STEP DEVELOPMENTS LIMITED

Executive Summary

Step Developments Limited shows clear signs of financial strain with negative net assets and poor working capital coverage. Despite experienced directors and shareholder backing, the company’s current liquidity and equity position are inadequate to support new credit. Credit facilities should be declined unless material improvements or capital injections are demonstrated.

STEP DEVELOPMENTS LIMITED - Analysis Report

Company Number: 12679822

Analysis Date: 2025-07-20 18:18 UTC

1. Credit Opinion: DECLINE
   Step Developments Limited exhibits significant financial distress with net liabilities of £620k as of 31 December 2022, worsening from £113k the previous year. Current liabilities (£1.47m) substantially exceed current assets (£849k), resulting in negative working capital and a large liquidity gap. The company is unable to demonstrate adequate financial strength or cash flow to comfortably meet short-term obligations. Despite a strong board including finance and accounting professionals and backing from reputable shareholders, the negative equity position and deteriorating balance sheet pose a high credit risk. Without clear evidence of imminent capital injection or turnaround, extending credit facilities is not advised.

2. Financial Strength:
   The balance sheet shows net liabilities of £620k, indicating that total liabilities exceed total assets. There is a sharp increase in current liabilities from £821k in 2021 to £1.47m in 2022, driven largely by accruals and deferred income (£1.41m). Current assets rose modestly, mainly cash increasing to £459k from £202k, but this is insufficient to offset liabilities. Negative shareholders’ funds and accumulated losses of over £621k reflect sustained losses or capital erosion, undermining financial stability.

3. Cash Flow Assessment:
   While cash increased significantly year-on-year, the company’s cash and current assets are still less than half its current liabilities. The negative net current assets (-£620k) highlight working capital deficiency, raising concerns over liquidity and the ability to service short-term debts as they fall due. The company has no employees beyond directors, suggesting limited operational expenses, but its cash burn and creditor obligations remain high. The directors’ statement on going concern assumes forecasted liquidity will improve, but actual historical data suggests ongoing cash flow challenges.

4. Monitoring Points:

• Track quarterly cash flow and working capital trends to verify improvement.
• Monitor accruals and deferred income for signs of potential liabilities crystallizing.
• Watch for capital injections or shareholder support that could restore net asset position.
• Review the company’s project pipeline and contract revenue recognition to assess future earning potential.
• Observe any changes in director appointments or disclosures indicating financial restructuring or distress.