JEST ENGINEERING LTD

Executive Summary

Jest Engineering Ltd is exhibiting signs of financial distress with negative working capital and shareholders' funds, indicating a precarious liquidity position and accumulated losses. Immediate action focusing on liquidity improvement, debt restructuring, and cost management is critical to stabilise the company’s financial health and avoid insolvency risks.

JEST ENGINEERING LTD - Analysis Report

Company Number: SC737961

Analysis Date: 2025-07-20 11:13 UTC

Financial Health Assessment for Jest Engineering Ltd

---

1. Financial Health Score: D

Explanation:
Jest Engineering Ltd shows clear signs of financial distress with persistent negative net assets and working capital deficits. The company’s liabilities exceed its assets, indicating insolvency on a balance sheet basis. While the business remains operational ("active"), its financial "vital signs" reflect significant strain, necessitating immediate remedial action to avoid further deterioration.

---

2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Current Assets	4,346	Very low short-term resources available
Cash	938	Critically low cash reserves ("weak pulse")
Debtors	3,408	Moderate receivables, potential to convert to cash
Current Liabilities	30,591	Substantial short-term debts ("heavy burden")
Net Current Assets (Working Capital)	-26,245	Negative; unable to cover immediate obligations
Fixed Assets (Net Book Value)	18,142	Physical assets present but diminished by depreciation
Total Assets Less Current Liabilities	-8,103	Overall liabilities exceed assets ("underweight")
Shareholders’ Funds (Equity)	-8,203	Negative equity; losses accumulated over time
Number of Employees	2	Small workforce; micro/small enterprise scale

---

3. Diagnosis: Financial Condition Overview

Symptoms of Financial Distress:

• Negative Working Capital: The company’s current liabilities significantly exceed current assets, indicating it may struggle to meet short-term obligations as they fall due. This is a critical symptom akin to "laboured breathing," signaling cash flow stress.

• Negative Equity: Shareholders’ funds are negative and worsening year-on-year, reflecting accumulated losses and potential erosion of investor confidence. This condition resembles "chronic illness" where the company’s net worth is below zero.

• Low Cash Reserves: With less than £1,000 in cash, Jest Engineering has limited liquidity cushion to absorb shocks or invest for growth, akin to a "weak heartbeat."

• Increasing Trade Creditors: Trade creditors have increased notably, suggesting delayed payments to suppliers or extended credit terms, which can strain supplier relationships.

• Fixed Assets Stable but Depreciating: The company has tangible fixed assets worth £18,142 net of depreciation, which could be leveraged or sold to improve liquidity, but these are not sufficient to offset liabilities.

• Small Scale Operation: With only 2 employees and micro/small business financials, the company has limited scale to absorb financial shocks.

Underlying Causes Hypothesis:

• The company may be experiencing operational losses or insufficient revenue to cover costs, evident from accumulated losses.
• Tight cash flow management is likely a challenge due to low cash and high short-term liabilities.
• Dependence on supplier credit or deferred payments may be masking deeper liquidity issues.
• Asset base is modest and declining due to depreciation, limiting collateral value for financing.

---

4. Prognosis: Future Financial Outlook

If current trends persist without intervention, Jest Engineering faces an elevated risk of insolvency or forced restructuring. The “vital signs” suggest the company is in a fragile state where liquidity shortages and creditor pressure could escalate quickly. However, the company is still active with some asset base and receivables, offering a window for corrective measures.

---

5. Recommendations: Improving Financial Wellness

• Improve Liquidity Management: Implement stringent cash flow forecasting and controls to ensure timely collection of debtors and prioritise payments to critical suppliers. Aim to increase cash reserves ("stabilise pulse").

• Renegotiate Credit Terms: Engage with suppliers and lenders to extend payment terms or restructure short-term debts to ease working capital pressure.

• Cost Control and Revenue Growth: Review operating expenses to identify savings and explore opportunities to increase sales or diversify services within the machinery repair sector.

• Asset Utilisation: Consider sale or leaseback of underutilised fixed assets to raise cash, or use assets as collateral to secure working capital loans.

• Equity Injection: If possible, inject new equity capital to restore positive net assets and improve balance sheet strength.

• Professional Financial Advice: Consult with insolvency practitioners or business turnaround specialists early to explore restructuring options before financial distress worsens.

---

Medical Analogy Summary

Jest Engineering Ltd’s financial health is currently in a state of distress, analogous to a patient with a weakened heart and laboured breathing—its liquidity is low, debts are high, and accumulated losses have eroded financial vitality. Without prompt intervention to restore cash flow and balance sheet strength, the risks of insolvency and operational failure increase significantly.

---