M & L HATCH PROPERTIES LTD

Executive Summary

M & L Hatch Properties Ltd shows stable investment property assets but suffers from negative working capital and high debt levels, indicating liquidity challenges and financial fragility. While equity has improved, the company needs to focus on improving cash flow and managing debt to ensure long-term financial health. Immediate attention to liquidity and debt restructuring is recommended to stabilize operations and reduce risk.

M & L HATCH PROPERTIES LTD - Analysis Report

Company Number: 13667697

Analysis Date: 2025-07-20 11:33 UTC

Financial Health Assessment for M & L Hatch Properties Ltd

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1. Financial Health Score: C

Explanation:
The company shows signs of financial strain with persistent negative net current assets (working capital) and low net asset value, but it also has stable fixed assets (investment property) and is not overdue on filings. The capital structure is fragile, and liquidity is a concern, but the business is still operational with some equity growth. This places the company in a moderate-risk category, warranting attention to cash flow and debt management.

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2. Key Vital Signs:

Metric	2024 Value	Interpretation
Fixed Assets	£95,000	Stable investment in property; appreciating in value, which is a positive sign ("healthy asset base").
Current Assets	£4,599	Very low liquidity — cash is minimal.
Current Liabilities	£30,506	Short-term debts exceed current assets substantially ("symptom of liquidity stress").
Net Current Assets	-£25,907	Negative working capital indicates difficulty meeting short-term obligations ("cash flow distress").
Total Assets Less CL	£69,093	Moderate buffer after short-term liabilities but reduced by long-term debts.
Creditors > 1 Year	£60,305	Significant long-term debt secured by a fixed charge on assets ("high leverage").
Net Assets (Equity)	£6,635	Positive but very low equity, indicating minimal cushion for losses or shocks ("fragile financial health").
Shareholders' Funds	£6,625	Matches net assets; shareholder equity has increased from prior year but remains low.

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3. Diagnosis:

• Liquidity and Working Capital:
  The company suffers from persistent negative net current assets, meaning it does not have enough short-term assets to cover its short-term liabilities. This "symptom" indicates potential cash flow challenges, which could hamper day-to-day operations and ability to fund unexpected costs.

• Leverage and Solvency:
  The company carries a significant amount of long-term debt (£60,305), secured against its investment properties. While the fixed assets are stable and appreciating, the debt level is high relative to equity (high gearing). This "diagnosis" suggests a heavy financial burden that limits flexibility.

• Asset Quality:
  The main asset is investment property valued at £95,000, which has increased by £5,000 in the last year, indicating some "healthy growth" in asset value. However, this asset is relatively illiquid and tied to debt.

• Equity and Capital Structure:
  Equity is positive but minimal, having risen from £497 to £6,635 over the last year, suggesting some improvement but still a "thin margin of safety" for creditors and shareholders.

• Operational Status:
  No overdue filings or indications of insolvency proceedings; directors appear engaged. The company is active and continuing operations but should be cautious.

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4. Recommendations:

• Improve Liquidity:
  Focus on increasing cash reserves through better rent collection, tighter control of short-term payables, or arranging short-term financing. Consider negotiating extended payment terms with creditors to ease working capital strain.

• Debt Management:
  Explore restructuring long-term debt to reduce interest burden or extend repayment terms, improving cash flow. Given the high leverage, reducing debt over time should be a priority.

• Asset Utilization:
  Consider if the investment property is generating sufficient rental income relative to its value and debt cost. If not, evaluate options to enhance income or realize part of the asset to improve liquidity.

• Equity Injection:
  If possible, a capital injection from shareholders could strengthen the balance sheet and provide a buffer to absorb shocks.

• Financial Monitoring:
  Implement regular cash flow forecasting and financial reviews to detect early "symptoms" of distress and respond proactively.

• Professional Advice:
  Engage with financial advisors specializing in property companies to optimize the capital structure and financial strategy.

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