ESDEBE CONSULTANCY LIMITED

1. Risk Rating: HIGH

The company's net assets have collapsed from £39,831 to just £1,006 in the latest financial year (ending March 2026), representing a 97.5% erosion of shareholder equity. The current ratio stands at approximately 1.001:1, leaving virtually no margin for error in meeting short-term obligations. While the company remains technically solvent, the margin is perilously thin and the trajectory is deeply concerning.

2. Key Concerns:

• Near-Zero Equity Buffer: Net assets of £1,006 on total assets of £280,649 means the company is operating with equity comprising just 0.36% of its asset base. A modest increase in liabilities or impairment of debtors would push the company into negative equity and potential insolvency. The P&L reserve has been virtually wiped out, falling from £39,068 to £243, indicating a substantial loss in the latest year.

• Alarming Increase in Accrued Liabilities: Accruals surged from £3,455 to £27,235 (nearly an 8-fold increase year-on-year). This is a significant red flag that may indicate the company is unable to settle current expenses and is instead deferring them. Combined with growing trade creditors (up from £109,426 to £128,056), this suggests potential cash flow pressures and possible difficulty paying suppliers on time.

• Dependency on Director Loans: Director loans increased from £70,582 to £96,745, now representing approximately 34.5% of total liabilities. This indicates the business cannot fund its operations from revenue alone and is reliant on the director's personal financial support. The cash balance of £92,741 appears healthy in isolation, but much of this may effectively be director-funded rather than organically generated.

3. Positive Indicators:

• Long Operating History: Incorporated in 2001, the company has survived for over 24 years, demonstrating some resilience and adaptability in a changing IT services market.

• Filing Compliance: Accounts and confirmation statements are filed on time with no overdue items, suggesting competent administrative governance and a director who takes statutory obligations seriously.

• Improved Cash Position: Cash increased from £3,000 to £92,741 year-on-year, though the source and sustainability of this improvement requires scrutiny given the concurrent increase in liabilities.

4. Due Diligence Notes:

• Profitability Investigation: The filed accounts are filleted (no P&L delivered), so the magnitude of the loss that eroded the P&L reserve from £39,068 to £243 cannot be directly determined. Request detailed management accounts to understand whether the loss is operational or related to one-off items.

• Debtor Quality: Trade debtors of £186,165 represent 66% of current assets. Assess the age profile and collectability of these debts. If significant debtors are overdue or impaired, the already razor-thin equity position could deteriorate rapidly.

• Director Loan Terms: Clarify the repayment terms, interest provisions, and whether these loans are subordinated. If the director were to demand repayment, the company would likely be unable to comply without triggering insolvency.

• Deferred Income Nature: The appearance of £14,560 in deferred income (nil in the prior year) should be investigated. Understand whether this represents customer prepayments for services yet to be delivered, which creates an obligation rather than a revenue benefit.

• 2023 Anomaly: The spike to £691,643 in total assets and £118,608 in net assets in 2023 (from £164,011 and £59,590 respectively in 2022) warrants explanation. Was this a one-off large contract, an asset revaluation, or another factor? Understanding this context is critical to assessing whether the subsequent decline is a normalisation or a deterioration.

• Related Party Transactions: Given the director's significant financial involvement through loans, investigate whether any other related party transactions exist, particularly with the two secretaries (Zarah Rudd and Peter Chubb) who may also be connected parties.