PMC BUILDING GROUP LIMITED

Executive Summary

PMC Building Group Limited shows foundational financial stability with positive net assets and working capital. However, significant finance lease commitments and a high dividend payout relative to equity indicate caution is warranted. By managing liabilities, controlling cash flow, and reconsidering dividend policies, the company can strengthen its financial health and support sustainable growth.

PMC BUILDING GROUP LIMITED - Analysis Report

Company Number: SC766422

Analysis Date: 2025-07-29 14:14 UTC

Financial Health Assessment for PMC Building Group Limited (as of 30 April 2024)

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1. Financial Health Score: C

Explanation:
The company demonstrates some positive signs such as positive net assets and net current assets, indicating a foundational level of financial health. However, the presence of significant finance lease obligations and relatively modest equity base relative to liabilities signals caution. This score reflects a company in early stages with manageable but noticeable financial risks.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Fixed Assets (Tangible)	31,769	Investment in long-term assets. Healthy for operational capacity but mostly financed through leases.
Current Assets	27,798	Includes cash and debtors. Reflects liquidity to meet short-term obligations.
Cash at Bank and in Hand	14,420	Reasonable cash reserve; provides a buffer for daily operations and short-term needs.
Debtors	13,378	Amount owed by customers; reflects working capital tied up in credit sales.
Current Liabilities	14,459	Obligations due within one year, including lease payments, taxes, and other creditors.
Net Current Assets	13,339	Positive working capital indicates the company can cover short-term debts comfortably.
Long-Term Liabilities	27,058	Finance leases due after one year; a significant financial burden that may impact cash flow.
Net Assets (Equity)	18,050	Positive equity indicates the company’s assets exceed liabilities, but equity base is modest.
Share Capital	10	Nominal share capital, typical for a small private company.
Profit and Loss Reserve	18,040	Retained earnings or accumulated profits, reflecting company’s operational results.
Dividend Paid	39,500	A significant dividend payment exceeding equity suggests potential strain on retained resources.

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3. Diagnosis: What the Numbers Reveal About Business Health

PMC Building Group Limited is a relatively new private limited company in the construction installation sector, with its first financial year ending in April 2024. The company shows a "healthy pulse" in terms of positive net current assets, suggesting it can meet its short-term obligations without distress. Cash holdings are adequate, and debtors reflect ongoing business activity.

However, the "symptoms of distress" lie in the company's significant lease commitments (£34,438 total finance lease obligations), with £27,058 due beyond one year. These long-term liabilities are substantial compared to the modest equity base (£18,050). The company relies heavily on finance leases to fund fixed assets, which could pressure future cash flows, especially if revenue generation does not scale as anticipated.

Notably, the company paid dividends totaling £39,500, which is more than twice its equity base. This could represent a cash outflow that weakens the equity cushion and may limit reinvestment capacity. It is important to clarify whether these dividends are from retained profits or funded through external cash resources or borrowing.

The company currently has a single full-time employee, likely the managing director, indicating a lean operational structure. The appointment of a second director recently, who is from a different professional background, may suggest plans for strategic or operational expansion.

Overall, the company is in a stable but cautious financial condition, akin to a patient recovering from initial stresses but needing careful monitoring and management to avoid relapse.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Manage Lease Obligations:
   Consider negotiating lease terms or refinancing lease liabilities to reduce the burden of long-term financial commitments. Explore options to purchase assets outright if financially feasible to improve balance sheet strength.

2. Monitor Cash Flow Closely:
   Maintain a "healthy cash flow" by managing debtor collection periods and controlling operating expenses. Establish robust cash flow forecasting to anticipate liquidity needs, especially given lease payment schedules.

3. Review Dividend Policy:
   Reassess the dividend payout strategy to ensure it does not compromise the company’s equity and cash reserves. Retain sufficient profits to support growth and debt servicing.

4. Strengthen Equity Base:
   Consider capital injection through shareholder funds or retained earnings reinvestment to build a stronger equity buffer, which will enhance financial resilience.

5. Operational Scale-Up Cautiously:
   As the company expands (evidenced by new director appointment), ensure that growth is supported by strong financial controls and risk management to avoid overextension.

6. Regular Financial Health Checks:
   Implement periodic financial reviews to detect early "symptoms" of financial stress, such as delayed payments or rising liabilities, enabling timely interventions.

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