DRAKEFORD ASSOCIATES LIMITED

Executive Summary

DRAKEFORD ASSOCIATES LIMITED shows serious financial distress with persistent negative net assets and working capital deficits despite a recent small profit. The sharp fall in turnover and rising staff costs exacerbate liquidity risks, indicating urgent need for cash flow management and cost control. Without prompt action to improve revenue and strengthen the balance sheet, the company’s financial health remains precarious.

DRAKEFORD ASSOCIATES LIMITED - Analysis Report

Company Number: 13830507

Analysis Date: 2025-07-20 15:28 UTC

Financial Health Assessment: DRAKEFORD ASSOCIATES LIMITED

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1. Financial Health Score: D

Explanation:
DRAKEFORD ASSOCIATES LIMITED shows clear signs of financial distress. The company has persistently negative net assets over four reported years, indicating that liabilities exceed assets—a symptom akin to a critical illness in financial terms. Despite some profit in the latest year, the firm's working capital remains negative, putting pressure on its operational liquidity. Overall, the company's financial "vital signs" suggest a fragile condition needing urgent care.

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2. Key Vital Signs

Metric	Latest Year (2025)	Interpretation
Turnover	£7,400	Very low revenue for a management consultancy, down from £26k.
Profit (Loss) for Period	+£1,945	Slight profit, an improvement but still marginal.
Current Assets	£4,230	Limited liquid assets to cover short-term debts.
Current Liabilities	£10,964	Short-term debts significantly exceed current assets.
Net Current Assets	-£3,234	Negative working capital, indicating cash flow stress.
Net Assets (Shareholders’ Funds)	-£3,232	Negative equity, company owes more than it owns.
Staff Costs	£5,455	Increased sharply, indicating rising operational expenses.
Prepayments and Accrued Income	£3,500	Some income or expenses paid in advance, positive sign.

Interpretation of Vital Signs:

• Negative net assets suggest the company is "underweight" financially, with liabilities surpassing assets. This is a critical symptom often seen in companies struggling to sustain operations without fresh capital or improved profitability.
• Negative working capital means the company may face difficulties paying its immediate obligations, risking supplier or creditor distress signals.
• Turnover drop from £26,000 to £7,400 in the latest year indicates shrinking business activity or market demand issues, a concerning trend for future sustainability.
• Slight profit in the latest year is a positive symptom but too small relative to the overall financial burden.
• The increase in staff costs despite falling turnover may indicate inefficiency or a mismatch between cost structure and income.

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3. Diagnosis

DRAKEFORD ASSOCIATES LIMITED is currently in a fragile financial state resembling a patient with chronic illness showing some signs of temporary improvement but still at high risk. The persistent negative net assets and working capital deficits are the core symptoms indicating financial distress. The company is operating with liabilities greater than assets and limited cash flow cushion to support daily business needs. The sharp decline in turnover adds strain, suggesting potential market or operational challenges.

While the recent small profit is encouraging, it is not yet sufficient to reverse the negative equity condition or to signal a robust recovery. The company's financial "immune system" is weak, exposing it to liquidity crises or creditor actions if conditions do not improve.

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4. Recommendations

1. Improve Cash Flow Management:
   Address the negative working capital by accelerating receivables, managing payables strategically, and minimizing unnecessary expenses to stabilize liquidity.

2. Review Cost Structure:
   Staff costs have risen despite lower turnover. Evaluate staffing levels, roles, and productivity to align costs with current revenue realities.

3. Increase Revenue:
   Investigate opportunities to boost sales or diversify services within management consultancy to reverse the turnover decline. Consider targeted marketing or new client acquisition strategies.

4. Capital Injection or Restructuring:
   Given negative net assets, explore options for new equity investment or shareholder loans to strengthen the balance sheet. Alternatively, consider restructuring liabilities to reduce short-term burdens.

5. Regular Financial Monitoring:
   Implement monthly financial health checks focusing on liquidity ratios and cash forecasting to catch early signs of distress and adjust plans proactively.

6. Engage Professional Advice:
   Consult with financial advisors or turnaround specialists to develop a recovery plan tailored to the company’s specific challenges.

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