MESHAM SPICE LIMITED

Executive Summary

Mesham Spice Limited has shown promising improvement in liquidity and equity after early financial difficulties, moving from negative net assets to a marginally positive financial position. However, the company remains vulnerable due to minimal working capital and increasing short-term liabilities. Focused efforts on strengthening cash flow, managing liabilities prudently, and improving profitability are essential to secure sustainable financial health.

MESHAM SPICE LIMITED - Analysis Report

Company Number: 14317293

Analysis Date: 2025-07-29 12:18 UTC

Financial Health Assessment: Mesham Spice Limited

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1. Financial Health Score: C

Explanation:
Mesham Spice Limited shows early signs of financial recovery after a challenging start. The company moved from a negative net asset position and working capital deficit in its first two years to a modest positive net asset and net current asset position in the latest year. However, the margin of safety remains very thin, with minimal working capital and shareholder funds, suggesting vulnerability to cash flow shocks or unexpected expenses.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Analysis (Vital Signs)
Current Assets	5,356	1,419	Healthy increase, driven mainly by cash growth.
Cash at Bank	5,196	959	Substantial cash flow improvement — a positive vital sign.
Current Liabilities	5,272	1,809	Significant increase, reflecting more short-term obligations.
Net Current Assets	84	-390	Shift from working capital deficit to a very slight surplus.
Net Assets (Shareholders Funds)	84	-390	Improved equity position but still marginal.
Average Number of Employees	3	2	Slight growth in workforce indicating business expansion.

Interpretation:

• Working Capital: The net current assets of £84 indicate a very narrow buffer of liquid resources after settling short-term debts. This is a critical vital sign — the company is just barely "breathing" financially.
• Cash Position: The jump in cash reserves is a strong positive symptom, showing improved liquidity and ability to meet immediate obligations.
• Liabilities: The rise in short-term creditors suggests increased operational activity or short-term financing reliance, which needs monitoring.
• Equity Position: The turnaround from negative to positive shareholder funds is like stabilizing a previously failing vital organ, but the margin remains fragile.

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3. Diagnosis

Mesham Spice Limited is in a fragile but improving financial condition. The company was initially in a state of distress, operating with negative net assets and working capital deficits, akin to a patient with symptoms of financial anemia. However, the latest financial year shows signs of recovery with positive net assets and healthy cash flow. The business appears to be expanding its operations modestly (increased employees and liabilities).

The narrow working capital margin and low equity suggest the company is still vulnerable to financial shocks such as delayed customer payments, unexpected expenses, or downturns in sales. The increase in creditors also demands careful management to avoid cash flow pressure.

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4. Recommendations

1. Strengthen Working Capital:
   Aim to build a more comfortable working capital buffer. This could involve negotiating longer payment terms with suppliers, accelerating receivables, or improving inventory turnover to free up cash.

2. Maintain Healthy Cash Flow:
   Continue to monitor and manage cash inflows and outflows rigorously. Consider cash flow forecasting to anticipate shortfalls and avoid liquidity crises.

3. Cost Control and Profitability:
   Focus on improving profitability to convert positive cash flow into retained earnings. This will help increase shareholder funds and financial resilience.

4. Debt Management:
   Avoid excessive reliance on short-term creditors. Explore options for longer-term financing or equity injections if needed to reduce liquidity risk.

5. Operational Efficiency:
   Review staffing levels and operational processes to ensure they scale profitably with business growth.

6. Regular Financial Review:
   Implement monthly financial health check-ups to detect symptoms of distress early and adjust strategies promptly.

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