PHGM LTD

Executive Summary

PHGM Ltd has a solid asset base anchored by investment property but faces liquidity challenges due to negative working capital and high current liabilities. While solvent and stable in the long term, the company must focus on improving cash flow and managing short-term debts to strengthen financial health and sustain operations. Addressing these issues promptly will enhance resilience and support future growth.

PHGM LTD - Analysis Report

Company Number: 14500390

Analysis Date: 2025-07-20 17:06 UTC

Financial Health Assessment of PHGM LTD as of 30 November 2024

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1. Financial Health Score: C

Explanation:
PHGM Ltd shows signs of operational viability supported by substantial fixed assets and positive net assets, but also exhibits symptoms of financial strain due to significant current liabilities exceeding current assets (negative working capital). The company is solvent on a long-term basis but may face short-term liquidity challenges. The overall financial health is fair but requires attention to improve cash flow management and reduce short-term obligations.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Current Assets	£11,777	Very low relative to liabilities; limited liquid resources for near-term obligations
Cash at Bank	£7,313	Cash “pulse” is weak, indicating tight liquidity
Debtors	£4,464	Small amount of receivables, possibly slow collections or limited credit sales
Current Liabilities	£98,485	Over 8 times current assets, indicating liquidity stress ("symptom of distress")
Net Current Assets (Working Capital)	-£86,708	Negative working capital signals potential short-term cash flow difficulties
Fixed Assets (Investment Property)	£1,117,000	Strong asset base; real estate provides stable collateral and long-term value
Total Liabilities (including long-term)	£1,008,376	High leverage primarily due to bank loans secured against investment property
Net Assets (Equity)	£120,401	Positive equity indicates solvency but relatively low buffer against liabilities
Shareholders Funds	£176,164	Includes revaluation reserve; reflects shareholder investment and asset valuation
Retained Earnings	-£55,863	Accumulated losses ("symptom of ongoing operational losses or write-downs")

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3. Diagnosis: Business Financial Health Overview

• Strengths:
  The company has a solid long-term asset base, specifically investment property valued at approximately £1.1 million. This provides a strong foundation and collateral for bank financing. Positive net assets and shareholders’ funds reflect that the business is solvent, with equity exceeding liabilities.

• Symptoms of Distress:
  The most significant concern is the negative working capital of approximately -£86,700. Current liabilities (£98,485) far exceed current assets (£11,777), indicating that PHGM Ltd may struggle to meet its short-term debts without additional cash inflow or refinancing. The cash on hand is low and declining compared to the previous year, suggesting tight liquidity and potential cash flow issues.

• Leverage and Debt Structure:
  The company carries substantial long-term debt (£880,681 bank loans), with repayments due beyond five years but still a significant financial obligation. The debt level relative to equity is high, increasing financial risk especially if property valuations decline or rental income fluctuates.

• Profitability and Reserves:
  Negative retained earnings highlight that the business has accumulated losses to date. While the revaluation reserve boosts equity, the underlying operational performance and profit generation may be weak or recently negative. No employees are recorded, likely reflecting a property management or holding company model with low operational overhead.

• Governance and Control:
  The company is controlled by directors with significant shareholdings and appointment rights, suggesting concentrated ownership and control. This may facilitate swift decision-making but also concentrates risk.

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4. Recommendations: Actions to Improve Financial Wellness

1. Improve Liquidity (Cash Flow Management):

   • Develop a detailed cash flow forecast to identify timing gaps and ensure sufficient cash to cover short-term liabilities.
   • Explore options to accelerate debtor collections or renegotiate payment terms with creditors to ease liquidity pressure.

2. Reduce Short-Term Liabilities:

   • Consider restructuring current liabilities where possible, converting high-interest or short-term debt to longer-term financing to improve working capital.
   • Engage with lenders or investors to refinance or inject additional capital if necessary.

3. Enhance Profitability:

   • Review operational costs and income streams related to investment property. If applicable, increase rental income or explore additional revenue sources from the property.
   • Monitor market conditions for property valuation to safeguard the asset base.

4. Strengthen Financial Reporting and Monitoring:

   • Implement regular financial reviews to track key metrics such as liquidity ratios and debt servicing capacity.
   • Consider obtaining an audit or external review to enhance credibility with lenders and investors.

5. Plan for Contingencies:

   • Develop contingency plans for potential property market downturns or interest rate increases that could impact debt servicing.

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Medical Analogy Summary

PHGM Ltd’s financial health resembles a patient with a strong skeletal system (fixed assets) but weak circulation (cash flow). Despite a solid foundation, the company shows symptoms of short-term distress due to liquidity constraints, akin to a patient with low blood pressure risking fainting spells. Immediate interventions to improve cash flow and reduce short-term liabilities are essential to restore full vitality and prevent further deterioration.

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