THE DELI KITCHEN CO. LTD

Executive Summary

THE DELI KITCHEN CO. LTD shows early signs of business growth with positive working capital but is currently burdened by high long-term debt leading to negative equity, which signals financial distress. Immediate focus on debt restructuring, cash flow management, and profitability enhancement is critical to restore financial health and ensure sustainable operations.

THE DELI KITCHEN CO. LTD - Analysis Report

Company Number: 14459171

Analysis Date: 2025-07-20 12:22 UTC

Financial Health Assessment: THE DELI KITCHEN CO. LTD

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1. Financial Health Score: D

Explanation:
THE DELI KITCHEN CO. LTD shows signs of financial distress based on its most recent micro-entity accounts for the year ended 31 March 2024. The company reports net liabilities of £2,355, indicating that total liabilities exceed assets, which is a critical "symptom" of financial strain. While the company has grown in assets and employees since inception, the balance sheet shows a troubling negative equity position primarily due to significant long-term creditors. This suggests underlying liquidity and solvency issues that could threaten ongoing operational viability without corrective measures.

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2. Key Vital Signs:

Metric	Value (2024)	Interpretation
Fixed Assets	£45,048	Investment in long-term assets indicates some capital base.
Current Assets	£14,583	Cash, stock, receivables - relatively small but improved.
Current Liabilities	£10,586	Short-term obligations, manageable relative to current assets.
Net Current Assets	£3,997	Positive working capital, a "healthy cash flow" indicator.
Creditors > 1 Year	£51,400	High long-term debt; major concern for solvency and liquidity.
Net Assets / Equity	-£2,355	Negative net worth indicates financial distress or insolvency.
Employees	5	Growing workforce suggests business activity increase.

Interpretation of Vital Signs:

• The positive net current assets ("working capital") show the company can cover short-term debts, a good sign of operational liquidity.
• However, the substantial long-term creditors (£51,400) far exceed net assets, pushing equity into negative territory. This is akin to a patient having normal blood pressure but dangerously elevated cholesterol—short-term health appears stable, but long-term risks are severe.
• The increase from 0 to 5 employees suggests growth and operational scaling, but this also increases fixed costs and pressure on cash flow.

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3. Diagnosis:

The financial "symptoms" reveal a company in early stages of growth but with significant financial strain:

• Liquidity: Positive net current assets indicate the company can meet immediate obligations, which is a positive sign of "healthy cash flow."
• Solvency: Negative net assets due to high long-term creditors show the company’s liabilities exceed assets, a critical warning sign akin to "organ stress" in a patient. This threatens the company's ability to sustain operations without restructuring debt or improving profitability.
• Growth: The increase in fixed assets and employees demonstrates business development, but this is not yet translating into a stable financial foundation.
• Capital Structure: Entire ownership and control rest with one director and PSC, which simplifies decision-making but concentrates risk.

Overall, THE DELI KITCHEN CO. LTD is in a fragile financial state with symptoms of distress requiring prompt attention to prevent deterioration.

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4. Recommendations:

To improve financial wellness and stabilize the company’s financial health, the following actions are advised:

• Debt Restructuring: Engage creditors to renegotiate terms on the £51,400 long-term liabilities to reduce repayment pressure and align with cash flow. Consider consolidating or extending repayment schedules.
• Cash Flow Management: Monitor working capital closely to maintain positive liquidity. Implement tighter controls on receivables and inventory turnover to preserve "healthy cash flow."
• Profitability Focus: Increase efforts to improve margins through pricing strategy, cost control, and operational efficiency to generate retained earnings and rebuild equity.
• Capital Injection: Consider additional equity investment or director loans to strengthen the balance sheet and reduce reliance on creditors.
• Financial Monitoring: Establish regular financial reviews to track vital signs and detect early symptoms of distress, enabling proactive management.
• Governance: Although single director control expedites decisions, consider involving financial advisors or independent board members to enhance oversight and strategic planning.

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