DAVIES MECHANICAL ENGINEERING LTD

Executive Summary

Davies Mechanical Engineering Ltd shows a strong recovery and solid financial footing for a start-up micro-entity with improved net assets and liquidity in the latest year. The company demonstrates capacity to service short-term liabilities and is progressing well operationally. Credit approval is recommended with ongoing monitoring of working capital and cash flow trends as the business scales.

DAVIES MECHANICAL ENGINEERING LTD - Analysis Report

Company Number: 14222975

Analysis Date: 2025-07-20 12:06 UTC

1. Credit Opinion: APPROVE
   Davies Mechanical Engineering Ltd presents a positive credit profile for a micro-entity at an early stage of trading. The company has demonstrated a strong recovery and growth trajectory from a negative net asset position in 2023 to a solid positive net asset base in 2024. The increase in current assets and net working capital indicates improving liquidity and capacity to meet short-term obligations. There are no overdue filings or regulatory concerns, and the sole director's involvement appears stable. While the company is young, its financial progress and balance sheet strength support credit approval with standard monitoring.

2. Financial Strength:

• Fixed assets grew from £39,982 in 2023 to £107,030 in 2024, indicating reinvestment in the business infrastructure.
• Current assets increased substantially from £34,665 to £600,872, reflecting improved cash or receivables.
• Current liabilities rose to £451,586 but are well covered by current assets, producing net current assets of £149,286 (up from negative £45,211).
• Shareholders’ funds improved markedly from a deficit of £5,229 to £256,316, demonstrating strengthened equity and solvency.
• The balance sheet shows a total asset base of £657,902 in 2024 (fixed plus current assets), supporting operational scale-up.

3. Cash Flow Assessment:

• The significant increase in current assets relative to current liabilities suggests enhanced liquidity and working capital management.
• Net current assets of £149,286 provide a buffer against short-term cash flow pressures.
• The company’s average headcount remains low (2 employees), which helps control operating costs.
• Although detailed cash flow statements are not provided, the balance sheet trends imply positive operational cash generation or effective capital injections.

4. Monitoring Points:

• Maintain oversight on the growth in current liabilities to ensure they remain manageable and linked to productive business expansion.
• Monitor cash conversion cycles closely to confirm that current assets, especially receivables or stock, do not become overstretched.
• Watch for consistent profitability and positive cash flow from operations in future filings to reinforce creditworthiness.
• Track any changes in director or ownership structure that might impact governance or financial strategy.
• Given the company’s young age, monitor timely filing of accounts and confirmation statements to avoid compliance risk.