Risk Assessment: GROUP MANAGEMENT ELECTRICAL SURVEYS LIMITED

1. Risk Rating: LOW-MEDIUM

The company demonstrates a strong and consistent growth trajectory over the past decade, with net assets growing from approximately £77K (2015) to over £2.6M (2024). Cash reserves are healthy at £670K, and current liabilities are well-covered by current assets. However, the concentration of assets in debtors (approximately 75% of total assets) and the limited visibility into profitability due to filleted accounts temper the overall assessment. The corporate PSC structure with >75% control also warrants attention from a minority investor perspective.

2. Key Concerns

a) Debtors Concentration Risk

Debtors stand at £2,310,867, representing approximately 75% of total assets (£3,067,342). This represents a 52% increase year-over-year (from £1,523,040). While growth in debtors often accompanies revenue growth, the concentration is significant. If a material portion of these receivables proves unrecoverable—whether through bad debts, disputed invoices, or customer insolvency—the impact on net assets would be substantial. Without a profit and loss statement or debtor aging analysis (not required for small company filleted accounts), it is impossible to assess recoverability or concentration by customer.

b) Limited Financial Visibility

The company files filleted accounts under the small companies' regime, meaning no income statement, no detailed notes on turnover, cost of sales, or operating margins are publicly available. This makes it impossible to assess: - Revenue growth rates and sustainability - Profit margins and whether they are improving or deteriorating - The relationship between debtors growth and revenue growth - Working capital management efficiency

The retained earnings have grown from £1,565,352 to £2,609,653 (an increase of approximately £1.04M), suggesting profitability, but without the P&L, we cannot determine the quality or sustainability of those earnings.

c) Corporate PSC Control Structure

Cognizant Management Limited holds more than 75% of shares, more than 75% of voting rights, and the right to appoint and remove directors. This level of concentrated control means minority shareholders have essentially no influence over strategic decisions, dividend policy, or board composition. Notably, the PSC entry for Cognizant Management Limited appears duplicated in the filing, which may be an administrative error but could also indicate inconsistent record-keeping at Companies House level. Additionally, Mr Steven Cressey is listed as both a director and an individual with significant influence or control, creating overlap between the corporate PSC and individual control.

3. Positive Indicators

a) Consistent Long-term Growth Trajectory

The financial history demonstrates steady, uninterrupted growth in net assets over the full 10-year period available:

This sustained growth over a decade, including through the pandemic period, suggests a resilient business model.

b) Strong Liquidity Position

Net current assets of £2,546,337 provide substantial headroom against current liabilities of £435,196. The current ratio is approximately 6.8:1, which is exceptionally strong. Cash has grown from £240,365 (2023) to £670,666 (2024), an increase of nearly 180%. The company appears to have no reliance on external debt financing, with all growth apparently funded from retained earnings.

c) Regulatory Compliance and Operational Stability

The company has been incorporated for nearly 25 years (since July 2000), has no overdue filings for accounts or confirmation statements, and is not in liquidation or any insolvency procedure. Employee numbers have grown from 21 to 26, indicating active expansion. The company has also maintained consistent accounting policies under FRS 102 Section 1A and has its accounts audited (per the filing tags), which provides additional assurance over the financial statements.

4. Due Diligence Notes

i) Debtors Quality and Aging

Request a detailed debtor aging report. Specifically investigate: - The concentration of the top 5-10 debtors by value - Aging profile (current, 30, 60, 90+ days) - Whether any single customer represents more than 10% of total debtors - The bad debt provision methodology and whether it is adequate given the 52% year-over-year increase

ii) Cognizant Management Limited

Investigate the PSC entity, Cognizant Management Limited. Key questions: - Is this a holding company, and if so, what other entities does it control? - Are there related-party transactions between this company and other entities in the group? - What is the ultimate beneficial ownership behind Cognizant Management Limited? - The duplicate PSC entry should be clarified with the company

iii) Profitability and Revenue

Request full management accounts or audited financial statements that include the profit and loss account. Key metrics to establish: - Revenue for 2024 and year-on-year growth rate - Gross and net profit margins - Whether the increase in net assets is driven by operating profit or other factors (e.g., revaluations, asset transfers) - Dividend history—retained earnings suggest no dividends have been paid, but confirmation is needed

iv) Provisions

The balance sheet shows provisions of £19,493 (up from £17,902 in 2023). Understand the nature of these provisions—are they for warranties, litigation, restructuring, or other obligations?

v) Business Model Sustainability

The SIC code (81100 - Combined facilities support activities) and the company name referencing "Electrical Surveys" suggest a specialist trade. Investigate: - Contract structures (retainer vs project-based) - Client concentration risk - Competitive positioning and barriers to entry - Whether the rapid growth in 2024 is sustainable or driven by one-off contracts

vi) Director Backgrounds

With six officers (five directors and one secretary), investigate whether any directors have prior disqualification orders, directorships in failed companies, or conflicts of interest. The mix of British and Irish nationalities among directors is unremarkable but should be verified.