KP ACOUSTICS RESEARCH LABS LTD

Executive Summary

KP Acoustics Research Labs Ltd is currently experiencing significant financial distress characterized by negative working capital, low cash reserves, and growing liabilities exceeding assets. While the company remains operational and supported by its parent group, urgent financial management and strategic actions are needed to restore liquidity and move toward profitability. With focused interventions, the company has a viable path to financial recovery.

KP ACOUSTICS RESEARCH LABS LTD - Analysis Report

Company Number: 13289484

Analysis Date: 2025-07-20 11:35 UTC

Financial Health Assessment for KP Acoustics Research Labs Ltd

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1. Financial Health Score: D

Explanation: The company’s financial position shows significant stress, with growing net liabilities and worsening working capital. Though it remains a going concern supported by its group, the current financial “vital signs” reflect symptoms of financial distress that require urgent attention.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Net Current Assets (Working Capital)	-353,029	-25,538	A large negative working capital indicates a liquidity strain; the company’s short-term liabilities exceed its short-term assets by a substantial margin, impairing its ability to meet immediate obligations.
Net Assets (Shareholders’ Funds)	-341,733	-23,281	Negative net assets reveal that total liabilities exceed total assets, pointing to an eroded equity base and accumulated losses. This is a chronic symptom of financial distress.
Cash at Bank	17,394	25,430	Low and declining cash levels suggest tight cash flow and limited liquidity buffer. Cash is the bloodstream of the company; low cash can cause operational difficulties.
Debtors	116,652	71,164	Increasing debtors show rising amounts owed to the company but could indicate slow collection, tying up cash in credit.
Creditors (Due within one year)	487,075	122,132	A sharp increase in short-term creditors signals rising obligations, possibly from group undertakings, that the company must service soon.

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3. Diagnosis

KP Acoustics Research Labs Ltd is currently in a financially fragile state. The company’s balance sheet shows a growing imbalance between liabilities and assets, with net liabilities increasing dramatically from about £23k in 2023 to over £341k in 2024. This deterioration is primarily driven by a surge in current liabilities, largely amounts owed to group undertakings (£431,831), which has overwhelmed the company’s current assets.

The company exhibits symptoms of liquidity distress — negative working capital and low cash reserves mean it may struggle to pay its short-term debts on time without additional support. Although the director’s report states confidence in group support and future profitability, the current financials show a company that is yet to achieve stable, healthy cash flow or profitability.

The company remains in a development phase, investing in tangible fixed assets (plant and machinery increased to £11,296) and research & development costs, which may explain the losses. However, accumulated losses represented in retained earnings are substantial and increasing.

Overall, the financial “patient” is under strain but not beyond recovery if appropriate interventions are made.

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4. Recommendations

To improve financial wellness and steer toward a healthier financial state, the company should consider the following actions:

• Strengthen Liquidity: Prioritize improving cash flow by accelerating debtor collections, negotiating extended payment terms with creditors, and possibly arranging short-term financing to cover liquidity gaps. Healthy cash flow is critical to avoid operational disruptions.

• Manage Related Party Balances: The large amounts owed to group undertakings suggest intercompany financing. Formalizing repayment plans or converting some liabilities into equity could improve the balance sheet and reduce short-term pressure.

• Cost Control and Profitability: Review operational expenses and R&D spending to ensure capital is used efficiently. Transition from development phase to revenue-generating activities to improve profitability.

• Equity Injection: Consider capital infusion from shareholders or the parent group to restore positive net asset value, which will improve solvency and creditor confidence.

• Regular Financial Monitoring: Implement tighter financial controls and frequent monitoring of key metrics like working capital, cash flow, and creditor days to detect and address financial symptoms early.

• Strategic Business Planning: Develop a clear roadmap for moving from development to commercial success, including sales growth targets, market expansion, and risk mitigation.

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Medical Analogy Summary

KP Acoustics Research Labs Ltd is like a patient with severe dehydration and nutrient deficiency—the body (company) is low on cash (blood supply) and burdened by liabilities (toxins). Without prompt hydration (cash inflow) and detoxification (liability management), the patient risks further deterioration. However, with proper treatment (financial restructuring and operational focus), recovery is possible.

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