AFFINITY PROPERTY PROJECTS LIMITED

Executive Summary

Affinity Property Projects Limited faces liquidity challenges with negative net current assets and a high debt load, placing it in a fragile financial position. Immediate actions to improve cash flow, manage debt, and increase equity are critical to stabilizing the company’s financial health. Without intervention, the company risks deeper financial distress despite having substantial investment assets.

AFFINITY PROPERTY PROJECTS LIMITED - Analysis Report

Company Number: 12695636

Analysis Date: 2025-07-20 17:16 UTC

Financial Health Assessment for Affinity Property Projects Limited

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1. Financial Health Score: D

Explanation:
Affinity Property Projects Limited exhibits symptoms of financial distress primarily due to significant negative working capital and high long-term liabilities relative to equity. The company’s current liabilities far exceed its current assets, indicating liquidity challenges. The minimal cash reserves and declining net assets further support a cautious grade. While investment assets provide some stability, the overall financial structure is strained and requires intervention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Cash at Bank	1,854	Critically low cash reserves—“weak pulse” for immediate liquidity needs.
Current Liabilities	475,175	Very high short-term obligations—“pressure on the system” for meeting near-term debts.
Net Current Assets	-204,646	Negative working capital—indicative of “symptoms of distress” in day-to-day operational liquidity.
Net Assets (Equity)	20,179	Very thin equity buffer relative to liabilities—“fragile immune system” against financial shocks.
Share Capital	100	Minimal capital base—limited “nutritional reserves” from shareholders.
Investments (Fixed Assets)	700,000	Significant non-current assets, mostly investments—“long-term organs” providing value but illiquid.
Bank Loans & Overdrafts (LT Debt)	475,175	High leverage—“burden on the heart” of the balance sheet, requiring servicing from limited cash flow.

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3. Diagnosis

Affinity Property Projects Limited’s financial health shows clear signs of liquidity strain and high leverage. The company relies heavily on investment assets valued at £700,000, but these are not readily convertible to cash to meet immediate obligations. The negative net current assets suggest the business is operating with a working capital deficit, a “warning sign” that it may struggle to pay its short-term debts without additional financing or asset sales.

The equity base is very low (£20,179), reflecting minimal retained earnings or capital injections since incorporation in 2020. This thin equity margin reduces the company's ability to absorb losses or fund growth internally. The steady decline in net assets from £34,080 in 2023 to £20,179 in 2024 further indicates erosion of financial strength.

The company’s exemption from audit may reflect its small size, but also means limited external scrutiny. Directors have declared responsibility for preparing accounts, but the absence of an income statement (not filed as permitted) makes it harder to assess profitability or cash flow trends fully.

Overall, the company is in a vulnerable financial position, with symptoms akin to “poor circulation” in its liquidity and “high blood pressure” in its debt load, risking insolvency if conditions worsen.

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4. Recommendations

To improve financial wellness and stabilize the business, the following actions are advised:

• Enhance Liquidity:
  Seek to strengthen cash reserves immediately. This might involve negotiating extended payment terms with creditors, accelerating receivables, or securing short-term financing. Consider asset sales if possible to convert non-current investments to cash.

• Manage Debt Burden:
  Explore restructuring or refinancing the £475k bank loans to reduce interest and extend maturities. Lowering the “debt load” will improve financial breathing room and reduce risk.

• Increase Equity Base:
  Consider a capital injection from shareholders or new investors to build a stronger “immune system” against future shocks. A higher equity base improves solvency ratios and lending capacity.

• Improve Financial Transparency and Controls:
  Although audit exemption applies, voluntarily preparing a full income statement and cash flow analysis will help identify operational inefficiencies and improve stakeholder confidence.

• Monitor Working Capital Closely:
  Implement stricter control over short-term assets and liabilities to avoid worsening negative working capital. Efficient inventory and debtor management can ease day-to-day cash flow pressures.

• Strategic Review of Investments:
  Evaluate the portfolio of fixed asset investments to ensure they align with the company’s core business and can be liquidated if necessary without significant losses.

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