HAMMAC SCAFFOLDING LTD

Executive Summary

HAMMAC Scaffolding Ltd shows promising recovery with positive net assets and operational growth but exhibits ongoing liquidity challenges indicated by negative working capital and low cash reserves. The company should focus on improving cash flow management and working capital efficiency to strengthen its financial health and support sustainable expansion.

HAMMAC SCAFFOLDING LTD - Analysis Report

Company Number: 13323653

Analysis Date: 2025-07-20 16:07 UTC

Financial Health Assessment for HAMMAC SCAFFOLDING LTD as of 31 March 2024

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1. Financial Health Score: C (Fair)

Explanation:
HAMMAC Scaffolding Ltd exhibits signs of recovery and growth but still faces notable liquidity challenges and a relatively leveraged balance sheet. The company has returned to positive net assets after previous years of net liabilities, indicating improved equity and profitability, yet the current liabilities exceed current assets, signaling ongoing working capital constraints. This grade reflects a business in transition—improving but not yet fully stable or robust financially.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Assets	£77,210	Positive net assets indicate growing shareholder equity and overall financial improvement.
Net Current Assets (Working Capital)	-£22,813	Negative working capital suggests short-term liquidity pressure; liabilities due exceed assets.
Cash Balance	£13,979	Relatively low cash reserves given current liabilities; "weak pulse" on cash flow health.
Debtors	£58,460	Significant trade debtors, partly long-term (£47,449), indicating potential cash flow delays.
Current Liabilities	£154,863	High short-term obligations create "symptoms of distress" in meeting immediate debts.
Fixed Assets (Tangible)	£231,585	Substantial investment in plant and equipment, showing capital growth and operational scale.
Bank Loans & Finance Leases	£31,222 (short-term) + £73,662 (long-term)	Moderate financial leverage; manageable but requires monitoring.
Profit & Loss Reserves	£77,208	Positive retained earnings reflect profitable operations in latest year.
Employee Count	10 (2024)	Growth in workforce from 6 to 10 employees signals operational expansion and increased capacity.

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3. Diagnosis: Financial Condition and Underlying Business Health

• Balance Sheet Strengthening: The company has shifted from negative net assets (-£12,357 in 2023) to a positive net equity position (£77,210 in 2024). This is akin to a patient whose vital signs have improved after treatment, showing resilience and recovery.

• Liquidity Concerns: Despite improved equity, the company’s working capital remains negative (-£22,813), indicating that current liabilities exceed current assets. This "shortness of breath" in financial terms suggests potential cash flow tightness, which can hamper day-to-day operations if not addressed.

• Cash Flow Pressure: Cash on hand is relatively low compared to liabilities due soon, and debtors include a large portion of long-term amounts (£47,449), which may not be readily collectible. This creates a "weak pulse" for immediate liquidity and could lead to funding strain if collections slow.

• Operational Growth: The increase in tangible fixed assets and employees points to business expansion and investment in capacity. This "muscle building" is positive but requires adequate cash flow and working capital to sustain.

• Financial Leverage: Moderate use of bank loans and finance leases demonstrates some reliance on external funding. While not excessive, this debt requires careful servicing to avoid "heart strain" on the financial system.

• Going Concern: The directors affirm the company as a going concern, suggesting confidence in future operations, but the financial "symptoms" highlight the need for vigilant cash flow management.

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4. Recommendations: Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Accelerate debtor collections, especially the large amounts due after one year, to convert receivables into cash faster.
   • Negotiate extended payment terms with suppliers where possible to ease short-term obligations.

2. Enhance Cash Reserves:

   • Consider short-term financing options or overdraft facilities to bolster cash availability during tight cycles.
   • Implement tighter cash flow forecasting to anticipate and manage liquidity gaps proactively.

3. Monitor Debt Levels:

   • Avoid additional debt until working capital improves to reduce financial strain.
   • Explore refinancing options to possibly extend loan maturities and reduce current liabilities pressure.

4. Operational Efficiency:

   • Review stock management (noting £59,611 stock held in 2024) to minimize capital tied up in inventory.
   • Optimize resource allocation to balance growth with sustainable profitability.

5. Financial Reporting Enhancements:

   • Although exempt from audit, consider voluntary financial reviews or advisory services to strengthen financial controls and insights.

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