CARNEGIE LONDON LTD

Risk Rating: MEDIUM

Justification: Carnegie London Ltd demonstrates a historically thin capital base, including periods of negative net assets (2016-2017) and marginal equity (£21 in 2018). While the company has recently strengthened its balance sheet, its net asset position remains modest relative to its size. The company operates in a cyclical industry (building projects) and is entirely dependent on a single director, which elevates operational and key-person risks. However, regulatory compliance is currently maintained, and recent solvency indicators are positive.

Key Concerns 1. Thin Capitalization and Historical Insolvency Risk: The company has a concerning historical trajectory regarding its net assets. From 2016 to 2022, net assets fluctuated between negative £6,607 and a mere £2,387. While net assets have improved to £9,599 as of June 2025, the equity buffer remains exceptionally thin for a company involved in building projects, leaving minimal margin to absorb potential project losses or economic downturns. 2. Key Person Dependency: John Beasley is the sole director and the Person with Significant Control (owning >75% of shares and voting rights). This creates a critical key-person risk; the company's operational continuity, decision-making, and financial stability are entirely reliant on a single individual. 3. Liquidity Concentration: While current assets (£43,607) cover current liabilities (£30,731), the current ratio is approximately 1.42:1. For a development company, where project delays can rapidly alter cash flow dynamics, this working capital margin is adequate but not robust. Furthermore, the composition of current assets is unknown—liquidity could be severely compromised if a significant portion is tied up in illiquid stock (e.g., unsold property) or slow-paying debtors rather than cash.

Positive Indicators 1. Recent Financial Strengthening: The company has shown a marked improvement in its balance sheet over the past two years. Net assets jumped from £288 in 2023 to £10,322 in 2024, maintaining a similar level (£9,599) in 2025. This indicates a recent period of successful trading or asset accumulation. 2. Regulatory Compliance: The company is up to date with its filing obligations. Accounts for the year ended 30 June 2025 were approved and filed on time, and the confirmation statement is current. There are no overdue filings, suggesting disciplined administrative governance. 3. Positive Working Capital: As of 30 June 2025, the company reports net current assets of £12,876, indicating that it can meet its short-term obligations without needing to liquidate fixed assets or seek immediate external funding.

Due Diligence Notes 1. Asset Composition: The filed micro-entity accounts do not provide a breakdown of current assets. It is critical to determine the split between cash, trade debtors, and stock. If the £43,607 in current assets is primarily an unsold development, the actual liquidity risk is significantly higher than the balance sheet suggests. 2. Long-term Liabilities: The accounts show £3,333 in creditors falling due after more than one year. Further investigation is required to understand the nature of this debt (e.g., is it a director's loan, a commercial mortgage, or an unsecured loan?) and its repayment terms. 3. Profitability and Cash Flow: As a micro-entity, the company is exempt from filing a Profit & Loss account. Consequently, revenue, gross margins, and net profitability cannot be assessed from public records. An investor should request management accounts to verify that the recent growth in net assets is driven by sustainable operational cash flow rather than asset revaluation or director capital injections. 4. Current Project Pipeline: Given the SIC code (41100 - Development of building projects), the company's financial health will be highly contingent on the status of current developments. Verification of ongoing contracts, planning permissions, and expected completion timelines is essential.