ALCHEMY PROPERTY SERVICES LTD
Executive Summary
Alchemy Property Services Ltd demonstrates fair financial health with positive but declining liquidity and capital reserves. The company is experiencing early symptoms of cash flow strain and increased short-term liabilities, partly mitigated by director advances. Prompt action to improve cash management and strengthen capital structure will be crucial to maintain stability and support future growth.
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This analysis is opinion only and should not be interpreted as financial advice.
ALCHEMY PROPERTY SERVICES LTD - Analysis Report
Financial Health Assessment for ALCHEMY PROPERTY SERVICES LTD (As of 31 December 2023)
1. Financial Health Score: C (Fair)
Explanation:
The company exhibits some positive traits such as maintaining positive net current assets and shareholder funds, which are signs of basic financial stability. However, the decline in net current assets and shareholders’ funds compared to the previous year indicates emerging strains on liquidity and capital base. The modest fixed asset base and reliance on director advances suggest limited operational scale and potential cash flow constraints. Overall, the financial health is fair but shows symptoms of stress that require close monitoring and corrective actions.
2. Key Vital Signs (Critical Financial Metrics)
Metric | 2023 Value (£) | 2022 Value (£) | Interpretation |
---|---|---|---|
Fixed Assets | 2,750 | 598 | Increase suggests some investment in long-term assets but remains very low overall. |
Current Assets | 13,981 | 16,374 | Decrease signals reduced short-term liquidity resources available to meet liabilities. |
Current Liabilities | 10,527 | 6,725 | Increase indicates growing short-term obligations which could pressure liquidity. |
Net Current Assets | 3,454 | 9,649 | Sharp decrease implies working capital is tightening, a symptom of potential cash flow stress. |
Total Assets Less Current Liabilities | 6,204 | 10,247 | Decline in this broader net asset measure points to weakening overall asset coverage. |
Shareholders Funds | 6,204 | 10,247 | Drop in equity signals reduced buffer to absorb losses or financial shocks. |
Director Advances | 9,864 | 10,066 | Significant director loans reveal reliance on internal funding to support operations. |
Number of Employees | 2 | 2 | Small workforce consistent with micro-entity status, limiting operational scale. |
3. Diagnosis: What the Financial Data Reveals About Business Health
Liquidity & Cash Flow: The company’s "pulse" shows signs of weakening liquidity — current assets are falling, while current liabilities rise, causing net current assets to decrease substantially. This is a classic symptom of cash flow tightening, which, if unchecked, could lead to difficulties in meeting short-term obligations.
Capital Structure: The drop in shareholders’ funds and total net assets suggests the company’s capital base is eroding. This could be due to operational losses, increased liabilities, or asset write-downs. The balance sheet remains solvent but with a shrinking safety margin.
Reliance on Directors’ Funding: Persistent and sizeable advances from the director hint at the company’s dependence on internal support to maintain operations. While this can be a lifeline, it also points to insufficient external funding or operational cash generation.
Growth & Investment: The modest increase in fixed assets is a positive sign but remains minimal, indicating limited reinvestment capacity or growth initiatives.
Size and Scale: As a micro-entity with only two employees, the company operates on a very small scale, which inherently increases vulnerability to market fluctuations or unexpected expenses.
Compliance and Governance: The company is current on filings with no overdue accounts or confirmation statements, reflecting good compliance discipline, which is a positive indicator of management’s attention to regulatory matters.
4. Recommendations: Specific Actions to Improve Financial Wellness
Improve Cash Flow Management:
- Conduct a detailed cash flow forecast to identify timing mismatches between inflows and outflows.
- Tighten credit control and accelerate debtor collections where possible.
- Negotiate better payment terms with suppliers to ease short-term cash demands.
Reduce Reliance on Director Advances:
- Explore alternative financing options such as small business loans or equity injections to reduce personal risk to directors.
- Consider restructuring director loans to formal debt instruments with clear repayment terms.
Enhance Profitability:
- Review pricing strategies and cost structures to improve margins.
- Identify and cut non-essential expenses to conserve cash.
Strengthen Capital Base:
- Retain earnings where possible rather than distributing profits to rebuild shareholders’ funds.
- Evaluate opportunities for strategic investment to drive revenue growth and asset base expansion.
Operational Scalability:
- Assess whether scaling up workforce or service offerings can increase revenue without disproportionately increasing costs.
Regular Financial Monitoring:
- Implement monthly financial reviews focusing on cash flow, working capital, and key ratios to detect early warning signs of distress.
Medical Analogy Summary
Alchemy Property Services Ltd currently shows a "fair" financial health status, akin to a patient with stable but declining vital signs. The "healthy cash flow" vital signs are weakening, with symptoms like reduced liquidity and shrinking equity indicating early distress. Immediate interventions focusing on cash flow management and reducing internal funding dependency are recommended to restore financial wellness and prevent deterioration.
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