Risk Analysis: CPTC LIMITED

1. Risk Rating: MEDIUM-HIGH

The rating reflects a significant deterioration in both operational activity and financial position over the most recent fiscal year, combined with reserves falling below the charity's own stated policy threshold. While the entity remains solvent with no immediate insolvency risk, the trajectory and pace of decline warrant serious concern. The limited by guarantee structure and charitable status provide some structural protections, but do not mitigate the fundamental operational contraction evident in the filings.

2. Key Concerns

Concern 1: Severe Revenue and Activity Decline

The most pressing issue is the dramatic contraction in both operational volume and income. Charitable activity income fell from £109,851 (2021) to £46,189 (2022) – a decline of approximately 58%. This corresponds with a 60% drop in test registrations (from 1,209 to 483). A decline of this magnitude in a single year raises fundamental questions about the ongoing viability of the business model and whether this represents a temporary disruption or structural market shift.

Concern 2: Operating Deficit and Rapid Reserve Depletion

The entity moved from a modest net income of £6,521 in 2021 to a net expenditure of £25,712 in 2022. This has consumed nearly half of the accumulated reserves in a single year (from £52,296 to £26,584). At the current burn rate, unrestricted reserves would be exhausted within approximately 12-18 months if the deficit persists, leaving no buffer for operational continuity.

Concern 3: Reserves Below Stated Policy Threshold

The trustees explicitly acknowledge that "the level of reserves has fallen below this amount during the year." Their reserves policy targets 3-6 months of expenditure (£17,975 to £35,951). With current reserves of £26,584, the entity sits at the lower end of this range, providing minimal cushion against further revenue deterioration or unexpected costs. The trustees' assertion that reserves "will increase to a sufficient level in the future as turnover increases" is stated without supporting evidence or a concrete recovery plan.

3. Positive Indicators

Governance and Compliance

Filing obligations are current with no overdue documents. The charity has undergone an independent examination by a qualified professional (Josh Stevens ACA, RRL LLP) with no matters of concern noted. The board structure includes nominated representatives from established agricultural bodies (NFU Cornwall, Cornwall Young Farmers, Cornwall College), providing institutional oversight.

Debt-Free Position

The balance sheet shows no long-term liabilities. Current liabilities of £8,900 are modest relative to current assets of £35,084, yielding a healthy current ratio of approximately 3.9:1. There are no borrowings or financial instruments creating leverage risk.

Structural Protections

As a company limited by guarantee with charitable status, member liability is capped at £1 per member. The PSC structure with established educational and agricultural organisations provides a degree of institutional backing and oversight that would not exist in a typical commercial entity.

4. Due Diligence Notes

Item 1: Related Party Transactions

The accounts disclose that "two trustees provide consultancy and assessor services to the charity" with details referenced in notes 7 and 12. However, the extracted accounts text is truncated and these specific disclosures are not visible. The quantum and terms of these transactions should be obtained to assess whether conflicts of interest exist and whether related party costs are contributing disproportionately to the deficit.

Item 2: Revenue Pipeline and Contract Status

The 60% decline in test volumes requires investigation. Key questions: Is this driven by loss of specific contracts (e.g., with Duchy College or Bicton College)? Has there been a regulatory or market change affecting demand for Certificates of Competence? Is the decline cyclical or permanent? The trustees' forward-looking statement references "changes in Land-based Education" increasing demand for CoCs, which appears inconsistent with the actual performance data.

Item 3: Cash Flow Trajectory

Cash has declined from £36,222 to £22,121 over the year, while debtors dropped from £33,862 to £12,963. The reduction in debtors may indicate improved collections or, more concerningly, reduced billing activity with no corresponding pipeline of receivables. Monthly cash burn rates and projected cash positions should be modelled under various scenario assumptions.

Item 4: Trustee Resignations

Two trustees resigned on the same date (5 May 2022) – Andrew Counsell and Stephen Parsons. While resignations can be routine, the simultaneous departure of two board members mid-year warrants understanding, particularly during a period of financial stress.

Item 5: Fixed Asset Base

Tangible assets of just £400 represent minimal capital investment. This may be appropriate for an assessment/qualification body, but it also means the entity has essentially no asset base to leverage or liquidate in a distress scenario – reserves are the sole buffer.