YESERO LIMITED

Risk Assessment: YESERO LIMITED

Risk Rating: HIGH
The company faces severe liquidity strain with cash reserves collapsing to £5,369 from £378,000 in one year, despite a growing equity base. While solvency appears sound on paper, the cash position alone constitutes a material vulnerability for a business with £1.65m in short-term obligations.

Key Concerns

1. Critical Cash Depletion
   Cash has fallen 98.6% year-over-year (from £378k to £5k). This is not explained by a commensurate reduction in liabilities (which fell only 7.6%) or investment in fixed assets (£51k additions). The cash outflow is largely unaccounted for in the available data and represents a significant liquidity event requiring immediate explanation.

2. Heavy Reliance on Short-Term Credit and Debtors
   The company operates entirely on current liabilities (£1.65m) with no long-term debt. Trade creditors (£1.44m) substantially exceed trade debtors (£989k), meaning the company is effectively using supplier credit to fund operations. Meanwhile, amounts owed by group undertakings (£1.2m) and other debtors (£465k) tie up significant cash. This structure leaves minimal buffer for payment shocks.

3. Employee Base Halved
   Average headcount dropped from 6 to 3 employees. In a plastering business (SIC 43310), this suggests a material reduction in operational capacity. Without corresponding revenue or profit data, this raises questions about contract losses, restructuring, or financial distress. The combination of cash crisis and staff reduction is particularly concerning.

Positive Indicators

• Growing Equity: Shareholders' funds increased from £1.02m to £1.12m, with retained earnings rising consistently over the past decade. The company appears profitable and solvent in an accounting sense.
• Healthy Net Current Assets: Net current assets rose to £1.01m from £919k, indicating working capital is positive and improving despite the cash position.
• Reduced Leverage: Total liabilities decreased by £137k, and bank loans were trimmed from £185k to £111k. The debt-to-equity ratio improved from 1.75x to 1.48x.
• Compliance Clean: All filing deadlines met, no overdue accounts, no director conduct records, and no audit qualification.

Due Diligence Notes

• Cash Flow Analysis: Request a statement of cash flows for FY2025. The £372k cash burn requires reconciliation – was it used to reduce intercompany balances, fund director drawings, or service other obligations not captured in the balance sheet?
• Group Undertaking Risk: The £1.2m intercompany debtor is a material concentration (45% of current assets). Assess the financial health of the group entity and the likelihood of repayment. If impaired, the equity base would be significantly eroded.
• Other Debtors Breakdown: The £206k increase in "Other debtors" (from £259k to £465k) is unexplained. Inquire about nature – deposits, loans, prepayments – and recoverability.
• Profitability Context: Obtain the Profit and Loss account (not filed with the balance sheet under small company exemption). The £98k increase in retained earnings implies a profit, but margin and turnover trends are critical to assessing sustainability.
• Supplier Payment Profile: Trade creditors of £1.44m against minimal cash raises the risk of supplier distress. Check for any late payment claims, County Court Judgments (none in data, but worth verifying), or strained trade relationships.
• Director Dependency: Sole director and 75%+ shareholder. Key man risk is high – no succession plan evident.
• Employee Reduction Rationale: Confirm whether the reduction was voluntary (e.g., seasonal) or involuntary (redundancy). Cost savings may improve margins, but capacity loss could hinder revenue.