SPICE FACTORY LIMITED

Executive Summary

SPICE FACTORY LIMITED demonstrates a stable asset base and positive equity, but suffers from negative working capital indicating liquidity pressures. While the company is growing operationally, careful cash flow management is essential to avoid short-term financial distress. Addressing liquidity and improving financial transparency will strengthen the company’s financial health and support sustainable growth.

SPICE FACTORY LIMITED - Analysis Report

Company Number: 14226607

Analysis Date: 2025-07-20 15:58 UTC

Financial Health Assessment: SPICE FACTORY LIMITED (As of 31 July 2024)

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1. Financial Health Score: C

Explanation:
The company shows some strengths in fixed asset holdings and positive net assets, but also exhibits clear signs of liquidity strain with persistent negative net current assets (working capital). This indicates the company may struggle to meet short-term obligations without additional cash inflows or financing. The score reflects a cautious outlook—business operations are continuing, but symptoms of financial distress are present that require attention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	87,310	Stable investment in long-term assets, indicating some capital base.
Current Assets	24,374	Limited short-term assets available to cover immediate liabilities.
Current Liabilities	74,779	Significant short-term obligations due within one year.
Net Current Assets (Working Capital)	-50,405	Negative working capital signals liquidity pressure—company owes much more than it holds in liquid assets.
Net Assets (Equity)	36,905	Positive net assets indicate that after settling liabilities, the company retains some value.
Average Number of Employees	13	Indicates a small but growing workforce, reflecting some operational scale-up compared to prior year (8 employees).

Interpretation:

• Healthy cash flow is essential for daily operations, but negative net current assets indicate the company may face difficulty paying bills and short-term debts without external support.
• The stable fixed assets suggest the business has invested in property or equipment, which is a positive sign of operational capacity.
• Equity position is positive and growing, which is a good sign of underlying value retained by shareholders.
• The increasing number of employees shows operational growth but may add to cost pressures if revenues do not keep pace.

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3. Diagnosis

SPICE FACTORY LIMITED is at an early stage (incorporated in 2022) and operates in sectors including real estate activities and licensed restaurants. The company’s financial statements reflect a typical "growing pains" scenario:

• The negative working capital (net current assets) is a key symptom of liquidity stress, meaning the business may be relying on credit or short-term borrowing to fund operations. This can be risky if cash inflows are irregular or delayed.
• Despite liquidity challenges, the company maintains a positive net asset base, indicating that long-term solvency is not currently threatened. The capital invested in fixed assets supports continued operation and growth potential.
• The business has increased its workforce, which implies operational expansion but also increased fixed costs.
• The directors have opted for micro-entity accounting standards, which simplifies reporting but limits detailed financial disclosures such as profit and loss, making it harder to assess profitability and cash flow quality directly.
• Control is shared among three individuals with significant ownership and voting rights, which may facilitate swift decision-making but also concentrates governance risk.

In summary: The company shows resilience in its capital structure but exhibits symptoms of short-term financial strain that could jeopardize day-to-day operations if not managed carefully.

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4. Recommendations

To improve financial wellness and strengthen the company’s "financial pulse," the following actions are advised:

1. Improve Liquidity Management:

   • Review and tighten credit control to accelerate receivables collection.
   • Negotiate extended payment terms with suppliers to better align cash outflows with inflows.
   • Consider short-term financing options if needed, but avoid over-reliance on costly debt.

2. Enhance Cash Flow Forecasting:

   • Implement detailed cash flow projections to anticipate periods of cash shortage and proactively manage working capital.
   • Monitor daily cash balances to ensure sufficient liquidity for operational needs.

3. Operational Efficiency:

   • Evaluate staffing levels relative to revenue to ensure labor costs do not outpace income growth.
   • Explore cost-saving measures without compromising service quality.

4. Financial Reporting Transparency:

   • Even though micro-entity provisions allow simplified reporting, consider preparing internal profit and loss statements to better understand profitability trends.
   • Use these insights to guide strategic decisions and investor communications.

5. Governance and Oversight:

   • With three major shareholders/directors, ensure clear roles and responsibilities and regular financial reviews.
   • Seek external advice if necessary to challenge assumptions and improve financial discipline.

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