DEEPCAR HOME IMPROVEMENTS LIMITED

Executive Summary

DEEPCAR HOME IMPROVEMENTS LIMITED is currently facing liquidity challenges evidenced by negative working capital and declining equity. While the company has a reasonable asset base and cash reserves, it must focus on improving cash flow management and reducing short-term liabilities to stabilize its financial health. Proactive financial management and potential additional funding are recommended to improve the company’s outlook and avoid deeper distress.

DEEPCAR HOME IMPROVEMENTS LIMITED - Analysis Report

Company Number: 12463434

Analysis Date: 2025-07-19 12:44 UTC

Financial Health Assessment: DEEPCAR HOME IMPROVEMENTS LIMITED (as of 29 February 2024)

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1. Financial Health Score: C

Explanation:
The company exhibits signs of financial strain, particularly in its liquidity position, reflected by negative net current assets (working capital). However, it retains positive net assets and shareholders’ funds, indicating some underlying asset strength. The score "C" represents a condition where the business is stable but showing symptoms of financial stress that warrant active management attention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Cash at Bank	69,963	Adequate cash reserves; a vital lifeline for meeting immediate obligations
Current Assets	98,624	Includes cash, debtors, and stock; reasonable but not sufficient to cover short-term debts
Current Liabilities	132,226	Debts due within one year; higher than current assets, causing working capital deficit
Net Current Assets	-33,602	Negative working capital ("symptom of distress"); potential liquidity challenges
Fixed Assets (Net Book Value)	54,902	Tangible assets like vehicles and equipment; a stable asset base but partially financed
Net Assets / Shareholders Funds	3,820	Positive but significantly reduced from prior years; indicates diminished retained earnings
Hire Purchase Obligations (Long Term)	14,287	Long-term liabilities related to asset financing; adds to leverage and fixed charges
Debtors (Amounts owed to the company)	24,161	Reasonable but moderate; efficient collection needed to improve cash flow

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3. Diagnosis: Financial Condition Overview

DEEPCAR HOME IMPROVEMENTS LIMITED has been operating since 2020 and is engaged in building completion and finishing activities. The financial snapshot reveals a company with tangible asset investment, but currently experiencing a cash flow and liquidity squeeze:

• Liquidity Stress: The negative net current assets (-£33,602) indicate that the company’s short-term obligations exceed its short-term assets. This "symptom" suggests potential difficulty in meeting immediate creditor payments without relying on asset sales or additional financing.

• Asset Financing: A significant portion of fixed assets is financed through hire purchase agreements, which contributes to ongoing liabilities and cash outflows (interest and principal payments). This leverage increases financial risk.

• Diminishing Equity: Net assets decreased sharply from £16,595 in 2023 to £3,820 in 2024, reflecting accumulated losses or distributions. This erosion signals weakening financial resilience.

• Cash Position: While cash reserves are moderately healthy (£69,963), the company must maintain or improve this balance to avoid liquidity crises.

• Director Loans: The company shows amounts owed by director I Clancy (£24,161), which may reflect internal financing. This can be a double-edged sword: helpful for liquidity but potentially risky if director advances are withdrawn or not repaid timely.

Overall, the company is operating with financial strain, especially on the liquidity front, but avoids insolvency indicators such as negative net assets or overdraft reliance. It resembles a patient with stable vital signs but presenting early symptoms of cardiovascular stress that require lifestyle changes and monitoring.

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4. Recommendations: Steps to Improve Financial Wellness

• Improve Working Capital Management:

  • Accelerate debtor collections to convert receivables into cash faster.
  • Negotiate extended payment terms with creditors or restructure short-term liabilities.
  • Review stock levels to reduce obsolete or slow-moving inventory tying up cash.

• Strengthen Cash Flow:

  • Prepare detailed cash flow forecasts to anticipate shortfalls and plan financing needs.
  • Control discretionary spending and delay non-essential capital expenditures until liquidity improves.

• Review Hire Purchase Financing:

  • Explore refinancing options to reduce interest costs or consolidate hire purchase obligations for better terms.
  • Consider sale and leaseback arrangements or asset disposals if consistent cash flow pressure persists.

• Equity Injection or Director Support:

  • Evaluate the possibility of new equity investment or additional director loans with clear repayment plans to bolster capital.
  • Avoid over-reliance on director advances to prevent personal financial risk and maintain company governance standards.

• Financial Monitoring and Reporting:

  • Implement regular financial health checks and early warning indicators to catch worsening trends early.
  • Consider professional financial advice for restructuring or operational improvements.

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Medical Analogy Summary

DEEPCAR HOME IMPROVEMENTS LIMITED shows a "heart" (equity and assets) still beating but with "circulatory issues" (negative working capital) that could worsen if untreated. The company needs to improve its "blood flow" (cash flow) and reduce "arterial blockages" (short-term liabilities) to avoid a "cardiac event" (insolvency). With timely intervention and financial discipline, the prognosis can improve to a healthier state.

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