COLLINS ELECTRICAL CONTRACTS LTD

Executive Summary

COLLINS ELECTRICAL CONTRACTS LTD is financially stable but exhibits a narrow margin of working capital indicating potential short-term liquidity stress. The company's equity base is growing, reflecting retained earnings or capital support, which is positive for future resilience. Proactive cash flow management and cost control are recommended to sustain healthy financial wellness as the business grows.

COLLINS ELECTRICAL CONTRACTS LTD - Analysis Report

Company Number: NI685463

Analysis Date: 2025-07-20 17:15 UTC

Financial Health Assessment: COLLINS ELECTRICAL CONTRACTS LTD (as at 29 February 2024)

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1. Financial Health Score: B-

Explanation:
The company shows moderate financial health with stable but somewhat constrained liquidity and working capital. Shareholders’ funds have increased, indicating some retained profitability or capital injection, but current liabilities remain high relative to current assets, suggesting potential short-term cash flow pressures. The company is young (incorporated 2022) and growing modestly, but careful management of liabilities and cash conversion cycles is recommended to avoid financial distress.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	107,940	Moderate investment in long-term assets, slightly reduced from previous year—sign of asset utilization or disposal.
Current Assets	201,772	Includes cash, debtors, and stock; sufficient but declined from prior year, indicating tighter liquidity.
Current Liabilities	172,219	High short-term obligations, lowered from previous year but still significant.
Net Current Assets	29,553	Positive but slim working capital buffer; a healthy company usually maintains a solid positive margin here to cover day-to-day expenses.
Shareholders' Funds	119,888	Increased by approx. £30,000 year-on-year, indicating accumulated profits or new equity. Solid equity base for a micro company.
Average Number of Employees	7	Small workforce consistent with micro entity status and electrical installation sector.

Interpretation:

• Liquidity ("healthy cash flow"): The net current assets (working capital) of £29,553 is positive but narrow, reflecting a potential "symptom of stress" in covering short-term obligations comfortably.
• Leverage: No long-term debt is explicitly stated beyond £12,787 creditors after one year, which is manageable but should be monitored.
• Profitability: Shareholders’ funds increase suggests retained earnings and profitability, though micro-entity accounts limit detailed profit analysis.
• Asset Management: Fixed assets slightly decreased, possibly indicating asset disposals or depreciation—all normal for a young growing business.

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3. Diagnosis

• Liquidity Position: The company shows a "mild symptom of cash flow restriction" due to modest working capital. While current assets exceed liabilities, the margin is narrow, meaning unexpected expenses or revenue delays could cause strain.
• Capital Structure: The equity base is solid for a micro company, with increasing shareholder funds suggesting retained profits or fresh capital contributions, which is a "healthy sign" of internal financial strength.
• Growth & Stability: The company increased its workforce and maintained stable asset investment, reflecting business expansion and operational activity. However, the slight decline in current assets and current liabilities reduction indicates active management of payables and receivables.
• Risk Factors: Being a micro entity, detailed profit and cash flow data are limited, which constrains full financial diagnosis. The company is still in early years of operation, which naturally involves more volatility and risk. Its narrow working capital margin is a "warning symptom" to be closely monitored.

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4. Recommendations

1. Improve Liquidity Management:

   • Monitor receivables closely to accelerate cash inflows.
   • Negotiate longer payment terms with suppliers where possible to ease pressure on working capital.
   • Maintain a cash buffer to handle unexpected expenses or delays.

2. Asset Utilization Review:

   • Review fixed assets for efficiency and potential disposal of underused equipment to free cash.

3. Strengthen Equity Base:

   • Consider capital injections or retained profits reinvestment to build a larger equity cushion.

4. Cost Control & Profitability Tracking:

   • Implement detailed budgeting and cash flow forecasting to detect early "symptoms of distress."
   • Regular review of profit margins on contracts to ensure sustainable earnings.

5. Contingency Planning:

   • Develop contingency plans for liquidity stress or downturns, including access to short-term financing if needed.

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Medical Analogy Summary:
COLLINS ELECTRICAL CONTRACTS LTD is like a young patient with generally good vitality (equity and asset base) but showing early signs of mild stress in liquidity (working capital). With prompt attention to cash flow and working capital management, the company can maintain and improve its financial health and avoid symptoms progressing into more serious distress.

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