Investment Risk Assessment: HIGHADMIT PROJECTS LIMITED

1. Risk Rating: MEDIUM

Justification: The company demonstrates strong long-term fundamentals—consistent net asset growth over a 30+ year operating history, a healthy cash position, and improving profit margins. However, the significant increase in total liabilities from £2.2M to £4.5M in the latest year, combined with a 36.2% revenue decline (albeit explained by group restructuring) and concentrated family control, elevates risk above a straightforward LOW rating. Further investigation into the group structure and liability composition is warranted.

2. Key Concerns

i. Significant Liability Increase

Total liabilities nearly doubled from £2,204,109 (2023) to £4,531,654 (2024), while net assets actually declined slightly from £3,364,630 to £3,268,456. This represents a material shift in the capital structure. Without a detailed breakdown of current versus long-term liabilities and trade creditors, it is difficult to assess whether this leverage increase is sustainable or indicative of funding pressures.

ii. Revenue Volatility and Group Restructuring

Revenue fell 36.2% from £18,405,399 to £11,737,755. The directors attribute this to "operations being divided into the relevant group companies," which raises questions about intercompany transactions, transfer pricing, and whether revenue has been re-routed to related entities. The nature and financial health of these group companies is not disclosed, creating opacity around the true economic picture.

iii. Concentrated Ownership and Governance

Two PSCs (Mr Mekola Tuchli and Mrs Maria Helen Tuchli) each hold 25-50% of shares and voting rights, with rights to appoint and remove directors. Three of the five directors share the Tuchli surname, and Mrs Tuchli also serves as company secretary. This level of family control concentrates decision-making power and may limit minority shareholder protections.

3. Positive Indicators

i. Strong and Growing Cash Position

Cash reserves have grown from £119,251 (2014) to £2,575,125 (2024)—a more than twentyfold increase over the decade. The current cash position represents approximately 35% of total assets, providing a meaningful liquidity buffer.

ii. Improving Profitability

Despite the revenue decline, operating profit increased from £486,372 to £543,788, and gross margin improved from 14.9% to 18.7%. This suggests the company is retaining higher-value work following the group restructuring, rather than simply shrinking.

iii. Long Operating History and Clean Audit

Incorporated in 1992, the company has over three decades of trading history. The auditor (UHY Hacker Young) issued an unqualified opinion with no material uncertainties regarding going concern. All filings are current with no overdue items.

iv. Consistent Long-Term Net Asset Growth

Net assets have grown from £822,993 (2014) to £3,268,456 (2024), demonstrating sustained value creation across economic cycles, including through the pandemic period.

4. Due Diligence Notes

a. Liability Composition

Request a detailed breakdown of the £4.5M in total liabilities—specifically the split between current and long-term, and between trade creditors, intercompany balances, and any new debt facilities. The sharp increase warrants understanding whether it reflects normal trade creditor growth, acquisition financing, or intercompany obligations.

b. Group Structure and Related Party Transactions

The reference to "relevant group companies" indicates this entity sits within a wider group. Obtain details of all group entities, their financial positions, and the nature/quantum of intercompany transactions. Assess whether revenue has been deliberately shifted and whether the profitability of this entity is dependent on group arrangements.

c. Dividend Policy Sustainability

Dividends of £486,913 were paid in 2024, representing approximately 89% of operating profit. While cash reserves can support this, the sustainability of such a payout ratio alongside rising liabilities should be questioned—particularly whether retained profits are sufficient to fund ongoing working capital and capital expenditure needs.

d. Working Capital and Contract Pipeline

Given the revenue decline and the project-based nature of electrical installation work, assess the current order book and contract pipeline. The strategic report references secured contracts, but quantification is absent. Understand whether the reduced revenue base is a structural change or a temporary trough.

e. Director and PSC Backgrounds

Conduct standard checks on all directors, particularly the three Tuchli family members, for any disqualification orders, directorship history, and involvement in other entities—especially those group companies referenced in the strategic report.