DIRECT PARTITIONING SERVICES LIMITED

Executive Summary

Direct Partitioning Services Limited is currently experiencing liquidity challenges, reflected by negative working capital and declining cash reserves, though it retains positive net assets and equity. The company needs to focus on improving cash flow and working capital management to stabilize its financial health and avoid future distress. Strengthening profitability and equity through operational efficiencies and potential capital injection will support a more sustainable financial outlook.

DIRECT PARTITIONING SERVICES LIMITED - Analysis Report

Company Number: 13137404

Analysis Date: 2025-07-20 17:28 UTC

Financial Health Assessment for Direct Partitioning Services Limited

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1. Financial Health Score: C

Explanation:
The company shows signs of financial strain but remains operational with positive net assets. Persistent negative net current assets (working capital deficit) and declining cash reserves signal liquidity challenges, though the company maintains a positive shareholders’ equity base. This places the company in a moderate risk category—neither healthy (A-B) nor critically distressed (D-F).

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Current Assets	£1,730	Low short-term resources available to cover liabilities
Cash at Bank	£480	Limited cash reserves; modest but critical lifeblood
Debtors	£1,250	Moderate receivables; potential cash inflow source
Current Liabilities	£3,103	Short-term debts exceed current assets significantly
Net Current Assets (Working Capital)	-£1,373	Negative; "symptom of distress" in liquidity
Total Assets Less Current Liabilities	£2,234	Positive; net assets remain healthy
Shareholders’ Funds (Equity)	£2,234	Equity remains positive but declining over recent years
Fixed Assets (Net Book Value)	£3,607	Tangible asset base providing some stability

Additional Observations:

• Working capital deficit indicates the company may struggle to pay off short-term obligations without relying on external financing or faster collection of receivables.
• Decrease in debtors and cash compared to previous years shows possible tightening of liquidity or reduced sales/revenue inflow.
• Shareholders’ funds have decreased from £5,589 in 2021 to £2,234 in 2024, indicating retained losses or distributions reducing equity.

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3. Diagnosis

The company exhibits symptoms of liquidity stress with negative working capital persisting over multiple years. This weak "cash flow pulse" suggests the business may be relying on extended credit terms, delayed payments, or external funding to meet immediate obligations. However, the presence of tangible fixed assets and positive net assets indicates the company still holds underlying value, akin to a patient with chronic but manageable health issues.

The decline in shareholders’ equity over three years signals accumulated losses or distributions exceeding profits, which weakens the company's financial "immune system." The modest cash reserves and declining receivables further exacerbate liquidity risks.

Despite these concerns, the company remains solvent (net assets positive) and is not currently in any formal distress process (e.g., liquidation). The situation calls for careful monitoring and corrective action to avoid deterioration into financial distress.

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4. Recommendations

To improve financial wellness and strengthen the company's "financial heartbeat," the following actions are advised:

1. Improve Cash Flow Management:

   • Accelerate collection of trade debtors to boost cash reserves.
   • Negotiate extended payment terms with suppliers to ease short-term liabilities.
   • Implement tighter credit control to avoid bad debts.

2. Enhance Working Capital:

   • Explore options for short-term financing or overdraft facilities as a buffer.
   • Reduce unnecessary stock or overhead to free up cash.

3. Profitability Focus:

   • Conduct a detailed review of pricing, costs, and operational efficiency.
   • Identify opportunities to increase revenue streams or cut non-essential expenses.

4. Equity Strengthening:

   • Consider capital injection from the shareholder (noting current 75-100% control) to replenish equity and improve balance sheet strength.

5. Regular Financial Monitoring:

   • Establish monthly cash flow forecasts and liquidity reports to detect early warning signs.
   • Engage with financial or business advisors to implement turnaround strategies if needed.

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Executive Summary