JJP ELECTRICAL SERVICES LTD

Executive Summary

JJP ELECTRICAL SERVICES LTD faces liquidity challenges, with negative working capital and low cash reserves despite positive equity. The company’s financial health is compromised primarily by cash flow constraints linked to increased debtors and rising current liabilities. Immediate focus on improving cash inflows, managing payables, and restoring profitability is essential to regain financial stability and ensure sustainable operations.

JJP ELECTRICAL SERVICES LTD - Analysis Report

Company Number: 13326945

Analysis Date: 2025-07-20 17:28 UTC

Financial Health Assessment of JJP ELECTRICAL SERVICES LTD

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1. Financial Health Score: C

Explanation:
The company shows signs of financial strain reflected in negative net current assets (working capital deficits) over multiple years, though it maintains positive net assets and shareholder funds. The cash position is low relative to current liabilities, indicating liquidity stress. However, the company is still active, with no overdue filings or formal insolvency proceedings. The score reflects caution due to liquidity issues but acknowledges ongoing operations and positive equity.

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2. Key Vital Signs

Metric	2024	Interpretation
Current Assets	£19,268	Increased significantly, mainly from debtors
Cash at Bank	£1,426	Very low cash reserves, a symptom of liquidity tightness
Debtors	£17,842	Large amount tied up in receivables; risk of cash flow delay
Current Liabilities	£23,287	Increased sharply, surpassing current assets
Net Current Assets (Working Capital)	-£4,019	Negative; indicates short-term liquidity problems
Net Assets (Equity)	£2,702	Positive but reduced from prior year; shows long-term solvency is still intact
Fixed Assets (Net)	£9,537	Substantial investment in tangible assets, but depreciating
Bank Loans & Finance Leases (short + long term)	£5,750 combined	Moderate debt burden, manageable if cash flow improves
Profit & Loss Reserves	£2,701	Accumulated retained earnings, but halved from previous year

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3. Diagnosis: What the Financial Data Reveals

• Liquidity Stress ("Healthy Blood Flow"): The company is exhibiting symptoms of cash flow difficulties. Current liabilities exceed current assets by £4,019, indicating that the company may struggle to meet its short-term obligations without additional cash inflows or financing. The very low cash balance (£1,426) heightens this concern. This is akin to a patient with poor circulation—while the heart (equity) is still beating, the immediate supply lines (cash) are compromised.

• Receivables Concerns ("Clogged Arteries"): Debtors have increased significantly to £17,842, which is a good sign of sales but raises concerns about collection efficiency. Slow or delayed payments can choke the operational liquidity, causing distress.

• Leverage and Debt ("Load on the Heart"): The company carries finance lease obligations and some bank loans totaling £5,750, which is moderate relative to net assets but requires strong cash flow to service. The decrease in long-term liabilities from £5,415 to £2,816 is a positive sign of reducing debt burden.

• Erosion of Equity ("Weakening Vital Signs"): Net assets and shareholder funds have decreased from £5,556 to £2,702, indicating that accumulated profits have been drawn down or losses incurred. While the company remains solvent, this trend, if it continues, could weaken financial resilience.

• Fixed Assets ("Body Mass"): Tangible fixed assets have decreased slightly due to depreciation (£9,537 from £11,921), reflecting normal wear and tear rather than impairment.

• Operational Size: With only one employee and small scale operations, the company is tightly held and likely dependent on a small customer base or contracts.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Cash Flow Management

   • Accelerate debtor collections by tightening credit terms, offering early payment incentives, or pursuing overdue accounts actively.
   • Consider factoring or invoice financing to convert receivables into immediate cash.
   • Monitor cash flow daily to avoid liquidity crises.

2. Reduce Current Liabilities

   • Negotiate extended payment terms with suppliers or restructure finance lease obligations to reduce short-term pressure.
   • Prioritize payment of high-interest or urgent liabilities to stabilize working capital.

3. Cost Control and Profitability

   • Review operational costs and overheads closely to enhance profitability and rebuild reserves.
   • Explore new business contracts or diversify client base to increase revenue streams.

4. Capital Injection or Financing

   • Consider equity injection from shareholders or director loans to shore up cash reserves if necessary.
   • Explore banking facilities for working capital support, ensuring terms match cash flow cycles.

5. Regular Financial Monitoring

   • Implement monthly management accounts and KPIs for early detection of financial stress.
   • Engage in financial planning and budgeting aligned with strategic goals.

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