DR N C GAUT LTD

Executive Summary

DR N C GAUT LTD is currently in a financially fragile position characterized by negative working capital and net liabilities, which signal liquidity and solvency challenges. While the company has improved its financial standing over the past year, urgent actions are needed to strengthen cash flow, reduce debt, and restore profitability. With careful management and strategic financial measures, the company can stabilize and work towards sustainable financial health.

DR N C GAUT LTD - Analysis Report

Company Number: 13639165

Analysis Date: 2025-07-29 20:50 UTC

Financial Health Assessment of DR N C GAUT LTD as of 30 September 2024

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1. Financial Health Score: D

Explanation:
The company’s financial health is currently weak, reflected by persistent net liabilities, negative working capital (net current assets), and a shareholders’ deficit. Though there is some improvement over prior years, the company still exhibits symptoms of financial distress that require active management intervention to restore full health.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Current Assets (Working Capital)	£-14,378	Negative working capital — liabilities exceed short-term assets — risk of cash flow strain.
Net Assets (Shareholders' Equity)	£-2,385	Negative net assets indicate the company owes more than it owns.
Cash at Bank	£7,378	Limited cash reserves, tight liquidity buffer.
Current Liabilities	£30,045	High short-term liabilities relative to assets.
Long-term Borrowings	£19,792	Significant long-term debt obligations.
Retained Earnings	£-2,386	Accumulated losses persist, though improved from prior years.
Tangible Assets (Net Book Value)	£30,486	Fixed assets provide collateral value but are depreciating.
Debtors (Trade Receivables)	£3,942	Declining receivables indicate either reduced sales or improved collections.
Staff Numbers	6 employees	Small team, consistent with micro/small business scale.

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3. Symptoms Analysis: What the Numbers Reveal

• Negative Working Capital: The company’s current liabilities exceed current assets by £14,378, indicating a liquidity crunch. This suggests the business may struggle to meet its short-term obligations without additional cash inflows or financing.

• Negative Net Assets: The company’s net liabilities of £2,385 reflect accumulated losses. While this is a marked improvement from £21,351 net liabilities in 2023, it still signals that creditors have a claim beyond the value of assets owned by shareholders.

• High Borrowings: With nearly £41,000 in total borrowings (£21k short-term and £20k long-term), the company carries considerable debt for its size. The presence of hire purchase contracts and bank loans increases fixed financial charges.

• Improving but Limited Cash Reserves: Cash balance has decreased from £9,228 in 2023 to £7,378 in 2024, pointing to tighter liquidity. However, ongoing operations must be carefully managed to avoid cash flow distress.

• Reduced Debtors: Trade debtors declined significantly from £17,010 in 2023 to £3,342 in 2024, which might indicate better credit control or lower sales volume. This reduction can be positive if it reflects improved collections.

• Tangible Assets Depreciation: Fixed assets have decreased from £40,207 to £30,486 due to depreciation, which is normal but reduces collateral value over time.

• Retained Losses: Although losses have been reduced, the company still carries a negative retained earnings balance, indicating it has yet to generate sustained profitability.

• Going Concern Note: The director believes the company can continue as a going concern based on forecasts, which is positive, but the financial indicators suggest caution.

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4. Diagnosis: Overall Financial Condition

DR N C GAUT LTD is currently in a fragile financial state. The company shows signs of financial strain, primarily due to negative working capital and net liabilities, which pose risks to liquidity and solvency. The improving trend in net assets and reduced liabilities is encouraging but remains below healthy thresholds.

The company’s liquidity is a key concern: current liabilities exceed current assets, which could lead to difficulties in meeting short-term creditor demands without fresh funding or improved cash flow. The relatively high debt levels and persistent losses underscore the need for strategic financial management.

This condition is analogous to a patient showing improvement after treatment but still requiring ongoing care and monitoring to avoid relapse.

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5. Recommendations: Steps to Improve Financial Wellness

a) Strengthen Liquidity and Working Capital:

• Improve cash collection cycles: Tighten debtor credit terms and actively pursue overdue payments to boost cash inflows.
• Negotiate creditor terms: Seek extended payment terms with suppliers to ease short-term cash outflows.
• Consider short-term financing: Explore overdraft facilities or short-term loans to cover immediate cash shortfalls if necessary.

b) Reduce Debt Burden:

• Repay or refinance high-cost borrowings: Aim to reduce hire purchase liabilities or refinance loans at better rates to lower financial charges.
• Avoid additional borrowings unless cash flow positive: New debt should be carefully evaluated to avoid exacerbating leverage.

c) Improve Profitability:

• Increase revenue streams: Expand client base or offer additional veterinary services/products to increase turnover.
• Control costs: Review operating expenses, including staff and overheads, to enhance net margins.

d) Asset Management:

• Maintain essential fixed assets: Ensure assets critical to operations are well-maintained and utilized effectively, but avoid unnecessary capital expenditures.

e) Financial Monitoring and Planning:

• Regular cash flow forecasting: Implement rolling cash flow projections to anticipate liquidity needs.
• Management reporting: Establish key performance indicators for financial health and operational efficiency.

f) Director’s Personal Support:

• Since the director is the sole significant controller, consider personal financial support or equity injection if feasible to stabilize the balance sheet.

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Executive Summary