THE WRAP AGENCY LTD

Executive Summary

THE WRAP AGENCY LTD is experiencing significant liquidity challenges with negative working capital and declining equity, indicating financial distress. Immediate focus on cash flow management, cost control, and creditor negotiations is essential to stabilize operations and improve financial health. Without prompt corrective action, the company's financial condition may worsen, threatening its long-term viability.

THE WRAP AGENCY LTD - Analysis Report

Company Number: 12521250

Analysis Date: 2025-07-20 12:52 UTC

Financial Health Assessment for THE WRAP AGENCY LTD (as of 31 March 2024)

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1. Financial Health Score: D

Explanation:
THE WRAP AGENCY LTD shows clear signs of financial distress primarily due to persistent negative net current assets (working capital) and a significant decline in net assets over recent years. While the company remains solvent with positive net assets, the erosion of liquidity and working capital is concerning. This score reflects a weak financial condition needing urgent attention to avoid further deterioration.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Current Assets	£1,179	Extremely low current assets, mainly cash (£1,030), indicating limited short-term resources.
Current Liabilities	£6,533	High short-term liabilities relative to assets, creating a liquidity crunch.
Net Current Assets	-£5,354	Negative working capital—a symptom of cash flow distress, inability to cover short-term debts.
Net Assets (Shareholders' Funds)	£2,645	Reduced by almost 50% since 2023 (£5,203), showing erosion of equity possibly due to losses.
Fixed Assets (Net Book Value)	£7,999	Tangible assets provide some cushion but are illiquid and depreciating.
Cash	£1,030	Cash level stable but very low; insufficient buffer for liabilities.
Debtors	£149	Sharp decrease from previous years (~£4,137), perhaps reflecting reduced sales or better collection, but also possibly lower business activity.
Trade Creditors & Other Short-Term Creditors	£5,662 (Other creditors) + £1 (Trade creditors) + £871 (Bank loans)	Reliance on creditors is high, with some bank borrowings present.
Turnover & Profitability	Not disclosed	Lack of Income Statement limits full diagnosis, but net asset decline suggests losses or low profitability.

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3. Diagnosis: Financial Condition Analysis

• Liquidity and Working Capital:
  The company is exhibiting a classic symptom of financial distress—negative net current assets (working capital). This means the company does not have enough short-term assets (cash, debtors) to cover its short-term liabilities, indicating a cash flow squeeze. The low debtor balance suggests either reduced sales or improved collection, but the liquidity has not improved correspondingly.

• Capital Structure & Solvency:
  Despite liquidity issues, the company remains solvent with positive net assets (£2,645). However, the steep drop in shareholders' funds from £5,203 in 2023 to £2,645 in 2024 signals accumulated losses or asset impairments. This erosion weakens the financial "immune system," reducing resilience to shocks.

• Asset Composition:
  A large proportion of assets are tied up in tangible fixed assets (£7,999 net), which are illiquid and depreciating. The company’s ability to convert these into cash quickly is limited, restricting flexibility.

• Cash Flow Health:
  Cash on hand remains minimal (£1,030), barely covering short-term obligations. This "healthy cash flow" is not present here; instead, symptoms indicate a cash flow dry-up, possibly requiring external financing or asset sales.

• Business Activity:
  The company operates in temporary employment agency activities (SIC 78200), which can be sensitive to economic cycles. The dramatic drop in debtors and current assets may reflect reduced business volume or client payments delays.

• Governance and Control:
  Directors and significant controllers are well-aligned, holding 25-50% shares and voting rights each, which can facilitate swift decision-making for financial restructuring if needed.

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4. Recommendations: Path to Financial Wellness

1. Improve Liquidity Management:

   • Prioritize accelerating cash collections and reducing debtor days.
   • Negotiate extended payment terms with suppliers to ease immediate cash outflows.

2. Cost Control and Profitability:

   • Conduct a detailed review of operational expenses to cut unnecessary costs.
   • Explore revenue enhancement strategies to rebuild turnover and margins.

3. Asset Optimization:

   • Consider disposing of under-utilized or non-essential fixed assets to generate cash.
   • Evaluate lease vs. own strategy for equipment to improve flexibility.

4. Financial Restructuring:

   • Explore short-term financing options or overdrafts to cover working capital deficits.
   • Engage with creditors proactively to restructure or reschedule debts if needed.

5. Enhanced Financial Monitoring:

   • Implement rigorous monthly cash flow forecasting to detect symptoms of distress early.
   • Prepare and review profit and loss statements regularly for actionable insights.

6. Strategic Planning:

   • Review business model viability given market conditions in temporary employment sector.
   • Consider diversification or niche focus to stabilize and grow revenue streams.

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Medical Analogy Summary

THE WRAP AGENCY LTD currently suffers from "liquidity anemia," where the blood supply (cash and short-term assets) is insufficient to meet immediate operational demands, causing the "circulatory system" (working capital) to falter. The steadily declining "immune system" (shareholders' equity) reduces the company's ability to recover from financial shocks, signaling a need for urgent treatment to restore vitality and prevent systemic failure.

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