LESS COMMON METALS LIMITED

Executive Summary

Less Common Metals Limited maintains a sound capital structure with adequate liquidity and shareholder equity; however, operational profitability pressures and significant market risks related to raw material sourcing require close monitoring. The company’s strategic initiatives to diversify supply sources and secure funding are positive signs for long-term resilience. Investors should seek further clarity on cash flow dynamics and detailed mitigation of geopolitical supply risks.

LESS COMMON METALS LIMITED - Analysis Report

Company Number: 02690088

Analysis Date: 2025-09-29 11:52 UTC

1. Risk Rating: MEDIUM
   Reasoning: Less Common Metals Limited exhibits solid balance sheet strength with a net asset position of approximately £5.9 million as of December 2024 and no overdue statutory filings. However, the company recorded a net loss in 2024, declining turnover, and a reduction in cash balances, which raise some concerns about its profitability and liquidity in the short term.

2. Key Concerns:

• Profitability Decline: The company reported a negative net profit margin of -13.39% in 2024, worsening from -4.44% in 2023, following a substantial 35% fall in revenue, indicating operational profitability challenges.
• Sales & Volume Reduction: A 27% decrease in sales volume alongside falling revenues may signal market headwinds or competitive pressures that could affect future cash flows and business sustainability.
• Dependence on Critical Raw Materials: Heavy reliance on rare earth element sourcing, notably from China and geopolitical risks linked to potential export restrictions, represents an operational and supply chain vulnerability.

3. Positive Indicators:

• Strong Net Current Assets: The company maintains healthy net current assets (~£3.5 million), with current assets more than double current liabilities, reflecting sufficient short-term liquidity.
• Solid Shareholders’ Funds: Robust net asset and equity position (~£5.9 million) supports solvency and the company’s ability to meet long-term obligations.
• Strategic Positioning & Innovation: Management is actively securing grant funding and developing processes to reduce dependence on Chinese supply chains, showing strategic foresight and potential for future growth.
• Compliance & Governance: Timely filing of accounts and confirmation statements, with no signs of director disqualifications or regulatory non-compliance.

4. Due Diligence Notes:

• Obtain detailed cash flow statements to assess operational cash generation and liquidity trends beyond year-end snapshot.
• Review profitability drivers and cost structure evolution, particularly addressing causes of revenue decline and margin compression in 2024.
• Evaluate supply chain contracts and risk mitigation measures regarding critical raw materials sourcing, including contingency plans in case of export restrictions.
• Confirm the impact of the recent acquisition of Less Common Metals Europe SARL on the company’s financial position and future earnings potential.
• Review auditor communications for any emphasis of matter or concerns raised during the 2024 audit beyond the summary provided.