DNA INSTRUMENTS LTD

Executive Summary

DNA Instruments Ltd is currently facing financial distress with negative working capital and net assets, indicating liquidity and solvency challenges. Immediate focus on cash flow management, cost control, and capital restructuring is essential to stabilize the business. Without corrective action, the company risks further financial deterioration.

DNA INSTRUMENTS LTD - Analysis Report

Company Number: 12545131

Analysis Date: 2025-07-19 12:23 UTC

Financial Health Assessment for DNA INSTRUMENTS LTD as of 30 April 2024

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1. Financial Health Score: D

Explanation:
The company shows clear symptoms of financial distress, with net liabilities and a negative net asset position in the latest financial year. While the company is small (micro entity) and relatively young (incorporated in 2020), the most recent accounts reveal worsening liquidity and solvency positions, indicating a fragile financial state. This leads to an overall grade of D, signaling caution and urgent need for remedial actions.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets	£2,450	Minimal long-term asset base; typical for micro entities.
Current Assets	£17,794	Cash and receivables appear reasonable but must be assessed against liabilities.
Current Liabilities	£24,543	High short-term debts exceeding current assets; liquidity pressure evident.
Net Current Assets	-£6,749	Negative working capital; indicates difficulty in covering short-term obligations.
Total Assets Less Current Liabilities	-£4,299	Company’s assets insufficient to cover short-term liabilities.
Net Assets (Shareholders’ Funds)	-£5,824	Negative equity; company owes more than it owns.
Average Employees	3	Small workforce; operational scale is limited.

Vital Signs Interpretation:

• The negative net current assets act as a symptom of cash flow strain, akin to a patient showing signs of shortness of breath—indicating liquidity issues that could hamper day-to-day operations.
• The negative net assets highlight insolvency symptoms, akin to a structural weakness in a building’s foundation, suggesting the company’s liabilities outweigh its assets.
• The increase in current liabilities (from ~£13k to ~£24.5k) within one year is a worsening symptom that signals growing financial stress.
• Fixed assets are very low, which may imply limited collateral or investment in long-term resources.
• The company’s micro status means it has limited reporting obligations but also likely limited financial flexibility.

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3. Diagnosis

Underlying Business Health:
DNA Instruments Ltd is currently exhibiting financial distress symptoms primarily due to poor liquidity and negative equity. The rise in current liabilities far outpaces growth in current assets, creating a working capital deficit. This “cash flow tightness” is a critical symptom suggesting the company may struggle to meet short-term obligations without additional financing or operational improvements.

The company's business activity classified under SIC code 71129 (Other engineering activities) often requires investment in equipment and skilled labour; however, the low fixed asset value and small employee base suggest either minimal capital investment or early-stage development.

The negative net assets and shareholders’ funds indicate accumulated losses or liabilities exceeding assets, a warning sign of potential insolvency risks if not addressed. The company has avoided audit exemptions due to micro-entity status, but this limits insight into comprehensive operational performance.

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4. Recommendations

To improve financial wellness and reverse symptoms of distress, the company should consider the following actions:

• Improve Liquidity Management:

  • Tighten credit control policies to accelerate receivables collection.
  • Negotiate extended payment terms with suppliers to ease short-term cash outflows.
  • Explore short-term financing options such as overdrafts or invoice financing to bridge working capital gaps.

• Cost Control and Efficiency:

  • Review and reduce discretionary expenses to conserve cash.
  • Optimize workforce deployment to match operational needs without excess overhead.

• Capital Structure Review:

  • Consider equity injection from shareholders or external investors to restore positive net assets.
  • Explore government grants or industry-specific funding for engineering activities to bolster capital.

• Strategic Business Review:

  • Assess product/service profitability and focus on high-margin lines.
  • Diversify or strengthen customer base to stabilize revenue streams.

• Financial Monitoring:

  • Implement regular cash flow forecasting and scenario planning to detect early warning signs.
  • Engage professional advice to restructure debt if necessary.

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