SOUTHWEST UTILITIES NATIONWIDE LTD

Executive Summary

Southwest Utilities Nationwide Ltd shows solid profitability and a positive net asset position, reflecting a fundamentally healthy financial condition. However, critically low cash reserves and significant long-term lease obligations present liquidity risks that need addressing. With improved cash flow management and prudent dividend policies, the company is well positioned for sustainable growth.

SOUTHWEST UTILITIES NATIONWIDE LTD - Analysis Report

Company Number: 14528118

Analysis Date: 2025-07-20 15:37 UTC

Financial Health Assessment for Southwest Utilities Nationwide Ltd

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1. Financial Health Score: B+

This company demonstrates a reasonably healthy financial position for its stage of development, earning a solid B+ rating. The business shows positive net assets, growth in shareholder funds, and consistent profitability. However, some caution is warranted due to its relatively low cash balance and reliance on longer-term finance leases, which require careful management to maintain liquidity.

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2. Key Vital Signs

Vital Sign	Value (2024)	Interpretation
Net Assets	£44,430	Positive net worth indicates solvency and retained equity.
Net Current Assets (Working Capital)	£34,192	Healthy working capital, meaning current assets exceed current liabilities significantly—a sign of good short-term financial health.
Cash at Bank	£6	Very low cash reserves suggest limited immediate liquidity ("thin blood flow"), which could strain daily operations.
Debtors (Trade & Other)	£8,051	Moderate debtor levels; needs monitoring for timely collection to maintain cash flow.
Current Liabilities	£26,135 (negative in accounts due to presentation)	Creditors and payables are manageable with current assets.
Long-term Liabilities	£23,782	Finance lease obligations that require future cash outflows; manageable but significant.
Profit for the Year	£47,160	Strong profitability, indicating the business is generating surplus from operations.
Dividends Paid	£40,000	Significant dividend payments, implying confidence but also cash outflow that impacts liquidity.
Fixed Assets	£34,020	Investments into plant and machinery indicate capital expenditure and operational capacity.
Number of Employees	3	Small size consistent with a micro/small enterprise.

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3. Diagnosis: What the Financial Data Reveals

Strengths:

• Positive Net Worth: The company has solid shareholder equity, increasing from £37,270 in 2023 to £44,430 in 2024. This suggests retained earnings and value creation.
• Profitability: Reporting a profit of £47,160 despite being a relatively young company incorporated in late 2022 shows effective management and a viable business model.
• Healthy Working Capital: Net current assets of £34,192 indicate the company can cover short-term debts comfortably, a key indicator of financial "vitality."
• Asset Base: Tangible fixed assets of over £34k indicate investment in operational tools, signifying readiness for business activities.

Symptoms of Distress:

• Very Low Cash Balance: The cash at bank is just £6, an alarmingly low level ("aneamia" in liquidity terms). This suggests the company may be vulnerable to cash crunches despite otherwise healthy working capital, possibly due to timing gaps in cash inflows and outflows.
• Significant Long-term Debt: Finance lease liabilities of £23,782 represent ongoing commitments that require consistent cash flow to service.
• High Dividends Relative to Profit: The company paid £40,000 in dividends against a profit of £47,160, which is a high payout ratio. This could strain cash reserves and reduce reinvestment capacity.
• Debtor Concentration: Debtors (£8,051) are significant relative to cash, implying dependency on timely collection to avoid liquidity problems.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Cash Management:

   • Prioritize cash flow forecasting to anticipate and manage liquidity gaps.
   • Consider negotiating better payment terms with clients and creditors to smooth cash inflows and outflows.
   • Monitor debtor collection closely; implement stricter credit control policies to reduce days sales outstanding.

2. Reassess Dividend Policy:

   • Evaluate dividend payments in light of liquidity needs. Retaining more earnings could strengthen cash reserves and reduce reliance on external finance.
   • Consider deferring dividends temporarily during periods of cash stress.

3. Manage Long-term Debt Prudently:

   • Review finance lease agreements to explore refinancing or restructuring options for more favorable terms.
   • Ensure sufficient operating cash flow is maintained to meet lease obligations without compromising operations.

4. Build Cash Reserves:

   • Aim to increase cash balances to a healthy buffer to withstand short-term shocks.
   • Possibly delay non-essential capital expenditures if cash flow is tight.

5. Maintain Operational Efficiency:

   • Continue tracking key performance indicators related to profitability and asset utilization.
   • With only 3 employees, ensure workload and capacity are balanced to avoid overstretching resources.

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Medical Analogy Summary

Southwest Utilities Nationwide Ltd is like a patient with a strong heart (profitability and positive net assets) and good muscle tone (working capital), but with a very low blood volume (cash reserves) that could cause fainting spells (cash flow crises) if not addressed. The "treatment plan" should focus on improving hydration (cash flow management), reducing unnecessary blood loss (dividend payments), and managing chronic conditions (long-term debts) to ensure sustained health.

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