PROSAW LIMITED

Risk Rating: MEDIUM — The company is solvent with a strong short-term liquidity position and no overdue statutory filings, but cash reserves and net assets have declined materially over recent years while significant dividends have been paid to the parent. The absence of a publicly filed income statement limits the ability to verify earnings coverage for distributions, creating uncertainty about the sustainability of current capital withdrawals.

Key Concerns - Declining cash and net assets: Cash at bank fell from £2.38m at 31 December 2020 to £0.86m at 31 December 2025. Net assets decreased from £3.20m at 31 December 2022 to £2.90m at 31 December 2025. Over the same period, dividends of £550,000 (2025) and £770,000 (2024) were paid to Prosaw Holdings Limited, the majority shareholder. - Limited public profitability data: The accounts are filleted under the small companies regime, so the income statement is not delivered to Companies House. Turnover, gross margin, operating profit, and earnings cover for dividends cannot be assessed from the public record. - Working capital movement: Trade debtors increased to £652,077 while stocks fell to £1,355,300 and cash decreased. Without a cash flow statement or debtor aging analysis, the speed of collection and operating cash conversion cannot be verified.

Positive Indicators - Strong short-term solvency: current assets of £2.98m against current liabilities of £1.22m (a ratio of approximately 2.4:1), with no evident bank borrowing in creditors falling due within one year. - Audited accounts with an unqualified audit opinion; all Companies House filings (accounts and confirmation statement) are up to date. - Long-established business incorporated in 1973 with positive shareholders funds of £2.90m. - The director advance balance reported in the prior year was repaid in full during the year.

Due Diligence Notes - Obtain the full statutory accounts, including the profit and loss account and cash flow statement, to assess profitability, operating cash generation, and dividend cover. - Review debtor aging and customer concentration given the increase in trade debtors to £652k. - Examine the composition of “other creditors” (£577,908) and the nature and valuation of the £969,974 investment in group undertakings. - Confirm post-balance-sheet trading, order book, and any operational impact following the resignation of a director and secretary in April 2026. - Clarify the group’s dividend policy and whether distributions are supported by distributable profits rather than capital.