COLCHESTER FITNESS CENTRE LTD

Executive Summary

COLCHESTER FITNESS CENTRE LTD exhibits signs of financial strain primarily due to negative working capital, though it has shown improvement in net assets and reduced liabilities. The company should focus on strengthening liquidity and cash flow management to ensure sustainable operations. With targeted actions on working capital and potential asset optimization, the outlook can improve to a healthier financial state.

COLCHESTER FITNESS CENTRE LTD - Analysis Report

Company Number: 12822281

Analysis Date: 2025-07-20 17:35 UTC

Financial Health Assessment for COLCHESTER FITNESS CENTRE LTD (as of 31 August 2024)

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1. Financial Health Score: C

Explanation:
The company shows some signs of financial strain, particularly in working capital management, but also displays improvement. While net assets have increased, persistent negative net current assets ("working capital deficit") indicate liquidity challenges that warrant close monitoring and corrective action.

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2. Key Vital Signs

Metric	2024 Value (£)	2023 Value (£)	Interpretation
Fixed Assets	147,308	173,657	Long-term investments have decreased, possibly indicating asset disposals or depreciation.
Current Assets	127,858	84,651	Increase in cash, receivables, or stock improves short-term liquidity potential.
Current Liabilities	206,702	232,939	A decrease in short-term obligations is positive but still high relative to current assets.
Net Current Assets	-74,644	-141,801	Negative working capital, though improved, signals ongoing liquidity risk ("symptom of distress").
Total Assets less Current Liabilities	72,664	31,856	Net assets have more than doubled, indicating improved overall financial stability ("strengthening pulse").
Net Assets / Shareholders' Funds	72,664	31,856	Equity base has grown, which is positive for solvency and creditor confidence.
Average Number of Employees	4	4	Stable workforce size indicates steady operational scale.

Additional Observations:

• The share capital remains nominal (£3), indicating minimal initial equity injection.
• The company operates in "Activities of sport clubs" (SIC 93120), a sector potentially sensitive to economic cycles and discretionary spending.
• The company is micro-entity sized with simple accounting requirements.
• No overdue filings or compliance issues detected, indicating good administrative health.
• The company has three directors and two significant controllers owning between 25%-50% shares each, indicating concentrated ownership.

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3. Diagnosis: What the Numbers Reveal

• Liquidity Challenges: The consistently negative net current assets over multiple years highlight a "symptom of distress" — the company’s short-term liabilities exceed its current assets, threatening its ability to meet immediate obligations without selling long-term assets or raising cash. Although this deficit has improved significantly from -£141,801 in 2023 to -£74,644 in 2024, the issue remains a concern.

• Asset Management: The reduction in fixed assets from £173,657 to £147,308 could be due to depreciation or asset sales. This lessens long-term asset strength but might be a strategic move to improve cash or reduce debt.

• Improving Solvency: The doubling of net assets from £31,856 to £72,664 is a "positive heartbeat," showing the company has strengthened its equity base, possibly through retained earnings or capital injections.

• Operational Stability: Consistent employee levels and no signs of administration or liquidation suggest operational continuity and management commitment.

• Risk Factors: The company’s sector (sports clubs) may face volatility due to economic conditions or public health measures, which can impact cash flow and profitability.

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4. Recommendations: Prescription for Financial Wellness

Immediate Actions:

• Improve Working Capital: Prioritize reducing short-term liabilities or increasing current assets (e.g., faster receivables collection, inventory optimization). Consider renegotiating payment terms with suppliers to ease cash flow pressures.

• Cash Flow Management: Implement rigorous cash flow forecasting and monitoring to avoid liquidity crises. Preserve "healthy cash flow" by controlling discretionary spending and increasing membership or service revenues.

• Asset Review: Assess fixed assets for potential underutilization. Selling non-essential assets could provide liquidity without harming operations.

• Capital Strengthening: Explore additional equity funding or shareholder loans to shore up working capital and buffer against short-term obligations.

Long-term Strategies:

• Diversify Revenue Streams: Consider expanding services or memberships to stabilize income and reduce sector-specific risks.

• Cost Control: Evaluate operational efficiencies and cost-saving measures without compromising service quality.

• Financial Reporting: Though exempt from audit, consider voluntary external reviews or forecasts to enhance financial transparency and planning.

• Stakeholder Communication: Maintain clear communication with directors, shareholders, and creditors to build confidence and negotiate support if needed.

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