ABF GROUP LTD

Executive Summary

ABF Group Ltd is currently facing financial stress characterized by negative net assets and working capital deficits, signaling liquidity and solvency challenges. While the company remains operational and compliant, urgent measures to improve cash flow, reduce costs, and strengthen equity are recommended to restore financial health and ensure long-term viability.

ABF GROUP LTD - Analysis Report

Company Number: 13042127

Analysis Date: 2025-07-29 14:05 UTC

Financial Health Assessment: ABF Group Ltd (as of 30 November 2024)

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1. Financial Health Score: C

Explanation:
ABF Group Ltd shows mixed signals in its financial health. While the company remains active and compliant with filing deadlines, its net asset position has deteriorated sharply from a positive £1,393 in 2023 to a negative £1,412 in 2024. This negative net asset (or equity) position is a significant symptom of financial distress, akin to a patient whose vital signs have suddenly worsened. However, the business is still operational, has low fixed assets, and a small workforce, which provides some flexibility. Therefore, the company earns a mid-level grade of C, indicating caution but not immediate failure.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Fixed Assets	615	1,075	Low and declining; minimal long-term asset base.
Current Assets	417	8,845	Sharp decline; reduced cash/debtors signals liquidity issues.
Current Liabilities	2,444	8,527	Improved but still exceeds current assets, causing negative working capital.
Net Current Assets (Working Capital)	-2,027	317	Negative working capital is a "symptom of distress" in short-term financial health.
Net Assets (Equity)	-1,412	1,393	Negative equity indicates liabilities exceed assets; a critical warning sign.
Share Capital	100	100	Very small capital base, typical of micro entities.
Number of Employees	2	2	Small and stable workforce.

Interpretation of Vital Signs:

• The significant drop in current assets suggests the company’s "cash flow health" is weakening, possibly due to declining sales or delayed receivables collection.
• Negative working capital means the company may struggle to meet short-term obligations without additional financing or improved cash collection.
• Negative net assets is akin to a "heart condition" for the company — it suggests the business is technically insolvent on a balance sheet basis.
• The low fixed assets base suggests limited tangible collateral to secure loans, increasing financial risk.

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3. Diagnosis

ABF Group Ltd is exhibiting early symptoms of financial strain:

• The shift from positive to negative net assets within one year raises "red flags" about the sustainability of operations without corrective action.
• Negative working capital indicates the company may face liquidity crunches, risking delayed payments to suppliers or creditors.
• The small asset base and limited equity mean the company’s financial "immune system" is weak, with little buffer against market or operational shocks.
• No indication of overdue filings or administration/liquidation suggests the company has not yet reached a critical health crisis but is vulnerable.
• The director holds full ownership and control, which can be beneficial for swift decision-making but also concentrates risk.

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4. Recommendations

To improve ABF Group Ltd’s financial wellness and avoid further deterioration, the following steps are advised:

1. Strengthen Cash Flow Management:

   • Accelerate debtor collections and manage payables strategically.
   • Explore short-term financing options to cover negative working capital gaps.
   • Monitor cash flow forecasts closely to detect strain early.

2. Review Cost Structure:

   • Analyze operating expenses and reduce non-essential costs to preserve cash.
   • Maintain the lean employee structure but ensure sufficient capacity for core business functions.

3. Increase Equity Base:

   • Consider capital injection from the owner or external investors to restore positive net assets and improve financial stability.
   • Explore grants or funding schemes available to micro enterprises in the IT/software sector.

4. Enhance Revenue Generation:

   • Focus on client acquisition and retention strategies for the IT consultancy and software development areas.
   • Assess the profitability of current contracts and adjust pricing if necessary.

5. Regular Financial Monitoring:

   • Implement monthly financial reviews to track vital signs and symptoms, enabling early intervention.
   • Engage with an accountant or financial advisor to support strategic planning.

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