Investment Risk Analysis: DAVID ALMOND (UK) LIMITED

1. Risk Rating: LOW

Justification: The company demonstrates a strong balance sheet with net assets of £241,570, minimal liabilities of £10,725, and substantial liquid resources (cash £127,289 plus listed investments £121,616). The company has operated successfully for over 25 years with consistent positive net asset positions. While there is a trend of declining net assets in recent years, the company remains solvent with significant financial buffers.

2. Key Concerns

Concern 1: Declining Net Assets Trend

Net assets have declined from £321,793 (2021) to £241,570 (2024), representing a 25% reduction over three years. The P&L reserve fell by £7,032 in the latest year (£248,596 to £241,564), indicating ongoing losses or director drawings. Without visibility of the P&L account (exempt from filing under small company provisions), the underlying trading performance cannot be fully assessed.

Concern 2: Cash Depletion

Cash at bank has decreased from £165,275 (2023) to £127,289 (2024), a reduction of £37,986 (23%). While partially offset by increased listed investments (£83,251 to £121,616), the overall liquid asset position has contracted. If this cash burn rate continues without revenue generation, reserves could become pressured over the medium term.

Concern 3: Key Person Dependency

The company operates with only 2 employees (including directors) in "Artistic creation" (SIC 90030). David Almond appears central to revenue generation, creating significant key person risk. The PSC structure shows ownership split between Mr Almond (25-50%) and Ms Sara Jane Palmer (25-50%), but Ms Palmer is not listed as a director, raising questions about succession and operational continuity.

3. Positive Indicators

• Strong Solvency Position: Net assets of £241,570 against total liabilities of only £10,725 provides a substantial equity buffer. The company has no long-term debt and minimal creditor exposure.

• Liquid Asset Base: Combined liquid resources of £248,905 (cash £127,289 + investments £121,616 + nil debtors) significantly exceed current liabilities, providing excellent coverage of 23:1.

• Long Operational History: Incorporated in 1999, the company has survived multiple economic cycles over 25+ years, demonstrating resilience and adaptability in its sector.

• Regulatory Compliance: Accounts and confirmation statements are filed and up to date with no overdue filings. The company maintains active status with no indications of regulatory issues.

• Asset Diversification: The listed investments (£121,616) suggest prudent treasury management and potential for capital appreciation or income generation beyond core operations.

4. Due Diligence Notes

Items Requiring Further Investigation:

1. Profit & Loss Performance: The company has elected not to file its P&L account (permitted under section 444(1) Companies Act 2006). Understanding whether the declining reserves stem from trading losses, director remuneration/drawings, or dividend distributions is critical to assessing ongoing viability.

2. Listed Investments Composition: Note 6 shows £121,616 in listed investments with significant year-on-year growth (£83,251 to £121,616, +46%). Clarification is needed on whether this represents unrealized gains, additional investment, or reclassification of cash. The nature and risk profile of these investments should be understood.

3. Taxation Liability Increase: Taxation and social security liabilities increased from £3,076 to £8,547 (177% increase). This may indicate a one-off adjustment, changed assessment, or could signal higher trading profits in prior periods not visible from the balance sheet alone.

4. Director Remuneration: With only £6 in share capital and significant P&L reserves, the company likely remunerates directors through salary or dividends. Understanding the total director compensation relative to reserves erosion is important for projecting future reserve trajectories.

5. Revenue Visibility: As an "Artistic creation" business (likely linked to author David Almond's literary works), revenue may be lumpy and dependent on publishing cycles, royalties, and advances. Understanding the revenue mix and contractual pipeline would inform sustainability assessments.

6. PSC Discrepancy: Ms Sara Jane Palmer holds 25-50% of shares as a PSC but is not listed as a director. Professor Julia Green is listed as a director but not as a PSC. Clarification on the governance and control dynamics would be prudent.