net current liabilities, signaling potential solvency challenges. While regulatory compliance and stable management are positive factors, significant liquidity concerns and accumulated losses warrant careful investigation of director balances and business viability before considering investment.

SMITHY'S CATERING LTD - Analysis Report

Company Number: 13799930

Analysis Date: 2025-07-29 20:25 UTC

1. Risk Rating: HIGH

The company's financial statements reveal significant solvency and liquidity concerns, with persistent and increasing net current liabilities and negative shareholders' funds over multiple years. The inability to cover short-term liabilities with current assets, coupled with a substantial deficit in equity, indicates high financial distress risk.

2. Key Concerns:

• Severe Negative Net Current Assets: The company has net current liabilities of approximately £21,305 as of 31 December 2023, which represents an inability to meet short-term obligations from liquid assets. This situation has worsened slightly compared to previous years.

• Consistent Net Liabilities and Shareholder Deficit: The net assets are deeply negative (£-15,432 in 2023), and shareholders’ funds are similarly in deficit, indicating accumulated losses and a weak capital base that undermines financial stability.

• Director Loans and Advances: The director B M Eriksson has a substantial outstanding balance owed to the company (~£21,608), which appears to be a credit balance rather than a loan from the company, but the nature and recoverability of these balances require scrutiny. Reliance on director advances or credits can indicate funding challenges.

3. Positive Indicators:

• Timely Filing and Compliance: The company is active with no overdue filings for accounts or confirmation statements, showing compliance with regulatory requirements.

• Stable Management and Control: The directors and significant controllers have maintained consistent roles since incorporation, suggesting operational continuity.

• Small Scale Operations: Being a small private company operating in the food services sector with only 2 employees may imply a lean cost structure, which might be beneficial if business conditions improve.

4. Due Diligence Notes:

• Clarify Nature of Director Balances: Investigate the director advances/credits account, its classification, and whether it represents financial support, loans, or other arrangements, including any repayment plans.

• Cash Flow Analysis and Forecasts: Obtain cash flow statements or management forecasts to assess liquidity management, ability to service debts, and plans to restore solvency.

• Business Model Viability: Explore the operational sustainability of the catering business, including revenue streams, client base, and growth prospects, to understand if losses are temporary or structural.

• External Funding and Support: Determine if there are external investors, loans, or guarantees that might support the company’s financial position beyond the balance sheet.

• Audit and Verification: Note that accounts are unaudited filleted accounts; consider requesting audited financials or further assurances on the accuracy of reported figures.

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