CAPES & MCLEOD LEISURE LTD

Financial Health Score: A (Excellent)

This business exhibits the financial equivalent of an athlete's resting heart rate—exceptionally strong liquidity, minimal debt, and consistent profitability. The company is more than capable of meeting its obligations and has significant financial reserves to weather any unexpected economic illness.

1. Key Vital Signs

Pulse (Liquidity & Cash Flow): Strong and Steady - Current Ratio: 5.7x (£537,664 current assets / £94,242 current liabilities) - Cash Reserves: £259,605 - Interpretation: The company has an incredibly healthy cash flow. For every £1 of short-term debt, the business holds £5.70 in short-term assets. There are no signs of cash flow distress or breathing difficulties here.

Blood Pressure (Solvency & Leverage): Optimal - Total Liabilities to Total Assets: 15% (£94,242 / £622,247) - Long-term Debt: £1,695 - Interpretation: Blood pressure is perfectly balanced. The business operates with virtually no long-term debt pressure, meaning external creditors have minimal claims over the company's assets.

Temperature (Profitability): Healthy, but slightly cooling - Estimated Profit (2025): £140,863 (Calculated as the movement in retained earnings plus dividends paid: -£33,137 + £174,000) - Estimated Profit (2024): £196,738 - Interpretation: The patient is running a very healthy temperature, generating strong profits. However, there is a slight cooling compared to the prior year, with profits dropping by roughly 28%. This warrants monitoring but is not a symptom of critical distress.

Cholesterol (Working Capital Efficiency): Monitor for hardening - Stock Levels: £262,000 (representing ~49% of total current assets) - Interpretation: High stock levels act like financial cholesterol—necessary for trading, but potentially dangerous if it stops moving. Stock is the largest component of current assets, meaning liquidity could clog up if inventory doesn't convert to cash efficiently.

2. Diagnosis

Overall Condition: Robust Constitution with Minor Symptoms of Contraction

Capes & Mcleod Leisure Ltd is in exceptional financial shape. The balance sheet is pristine, carrying a net asset value of over £522,000 against practically zero long-term debt. The business has consistently generated healthy profits over the last five years, accumulating a substantial P&L reserve of £521,959. This indicates a business that knows how to generate cash and, importantly, how to retain it.

However, a closer examination of the symptoms reveals a slight contraction in the business's physical footprint: - Employee Headcount: Dropped from 9 to 7. - Director Resignation: Tim Capes resigned in late 2025 (after signing the accounts). - Profit Contraction: Estimated net profit fell from £196k to £140k. - Asset Reduction: Total assets contracted from £690k to £622k, driven largely by a reduction in stock and a slight dip in cash.

Diagnosis: The business is not sick, but it is currently "slimming down." Whether this is an intentional strategic diet (streamlining operations, reducing overhead) or a symptom of a shrinking market is the key question. The massive dividend payouts of £174,000 in both 2024 and 2025 suggest the directors are extracting surplus cash rather than reinvesting it for aggressive growth.

3. Prognosis

Future Outlook: Very Positive, but leaning towards a static maturity phase rather than active growth.

The financial foundation is rock solid. The company has zero risk of insolvency in the near or medium term. The transition of ownership/control following Tim Capes' resignation will need to be managed carefully, but the financial body is more than strong enough to withstand this organizational change.

The main risk to the patient's future health is complacency. With high cash reserves and low debt, there is a risk of "financial inertia"—where capital sits idle in low-yield business accounts rather than being deployed to generate future growth. Additionally, the drop in employee headcount and revenue/profit margins suggests the business may be entering a slow decline if the core business model isn't revitalized.

4. Recommendations

To maintain and improve this excellent financial wellness, I recommend the following preventative care and fitness regime:

1. Cardiovascular Exercise (Get the Cash Moving): With £259k sitting in the bank and £14.7k in listed investments, the company has significant idle capital. Consider whether this cash could be better utilized—either through reinvestment into the business for growth, higher-yield external investments, or further shareholder returns. Cash sitting still loses value to inflation.
2. Monitor Cholesterol (Stock Management): Stock represents nearly half of your current assets (£262k). Ensure you have robust inventory management practices in place. Stock that sits on the shelf too long can become obsolete, writing down the company's overall health. Clear out slow-moving items to improve cash conversion cycles.
3. Post-Resignation Check-Up (Strategic Review): With Tim Capes stepping down and headcount reducing from 9 to 7, conduct a strategic review to ensure the business has the right human resources in place to drive future revenue. The drop in profit could be a direct result of lost capacity or capability.
4. Maintain Dividend Health: The £174k dividends are an excellent reward for shareholders, supported by actual profits rather than debt. Continue this disciplined approach to ensure dividends remain covered by operating cash flow.