HEMN.D DEVELOPERS LTD

Executive Summary

HEMN.D DEVELOPERS LTD possesses a strong asset base but is challenged by liquidity issues and heavy reliance on director loans. While net assets have improved, the company must urgently address short-term cash flow management and diversify funding sources to ensure sustainable financial health. Proactive financial controls and strategic planning will be key to stabilizing and strengthening its financial position.

HEMN.D DEVELOPERS LTD - Analysis Report

Company Number: 12778178

Analysis Date: 2025-07-29 18:58 UTC

Financial Health Assessment for HEMN.D DEVELOPERS LTD (as of 31 July 2024)

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1. Financial Health Score: C (Fair)

Explanation:
The company shows signs of underlying financial strain, particularly in liquidity and working capital management, despite having a solid asset base. The fixed assets (property) are strong, but the heavy current liabilities and negative net current assets indicate cash flow difficulties. However, the company has improved its net assets compared to the previous year, showing some recovery or growth. This puts the financial health in a cautious "fair" zone, with significant room for improvement.

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2. Key Vital Signs:

Metric	2024 Value	Interpretation
Fixed Assets	£235,000	Stable long-term asset base, representing property holdings. Good "structural" health.
Current Assets	£5,565	Very low liquid assets to cover short-term obligations, indicating weak liquidity ("thin pulse").
Cash at Bank	£5,565	Cash is minimal, reinforcing liquidity concerns.
Current Liabilities	£182,895	High short-term debts, especially the director's loan £175,236, creating pressure on cash flow.
Net Current Assets	-£177,330	Negative working capital, a key "symptom of distress" indicating inability to cover short-term debts.
Net Assets (Equity)	£57,670	Positive net worth showing business value exceeds liabilities, though improved from £30,877 last year.
Share Capital	£100	Nominal capital, typical for small private companies.
Director's Loan Account	£175,236	Majority of current liabilities owed to director, indicating reliance on internal financing.

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3. Diagnosis:

The company’s financial "vital signs" reveal a mixed picture:

• Healthy structural assets: The fixed asset base (£235,000 in property) is solid and unchanged, providing tangible value and collateral. This is like a strong skeletal structure supporting the business.

• Symptoms of liquidity distress: Current assets (mostly cash) are insufficient to meet immediate liabilities, with a working capital deficit exceeding £177,000. This is akin to a patient having a weak pulse — the business struggles to generate or hold enough cash to settle short-term debts promptly, risking payment delays or default.

• High short-term liabilities primarily to director: The director’s loan of £175,236 forms the bulk of current liabilities, suggesting the company is heavily reliant on internal funding rather than external credit or operational cash flow. This can be a double-edged sword; while it provides flexibility, it may also indicate difficulties in sourcing external finance or generating operating cash.

• Improving net assets: The positive movement from £30,877 net assets to £57,670 is a positive sign, reflecting either asset revaluation gains or profit retention. This suggests the company is building equity and potentially improving profitability or asset values.

• No employees reported: The absence of employees indicates a very lean operation, possibly owner-managed, which keeps overheads low but may limit growth capacity.

In summary, the company is currently stable but experiences critical liquidity challenges and heavy reliance on director funding. Without corrective action, these symptoms may worsen, leading to cash flow crises.

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4. Recommendations:

• Improve liquidity management:

  • Develop a clear cash flow forecast and implement tighter controls on expenses and payments to avoid liquidity shortfalls.
  • Consider accelerating receivables and negotiating longer payment terms with creditors.

• Reduce reliance on director loans:

  • Explore options to convert director loans into equity or seek external financing to spread financial risk.
  • Formalize loan agreements to ensure clarity on repayment terms and tax treatment.

• Asset utilization and profitability:

  • Review the use of property assets—consider rental income or sale-and-leaseback to unlock cash if appropriate.
  • Focus on enhancing turnover and profitability to generate healthy operational cash flow.

• Financial monitoring and reporting:

  • Maintain regular financial reviews to detect early signs of distress.
  • Engage with a financial advisor to improve reporting and strategic planning.

• Strategic growth planning:

  • Investigate opportunities to expand the business or diversify income streams without jeopardizing liquidity.

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