CHAPPLES CONSTRUCTION LIMITED

Executive Summary

CHAPPLES CONSTRUCTION LIMITED currently exhibits financial distress with negative net assets and deteriorating liquidity, signaling risk to its operational viability. Immediate action to improve cash flow, control costs, and restore equity is essential to stabilize the business. Without intervention, the prognosis points toward increasing financial challenges.

CHAPPLES CONSTRUCTION LIMITED - Analysis Report

Company Number: 13885324

Analysis Date: 2025-07-29 20:53 UTC

Financial Health Assessment of CHAPPLES CONSTRUCTION LIMITED

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1. Financial Health Score: D

Explanation:
The company exhibits symptoms of financial distress primarily due to negative net assets and worsening working capital. The balance sheet shows a decline from positive net assets of £8,950 in 2023 to net liabilities of £4,142 in 2024. This dip below zero equity indicates the company’s financial "vital signs" are weak, reflecting an unhealthy financial state that requires urgent attention.

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2. Key Vital Signs (Core Financial Metrics)

Metric	2023 (£)	2024 (£)	Interpretation
Fixed Assets	13,667	10,452	Slight decrease, possibly asset disposals or depreciation
Current Assets	8,164	8,403	Stable short-term resources, slightly improved
Current Liabilities	12,881	22,997	Sharp increase in short-term debts, stress on liquidity
Net Current Assets	(4,717)	(14,594)	Negative and worsening working capital, liquidity risk
Net Assets (Equity)	8,950	(4,142)	From positive to negative equity, a key warning sign
Share Capital	102	102	Minimal capital base, typical for a micro entity
Employees (Average)	0	4	New hires, operational expansion but increased cost

Interpretation:

• The company’s liquidity is poor and deteriorating as shown by the negative net current assets, meaning current liabilities exceed current assets by a significant margin. This is akin to a patient whose blood pressure (cash flow) is dangerously low, risking operational stability.
• The plunge in net assets from positive to negative signals accumulated losses or write-downs exceeding the company's capital base, reflecting poor profitability or financial strain.
• The increase in current liabilities without a corresponding rise in current assets suggests overdue payments or higher short-term borrowing.
• The increase in staff may indicate business growth efforts but also increased overhead burden.

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3. Diagnosis: What the Financial Data Reveals About Business Health

CHAPPLES CONSTRUCTION LIMITED shows clear symptoms of financial distress:

• Negative Equity: The company has moved from a healthy equity position to a deficit, indicating that liabilities exceed assets. This situation is similar to a patient whose vital organs are failing; in business terms, it signals insolvency risk.

• Liquidity Stress: With current liabilities more than twice current assets in 2024, the company faces a working capital crunch. It may struggle to meet short-term obligations such as supplier payments and wages, potentially leading to cash flow insolvency.

• Asset Depletion: The reduction in fixed assets might reflect asset sales or heavy depreciation, reducing the company’s long-term asset base, which weakens collateral value for borrowing.

• Operational Expansion vs. Financial Strain: The jump to four employees indicates operational scaling, but without corresponding financial stability, this increases cash burn and risk.

• No Profit and Loss Detail: Absence of P&L statements limits insight into revenue, expenses, and profitability trends, but the equity drop suggests losses were incurred.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Liquidity Management:

   • Urgently review and renegotiate payment terms with suppliers and creditors to ease short-term cash outflows.
   • Prioritize collection of receivables and optimize inventory management to boost current assets.

2. Cost Control and Operational Efficiency:

   • Reassess staffing levels and operational expenses to align costs with revenue, possibly delaying further hires.
   • Implement strict budget controls to reduce overhead and improve cash flow.

3. Capital Injection or Restructuring:

   • Consider raising additional equity capital from shareholders or external investors to restore positive net assets.
   • Explore refinancing options to convert short-term liabilities into longer-term debt, easing liquidity pressure.

4. Financial Monitoring and Reporting:

   • Prepare detailed profit and loss accounts to identify loss-making activities.
   • Set up regular financial health checks akin to medical checkups to detect early symptoms of distress.

5. Seek Professional Advice:

   • Engage financial advisors or turnaround specialists to design a recovery plan.
   • Explore government support schemes or grants available to construction SMEs.

6. Maintain Compliance and Governance:

   • Ensure all statutory filings are timely to avoid penalties and maintain creditor confidence.
   • Directors should monitor financial risks actively, fulfilling fiduciary duties to prevent wrongful trading.

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