SOJO PROPERTIES LTD

Executive Summary

SOJO PROPERTIES LTD is expanding its fixed asset base but faces serious liquidity challenges and negative equity, indicating financial distress. Immediate action to improve cash flow, restructure debt, and optimize operations is critical to avoid solvency risks and ensure sustainable growth. Without intervention, the company’s financial health may deteriorate further.

SOJO PROPERTIES LTD - Analysis Report

Company Number: 13601644

Analysis Date: 2025-07-20 15:30 UTC

Financial Health Assessment for SOJO PROPERTIES LTD

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1. Financial Health Score: D

Explanation:
The company is currently showing significant signs of financial distress, indicated by negative net assets and deeply negative working capital. While there is growth in fixed assets, the overwhelming current liabilities and long-term creditors surpass assets, resulting in negative shareholders’ funds. These symptoms suggest financial instability and potential solvency concerns if not addressed promptly.

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2. Key Vital Signs

Metric	30 Sep 2024	Interpretation
Fixed Assets	£563,300	Growth in long-term assets; investment in property or equipment. Positive sign of asset base expansion.
Current Assets	£15,147	Very low cash or liquid assets available for short-term needs. Poor liquidity.
Current Liabilities	£430,883	Large short-term debts due within one year. Indicates high near-term obligations.
Net Current Assets (Working Capital)	£-415,736	Negative working capital ("symptom of distress"), unable to cover short-term liabilities with current assets.
Total Assets Less Current Liabilities	£147,564	Positive but modest buffer after current liabilities; overshadowed by long-term debts.
Creditors Due After One Year	£399,323	High long-term debt burden, increasing financial risk.
Net Assets / Shareholders Funds	£-251,759	Negative equity indicates company owes more than it owns; "critical symptom" of financial weakness.

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3. Diagnosis

SOJO PROPERTIES LTD currently exhibits symptoms of financial distress:

• The company has invested significantly in fixed assets, which may be property holdings or equipment, consistent with its real estate management and trading activity. This shows some strategic asset accumulation.
• However, the company's liquidity is weak with very low current assets relative to very high current liabilities, indicating a "poor pulse" in cash flow health. This negative working capital means it does not have enough readily available resources to meet its immediate obligations.
• The net liabilities position (negative equity) reveals that total liabilities exceed assets by over £250,000. This "critical symptom" suggests insolvency risk if the company cannot improve profitability or restructure debts.
• The increase in both assets and liabilities since 2022 suggests growth but with a disproportionate rise in debts, potentially from financing the asset purchases.
• The absence of employees and micro entity accounting implies a small operational scale, which may limit cash generation capacity.
• Directors’ confidence in micro-entity exemption and no audit requirement indicates limited financial scrutiny, which could mask operational or financial issues.

Overall, the company’s financial health is fragile. It appears to be growing its asset base but is heavily reliant on debt financing, with insufficient liquidity and negative equity posing risks to long-term sustainability.

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4. Recommendations

To improve financial wellness and address current distress symptoms, the company should consider the following actions:

• Improve Liquidity ("Restore healthy cash flow"):

  • Accelerate collection of receivables or convert some fixed assets into cash to increase current assets.
  • Negotiate extended payment terms with creditors to reduce immediate cash outflows.
  • Explore short-term financing options with favourable terms to cover working capital gaps.

• Debt Restructuring ("Alleviate burden of liabilities"):

  • Engage with lenders to refinance or restructure long-term debt to reduce interest and improve repayment schedules.
  • Consider equity injection from shareholders or new investors to improve net asset position and reduce reliance on debt.

• Operational Review ("Address root causes"):

  • Conduct a detailed review of business operations to identify ways to increase revenue and profitability.
  • Given the company's industry (real estate management and trading), assess market conditions and asset portfolio performance to optimize returns.

• Financial Monitoring ("Regular health check-ups"):

  • Implement more rigorous financial controls and regular cash flow forecasting to anticipate liquidity issues early.
  • Prepare fuller financial statements beyond micro-entity provisions as the company grows to enhance transparency and stakeholder confidence.

• Director Engagement:

  • Directors should actively monitor financial position and consider seeking professional advice on insolvency risk mitigation if conditions worsen.

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