MAC STAR SERVICES LTD

Executive Summary

MAC STAR SERVICES LTD shows promising revenue growth but faces liquidity challenges with negative working capital and declining net assets. The company is minimally profitable but vulnerable to cash flow issues. Immediate focus on cash management and cost control is essential to stabilize financial health and support sustainable growth.

MAC STAR SERVICES LTD - Analysis Report

Company Number: 13100425

Analysis Date: 2025-07-20 12:25 UTC

Financial Health Assessment for MAC STAR SERVICES LTD (as of 31 December 2024)

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1. Financial Health Score: C

Explanation:
MAC STAR SERVICES LTD demonstrates signs of operational activity and growth in turnover, but the financial structure shows stress, particularly in liquidity and working capital management. The company is generating a small profit but faces challenges with negative net current assets and increased liabilities. This grade reflects a company that is operational but shows symptoms of financial strain requiring attention.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Turnover	£89,607	Growing revenue; positive sign of business activity.
Profit for the Period	£59	Profitability is positive but marginal (thin margin).
Fixed Assets	£4,550	Increased investment in long-term assets.
Current Assets	£1,610	Low short-term assets to cover immediate obligations.
Current Liabilities	£3,200	Liabilities due soon exceed current assets.
Net Current Assets (Working Capital)	-£890	Negative working capital indicates liquidity strain.
Total Net Assets	£460	Equity eroded significantly from prior years (£1,500).
Staff Costs	£56,675	High proportion of costs relative to turnover.
Employee Count	9	Small workforce consistent with micro-entity scale.

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3. Symptoms Analysis

• Negative Working Capital ("Liquidity Deficiency"): The company’s current liabilities (£3,200) exceed current assets (£1,610), resulting in a net current liability of -£890. This is a red flag akin to a patient showing signs of dehydration—cash inflows are insufficient to cover short-term debts, risking payment delays or defaults.

• Thin Profit Margin ("Weak Vital Signs"): Despite revenue growth (+64% increase from £54,520 in 2023 to £89,607 in 2024), the net profit is only £59, indicating very slim margins. High staff and material costs are consuming most of the revenue, leaving little buffer.

• Declining Net Assets ("Loss of Resilience"): Net assets dropped from £1,500 to £460, showing erosion of shareholder equity. This suggests the company is consuming its capital base, similar to a patient losing muscle mass over time.

• Increased Fixed Assets Investment ("Growth Attempt"): Fixed assets increased from £1,000 to £4,550, indicating capital expenditure possibly to support growth or operational capability, which can be positive if managed well.

• Consistent Employee Base ("Stable Workforce"): Maintaining 9 employees aligns with the micro company scale but given high staff costs, efficiency and productivity should be evaluated.

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4. Diagnosis

MAC STAR SERVICES LTD is in a fragile financial state. The company is producing revenue growth and a minimal profit, which are encouraging signs, but the negative working capital and declining net assets point to liquidity and capital structure weaknesses. The business may experience cash flow difficulties in meeting short-term debts without additional financing or improved cash management. The increase in fixed assets indicates investment in capacity but may also be stretching resources. The financial health resembles a patient with early symptoms of distress—still standing but needing intervention to prevent deterioration.

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5. Prognosis

If current trends continue without addressing liquidity and cost structure, the company risks increased financial stress, potentially leading to difficulties in meeting obligations, delayed payments, or need for external funding. However, the growing turnover signals underlying business potential. With targeted improvements in cash flow management, cost control, and possibly capital injection, the prognosis can improve towards a stable and healthy financial condition.

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6. Recommendations

• Improve Working Capital Management: Prioritise collecting receivables faster, negotiating better payment terms with suppliers, or securing short-term funding to manage liquidity.

• Cost Efficiency Review: Examine staff costs and material usage to identify efficiency gains or cost reductions without impairing service quality.

• Cash Flow Forecasting: Implement regular cash flow forecasts to anticipate liquidity gaps and plan accordingly.

• Monitor Fixed Asset Investments: Ensure capital expenditures are aligned with return on investment and do not unduly strain cash resources.

• Explore Financing Options: Consider arranging an overdraft facility or short-term loan to provide a cash buffer.

• Strategic Pricing and Sales Growth: Focus on improving profit margins through pricing strategies or value-added services.

• Regular Financial Health Monitoring: Establish monthly financial reviews to detect and respond to symptoms of distress early.

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