DAVE MEP ENGINEERING LTD
Executive Summary
DAVE MEP ENGINEERING LTD exhibits significant solvency and liquidity risks with negative net assets and high current liabilities relative to cash. While compliant with filings and currently active, operational and governance concerns, including dividend payments despite losses, suggest a high-risk profile. Detailed investigation into liabilities, cash flow, and governance is recommended to assess sustainability.
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This analysis is opinion only and should not be interpreted as financial advice.
DAVE MEP ENGINEERING LTD - Analysis Report
Risk Rating: HIGH
The company exhibits significant solvency and liquidity concerns, demonstrated by consistently negative net assets and net current liabilities over multiple years, indicating an ongoing funding deficit.Key Concerns:
- Negative Net Assets and Working Capital: The company reported net assets of -£28,215 and net current liabilities of -£28,215 as of 30 November 2023, deteriorating from -£10,644 the prior year, showing an increased funding gap.
- High Current Liabilities Relative to Cash: Current liabilities of £29,719 vastly exceed current assets (£1,504), with no trade debtors, suggesting potential cash flow constraints to meet immediate obligations.
- Dividend Payments Despite Loss Reserves: The notes show dividends of £74,884 paid in the year despite retained earnings being negative, which may raise questions on governance and financial prudence.
- Positive Indicators:
- Timely Filings and Compliance: The company is active, with no overdue accounts or confirmation statements, indicating compliance with statutory filing requirements.
- Single Director with Full Control: Mr. David Roberts holds 75-100% of shares and voting rights, which may enable swift decision-making.
- Profit Reported in Period: The company recorded a profit of £57,313 in the latest period, suggesting some operational revenue generation capability despite balance sheet weaknesses.
- Due Diligence Notes:
- Investigate Nature and Terms of Current Liabilities: Confirm the composition of the £29,719 current liabilities, particularly the large taxation and social security creditor balance, and any payment plans or disputes.
- Review Dividend Policy and Source of Funds: Understand how dividends were paid amid negative reserves and whether this impacts ongoing liquidity or creditor relationships.
- Assess Cash Flow Projections and Funding Plans: Given the negative working capital, review management’s forecasts and plans to restore financial stability.
- Examine Related Party Transactions: Confirm if liabilities or dividends relate to director loans or transactions with related parties.
- Verify Operational Status and Client Base: Since there are no trade debtors, it would be prudent to confirm the business model, client contracts, and revenue sustainability.
Executive Summary:
DAVE MEP ENGINEERING LTD shows a high-risk financial profile characterized by persistent negative net assets and significant short-term liabilities exceeding current assets. Although the company remains compliant with filings and reported a profit in the latest period, liquidity pressures and governance concerns around dividend payments warrant careful scrutiny. Further due diligence is essential to understand the underlying causes of financial distress and the viability of the business going forward.
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