Risk Analysis: GECKO BUILD LTD (11520229)

1. Risk Rating: HIGH

Justification: The company has moved into a net current liabilities position as at 31 January 2025, with current liabilities exceeding current assets by £1,492. Cash reserves have depleted by approximately 74% year-on-year (from £27,269 to £6,979), while the company simultaneously invested £21,995 in plant and machinery. The combination of negative working capital, significant cash depletion, and operating in the inherently volatile construction development sector presents material solvency and liquidity concerns.

2. Key Concerns

Concern 1: Negative Working Capital

The balance sheet shows net current liabilities of (£1,492) at 31 January 2025, a dramatic reversal from net current assets of £17,554 in the prior year. This means the company cannot cover its short-term debts from current assets alone. Other creditors have increased from £1,652 to £11,967, suggesting potential trade creditor pressure or deferred payments to suppliers.

Concern 2: Severe Cash Depletion

Cash at bank has fallen from £27,269 to £6,979 – a reduction of £20,290 or approximately 74%. While some of this cash has been deployed into tangible fixed assets (plant and machinery additions of £21,995), the resulting liquidity position leaves minimal buffer for operational requirements, unexpected costs, or a downturn in trade.

Concern 3: Historical Financial Volatility

The financial history demonstrates significant volatility in shareholders' funds: - 2021: £78,305 (peak, with £108,009 cash) - 2022: £29,529 - 2023: £11,124 (trough) - 2024: £18,478 - 2025: £15,697

This pattern suggests project-based revenue with lumpy cash inflows and outflows, which is typical of construction development but creates ongoing solvency risk between projects.

3. Positive Indicators

• Filing Compliance: Accounts and confirmation statements are filed on time with no overdue items, indicating adequate administrative governance.

• Continuity of Leadership: Both directors (G and J Hards) have been with the company since incorporation in 2018, providing stability and institutional knowledge. No disqualification records are noted.

• Tangible Asset Backing: The company holds £17,189 in tangible fixed assets (net book value), providing some underlying asset value beyond current assets. Total assets less current liabilities remain positive at £15,697.

• Active Trading Status: The company remains active and the investment in significant plant and machinery additions (£21,995) during the year suggests ongoing business operations and future contract expectations.

• Reduced Tax Liability: Corporation tax payable has decreased from £12,069 to £967, indicating the prior year's tax obligation has been substantially settled.

4. Due Diligence Notes

Items Requiring Further Investigation:

1. Nature of Other Creditors: The shift from £1,652 to £11,967 in other creditors is material and unexplained in the filleted accounts. Determine whether this represents trade payables, director loans, HP/lease commitments, or other obligations. If related to the plant and machinery additions, clarify the terms and repayment schedule.

2. Plant and Machinery Financing: Given the £21,995 in additions against significant cash depletion, investigate whether assets were purchased outright or financed. If financed, the related obligations may not be fully visible on the balance sheet if structured as operating leases (which are charged to profit and loss on a straight-line basis per the stated accounting policy).

3. Profitability Trend: The Income Statement has not been delivered (permitted under Section 444 for small companies), making it impossible to assess revenue, gross margins, or operating profit. Request management accounts to evaluate whether the decline in shareholders' funds from £18,478 to £15,697 (a £2,781 loss) reflects operational losses or asset-related adjustments.

4. Debtor Quality: Trade debtors of £2,452 and other debtors of £2,011 should be reviewed for collectability, particularly given the small scale of operations and the construction sector's exposure to payment disputes.

5. Project Pipeline: Given the project-based nature of building development (SIC 41100), understand the current contract pipeline, expected revenue timing, and whether the working capital deficit is temporary (between project milestones) or structural.

6. Director Remuneration and Loans: With only 2 employees (the directors), clarify whether directors are drawing salaries, how they are compensated, and whether any director loans exist that could affect the company's true financial position.

7. Long-term Liability Position: The accounts show only current liabilities. Confirm whether there are any long-term borrowings, HP agreements, or contingent liabilities not captured in the filleted accounts.

8. Going Concern Assessment: Given the net current liabilities, the directors should have considered and disclosed their going concern assessment. Verify this is addressed in the full accounts or board minutes.