TOWNSEND CONTRACTING LTD

Executive Summary

Townsend Contracting Ltd shows severe financial weakness with negative net assets and working capital deficits, heavily reliant on director loans for liquidity. The company’s micro scale and recent losses limit its ability to service new credit. Credit facilities should be declined until financial stability improves.

TOWNSEND CONTRACTING LTD - Analysis Report

Company Number: 13537051

Analysis Date: 2025-07-20 16:40 UTC

1. Credit Opinion:
   DECLINE. Townsend Contracting Ltd exhibits significant financial distress as evidenced by substantial negative net assets (£-18,898) and net current liabilities (£-18,898) at the latest year-end (31 July 2024). The company’s working capital position is weak, with current liabilities vastly exceeding current assets, indicating an inability to meet short-term obligations without additional funding. The director’s loan account balance (£18,114), interest-free and repayable within 9 months of year-end, suggests reliance on insider funding rather than operational cash flow. Given these signs, the company’s capacity to service debt or new credit facilities appears inadequate.

2. Financial Strength:
   The balance sheet shows deteriorated financial strength over the last financial year, moving from minimal positive net assets (£100 in 2023) to a sizable deficit. Shareholders’ funds are negative, implying accumulated losses have eroded equity. The absence of fixed assets and the reliance solely on minimal current assets (cash £957, debtors £2,549) further weaken the financial base. The company is micro-sized with only one employee, limiting operational scale and diversification of risk.

3. Cash Flow Assessment:
   Cash and debtor balances are very low relative to immediate liabilities, resulting in a net current liability position. Operational cash flow is insufficient to cover short-term creditors without director loans or external finance. The director loan of £18,114 is interest-free and short-term, indicating current liquidity depends on related party support rather than robust cash generation. There is no indication of positive cash flow trends or sufficient working capital buffers.

4. Monitoring Points:

• Track changes in net current assets/liabilities to monitor liquidity improvement or deterioration.
• Monitor director loan account movements and repayment terms to assess reliance on insider funding.
• Review forthcoming financial statements for improvements in profitability and equity restoration.
• Watch for any overdue filings or changes in company status indicating distress escalation.
• Assess any new credit facilities granted to evaluate risk exposure and covenant compliance.