Company Number: 13516127

Analysis Date: 2025-07-29 18:29 UTC

Financial Health Assessment of AKHARSHA PROPERTIES LTD as at 31 July 2024

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1. Financial Health Score: C

Explanation:
AKHARSHA PROPERTIES LTD shows a moderate financial condition characterized by a solid asset base in investment property but constrained liquidity and significant debt levels. The company’s net assets have nearly doubled from £7,065 in 2023 to £14,981 in 2024, reflecting growth, yet cash reserves are very low relative to its current liabilities, presenting symptoms of liquidity stress. The presence of long-term debt and directors’ loans supports ongoing operations but also indicates leverage risk. The financial health is stable but with caution required regarding short-term cash flow management and debt servicing.

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2. Key Vital Signs (Core Financial Metrics)

Metric	Value (2024)	Interpretation
Investment Property (Fixed Assets)	£758,037	Main asset; significant increase from £476,894 (2023), indicating property acquisitions or revaluation. Healthy asset growth.
Cash at Bank	£3,242	Very low cash balance, down from £13,464 in 2023. Symptom of tight liquidity.
Current Liabilities	£743,888	High current liabilities, mostly long-term loans reclassified as current? Small current creditors only £2,410, low trade payables.
Net Current Assets	£832	Positive but minimal working capital; liquidity is fragile.
Total Assets less Current Liabilities	£758,869	Reflects strong asset base despite liabilities.
Creditors due after 1 year (Long-term debt)	£743,888	Significant long-term bank loans and director loans. High leverage.
Net Assets (Equity)	£14,981	Positive net worth, improved from prior year, showing retained earnings growth.
Shareholders’ Funds	£14,981	Equity backing is small relative to liabilities but improving.

Additional Notes:

• The company has no employees, indicating it may operate with minimal overhead or via contractors.
• Loans from directors are interest-free, reducing immediate cash flow strain but increasing reliance on personal funding.
• Bank loans have long maturities (25-28 years) with varying interest rates (3% to 6%), which spreads repayment burden but interest costs could be significant.
• No audit required due to small company exemption; accounts unaudited but prepared under FRS 102 Small Entities standard.

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3. Diagnosis (What the Financial Data Reveals About Business Health)

AKHARSHA PROPERTIES LTD is in a growth phase in terms of asset acquisition, evidenced by a large increase in investment property value (£758k vs. £477k prior year). This is a positive sign of expanding the core asset base, which is critical for a property investment company.

Symptoms of distress:

• Liquidity strain: Cash reserves are very low (£3,242), raising concerns about the company’s ability to cover short-term obligations or unexpected expenses promptly, despite a positive net current asset figure (£832). This is akin to a patient with a strong heart (asset base) but low blood pressure (cash flow).

• High leverage: The company is highly leveraged with total debt (current + long-term) exceeding £740k, compared to net assets of only £15k. This indicates the company is heavily dependent on external financing, increasing financial risk.

• Reliance on directors’ loans: Interest-free loans from directors (£180k) form a significant part of liabilities, indicating reliance on related-party funding. While this helps reduce immediate cash outflows on interest, it is not a sustainable long-term solution.

• No turnover or profit data: The absence of reported turnover or profit figures limits insight into operational performance and income generation, making it difficult to assess profitability and cash flow from operations. This is a critical missing vital sign.

Overall, the company’s financial health resembles a patient with a strong skeleton (asset base) but weak vital signs (cash flow and liquidity), requiring monitoring and potentially intervention to avoid distress.

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4. Recommendations (Specific Actions to Improve Financial Wellness)

Short-term:

• Improve liquidity: Focus on boosting cash reserves through better collection of rental income, reducing unnecessary expenses, or restructuring short-term liabilities. Consider negotiating payment terms or refinancing to extend current liabilities into longer-term debt, easing immediate pressure.

• Cash flow forecasting: Implement detailed monthly cash flow forecasting to anticipate shortfalls and manage payments proactively. This acts like monitoring vital signs regularly to prevent crisis.

Medium-term:

• Debt management: Explore options for refinancing high-interest loans (e.g., 6% loan) to lower rates, or consolidating debt to reduce interest burden and improve cash flow.

• Profitability and revenue transparency: Ensure turnover and profit figures are accurately recorded and reported to evaluate operational health. This transparency will help diagnose root causes of cash strain and identify growth opportunities.

• Equity strengthening: Consider raising additional equity capital or converting some director loans into equity, which would improve net asset position and reduce financial risk.

Long-term:

• Asset utilization: Maximise income from investment properties through professional management, periodic revaluation, and strategic acquisition/disposal aligned with market conditions.

• Governance and reporting: Maintain compliance with filing deadlines and consider voluntary audit or review to enhance financial credibility with lenders and investors.

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