ST DONATS NURSERY LTD

Executive Summary

ST DONATS NURSERY LTD is currently experiencing financial distress, indicated by a negative net asset position and poor liquidity. Immediate action to improve cash flow, reduce costs, and consider capital injection is essential to restore financial health. While the company operates in a stable sector, without intervention, these symptoms could worsen, threatening the business's viability.

ST DONATS NURSERY LTD - Analysis Report

Company Number: 14119972

Analysis Date: 2025-07-29 14:57 UTC

Financial Health Assessment for ST DONATS NURSERY LTD

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1. Financial Health Score: D

Explanation:
The company shows clear symptoms of financial distress, primarily due to negative net current assets and net liabilities. While the business operates in the pre-primary education sector—a stable industry—the financial "vital signs" reveal liquidity challenges and an erosion of shareholder equity, warranting a "D" grade indicating poor financial health. Early intervention is advisable to prevent further deterioration.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Cash at Bank	£4,206	Low cash reserves suggest limited liquidity to cover expenses.
Current Liabilities	£60,274	High short-term debts relative to cash and current assets.
Net Current Assets (Working Capital)	-£56,068	Negative working capital indicates difficulty meeting short-term obligations.
Net Assets	-£6,716	Negative net assets reflect that liabilities exceed total assets—sign of insolvency risk.
Shareholders' Funds	-£6,717	Equity is negative, meaning the company has accumulated losses.
Fixed Assets (Tangible)	£50,352	Significant investments in long-term assets, but these are illiquid.
Year-on-Year Change in Cash	Decreased from £12,129 (2023) to £4,206 (2024)	Shrinking cash reserves indicate cash flow pressure.

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3. Diagnosis: What the Financial Data Reveals

• Liquidity Crisis (Healthy Cash Flow Absent):
  The company has a critical shortage of liquid assets (cash and equivalents) relative to its current liabilities, evidenced by a negative net current assets position of -£56,068. This “symptom” shows that the business may struggle to pay its short-term debts as they fall due, which poses a risk to operational continuity.

• Erosion of Equity (Symptoms of Financial Stress):
  The shareholder funds have moved from a positive £74 to a negative £6,717 in one year. This shift indicates the company is likely incurring losses or writing down assets, reducing the net worth of the business.

• Asset Structure Concerns:
  Tangible fixed assets are substantial (£50,352), but these are long-term and not easily convertible to cash in the short term. This imbalance exacerbates liquidity issues since the company cannot readily leverage these assets to meet immediate obligations.

• Operational Scale and Risk:
  With an average of 4 employees and operating in pre-primary education, the company is small but has high liabilities relative to its size. The rapid deterioration in working capital and equity within two years of incorporation suggests operational or financial management challenges.

• No Overdue Filings:
  The company is compliant with filing deadlines, which is a positive sign of administrative health but does not mitigate the financial distress signals.

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4. Recommendations: Steps to Improve Financial Wellness

• Improve Cash Flow Management:

  • Tighten control over receivables and payables to improve cash inflows and defer outflows where possible.
  • Negotiate extended payment terms with creditors to alleviate immediate liquidity stress.
  • Explore short-term financing options or overdraft facilities to cover working capital gaps temporarily.

• Review Cost Structure:

  • Analyze operating expenses and identify areas for cost reduction without compromising service quality.
  • Consider staffing adjustments or efficiency improvements to reduce overheads.

• Asset Utilization:

  • Evaluate whether any fixed assets can be sold or leased to generate cash.
  • Ensure fixed assets are fully utilized to generate income.

• Capital Injection:

  • Discuss with the majority shareholder about the possibility of an equity injection to restore positive net assets.
  • Alternatively, seek external investors or loans with favourable terms to bolster financial stability.

• Strategic Business Review:

  • Conduct a thorough review of the business model and revenue streams to identify growth opportunities or diversification.
  • Implement robust financial reporting and forecasting to detect financial “symptoms” earlier and take corrective action.

• Monitor Financial Health Regularly:

  • Establish monthly financial reviews focusing on liquidity ratios and cash flow.
  • Engage financial advisors if necessary to guide turnaround strategies.

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