DAP PROJEKT LTD

Executive Summary

DAP PROJEKT LTD currently maintains a stable financial position with positive net assets and working capital, but recent trends reveal declining liquidity and equity. The company exhibits symptoms of financial strain such as reduced cash reserves and increasing receivables, suggesting the need for improved cash flow management and careful control of dividend payments. Proactive financial measures can restore robust health and ensure long-term business resilience.

DAP PROJEKT LTD - Analysis Report

Company Number: SC706087

Analysis Date: 2025-07-20 18:27 UTC

Financial Health Assessment for DAP PROJEKT LTD (Year ended 31 March 2024)

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1. Financial Health Score: C

Explanation:
DAP PROJEKT LTD demonstrates a stable but somewhat declining financial position compared to prior years. The company maintains positive net assets and working capital, indicating it is solvent and able to meet short-term obligations. However, a noticeable reduction in net current assets and shareholders' funds over recent periods signals emerging symptoms of financial strain. The absence of an income statement limits insight into profitability, but cash reserves remain healthy. Overall, the business is financially stable but requires attention to prevent deterioration.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	51,834	56,578	Slight reduction; assets available to cover debts
Cash	42,472	51,673	Healthy cash flow but decreasing cash buffer
Debtors	9,362	4,905	Increase in receivables; may indicate slower collections
Current Liabilities	39,682	38,249	Slight increase in short-term liabilities
Net Current Assets (Working Capital)	12,152	18,329	Decreasing buffer to cover short-term debts
Net Assets (Equity)	15,856	20,892	Declining shareholder value; needs monitoring
Tangible Fixed Assets (Net Book Value)	4,304	2,863	Investment in plant and machinery ongoing
Provisions for Liabilities	600	300	Doubling provisions indicates caution for future costs
Dividends Paid	30,000	35,000	Regular withdrawals reducing retained earnings

Interpretation of Vital Signs:

• Working Capital: The company maintains positive working capital, a sign of a "healthy cash flow pulse," but the declining trend is a symptom of tightening liquidity.
• Cash Reserves: While cash remains the largest current asset, the decline suggests the company is using cash reserves, possibly to meet expenses or dividends.
• Debtors: Growing receivables could indicate delays in customer payments, which if prolonged, may stress cash flow ("symptom of cash flow congestion").
• Equity Decline: Reduction in net assets signals the company is consuming retained earnings, possibly due to operating losses or dividend payments.
• Fixed Assets: Incremental investment in tangible assets may indicate business growth or replacement of equipment, a positive sign if matched by revenue growth.
• Provisions: Increasing provisions suggest anticipation of future liabilities—management is prudent but this could pressure future profits.

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3. Diagnosis

DAP PROJEKT LTD shows signs of a company in a stable but cautious state of financial health. The "heartbeat" of working capital is positive, confirming the company can currently meet its short-term obligations. However, the shrinking cash reserves and net current assets, coupled with rising debtors and provisions, are "symptoms of financial stress" that warrant close monitoring.

The company’s equity base is shrinking, reflecting either operational losses or the impact of dividend payments that exceed profits. This trend, if continued, could erode the company’s "financial immunity," reducing its resilience against unexpected shocks.

The absence of an income statement limits the ability to diagnose profitability or operational efficiency fully, but the balance sheet suggests the company is in a "recovering patient" stage rather than robust health.

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4. Recommendations

To improve financial wellness and avoid the progression of financial distress, the following actions are recommended:

• Improve Cash Flow Management: Tighten debtor credit terms and pursue overdue payments to reduce receivables and bolster cash reserves. Consider incentivizing early payments.
• Review Dividend Policy: Reduce or temporarily suspend dividend payments to preserve retained earnings and improve equity strength. Dividends appear to be a significant drain on financial resources.
• Cost Control and Profitability: Conduct a detailed review of operating expenses and pricing strategies to enhance profitability and rebuild equity.
• Monitor Provisions: Analyze the nature of provisions and implement measures to mitigate future liabilities where possible.
• Asset Utilization: Evaluate the return on investment of tangible assets to ensure capital expenditures contribute positively to revenue generation.
• Financial Reporting: Prepare full profit & loss accounts and cash flow statements to gain a comprehensive view of operational performance and better diagnose financial health.
• Engage Financial Advisers: Regular financial reviews and forecasting can help detect early signs of distress and provide timely corrective actions.

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