ROADWAY HOUSE LIMITED

Executive Summary

ROADWAY HOUSE LIMITED is profitable with strong asset backing but faces liquidity challenges due to high short-term liabilities, mainly director loans. The company’s financial health is moderate, requiring improved cash flow management and debt restructuring to ensure stability and growth. Addressing these issues will help secure its financial future.

ROADWAY HOUSE LIMITED - Analysis Report

Company Number: 14216642

Analysis Date: 2025-07-29 20:07 UTC

Financial Health Assessment Report: ROADWAY HOUSE LIMITED (as of 31 July 2024)

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1. Financial Health Score: C

Explanation:
ROADWAY HOUSE LIMITED demonstrates steady profitability and growth in net assets, indicating some resilience and potential for future success. However, the company shows symptoms of liquidity stress, reflected in significant negative net current assets (working capital deficit) and high short-term liabilities, especially related-party balances. This constrains operational flexibility and poses risks if not managed carefully. The financial health is moderate — profitable but with liquidity challenges requiring attention.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Turnover	£295,699	Small turnover consistent with small company size and business stage.
Operating Profit	£228,971	Healthy operating margin (~77%), indicating good cost control and profitable core operations.
Profit for the Year	£173,423	Positive net profit, showing business is generating surplus after tax.
Fixed Assets	£2,041,055	Large investment property held at stable valuation, a key asset underpinning company value.
Current Assets	£185,235	Limited liquid resources, mainly cash (£173k).
Current Liabilities	£1,889,008	Very high short-term obligations, mainly owed to directors (£1.8m), a red flag for liquidity.
Net Current Assets (Working Capital)	-£1,703,773	Strong negative working capital indicates a liquidity crunch; company owes much more than it holds in short-term assets.
Net Assets / Shareholders’ Funds	£337,282	Positive equity, showing net value after liabilities, improved from prior year (£164k).

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3. Diagnosis: What the Financial Data Reveals

ROADWAY HOUSE LIMITED has the "pulse" of profitability—turnover and operating profit have increased year on year, and the company is generating a healthy bottom line after tax. This is a sign of strong operational health and effective expense management.

However, beneath this robust profit lies a concerning "symptom of distress"—the liquidity position. The company carries a significant working capital deficit, with current liabilities nearly ten times the current assets. This imbalance is primarily due to large short-term loans owed to the directors (£1.8 million), reported under "other creditors." While director loans can provide vital financing support, the heavy reliance on such related-party funding is a double-edged sword. It may signal funding difficulties in accessing external credit or converting assets to cash quickly.

The company owns a valuable investment property (£2 million+), which is not depreciated and held at market value. This asset provides a solid balance sheet foundation but is inherently illiquid—it cannot be readily converted into cash to meet immediate obligations.

The combination of strong profitability and negative working capital is analogous to a patient with a strong heart but weakened lungs—profitable operations but poor short-term financial breathing room. This condition requires careful management to avoid cash flow crises that could threaten ongoing operations.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Liquidity Management:

   • Develop a cash flow forecast to closely monitor and manage liquidity needs.
   • Explore restructuring director loans to longer-term debt or equity to reduce short-term pressure.
   • Consider negotiating extended payment terms with creditors or seek external financing for working capital.

2. Enhance Working Capital Efficiency:

   • Actively manage receivables and payables to optimise cash conversion cycle.
   • Evaluate if any current assets can be liquidated or converted faster without compromising operations.

3. Leverage Investment Property:

   • Assess options to monetise or refinance the investment property (e.g., mortgage or sale and leaseback) to inject liquidity.
   • Ensure property valuations remain current and aligned with market conditions to support financing discussions.

4. Maintain Profitability Focus:

   • Continue controlling administrative expenses and seek to grow turnover steadily.
   • Monitor tax liabilities and explore any available reliefs or incentives.

5. Governance and Transparency:

   • Ensure transparent reporting on director loan terms and repayment plans to maintain stakeholder confidence.
   • Regularly review financial strategy with advisers to mitigate financial risks.

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Summary

ROADWAY HOUSE LIMITED shows solid profitability and growing equity, indicating a fundamentally sound business model. However, the significant negative working capital and reliance on director loans present liquidity risks that must be actively managed. With careful financial planning and restructuring of short-term obligations, the company can strengthen its financial health and support sustainable growth.

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