PERRY'S CONTRACT HIRE LTD

Executive Summary

Perry's Contract Hire Ltd is currently facing significant financial stress characterized by negative net assets and a critical liquidity shortfall. The company must urgently address its cash flow and debt structure to avoid insolvency risk. With focused financial management and possible capital support, there is potential to stabilize and improve the company’s financial health.

PERRY'S CONTRACT HIRE LTD - Analysis Report

Company Number: 13040585

Analysis Date: 2025-07-20 13:00 UTC

Financial Health Assessment for Perry's Contract Hire Ltd

---

1. Financial Health Score: D

Explanation:
Perry's Contract Hire Ltd shows clear symptoms of financial distress, primarily due to persistent negative net assets and a significant working capital deficit. The company's liabilities exceed its assets by a large margin, indicating a fragile financial position. While the company is operational and filing on time, the imbalance between current liabilities and current assets signals liquidity challenges that require urgent attention.

---

2. Key Vital Signs

Metric	2023 Value (£)	Interpretation
Fixed Assets	155,038	Investment in long-term assets (vehicles, equipment). Healthy for operational capacity.
Current Assets	26,963	Includes cash (£24k) and debtors (£2.9k). Relatively low liquidity buffer.
Current Liabilities	247,361	Debts due within a year are very high, causing liquidity strain.
Net Current Assets (Working Capital)	-220,398	Negative working capital; company may struggle to meet short-term obligations.
Total Assets Less Current Liabilities	-65,360	Assets insufficient to cover current debts—symptom of financial stress.
Long-term Liabilities	77,185	Bank loans repayable after one year, adding to total debt burden.
Net Assets (Shareholders’ Funds)	-142,545	Negative equity indicates accumulated losses and insolvency risk.
Share Capital	2	Nominal capital; does not provide a financial cushion.

---

3. Diagnosis: What the Financial Data Reveals About Business Health

• Liquidity Crisis: The company’s most alarming symptom is the substantial negative net current assets (£-220k). This means Perry's Contract Hire Ltd does not have enough liquid assets to cover its immediate debts, suggesting a daily cash flow crisis. The modest cash reserve (£24k) is inadequate relative to short-term liabilities.

• Balance Sheet Weakness / Insolvency Risk: The negative net assets (£-142k) show the company’s total liabilities exceed its total assets. This is a critical sign of financial health deterioration and points to accumulated losses or over-leveraging.

• Debt Burden: The company carries significant short-term liabilities (£247k) and long-term borrowings (£77k). The high level of bank loans and other creditors compared to assets highlights a heavy reliance on debt financing, which may be unsustainable without improved cash flow or profitability.

• Asset Base: Fixed assets have grown (£155k), mainly motor vehicles and equipment, indicating ongoing investment in operational capacity. However, these assets are illiquid and cannot be quickly converted to cash to alleviate immediate financial pressures.

• Profitability and Retained Earnings: The large negative balance in the profit and loss reserve implies continued losses or insufficient profits since incorporation. This weakens the company’s equity base and ability to absorb shocks.

• Governance and Control: Two directors, with one holding majority control, provide a stable leadership structure, but financial challenges may require strategic restructuring or capital injection.

---

4. Recommendations: Specific Actions to Improve Financial Wellness

• Improve Cash Flow Management:

  • Prioritize collection of receivables and reduce outstanding debtors.
  • Negotiate extended payment terms with creditors to ease short-term pressures.
  • Consider short-term financing solutions cautiously to cover liquidity gaps.

• Restructure Debt:

  • Engage lenders to restructure existing debt, possibly extending maturities or reducing interest rates.
  • Evaluate options for refinancing to relieve immediate cash strain.

• Cost Control and Profitability Focus:

  • Review operational costs, particularly related to asset utilization (e.g., vehicle expenses).
  • Increase pricing efficiency or explore higher-margin service lines in taxi operation.

• Capital Injection:

  • Consider equity funding from existing shareholders or new investors to strengthen net assets and provide working capital.

• Strategic Review:

  • Conduct a thorough business review to identify loss-making activities or underperforming assets.
  • Explore partnerships or diversification to stabilize income streams.

• Regular Financial Monitoring:

  • Implement robust financial reporting and forecasting to detect early warning signs and manage symptoms proactively.

---

Medical Analogy

The company is exhibiting symptoms akin to a patient with low blood pressure and poor circulation—the “blood” (cash) is insufficient to meet the body's (business’s) immediate needs, and the “organs” (assets) are not easily mobilizable to support recovery. Without intervention to stabilize liquidity and reduce debt stress, the company risks further deterioration.

---