PURE HEATING WATER LTD

Executive Summary

PURE HEATING WATER LTD is currently experiencing financial distress characterized by negative working capital and shareholders’ funds, signaling liquidity and solvency challenges. Immediate actions to improve cash flow, reduce liabilities, and potentially inject new capital are essential to stabilize and restore financial health. Without corrective measures, the company risks operational disruptions despite being active and compliant with filings.

PURE HEATING WATER LTD - Analysis Report

Company Number: 13537494

Analysis Date: 2025-07-20 16:48 UTC

Financial Health Assessment for PURE HEATING WATER LTD
Incorporated: July 2021 | Industry: Plumbing, heat and air-conditioning installation (SIC 43220) | Status: Active

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1. Financial Health Score: D

Explanation:
The company is exhibiting symptoms of financial distress, notably persistent negative net current assets and shareholders’ funds over the past three years, signaling ongoing working capital shortages and accumulated losses. While it remains active and compliant with filings, the financial vitality is compromised, warranting urgent corrective measures.

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2. Key Vital Signs

Metric	2024 (£)	Interpretation
Current Assets	8,342	Low short-term assets, mainly cash (£8,142), minimal debtors.
Current Liabilities	14,964	Higher short-term debts than assets; cash alone insufficient.
Net Current Assets	-6,622	Negative working capital; “symptom” of liquidity strain.
Total Assets Less CL	-4,641	Total assets minus current liabilities negative; weak buffer.
Shareholders’ Funds	-4,642	Negative equity; accumulated losses outweigh capital.
Tangible Fixed Assets	1,981	Modest investment in plant and machinery, depreciating.
Cash Flow Indicator	Cash stable but low	Healthy cash flow absent; limited cash reserves.
Director Ownership	75-100%	Single controlling shareholder/director; decision-making centralized.

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3. Diagnosis: What the Numbers Reveal

• Liquidity Stress: The negative net current assets indicate the company does not have enough liquid resources to cover short-term obligations. This is a critical "vital sign" of financial distress and may lead to cash flow crises if not addressed.
• Capital Erosion: Negative shareholders’ funds reflect accumulated losses exceeding the initial equity investment. This situation is akin to a weakened immune system for a business, reducing its ability to absorb financial shocks.
• Stagnant or Declining Asset Base: Tangible fixed assets have depreciated, with no signs of significant reinvestment or expansion, suggesting limited growth capacity.
• Limited Receivables: Very low trade debtors suggest either immediate payment terms or low sales volume on credit, which may be positive for cash flow but could also indicate limited business scale.
• Single Operator Risk: The sole director and majority shareholder structure centralizes control but poses a risk if management capacity or decision-making falters.

In essence, the company is showing chronic symptoms of financial strain, primarily liquidity and solvency issues, reminiscent of a patient with a weakened heart and low blood pressure — struggling to sustain normal operations without external support or internal restructuring.

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4. Recommendations: Steps Toward Financial Wellness

1. Improve Liquidity Position:

   • Negotiate extended payment terms with creditors to ease current liabilities pressure.
   • Accelerate collection of any outstanding receivables and consider securing short-term financing or overdraft facilities as a liquidity buffer.

2. Capital Injection:

   • Consider additional equity investment from the current shareholder or external investors to restore positive net assets and strengthen the balance sheet.
   • Alternatively, explore grants or government-backed loans available for SMEs in the heating and plumbing sector.

3. Cost Control and Revenue Enhancement:

   • Conduct a thorough review of operating expenses to identify and reduce non-essential costs.
   • Develop strategies to increase sales volume, possibly via marketing, partnerships, or service diversification.

4. Asset Management:

   • Assess the fixed asset utilization; consider disposing of underused assets to generate cash.
   • Plan for asset upgrades cautiously, ensuring that capital expenditure aligns with revenue growth.

5. Financial Monitoring and Forecasting:

   • Implement robust cash flow forecasting to anticipate liquidity gaps early.
   • Regularly monitor key ratios and financial health indicators to detect and act on symptoms before they worsen.

6. Governance and Advisory:

   • Engage a financial advisor or accountant to provide ongoing financial health checks.
   • Consider appointing an additional director or advisor to bring strategic oversight.

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