E&B RENOVATIONS LTD

Executive Summary

E&B Renovations Ltd maintains a solid liquidity position and positive net assets, indicating overall financial health with a score of B. However, a noticeable decline in working capital and net assets hints at emerging financial stress symptoms, particularly reliance on the director's loan. Proactive management of cash flow, working capital, and financing sources will be crucial to sustain and improve financial wellness.

E&B RENOVATIONS LTD - Analysis Report

Company Number: 14062541

Analysis Date: 2025-07-19 12:42 UTC

Financial Health Assessment for E&B RENOVATIONS LTD

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1. Financial Health Score: B

Explanation:
E&B Renovations Ltd demonstrates a generally sound financial position with positive net current assets and net assets, indicating a stable liquidity and capital structure. However, there is a noticeable decline in net current assets and net assets compared to the previous year, which signals some early symptoms of financial stress that require monitoring. The company is young (incorporated 2022) and operating within a challenging construction and building services sector, so maintaining and improving its cash flow and working capital is crucial.

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2. Key Vital Signs

Vital Sign	2024 Value	Interpretation
Current Assets	£114,890	Adequate short-term resources, but declined from £148,363 in 2023.
Cash at Bank	£84,282	Healthy cash reserve, increased from last year (£75,913). Cash is the lifeblood, reflecting a relatively healthy cash flow.
Debtors	£30,608	Significant drop from £72,450, indicating either faster collections or lower sales on credit.
Current Liabilities	£66,042	Reduced from £97,846, improving short-term obligations management.
Net Current Assets	£48,848	Positive and stable working capital, but decreased from £71,955 in 2023.
Net Assets / Shareholders’ Funds	£48,848	Positive equity indicating solvency, but down from £71,955, showing some erosion in retained earnings or asset base.
Director’s Loan Account	£45,252	A substantial liability to director, reduced from £75,114, reflecting possible repayment or capital restructuring.

Additional Notes:

• The company has only one employee (the director), which means low overhead but also potential capacity constraints.
• Turnover and profit details are not disclosed; however, the drop in debtors and net assets suggests a contraction or tighter credit management.
• No audit requirement due to small company exemption, so less external scrutiny of financials.

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3. Diagnosis: What the Financial Data Reveals

• Liquidity: The company shows a reasonably healthy liquidity position with a solid cash reserve and positive net current assets. The "healthy cash flow" analogy applies here as cash on hand is sufficient to cover short-term liabilities comfortably.
• Working Capital: The net current assets, though positive, have declined year-on-year by about 32%, which is a "symptom of distress" that could be linked to reduced sales or tighter credit terms with customers or suppliers.
• Solvency: Positive net assets and shareholders’ funds indicate the company is solvent with a buffer of equity over liabilities. However, the decline in net assets could be an early warning sign of shrinking retained profits or asset write-downs.
• Reliance on Director’s Loan: The director’s loan account is a significant current liability, which indicates the company may be relying on director financing to manage cash flow or operations. This can be a vulnerability if not managed prudently.
• Business Age and Scale: Being a relatively new and micro-sized company in a competitive sector (electrical installation, demolition, construction), the company is likely still establishing its market presence and operational efficiencies.
• No Overdue Filings: Compliance “vital sign” is positive with accounts and confirmation statements filed on time, reducing regulatory risk.

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4. Recommendations for Improving Financial Wellness

1. Improve Working Capital Management:

   • Monitor debtor days closely to avoid cash flow bottlenecks. The sharp drop in debtors could imply either reduced sales or better collections; maintaining a balance is key.
   • Negotiate supplier terms to optimise payable days without jeopardising supplier relationships.

2. Reduce Reliance on Director’s Loan:

   • Explore alternative financing routes such as small business loans or invoice financing to reduce dependency on director’s personal funds, improving corporate financial resilience.

3. Enhance Profitability and Retained Earnings:

   • Focus on increasing turnover through targeted marketing and client acquisition in core SIC areas (electrical installation, demolition, commercial construction).
   • Control costs carefully to avoid erosion of net assets.

4. Regular Financial Monitoring and Forecasting:

   • Implement monthly cash flow forecasting to anticipate and mitigate liquidity shortfalls early.
   • Establish key performance indicators (KPIs) for financial health to spot adverse trends promptly.

5. Consider Professional Financial Advice:

   • Given the business’s early stage and sector risks, periodic reviews by financial advisors can help refine strategies for growth and risk mitigation.

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