SPA ELECTRICAL SERVICES LTD

Executive Summary

SPA ELECTRICAL SERVICES LTD is in the early stages of operation with significant investment in fixed assets but is currently experiencing liquidity stress due to negative working capital and low equity. Immediate focus on improving cash flow, strengthening capital, and managing liabilities is essential to avoid financial distress. With careful management, the company can stabilize and build a healthier financial foundation for future growth.

SPA ELECTRICAL SERVICES LTD - Analysis Report

Company Number: 14501955

Analysis Date: 2025-07-29 12:35 UTC

Financial Health Assessment for SPA ELECTRICAL SERVICES LTD

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1. Financial Health Score: D

Explanation:
The company shows signs of early-stage operational challenges and financial strain. While it maintains positive net assets, significant negative working capital (net current liabilities) and very minimal shareholder equity reflect "symptoms of financial distress." The score “D” indicates the company is currently financially fragile but not yet in crisis. Immediate attention is required to strengthen liquidity and capital structure.

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2. Key Vital Signs

Metric	Latest Value (FY 2025)	Interpretation
Fixed Assets	£38,881	Moderate investment in tangible assets indicating asset base.
Current Assets	£16,569	Low liquidity buffer; cash is the majority (£15,850).
Current Liabilities	£35,394	High short-term obligations exceeding current assets.
Net Current Assets (Working Capital)	-£18,825	Negative; indicates liquidity stress and potential cash flow issues.
Total Assets Less Current Liabilities	£20,056	Positive but very low buffer after current liabilities.
Long-Term Liabilities	£20,001	Newly introduced debt or obligations, further pressure on solvency.
Net Assets (Equity)	£55	Extremely low equity base signals weak capitalisation.
Share Capital	£2	Minimal paid-in capital; company primarily relies on retained earnings.
Debtors	£719	Very low receivables; possibly efficient collection or low sales on credit.

Additional Observations:

• Increase in fixed assets from £26,846 to £38,881 suggests investment in equipment or machinery, which is typical in electrical services but may strain cash resources.
• Cash holdings are stable but insufficient relative to liabilities.
• Negative working capital is a "symptom of distress" indicating the company may struggle to meet short-term obligations without additional financing or better cash management.
• Introduction of long-term liabilities (£20,001) adds financial risk and interest burden.
• Shareholders’ funds remain almost negligible, indicating limited buffer to absorb losses or shocks.
• The company is newly incorporated (Nov 2022) and has a relatively short operating history, which adds to uncertainty.

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3. Diagnosis: Overall Financial Condition

SPA ELECTRICAL SERVICES LTD exhibits early-stage financial fragility typical of startups or companies in growth phases that have invested heavily in fixed assets but are yet to build a stable cash flow and equity base. The negative working capital and significant current liabilities mean the company is facing liquidity risk—like a patient with a weak heartbeat—where short-term obligations may overwhelm available resources.

The newly assumed long-term liabilities compound the risk, resembling a patient who has taken on medication with side effects; it may help in the short term but introduces longer-term complications if not managed carefully.

The extremely low net assets and equity suggest the company lacks a healthy financial cushion to absorb operational shocks, which could lead to solvency issues if revenues and cash flows do not improve.

However, the presence of tangible fixed assets and stable cash position provides some positive signs, implying the company has invested in capacity and maintains some liquidity, which could support recovery if managed well.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Liquidity Management:

   • Accelerate collection of receivables and tighten credit terms to boost current assets.
   • Negotiate extended payment terms with suppliers to reduce current liabilities.
   • Monitor cash flow rigorously to avoid short-term cash crunches.

2. Strengthen Capital Structure:

   • Inject additional equity capital to increase shareholders' funds and reduce reliance on debt.
   • Consider equity partners or investors to provide financial stability.

3. Control Fixed Asset Investment:

   • Pause or slow down further capital expenditures until working capital improves.
   • Evaluate asset utilization to ensure investments are contributing effectively to revenue.

4. Debt Management:

   • Restructure existing long-term liabilities if possible to reduce immediate financial pressure.
   • Avoid assuming new debt without clear repayment plans and cash flow support.

5. Operational Efficiency:

   • Review cost structures and improve margins to generate positive operational cash flow.
   • Increase turnover via marketing and business development leveraging local presence and reputation.

6. Regular Financial Monitoring:

   • Implement monthly financial reviews focusing on liquidity ratios and working capital.
   • Early identification of financial symptoms will enable timely corrective actions.

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