Risk Analysis: FRANJO LIMITED

1. Risk Rating: MEDIUM

The company presents a mixed risk profile. While the long-term trend shows meaningful improvement in net assets (from -£39,588 in 2020 to +£31,826 in 2025), the balance sheet carries substantial net current liabilities of £303,623, indicating significant reliance on illiquid fixed assets—presumably property—to maintain solvency. The improving trajectory and established trading history since 2012 provide moderate comfort, but the liquidity position warrants careful monitoring.

2. Key Concerns

a) Severe Net Current Liabilities Current assets of £83,822 against current liabilities of £387,445 produces net current liabilities of £303,623. The company cannot meet its short-term obligations from liquid resources. If creditors demanded repayment or if rental income was disrupted, the company would be entirely dependent on refinancing or asset disposals. This structural liquidity weakness has persisted for several years.

b) Sharp Decline in Current Assets Current assets fell by 41% from £142,741 (2024) to £83,822 (2025). Without a detailed breakdown (permitted by micro-entity filing), it is unclear whether this represents a cash drawdown, debtor collection issues, or another factor. This deterioration in the liquidity buffer is unwelcome in an already illiquid position.

c) Creditor Concentration and Leverage Total liabilities of £387,445 against total assets of £419,671 yields a liabilities-to-assets ratio of approximately 92%. The nature of these creditors is not disclosed—whether they represent mortgage finance, director loans, or trade creditors is unknown. This level of gearing leaves minimal margin for asset value fluctuations.

3. Positive Indicators

a) Consistent Improvement in Net Assets The trajectory from negative net assets of -£39,588 (2020) to positive net assets of £31,826 (2025) demonstrates sustained progress. Each year has shown improvement, suggesting the business model is generating returns that are gradually deleveraging the balance sheet.

b) Reduction in Current Liabilities Creditors fell from £453,753 to £387,445—a reduction of approximately £66,000. This indicates active liability management and suggests the company is not simply allowing debts to accumulate.

c) Regulatory Compliance Accounts are filed on time, the confirmation statement is current, and there are no overdue filings. The company has maintained an active status throughout its 12-year history with no indications of insolvency proceedings or regulatory interventions.

d) Stable Fixed Asset Base Fixed assets of £335,849 have remained constant year-on-year, consistent with investment property held at cost (without depreciation, as permitted for investment property under relevant accounting standards). This stability suggests the underlying property portfolio is not being eroded.

4. Due Diligence Notes

a) Creditor Composition The single most important item to establish is the nature of the £387,445 in current liabilities. If this includes long-term mortgage debt reclassified as current (e.g., due to covenant breach or maturity), the risk profile changes materially compared to trade creditors or director loans. Request full creditor breakdown from management.

b) Director Name Discrepancy The 2025 accounts are signed by "Mrs Francesca Scott, Director" dated 12/12/2025, while Companies House records list the director as "Francesca Joanne Forster." The company's previous name was "SCOTT & LYLE LTD." Clarify whether this reflects a name change following marriage or an administrative inconsistency—this should be verified for consistency with PSC records.

c) Rental Income and Cash Generation As a property letting company (SIC 68209) with zero employees, the business is presumably dependent on rental income. Obtain profit and loss information to assess whether rental income adequately covers debt servicing and whether the improvement in net assets is being driven by trading profits or director capital injections.

d) Property Valuation and Security Fixed assets of £335,849 likely represent investment property. Assess whether this is held at historic cost or fair value, and whether current valuations support the balance sheet figure. Given 92% leverage, even a modest decline in property values could push net assets negative again.

e) Related Party Transactions With two PSCs each holding 25-50% and only £200 in share capital, investigate whether director loans or related party balances feature within the creditor base. This is common in small property companies and affects risk assessment significantly.

f) Cash Position Cash data is only available for 2019 (£2,986) and 2020 (£1,140). Given the 41% drop in current assets in 2025, obtaining current cash balances is essential to assess day-to-day liquidity adequacy.