KERNPARK ESTATES LTD

Executive Summary

Kernpark Estates Ltd has a solid asset base in investment properties but faces liquidity challenges due to negative working capital and high current liabilities. The company's financial structure is fragile with low equity relative to debts, suggesting cautious management of cash flows and liabilities is essential. Strategic action to improve working capital and strengthen the balance sheet will be critical for sustaining financial wellness.

KERNPARK ESTATES LTD - Analysis Report

Company Number: 14072082

Analysis Date: 2025-07-20 12:51 UTC

Financial Health Assessment for Kernpark Estates Ltd

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1. Financial Health Score: C

Explanation:
Kernpark Estates Ltd displays a mixed financial condition. While the company holds significant fixed assets in the form of investment properties valued at £1.63 million, it suffers from persistent working capital deficits (negative net current assets) and relatively low net equity (£62,803). The presence of a substantial bank loan (£851,655) introduced in the latest year adds leverage but also financial risk. The company is solvent but shows symptoms of liquidity stress and a thin equity buffer, warranting a cautious rating.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets (Investment Properties)	£1,630,000	Strong asset base; core business asset stable in value
Current Assets	£938,533	Includes cash of £809,913; improved liquidity position
Current Liabilities	£1,654,075	High short-term obligations; slightly increased since prior year
Net Current Assets (Working Capital)	-£715,542	Negative; indicates potential short-term liquidity strain
Bank Loans (Long-term Liabilities)	£851,655	New debt introduced; increases financial leverage
Net Assets (Equity)	£62,803	Very low equity buffer relative to assets and liabilities
Share Capital	£100	Minimal share capital; most equity from retained earnings
Cash Reserves	£809,913	Healthy cash on hand, major contributor to current assets

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3. Diagnosis

• Asset Health: The company's fixed assets are stable, reflecting consistent valuation of investment properties (£1.63m). No depreciation is charged as investment properties are carried at fair value, indicating a "healthy backbone" in the asset structure.

• Liquidity Symptoms: Despite a large cash balance (£809,913), current liabilities (£1.65m) exceed current assets (£938,533), causing a negative working capital. This suggests "symptoms of short-term liquidity stress"—the company has cash but faces substantial near-term obligations, including trade creditors and other creditors.

• Leverage and Solvency: The introduction of a bank loan (£851,655) in the latest year increases leverage. While the company’s total assets exceed total liabilities, the net equity of just £62,803 is very thin, indicating a "fragile capital structure" vulnerable to shocks or losses.

• Profitability and Retained Earnings: The profit and loss reserve has grown from £41,745 to £62,703, showing some retained profits. However, the company has opted for total exemption full accounts and does not disclose turnover or profit figures, limiting insight into operational performance.

• Ownership and Control: The company’s shares and control are concentrated in a single individual and a group, which can be beneficial for decisive management but also concentrates risk.

• Overall Financial Condition: The company is solvent and operating with valuable assets, but the negative working capital and low equity capital are clear "symptoms of financial strain." Without improved management of current liabilities or increased equity, the company risks liquidity issues.

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4. Recommendations

• Improve Working Capital Management:
  Consider negotiating longer payment terms with creditors or accelerating debtor collections to reduce the working capital deficit. Despite strong cash reserves, negative net current assets indicate stress on short-term financial health.

• Capital Injection or Debt Restructuring:
  Explore options to increase equity capital or refinance short-term liabilities into longer-term debt to strengthen the balance sheet and reduce liquidity risk.

• Cash Flow Monitoring:
  Maintain rigorous cash flow forecasts to ensure the company can meet upcoming obligations without distress. The current cash buffer is a "healthy pulse," but ongoing monitoring is essential.

• Profitability Transparency:
  Provide more detailed disclosures on turnover and profit margins to better understand operational health and identify areas for margin improvement.

• Risk Management:
  Establish contingency plans for interest rate rises or property market downturns, given the company's reliance on investment property values and bank debt.

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