Company Number: 13874116

Analysis Date: 2025-07-20 13:32 UTC

Financial Health Assessment for AEROHAL LTD
Assessment Date: Based on accounts as of 30 November 2023

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1. Financial Health Score: B

Explanation:
AEROHAL LTD demonstrates a solid financial position with strong net current assets and significant retained earnings growth. However, the reliance on related party loans and director current accounts as creditors introduces some liquidity risk and potential governance concerns. The absence of an income statement limits insight into operational profitability trends. Overall, the company shows good recovery and financial strength but should aim to improve cash liquidity and transparency.

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2. Key Vital Signs

Metric	Value (GBP)	Interpretation
Share Capital	£110	Nominal capital; typical for small private companies
Fixed Assets (Investments)	£26,933	Relatively small fixed asset base, consisting mainly of investments
Current Assets	£1,434,560	Predominantly debtors (amounts owed from group undertakings) and some cash
Cash at Bank	£7,317	Low cash balance signals potential liquidity constraints
Current Liabilities	£818,331	Mainly directors’ current accounts, indicating internal financing
Net Current Assets	£616,229	Positive working capital, indicating ability to cover short-term liabilities
Shareholders' Funds	£643,162	Strong equity base boosted by retained earnings
Retained Earnings (P&L Reserves)	£643,019	Large accumulated profits showing profitable history or capital injections
Related Party Loans (Debtors)	£1,427,243	Significant receivables from group undertakings, unsecured and interest-free
Directors’ Current Accounts (Creditors)	£815,211	Significant liabilities owed to directors, possibly informal financing
Employees	2	Micro-business scale

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3. Diagnosis: What the Financial Data Reveals About AEROHAL LTD's Business Health

• Healthy Capital Structure: The company’s shareholders’ funds have increased substantially year-over-year (£9,130 to £643,162), largely driven by retained earnings, indicating profitability or capital injections. This points to a "healthy heart" of the business with strong equity.

• Working Capital (Net Current Assets): Positive net current assets of £616,229 indicate the company can meet its short-term obligations, a vital sign of financial stability. However, the low cash balance (£7,317) is a "weak pulse" suggesting liquidity might be tight, potentially causing stress if immediate cash is needed.

• Related Party Exposure: Large debtor balances (£1.43 million) are owed by group companies, unsecured and interest-free. This represents an "internal dependency" symptom. While not necessarily negative, it indicates the company’s assets are tied up within the group, which could impair cash conversion if those entities face difficulties.

• Director Loans as Creditors: The company owes over £815k to directors via current accounts, which is a significant liability. While this may provide flexible short-term financing, it may also indicate "external support" due to insufficient internal cash flow.

• No Audit Requirement: The company qualifies for audit exemption under small company rules, so financial statements are unaudited. This limits the external assurance on financial accuracy.

• Micro-Enterprise Scale: With only 2 employees and minimal fixed assets, the company has a lean operational structure, likely focused on investment activities or related services.

• Profitability Insight: The absence of an income statement is a limitation. However, the large increase in retained earnings (£8,987 to £643,019) implies a strong profit or capital movement during the year.

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4. Recommendations: Actions to Improve Financial Wellness

1. Improve Cash Reserves: The company should aim to increase its cash holdings to create a "healthy cash flow" buffer that can meet unexpected expenses without reliance on director loans.

2. Review Related Party Transactions: Conduct a formal review of loans and receivables from group undertakings to ensure repayment terms are clear and risk is managed. Consider formalizing terms or reducing exposure to improve liquidity.

3. Strengthen Governance: Transparent documentation of director loans and related party dealings will reduce potential conflicts of interest and increase stakeholder confidence.

4. Consider External Financing: If growth or working capital needs increase, explore external financing options to reduce dependence on directors’ current accounts.

5. Prepare Full Financial Statements: Including an income statement in future filings would provide clearer insight into operational performance and assist stakeholders in understanding profitability drivers.

6. Cash Flow Management: Implement rigorous cash flow forecasting and management to avoid liquidity strain, given the low cash and high internal receivables.

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