THE SOCIAL (DEVON) LTD

Executive Summary

THE SOCIAL (DEVON) LTD is a start-up licensed restaurant company with a weak initial financial position characterized by negative net assets and a working capital deficit. Credit exposure should be cautiously extended with conditions tied to liquidity improvements and profitability evidence in future periods. Close monitoring of cash flow and management’s ability to stabilize operations is vital for credit risk mitigation.

THE SOCIAL (DEVON) LTD - Analysis Report

Company Number: 15028025

Analysis Date: 2025-07-20 12:50 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   THE SOCIAL (DEVON) LTD is a newly incorporated micro-entity operating in the licensed restaurant sector. The company shows net liabilities of £14,755 and significant net current liabilities of £59,177 as at 31 March 2024. This reflects a weak balance sheet and working capital deficit, indicating short-term liquidity constraints. However, the company is still in early stages (first year) with 13 employees, suggesting initial investment and operating costs impacting the financial position. Given the lack of trading history and negative equity, credit extension should be conditional on improvement in liquidity and positive cash flow demonstrated in subsequent filings. Close monitoring of working capital and profitability is essential before increasing credit exposure.

2. Financial Strength:
   The balance sheet reveals fixed assets of £44,422 representing initial capital expenditure likely on equipment or leasehold improvements. Current assets total £31,770 but are outweighed by current liabilities of £90,947, resulting in a net current liability position of £59,177. Shareholders' funds are negative at £14,755, showing that accumulated losses or start-up expenses exceed invested capital. The company’s negative net assets indicate financial fragility. The directors’ equity injection and future profitability will be critical to restoring balance sheet strength.

3. Cash Flow Assessment:
   The absence of detailed profit and loss statements limits precise cash flow analysis. However, the large working capital deficit signals potential cash flow pressures in meeting short-term obligations. The company must improve its cash conversion cycle, possibly through better management of payables and receivables or additional capital injection. The current asset base relative to liabilities is insufficient to cover immediate debts, posing a risk to ongoing operational liquidity.

4. Monitoring Points:

• Quarterly updates on cash flow and working capital position to assess liquidity improvements.
• Profit and loss trends to evaluate movement towards profitability and reducing losses.
• Any new capital injections or financing arrangements to strengthen equity and liquidity.
• Management actions on cost control and revenue growth in a competitive restaurant market.
• Timely filing of statutory accounts and confirmation statements to ensure compliance and transparency.