ST THOMAS SURGERY LIMITED

Comprehensive Financial Health Assessment: ST THOMAS SURGERY LIMITED

1. Financial Health Score: B-

Explanation: The patient is stable and generating healthy cash flow, but suffers from a deliberate lack of financial immunity. By distributing almost all earnings as dividends, the practice operates on a lean, "paycheck-to-paycheck" basis. While current vital signs show a strong recovery from a brief cash drought in 2024, the long-term trend shows a significant contraction in balance sheet strength compared to historical norms. The business is healthy enough to keep running, but has very little cushion if primary revenue streams face disruption.

2. Key Vital Signs

• Blood Pressure (Liquidity): Strong. The current ratio (current assets vs. current liabilities) stands at a robust 2.75:1 (£18,178 vs £6,613). The practice has more than enough liquid assets to cover its short-term debts, indicating no immediate risk of financial cardiac arrest.
• White Blood Cell Count (Cash Reserves): Recovering, but historically low. Cash at bank rebounded to £15,500 in 2025, up from a dangerously low £3,539 in 2024. However, looking at the patient's medical history, cash reserves were £97,000+ in 2017 and £54,000 in 2018. The practice has experienced massive "weight loss" in its cash reserves over the last half-decade.
• Cholesterol Levels (Liabilities): Healthy. Total liabilities are a very manageable £6,613, with no long-term debt. The practice is not clogging its arteries with expensive borrowings. The main liabilities are trade creditors (£1,768) and corporation tax (£3,791), which are routine, operational expenses.
• Nutrient Absorption (Profitability & Retention): Poor retention. The practice is effectively "exhaling" all the oxygen it breathes in. Dividends of £11,677 were paid out in 2025, against a profit and loss reserve that sits at only £10,245. The business is consuming its own retained earnings to fund shareholder payouts.

3. Diagnosis

The financial data reveals a business that operates as a lean, pass-through vehicle for its GP shareholders, which is a common structural model for medical practices. However, the underlying business health has fundamentally changed over the last seven years.

Between 2016 and 2018, the practice carried substantial cash reserves (peaking at £97k in 2017), acting as a robust financial immune system. Since then, there has been a systematic draining of these reserves, likely through large historical dividend distributions or capital withdrawals, leaving the P&L reserve in negative territory in recent years before recovering slightly to £10k in 2025.

In 2024, the practice showed symptoms of acute cash distress, with cash dropping to just £3,539. While 2025 shows a swift recovery to £15,500, this appears to be a cyclical ebb and flow tied to the timing of NHS/contractor payments and immediate dividend payouts, rather than a structural improvement. The transition of "Other Debtors" dropping from £10,919 in 2024 to £0 in 2025 suggests an inter-company or director loan was settled, which temporarily inflated the 2024 assets and likely drove the 2024 dividend payout.

The diagnosis is a stable but fragile operation: the practice generates enough cash to serve its principals, but retains almost nothing to protect against future shocks.

4. Recommendations

To improve financial wellness and build resilience, the following treatments are prescribed:

• Build a Financial Immune System (Cash Buffer): The practice should aim to retain a minimum of 3 to 6 months of operating expenses in cash before distributing dividends. The current practice of draining the P&L reserve leaves the surgery vulnerable to any delays in NHS funding or unexpected operational costs.
• Monitor Tax Health: Corporation tax liabilities have more than doubled from £1,438 in 2024 to £3,791 in 2025. Ensure that cash flow forecasting accounts for this growing tax burden so that tax bills do not trigger another cash crisis like the one seen in 2024.
• Review Dividend Policy: While it is understandable that the GP shareholders wish to extract their hard-earned profits, the current extraction rate (£11,677 dividends against £10,245 in P&L reserves) is effectively eating into the practice's equity. Implement a policy where a fixed percentage of profits is retained annually for reinvestment and emergency buffering.
• Invest in Preventative Care (Fixed Assets): The balance sheet shows £0 in fixed assets. As a healthcare provider, maintaining modern medical equipment and IT systems is critical. The lack of fixed assets may indicate aging equipment that will soon need replacement, requiring a sudden, large cash outlay.