Investment Risk Analysis: PP DERBY LIMITED

1. Risk Rating: HIGH

Justification: While the company has returned to positive net assets after a prolonged period of negative equity, significant concerns remain regarding liquidity, related party dependency, and debtor concentration. Cash reserves have deteriorated to critically low levels, and the company's working capital is overwhelmingly dependent on a single related-party debtor whose recoverability is uncertain.

2. Key Concerns

Concern 1: Related Party Debtor Concentration

The most material risk is the £458,401 owed by parent company The Delta Echo Group Limited (formerly Professional Properties Limited), representing approximately 84.5% of total debtors and 83% of net current assets. Should the parent company fail to honour this balance, PP Derby Limited's liquidity position would become immediately untenable. The intercompany balance has also grown 33% year-on-year (from £345,518), suggesting ongoing dependency rather than reduction.

Concern 2: Critical Liquidity Position

Cash at bank has declined from £247,029 (2020) to £9,995 (2025), a 96% reduction over five years. Current liabilities of £373,180 dwarf available cash, and the current ratio is only viable due to the parent company debtor. Stripping out this related-party balance, the company's operational current assets (trade debtors of £6,166 plus cash of £9,995) total just £16,161 against £373,180 in current liabilities — a deeply concerning 0.04:1 operational current ratio.

Concern 3: Historical Negative Equity Period

The company sustained negative net assets for at least five consecutive years (2016–2021), reaching a nadir of -£139,475 in 2017. While recovery to positive equity is welcome, the prolonged insolvency risk period raises questions about the business model's resilience and whether the recovery is structurally sustainable or dependent on intercompany support. The slight decline in net assets from £149,478 (2024) to £146,518 (2025) may indicate the turnaround is plateauing.

3. Positive Indicators

• Return to Positive Net Assets: The transition from -£18,073 (2021) to £146,518 (2025) demonstrates meaningful recovery and improved balance sheet strength.

• Growing Asset Base: Total assets have grown consistently from £219,987 (2021) to £654,858 (2025), suggesting business expansion.

• Regulatory Compliance: Accounts and confirmation statements are filed on time with no overdue filings, indicating adequate administrative governance.

• Established Business: A 25-year operating history (incorporated 2000) suggests market longevity, and employee numbers have grown from 20 to 21.

• Director Investment: Xxxxxx Xxxxxxxxname shown to subscribers maintains a £13,090 unsecured, interest-free loan to the company, demonstrating some personal financial commitment.

4. Due Diligence Notes

1. Parent Company Financial Health: Urgently obtain and review the financial statements of The Delta Echo Group Limited. The entire liquidity position of PP Derby Limited hinges on the parent's ability to repay £458,401. Any distress at the parent level would cascade directly.

2. PSC Register Discrepancy: Two PSCs are listed (Professional Properties Limited and The Delta Echo Group Limited), each claiming >75% ownership. The accounts clarify these are the same entity following a name change. This duplication on the PSC register should be rectified and may indicate a compliance oversight.

3. Debtor Recoverability: Investigate the nature and terms of the parent company debtor. Is it trading-related, a loan, or accumulated management charges? The management charge was nil in 2025 versus £72,500 in 2024 — understand why, and whether the debtor balance includes unpaid management fees.

4. Cash Flow Trajectory: Request detailed cash flow statements to understand why cash has declined so precipitously despite growing total assets. Clarify whether cash is being absorbed by capital expenditure, debt servicing, or intercompany transfers.

5. Debt Structure Review: Bank loans increased from £29,671 to £77,669 in long-term liabilities, while current bank borrowings rose from £15,924 to £40,646. Understand the terms, security, and covenants attached to this expanding debt facility.

6. Taxation Liability: Current taxation and social security of £144,225 is substantial. Confirm this is being managed and not indicative of underlying profitability concerns or arrears.

7. Finance Lease Commitments: Future lease obligations of £49,958 (down from £100,765) relate to plant and machinery. Understand what assets these secure and whether they are essential to operations.

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