FLAME HEATING LTD

Executive Summary

Flame Heating Ltd shows solid growth in net assets and fixed asset investment but currently faces liquidity challenges reflected in a negative working capital position. Immediate focus on cash flow management and lease obligations is recommended to ensure smooth operations. Overall, the company is solvent with a fair financial health grade and a cautiously positive outlook.

FLAME HEATING LTD - Analysis Report

Company Number: 12775449

Analysis Date: 2025-07-20 18:26 UTC

Financial Health Assessment: Flame Heating Ltd (as at 31 July 2024)

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1. Financial Health Score: C (Fair)

Explanation: Flame Heating Ltd shows some positive growth in net assets and fixed assets, indicating investment and expansion. However, the emergence of a negative net current asset position ("working capital") signals a liquidity strain, which can be a symptom of operational cash flow challenges. The company is not in immediate distress but should address liquidity to avoid financial discomfort.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Net Current Assets (Working Capital)	-£6,952	Negative working capital means current liabilities exceed current assets, indicating potential liquidity stress. The company may struggle to cover short-term obligations with its available liquid assets.
Cash at Bank	£26,038	Reasonably healthy cash balance, but offset by creditors and lease obligations. Cash is the lifeblood; while present, it must be monitored closely.
Fixed Assets (Net book value)	£27,893 (up from £5,200 in 2023)	Significant investment in plant and machinery, which may enhance operational capacity or efficiency but also ties up cash. Depreciation charges have increased accordingly.
Total Assets less Current Liabilities	£20,941	Indicates the company’s assets net of short-term debts are positive, but less so than previous years.
Long-term Liabilities (Finance Lease Obligations)	£8,543	New long-term obligations have been taken on, increasing financial leverage and future cash flow commitments.
Net Assets (Shareholders' Funds)	£12,398 (up from £6,128 in 2023)	Growth in equity shows retained profit accumulation, a sign of operational profitability or capital injections.
Turnover and Profitability Data	Not disclosed in detail	Limits assessment of operational profitability but accumulated reserves suggest positive retained earnings.

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3. Diagnosis: What the Financial Data Reveals

• Liquidity Strain (Symptoms of Distress): The shift from positive to negative net current assets is a warning sign. Despite a decent cash balance, current liabilities have grown sharply, especially short-term creditors (£30,064) and finance lease obligations. This imbalance may stress day-to-day operations if payments come due before cash inflows.

• Investment and Expansion: The company has acquired significant fixed assets (£44,456 gross, net £27,893), suggesting growth or modernization efforts. While this is a good sign for future capacity, it has been financed in part by long-term finance leases, increasing debt service obligations.

• Solvency and Equity Strength: Shareholders’ funds have doubled since last year, indicating retained profits or capital injections. This provides a cushion against shocks and reflects an overall solvent position.

• Operational Scale and Staffing: The company employs only one person, indicating a very small operation, possibly owner-managed. This can limit scale but allows tight control.

• Absence of Audit and Limited Disclosures: The company benefits from small company exemptions, which limit transparency on profitability and cash flows. This restricts full diagnostic insight but is not uncommon for companies of this size.

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4. Recommendations: Specific Actions to Improve Financial Wellness

• Improve Working Capital Management:

  • Tighten credit control to reduce debtor days and improve cash inflows.
  • Negotiate longer payment terms with creditors or restructure short-term liabilities.
  • Monitor cash flow forecasts regularly to pre-empt liquidity crunches.

• Review Lease Obligations:

  • Assess the cost-effectiveness of finance leases. Consider refinancing or restructuring to reduce immediate cash outflows.
  • Evaluate if the fixed assets acquired are generating expected returns; if not, consider asset disposal options.

• Enhance Financial Reporting and Planning:

  • Even if exempt from audit, prepare detailed internal management accounts to track profitability, cash flows, and financial ratios monthly.
  • Develop a budget and cash flow plan to manage expansion sustainably.

• Explore Capital Options if Needed:

  • Consider injection of additional equity or short-term working capital loans if liquidity issues persist.
  • Maintain good banking relationships for contingency funding.

• Maintain Compliance and Timely Filings:

  • Continue timely filing of accounts and confirmation statements to avoid penalties and maintain good standing for creditworthiness.

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Medical Analogy Summary

Flame Heating Ltd’s financial health is akin to a patient who has recently undergone a significant treatment (investment in fixed assets) and is showing signs of recovery (growth in net assets). However, the patient exhibits symptoms of mild dehydration (negative working capital), which if not addressed promptly, can lead to complications. With proper hydration (improved liquidity management) and monitoring, the outlook remains stable and promising.

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