GYM GEEK ONLINE LTD

Executive Summary

Gym Geek Online Ltd has a stable equity base but faces ongoing liquidity challenges with negative working capital and low cash reserves, signaling short-term financial strain. The company relies heavily on director loans to bridge cash flow gaps. Improving cash flow management and reducing current liabilities are critical to strengthening its financial health and ensuring sustainable operations.

GYM GEEK ONLINE LTD - Analysis Report

Company Number: 13558128

Analysis Date: 2025-07-20 15:38 UTC

Financial Health Assessment: GYM GEEK ONLINE LTD (As at 31 August 2024)

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1. Financial Health Score: C

Explanation:
Gym Geek Online Ltd shows modest growth in net assets and shareholders' funds over the last three years, indicating some strengthening in financial position. However, the company exhibits chronic liquidity challenges, with negative net current assets (working capital) and limited cash reserves, symptomatic of cash flow strain. This score reflects a company that is stable but under pressure from short-term liabilities and needs to improve liquidity management.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	27,451	Stable investment in long-term assets; moderate aging.
Current Assets (Cash)	893	Very low cash reserves; risky for short-term needs.
Current Liabilities	15,825	Significant short-term obligations to meet.
Net Current Assets (Working Capital)	-14,932	Negative working capital indicates liquidity stress.
Net Assets (Equity)	12,519	Positive and growing equity base; business has value.
Share Capital	100	Minimal initial capital invested; risk absorbed by profits.
Increase in Net Assets (2023-24)	+8,237	Improvement signals better profitability or control.
Directors' Loan Accounts	13,834	High reliance on director funding suggests external borrowing limits.

Interpretation:

• Liquidity: The company’s negative working capital is the most concerning vital sign. It means current liabilities exceed current assets by nearly £15k, indicating the company may struggle to pay bills as they fall due without additional cash inflows.
• Solvency: Positive net assets and growth in shareholders’ funds show the company is solvent and building equity, a healthy sign.
• Funding: Heavy use of director loans (13,834) as part of current liabilities indicates dependence on internal sources to fund operations, which may not be sustainable.
• Asset Management: Fixed assets have declined slightly, possibly due to depreciation, but remain a significant part of the balance sheet.

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3. Diagnosis

The company is showing symptoms of financial distress primarily due to liquidity issues — a "healthy heart" (equity and asset base) but "weak pulse" (cash flow and working capital). Persistent negative working capital over the past four years signals ongoing difficulty in meeting short-term obligations from liquid resources. Although net assets have increased, this is driven more by accumulated profits (P&L reserve) than by improved liquidity.

The high director loan balance within current liabilities indicates the company is relying on insiders to plug cash flow gaps, which while a positive sign of support, is not a long-term solution and may mask underlying operational cash flow problems.

The company operates in the fitness facilities industry, which may be subject to seasonality and demand fluctuations, further emphasizing the need for robust cash flow management.

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4. Recommendations

To improve financial wellness and avoid liquidity crises, the company should:

1. Enhance Cash Flow Management:

   • Implement stricter cash flow forecasting and control.
   • Accelerate receivables collection and manage payables timing to reduce working capital deficit.

2. Reduce Current Liabilities:

   • Negotiate longer payment terms with suppliers or refinance short-term debts to medium-term where possible.
   • Consider repaying or restructuring director loans to reduce pressure on short-term liabilities.

3. Increase Liquid Assets:

   • Build a cash buffer to cover at least 3 months of operating expenses.
   • Avoid unnecessary capital expenditures until liquidity improves.

4. Boost Revenue and Profitability:

   • Explore expanded services or marketing to increase turnover and improve operating margins.
   • Monitor cost controls closely to improve net profits that strengthen equity further.

5. Regular Financial Health Check-ups:

   • Perform quarterly financial reviews to detect early signs of distress and adjust plans accordingly.

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Medical Analogy Summary

Gym Geek Online Ltd’s financial "heart" is beating with positive net assets and accumulated profits, but the "circulatory system" is clogged — negative working capital and minimal cash flow restrict the company’s ability to deliver nutrients (cash) where needed promptly. Without intervention to clear these blockages (improve liquidity), the risk of short-term distress or "financial shock" remains elevated despite a solid foundation.

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