SRH ALLEN LTD

Executive Summary

SRH ALLEN LTD displays significant financial distress characterized by growing negative net assets and worsening liquidity. The company is currently unable to meet its short-term obligations from current assets, signaling urgent need for financial restructuring and operational improvements. Without prompt intervention, the risk of insolvency remains high.

SRH ALLEN LTD - Analysis Report

Company Number: 13478705

Analysis Date: 2025-07-20 16:50 UTC

Financial Health Assessment for SRH ALLEN LTD

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1. Financial Health Score: D

Explanation:
The company exhibits significant financial distress, indicated by persistent negative net assets (shareholders’ funds) and worsening net current liabilities, which points to liquidity and solvency challenges. The grade "D" reflects a company with serious financial symptoms requiring urgent attention but not yet insolvent or in formal liquidation.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Assets (Shareholders’ Funds)	£-250,895	Negative and deteriorating, signaling accumulated losses exceeding capital investment.
Net Current Assets (Working Capital)	£-154,739	Strongly negative, indicating the company cannot cover short-term liabilities with current assets—symptom of liquidity distress.
Fixed Assets	£75,656	Moderate fixed asset base but decreased from prior year, possibly due to disposals or depreciation.
Current Liabilities	£186,447	High short-term obligations posing cash flow pressure.
Long-term Liabilities	£165,611	Significant debt burden beyond current year, adding to solvency risk.
Trend in Net Assets (2021-2024)	From -£83,940 to -£250,895	Worsening equity position, reflecting ongoing losses or write-downs.

Interpretation of Vital Signs:

• Negative net assets indicate that liabilities exceed total assets, a sign of balance sheet insolvency.
• Negative net current assets reveal an inability to meet short-term debts with liquid assets, a "symptom of cash flow distress."
• The company’s total liabilities (current + long-term) exceed total assets by a large margin, indicating a weak financial foundation and high risk.
• The trend shows a deepening financial weakness over the last three years.

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3. Diagnosis: Financial Condition Assessment

SRH ALLEN LTD is exhibiting classic signs of financial strain akin to a patient with chronic illness that has not been effectively treated. The company’s balance sheet shows substantial net liabilities, which is like the "organ failure" of financial health—where obligations have overwhelmed resources. The working capital deficiency is particularly concerning, suggesting the company struggles to fund day-to-day operations without external support.

The steady increase in negative shareholders’ funds indicates accumulated losses or erosion of capital over time. The reduction in fixed assets alongside increasing liabilities may imply asset disposals or depreciation without sufficient income generation or capital injection.

While the company remains active and has no overdue filings, the financial "symptoms" suggest urgency for intervention to prevent progression to insolvency or formal liquidation.

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4. Recommendations: Actions to Improve Financial Wellness

1. Liquidity Management:

   • Immediate focus on improving cash flow, possibly by negotiating better payment terms with suppliers, accelerating receivables, or reducing discretionary expenses.
   • Consider short-term financing options to bridge working capital gaps, but cautiously to avoid further over-leverage.

2. Debt Restructuring:

   • Engage creditors to restructure existing liabilities, extending maturities or reducing interest burdens to improve solvency metrics.
   • Explore options for debt-for-equity swaps or additional equity injections to restore positive net assets.

3. Operational Review:

   • Conduct a thorough review of business operations and cost structures to identify and eliminate unprofitable activities.
   • Focus on improving gross margins and operational efficiency in food retailing, the company’s core sector.

4. Strategic Planning:

   • Develop a turnaround plan with realistic financial projections and milestones, incorporating contingency plans for further distress.
   • Consider seeking professional advisory support for financial restructuring and business strategy.

5. Regular Monitoring:

   • Implement rigorous financial controls and monthly monitoring of cash flow and working capital to detect early warning signs of distress.

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