RAK 70 LEDBOROUGH LANE LIMITED

Executive Summary

RAK 70 LEDBOROUGH LANE LIMITED is currently in a fragile financial state characterized by negative working capital and equity, signaling liquidity and solvency challenges. However, recent profitability improvements offer hope for recovery if cash flow management and debt restructuring are prioritized. Immediate focus on converting assets into cash and strengthening the capital base will be critical to restoring financial health.

RAK 70 LEDBOROUGH LANE LIMITED - Analysis Report

Company Number: 12768629

Analysis Date: 2025-07-20 11:54 UTC

Financial Health Assessment: RAK 70 LEDBOROUGH LANE LIMITED

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1. Financial Health Score: D

Explanation:
The company shows signs of financial distress with net current liabilities and negative shareholders’ funds over multiple periods, though improvement is evident in the latest period. The "D" grade reflects a fragile financial position with some recovery signs but risks remain significant.

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2. Key Vital Signs

Metric	Latest Period (31 Mar 2023)	Interpretation
Current Assets	£1,297,908	Healthy asset base but largely tied up in stocks and debtors.
Cash at Bank	£43,853	Low liquidity; cash is a small fraction of current liabilities.
Current Liabilities	£1,346,160	High short-term debts, nearly equal to current assets.
Net Current Assets (Working Capital)	-£48,252	Negative working capital indicates liquidity strain ("symptom of distress").
Shareholders’ Funds (Equity)	-£48,252	Negative equity signals accumulated losses and financial weakness.
Profit and Loss Reserves	-£48,352	Large accumulated losses, though improved from previous years.
Stock (Work in Progress)	£706,353	Significant inventory tied up; potential liquidity risk if not converted to cash soon.
Debtors	£547,702	Large amounts owed to company; collection efficiency needed to improve cash flow.
Bank Loans	£1,021,179	Substantial secured borrowing increases financial risk.

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3. Diagnosis: Financial Health Overview

• Liquidity Concerns: The company’s "vital signs" reveal a "symptom of distress"—negative net current assets indicates the company may struggle to meet short-term obligations without additional financing or asset sales. Cash on hand is very low compared to liabilities, signaling tight liquidity.

• Capital Structure: Negative shareholders’ funds (equity) indicate the company’s liabilities exceed its assets, reminiscent of a "weakened heartbeat" in financial terms. This accumulated deficit is a red flag for insolvency risk if not addressed.

• Operational Performance: The company reported a profit of approximately £137,000 in the latest period after prior losses, suggesting some recovery and improved operational efficiency. This "healthy pulse" is encouraging but needs consolidation.

• Asset Composition: A large portion of current assets is tied up in stocks (work in progress) and debtors, which may not be quickly convertible to cash, posing a risk to ongoing liquidity.

• Debt Profile: Significant bank loans secured by legal mortgage elevate financial risk, especially with weak equity cushions. The company must manage debt repayment carefully to avoid distress.

• Industry Context: Operating in domestic building construction, a sector prone to cash flow timing challenges and project risks, the company’s financial fragility warrants close monitoring.

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4. Recommendations: Steps to Improve Financial Wellness

• Enhance Cash Flow Management:

  • Accelerate collection of trade debtors through stricter credit control and possibly incentives for early payments.
  • Review stock/work-in-progress levels to avoid overcapitalization; consider faster project turnovers or sales.
  • Develop cash flow forecasts to anticipate liquidity needs and avoid shortfalls.

• Restructure Debt:

  • Engage lenders to explore possible refinancing or restructuring of bank loans to ease short-term pressures.
  • Consider negotiating extended payment terms with creditors or seeking additional equity injections.

• Strengthen Capital Base:

  • Address negative equity by injecting fresh capital if feasible or retaining profits from operations.
  • Consider strategic partnerships or external investors to bolster financial stability.

• Cost Control and Profitability:

  • Maintain or improve profitability trends by controlling overheads and optimizing project margins.
  • Monitor and manage project risks carefully to avoid unexpected losses.

• Regular Financial Monitoring:

  • Institute frequent financial health checks ("vital sign monitoring") to detect early signs of distress.
  • Keep stakeholders informed of financial status and recovery plans.

• Governance and Reporting:

  • Ensure compliance with filing deadlines and transparency to maintain stakeholder confidence.
  • Use detailed financial reports to guide management decisions.

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