H R CONSTRUCTION ESSEX LTD

Executive Summary

H R CONSTRUCTION ESSEX LTD is facing liquidity and capital challenges, indicated by negative working capital and shareholders' funds over recent years. Without intervention, these symptoms of financial distress could impair operational sustainability. Strategic actions focusing on cash flow management, capital restructuring, and cost efficiency are crucial to restoring financial health and ensuring future viability.

H R CONSTRUCTION ESSEX LTD - Analysis Report

Company Number: 13107433

Analysis Date: 2025-07-20 13:00 UTC

Financial Health Assessment of H R CONSTRUCTION ESSEX LTD

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1. Financial Health Score: D

Explanation:
The company is currently experiencing financial distress indicated by persistent negative net current assets (working capital deficit) and negative shareholders' funds over the last three years. While it remains active, the financial "vital signs" show symptoms of ongoing liquidity challenges and capital erosion, meriting a below-average health grade.

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2. Key Vital Signs:

Metric	2020 (£)	2021 (£)	2022 (£)	2023 (£)	Interpretation
Current Assets	42,834	4,937	4,937	4,946	Sharp drop after 2020, stable but low thereafter.
Current Liabilities	28,018	14,899	14,899	17,419	Moderate increase in 2023, higher short-term debt
Net Current Assets	14,816	-9,962	-9,962	-12,473	Negative working capital signals liquidity stress
Total Assets Less Current Liabilities	14,816	-9,962	-9,962	-12,473	Negative net assets imply insolvency risk
Shareholders' Funds	14,816	-9,962	-9,962	-12,473	Negative equity means accumulated losses exceed capital

Interpretation of Vital Signs:

• Negative Working Capital: The company has more short-term debts than short-term assets, indicating it may struggle to meet immediate obligations without additional financing.
• Declining Shareholders' Funds: The equity base is negative and deteriorating, a sign the company is "ill" financially, possibly due to losses exceeding initial capital and reserves.
• Stable but Low Current Assets: Cash and receivables remain low and stagnant after a significant drop post-2020, reducing the buffer for day-to-day operations.
• Rising Current Liabilities: Increasing short-term obligations in 2023 further squeeze liquidity.

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3. Diagnosis:

H R CONSTRUCTION ESSEX LTD exhibits symptoms of financial distress, characterized by continued negative net current assets and negative equity. This condition suggests the company is operating with a liquidity deficit and eroded capital base, akin to a patient with weakened vital organs unable to sustain normal function without intervention. The company’s ability to fund operations from working capital is compromised, raising concerns about its short-term solvency.

The absence of significant fixed assets and the micro-entity status limit the company’s collateral for borrowing, tightening financial flexibility. The ownership structure shows a controlling shareholder with 75-100% control, which may support financial injections if needed, but no evidence is present in the accounts of capital injections or profitability improvements.

The company appears to have survived initial startup challenges in 2020 with positive net assets but has since declined, potentially due to operational losses or increased liabilities. The lack of audit and micro-entity reporting suggests limited financial transparency and possibly constrained resources for thorough financial management.

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4. Recommendations:

• Immediate Cash Flow Management: Prioritize improving liquidity by accelerating receivables collection, negotiating longer payment terms with suppliers, or seeking short-term financing to relieve pressure on current liabilities.
• Capital Injection or Restructuring: Consider equity injection from shareholders or restructuring debts to restore positive shareholders' funds and working capital balance, improving solvency.
• Cost Control and Profitability Improvement: Review operational costs rigorously to identify savings and improve margins, potentially through better project management or pricing strategies.
• Financial Planning and Monitoring: Implement robust cash flow forecasting and financial controls to detect early signs of distress and manage capital efficiently.
• Seek Professional Advice: Engage with financial advisors or insolvency practitioners proactively to explore restructuring options before distress worsens.
• Transparency and Reporting: Although micro-entity, consider enhanced financial reporting to stakeholders to build confidence and facilitate access to finance.

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