Company Number: 13741770

Analysis Date: 2025-07-20 11:16 UTC

Financial Health Assessment for SCRABO LIMITED as at 30 November 2024

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1. Financial Health Score: C

Explanation:
The company shows a moderately stable financial position with solid fixed asset backing but exhibits symptoms of liquidity stress and working capital challenges. While net assets remain positive, the sharp deterioration in net current assets and rising current liabilities are causes for concern. This grade reflects a cautionary stance, recommending close monitoring and remedial action to improve short-term financial health.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets	£1,377,500	Strong asset base in investment properties, appreciating year-over-year (+15%).
Current Assets	£38,678	Severely reduced from previous year (£265,861), indicating cash and receivables depletion.
Cash at Bank	£25,680	Low cash reserves, down from £62,698; potential liquidity crunch.
Debtors	£12,998	Slight increase in receivables but still low.
Current Liabilities	£919,338	Very high short-term obligations, up from £533,465 last year, signaling increasing short-term debts.
Net Current Assets (Working Capital)	-£221,549	Negative working capital, a symptom of liquidity stress—company may struggle meeting short-term debts.
Long-term Liabilities (Bank Loans)	£919,338	Significant long-term debt, increasing from £727,684, indicating gearing risk.
Net Assets (Shareholders’ Funds)	£171,483	Positive but decreased from £201,649, reflecting erosion of equity over the year.
Profit & Loss Reserve	£171,383	Reflects accumulated retained earnings; reduction indicates losses or distributions.

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3. Diagnosis

Vital Signs Analysis:
SCRABO LIMITED’s financial structure is anchored on substantial investment properties, which represent the core asset and source of value. This “solid skeleton” provides a firm base, much like healthy bones in a patient.

However, the company manifests several symptoms of financial distress:

• Liquidity Strain: The most alarming symptom is the negative net current assets (-£221,549), indicating the company has more short-term liabilities than liquid assets to cover them. This is akin to a patient having insufficient blood flow to meet immediate oxygen needs—cash flow is insufficient to meet short-term obligations.

• Increasing Current Liabilities: The jump in current liabilities from £533k to £919k within one year heightens the urgency of addressing working capital management.

• Reduced Cash Reserves: Cash at bank has dropped by more than half, which may impair the company's ability to fund day-to-day operations, pay suppliers, or service debts without external support.

• Rising Debt Levels: Long-term bank loans have increased by about £191k, raising leverage and financial risk. Excessive gearing may limit financial flexibility and increase vulnerability to interest rate shocks.

• Eroding Equity: Net assets have declined by approximately £30k, signaling some level of operational losses or capital distributions, weakening the company’s buffer against financial shocks.

• No Employees: The absence of employees suggests a very lean operation, likely focused on property holding or investment rather than trading activities, which may limit revenue generation capacity and increase dependency on rental income.

Underlying Causes:
The financial “symptoms” suggest the company may be experiencing cash flow difficulties, possibly due to increased debt servicing costs or delayed receipts. The liquidity crunch could be a temporary ailment or a sign of chronic cash flow insufficiency if rental income or other operating cash inflows are insufficient.

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4. Recommendations to Improve Financial Wellness

1. Improve Liquidity Position:

   • Explore options to refinance or restructure current liabilities to reduce short-term pressure. Negotiating longer repayment terms could alleviate the immediate liquidity strain.
   • Consider raising additional equity capital or securing short-term credit facilities to bolster cash reserves, providing a “healthy blood flow” to sustain operations.

2. Enhance Cash Flow Management:

   • Tighten debtor collections and review payment terms to accelerate cash inflows.
   • Assess expenditure rigorously to reduce outflows, conserving cash.

3. Leverage Asset Base:

   • Review investment properties for potential refinancing opportunities or partial disposals to generate liquidity if necessary.
   • Monitor market conditions closely to optimise property valuation and cash generation.

4. Strategic Planning:

   • Develop a cash flow forecast and stress testing scenario to anticipate future liquidity needs and prepare contingency plans.
   • Consider appointing financial advisors or insolvency practitioners early if cash flow symptoms worsen to avoid critical distress.

5. Monitor Financial Ratios Regularly:

   • Keep track of working capital ratios and gearing levels monthly to detect early warning signs of financial illness.

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Executive Summary