WET AUDITORS LIMITED
Company number 06382322 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Credit Analysis: Wet Auditors Limited
1. Credit Opinion: CONDITIONAL
Reasoning: This company presents material credit concerns. Net assets have deteriorated by 79.6% in a single year (from £334,679 to £68,156), working capital has collapsed from £321,375 to £49,776, and cash has more than halved. The company operates within a group structure that extracts £215,000 annually in dividends to its parent (Reflection Properties Limited), which raises serious questions about whether the entity retains sufficient resources to service independent debt obligations. Any credit facility would require robust covenants, parent company guarantees, and restrictions on further dividend extraction.
2. Financial Strength
Balance Sheet Deterioration – Critical Concern
The balance sheet has undergone a dramatic contraction:
| Metric | 2023 | 2024 | Change |
|---|---|---|---|
| Net Assets | £334,679 | £68,156 | -79.6% |
| Total Assets | £484,872 | £174,802 | -63.9% |
| Current Assets | £441,556 | £139,305 | -68.5% |
| Net Current Assets | £321,375 | £49,776 | -84.5% |
The primary driver is the collapse in trade debtors from £285,146 to £37,114. In 2023, £37,010 of debtors represented amounts owed by group undertakings; in 2024, this has flipped to £48,104 owed to the parent company as a creditor. This intercompany reversal alone accounts for approximately £85,000 of the working capital decline.
Capital Structure: Share capital is nominal at £2. The company is essentially reliant on retained profits and intercompany balances for its capital base. With P&L reserves at £68,154, the equity cushion is thin and deteriorating.
Tangible Asset Base: Net book value of fixed assets is £35,497 (plant & machinery, motor vehicles, fixtures). Depreciation continues to exceed additions, suggesting limited reinvestment.
3. Cash Flow Assessment
Liquidity Position – Weakening
| Metric | 2023 | 2024 |
|---|---|---|
| Cash | £81,439 | £27,624 |
| Current Ratio | 3.67x | 1.56x |
| Quick Ratio (ex-stock) | 3.58x | 1.25x |
The current ratio has deteriorated from a comfortable 3.67x to a marginal 1.56x. While still above 1.0x, the trajectory is alarming.
Dividend Drain: £215,000 paid to the parent in both 2023 and 2024 represents a significant cash outflow that exceeds the company's apparent profit-generating capacity (corporation tax provision fell from £32,931 to £3,500, suggesting substantially reduced profitability). This dividend policy is stripping the company of liquidity.
Working Capital Concerns: - Stocks increased from £10,000 to £36,500 (including £26,500 work in progress) – cash potentially tied up in incomplete contracts - Corporation tax creditor fell from £32,931 to £3,500, suggesting much lower profits - VAT creditor dropped from £43,783 to £5,732 – may indicate reduced trading activity
Bank Debt: Total secured bank borrowings of £18,936 (current: £10,364; non-current: £8,571) are modest and appear to be on a reducing basis.
4. Monitoring Points
| Metric | Target/Threshold | Rationale |
|---|---|---|
| Dividend payments to parent | Zero until net assets recover to £200k+ | Prevent further equity stripping |
| Net current assets | Minimum £50,000 | Current level is borderline; any further decline creates insolvency risk |
| Cash position | Minimum £20,000 | Currently at £27,624 with downward trend |
| Intercompany balances | Cap at 25% of net assets | Currently £48,104 vs £68,156 net assets = 70.6% - unacceptable dependency |
| Current ratio | Minimum 1.5x | Currently 1.56x – no further deterioration acceptable |
| Trade debtor collection | Monitor quarterly | Collapse from £285k to £37k needs explanation – is this revenue decline or improved collections? |
| Profitability | Require annual P&L submission | Company has opted not to file P&L (permitted under s444); lender should require full accounts |
Additional Risk Factors
Group Structure Risk: As a subsidiary of Reflection Properties Limited, this company's financial health is intertwined with group decisions. The intercompany balance of £48,104 owed to the parent represents 70.6% of net assets. In a distress scenario, the parent may prioritize group interests over this entity's creditors.
Director/Control: Steven Moore controls both the company directly (75%+ shares/voting) and indirectly through Reflection Properties Limited. Concentration of control increases risk of decisions that may not serve independent creditor interests.
Name vs. Activity: Despite trading as "Wet Auditors," the SIC code (96090 – other service activities not elsewhere classified) and the nature of the balance sheet (stocks, work in progress, motor vehicles) suggest this is not a professional audit practice. The original incorporation name was "SHK 107 LIMITED," changed in 2008. Lenders should verify actual trading activity.
Employee Reduction: Headcount has reduced from 5 to 4, which may indicate contraction.