SJT CARPENTRY LTD

Executive Summary

SJT Carpentry Ltd has shown solid improvement in financial health over the past year, with increased net assets and positive working capital reversing previous deficits. However, a sharp decline in cash reserves and rising tax liabilities suggest some liquidity strain that requires close management. With focused attention on cash flow and tax planning, the company is well-positioned for sustainable growth.

SJT CARPENTRY LTD - Analysis Report

Company Number: 13182263

Analysis Date: 2025-07-29 17:24 UTC

Financial Health Assessment for SJT Carpentry Ltd

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1. Financial Health Score: B

Explanation:
SJT Carpentry Ltd displays a generally stable and improving financial position over recent years, with positive net assets and net current assets as of the latest financial year end. The company is small, with modest fixed assets and growing working capital. However, cash balances have decreased significantly, and there is a notable corporation tax creditor. These factors suggest a sound but cautiously monitored financial health, hence a "B" grade—good condition but with some watch points.

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2. Key Vital Signs

Metric	2023 (£)	2022 (£)	Interpretation
Fixed Assets	556	695	Small asset base, typical for a micro/small joinery installation business. Slight decline due to depreciation.
Current Assets	7,699	2,308	Significant increase driven primarily by debtors (trade and CIS), indicating more sales on credit or delayed payments.
Cash at Bank	178	1,428	Sharp decline in cash reserves; potential liquidity concern ("weak pulse").
Debtors	7,521	880	Large increase in amounts owed to company; risk if collections are slow.
Current Liabilities	6,336	2,776	More than doubled, mainly from corporation tax and trade creditors, which could strain short-term liquidity.
Net Current Assets (Working Capital)	1,363	-468	Shift from negative to positive working capital indicates improved short-term financial health.
Net Assets (Equity)	1,919	227	Strong growth in net assets signifies accumulated profits and retained earnings ("healthy reserves").
Shareholders' Funds	1,719	27	Increase aligns with net assets, reflecting reinvested earnings.

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3. Diagnosis: What the Financial Data Reveals

• Healthy Growth but Liquidity Watch: The company has demonstrated healthy growth in net assets and working capital from 2022 to 2023, which indicates profitability and better management of liabilities versus assets. This is akin to a patient recovering strength after illness.

• Cash Flow Symptoms: The significant drop in cash reserves from £1,428 to £178 suggests the company might be facing tight cash flow conditions despite growing receivables. This is a symptom of possible cash flow stress, where money is tied up in debtors rather than liquid cash for immediate obligations.

• Receivables Risk: The large increase in debtors, especially a sizeable CIS debtor (£5,679), indicates that the company is extending more credit or experiencing delays in payment collection. This raises the risk of bad debts and cash conversion delays.

• Tax Liability Build-up: Corporation tax creditors have risen substantially to £4,199, suggesting tax payments are accruing and may pressure liquidity if not managed carefully.

• Asset Base Stability: Fixed assets remain low and stable, reflecting the company's operational focus on services rather than capital-intensive assets. Depreciation is being accounted for appropriately.

• Share Capital and Ownership: The company is small, with minimal share capital (£200) and a single director. Control is shared with a person having significant control owning 25-50% shares and voting rights, indicating a closely held business.

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4. Recommendations: Actions to Improve Financial Wellness

• Improve Cash Flow Management:
  Prioritize collection processes to convert debtors into cash faster. Consider offering early payment discounts or stricter credit terms to reduce outstanding receivables. This will ease cash flow strain and improve liquidity.

• Monitor and Plan for Tax Payments:
  Given the rising corporation tax creditor, set aside funds regularly and plan payments to avoid penalties and cash crunches. Engage with a tax advisor for possible tax planning strategies.

• Maintain Working Capital Buffer:
  Keep an adequate buffer of net current assets to cover short-term liabilities comfortably. Avoid over-reliance on credit from suppliers or tax deferrals.

• Control Overhead and Costs:
  Evaluate operational expenses and ensure that growth in sales and receivables is matched by effective cost control to sustain profitability.

• Regular Financial Reviews:
  Conduct monthly financial health checks to spot early symptoms of distress, such as slow debtor collection or rising liabilities, and act promptly.

• Consider Cash Reserves:
  Explore ways to rebuild cash reserves for operational flexibility, such as negotiating payment terms or accessing short-term financing if needed, but avoid over-borrowing.

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Medical Analogy Summary

SJT Carpentry Ltd is like a patient who has recently recovered from a period of financial weakness (negative working capital) and is now in reasonably good health (positive equity and working capital). However, the patient's "pulse" (cash flow) is weak, as cash in hand is low while "debtor swelling" (accounts receivable) is high, indicating potential liquidity stress. With attentive care—improving cash collection and managing liabilities—the company can strengthen its financial "heartbeat" and maintain healthy growth.

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