LINCS CONTRACTS LIMITED

Executive Summary

LINCS CONTRACTS LIMITED demonstrates a stable financial position with positive equity and working capital, signaling overall good financial health. However, significant reliance on director loans and low cash reserves present liquidity risks that require management attention. Implementing stronger cash flow controls and reducing related party exposure will help safeguard future financial stability.

LINCS CONTRACTS LIMITED - Analysis Report

Company Number: 13630593

Analysis Date: 2025-07-29 21:00 UTC

Financial Health Assessment of LINCS CONTRACTS LIMITED as of 30 September 2024

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1. Financial Health Score: B

Explanation:
LINCS CONTRACTS LIMITED shows solid financial footing with positive net assets and a stable increase in net current assets and shareholders' funds over the last year. The company maintains a healthy working capital position, indicating it can meet its short-term obligations. However, the high level of current liabilities relative to current assets and the significant debtor balance—largely related to a director loan—suggest some caution. The absence of an audit and limited financial disclosures also limit full transparency, resulting in a grade of B rather than A.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Net Assets	5,406	Positive net assets indicate the company’s equity exceeds liabilities—a good sign of financial "health."
Net Current Assets (Working Capital)	4,646	Positive working capital ("healthy cash flow") means the company can cover short-term debts.
Current Assets	80,975	Primarily made up of debtors (£79,855), suggesting sales on credit or loans outstanding.
Current Liabilities	76,329	High but covered by current assets; however, a close margin warrants monitoring.
Cash at Bank	1,120	Low cash on hand compared to liabilities; cash flow timing may be a concern.
Share Capital	120	Minimal share capital, typical for small private companies.
Debtors to Creditors Ratio	~1.05	Debtors slightly exceed creditors, indicating receivables nearly cover payables.
Director Loan (Related Party Debtor)	63,373	Significant portion of debtors are amounts due from the director, which could be a risk if not recovered timely.

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3. Diagnosis: What the Financial Data Reveals

• Strengths:

  • The company has a positive net asset base that has increased year-over-year, signaling growing equity and retained earnings.
  • Working capital is positive, indicating the company can cover its immediate liabilities, a sign of financial "vitality."
  • Fixed assets are modest but stable, reflecting limited capital investment needs consistent with the business's nature in specialised construction services.

• Symptoms of Potential Distress:

  • The large balance of debtors, mostly a loan to the director, raises concerns about liquidity and risk if the director’s loan is not repaid promptly. This is akin to a patient with a symptom that looks manageable but could worsen if untreated.
  • Cash reserves are low relative to current liabilities, which could constrain the company’s ability to manage unexpected expenses or delays in debtor collections.
  • The company relies heavily on trade credit and related party funding, which could be a vulnerability in cash flow management.
  • The absence of an audit and limited public disclosure reduces external assurance, making it harder to detect underlying issues.

• Overall Condition:
  The company appears financially stable and growing but must manage its liquidity carefully. The reliance on director loans and low cash reserves are early warning signs that require attention to avoid cash flow stress.

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4. Recommendations: Actions to Improve Financial Wellness

• Improve Cash Flow Management:
  Increase cash holdings to build a buffer against short-term liabilities. Consider accelerating debtor collections or restructuring payment terms to enhance liquidity.

• Address Director Loan Exposure:
  Develop a clear repayment plan for the director loan to reduce related party risk and improve the quality of current assets.

• Increase Transparency:
  Although small companies are exempt from audits, voluntarily obtaining a review or assurance engagement may improve stakeholder confidence.

• Monitor Working Capital Closely:
  Regularly review receivables and payables to ensure working capital remains positive and avoid "cash flow infections" that can quickly deteriorate financial health.

• Plan for Growth Investments Carefully:
  Given modest fixed assets, any planned capital expenditure should be cautiously evaluated to avoid overextending resources.

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