LUBAS LIMITED

Executive Summary

LUBAS LIMITED is currently experiencing significant financial distress characterized by negative net assets and insufficient working capital to cover short-term liabilities. While operational, the company’s liquidity challenges and growing creditor obligations pose risks that require urgent management actions to restore financial health. With strategic focus on cash flow improvement and capital restructuring, the company can improve its financial prognosis.

LUBAS LIMITED - Analysis Report

Company Number: 13971764

Analysis Date: 2025-07-29 20:25 UTC

Financial Health Assessment for LUBAS LIMITED (as of 31 March 2024)

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1. Financial Health Score: D

Explanation:
LUBAS LIMITED currently exhibits financial distress symptoms, notably significant negative net assets and working capital deficits. Despite being operational and meeting filing deadlines, the company’s balance sheet reveals a weak financial position with liabilities exceeding assets by a substantial margin. The financial health score "D" reflects a critical need for remedial actions to restore balance sheet strength and liquidity.

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2. Key Vital Signs (Core Financial Metrics)

Metric	2024 Value	Interpretation
Current Assets	£137,636	Moderate short-term asset base, including cash & debtors
Cash at Bank	£46,567	Limited cash available for immediate obligations
Debtors	£91,069	High receivables suggesting sales on credit; risk of delays in cash inflows
Current Liabilities	£296,471	High liabilities due within one year — potential liquidity strain
Net Current Assets (Working Capital)	-£158,835	Negative; signals liquidity crunch and inability to cover short-term debts
Net Assets (Equity)	-£169,823	Negative equity indicates accumulated losses or funding deficits
Shareholders' Funds	-£169,923	Reflects overall negative net worth of the company

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3. Symptoms Analysis

• Negative Working Capital: The company’s current liabilities nearly double its current assets, a clear symptom of liquidity distress. This suggests the company may struggle to meet short-term obligations without additional financing or improved cash collections.
• Increasing Net Liabilities: Net liabilities worsened from -£109,984 in 2023 to -£169,823 in 2024, indicating ongoing losses or inadequate capital injection. This is akin to a patient’s vital signs worsening over time.
• High Trade Creditors: Trade creditors represent the bulk of current liabilities (£285,445), implying the company is reliant on supplier credit but may risk strained supplier relationships if cash flow remains tight.
• Receivables Growth: Debtors increased significantly from £14,084 in 2023 to £91,069 in 2024. This may indicate increased sales but also a potential symptom of delayed payments or credit risk.
• Low Cash Reserves: Cash at bank dropped from £65,666 to £46,567, reducing the company’s ability to manage day-to-day expenses and emergencies.
• No Audit Requirement: The company is exempt from audit, which may limit external financial scrutiny but also means less assurance on the robustness of financial controls.

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4. Diagnosis: Overall Financial Condition

LUBAS LIMITED is currently in a financially fragile state. The balance sheet reveals symptoms of distress characterized by negative net assets and working capital deficits. The company operates with a liquidity shortfall, relying on credit from suppliers and potentially delayed customer payments. Without intervention, this condition could worsen, risking insolvency or forced restructuring. However, the company remains active, and the director retains full control with a 75-100% stake, which could facilitate decisive corrective actions.

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5. Prognosis: Future Financial Outlook

If current trends continue—rising liabilities, increasing receivables, and weak cash reserves—the prognosis is poor. The company may encounter difficulties in meeting creditor demands, potentially leading to solvency challenges. However, early and focused action to improve cash flow management, reduce liabilities, and recapitalize could stabilize the condition. The prognosis will improve significantly if these measures are implemented promptly.

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6. Recommendations for Financial Wellness Improvement

• Improve Cash Flow Management: Accelerate collections from debtors and review credit terms to reduce accounts receivable days. Healthy cash flow is the lifeblood of any business.
• Negotiate with Creditors: Engage suppliers to extend payment terms or restructure debts to alleviate immediate cash outflows.
• Capital Injection: Consider new equity funding or director loans to shore up negative net assets and improve working capital.
• Cost Control: Review and reduce operating expenses to stem losses and conserve cash.
• Financial Monitoring: Implement robust financial reporting and forecasting to detect early warning signs and manage liquidity proactively.
• Explore Financing Options: Investigate short-term financing solutions such as invoice factoring or overdrafts to bridge liquidity gaps.
• Strategic Review: Evaluate business model and pricing to enhance profitability, possibly focusing on high-margin polyurethane products highlighted on the company website.

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Medical Analogy Summary

LUBAS LIMITED’s financial condition resembles a patient with critical but not yet terminal signs—negative equity and liquidity issues are like symptoms of internal stress and organ strain. Immediate intervention is required to stabilize vital signs (cash flow and working capital). Without treatment, the risk of financial "collapse" (insolvency) increases significantly.

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