EVOLUTION EVOLVING LIMITED

Executive Summary

EVOLUTION EVOLVING LIMITED shows clear symptoms of financial distress, with negative net assets and working capital indicating liquidity and solvency challenges. The company relies heavily on directors' loans and holds significant inventory, constraining cash flow. Immediate actions to improve liquidity, reduce debt reliance, and strengthen operational efficiency are critical to stabilizing financial health and improving future prospects.

EVOLUTION EVOLVING LIMITED - Analysis Report

Company Number: 12727689

Analysis Date: 2025-07-20 13:49 UTC

Financial Health Assessment of EVOLUTION EVOLVING LIMITED

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1. Financial Health Score: D

Explanation:
The company is exhibiting significant financial distress symptoms, including persistent net liabilities, negative working capital, and a growing shareholders’ deficit. While still active and filing on time, the balance sheet reveals a shaky financial footing with liabilities exceeding assets by a wide margin, indicating poor financial health.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Current Assets (Working Capital)	-£168,071	Negative working capital ("symptom of cash flow strain"). The company owes more in short-term debts than it holds in liquid assets.
Net Assets (Equity)	-£207,511	Negative net worth, indicating total liabilities exceed total assets. This is a critical "symptom of distress" in financial health.
Shareholders' Funds	-£207,611	Mirrors net assets, confirming accumulated losses and no retained profits to cushion financial shocks.
Cash Reserves	£195,816	Reasonable cash balance but insufficient to cover immediate liabilities (£909,929). Cash flow is vulnerable.
Current Liabilities	£909,929	High short-term debts, contributing to liquidity pressure and potential solvency issues.
Stock (Inventory)	£520,414	Large stock holdings may tie up cash and suggest slow-moving or unsold inventory, a potential liquidity risk.
Directors’ Advances (Loans)	-£813,763	Significant loans from directors indicate reliance on related-party funding to support operations, a sign of financial stress.
Trend in Net Assets	2020: -£12,324 → 2024: -£207,511	Deteriorating equity position over 5 years, worsening financial health.

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3. Diagnosis: What the Financial Data Reveals About Business Health

EVOLUTION EVOLVING LIMITED is currently in a state of financial distress, as evidenced by its persistently negative net assets and net current assets. The company's liabilities exceed its assets by a growing margin, a "critical symptom" akin to a patient with failing vital organs. Negative working capital indicates that the company may struggle to meet its short-term obligations without additional funding or asset liquidation.

The substantial stock levels relative to cash imply that a large portion of assets is tied up in inventory, which could be illiquid or slow to convert to cash. This situation acts like a "blockage" in the cash flow arteries, restricting the business's ability to generate healthy operating liquidity.

Further, the company is heavily reliant on directors' loans (£813k), which may be propping up operations but also signals external funding dependency rather than organic growth or profitability. This reliance on related-party funding is analogous to a patient needing constant life support.

Despite being active and compliant with filings, the absence of audit and the abridged accounts provide limited insight into profitability or cash flow from operations but the balance sheet alone signals chronic financial weakness.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Liquidity Management:

   • Accelerate inventory turnover to convert stock into cash, reducing working capital strain. Consider discounting slow-moving items or renegotiating payment terms with suppliers.
   • Explore short-term financing options or invoice factoring to ease immediate cash flow pressure.

2. Address Negative Net Worth:

   • Consider a capital injection either from existing shareholders or new investors to restore equity and improve the balance sheet.
   • Evaluate options for debt restructuring, especially high current liabilities, to spread repayments over longer terms and reduce immediate pressure.

3. Reduce Directors’ Loan Dependency:

   • Formalize director loan agreements with clear repayment plans to avoid future disputes and signal financial discipline.
   • Seek external funding sources to diversify financial support and reduce risk concentration.

4. Operational Efficiency Review:

   • Conduct a thorough review of business operations to identify cost-saving opportunities and enhance profitability.
   • Strengthen credit control to reduce debtor days and improve cash inflows.

5. Financial Reporting and Transparency:

   • Consider audited accounts in future periods to increase stakeholder confidence and provide more comprehensive financial insights.
   • Develop cash flow forecasts and regular financial monitoring to detect early signs of distress and respond proactively.

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