Investment Risk Assessment: BALDRY SON & CHANDLER LIMITED

1. Risk Rating: MEDIUM

Justification: The company demonstrates strong short-term liquidity and low current liabilities, but exhibits a persistent multi-year decline in net assets (from £3.81M in 2019 to £2.46M in 2025), property revaluation deficits, and aggressive dividend extraction during a period of declining asset values. The complex trust-based ownership structure and recent director resignation add governance considerations.

2. Key Concerns

i. Persistent Erosion of Net Asset Base

Net assets have declined by approximately £1.35 million (35%) over six years, from £3,813,038 (2019) to £2,464,002 (2025). While some decline is attributable to dividends, the 2025 accounts reveal a property revaluation deficit of £179,295 and cumulative investment revaluation losses of £187,342 transferred from non-distributable reserves. This suggests underlying asset quality deterioration beyond normal depreciation, which is particularly significant for a property-oriented business.

ii. Aggressive Dividend Policy Relative to Retained Earnings

Dividends of £404,031 were paid in FY2025 despite: - A reported profit of only £71,092 - Net asset decline of £332,939 year-on-year - Property and investment revaluation losses

The dividend significantly exceeded operating profit, effectively distributing capital rather than earnings. Over the six-year period from 2019-2025, net assets fell by £1.35M while the company maintained substantial distributions. This pattern raises questions about long-term capital preservation and whether distributions are sustainable.

iii. Asset Disposals and Changing Business Profile

FY2025 saw: - Property disposals of £209,990 - Complete liquidation of the investment portfolio (£239,249 disposed) - A prior-year directors' loan of £245,400 being cleared

The disposal of the entire investment portfolio and property assets, combined with the directors' loan repayment, suggests potential restructuring or asset realisation. The cash position improved from £95,561 to £573,864, but this appears driven by asset sales rather than operational income. The shift raises questions about the company's ongoing business model and future revenue streams.

3. Positive Indicators

i. Strong Liquidity Position

Current assets of £584,553 against current liabilities of only £72,782 yields a current ratio of approximately 8:1. Net current assets stand at £511,771, substantially improved from £288,702 in 2024. The company faces no immediate liquidity pressure.

ii. Minimal Leverage

Total liabilities of £72,782 (current) plus provisions of £635,026 against net assets of £2,464,002 indicate a conservatively capitalised structure with no visible debt financing. The company is not encumbered by external borrowings.

iii. Regulatory Compliance

Accounts and confirmation statements are filed and up to date. The company has maintained active status since 1971, demonstrating longevity. No disqualification orders appear against current directors.

iv. Directors' Loan Cleared

The £245,400 directors' loan outstanding in FY2024 has been fully repaid, removing a related party balance that could have represented cash extraction risk.

4. Due Diligence Notes

a. Provisions of £635,026

The accounts reference provisions of £635,026 (reduced from £683,707), but the nature of these provisions is not disclosed in the filleted accounts. This is a material amount relative to net assets (approximately 26% of net assets). Investigation is needed to understand whether these relate to deferred tax on property revaluations, legal claims, or other obligations, and whether they are likely to crystallise.

b. Trust-Based Ownership Structure

Three of the four PSCs hold interests "as trustees," and one PSC (GB Houses Limited) holds more than 75% of shares and voting rights. The interrelationship between the trust structure, the corporate PSC, and the individual trustees warrants examination. Specifically: - What are the terms of the trusts? - Are there cross-guarantees or related-party transactions not visible in filleted accounts? - Does GB Houses Limited have its own financial obligations that could affect this company?

c. Recent Director Resignation

Christopher Barnes resigned on 16 December 2025, shortly after the accounting reference date. The timing and reason for departure should be established, particularly given the family-name connection (Barnes) with remaining directors.

d. Related Party Transactions

The FY2024 directors' loan of £245,400 and its subsequent repayment in FY2025 suggests significant related-party activity. Full accounts would disclose additional related-party transactions not visible in filleted accounts. The identity of the director and terms of the loan should be verified.

e. Property Portfolio Details

Given the SIC code (68209 - letting and operating of own or leased real estate), the nature, location, and occupancy status of the £2.59M property portfolio is critical. The revaluation deficit of £179,295 on land and buildings, combined with property disposals, suggests potential impairment in specific assets. Valuation methodology and assumptions should be reviewed.

f. Revenue and Profitability

Filleted accounts do not disclose turnover or a full profit and loss statement. The reported profit of £71,092 provides limited insight without revenue context. Operating margins, rental income sustainability, and vacancy risk cannot be assessed from available data.

g. Deferred Tax Position

The accounts reference deferred tax adjustments on investment revaluations (£48,681). The total deferred tax position, particularly on property revaluation surpluses that may have accumulated over decades, should be quantified as this could represent a material future liability.