Commercial Credit Assessment: Springhaze Limited

1. Credit Opinion: CONDITIONAL

Springhaze Limited presents a mixed credit profile. The company holds a substantial cash position of £1.09M and exhibits strong liquidity ratios, suggesting immediate debt-servicing capacity. However, several material concerns warrant further investigation before unqualified approval: an unexplained dramatic balance sheet transformation between 2022-2023, persistent decline in shareholders' funds since 2023, a significant "other creditors" balance of £456K requiring clarification, and filleted accounts that obscure trading performance. Approval is recommended only subject to satisfactory responses on these points.

2. Financial Strength

Balance Sheet Summary (FY2025): - Net Assets: £1,035,874 - Share Capital & Premium: £302 (minimal) - Retained Earnings: £1,035,574 - Gearing: Net cash position; no visible bank debt

Asset Composition: | Asset Category | £ | % of Total | |---|---|---| | Tangible Fixed Assets | 391,894 | 35.5% | | Cash at Bank | 1,089,375 | 98.8% of current assets | | Stocks | 10,000 | <1% | | Debtors | 1,366 | <1% |

The balance sheet is dominated by cash (98.8% of current assets), which is unusual for a property letting company. Tangible assets comprise plant & machinery (£391,886 net) and land & buildings (£8 net). The land and buildings are effectively fully depreciated (£20,181 cost vs £20,181 depreciation), which raises questions about whether these are investment properties that should be held at fair value rather than depreciated cost.

Critical Balance Sheet Event: Between FY2022 and FY2023, total assets surged from £58,777 to £1,279,808—an increase of over 2,000%. Shareholders' funds jumped from £116,167 to £1,065,697. This transformation requires explanation. Possible explanations include property revaluation, capital injection, or asset transfer from a related entity. The absence of a P&L statement (permissible for small companies) makes it impossible to determine the source of this change from filed documents alone.

Declining Trajectory Since FY2023: | Metric | FY2023 | FY2024 | FY2025 | Change | |---|---|---|---|---| | Total Assets | £1,279,808 | £1,161,673 | £1,102,241 | -13.9% | | Cash | £1,177,868 | £1,148,867 | £1,089,375 | -7.5% | | Shareholders' Funds | £1,065,697 | £1,081,296 | £1,035,874 | -2.8% | | Retained Earnings | £1,065,397 | £1,080,996 | £1,035,574 | -2.8% |

The decline in retained earnings from FY2024 to FY2025 of £45,422 indicates a loss for the year, as share capital/premium remained unchanged. This erosion of capital is concerning.

3. Cash Flow Assessment

Liquidity Position: - Current Assets: £1,102,241 - Current Liabilities: £458,261 - Current Ratio: 2.41x (adequate) - Quick Ratio: 2.39x (strong, given minimal stock)

Creditor Composition: | Creditor Type | FY2025 | FY2024 | |---|---|---| | Taxation & Social Security | £2,281 | £7,586 | | Other Creditors | £455,980 | £474,960 | | Total | £458,261 | £482,546 |

The "other creditors" balance of £455,980 represents 99.5% of total current liabilities. This is material and its nature must be clarified—whether it represents related-party loans, trade creditors, or other obligations. Related-party debt could be subordinated, improving the credit position, or it could represent callable obligations creating refinancing risk.

Cash Burn Analysis: Cash has declined by approximately £59,493 between FY2024 and FY2025, and £88,493 from the FY2023 peak. At this rate of cash consumption, the company maintains significant runway, but the underlying cause (operational losses? asset purchases? creditor repayments?) must be understood.

Working Capital: Net current assets of £643,980 provide a comfortable buffer. However, if the "other creditors" are callable on demand, liquidity could deteriorate rapidly.

4. Monitoring Points

Immediate Clarifications Required: 1. Nature of "Other Creditors" (£455,980): Determine whether this is related-party debt, trade payables, or other obligations. Obtain confirmation of terms, maturity, and subordination status. 2. FY2022-2023 Balance Sheet Transformation: Obtain explanation for the asset increase from £58K to £1.28M. Request supporting documentation (valuation reports, board minutes, transaction records). 3. Trading Performance: Request management accounts or profit & loss information to understand the source of the £45K loss in FY2025 and projected performance. 4. Land & Buildings Accounting: Clarify why investment property (SIC 68209) is being depreciated rather than held at fair value, and whether this understates the true asset position.

Ongoing Monitoring: - Cash Trajectory: Track quarterly cash positions; alert if cash falls below £800K - Creditor Movement: Monitor "other creditors" for significant increases or changes in composition - Related-Party Transactions: Given the Nelson family ownership structure (Jason and Stanley each holding 25-50%), all related-party dealings should be disclosed and monitored - Filing Compliance: Accounts are current; ensure continuation of timely filings - Key-Person Risk: Stanley Nelson is sole director and secretary—establish succession/continuity provisions

Structural Concerns: - The company operates with a single employee (likely the director), suggesting it may function as a property-holding vehicle rather than an operating business - Minimal share capital (£2) and share premium (£300) means virtually all equity comprises retained earnings, which are being eroded - The registered office at "C/O Timber Supplies" suggests a potential related-entity connection that should be explored