DAVIES PROJECTS LIMITED

Executive Summary

Davies Projects Limited is currently experiencing significant financial distress, marked by negative working capital, very low cash reserves, and negative equity. The company faces urgent liquidity challenges and risks insolvency without immediate remedial action. Strategic cash flow management, asset monetization, and capital injection are critical steps to restore financial health and secure the company’s future viability.

DAVIES PROJECTS LIMITED - Analysis Report

Company Number: 13248838

Analysis Date: 2025-07-20 17:58 UTC

Financial Health Assessment for Davies Projects Limited

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1. Financial Health Score: D

Explanation:
The company is showing significant financial distress characterized by persistent negative net current assets and negative shareholders’ funds over multiple years. The continuing erosion of equity and high current liabilities relative to very low cash reserves indicate critical liquidity issues and potential solvency concerns. This score reflects a company struggling to maintain a healthy financial state, with urgent need for corrective action.

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2. Key Vital Signs

Metric	Latest Value (2024)	Interpretation
Cash at Bank	£1,481	Critically low cash, symptomatic of poor liquidity and limited immediate spending capacity.
Current Liabilities	£474,402	Very high short-term obligations, representing a heavy immediate financial burden.
Net Current Assets	-£472,921	Negative working capital, indicating inability to cover short-term debts with current assets.
Total Assets Less Current Liabilities	-£73,019	Negative net assets after accounting for current liabilities, indicating balance sheet weakness.
Shareholders' Funds (Equity)	-£73,021	Negative equity, a critical symptom of financial distress and potential insolvency risk.
Fixed Assets (Net Book Value)	£399,902	Substantial investment in tangible assets, but these are illiquid and do not offset liabilities.

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3. Diagnosis

Davies Projects Limited presents classic symptoms of financial distress:

• Liquidity Crisis: The company holds negligible cash (£1,481) against large current liabilities (£474k+), indicating a "dry" cash flow state. The inability to meet short-term obligations without external support is a critical red flag.

• Negative Working Capital: With net current assets deeply negative (~-£473k), the company is reliant on external financing or asset liquidation to fund operations, which is unsustainable long-term.

• Eroded Equity Base: Shareholders' funds are significantly negative (~-£73k), reflecting accumulated losses or deficits. This undermines the company’s financial stability and may threaten creditor confidence.

• Fixed Asset Heavy but Illiquid: While the company has substantial fixed assets (~£400k), they are not readily convertible to cash to ease immediate financial pressures. This asset structure may complicate turnaround without asset sales or refinancing.

• No Audit Requirement: As a small private company, the accounts are unaudited, which means financial statements may lack the rigor of external verification, adding some uncertainty to the financial picture.

• Director Loans: The director, Mr. G E Davies, has an outstanding loan (~£186k) to the company, indicating reliance on related-party financing, which may be a symptom of cash flow challenges.

These symptoms collectively indicate a business struggling with liquidity and solvency, potentially at risk of financial failure if conditions do not improve.

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4. Recommendations

To restore financial wellness and improve the prognosis, consider the following actions:

1. Immediate Cash Flow Management:

   • Negotiate with creditors to restructure or extend payment terms to reduce immediate pressure.
   • Explore short-term financing options or director advances to ensure operational continuity.

2. Asset Review and Monetization:

   • Evaluate the fixed asset portfolio for potential sales or refinancing to generate cash.
   • Consider whether all assets are essential or if disposal can reduce liabilities.

3. Equity Injection:

   • Seek capital infusion from shareholders or new investors to shore up the equity base and improve solvency.

4. Cost Control and Operational Efficiency:

   • Tighten operational expenses, review staffing and overheads, and prioritize profitable projects.
   • Improve turnover and margin to gradually rebuild reserves.

5. Financial Monitoring and Reporting:

   • Implement rigorous cash flow forecasting and financial controls to detect early warning signs.
   • Consider voluntary audit or external financial review for transparency and stakeholder confidence.

6. Professional Advice:

   • Engage insolvency or turnaround specialists to explore restructuring options before distress escalates.

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Prognosis

Without corrective action, the company faces an increasingly precarious financial position that could lead to insolvency or forced liquidation. However, with prompt interventions—particularly addressing liquidity and capital structure—the company may stabilize and recover over the medium term. The substantial fixed assets, if leveraged effectively, provide a foundation for potential turnaround.

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