Risk Assessment: SILURIAN SECURITY SERVICES LIMITED

1. Risk Rating: MEDIUM

Justification: The company demonstrates consistent profitability and adequate liquidity with net current assets of £918,352. However, several material anomalies in the latest filed accounts warrant significant scrutiny, including an unexplained £1.1 million decline in shareholders' equity despite profitability, a major discrepancy between the cash flow statement and balance sheet, and dramatic shifts in cost classification. These issues, combined with a declining revenue trend, elevate risk beyond what the headline financials might otherwise suggest.

2. Key Concerns

Concern 1: Unexplained Equity Erosion Despite Profitability

Shareholders' funds decreased from £2,583,733 to £1,479,352 — a reduction of £1,104,381 — despite the company reporting a profit after tax of £487,986. Even accounting for dividends declared of £156,000, the expected equity would be approximately £2,915,619, leaving an unexplained shortfall of approximately £1.4 million. This suggests either undisclosed distributions, prior period adjustments, or potential misstatement requiring urgent clarification.

Concern 2: Cash Flow Statement vs Balance Sheet Discrepancy

The cash flow statement reports closing cash of £2,272,784, while the balance sheet shows cash at bank of £680,417 — a difference of approximately £1.6 million. This is a material inconsistency that could indicate a preparation error or a more fundamental issue with the financial statements. The cash flow also appears to show dividends paid as a positive figure (£156,000) rather than an outflow, which contradicts standard presentation and the comparative year's treatment.

Concern 3: Dramatic Cost Structure Reclassification

Cost of sales fell by 56% (from £1,829,605 to £797,590) while administrative expenses increased by 63% (from £1,710,937 to £2,790,987). Staff costs simultaneously increased by 64% from £1,944,254 to £3,190,163, with employee headcount apparently dropping from 90 to nil (or undisclosed). These shifts suggest either a fundamental change in business operations, a change in accounting policy, or a reclassification of costs that obscures true operational performance and margin analysis.

3. Positive Indicators

Long Track Record and Active Status

Incorporated in 2001, the company has over 23 years of operating history in private security services. Filing compliance appears current with no overdue documents.

Consistent Profitability

The company has maintained operating profits throughout the reported period, generating £650,648 in operating profit for YE 2025 (albeit down from £731,834 in 2024). The business model appears fundamentally viable.

Strong Liquidity Position

Net current assets of £918,352 and cash of £680,417 provide a reasonable buffer against current liabilities of £268,416. The current ratio stands at approximately 4.4:1, indicating the company can comfortably meet short-term obligations.

Low Financial Leverage

Total liabilities of £268,416 against shareholders' funds of £1,479,352 represents modest gearing. The company appears to operate with minimal debt reliance.

4. Due Diligence Notes

Priority 1: Reconcile the Equity Movement

Request a detailed reconciliation of the profit and loss reserve movement from £2,583,633 to £1,479,252. Specifically, confirm whether any additional dividends, capital reductions, prior period adjustments, or other distributions occurred during the year. The magnitude of the unexplained reduction is concerning.

Priority 2: Clarify the Cash Flow Discrepancy

Seek explanation for the £1.6 million difference between the cash flow statement's closing cash figure and the balance sheet cash figure. Also request clarification on why dividends paid appear as a positive figure in the 2025 cash flow statement when they should represent an outflow.

Priority 3: Understand Cost Reclassification

Obtain management explanation for the significant shift in cost classification between cost of sales and administrative expenses. Determine whether this reflects a genuine change in business operations (e.g., shift from subcontracted to employed labour) or an accounting policy change that affects comparability.

Priority 4: Employee Headcount Disclosure

The 2025 accounts show production staff as "–" versus 90 in 2024, yet staff costs increased by 64%. Clarify whether the company still employs staff, whether costs have been reclassified, and whether the "–" represents zero employees or a disclosure exemption.

Priority 5: Directors' Remuneration

In 2024, directors' remuneration was £460,050; in 2025 it is shown as nil. Determine whether director remuneration has been reclassified into staff costs, or whether a genuine change in compensation has occurred. Given Xxxxxx Xxxxxxxxname shown to subscribers's >75% ownership, related party transactions require scrutiny.

Priority 6: Director Changes

The directors' report lists three directors (Xxxxxxxname shown to subscribers, King, Xxxxxxxname shown to subscribers), but only Xxxxxx Xxxxxxxxname shown to subscribers appears as a current officer. Clarify the status of Xxxxxx Xxxxxxxxname shown to subscribers and Xxxxxx Xxxxxxxxname shown to subscribers, including whether they resigned after the year end and whether any termination payments were made.

Priority 7: Revenue Trajectory

Turnover has declined from £5.17M (2022) to £4.24M (

Names of the people mentioned are shown to subscribers. See subscription