MAIDSTONE STUDIOS LIMITED

1. Risk Rating: MEDIUM

The company maintains a substantial net asset position (£4.58M) and a positive current ratio, indicating solvency. However, a sharp deterioration in working capital, declining net assets over consecutive years, and a significant increase in related-party costs undermine the financial profile. The lack of filed Profit & Loss data limits precision, but the evidence points to a moderate risk level.

2. Key Concerns

• Liquidity Deterioration: Net current assets halved from £1.21M to £479k in 2025. Cash at bank (£321k) covers only 32% of current liabilities, and the company relies heavily on debtors—particularly the £405k owed by group undertakings—to meet short-term obligations.
• Earnings Pressure from Related-Party Transactions: Rent paid to a group company increased by 80% year-on-year (£250k to £450k). This directly inflates the cost base and is likely the primary driver behind the £396k reduction in net assets (from £4.98M to £4.58M), indicating a probable pre-dividend loss for the year.
• Operational Restructuring Signal: Disposal of plant and machinery with a gross cost of £5.2M in 2025 represents a fundamental shift away from production-related assets. While cash may have been raised, this raises questions about the future viability of the broadcasting/production arm, potentially pivoting the business entirely towards property letting (SIC 68209).

3. Positive Indicators

• Strong Solvency Buffer: Net assets of £4.58M provide a comfortable margin above total liabilities. Tangible fixed assets (£5.09M) are largely unencumbered, with total creditors under £1M.
• Compliant Regulatory Status: All filing deadlines are met (accounts and confirmation statement), with no overdue submissions. The company correctly utilises the small companies audit exemption.
• Stable Operational Base: The company boasts a 45-year trading history and a stable workforce of 20 employees. Furthermore, ownership by Dovedale Associates Ltd (>75% PSC) implies access to group-level financial support, which is a mitigating liquidity factor.

4. Due Diligence Notes

• Recoverability of Group Debtors: Investigate the credit quality and expected repayment timeline for the £405,565 owed by group/related companies. Delayed repayment could materially impact liquidity.
• Composition of Accruals: Scrutinise the £527,680 held in accruals and deferred income. Confirm whether this represents substantial customer prepayments for future studio space, which is a forward-looking indicator of demand, or primarily unpaid supplier costs.
• Related-Party Rent Review: Request the intercompany agreement governing the £450,000 rent charge. Verify that the terms are at arm's length and assess whether any non-cash or capitalised elements exist.
• Off-Balance Sheet Risk: Request the full Profit & Loss account and cash flow statement (exempt from filing) to determine exact EBITDA, interest cover, and cash conversion. The current data does not permit calculation of these core solvency metrics.
• Security and Covenant Compliance: Review the terms of the secured bank loan (fixed and floating charge). Confirm the remaining balance (£358k total) and any financial covenants which might be breached given the declining net asset trend.