COFFEE BEANS CAFE LIMITED

1. Risk Rating: LOW The company demonstrates strong financial health characterized by consistent, significant year-on-year growth in net assets and a highly liquid balance sheet with no long-term debt. Regulatory compliance is current, with no overdue filings. The primary risks stem from a concentrated ownership structure and a recent notable reduction in employee count, which warrants monitoring but does not overshadow the overall robust financial position.

2. Key Concerns: - Significant Reduction in Workforce: The average number of employees dropped considerably from 29 in 2023 to 20 in 2024 (a reduction of approximately 31%). In the hospitality sector, this could indicate operational restructuring, recruitment difficulties, or a contraction in trading capacity that may impact future revenue generation. - Concentrated Control and Key-Person Risk: Xxxxxx Xxxxxxxxname shown to subscribers holds over 75% of the company's shares and serves as a director, while Xxxxxx Xxxxxxxxname shown to subscribers serves as both director and secretary. This concentrated power in just two individuals creates a key-person dependency; the incapacity or departure of either individual could severely disrupt operations. - Limited Financial Granularity: As a micro-entity, the company files abbreviated accounts. The absence of a Profit & Loss statement, cash flow statement, and a detailed breakdown of current assets makes it difficult to ascertain the exact drivers behind the recent surge in current assets or to assess the quality of those assets (e.g., cash versus trade debtors).

3. Positive Indicators: - Strong Asset Growth: The company has demonstrated a consistent and impressive trajectory of net asset growth, increasing from £53,426 in 2017 to £279,856 in 2024. This implies robust retained profitability over a sustained period. - Excellent Liquidity Position: As of October 2024, net current assets stood at £270,541 against current liabilities of only £62,158. This yields a current ratio of over 5:1, indicating the company has ample liquid resources to meet its short-term obligations comfortably. - Zero Long-Term Debt: The balance sheet shows no creditors falling due after more than one year. The company is entirely funded by equity and short-term operational liabilities, minimizing solvency risk and interest expense burdens. - Regulatory Compliance: The company is active, and its accounts and confirmation statements are up to date with no overdue filings, indicating good administrative governance.

4. Due Diligence Notes: - Workforce Dynamics: Investigate the underlying cause of the 31% drop in average employee numbers. It is crucial to determine whether this was a strategic cost-reduction that improved margins, or a sign of operational distress and reduced capacity. - Composition of Current Assets: Request a detailed breakdown of the £330,367 in current assets. While historical data suggests strong cash positions, verifying the proportion of cash versus trade debtors is necessary to ensure this asset base is liquid and not tied up in potentially unrecoverable receivables. - Succession Planning: Given the concentrated ownership and management, it is advisable to understand the company's contingency plans and any personal guarantees that might be linked to the directors. - Operating Margins: Obtain management accounts to assess current trading performance. While net assets grew by nearly £100k in the latest year, confirming the operational margins and cash conversion cycle of the cafe will provide a clearer picture of ongoing sustainability.

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