Investment Risk Analysis: COBA ELECTRICAL SERVICES LTD

1. Risk Rating: LOW-MEDIUM

The company demonstrates a solid financial trajectory with consistent net asset growth over six years and strong liquidity ratios. However, the recent resignation of a significant shareholder-director and some unusual movements in taxation liabilities introduce moderate uncertainty that requires monitoring.

2. Key Concerns

Concern 1: Director Resignation and Governance Concentration

Andrew Brian Bales resigned as both director and secretary on 27 November 2025. This is significant given he held 25-50% shareholding and possessed the right to appoint/remove directors. The company now appears to rely solely on Simon John Costello as director, creating key-person dependency. The PSC register appears to still list Bales with significant control, suggesting it may not yet reflect this governance change.

Concern 2: Dramatic Drop in Other Taxation and Social Security

Other taxation and social security liabilities fell from £18,042 (2024) to £234 (2025)—a 98.7% reduction—despite employee headcount increasing from 11 to 12. This is atypical and could indicate: a timing difference in year-end accruals, a change in employment structure (e.g., subcontractors replacing employees), or potential under-accrual. The corporation tax liability also fell significantly from £21,193 to £9,452, suggesting lower profitability.

Concern 3: Trade Debtors Contraction

Trade debtors decreased by 39% from £73,689 to £44,946 year-on-year. While this could reflect improved collections, combined with the lower corporation tax charge, it may indicate revenue contraction. Without a profit and loss account (elected not to file), it is impossible to confirm turnover trends—this is a transparency limitation inherent to small company filings.

3. Positive Indicators

Strong and Growing Net Asset Base

Net assets have grown consistently from £50,206 (2019) to £119,595 (2025), representing a 138% increase over six years. This demonstrates sustained profitability and retention of earnings within the business. Shareholders' funds match net assets exactly, confirming no preference capital structures.

Healthy Liquidity Position

Current assets of £178,311 against current liabilities of £61,151 yields a current ratio of approximately 2.9:1. Even excluding the £9,000 stock (which appears static year-on-year), the quick ratio remains robust at approximately 2.77:1. Cash holdings of £64,781 provide a meaningful buffer.

Debt Reduction Trajectory

Total liabilities have decreased from £91,127 (2024) to £61,151 (2025), a 33% reduction. Long-term bank loans have reduced from £25,784 to £15,731, indicating active deleveraging. The company is clearly not over-leveraged.

Filing Compliance

Accounts and confirmation statements are up to date with no overdue filings. The company has maintained active status throughout its 17-year operating history.

Tangible Asset Investment

Additions of £14,312 to plant and machinery in the current year suggest ongoing investment in operational capacity, which is positive for a trade services business.

4. Due Diligence Notes

Priority Investigations:

1. Clarify the Bales Resignation Circumstances: Determine whether the resignation was amicable or reflects a dispute. As a 25-50% shareholder, Bales retains economic interest even without board representation. Investigate whether his shareholding is being acquired by Costello or a third party, which could trigger pre-emption or valuation issues.

2. Verify PSC Register Accuracy: The register still lists Bales with significant control. Companies House should be updated within 28 days of any change. Confirm whether Costello now holds >75% directly, which would consolidate control but increase key-person risk.

3. Investigate Taxation Liability Movements: Request management accounts or VAT returns to understand the dramatic reduction in other taxation/social security. Confirm whether PAYE/NI obligations are being met and whether the 2024 figure included any one-off settlements or arrears.

4. Revenue and Profitability Trends: The company has elected not to file a profit and loss account (permitted under small company regime). Request full management accounts to assess turnover trajectory, gross margins, and operating profit trends—particularly given the 55% reduction in corporation tax provision.

5. Other Debtors Composition: Other debtors of £59,584 (down from £68,430) represent 33% of current assets. Understand the nature of these balances—are they related party loans, prepayments, or HMRC rebates? Related party exposure could indicate interconnected financial risk.

6. Provisions: £4,261 in provisions (up from £3,375) should be understood—these could relate to holiday pay accruals, warranty obligations, or other commitments.

7. Stock Valuation: Stock has remained static at £9,000 for two consecutive years. For an electrical installation business, confirm this represents genuinely held materials rather than obsolete or written-down inventory.