OWENS MECHANICAL & MACHINE HIRE LIMITED

Executive Summary

Owens Mechanical & Machine Hire Limited faces liquidity pressures and increased debt burdens, reflected in a significant drop in cash reserves and equity. The company must urgently improve cash flow management and carefully control liabilities to stabilize its financial condition and secure future viability.

OWENS MECHANICAL & MACHINE HIRE LIMITED - Analysis Report

Company Number: 12696722

Analysis Date: 2025-07-20 15:16 UTC

Financial Health Assessment of OWENS MECHANICAL & MACHINE HIRE LIMITED

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1. Financial Health Score: C

Explanation:
The company shows signs of survival with positive net assets and shareholders’ funds, but there are emerging symptoms of financial strain. The marked decline in net current assets and equity compared to previous years, alongside increased long-term liabilities, indicate financial pressure. While not critical, these symptoms warrant careful monitoring and remedial action to avoid deterioration.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	18,999	38,410	Significant drop; potential cash flow tightening.
Cash & Cash Equivalents	11,662	33,848	Sharp decline; less liquidity available immediately.
Debtors	7,337	4,562	Increase; potentially slower collections or extended credit terms.
Current Liabilities	17,123	9,997	Nearly doubled; rising short-term obligations.
Net Current Assets (Working Capital)	1,876	28,413	Drastic fall; working capital strained, risk of liquidity issues.
Total Assets Less Current Liabilities	56,530	52,707	Improved due to fixed asset additions, but offset by liabilities.
Creditors > 1 Year (Long-term Liabilities)	19,550	0	New long-term debt introduced; increases financial risk.
Provisions for Liabilities (Deferred Tax)	10,384	0	New deferred tax liability; requires future cash outflow.
Net Assets / Shareholders Funds	26,596	52,707	Halved; erosion of company equity, potential distress signal.

Interpretation of Vital Signs:

• Liquidity ("Healthy Cash Flow"): The company’s cash reserves and net current assets have dropped significantly, indicating tighter liquidity and potential difficulties meeting short-term obligations.
• Leverage ("Symptoms of Distress"): Introduction of long-term creditors and deferred tax provisions indicates increased financial burdens that may constrain future cash flows.
• Asset Base: Tangible fixed assets nearly doubled, showing investment in plant and machinery, which could be positive if generating revenue but also puts pressure on finances.
• Equity Position: Decrease in net assets signals the company may be consuming its capital base to fund operations or investments, a red flag for sustainability if trend continues.

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3. Diagnosis

OWENS MECHANICAL & MACHINE HIRE LIMITED is currently in a fragile financial state. The company has made significant capital investments in fixed assets, which may bode well for operational capacity in the medium term. However, this has coincided with a large reduction in liquidity and working capital, along with increased liabilities, both short-term and long-term.

The sharp drop in cash reserves and net current assets indicates the company may be experiencing a "cash flow headache," struggling to convert assets into available cash quickly enough to cover immediate debts. The new long-term creditors and deferred tax provisions add to the financial burden, creating a heavier interest and repayment load.

While the company remains solvent (positive net assets), these symptoms suggest it is under financial stress and must carefully manage cash flows to avoid liquidity crises. The decline in equity suggests possible operating losses or write-downs, weakening the company’s buffer against shocks.

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4. Recommendations

1. Improve Cash Flow Management:

   • Accelerate debtor collections by tightening credit terms and following up overdue invoices promptly.
   • Negotiate extended payment terms with suppliers to ease short-term cash demands.
   • Consider short-term financing options only if cost-effective and manageable.

2. Review Fixed Asset Utilisation:

   • Ensure recent investments in plant and machinery are generating expected returns or revenues.
   • If assets are underutilised, consider leasing or selling non-core equipment to raise cash.

3. Debt Restructuring and Liability Management:

   • Engage with creditors about restructuring long-term debt to improve cash flow flexibility.
   • Monitor deferred tax liabilities and plan for future tax payments to avoid surprises.

4. Financial Planning and Forecasting:

   • Prepare detailed cash flow forecasts to anticipate liquidity gaps.
   • Explore cost reduction measures to improve profitability and preserve equity.

5. Consider Professional Advice:

   • Early consultation with financial advisors or turnaround specialists can help diagnose deeper issues and implement recovery plans.

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Summary

OWENS MECHANICAL & MACHINE HIRE LIMITED is showing signs of financial strain, primarily due to reduced liquidity, increased liabilities, and a declining equity base. While assets have increased, the company’s ability to meet short-term obligations is becoming compromised, posing potential risks to ongoing stability. Immediate focus on cash flow management, debt restructuring, and operational efficiency is essential to restore financial health and avoid worsening distress.