R&A BUILDING SERVICES LTD

Executive Summary

R&A Building Services Ltd shows a fragile financial state with significant liquidity pressures despite positive net assets and investment in fixed assets. To avoid worsening financial distress, the company must improve cash flow management and reduce short-term liabilities. With prudent financial controls and potential external support, the firm can stabilize and pursue growth in its building services market.

R&A BUILDING SERVICES LTD - Analysis Report

Company Number: 13896221

Analysis Date: 2025-07-20 12:50 UTC

Financial Health Assessment: R&A Building Services Ltd (as of 28 February 2024)

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1. Financial Health Score: C

Explanation:
The company exhibits some concerning signs primarily related to liquidity, reflected in a negative working capital position and increased current liabilities. However, tangible fixed assets and positive net assets indicate some financial stability. The "C" grade suggests the company is in a fragile state—stable but with symptoms of financial strain that require management attention.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Fixed Assets (Net Book Value)	£17,200	Represents investment in long-term assets. Healthy for a young construction firm, showing asset base.
Current Assets	£1,070	Low current assets implying limited short-term resources.
Cash at Bank and in Hand	£350	Very low cash balance indicating tight liquidity.
Debtors	£720	Some receivables outstanding, which could turn into cash soon if collected promptly.
Current Liabilities	£9,174	High short-term debts, increased significantly from previous years, putting pressure on liquidity.
Net Current Assets (Working Capital)	-£8,104	Negative working capital reflects "symptoms of distress" in meeting short-term obligations.
Total Assets Less Current Liabilities	£9,096	Positive but declined, indicating some erosion of net assets after covering short-term debts.
Net Assets (Shareholders’ Funds)	£5,761	Positive equity but a decline from previous years; indicates some retained earnings but under strain.
Loan from Director	£4,600	Interest-free loan from director; reflects reliance on internal funding to support operations.

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3. Diagnosis

The company's financial "vital signs" reveal a mixed picture. While fixed assets are growing and net assets remain positive, the liquidity position is weak—current liabilities have surged dramatically from £99 in 2022 to over £9,000 in 2024, while current assets have only modestly increased. This creates a significant negative working capital of over £8,000, which is a critical "symptom of distress." It suggests the company may struggle to pay its short-term debts as they fall due, risking operational disruptions if this trend continues.

The reliance on a director loan (£4,600) to cover immediate financial needs further indicates cash flow challenges. The director's confidence in the business is a positive, but this is not a sustainable funding source long-term without clear plans for repayment or improved cash flow.

The company is young (incorporated in 2022) and operating in the building completion and domestic construction sector, which can be capital intensive and have variable cash inflows. The increase in tangible fixed assets suggests investment in plant and machinery, potentially positioning the business for growth. However, the ongoing cash flow "health" must improve to avoid liquidity crises.

The Director's statement confirms that the company is a going concern, but the financial data implies the need for careful cash flow management and possibly restructuring short-term liabilities.

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4. Recommendations

• Improve Cash Flow Management:
  Prioritize collection of debts and closely monitor receivables to convert them into cash swiftly. Consider negotiating extended payment terms with creditors to ease short-term pressure.

• Review and Reduce Current Liabilities:
  Investigate the nature of the large increase in current liabilities. Develop a plan to reduce these, possibly through restructuring or refinancing with longer-term credit facilities.

• Director Loan Repayment Plan:
  Formalize a repayment schedule for the director’s loan to improve financial transparency and reduce risk.

• Cost Control and Operational Efficiency:
  Assess operational expenses to identify areas where costs can be trimmed without impacting project quality or delivery.

• Seek External Financing or Equity Injection:
  If growth plans require continued investment in assets, consider raising external capital to avoid over-reliance on short-term liabilities and director loans.

• Strengthen Financial Reporting and Forecasting:
  Implement monthly financial reviews and cash flow forecasting to detect early signs of distress and make informed decisions.

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Medical Analogy Summary

The company’s financial "pulse" is currently weak with "symptoms" of liquidity stress (negative working capital and high short-term liabilities). There is a "healthy" foundation in fixed assets and positive equity, but without intervention, the "condition" could worsen, leading to a "financial crisis." Prompt management action and stronger cash flow "circulation" are essential to restore "financial wellness."

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