CHAHAL ENERGY SOLUTIONS LTD

Executive Summary

CHAHAL ENERGY SOLUTIONS LTD shows strong financial improvement with healthy working capital and equity growth, indicating a generally sound financial condition. However, a sharp increase in trade debtors and creditors signals a need for enhanced cash flow management to avoid liquidity strain. Focused efforts on receivables collection and payables management will strengthen their financial wellness and future resilience.

CHAHAL ENERGY SOLUTIONS LTD - Analysis Report

Company Number: 13052938

Analysis Date: 2025-07-20 12:42 UTC

Financial Health Assessment for CHAHAL ENERGY SOLUTIONS LTD

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1. Financial Health Score: B

Explanation:
The company exhibits strong improvement in its financial position over the last year, with substantial growth in current assets and net assets. The liquidity and working capital position are healthy, indicating good short-term financial stability. However, the significant increase in debtors and creditors warrants close monitoring to ensure sustainable cash flow management. Overall, the company is financially sound but with some cautionary signs relating to receivables and payables management.

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2. Key Vital Signs

Metric	2023 (£)	2022 (£)	Interpretation
Current Assets	397,338	29,134	Large increase, mainly due to debtors; potential cash flow risks if not collected timely.
Cash Balance	23,652	24,518	Stable cash on hand, indicating maintained liquidity.
Debtors (Accounts Receivable)	373,686	4,616	Sharp rise; "symptom of distress" if collection is slow, may strain operational cash flow.
Current Liabilities	257,576	15,306	Increased payable obligations; needs careful management to avoid liquidity crunch.
Net Current Assets	139,762	13,828	Positive working capital; company can cover short-term obligations comfortably.
Net Assets (Equity)	141,532	16,708	Healthy growth in equity, indicating strong retained earnings or capital infusion.
Share Capital	1	1	Minimal share capital; equity growth driven by profits retained.

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3. Diagnosis

• Liquidity and Working Capital: The company has a healthy working capital position at £139,762, which is a "healthy pulse" indicating the business can meet its short-term debts. The cash balance remains stable year-on-year, which suggests the company maintains a baseline liquidity level.

• Receivables and Payables: The drastic increase in debtors from £4,616 to £373,686 is a "red flag symptom" that the company has extended significant credit or has a large outstanding invoice portfolio at year-end. This could be a strain on cash flow if these receivables are not collected promptly. Similarly, current liabilities have increased substantially, showing the company is also relying more on trade creditors and other short-term obligations.

• Asset Base: Tangible fixed assets decreased slightly but remain low relative to current assets, indicating a capital-light business model typical for the plumbing and construction service industry.

• Profit Retention: The rise in retained earnings (profit and loss reserve) from £16,707 to £141,531 indicates the company has generated profits or capital contributions that have strengthened its financial base.

• Ownership and Control: The sole director and 100% owner, Mr. Liaqat Ali, centrally manages the company, which may provide agility in decision-making but also concentrates control risk.

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4. Recommendations

• Improve Debtor Management: Implement stricter credit control policies to reduce days sales outstanding (DSO). Prompt invoicing and active follow-up on receivables will improve cash flow "heart rate" and reduce risk of bad debts.

• Monitor Payables: Negotiate payment terms with suppliers to maintain a balance between leveraging supplier credit and avoiding liquidity issues.

• Cash Flow Forecasting: Regularly update cash flow forecasts to anticipate any shortfalls given the increased receivables and payables.

• Maintain Profitability: Continue to focus on operational efficiency to sustain profit margins and further grow retained earnings.

• Consider Financial Buffers: Build cash reserves beyond the current stable level to cushion against periods of delayed payments or unexpected expenses.

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