POTTS GROUNDWORK SOLUTIONS LTD

Executive Summary

Potts Groundwork Solutions Ltd is financially solvent with a positive and growing equity base, reflecting a stable "heart" in its financial health. However, ongoing negative working capital signals liquidity challenges that require careful cash flow and working capital management. With focused actions on improving short-term liquidity and cost control, the company can strengthen its financial wellness and sustain growth.

POTTS GROUNDWORK SOLUTIONS LTD - Analysis Report

Company Number: 14457544

Analysis Date: 2025-07-29 12:57 UTC

Financial Health Assessment of POTTS GROUNDWORK SOLUTIONS LTD

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1. Financial Health Score: C

Explanation:
The company shows positive net assets and increasing shareholder funds, which are good signs of solvency and equity build-up. However, persistent negative working capital (net current liabilities) indicates liquidity pressure, meaning the company’s short-term obligations exceed its short-term assets. This "symptom of distress" in liquidity suggests a need for stronger cash flow management despite an overall solvent balance sheet.

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2. Key Vital Signs (Core Financial Metrics):

Metric	Latest Year (2024)	Interpretation
Fixed Assets	£44,161	Increased from prior year; investment in long-term resources, a positive growth sign.
Current Assets	£6,901	Decreased from £10,882 last year; caution as less liquid assets available.
Current Liabilities	£13,789	Reduced significantly from £28,083, showing improved short-term debt management.
Net Current Assets	-£6,888 (negative)	Negative working capital; company may struggle to meet short-term liabilities promptly.
Total Assets less Current Liabilities	£37,273	Positive and growing; company has more assets than immediate liabilities.
Shareholders’ Funds	£37,273	Increasing equity base, indicating retained earnings or capital injection.

Additional Observations:

• The company is a micro-entity, with one employee, indicating a very small, likely owner-operated business.
• No audit required due to micro-entity status; accounts unaudited but filed timely.
• Director and sole significant controller is Mr Daniel Joseph Potts, reflecting centralized control.

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3. Diagnosis: What the Financial Data Reveals

• Solvency ("Healthy heart"): The company maintains positive net assets and growing shareholders' funds, indicating it is financially solvent and has a stable equity base. This is like a patient with good blood pressure and heart function.

• Liquidity ("Circulatory symptoms"): The negative net current assets are a warning sign. The firm has more short-term liabilities than current assets, a "symptom of distress" in its cash flow. This could lead to challenges paying bills on time or covering immediate expenses, akin to poor circulation reducing nutrient delivery.

• Growth and Investment ("Muscle tone"): Increased fixed assets suggest investment in equipment or long-term resources, indicating the company is building capacity or improving operational capability.

• Risk Factors ("Underlying conditions"): Small size and sole director control could limit access to external financing and may increase risk concentration. The company must monitor liquidity closely to prevent cash flow crises.

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4. Recommendations: Specific Actions to Improve Financial Wellness

• Improve Working Capital Management:

  • Accelerate collection of receivables and monitor payables to maintain a better balance of current assets vs. liabilities.
  • Consider negotiating longer payment terms with suppliers or securing short-term financing lines to bridge cash gaps.

• Cash Flow Forecasting:

  • Implement detailed cash flow forecasts to anticipate liquidity shortfalls early. This proactive approach is like regular check-ups to catch health issues before they escalate.

• Cost Control and Margin Management:

  • Review operating expenses to ensure profitability supports liquidity needs.
  • Explore opportunities to improve pricing or reduce costs to boost cash generation.

• Capital Structure Review:

  • If feasible, consider injecting additional capital or securing a small credit facility to strengthen working capital reserves.

• Governance and Risk Management:

  • Given the single director and control, consider advisory support or mentoring to broaden strategic oversight and reduce business risks.

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