DCOSTA HEATING SOLUTIONS LTD

Executive Summary

DCOSTA HEATING SOLUTIONS LTD has shown a commendable recovery from several years of financial distress to a position of positive net assets and working capital. The company is now in a healthier financial state but should focus on improving cash reserves and debtor management to ensure sustained financial wellness. Continued vigilance and proactive financial planning will be key to maintaining this upward trajectory.

DCOSTA HEATING SOLUTIONS LTD - Analysis Report

Company Number: 13238089

Analysis Date: 2025-07-29 12:19 UTC

Financial Health Assessment for DCOSTA HEATING SOLUTIONS LTD

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1. Financial Health Score: B-

Explanation:
DCOSTA HEATING SOLUTIONS LTD shows a significant turnaround from prior years’ distress to a healthier financial position in the most recent year. The company has moved from negative net current assets and shareholders’ funds to positive figures, indicating a recovery. However, the business is still at an early stage with modest asset base and low cash reserves, which calls for cautious optimism. The score B- reflects a business showing clear signs of improvement but still with vulnerabilities requiring ongoing attention.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets	£7,419	Stable asset base; investment in tangible/intangible assets maintained
Current Assets	£17,674	Healthy increase, predominantly from debtors (trade receivables)
Cash	£2,235	Positive cash balance but relatively low — watch cash flow closely
Current Liabilities	£8,676	Reduced from prior year; manageable short-term obligations
Net Current Assets	£8,998	Positive working capital — good short-term liquidity
Total Assets Less Current Liabilities	£16,417	Solid balance sheet position; positive net assets
Shareholders’ Funds	£16,417	Positive equity base after previous years’ losses
Share Capital	£1.00	Minimal share capital; company likely reliant on retained earnings

Interpretation:

• The company’s net current assets have shifted from negative to positive, indicating a return to a "healthy cash flow" situation where current assets exceed short-term liabilities.
• The increase in debtors suggests more sales made on credit, which could be a symptom of business growth but also a warning to manage debtor collections carefully.
• The cash balance is positive but modest, so liquidity management remains vital to avoid cash flow "symptoms of distress."
• The company’s shareholders’ funds have improved from negative to positive, reflecting retained earnings turning profitable or capital injections, a key sign of financial recovery.

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3. Diagnosis

• Symptoms Analysis:

  • The company showed financial distress in its initial years, with negative net current assets and shareholders’ funds, indicating a weakened balance sheet and potential solvency concerns.
  • The 2024 accounts reveal a marked improvement, with reversal to positive net current assets and equity. This suggests the company has stabilized operations, improved cash management, and possibly increased profitability or capital support.
  • The presence of significant debtors indicates growing sales but also raises the need for robust credit control to ensure these receivables convert to cash promptly.
  • The company operates in the plumbing, heat, and air-conditioning installation sector, a trades industry typically sensitive to economic cycles; maintaining liquidity is crucial.

• Underlying Business Health:
  The financial "vital signs" indicate recovery from prior "financial illness." The company is structurally sound for now but remains vulnerable due to its small size, limited cash reserves, and reliance on receivables. The director’s hands-on involvement and the company’s private limited status suggest a closely controlled operation, which can be a strength in managing financial risks.

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4. Recommendations

• Enhance Cash Reserves:
  Aim to build a larger cash buffer to absorb short-term shocks and improve the company’s ability to meet unexpected expenses or delays in payment collection.

• Improve Debtor Management:
  Implement tighter credit control procedures to reduce the risk of late payments and bad debts. This will directly improve cash flow health.

• Monitor Working Capital Diligently:
  Regularly review current assets and liabilities to ensure the company maintains positive net current assets, avoiding liquidity crunches.

• Plan for Capital Strengthening:
  Consider modest capital injections or retained earnings reinvestment to further strengthen shareholders’ funds and support growth.

• Financial Reporting & Forecasting:
  Maintain up-to-date financial records and prepare cash flow forecasts to anticipate financial needs and avoid surprises.

• Risk Management:
  Given the company’s sector, stay alert to economic shifts affecting demand for heating solutions, and adjust business plans accordingly.

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