Company Number: 14195220

Analysis Date: 2025-07-19 12:56 UTC

Financial Health Assessment for Kalana Ltd
Date of Assessment: As of 30 June 2024

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1. Financial Health Score: Grade D

Explanation:
Kalana Ltd exhibits clear symptoms of financial distress, including negative net assets and persistent working capital deficits. While the company is still operational and has not defaulted on filings, the financial "vital signs" suggest it is under significant strain and dependent on director loans to sustain operations. Recovery is possible but requires urgent intervention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Net Current Assets	-22,325	Negative working capital—potential liquidity crunch. Short-term liabilities exceed current assets.
Cash at Bank	21,402	Low cash reserves relative to liabilities, limiting buffer for daily operations.
Debtors	51,898	Moderate level of receivables; cash conversion cycle may be slow, impacting liquidity.
Current Liabilities	112,167	High short-term obligations. Risk of payment delays or defaults.
Non-current Liabilities (Director Loans)	183,312	Heavy reliance on director funding indicates external financing constraints.
Net Assets	-69,167	Negative equity implies the company owes more than it owns—indicative of insolvency risk.
Fixed Assets (Tangible)	136,470	Reasonable asset base mostly in land and buildings, but these are illiquid assets.
Employee Count	9 (up from 5)	Business expansion in headcount, increasing fixed overheads.

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3. Diagnosis: What the Numbers Reveal

• Liquidity Strain: The company’s negative net current assets and low cash balance reveal a "weak pulse" in liquidity. Despite having debtors, these may not be converting quickly enough into cash to meet short-term debts.
• Capital Structure Weakness: Negative net assets and shareholder funds indicate "symptoms of capital erosion." The company is technically insolvent on a balance sheet basis, relying on director loans to plug financing gaps.
• Dependence on Directors: The significant director loan balance (£183K) acts like an "intravenous drip" keeping the company alive. Without this support, the company might face immediate survival risk.
• Growth Pressure: Increased employee numbers suggest operational expansion, but without corresponding improvements in working capital and profitability, this adds strain.
• Going Concern Note: Directors assert going concern status based on continuing financial support, critical for survival but a fragile foundation.

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4. Recommendations: Steps to Improve Financial Wellness

• Improve Cash Flow Management: Accelerate debtor collections and negotiate longer payment terms with suppliers to improve working capital. Consider tighter credit control policies to reduce bad debts.
• Restructure Debt: Engage with directors and possibly external lenders to restructure or convert director loans into equity, reducing long-term liabilities and improving net asset position.
• Cost Control: Review operational expenses, including employee costs and overheads, to align with current revenue and cash flow realities. Avoid overexpansion until financial stability improves.
• Enhance Profitability: Focus on increasing sales margins and reducing waste. Implement pricing strategies and cost efficiencies to generate positive retained earnings.
• Financial Monitoring: Establish regular cash flow forecasting and financial health check-ups to detect early signs of distress and respond proactively.
• Consider Equity Injection: If possible, raise new equity capital to strengthen the balance sheet and reduce reliance on loans.
• Professional Advice: Seek expert financial restructuring advice to explore turnaround options and avoid insolvency.

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