J & K LEISURE YORK LTD

Executive Summary

J & K LEISURE YORK LTD is investing in its asset base but faces significant short-term liquidity challenges, with a large working capital deficit and reduced cash reserves. While the company remains solvent with positive net assets, urgent actions to improve cash flow management and working capital are critical to stabilize financial health and support sustainable growth.

J & K LEISURE YORK LTD - Analysis Report

Company Number: 13554695

Analysis Date: 2025-07-29 18:27 UTC

Financial Health Assessment of J & K LEISURE YORK LTD (Year ended 31 August 2024)

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1. Financial Health Score: C-

Explanation:
J & K LEISURE YORK LTD shows some improvement in net asset value and fixed asset investment but faces significant short-term liquidity challenges. The company’s working capital is deeply negative, indicating symptoms of financial distress in meeting immediate obligations, despite a positive net asset position. This results in a borderline health grade, reflecting cautious optimism but notable concerns.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Current Assets	£9,829	Low level of liquid and receivable assets relative to liabilities.
Cash at Bank	£1,456	Very limited cash on hand—symptom of tight liquidity or cash flow pressure.
Current Liabilities	£48,536	High short-term debts due within one year—potential liquidity crunch.
Net Current Assets (Working Capital)	-£38,707	Negative by a large margin, indicating inability to cover short-term debts.
Fixed Assets (Tangible)	£67,816	Significant investment in property, plant, and equipment—asset base growing.
Net Assets (Equity)	£29,109	Positive shareholder funds showing accumulated value despite liquidity issues.
Debtors	£8,373	Moderate receivables but may be slow to convert to cash (cash flow symptom).
Profit & Loss Reserves	£29,107	Retained earnings improving, suggesting some profitability or capital infusion.

Additional Observations:

• The company’s cash position has declined from £6,684 (2023) to £1,456 (2024), a red flag for immediate cash flow.
• Current liabilities more than doubled from £23,094 (2023) to £48,536 (2024), increasing short-term pressure.
• Fixed assets nearly tripled, indicating capital expenditure or property acquisition, which could strain cash flow but may enhance long-term capacity.
• The company employs only 2 staff, consistent with a micro/small business profile.

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3. Diagnosis: What the Financial Data Reveals About Business Health

Symptoms of Distress:

• Working Capital Deficiency: The company’s net current assets are deeply negative (-£38,707), indicating it cannot easily cover short-term debts with current assets. This is akin to a patient with a weak pulse—warning of potential cash crises ahead.
• Cash Flow Tightness: The drop in cash reserves by over 75% year-on-year suggests operational cash inflows are insufficient or cash is tied up in debtors or fixed assets.
• Increased Short-Term Debt: Current liabilities grew significantly, likely increasing pressure on liquidity and solvency.
• Asset Investment: The large increase in fixed assets shows the company may be investing to grow or upgrade operations, which is a positive sign but may be currently straining financial resources.

Positive Signs:

• Positive Net Assets: Despite liquidity problems, the company’s overall net assets are positive and growing, meaning it has an equity buffer.
• Retained Earnings Growth: The increase in profit and loss reserves suggests the company has generated or retained profit over time.
• Stable Ownership and Management: Directors and significant control persons have been consistent since incorporation, providing stable governance.

Overall Condition:
The company exhibits a classic case of a "growth strain": investing heavily in fixed assets while struggling with short-term liquidity. It is not insolvent but shows clear symptoms of financial stress in cash management and working capital. This resembles a patient with good underlying health but suffering from acute symptoms that require immediate care.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Accelerate collection of debtors to convert receivables into cash faster.
   • Negotiate extended payment terms with creditors to ease immediate cash outflows.

2. Cash Flow Forecasting and Control:

   • Implement rigorous cash flow forecasting to anticipate crunch periods.
   • Limit further capital expenditure until liquidity improves.

3. Explore Short-Term Financing Options:

   • Consider short-term credit lines or overdrafts to manage liquidity gaps.
   • Evaluate the possibility of equity injection or director loans to bolster cash reserves.

4. Operational Efficiency Review:

   • Analyze costs and overheads to identify savings opportunities.
   • Reassess staffing and operational processes given the small workforce.

5. Asset Utilization:

   • Review the newly acquired fixed assets for potential to generate revenue or be monetized if necessary.

6. Regular Financial Monitoring:

   • Establish monthly financial health checks focusing on liquidity and working capital.

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