Investment Risk Analysis: Custom Security Solutions Limited

1. Risk Rating: LOW-MEDIUM

The company demonstrates a strong and improving financial trajectory with substantial cash reserves, growing net assets, and no filing irregularities. The primary risk factors relate to recent corporate restructuring (acquisition by andwis group), significant board turnover, and the need to understand the composition of growing liabilities. The business is well-established with 25 years of trading history and a resilient order book.

2. Key Concerns

i. Significant Board Turnover Coinciding with Acquisition

On 31 March 2025, four new directors were appointed simultaneously (Xxxxxxxname shown to subscribers, Xxxxxxxname shown to subscribers, Xxxxxxxname shown to subscribers, Xxxxxxxname shown to subscribers), while Xxxxxx Xxxxxxxxname shown to subscribers resigned on the same date. Xxxxxx Xxxxxxxxname shown to subscribers subsequently resigned in March 2026. This level of board change, coinciding with the company becoming part of the andwis group, raises questions about post-acquisition governance, strategic direction, and potential cultural integration risks. The influx of new leadership warrants scrutiny regarding their experience and the rationale for the near-wholesale board replacement.

ii. Growing Liabilities Alongside Asset Growth

Total liabilities have grown from £1.11M (2019) to £4.67M (2025), tracking closely with asset growth. While net assets remain positive and growing, the liability composition is not fully visible from the summary data. Understanding whether these are trade payables, deferred income (common in service/maintenance contracts), or debt obligations is essential to assessing true solvency risk.

iii. Ownership Structure and PSC Discrepancy

The PSC register lists Custom Security Group Limited as controlling 75%+ of shares, yet the strategic report references the company becoming part of the andwis group on 31 March 2025. This suggests either a chain of ownership (andwis group may own Custom Security Group Limited) or a recent transaction not yet reflected in PSC filings. The PSC register should be updated within 28 days of changes; any delay would represent a compliance concern.

3. Positive Indicators

• Strong Financial Trajectory: Net assets have grown from £11,111 in 2018 to £2.78M in 2025, demonstrating sustained profitability and value creation over multiple periods.
• Robust Liquidity: Cash reserves of £2.7M against total assets of £7.3M represent a healthy cash position (approximately 37% of total assets), providing significant operational flexibility and a buffer against short-term obligations.
• Revenue Growth and Order Book: The strategic report confirms year-on-year revenue growth and a resilient order book, with all key certifications retained.
• Compliance Standing: All filings are current with no overdue status. The company maintains audited accounts despite qualifying for audit exemption as a subsidiary, indicating a commitment to financial transparency.
• Established Market Position: 25 years of continuous operation in the private security sector, with a diversified service offering (CCTV, access control, intruder alarms, intercoms, analytics).
• No Dividend Stripping: The directors have not paid dividends, retaining earnings within the business to fund growth and strengthen the balance sheet.

4. Due Diligence Notes

1. Liability Composition: Obtain the full balance sheet to break down current vs. non-current liabilities. Specifically investigate whether the £4.67M liability figure includes deferred revenue from maintenance contracts (which would be lower risk) versus short-term trade payables or group loans.

2. Group Structure and Intercompany Balances: Given the acquisition by andwis group, investigate whether any liabilities represent intercompany balances with the parent or fellow group companies. This is critical for understanding true third-party solvency exposure.

3. PSC Register Currency: Verify whether the PSC register has been updated to reflect the andwis group ownership structure. If Custom Security Group Limited is now a subsidiary of andwis group, this chain should be documented. Check for any late PSC notifications.

4. Year-End Change Rationale: The company changed its accounting reference date from 30 April to 31 March. While this is commonly done to align with a parent company's year-end, confirm this was properly filed and understand any impact on comparability of financial periods.

5. New Director Backgrounds: Conduct standard due diligence on the four directors appointed on 31 March 2025. Verify their prior experience, any directorship history, and check the Insolvency Service disqualification register. The near-simultaneous appointment suggests these may be group-appointed individuals.

6. Auditor Independence: TC Group London Limited are proposed for reappointment. Verify they have no conflicts of interest with the andwis group and that audit fees are proportionate to the company's size.

7. Working Capital Cycle: With cash at £2.7M and the company in a service/installation business, investigate debtor days and creditor days to understand whether the cash position reflects efficient collections or deferred supplier payments. The slight cash decline from 2024 (£2.75M) to 2025 (£2.70M) despite revenue growth warrants explanation.

8. Acquisition Terms: Seek details of the andwis group acquisition structure, consideration paid, and any earn-out or performance conditions that could affect future cash flows.

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