CHS LONDON LTD.

Financial Health Assessment: CHS LONDON LTD.

1. Financial Health Score: D

Explanation: The patient is alive but in a highly fragile state. While the company is currently technically solvent, it is suffering from chronic thin equity and severe leverage. The margin for error is almost non-existent, and the business has a recent history of slipping into negative equity (technical insolvency). The dramatic drop in the asset base between 2017 and 2018, combined with persistently high liabilities, suggests a fundamental change in the business model that has left the company operating on financial life support.

2. Key Vital Signs

• Net Assets (Equity): £5,717 – This is the company's financial "immune system." At less than £6k, it provides virtually no buffer against unexpected costs or revenue drops. Alarmingly, this is down significantly from £17,359 in 2024, indicating a recent hemorrhage of value (likely a loss or dividend extraction).
• Debt-to-Equity Ratio (Leverage): 33:1 – This is the financial equivalent of extremely high blood pressure. For every £1 of the company's own money, it owes £33 to creditors. This level of leverage is dangerously high and restricts financial agility.
• Current Ratio (Liquidity): 1.04 – Calculated as Current Assets (£196,623) divided by Current Liabilities (£189,314). This indicates the company can just barely cover its short-term debts with its short-term assets. A ratio this close to 1.0 means the company is living paycheck-to-paycheck; any delay in receiving payment could trigger a cardiac arrest in the cash flow.
• Share Capital: £100 – The nominal share capital remains tiny, meaning the P&L reserve is carrying almost the entirety of the equity.

3. Symptoms Analysis & Diagnosis

Symptoms: Looking at the patient's medical history reveals a dramatic event. In 2017, the company had total assets of £1.25 million and net assets of £96,664. By 2018, total assets had plummeted to £193,930. Given the business classification (SIC 55900 - Other accommodation), this strongly suggests the company sold a property (likely a leasehold or freehold asset used for accommodation) and transitioned into a much smaller operation.

Since that major "surgery" in 2017/2018, the company has struggled to maintain a healthy weight. It displayed symptoms of severe distress in 2019 and 2021, when net assets fell into negative territory (negative £645 and negative £7,768 respectively), meaning the business was technically insolvent and unable to pay its debts if they were all called in at once. While it recovered to a positive position in recent years, the latest 2025 figures show the equity cushion shrinking once again.

Diagnosis: Chronic Thin Equity Syndrome with Acute Debt Hypertension. The business is over-reliant on short-term creditor financing to sustain its operations. The recent drop in net assets from £17k to £5.7k is a concerning relapse. The company owns very little of its own assets outright and is heavily at the mercy of its creditors. With only one employee and minimal fixed assets (£208), the company is essentially managing cash flows from an accommodation-related business model that carries massive short-term debt obligations.

4. Prognosis & Recommendations

Prognosis: Cautious to Guarded. While the company has managed to survive periods of technical insolvency in the past, operating with such a thin equity base means it is highly vulnerable to external shocks. A sudden increase in interest rates, a major repair bill, or a disruption to revenue could easily push net assets back into negative territory, risking a formal insolvency event.

Recommendations for Financial Wellness: 1. Capital Injection (Vitamin Boost): The controlling shareholder (Mr. Nott) should consider injecting fresh equity into the business to thicken the equity cushion. This will reduce the debt-to-equity ratio to healthier levels and provide a vital buffer against future trading volatility. 2. Debt Restructuring (Blood Pressure Medication): Explore whether any of the £189k in current liabilities can be restructured into longer-term debt. Spreading the repayment burden over a longer horizon will ease the immediate pressure on cash flow. 3. Profit Retention (Building Muscle): If the company generates profits, it is vital to retain these within the business rather than extracting them as dividends. Building up the P&L reserve is the most organic way to nurse the balance sheet back to robust health. 4. Cash Flow Forecasting (Regular Check-ups): With a current ratio of 1.04, cash flow management must be meticulous. Implement rolling 12-week cash flow forecasts to ensure the company can meet its creditor obligations without relying on perfect timing of incoming revenues.