WELLWOOD MANAGEMENT LTD

Executive Summary

Wellwood Management Ltd has made significant progress in improving its financial position with positive net assets and working capital after previous years of strain. However, high current liabilities and reliance on director loans present liquidity challenges that require focused cash flow management and creditor negotiations. With these measures, the company’s financial outlook can strengthen further.

WELLWOOD MANAGEMENT LTD - Analysis Report

Company Number: 12851956

Analysis Date: 2025-07-29 20:26 UTC

Financial Health Assessment of Wellwood Management Ltd as at 30 September 2024

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1. Financial Health Score: B-

Explanation:
Wellwood Management Ltd shows a significant recovery in net assets and working capital this year compared to previous years, indicating improving financial vitality. However, current liabilities remain high relative to cash and debtors, creating some liquidity strain. The business is generally stable but exhibits symptoms that warrant close monitoring and action to strengthen cash flow and reduce short-term obligations.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Assets (Shareholders' Funds)	£10,271	Positive net worth, improved from nearly zero last year; indicates growing equity cushion.
Net Current Assets (Working Capital)	£8,771	Positive working capital after previous years of negative; suggests better capability to cover short-term liabilities.
Current Liabilities	£146,716	Relatively high; could exert pressure on liquidity if cash inflows slow.
Cash on Hand	£30,338	Moderate cash balance but less than current liabilities; indicates potential short-term liquidity risk.
Debtors	£125,149	Large receivables balance; heavy reliance on timely collections critical for liquidity.
Director Loan Advances	£92,021	Significant unsecured loans advancing from directors; suggests reliance on insider financing to support operations.

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3. Diagnosis: What the Financial Data Reveals About Business Health

• Symptoms of Recovery and Growth:
  After reporting net assets near zero and negative working capital in 2022 and 2023, the company has shown a substantial turnaround in 2024 with net assets growing to over £10k and positive working capital of nearly £9k. This indicates an improving financial condition and the business is regaining strength.

• Liquidity Strain - "Breathing Difficulties":
  Despite improvements, the company faces symptoms of liquidity strain. Current liabilities (£146,716) exceed cash reserves (£30,338) by a large margin. The business depends heavily on collecting £125,149 in debtors to meet short-term obligations. Delays or defaults in collection could lead to cash flow problems.

• Reliance on Director Financing - "Life Support":
  The company has a substantial loan from a director (£92,021), unsecured and repayable on demand, which acts as a financial life support. While this provides flexibility, it also indicates the business may not yet be self-sustaining fully from operational cash flows.

• Asset Base - "Structural Strength":
  The fixed assets are minimal (£1,500), typical for a service company with low capital intensity. This means the company’s strength lies primarily in its working capital and operational cash flow rather than physical asset backing.

• Profitability Insight (Limited Data):
  Profit and loss details are not provided, but increasing retained earnings (P&L Reserve) from £90 to £10,171 in one year suggests the company became profitable or wrote off some liabilities, improving equity.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Enhance Cash Flow Management:

   • Accelerate debtor collections by tightening credit terms and improving invoicing processes.
   • Consider offering early payment discounts or using factoring services to convert receivables into immediate cash.
   • Monitor and manage payables carefully to avoid unnecessary penalties or interest.

2. Reduce Current Liabilities:

   • Negotiate extended payment terms with suppliers and tax authorities to ease short-term pressure.
   • Prioritize repaying non-essential short-term debts.

3. Formalize Director Loan Terms:

   • Document director loans with clear repayment plans and interest terms to provide transparency and reduce operational uncertainty.

4. Build Cash Reserves:

   • Aim to increase cash on hand to cover at least 1-2 months’ operating expenses to provide a liquidity buffer.

5. Explore Profitability Drivers:

   • Analyze the revenue streams under SIC code 96090 (Other service activities not elsewhere classified) to identify higher margin activities.
   • Invest in marketing or operational efficiencies to increase turnover and net profit.

6. Maintain Regular Financial Monitoring:

   • Implement monthly cash flow forecasting and financial reviews to catch early signs of distress.
   • Engage with financial advisors to explore funding options if growth opportunities require capital.

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Summary

Wellwood Management Ltd is showing promising signs of recovery with improved net assets and positive working capital, indicating a healthier financial "pulse." However, the business exhibits symptoms of liquidity strain due to high current liabilities and dependence on director loans, which act as critical life support. Focused actions on cash flow management, liability reduction, and formalizing director financing will be essential for sustained financial wellness.