Risk Assessment: ASSURETY LIMITED

1. Risk Rating: LOW

Justification: The company demonstrates a strong and consistent financial trajectory with net assets growing from £108,286 (2014) to £2,194,948 (2024). Cash reserves remain substantial at £1.46M, all liabilities are current (no long-term debt), and the company maintains a healthy current ratio of approximately 3:1. Filing obligations are fully compliant with no overdue items. The primary area of concern is the significant growth in trade debtors, which requires monitoring but does not, on its own, elevate the overall risk profile.

2. Key Concerns

a) Trade Debtors Concentration and Growth Trade debtors increased by approximately 155% from £705,765 (2023) to £1,802,509 (2024). This now represents 55% of total current assets. Such a rapid increase raises questions about: collection risk, potential revenue recognition timing issues, or concentration exposure to a small number of debtors. Without a breakdown of debtor ageing or client concentration, recoverability cannot be fully assessed.

b) Corporation Tax Liability Increase Corporation tax nearly doubled from £329,768 to £593,224 year-on-year. While this indicates strong profitability, it represents a significant near-term cash outflow requirement. The underlying cause—whether organic profit growth, one-off gains, or deferred tax adjustments—cannot be determined from the abbreviated accounts filed.

c) Limited Financial Transparency The company files under the small companies regime with Total Exemption Full accounts, meaning no profit and loss account is publicly available. This limits the ability to assess revenue trends, margins, operating costs, and the quality of earnings. The absence of an independent audit also reduces assurance over the figures presented.

3. Positive Indicators

• Consistent Net Asset Growth: Net assets have grown every year for the past decade, from £108,286 to £2,194,948, demonstrating sustained value creation and business stability.

• Strong Cash Position: Cash of £1,455,918 provides significant liquidity coverage against current liabilities of £1,097,999. The company could theoretically settle all current obligations from cash reserves alone.

• No Long-term Debt: All liabilities fall due within one year, with no borrowings or long-term creditors. This eliminates refinancing risk and interest burden.

• Regulatory Compliance: Accounts and confirmation statements are current with no overdue filings. The company has maintained an active status throughout its 13-year history.

• Stable Governance Structure: Three directors, each holding 25-50% of shares and voting rights, suggests a balanced ownership structure with no single dominant controller. All three PSCs are registered and current.

• Consistent Employment: The company has maintained 9 employees across both 2023 and 2024, indicating operational stability.

4. Due Diligence Notes

1. Debtor Quality: Request a detailed aged debtor analysis and identify the top 5 debtors by value. Determine whether the increase relates to a small number of clients (concentration risk) and assess the recoverability profile. Consider whether any related-party debtor balances exist beyond the £300 noted.

2. Profitability Drivers: Seek management accounts or detailed P&L to understand what drove the significant increase in corporation tax. Clarify whether 2024 profits reflect sustainable trading or one-off items.

3. Revenue Recognition Policy: The accounts note revenue is recognised by reference to "stage of completion" for professional services. Given the SIC code (74909 – other professional, scientific and technical activities), understand whether the debtor growth reflects work-in-progress billing or completed but unbilled services.

4. Related Party Transactions: The accounts disclose only £300 due from related parties. Confirm whether any of the trade debtors represent connected entities not captured in this disclosure.

5. Cash Flow Reconciliation: Despite strong profitability (evidenced by growing retained earnings and higher tax liability), cash declined from £1,682,879 to £1,455,918. Understand the cash flow dynamics—specifically, how much cash was absorbed by the debtor book increase versus capital expenditure and tax payments.

6. Other Creditors: Other creditors decreased from £300,157 to £208,568. Clarify the nature of these balances—whether they represent accruals, director loans, or trade-related items.

7. Provisions: A small provision of £2,003 exists (down from £2,788). Understand the nature and whether any larger contingent liabilities exist.

8. Business Model Sustainability: With only £6 in share capital, the business has been entirely equity-funded through retained profits. Understand the dividend policy and whether the owners are extracting value through remuneration versus dividends, which would affect future capital retention.