DRACO CONSTRUCTION LTD

Executive Summary

DRACO CONSTRUCTION LTD maintains a solid financial foundation with positive net assets and a stable equity base, reflecting overall financial health for a micro-entity. However, reduced current assets and increased long-term debt highlight liquidity and financing considerations to monitor. With prudent cash flow management and careful operational planning, the company is positioned to sustain and potentially grow its business in the construction sector.

DRACO CONSTRUCTION LTD - Analysis Report

Company Number: 13637233

Analysis Date: 2025-07-29 19:36 UTC

Financial Health Assessment for DRACO CONSTRUCTION LTD

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1. Financial Health Score: B

Explanation:
DRACO CONSTRUCTION LTD shows a generally stable financial position with positive net assets and shareholders’ funds that have steadily grown since inception. The company maintains healthy working capital levels and has increased its fixed assets, indicating investment in operational capacity. However, fluctuations in current assets and liabilities and an increase in longer-term creditors suggest areas to monitor closely. The lack of an audit (allowed due to micro-entity status) and minimal employee base indicates a small operation, which may present some risk if growth or market conditions change unexpectedly.

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2. Key Vital Signs

Metric	2024 (£)	Interpretation
Net Assets	86,492	Positive and stable net worth; shows retained value and solvency.
Fixed Assets	47,938	Increased from prior years, indicating capital investment.
Current Assets	90,006	Mainly cash and receivables; decreased significantly from 2023, potential liquidity reduction.
Current Liabilities	35,301	Manageable short-term obligations relative to current assets.
Net Current Assets	54,705	Positive working capital ("healthy cash flow buffer"), able to meet short-term debts comfortably.
Long-Term Creditors	16,151	An increase from prior year; indicates more long-term borrowing or obligations.
Shareholders' Funds	86,492	Consistent with net assets; equity base is solid for micro business.
Employee Count	1	Very small workforce; suggests a lean operation but potential operational risk if key personnel unavailable.

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3. Diagnosis: Business Financial Health

• Healthy Equity and Solvency:
  The company enjoys positive net assets with shareholders’ funds matching net assets, which means liabilities are well covered by assets. This is a strong sign of financial stability and solvency.

• Working Capital Strength but Shrinking Current Assets:
  Although working capital remains positive, current assets have dropped sharply from £251,777 in 2023 to £90,006 in 2024, while current liabilities have also reduced but less proportionally. This could be a symptom of reduced cash inflows or increased cash outflows, possibly due to fewer receivables or reduced stock. It warrants monitoring to ensure liquidity remains robust.

• Increased Fixed Assets and Long-Term Creditors:
  The jump in fixed assets (£15,870 to £47,938) suggests the company has invested in equipment or property, which may enhance operational capacity but also ties up capital. The corresponding increase in long-term creditors (£5,498 to £16,151) indicates financing these assets through borrowing or similar obligations, which is a typical trade-off but increases financial commitments.

• Limited Operational Scale:
  The company employs only one person on average, highlighting a very small scale operation. This "single doctor practice" approach is efficient but could be vulnerable to disruptions if key personnel are unavailable.

• No Audit Requirement:
  Being a micro-entity, the company is exempt from audit, which reduces compliance costs but also means less external verification of financial health — stakeholders should consider this while assessing risk.

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4. Recommendations

• Monitor Cash Flow Closely:
  The significant drop in current assets suggests a tightening of liquidity. Implement regular cash flow forecasting to anticipate any shortfalls and ensure adequate cash reserves are maintained to meet short-term liabilities.

• Evaluate Financing Structure:
  The increase in long-term creditors should be reviewed to ensure debt servicing is sustainable. Explore options to refinance or reduce long-term debt if interest rates or repayment terms are onerous.

• Plan for Operational Continuity:
  With only one employee, consider contingency plans to manage workload and knowledge transfer, reducing key person risk.

• Leverage Asset Investments:
  Ensure that investments in fixed assets translate into increased revenue or operational efficiency to justify capital expenditure and support growth.

• Prepare for Growth or Market Changes:
  As a small but stable micro-entity in the construction installation sector, positioning for future opportunities or mitigating market risks through strategic planning and diversification can enhance resilience.

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