LANCASTER PUBS LTD

Executive Summary

Lancaster Pubs Ltd is experiencing significant liquidity stress and capital erosion, evidenced by a sharp decline in cash reserves and shareholders' equity over the past year. The company remains solvent but requires urgent measures to improve cash flow and restructure capital to restore financial health. Without intervention, the risk of financial distress increases.

LANCASTER PUBS LTD - Analysis Report

Company Number: 13441716

Analysis Date: 2025-07-20 16:25 UTC

Financial Health Assessment: LANCASTER PUBS LTD (as of 30 June 2024)

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1. Financial Health Score: D

Explanation:
The company's key financial indicators reveal a concerning deterioration in liquidity and net asset value over the latest year. While still solvent, the sharp decline in net current assets and shareholders’ funds signals symptoms of financial distress akin to a patient whose vital signs show weakening. Immediate attention is needed to stabilize cash flow and rebuild equity to avoid further decline.

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2. Key Vital Signs: Critical Metrics and Interpretation

Metric	2024 Value	2023 Value	Interpretation
Fixed Assets	£1,156	£1,361	Slight reduction; stable asset base.
Current Assets	£18,179	£30,091	Significant drop (~40%), especially cash.
Cash at Bank & In Hand	£10,803	£22,814	Nearly 53% reduction—warning sign of cash flow stress.
Debtors	£2,457	£2,501	Stable; no major collection issues detected.
Current Liabilities	£14,462	£12,990	Increased liabilities (+11%)—rising short-term obligations.
Net Current Assets (Working Capital)	£3,717	£17,101	Drastic drop (~78%); indicates tightening liquidity.
Net Assets (Equity)	£4,873	£18,462	Severe shrinkage (~74%) in shareholder funds—potential capital erosion.
Share Capital	£100	£100	Nominal and unchanged.
Average Number of Employees	11	10	Small increase, may add to fixed costs.

Additional Observations:

• The company holds modest fixed assets, typical for its category.
• Stock levels are stable, showing consistent inventory management.
• Trade creditors and other short-term debts have increased, which may pressure cash flow.
• Directors’ loan account remains constant at £1,872, showing no recent director funding.
• No audit requirement due to size; accounts prepared under small companies regime.

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3. Diagnosis: What the Financial Data Reveals About Business Health

Lancaster Pubs Ltd shows symptoms akin to an enterprise experiencing liquidity strain and capital erosion. The critical “vital sign” of working capital plummeted from £17,101 to £3,717, indicating the company’s ability to meet short-term obligations from current assets has weakened significantly. This reduced buffer is like a patient with low energy reserves struggling to respond to stress.

The cash reserves have more than halved in a year, which is a red flag for cash flow health—potentially caused by operational losses, higher creditor payments, or increased expenses without matching revenue growth. Despite stable debtors and inventory, the increase in current liabilities means the company owes more in the short term, further straining liquidity.

The shareholders’ funds declining from £18,462 to £4,873 is a serious concern—it points to accumulated losses or capital withdrawals that have eaten into the company’s equity base. This reduces the safety net for creditors and limits the company’s ability to absorb future shocks.

The company is not in liquidation or administration but is showing early warning signs that, if untreated, could lead to financial distress. The industry classification (hospital activities) seems mismatched for a pub company, which may suggest a data classification error, but does not directly impact financial health.

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4. Recommendations: Specific Actions to Improve Financial Wellness

• Improve Cash Flow Management:

  • Conduct a detailed cash flow forecast to identify timing gaps.
  • Accelerate debtor collections and negotiate longer payment terms with suppliers.
  • Consider short-term financing options (e.g., overdrafts, invoice financing) carefully to ease liquidity pressure.

• Cost Control and Operational Efficiency:

  • Review staffing and overhead costs in light of increased employees but reduced liquidity.
  • Examine procurement and inventory turnover to reduce tied-up working capital.

• Capital Restructuring:

  • Explore options to inject additional equity capital or director loans to strengthen the balance sheet.
  • Communicate transparently with shareholders and creditors about financial plans to restore confidence.

• Financial Monitoring:

  • Implement regular financial health check-ups (monthly management accounts) to track vital signs.
  • Engage with a financial advisor or accountant to develop strategies tailored to pub industry cash flow cycles.

• Review Classification and Reporting:

  • Verify and correct industry classification to ensure accurate benchmarking and compliance reporting.

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Medical Analogy Summary:

Lancaster Pubs Ltd currently shows "symptoms of distress" with weakened liquidity ("low cash flow pulse") and diminished equity ("shrinking capital reserves"). Immediate intervention is necessary to stabilize the financial “patient” through improved cash management, cost control, and possible capital infusion to avoid progression to severe financial illness.

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