CHERRY & WHITE LIMITED
Company number 02468825 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Financial Health Assessment: Cherry & White Limited
1. Financial Health Score: C- (Fair)
Explanation: The company shows signs of a persistent, low-grade condition. While it retains a positive net worth and adequate working capital, its cash reserves have eroded to a critical low, and profitability appears to have slipped into loss. The balance sheet is top-heavy with stock, and debt levels have climbed significantly. The overall picture is one of a fundamentally solvent business that is running a slow financial fever—not yet in intensive care, but requiring immediate attention.
2. Key Vital Signs
| Vital Sign | 2025 | 2024 | 2023 | 2022 | 2021 | Trend / What It Indicates |
|---|---|---|---|---|---|---|
| Net Assets | £2.84M | £3.10M | £3.26M | £2.82M | £3.39M | 🡳 Declining from 2021 peak – falling patient weight |
| Cash at Bank | £23,927 | £130,751 | £399,263 | £59,334 | £776,322 | 🡇 Severe drop – dangerously low blood oxygen level |
| Current Ratio (Current Assets ÷ Current Liabilities) | 1.69 | 1.54 | Not calculable from summary data | Not available | Not available | 🡱 Barely adequate – like a weak pulse; relies on stock & debtors |
| Stock as % of Current Assets | 91% | 73% | Higher of two most recent years? Actually 2025: £4.96M / £5.45M = 91% | – | – | 🡱 Very high – arteries clogged with inventory |
| Total Liabilities | £3.36M (current + long-term) | £5.08M (current + long-term) | £3.34M | £2.21M | £0.81M | 🡱 More than quadrupled since 2021 – increasing debt burden |
| Retained Earnings Change | -£260,213 (loss/dividends) | -£156,935 (from 2023) | +£433,142 (from 2022) | – | – | 🡇 Probable loss in 2024/25 – the patient lost weight |
- Cash: The most alarming sign. From £1.3M in 2018 to just £24k now. Even a modest supplier push or a delay in debtor receipts would cause immediate strain.
- Stock: 91% of current assets are tied up in stock. This is an extreme concentration risk. If stock is slow-moving or obsolete, the company has very little liquid buffer.
- Debtors: Dropped sharply from £1.87M to £0.47M. This could mean better collection, but if it reflects falling sales, it's a symptom of revenue shrinkage.
- Net Assets: Down 16% from the 2021 high. The company is slowly consuming its equity cushion.
3. Diagnosis
Overall Condition: Chronic liquidity deterioration with increasing leverage.
- Primary symptom: Cash anaemia. The business is asset-rich on paper (mainly in stock and fixed assets) but cash-poor. It has enough working capital to meet current obligations on paper, but in practice it cannot easily convert its stock to cash without disruption.
- Secondary symptom: Earnings fatigue. Retained earnings have fallen for two consecutive years, indicating the company is either trading at a loss or distributing significant dividends. Without access to the profit and loss account, the exact cause is unclear, but the diminishing equity buffer is a concern.
- Risk factor: Debt load. Total liabilities have ballooned from £0.8M in 2021 to £3.4M in 2025. The business has used external borrowing to fund growth (likely stock accumulation), but the cost of that debt and the ability to service it are now questionable given the cash shortage.
- What it is not: This is not an insolvency risk today. Net assets are positive, the current ratio is above 1, and long-term debt is modest (£130k). The patient is not in cardiac arrest—more like a chronic iron deficiency that, left untreated, could lead to serious complications.
4. Recommendations (Treatment Plan)
Immediate (next 3–6 months):
-
Cash transfusion via stock reduction.
With over £4.96M in stock and only £24k cash, the priority must be to convert inventory into cash. Conduct a stock audit to identify slow-moving or obsolete items, and consider discounting, bundling, or selling off non-core stock. Target a stock reduction of at least 20% to free up £1M in cash. -
Working capital surgery.
- Debtors: With debtors down to £468k, the collection cycle appears to have improved. Maintain strict credit control and consider invoice discounting if further cash is needed.
- Creditors: Review payment terms with suppliers. If you are paying too quickly, extend terms to preserve cash. If you have overdue payables, negotiate a payment plan. -
Stop the earnings bleed.
Determine why retained earnings fell in 2024 and 2025. If the company is loss-making, implement cost-cutting measures (overheads, non-essential spending) or consider a price review. If dividends are being withdrawn at a rate that exceeds profits, suspend them until cash recovery.
Short-term (6–12 months):
-
Debt restructuring.
The £130k long-term creditor is manageable, but the £3.2M current liabilities are largely short-term. Speak to the bank or lenders about converting some short-term debt into longer-term facilities to reduce immediate repayment pressure. -
Build a cash buffer.
Aim for a minimum cash balance of £200k (roughly one month of operating costs). Use the stock reduction proceeds to achieve this.
Long-term (12–24 months):
-
Diversify funding sources.
The company’s heavy reliance on stock as an asset is risky. Consider whether a revolving credit facility or asset-based lending could provide a safety net without needing to hold so much inventory. -
Monitor key metrics monthly.
Track cash, stock days, debtor days, and the current ratio every month, not just at year-end. Set early warning triggers (e.g., cash below £50k, stock above 90% of current assets).