AUERHAM CONSULTANTS LTD

Executive Summary

AUERHAM CONSULTANTS LTD is currently in a financially distressed state, evidenced by negative working capital and shareholders' funds, indicating liquidity and solvency pressures. Immediate action to improve cash flow, reduce liabilities, and potentially inject capital is critical to prevent further deterioration. With targeted financial management and strategic adjustments, the company can stabilize and restore its financial health.

AUERHAM CONSULTANTS LTD - Analysis Report

Company Number: 13618589

Analysis Date: 2025-07-29 17:25 UTC

Financial Health Assessment for AUERHAM CONSULTANTS LTD

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1. Financial Health Score: D

Explanation:
The company shows significant financial distress signs, primarily indicated by persistent negative net current assets and shareholders' funds. The working capital deficit and equity erosion suggest the company is "unwell" financially, requiring urgent attention to remedy liquidity and solvency issues.

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2. Key Vital Signs

Metric	Latest Value (31-Mar-24)	Interpretation
Current Assets	£7,456	Very low level of liquid and short-term assets; insufficient to cover short-term obligations.
Cash at Bank	£1,521	Limited cash reserves; "weak pulse" suggesting tight daily liquidity.
Debtors	£5,935	Some receivables present but collection could be slow, further straining cash flow.
Current Liabilities	£28,263	High short-term debts, almost 4 times current assets, indicating "symptoms of distress."
Net Current Assets	-£20,807	Negative working capital, a critical red flag signaling inability to meet short-term debts.
Shareholders' Funds	-£20,807	Negative equity means liabilities exceed assets; company is technically insolvent.
Trend (over ~1.5 years)	Slight deterioration	Net current liabilities and negative equity have marginally worsened since 2022.

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3. Diagnosis

AUERHAM CONSULTANTS LTD is exhibiting classic symptoms of financial distress. The company's inability to cover its short-term liabilities with current assets—manifested in a large negative working capital—suggests a liquidity crisis. Coupled with negative shareholders’ funds, it is apparent that the company’s "financial health" is compromised, akin to a patient with weakened vital signs struggling to maintain stability.

The limited cash reserves (£1,521) indicate a fragile cash flow position, potentially leading to difficulties in meeting immediate obligations such as supplier payments, taxes, and employee wages. Debtors’ balances, while present, do not sufficiently offset the heavy creditor burden. This mismatch reflects a "circulatory issue" where inflows (receivables and cash) are inadequate against outflows (creditors).

The company operates in the IT consultancy sector (SIC 62020), which typically relies on timely project payments and contracts. The current financial profile suggests challenges in managing operating cash flow or possibly prolonged payment terms with clients or suppliers, worsening liquidity.

Although the company is still active and not in liquidation or administration, the "symptoms" warrant proactive intervention to avoid progression to insolvency or formal distress procedures.

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4. Recommendations

To restore the company’s financial wellness, consider the following "treatment plan":

1. Improve Cash Flow Management:

   • Accelerate debtor collections by tightening credit terms or offering early payment discounts.
   • Review and renegotiate payment terms with suppliers to extend payables without penalties.
   • Monitor daily cash flows closely to avoid liquidity crises.

2. Capital Injection:

   • Seek additional equity funding from shareholders or new investors to strengthen the balance sheet.
   • Consider short-term loans or overdrafts with manageable interest rates for bridging cash needs.

3. Cost Control and Efficiency:

   • Analyze operating expenses to identify and cut non-essential costs.
   • Evaluate staffing and overheads to align with current revenue levels.

4. Financial Restructuring:

   • Engage with creditors to restructure or reschedule debts to reduce immediate pressure.
   • Explore government support schemes or grants available for small IT consultancies.

5. Strategic Review:

   • Assess business model viability and market positioning.
   • Diversify client base or services to increase and stabilize revenue streams.

6. Regular Financial Monitoring:

   • Implement monthly management accounts and cash flow forecasts.
   • Establish early warning indicators to detect worsening financial conditions promptly.

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