Company Number: 12586504

Analysis Date: 2025-07-29 14:17 UTC

Certainly, let's conduct a thorough financial health assessment for NJHS Electrical's Ltd based on the data provided.

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1. Financial Health Score: C

Explanation:
The company shows moderate financial health with some warning signs. While it maintains positive net assets and working capital, there is a notable decline in liquidity (cash reserves) and a doubling of current liabilities in the latest year, indicating some financial strain. The absence of profits data limits a full diagnosis but the balance sheet trends suggest caution.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Current Assets	57,289	Adequate short-term resources but slightly reduced from previous year.
Cash at Bank	3,597	Very low cash balance, a symptom of tightening liquidity.
Debtors	53,692	Large portion of current assets tied up in receivables; potential risk.
Current Liabilities	40,248	Almost doubled from previous year, increasing short-term obligations.
Net Current Assets (Working Capital)	17,041	Positive but decreased by 60% from prior year, signaling less cushion.
Net Assets (Equity)	26,056	Positive shareholder equity but reduced by half compared to last year.
Hire Purchase Debt (Long-term liabilities)	3,326	Moderate level of longer-term debt; manageable but should be monitored.
Share Capital	11	Minimal paid-in capital; company relies on retained earnings for equity.

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3. Diagnosis

• Liquidity Concerns:
  The company's "healthy cash flow" appears compromised with cash reserves dropping sharply from £21,029 to £3,597. This "symptom of distress" suggests possible difficulties in meeting immediate cash obligations, despite a positive working capital. The large increase in current liabilities (from £20,333 to £40,248) compounds this concern and could be due to increased trade creditors, tax liabilities, or accrued expenses.

• Receivables Concentration:
  About 94% of current assets are debtors, indicating a heavy reliance on cash collection from customers. The rise in debtors from £41,348 to £53,692 may point to longer payment terms or delays in collection, which can strain cash flow and affect operational health.

• Declining Net Assets:
  The halving of net assets from £52,166 to £26,056 is a notable red flag. It suggests the company may have experienced losses or distributions exceeding profits in the last year, eroding retained earnings. Though no Profit & Loss statement is filed due to small company exemptions, this drop is a "symptom" that needs attention.

• Asset Utilization:
  Tangible fixed assets have decreased from £16,518 to £12,341, possibly due to depreciation outpacing additions. This "wear and tear" on assets without sufficient reinvestment might affect long-term operational capacity.

• Leverage:
  The company has hire purchase debt on its assets but the amounts are modest. However, the doubling of current liabilities could indicate increased short-term borrowing or accrued expenses, raising risk.

• Size and Scale:
  As a micro/small private limited company in electrical installation, NJHS Electrical's Ltd has relatively modest operations and balance sheet size. This exposes it to market and cash flow volatility.

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4. Recommendations

• Improve Cash Management:
  Prioritize converting debtors to cash faster by tightening credit control, offering early payment incentives, or negotiating better payment terms. Increasing cash reserves will restore a "healthy cash flow" and reduce liquidity risk.

• Manage Current Liabilities:
  Review the nature of current liabilities to identify urgent payments, tax obligations, or accrued expenses. Negotiate extended payment terms where possible to ease short-term financial pressure.

• Profitability Monitoring:
  Although P&L data is not available, the drop in net assets implies losses or withdrawals. Implement regular profit & loss tracking to diagnose operational profitability and cost control.

• Asset Investment Strategy:
  Consider planned reinvestment in fixed assets to maintain operational efficiency and support growth, balanced against liquidity constraints.

• Financial Planning and Forecasting:
  Develop cash flow forecasts and scenario analyses to anticipate periods of stress. This "financial pulse check" can alert management early to emerging problems.

• Consider External Funding:
  If cash flow challenges persist, explore options for external finance such as working capital loans or equity injections to stabilize finances.

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Summary

NJHS Electrical's Ltd currently maintains positive equity and working capital but shows signs of financial strain, particularly with sharply reduced cash reserves and increased current liabilities. The high level of receivables and declining net assets signal potential operational and liquidity challenges. Addressing cash flow management and liability control will be critical to restoring financial wellness and ensuring sustainable business health.