DERMAP LIMITED

Executive Summary

Dermap Limited exhibits strong financial fundamentals with solid net assets and working capital indicating overall stability. However, a sharp increase in receivables and reduced cash reserves highlight potential cash flow management challenges. Focused action on debtor collection and related party loan management will be critical to sustaining and improving financial health.

DERMAP LIMITED - Analysis Report

Company Number: 13454688

Analysis Date: 2025-07-20 19:16 UTC

Comprehensive Financial Health Assessment of Dermap Limited

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1. Financial Health Score: B

Explanation:
Dermap Limited demonstrates solid financial fundamentals with a strong net asset base, positive working capital, and a healthy equity position. However, certain signs such as the increase in debtors, reduced cash reserves, and related-party loans suggest areas needing close monitoring. Overall, the company is financially stable but should address liquidity management to elevate its financial health to an A grade.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Net Current Assets (Working Capital)	£120,743	Strong positive working capital indicating the company can comfortably cover short-term liabilities. Healthy cash flow "heartbeat."
Cash at Bank	£45,711	Moderate cash reserve; reduced from previous year (£100k). Potential liquidity concern if cash conversion slows.
Debtors (Receivables)	£105,322	Significant increase from £6,757 in 2023, signaling possible collection delays or credit risk. "Symptoms of cash flow congestion."
Current Liabilities	£30,290	Substantial reduction from £58,623 in 2023, easing short-term pressure.
Net Assets (Equity)	£123,607	Strong and growing net asset base, reflecting healthy retained earnings and shareholder funds.
Share Capital	£1.00	Nominal share capital; growth financed mainly through retained earnings and loans.
Related Party Loans	£100,000 (loan to related company)	Large interest-free loan to related party, which may impact liquidity and risk profile.

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3. Diagnosis: What the Financial Data Reveals About Business Health

Dermap Limited presents the financial "vitals" of a young specialist medical practice in generally good condition. The company’s assets comfortably exceed liabilities, indicating a solvent and stable business. The net current assets are healthy, showing good short-term financial resilience.

The "symptom" of concern is the sharp increase in debtors from £6,757 to £105,322 year-on-year. This suggests a potential issue with cash collections or billing cycles, which can strain liquidity despite positive working capital. Meanwhile, the cash reserves have halved, implying cash is tied up in receivables or loans.

The company has extended a sizeable interest-free loan (£100,000) to a related entity, which can be a liquidity drain and deserves scrutiny. The director's acknowledgment of going concern status indicates confidence in ongoing operations.

Overall, Dermap's financial "pulse" is strong but with early warning signs ("symptoms") that cash flow management and related party exposures need attention to avoid future distress.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Debtor Management:
   Implement stricter credit control and faster invoicing to convert receivables into cash more quickly. Consider setting clear payment terms and follow-up procedures to reduce debtor days and enhance liquidity.

2. Review Related Party Loans:
   Assess the risk and impact of the £100,000 interest-free loan to the related company. Consider formalizing repayment terms or securing the loan to protect company assets and maintain cash flow.

3. Maintain Adequate Cash Reserves:
   Aim to rebuild cash reserves to buffer against operational fluctuations. This may require optimizing working capital cycles or controlling discretionary spending.

4. Monitor and Control Costs:
   Ensure fixed and variable costs are managed prudently, especially given the specialist medical practice nature and small employee base.

5. Plan for Growth and Capital Needs:
   As the company grows, consider formal financing strategies (e.g., equity injection or bank facilities) to support expansion without compromising financial stability.

6. Regular Financial Review:
   Conduct periodic financial health checks to detect early "symptoms" of distress and take timely corrective action.

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Medical Analogy Summary

Dermap Limited’s financial "heart" beats steadily with strong net assets and positive working capital, akin to a patient with good baseline health. However, the swelling "symptom" of rising receivables and reduced cash "oxygen supply" signals the need for intervention to improve cash flow efficiency and liquidity. By addressing these early warning signs, the company can maintain and enhance its financial vitality.

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