THE COVE (BRIGHOUSE) LTD

Executive Summary

The Cove (Brighouse) Ltd has adequate short-term liquidity and positive net assets, but the doubling of current liabilities driven by tax obligations and a decline in retained earnings warrant caution. Conditional credit approval is recommended, subject to ongoing monitoring of cash flow, tax liability management, and profitability. Overall, the company’s financial position is stable but requires active oversight to mitigate emerging liquidity pressures.

THE COVE (BRIGHOUSE) LTD - Analysis Report

Company Number: 13609580

Analysis Date: 2025-07-29 19:53 UTC

1. Credit Opinion: CONDITIONAL APPROVAL The Cove (Brighouse) Ltd demonstrates a stable liquidity position with positive net current assets and adequate cash balances, indicating the ability to meet short-term obligations. However, the significant increase in current liabilities from £22,411 to £45,840 within one year, primarily driven by taxation and social security liabilities, raises some concerns about working capital management and potential cash flow pressures. The company's net assets have declined from £79,857 to £51,137, reflecting a reduction in retained earnings, which suggests profitability or capital retention issues. Given the company operates in the hospitality sector (public houses and bars), which can be sensitive to economic fluctuations, cautious monitoring is advised. Approval should be conditional on updated management accounts to assess ongoing profitability and cash flow, and confirmation that tax liabilities are being managed effectively.

2. Financial Strength: The balance sheet shows modest fixed assets (£18,657) and inventory (£4,000) against current assets of £78,320, mostly cash (£74,320). Net current assets remain positive at £32,480, but have nearly halved compared to the prior year (£59,692). The doubling of current liabilities to £45,840, primarily taxes and social security (£33,634), indicates increased short-term obligations that might strain liquidity. Net assets of £51,137 remain positive but have fallen significantly from £79,857, driven by declining retained earnings, which may reflect losses or dividend distributions. Overall, the company has a lean asset base with adequate equity but weakening capital reserves. The absence of long-term debt is a positive factor for financial resilience.

3. Cash Flow Assessment: Cash on hand is healthy and stable year-on-year (~£74k), supporting operational liquidity. However, the sharp rise in current liabilities, especially tax and social security obligations, could stress cash flow if these are not settled timely. The elimination of trade debtors in 2024 suggests improved collections or changes in credit policy, which is positive. The company’s average staff count decreased slightly (6 vs 7), potentially indicating cost control efforts. Monitoring working capital cycles closely is essential, as the reduction in net current assets signals tightening liquidity. Operating cash flows should be reviewed to confirm the company’s ability to service liabilities and fund operations without external support.

4. Monitoring Points:

• Monitor tax and social security obligations closely to ensure no build-up of overdue liabilities.
• Review updated management accounts quarterly to assess profitability and cash flow trends.
• Watch net asset and retained earnings trajectories to detect any sustained erosion of capital.
• Assess liquidity ratios (current ratio, quick ratio) regularly given the volatility in current liabilities.
• Evaluate impact of any sector-specific risks such as regulatory changes or market demand shifts on trading performance.
• Confirm directors’ plans for addressing the decline in net assets and working capital.