THOMAS SURFACING & GROUNDWORKS LTD

Executive Summary

Thomas Surfacing & Groundworks Ltd is currently facing financial challenges marked by negative working capital and a significant drop in net assets, indicating liquidity and solvency strain. Immediate action to improve cash flow management, restructure debt, and possibly secure additional capital is necessary to restore financial health and ensure sustainable operations.

THOMAS SURFACING & GROUNDWORKS LTD - Analysis Report

Company Number: 13121592

Analysis Date: 2025-07-19 13:05 UTC

Financial Health Assessment for THOMAS SURFACING & GROUNDWORKS LTD
(Financial Year Ended 31 January 2024)

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1. Financial Health Score: D

Explanation:
The company is currently exhibiting symptoms of financial distress primarily due to negative working capital and a significant drop in net assets compared to prior years. While it remains active and operational, the financial indicators suggest liquidity and solvency challenges that require immediate attention to restore financial health.

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2. Key Vital Signs

Metric	2024 Value	2023 Value	Interpretation / Symptom Analysis
Fixed Assets	£67,638	£44,883	Growth in fixed assets indicates investment, which could be positive if productive.
Current Assets	£130,426	£149,986	Decline in current assets, especially cash and debtors, signals tightening liquidity.
Cash at Bank	£14,243	£19,657	Reduced cash reserves weaken the company’s immediate payment capability (healthy cash flow is low).
Debtors	£116,183	£130,329	Slight reduction but still high; potential risk if collections are delayed.
Current Liabilities	£171,253	£141,123	Increased current liabilities worsen liquidity; more short-term obligations to meet.
Net Current Assets (Working Capital)	-£40,827	£8,863	Negative working capital is a critical symptom of cash flow distress.
Total Assets Less Current Liabilities	£26,811	£53,746	Significant decrease indicates reduced buffer after short-term obligations.
Creditors Due After One Year	£24,445	£4,812	Increased long-term debt obligations may pressure future cash flows.
Net Assets (Equity)	£2,366	£48,934	Drastic fall in net assets signals accumulated losses or erosion of shareholder value.
Shareholders' Funds	£2,266	£48,834	Reflects the same erosion of equity, reducing financial stability.
Directors’ Loan Accounts	£110,685	£72,923	Increased reliance on director loans indicates external financing pressure.

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3. Diagnosis: Financial Condition Evaluation

The company’s financial health shows clear symptoms of distress:

• Liquidity Crisis: Negative net current assets (-£40,827) indicate the company cannot cover its short-term liabilities with its current assets, a classic sign of liquidity strain. This "unhealthy cash flow" situation threatens operational continuity if not addressed.

• Erosion of Equity: The sharp drop in net assets from nearly £49k in 2023 to just over £2k in 2024 is concerning. It reveals that the company has likely incurred losses or written down assets heavily during the year, weakening its financial foundation ("weakened financial immune system").

• Increased Debt Burden: The growth in finance lease obligations and director loans suggests the company has been relying more on external and related-party financing to sustain operations. While this can provide short-term relief, it increases financial risk and future interest/repayment burdens ("overburdened financial lungs").

• Investment in Fixed Assets: The company has increased fixed assets significantly, which could indicate expansion or replacement of equipment. While investing in productive capacity is positive, it must be balanced with liquidity to avoid overextension.

• Operational Considerations: The company has a small workforce (2 employees) and operates in specialised construction activities. Given the sector’s capital intensity and dependence on contract payments, cash flow management is critical.

Overall, the financial "symptoms" point to a company struggling with cash flow, increasing debt, and eroding equity—conditions that if untreated, could lead to insolvency.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Working Capital Management:

   • Accelerate debtor collections through stricter credit control and timely invoicing.
   • Negotiate better payment terms with suppliers to extend current liabilities without penalties.

2. Cash Flow Monitoring and Forecasting:

   • Implement rigorous cash flow forecasting to anticipate shortfalls and manage liquidity proactively.
   • Manage discretionary spending to conserve cash.

3. Debt Restructuring:

   • Engage with lenders and directors to restructure finance lease payments and director loans, possibly extending terms or reducing interest to ease cash flow pressure.

4. Review Asset Utilisation:

   • Evaluate fixed asset investments for return on investment to ensure they contribute positively to earnings. Consider selling underutilised assets to raise cash.

5. Explore Additional Capital Injection:

   • Seek equity injection from shareholders or external investors to rebuild shareholder funds and strengthen the balance sheet.

6. Cost Control:

   • Review operational costs and overheads to identify savings opportunities without compromising service quality.

7. Strategic Business Review:

   • Evaluate business model and contract profitability to focus on more lucrative or less risky projects.

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