ARKEM LEISURE LIMITED

Executive Summary

ARKEM Leisure Limited shows a strong recovery in liquidity and net assets, indicating healthy financial growth and operational stability. Key risks include managing increased tax liabilities and receivables to sustain cash flow. With focused debtor control and tax planning, the company is well-positioned for continued financial wellness.

ARKEM LEISURE LIMITED - Analysis Report

Company Number: 12930211

Analysis Date: 2025-07-29 13:13 UTC

Financial Health Assessment for ARKEM LEISURE LIMITED

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1. Financial Health Score: B

Explanation:
ARKEM Leisure Limited demonstrates solid improvement in financial strength over the last 12 months, with a strong liquidity position and increasing net assets. While the company’s financials show healthy signs, some areas such as the significant increase in taxation and social security creditors warrant attention to avoid potential cash flow strain. Overall, the company is financially stable but should monitor working capital management closely.

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2. Key Vital Signs

Metric	2023 Value (£)	2022 Value (£)	Interpretation
Current Assets	163,286	50,576	Significant growth in short-term assets; good liquidity foundation.
Cash at Bank	109,215	37,224	Healthy cash reserves; strong ability to meet immediate obligations.
Trade Debtors	44,549	19,419	Increase in receivables; may require monitoring for timely collections.
Current Liabilities	69,807	44,996	Increase primarily due to taxation and social security obligations.
Net Current Assets	93,479	5,580	Strong improvement in working capital; positive sign of operational health.
Net Assets (Shareholders' Funds)	97,542	11,413	Significant growth in company equity, indicating retained earnings growth.
Share Capital	100	100	Minimal share capital; growth driven by retained earnings.
Average Number of Employees	3	2	Small team size consistent with micro/small company status.

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3. Symptoms Analysis

• Healthy Cash Flow: The company’s cash reserves have nearly tripled year-on-year, which is a vital sign of strong liquidity and operational cash management. This "healthy cash flow" suggests the company can meet short-term obligations without distress.

• Working Capital Improvement: The net current assets have surged from approximately £5,580 to £93,479, indicating a robust buffer to cover current liabilities. This is akin to a patient’s blood pressure stabilising after medication — a clear sign of financial recovery and stability.

• Rising Debtors: Trade debtors have increased substantially. While this might reflect growing sales or contracts, it also raises a "symptom" risk of delayed payments, which could lead to cash flow bottlenecks if not managed closely.

• Tax and Social Security Liabilities Spike: Creditors increased notably, largely due to taxation and social security liabilities rising from £1,525 to £52,918. This may indicate deferred payments or timing issues in meeting statutory obligations, which could become a "symptom of financial strain" if not addressed promptly.

• Retained Earnings Growth: The jump in retained earnings (from £11,313 to £97,442) shows profitability and reinvestment into the business, a sign of vitality and growth.

• Minimal Fixed Assets: Tangible fixed assets are low (£5,417), which means the company’s operations are likely asset-light or capital expenditure is low, reducing long-term financial burden but possibly limiting scale without investment.

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4. Diagnosis

ARKEM Leisure Limited is currently in good financial health, showing strong liquidity, increased net assets, and a growing operational scale. The company’s "vital signs" reflect a business in expansion, with healthy working capital and cash flow supporting its day-to-day activities. However, the significant increase in tax and social security liabilities is a cautionary symptom that needs monitoring to prevent future cash flow distress.

The company is well-positioned to continue growth but must carefully manage its receivables and ensure timely settlement of statutory obligations to avoid financial discomfort.

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5. Recommendations

• Improve Debtor Management: Implement or enhance credit control processes to reduce days sales outstanding (DSO) and convert receivables to cash more quickly, maintaining liquidity.

• Manage Tax Liabilities: Engage with tax advisors or HMRC proactively to confirm settlement plans for the increased tax and social security liabilities, avoiding penalties or cash flow shocks.

• Monitor Working Capital: Maintain regular reviews of current assets and liabilities to sustain the strong net current asset position and prevent any liquidity squeeze.

• Consider Fixed Asset Investment: Evaluate if strategic investment in tangible assets could support growth and operational efficiency without compromising cash flow.

• Maintain Transparent Reporting: Continue prompt and accurate financial reporting and compliance with Companies House filing deadlines to uphold stakeholder confidence.

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