HIGH LEGH PARK LTD

Executive Summary

HIGH LEGH PARK LTD holds a solid investment property asset but faces liquidity challenges due to substantial short-term liabilities largely composed of director loans. While the company remains solvent with positive net assets, its working capital deficit signals financial strain requiring improved cash flow management and funding restructuring. Addressing these symptoms promptly will be crucial for sustaining financial health and operational stability.

HIGH LEGH PARK LTD - Analysis Report

Company Number: 13146460

Analysis Date: 2025-07-29 20:16 UTC

Financial Health Assessment for HIGH LEGH PARK LTD
Assessment Date: 31 March 2024

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1. Financial Health Score: C

Explanation:
HIGH LEGH PARK LTD shows a stable asset base primarily in investment property but faces significant challenges in liquidity and working capital management. The heavy reliance on director loans and a large current liabilities position relative to current assets indicates symptoms of financial strain, though the company remains solvent with positive net assets. The score reflects moderate financial health with warning signs requiring close monitoring and corrective action.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets (Investment Property)	1,779,198	Healthy long-term asset base; property value stable since incorporation.
Current Assets	112,481	Low liquidity relative to liabilities; some improvement from prior year.
Cash at Bank	110,897	Reasonably healthy cash position, improved from £35,960 last year.
Current Liabilities	1,643,422	Very high short-term obligations, mostly director loans.
Net Current Assets (Working Capital)	-1,530,941	Negative working capital indicates liquidity stress—"symptom of distress."
Net Assets (Shareholders' Funds)	248,257	Positive net worth, indicating solvency but thin equity buffer.
Share Capital	500	Minimal equity capital; company relies heavily on external funding.
Directors' Loan Account	1,555,000	Significant related party funding, interest-free and repayable on demand.

Interpretation of Vital Signs:
The company’s core asset—investment property—is solid and stable, which is a positive backbone ("healthy skeleton"). However, the liquidity picture is frail, with current liabilities exceeding current assets by over £1.5 million, representing "symptoms of financial strain." The large director loan, while interest-free and repayable on demand, represents a significant short-term liability and dependence on internal funding sources rather than external financing or operational cash flows.

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3. Diagnosis

What the Financial Data Reveals:

• Asset Stability: The company owns investment property valued at £1.78 million, unchanged over recent years, suggesting no impairment or revaluation losses—a stable asset base.
• Liquidity Challenge: Persistent negative working capital (net current liabilities of over £1.5 million) signals liquidity risk. Although cash has improved, it is insufficient to cover short-term obligations fully.
• Funding Structure: The company depends heavily on director loans (£1.555 million), which may be a flexible but potentially risky source of funding. The lack of interest on this debt is beneficial but the repayable-on-demand feature introduces uncertainty.
• Profitability & Reserves: Accumulated profits (profit and loss reserve of £247,757) are positive but modest relative to liabilities—indicating limited retained earnings to absorb shocks.
• Operational Size: With only 2 employees and minimal share capital, the company is small and likely closely held and managed.
• No Audit Requirement: The company qualifies for audit exemption, which means less external scrutiny, increasing reliance on internal governance.

Overall Diagnosis:
The company is solvent but faces liquidity constraints and structural funding risks. Its "heart"—the investment property—is strong, but the "circulatory system" (cash flow and working capital) shows signs of strain. The risk lies in meeting short-term obligations without additional financing or asset sales.

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4. Recommendations

1. Improve Liquidity Management:

   • Develop a cash flow forecast to identify timing gaps in covering current liabilities.
   • Explore options to convert part of the director loan into longer-term financing or equity to reduce short-term pressure.

2. Strengthen Capital Base:

   • Consider injecting additional equity capital to boost shareholders’ funds and reduce reliance on loans.
   • Evaluate potential for external funding (bank loans, investors) to diversify funding sources.

3. Enhance Working Capital Controls:

   • Seek to reduce current liabilities through negotiation of payment terms or debt restructuring.
   • Tighten debtor collection processes to improve current asset quality and cash inflows.

4. Monitor Property Value and Income:

   • Continue regular valuation of investment property to ensure asset values remain sound.
   • Explore opportunities to increase rental income or property utilisation to generate operating cash flows.

5. Governance and Reporting:

   • Given the absence of audit, maintain rigorous internal controls and consider voluntary audit or review to reassure stakeholders.
   • Directors should regularly review related party transactions (director loans) to ensure transparency and sustainability.

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