DHM ENGINEERING SOLUTIONS LTD

Executive Summary

DHM ENGINEERING SOLUTIONS LTD exhibits significant financial strain as of July 2024, primarily due to a large dividend payout that severely depleted cash reserves and equity. While still solvent, the company’s liquidity and working capital are dangerously low, signaling potential distress if corrective actions are not taken. Immediate focus on rebuilding cash, controlling dividends, and improving working capital management is essential to restore financial wellness.

DHM ENGINEERING SOLUTIONS LTD - Analysis Report

Company Number: 14230841

Analysis Date: 2025-07-29 18:45 UTC

Financial Health Assessment for DHM ENGINEERING SOLUTIONS LTD

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1. Financial Health Score: D

Explanation:
The company shows significant signs of financial distress in the latest reported year (2024), with a sharp deterioration in liquidity and net assets compared to the prior year. The drastic drop in net current assets and shareholders’ funds indicates weakening financial health. This score reflects caution and the need for immediate remedial action to avoid worsening conditions.

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2. Key Vital Signs

Metric	31 July 2024	31 July 2023	Interpretation
Current Assets	£9,568	£56,201	Severe reduction in liquid resources; could indicate cash flow or collection problems.
Cash	£9,568	£37,852	Cash reserves have diminished substantially, a symptom of liquidity stress.
Debtors	£0	£18,349	No receivables suggest either improved cash collection or a halt in new sales—needs context.
Current Liabilities	£9,016	£18,368	Reduced liabilities but not in proportion to asset reduction; pressure remains on working capital.
Net Current Assets	£552	£37,833	Drastic drop, indicating near-zero working capital; "healthy cash flow" is compromised.
Net Assets	£903	£38,401	Equity erosion signals accumulated losses or large dividend payouts eroding company’s financial base.
Profit & Loss Reserves	£803	£38,301	Collapsed reserves after a large dividend payment; potential "symptom of distress" in capital management.

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3. Diagnosis

DHM ENGINEERING SOLUTIONS LTD’s financial health has deteriorated significantly within one year. The balance sheet reveals a dangerously low level of net current assets (£552) and net assets (£903), sharply down from the prior year’s healthy position. While the company remains active and solvent at the snapshot date, the near depletion of cash reserves and equity suggests vulnerability.

The primary symptom of distress is the large dividend paid in 2024 (£53,000), which far exceeds the profit for the year (£15,502), draining retained earnings and equity. This has left the company with minimal buffer to absorb operational shocks or delays in receivables. Additionally, the absence of debtors (trade receivables) in 2024 could indicate a pause or reduction in trading activities, which might affect future revenue inflows.

The company’s tangible fixed assets are low and depreciating, so the business may rely heavily on cash flow and working capital for ongoing operations. The small number of employees (2 in 2024) suggests a micro or small enterprise with limited scale.

Overall, the financial "vital signs" indicate a fragile state where liquidity and solvency are at risk if the current trends continue. The large dividend payout, while legally permissible, appears imprudent given the company’s financial status.

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4. Recommendations

• Improve Liquidity Management:
  Rebuild cash reserves to establish a "healthy cash flow" buffer. Avoid excessive dividend distributions until reserves are replenished.

• Review Dividend Policy:
  Align dividends with sustainable profits and cash generation. The recent large dividend drained equity and risks company stability.

• Enhance Working Capital Control:
  Maintain or increase current assets relative to current liabilities. Monitor debtor collections carefully to avoid cash shortages.

• Financial Planning & Forecasting:
  Implement robust cash flow forecasting to anticipate liquidity needs and plan expenditure accordingly.

• Explore Revenue Opportunities:
  Investigate the reasons behind zero debtors in 2024 to ensure ongoing business activity and revenue generation.

• Cost Control:
  Keep fixed costs low and manage expenses prudently to maintain profitability and positive cash flow.

• Stakeholder Communication:
  Inform shareholders and creditors about financial measures being taken to restore financial health and avoid surprises.

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