ORIGINAL HICKORY STICKS COMPANY LTD

Executive Summary

ORIGINAL HICKORY STICKS COMPANY LTD shows an operational profit but suffers from significant liquidity and solvency challenges, evidenced by negative net assets and working capital deficits. Immediate focus on improving cash flow, restructuring debt, and strengthening capital is essential to restore financial health and ensure sustainable business continuity.

ORIGINAL HICKORY STICKS COMPANY LTD - Analysis Report

Company Number: SC706171

Analysis Date: 2025-07-29 20:02 UTC

Financial Health Assessment Report
Company: ORIGINAL HICKORY STICKS COMPANY LTD
Assessment Date: Financial year ended 31 August 2024

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1. Financial Health Score: D

Explanation:
The company exhibits clear signs of financial distress as of the latest reporting period. Despite showing a profit on the profit and loss account, the balance sheet reveals negative net assets and significant current liabilities exceeding current assets. The company’s financial “vital signs” point toward liquidity challenges and weakened solvency. A grade of D reflects a concerning financial state requiring prompt remedial action to prevent escalation.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Turnover	£12,185	Low revenue base but increasing from prior years
Profit (Loss) for Period	£6,923	Profit reported, indicating operational income
Current Assets	£556	Very low liquid assets, insufficient for liabilities
Current Liabilities	£4,365	Significant short-term debts causing liquidity strain
Net Current Assets	-£3,809	Negative working capital (“unhealthy cash flow”)
Creditors > 1 year	£1,250	Long-term debt, including director loan
Net Assets	-£5,059	Negative equity (“balance sheet deficit”)
Shareholders Funds	-£5,059	Loss eroded shareholder value
Employee Count	2	Small workforce consistent with micro company

Interpretation of Vital Signs:

• Negative net current assets indicate the company cannot cover its short-term debts with its available liquid assets, a symptom of liquidity distress.
• Negative net assets/shareholders funds highlight insolvency at the balance sheet level, meaning liabilities exceed total assets.
• The profit of £6,923 suggests the company has achieved operational profitability in the year — a positive symptom — but this is overshadowed by the overall balance sheet weakness.
• The presence of a director loan of £1,250 as a creditor indicates reliance on insider funding, which may be a temporary support but not a sustainable financial foundation.

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3. Diagnosis

The company is showing symptoms of financial distress, primarily liquidity and solvency issues despite operational profitability. The negative working capital and overall net liabilities reveal the company currently lacks the financial “resilience” to comfortably meet its obligations without external support or restructuring.

The increasing turnover and reported profit are encouraging signs, suggesting the business model has potential; however, the balance sheet weakness signals underlying structural problems—possibly accumulated losses carried forward from prior periods or insufficient capitalization at start-up.

The director loan and long-term creditor balance imply that insiders and lenders have stepped in to keep the business afloat, but this is not a substitute for sustainable cash flow management and capital adequacy.

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4. Recommendations

To improve financial wellness and transition from distress to health, the following actions are advised:

• Improve liquidity management:

  • Accelerate collection of receivables and optimize inventory levels to raise current assets.
  • Negotiate extended payment terms with suppliers to reduce current liabilities pressure.

• Address capital structure:

  • Consider equity injection or shareholder loan restructuring to restore positive net assets.
  • Explore formal refinancing options to convert short-term debts to longer maturities.

• Enhance profitability and cash flow:

  • Build on the positive profit trend by controlling costs, particularly materials and staff expenses.
  • Develop a robust cash flow forecast and monitor it regularly to anticipate liquidity gaps.

• Engage with professional advisors:

  • Obtain expert financial and legal advice to explore restructuring options, including potential formal rescue procedures if necessary.
  • Review director loan terms to ensure transparency and compliance.

• Strengthen governance and oversight:

  • Ensure regular board reviews of financial performance and strategic planning.
  • Maintain timely and accurate filings to uphold credibility with stakeholders.

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