Company Number: 12933150

Analysis Date: 2025-07-29 14:23 UTC

Financial Health Assessment for BORLEY BROTHERS ENGINEERING LIMITED

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1. Financial Health Score: D

Explanation:
The company is currently exhibiting symptoms of financial distress, notably a significant negative net asset position and shrinking net current assets. While it remains an active business with operational cash balances, the overall balance sheet shows a deficit, indicating the company’s liabilities exceed its assets. This score reflects a weakened financial condition that requires careful management and strategic intervention.

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2. Key Vital Signs

Metric	2023 (£)	2022 (£)	Interpretation
Current Assets	903,911	1,112,683	Healthy short-term resources but declining year-over-year.
Cash at Bank	397,792	402,694	Reasonably stable cash reserves, supporting liquidity.
Debtors	506,119	709,989	Reduction indicates potential collection issues or lower sales.
Current Liabilities	872,809	1,014,040	High short-term obligations, though slightly reduced.
Net Current Assets	31,102	98,643	Positive but sharply decreased working capital, a warning sign.
Total Assets Less Current Liabilities	154,074	235,664	Decreasing buffer after covering short-term debts.
Creditors > 1 Year	303,490	203,490	Growing long-term debt burden, increasing leverage.
Net Assets (Equity)	-149,416	8,042	Shifted from modest positive to significant negative equity; critical symptom of distress.
Share Capital	1	1	Nominal capital indicating limited equity base.

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3. Diagnosis

Symptoms Analysis:

• The company’s net assets have swung from a positive £8k in 2022 to a negative £149k in 2023, signaling that liabilities now exceed assets by a considerable margin. This is a critical symptom of financial distress akin to a “weak heart” in a patient, indicating the company’s financial foundation is compromised.
• Net current assets have declined sharply, from £98k to £31k, showing that the company’s short-term liquidity cushion has thinned considerably, jeopardizing its ability to meet immediate obligations comfortably.
• The cash position remains relatively stable around £398k, which is a positive sign, suggesting the company still maintains some “healthy blood flow” (cash flow) to support operations in the short term.
• However, the increase in long-term creditors (from £203k to £303k) and the director’s loan account of £303k (deferred repayment) indicate rising debt levels, increasing financial strain and risk.
• The company has a relatively small share capital (£1), meaning it has a limited equity buffer to absorb losses.
• The director acknowledges the net liabilities and intends to support the company by delaying repayment of loans, which is a temporary life support measure but not a cure.
• The average number of employees has dropped from 28 to 24, possibly indicating cost-cutting or contraction.
• The company operates in engineering and construction-related activities, sectors that can be capital intensive and sensitive to economic cycles, which may exacerbate financial pressures.

Overall Condition:
The company is currently in a precarious financial position with signs of distress, mainly due to a deteriorating equity position and shrinking working capital. The “patient” is still alive and operating but requires immediate intervention to restore financial health and avoid insolvency risks.

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4. Recommendations

Immediate Actions:

• Improve working capital management: Accelerate debtor collections, review credit terms, and negotiate longer payment terms with suppliers to bolster net current assets.
• Restructure debt: Engage creditors and the director to formalize repayment terms and possibly reduce the burden of long-term liabilities. Consider refinancing options to spread out repayments and reduce immediate cash outflows.
• Enhance cash flow monitoring: Implement rigorous cash flow forecasting to identify potential liquidity shortfalls early and adjust operations accordingly.
• Cost control: Review and optimize operating expenses, including personnel costs, to improve profitability and cash conservation.

Medium to Long Term:

• Equity injection: Consider raising additional equity capital or obtaining external investment to rebuild the company’s net asset base and provide a financial cushion.
• Strategic review: Assess business lines and contracts for profitability and sustainability; focus on core competencies and discontinue loss-making activities.
• Financial reporting and transparency: Maintain timely and accurate financial reporting to support decision-making and stakeholder confidence.

Monitoring:
Regular financial health checks should be conducted, focusing on liquidity ratios, solvency, and profitability metrics to detect early signs of improvement or further decline.

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