DEVELOVATION LTD

Executive Summary

Develovation Ltd is currently experiencing significant financial distress characterized by persistent negative net assets and working capital deficits, coupled with very low cash reserves and high reliance on director loans. Immediate focus on improving cash flow, controlling costs, and restructuring capital is essential to restore financial health and sustainability. Without prompt intervention, the company faces a serious risk of insolvency.

DEVELOVATION LTD - Analysis Report

Company Number: 13264533

Analysis Date: 2025-07-29 15:56 UTC

Financial Health Assessment of DEVELOVATION LTD

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1. Financial Health Score: D

Explanation:
The company exhibits clear symptoms of financial distress, characterized primarily by persistent negative net assets and net current liabilities over the past three years. Despite being an active private limited company, its balance sheet "vital signs" reveal an unhealthy financial position that requires urgent attention. The score D reflects a company with financial challenges that threaten its sustainability if unaddressed.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	5,425	Small asset base; relatively low investment in long-term assets.
Current Assets	5,591	Includes cash (£292), debtors (£3,577), and stock (£1,722). Cash is very low ("weak pulse").
Current Liabilities	20,102	High short-term obligations; "symptom of liquidity strain."
Net Current Assets (Working Capital)	-14,511	Negative; indicates inability to cover short-term debts with current assets ("cash flow distress").
Net Assets (Shareholders’ Funds)	-9,086	Negative equity signals accumulated losses and financial weakness ("deep systemic ailment").
Share Capital	1	Minimal; essentially all funding comes from liabilities or loans, notably director’s loan account (£16,838).
Debtors	3,577	Significant portion of current assets tied up in receivables; potential risk if collection is slow.
Cash	292	Extremely low cash holdings; "heart rate dangerously low" for daily operations.
Director’s Loan Account	16,838	Large amount owed to director; indicates external reliance for funding.

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3. Diagnosis

Develovation Ltd is currently in a precarious financial condition. The persistent negative working capital and net asset position over multiple years resemble chronic symptoms of financial distress. The company's cash reserves are minimal, and current liabilities significantly exceed current assets, which could hamper day-to-day operations and creditor confidence.

The large director’s loan account suggests reliance on personal funding to keep the company afloat, which is not sustainable long-term without profitability improvements. The company’s total exemption full filing status and absence of audit suggest it is small and possibly lacks rigorous external financial scrutiny.

The operational nature (landscape services and building project development) typically requires healthy liquidity to manage project cash flows and stock/work-in-progress. The sharp reduction in stock/work-in-progress from £6,000 to £1,722 may indicate either project completion or reduced activity, which could affect revenue streams.

In summary, the company exhibits "symptoms" akin to a patient with chronic illness: low cash reserves, high short-term debt, negative equity, and dependence on director funding. Without intervention, these symptoms may worsen, risking insolvency.

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4. Recommendations

Immediate Actions:

• Improve Cash Flow Management:
  Prioritize collection of trade debtors; accelerate invoicing and tighten credit terms to improve liquidity. Consider negotiating longer payment terms with creditors to ease short-term cash outflows.

• Address Negative Working Capital:
  Explore options to convert stock/work-in-progress into cash faster or reduce inventory levels. Evaluate project profitability rigorously to avoid negative cash contributions.

• Reduce Reliance on Director Loans:
  Seek alternative funding sources such as small business loans, equity injection, or grants. Director loans are a temporary "life support" but not a sustainable solution.

• Cost Control and Operational Efficiency:
  Review overheads and operational expenses to minimize cash burn. Ensure projects are priced adequately to cover costs and generate profit.

Medium to Long Term:

• Capital Restructuring:
  Consider recapitalization to restore positive equity and improve balance sheet health. This might involve equity investment or debt restructuring.

• Financial Forecasting and Monitoring:
  Implement robust budgeting and cash flow forecasting to anticipate future liquidity needs and avoid surprises.

• Seek Professional Advice:
  Early engagement with insolvency practitioners or financial advisors can provide strategies to manage distress and potentially avoid formal insolvency.

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Medical Analogy Summary

Develovation Ltd’s financial health shows clear "symptoms" of distress—negative working capital and net assets are like a patient with dangerously low blood pressure and poor circulation. The company’s "heartbeat" (cash) is weak, and it relies heavily on a single "caretaker" (director loans) for survival. Immediate "treatment" through cash flow management, expense control, and recapitalization is critical to avoid "collapse" (insolvency).

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