NS PLUMBING LTD

Executive Summary

NS Plumbing Ltd maintains good short-term liquidity but suffers from negative net assets due to accumulated losses. Strengthening profitability and capital structure will be essential to secure long-term financial health and growth potential.

NS PLUMBING LTD - Analysis Report

Company Number: 12435409

Analysis Date: 2025-07-20 18:44 UTC

Financial Health Assessment Report for NS Plumbing Ltd

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1. Financial Health Score: C

Explanation:
NS Plumbing Ltd shows positive working capital and a gradual increase in net current assets year on year, which indicates improving liquidity—a key vital sign of financial health. However, the company reports negative net assets (shareholders’ funds) for the last two years, which is a symptom of accumulated losses exceeding the small equity base. This indicates financial strain despite operational cash availability. The company is solvent in the short term but has some symptoms of financial distress on the balance sheet level.

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2. Key Vital Signs

Vital Sign	2024 Figure (£)	Interpretation
Current Assets	5,842	Increased, reflecting better short-term asset base (cash + debtors)
Cash at Bank	3,850	Healthy cash balance showing improved liquidity
Debtors	1,992	Reasonable level of receivables, manageable credit risk
Current Liabilities	3,645	Liabilities due within one year, increased but covered by assets
Net Current Assets (Working Capital)	2,197	Positive and rising, indicating ability to cover short-term debts
Creditors due after 1 year	4,500	Long-term liabilities, increased from prior year
Net Assets (Shareholders’ Funds)	-2,303	Negative, reflecting accumulated losses exceeding equity
Share Capital	1	Minimal capital base, typical for a micro-company

Interpretation:

• The working capital is healthy and rising, akin to a patient whose vital signs (blood pressure, pulse) are stable and within normal range—good short-term liquidity to meet obligations.
• However, negative net assets are like a chronic underlying condition (e.g., high cholesterol) that, if untreated, could lead to serious complications. This shows that the company's accumulated losses outweigh its equity, reflecting ongoing financial stress.
• The increase in long-term creditors suggests the company has taken on more debt, which may be a concern if not managed carefully.

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3. Diagnosis

Underlying Business Health:
NS Plumbing Ltd is a micro-sized, single-director plumbing and electrical installation business showing signs of modest growth in operational liquidity but struggling with accumulated losses impacting overall net worth. The business maintains a positive working capital, suggesting it can cover its short-term debts comfortably. This is a positive symptom indicating a "healthy cash flow."

However, the continuing negative net assets signal the company has a "symptom of distress" in terms of capital structure. The equity base is minimal (£1 share capital), and retained losses have grown to over £2,300, which may limit the ability to raise additional capital or absorb financial shocks. The company’s reliance on external creditors, especially those due after more than one year (£4,500), may increase financial risk if earnings do not improve.

The company’s accounting treatment follows UK FRS 102 and small company exemptions, appropriate for its size, but also limits visibility into profitability trends due to abridged accounts without a full profit and loss statement filed.

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4. Recommendations

• Improve Profitability and Build Reserves: Focus on increasing operational profits to reverse accumulated losses. This can be achieved by reviewing pricing strategies, reducing costs, or increasing sales volumes. Building positive retained earnings will improve net assets and financial resilience.
• Manage Long-Term Debt Carefully: The increase in creditors due after one year should be monitored closely. Develop a clear repayment plan to avoid long-term solvency issues. Consider negotiating terms or refinancing if needed.
• Increase Equity Base: Consider injecting additional capital or retaining profits rather than distributing them to strengthen the equity base, which acts like a "financial immune system" protecting against shocks.
• Maintain Healthy Cash Flow: Continue to monitor and manage cash flow tightly, ensuring that receivables are collected promptly and payables are managed efficiently to maintain positive net current assets.
• Regular Financial Reviews: Conduct periodic financial health check-ups beyond statutory filings to catch early symptoms of distress and adjust strategy accordingly.
• Explore Growth Opportunities: Given the positive working capital and operational stability, cautiously explore growth initiatives to increase market share and revenue streams, improving the business’s financial "vitality."

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Executive Summary

NS Plumbing Ltd exhibits stable short-term liquidity with positive and improving working capital, indicating healthy cash flow management. However, the company’s negative net assets reflect accumulated losses that pose a risk to long-term financial stability. Addressing profitability and equity strengthening are key to improving overall financial health and resilience.