INOVA LEISURE LTD

Executive Summary

INOVA LEISURE LTD demonstrates improving operational metrics and short-term liquidity but remains in a net liability position, relying heavily on directors’ loans for funding. Conditional credit approval is recommended with close monitoring of cash flow, debtor collections, and profitability improvements to mitigate the risks associated with its current weak equity base and liquidity constraints.

INOVA LEISURE LTD - Analysis Report

Company Number: 14121366

Analysis Date: 2025-07-29 20:00 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   INOVA LEISURE LTD is a recently incorporated private limited company (since May 2022) operating in equipment repair and manufacturing (SIC 33190 and 32990). The company shows improving net current assets and total assets less current liabilities from FY 2023 to FY 2024, indicating operational growth and better short-term liquidity. However, it remains in a net liability position with negative shareholders’ funds (£-16,461 as at May 2024), reflecting accumulated losses. The significant directors’ loans (£54,160 total as of May 2024) suggest reliance on internal funding to maintain operations. Given these factors, the company has potential to service debt if growth and profitability continue but carries risk due to weak equity and reliance on director support. Credit approval should be conditional on further financial monitoring and possibly guarantees or covenants to mitigate risk.

2. Financial Strength:

• Fixed assets increased from £9,871 (May 2023) to £11,450 (May 2024), reflecting ongoing investment in tangible and intangible assets.
• Current assets improved substantially to £90,658, mainly driven by a sharp rise in debtors (£67,532) and stock (£21,671).
• Current liabilities rose to £87,175, but net current assets turned positive (£3,483) compared to negative (£-14,353) the prior year, indicating better short-term financial health.
• Long-term liabilities rose due to directors’ loan account (£30,554 as at May 2024), a non-traditional liability that may be less onerous than bank debt but still a financial obligation.
• Overall net liabilities remain high (£-16,461), showing accumulated losses and limited equity buffer.

3. Cash Flow Assessment:

• Cash on hand dropped significantly from £6,315 (May 2023) to £1,455 (May 2024), which could pressure liquidity despite positive net current assets.
• The increase in trade debtors and stock levels suggests working capital is tied up in operations; timely collection of receivables will be critical.
• Creditors have increased significantly, including VAT and tax obligations, which must be managed carefully to avoid cash flow stress.
• Directors’ loans likely provide an informal liquidity cushion but represent a concentration risk if these funds are withdrawn or unavailable.
• Overall, working capital position is improving but liquidity remains tight.

4. Monitoring Points:

• Monthly cash flow forecasts and debtor ageing to ensure timely collections and avoid cash shortages.
• Profitability trends and reduction of accumulated losses to build equity and reduce net liabilities.
• Directors’ loan balances and any changes in terms or withdrawals that could affect liquidity.
• Stock turnover rates to prevent overstocking and tied-up capital.
• Compliance with any agreed credit covenants or repayment schedules if credit is extended.