TWIN SPEED SCAFFOLDING LTD

Executive Summary

TWIN SPEED SCAFFOLDING LTD is a profitable new business with strong margins but is currently experiencing liquidity challenges indicated by negative working capital and minimal cash reserves. While the underlying business model shows promise, urgent attention to cash flow management and short-term liabilities is needed to ensure sustainable financial health.

TWIN SPEED SCAFFOLDING LTD - Analysis Report

Company Number: 14085939

Analysis Date: 2025-07-20 12:25 UTC

Financial Health Assessment of TWIN SPEED SCAFFOLDING LTD

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1. Financial Health Score: C

Explanation:
The company has demonstrated a profitable start with a positive net profit margin, which is a good "heartbeat" sign. However, there are clear "symptoms" of financial strain, primarily in liquidity and working capital management, indicated by significant net current liabilities. This mixed picture leads to a moderate grade, suggesting the company is stable but needs careful attention to its short-term financial health.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Turnover	40,258	Low but expected for a young micro-business.
Gross Profit	27,270	Healthy margin (approx. 68%), indicating effective cost control.
Operating Profit	18,188	Operating profit margin ~45%, strong operating efficiency.
Net Current Assets (Working Capital)	-21,082	Negative — cash and short-term assets insufficient to cover short-term liabilities, indicating liquidity stress.
Cash	410	Very low cash reserves — potential cash flow constraint.
Debtors	9,517	High trade debtors relative to turnover; risk of delayed payments.
Creditors (Due within 1 year)	31,009	High short-term liabilities, largely directors’ current accounts.
Shareholders' Funds	18,189	Positive equity reflecting retained earnings and capital.

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3. Diagnosis: What the Financial Data Reveals

Strengths (Healthy Signs):

• The company has made a solid profit in its first full operational year, showing a good margin between sales and costs. This is akin to a patient's strong pulse indicating core business viability.
• Positive shareholders' equity shows the company has value after liabilities, which is important for long-term stability.

Symptoms of Distress:

• The negative working capital is a red flag: current liabilities exceed current assets by £21k. This is like a patient having low energy reserves to meet immediate demands, risking a liquidity crisis.
• Cash on hand is extremely limited (£410), meaning the company might struggle to pay bills on time without additional funds or cash inflows.
• A large portion of current liabilities is owed to directors (£30,853), which may indicate reliance on director loans or deferred payments as a short-term financing measure. This is a common but risky practice akin to a patient relying on emergency medication rather than a sustainable treatment plan.
• Debtors (amounts owed to the company) are significant compared to turnover, and if collection is slow, this can choke cash flow further.

Underlying Causes:

• As a newly established micro-business (incorporated in May 2022), the company is in its infancy stage, which often involves cash flow tightening as it builds operational momentum.
• Investment in fixed assets (£39,271) suggests the company has committed capital to equipment, essential for scaffolding work, but this ties up resources and reduces liquid assets.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Liquidity Management:

   • Prioritize collecting outstanding debts quickly to convert trade receivables into cash — this is vital to ease the "breathing difficulties" caused by negative working capital.
   • Negotiate longer payment terms with suppliers or directors if possible to reduce immediate cash outflow pressures.

2. Increase Cash Reserves:

   • Consider short-term financing options such as a business overdraft or invoice financing to build a buffer of working capital and avoid cash flow shocks.

3. Monitor and Control Costs:

   • Continue to maintain tight control on administrative and operational expenses to preserve healthy profit margins.

4. Review Director Loans:

   • Formalize and plan repayment of director’s current account balances to avoid potential governance or financial risks.

5. Business Development:

   • Focus on increasing turnover through marketing and client acquisition to spread fixed costs and improve overall financial stability.

6. Financial Forecasting:

   • Implement regular cash flow forecasts and financial reviews to quickly identify and address liquidity issues before they become critical.

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Summary in Medical Terms

TWIN SPEED SCAFFOLDING LTD shows a strong cardiac output with good profitability but suffers from circulatory congestion due to negative working capital and low cash reserves. The company’s financial lungs (liquidity) are under strain, risking short-term distress despite an otherwise healthy core business. Immediate interventions to improve cash flow and liquidity are essential to avoid progression to a more severe financial condition.

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