STEPHEN JOHNSON CONSULTING ENGINEERS LIMITED

Comprehensive Financial Health Assessment: Stephen Johnson Consulting Engineers Limited

1. Financial Health Score: A (Excellent)

Explanation: The company exhibits exceptional financial health, akin to a patient with a robust immune system and excellent cardiovascular fitness. With a cash-heavy balance sheet, zero long-term debt, and consistently growing retained earnings, the business shows no signs of financial distress. In fact, the company is "over-hydrated" with cash, suggesting it is highly resilient to economic shocks, though it may not be putting its financial resources to their most efficient use.

2. Key Vital Signs

• Liquidity (Blood Pressure): Excellent. The company’s current assets (£169,447) vastly exceed its current liabilities (£29,577), yielding a current ratio of approximately 5.7 to 1. This indicates an incredibly strong ability to meet short-term obligations. The "blood flow" of this business is highly robust.
• Cash Reserves (Hydration Levels): Exceptional. Cash at bank stands at £158,896, representing roughly 94% of all current assets. The business is holding substantial liquid reserves.
• Solvency (Cholesterol/Heart Health): Optimal. Total liabilities of £29,577 are dwarfed by net assets of £141,832. There is no long-term debt clogging the arteries of this business; the only liabilities are routine trade creditors, tax obligations (VAT and Corporation Tax), and a negligible director loan.
• Profitability & Growth (Metabolism): Strong. The business generated a profit of £39,262 in the latest year (FY2025), a significant increase from the previous year's trajectory. Retained earnings have grown steadily from £28,743 in 2018 to £141,829 in 2025, showing a healthy and consistent metabolic rate of value creation.
• Capital Efficiency (Organ Function): Moderate. While the business is highly profitable, the sheer volume of cash sitting idle suggests that capital efficiency could be improved. The return on assets is naturally dragged down by the large, unleveraged cash position.

3. Symptoms Analysis

Looking beneath the skin, the numbers reveal a very conservative, owner-managed business that has prioritized safety over leverage: * Symptom: Cash Hoarding: The company is holding over £158k in cash. While this provides incredible immunity against downturns, it is also a symptom of potentially under-invested capital. Cash sitting in a low-interest business account may be losing real-term value against inflation. * Symptom: Modest Fixed Assets: With only £2,367 in net book value for tangible assets, this is clearly a "people and expertise" business, not a "machinery and equipment" business. The asset base is highly liquid, which is typical for consulting engineers. * Symptom: Healthy Dividend Policy: The directors chose to extract £15,000 as dividends against a £39,262 profit. This is a healthy, sustainable payout ratio, allowing the business to retain the majority of its earnings for future strength while still rewarding the shareholders.

4. Diagnosis

The patient is in peak financial condition. The diagnosis is one of Financial Robustness with Potential Under-Investment. The business has an incredibly strong safety net, virtually no risk of insolvency in the near or medium term, and a proven track record of generating and retaining profits. The lack of any external debt means the company operates with complete financial autonomy. The only "ailment" is a mild case of idle capital—where the business could potentially generate higher returns if it leveraged some of its substantial cash reserves for growth.

5. Prognosis

The future financial outlook is highly positive. With a cash reserve covering well over five years of total current liabilities, the business is well-insulated against any short-term market disruptions, client payment delays, or economic downturns. As long as the consulting team continues to generate revenue, the balance sheet will continue to strengthen. The transition of the VAT creditor from £17,765 to £18,779 and Corporation Tax from £2,787 to £9,482 is a clear indicator of increasing turnover and profitability, further confirming a vigorous prognosis.

6. Recommendations

To maintain this excellent health and optimize the business's physical fitness, I recommend the following: 1. Cash Deployment Strategy: Consider a review of the £158k cash pile. Explore options such as making higher pension contributions for the directors, investing in business growth/marketing, or declaring a special one-off dividend to extract excess capital efficiently. Leaving large sums in a business account often attracts a lower yield than inflation. 2. Director Loan Repayment: The company owes its directors £233. While this is microscopically small and interest-free, formally clearing these tiny related-party balances simplifies the balance sheet and keeps the financial "arteries" clear of unnecessary clutter. 3. Continued Monitoring of Trade Debtors: Trade debtors rose from £8,208 to £8,784. While this is perfectly healthy for a consulting firm, ensure credit control remains strict so that this doesn't swell into a bad debt "fever" in future years.