Risk Assessment: RELYON DIGITAL LIMITED

1. Risk Rating: MEDIUM

While the company demonstrates consistent growth in net assets and maintains a positive net current asset position, significant concerns around chronic low cash reserves, heavy reliance on intangible assets, debtor concentration, and stated dependence on parent company support for going concern justification elevate the risk profile above low. The recent management changes and corporate restructuring add additional uncertainty.

2. Key Concerns

Concern 1: Chronically Low Cash Reserves

Cash has been persistently minimal relative to the company's asset base and scale of operations. Over the past decade, cash has ranged from just £1,070 (2022) to £178,311 (2018), with the 2025 figure standing at only £54,097 against total assets of £4.03M. This represents a cash-to-assets ratio of approximately 1.3%. This pattern raises questions about working capital management and whether the company can respond to unexpected demands or short-term obligations without external support.

Concern 2: Asset Quality — Intangible Asset Dominance and Debtor Concentration

The balance sheet is heavily weighted toward two asset categories that carry impairment risk: - Intangible assets of £1,633,928 (primarily capitalised development costs and goodwill) represent approximately 40% of total assets. These are amortised over 3-6 years and are subject to impairment assessment. The significant write-down from £2,091,967 in 2024 to £1,633,928 in 2025 (£458k reduction) warrants explanation — whether this is amortisation, impairment, or disposal. - Debtors of £2,339,656 represent approximately 58% of total assets and 98% of current assets. The concentration of value in debtors creates vulnerability to collection failure, counterparty risk, and potential bad debts. Given the parent-subsidiary structure, it is unclear what portion of this debtor balance may be intercompany.

Concern 3: Going Concern Dependency on Parent Company

The accounts explicitly state: "The directors of the parent Company have signaled their intention to provide support as required" as a basis for the going concern assessment. This indicates the company may not be self-sustaining on its own cash flows and is reliant on group support. Current liabilities have increased by 51% year-on-year (from £626,132 to £946,126), which could indicate growing dependence on creditor (potentially intercompany) financing.

3. Positive Indicators

• Consistent Net Asset Growth: Net assets have grown from £1,442,661 (2015) to £3,083,355 (2025), demonstrating long-term value creation. The trajectory has been broadly upward with only minor dips (2017-2018 and 2019-2020).
• Positive Working Capital: Net current assets of £1,447,627 (2025) provide a reasonable buffer, having nearly doubled from £678,848 in 2024.
• Regulatory Compliance: All filings are current and not overdue. The company has engaged an independent auditor (AAB Audit & Accountancy Limited), and the accounts are prepared under FRS 102.
• Established Business: Incorporated in 1982, the company has over 40 years of operating history, suggesting resilience through multiple economic cycles.
• Parent Group Backing: The association with RelyOn Nutec (a larger international group) provides financial support infrastructure, as evidenced by the going concern statement.

4. Due Diligence Notes

1. Debtor Composition: Investigate the breakdown of the £2.34M debtor balance. Determine what proportion relates to intercompany balances versus third-party trade debtors. Assess ageing profiles and provision adequacy.

2. Intangible Asset Valuation: Request detail on the £458k reduction in intangible assets between 2024 and 2025. Clarify the split between goodwill, acquired intangibles, and capitalised development costs. Understand the amortisation policies and whether any impairment has been recognised.

3. Intercompany Arrangements: Given the PSC structure (RelyOn Digital A/S and P-Holding Relyon Nutec A/S with >75% control), investigate the nature of intercompany transactions, loans, and guarantees. The parent company's financial health is directly relevant to the going concern assumption.

4. Cash Flow Dynamics: Request cash flow statements to understand why cash generation remains so low despite growing profitability (as evidenced by increasing P&L reserves). Determine whether cash is being absorbed by capitalised development, intercompany transfers, or operational inefficiencies.

5. Recent Restructuring Context: The company changed its name from RELYON NUTEC DIGITAL LIMITED in May 2025, and director changes occurred in September 2025 (H Xxxxxxxname shown to subscribers resigned, M Xxxxxxxname shown to subscribers appointed). Understand the strategic rationale and whether this signals a broader group reorganisation.

6. Current Liabilities Growth: The 51% increase in current liabilities warrants investigation. Determine the composition — particularly whether this includes intercompany payables, accrued income, or deferred income related to the e-learning business model.

7. PSC Overlap: The PSC register shows overlapping ownership thresholds that appear inconsistent (multiple entities each holding >75%). Clarification should be sought on the actual ownership and control structure.

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