Risk Analysis: LDM SCANNING LTD

1. Risk Rating: MEDIUM

The company demonstrates a decade-long trading history with consistent net asset growth and a positive net current assets position. However, the significant and rapid expansion of liabilities in the most recent year, combined with a heavy concentration in debtors and an overdue confirmation statement, raises sufficient concern to warrant a medium risk classification rather than low.

2. Key Concerns

a) Dramatic Liability Expansion Total liabilities nearly tripled from £41,487 (2024) to £119,555 (2025), representing a 188% increase year-on-year. The taxation and social security obligation alone jumped from £35,738 to £81,044, and other creditors surged from £5,749 to £38,511. While asset growth accompanied this, the pace and magnitude of liability growth outstrips historical patterns and warrants scrutiny regarding the company's ability to service these obligations from operating cash flows.

b) Debtors Concentration and Quality Risk Trade debtors increased from £72,926 to £120,483 (a 65% increase), and critically, "other debtors" classified as falling due after more than one year ballooned from £30,500 to £90,000. This £90,000 long-term debtor represents 36% of total assets and is an unusually large figure for a small construction company. The nature, recoverability, and related-party status of this amount cannot be determined from available data but represents a material concentration risk.

c) Overdue Confirmation Statement The confirmation statement is marked as overdue, with the last made-up date of 01/06/2025 and a due date of 15/06/2026 noted as overdue. This suggests a compliance lapse that, while not uncommon for smaller entities, raises questions about governance discipline and the timeliness of statutory obligations.

3. Positive Indicators

Consistent Net Asset Growth: Over the 10-year history available, net assets have grown from £41,184 (2016) to £151,310 (2025), demonstrating sustained value creation. The only year of decline was 2020 (£50,181 from £64,000 in 2019), likely reflecting pandemic impacts on the construction sector.

Positive Working Capital Position: Net current assets stand at £131,083 (2025), up from £82,114 (2024). The current ratio (current assets of £250,638 against current liabilities of £119,555) is approximately 2.1:1, indicating adequate short-term liquidity coverage.

Cash Improvement: Cash at bank doubled from £20,175 to £40,155, suggesting the business is generating or receiving cash despite the liability growth.

Longevity and Stability: The company has traded for over 12 years since incorporation in 2013 with no history of insolvency, administration, or dissolution proceedings.

4. Due Diligence Notes

Nature of "Other Debtors" (£90,000): This is the single most important item requiring investigation. As a long-term debtor balance in a commercial construction business, it could represent loans to directors or related parties, deferred consideration on asset acquisitions, or long-term contract retentions. The related-party status and recoverability must be established.

Tax Liability Composition: The £81,044 taxation and social security balance should be broken down between Corporation Tax, VAT, and PAYE/NI. An increase of this magnitude may indicate either a profitable year with associated tax or accumulated arrears. Confirmation that tax payments are current and no HMRC enforcement action is pending is essential.

Other Creditors (£38,511): The increase from £5,749 requires explanation. Given the construction industry context, this could relate to subcontractor liabilities, HP/lease commitments, or accrued expenses. The nature and terms should be verified.

Director Remuneration and Related Party Transactions: With five directors listed (including two PSCs from the McBain family and three Brassington/Thompsom individuals) but only four employees on average, the overlap between directors and staff is significant. Related-party transactions, directors' loan accounts, and remuneration policies should be examined.

Profitability: As a small company filing under Section 444(1A), the Income Statement is not delivered. Retained earnings increased by £40,784 (£148,310 - £107,526), but this figure is net of any dividends, tax, and other appropriations. The actual trading profit margin and revenue cannot be determined from available data.

Construction Sector Risks: SIC code 41201 (Construction of commercial buildings) carries inherent risks including cyclical demand, contract retention balances, seasonal cash flow variations, and exposure to fixed-price contract overruns. Sector-specific credit checks and contract pipeline assessment would be prudent.