Investment Risk Analysis: LINCO PC LIMITED

1. Risk Rating: MEDIUM

Justification: The company demonstrates solvent status with positive net assets (£180,753) and adequate liquidity, but exhibits a persistent decline in shareholders' funds over multiple years. The absence of a profit and loss account limits visibility into the drivers of this erosion, and several balance sheet items warrant further scrutiny. The long operational history (20+ years) and current filing compliance provide some comfort, but the trajectory of declining equity is concerning.

2. Key Concerns

Concern 1: Persistent Decline in Net Assets / Shareholders' Funds

The most significant red flag is the consistent erosion of equity: - 2023: £298,804 - 2024: £229,290 (decline of £69,514 / 23.3%) - 2025: £186,755 (decline of £42,535 / 18.5%) - 2026: £180,753 (decline of £6,002 / 3.2%)

While the rate of decline has slowed considerably in the latest year, the cumulative reduction from the 2023 peak represents a 39.5% decline in net assets over three years. Without a filed profit and loss account, it is impossible to determine whether this reflects trading losses, dividend distributions, or a combination. The P&L reserve declining from £186,555 to £180,553 confirms at least a £6,002 loss was incurred in the latest year.

Concern 2: Significant Unexplained "Other Debtors"

Other debtors of £92,005 appear in both 2025 and 2026 with no movement. This represents a material portion of current assets (20.5%) and the static nature across two reporting periods raises questions about recoverability. Related-party balances or advances to directors should be investigated, as these may not be truly arm's-length assets.

Concern 3: Concentration of Liabilities and Creditor Pressure

Current liabilities of £324,169 include: - Trade creditors: £124,390 - Taxation and social security: £108,649 - Other creditors: £87,599

The combined creditor position represents 72.0% of total assets. While the current ratio of 1.39x is adequate, the composition of liabilities—with significant trade and tax obligations—suggests potential cash flow pressure if trading conditions deteriorate. The tax liability increasing by 11.4% year-on-year (from £97,549 to £108,649) while the business appears to be loss-making warrants explanation.

3. Positive Indicators

Strong Cash Position and Improving Liquidity

Cash at bank has increased significantly from £101,633 (2025) to £175,859 (2026), a 73.0% improvement. The quick ratio has improved from approximately 1.01x to 1.16x, suggesting the company has been collecting receivables and building a cash buffer. This provides a meaningful cushion against short-term obligations.

Long-Term Debt Eliminated

The company has cleared its long-term bank loan (down from £3,531 to nil), reducing future interest obligations and financial risk. Total creditors due after one year are now zero, simplifying the capital structure.

Filing Compliance and Operational Continuity

• Accounts and confirmation statements are filed and current (not overdue)
• The company has operated continuously since 2003 (20+ years)
• Employee count has remained stable at 10 for both 2025 and 2026
• The business has survived the 2020 period when net assets fell to just £70,457 and subsequently recovered

Provisions Reducing

Provisions for liabilities decreased from £19,758 to £18,323, suggesting the company is managing its contingent obligations rather than allowing them to accumulate.

4. Due Diligence Notes

Critical Items to Investigate

1. Profit and Loss Drivers: Request management accounts or detailed P&L to understand the source of net asset decline. Specifically determine: - Is the company generating operating losses? - Are significant dividends being paid to the three PSCs? - What caused the dramatic asset contraction from 2023 (£694,218) to 2024 (£448,035)?

2. Other Debtors Composition (£92,005): Clarify the nature of this balance. If these are related-party loans or advances, this represents a potential extraction of value. The static nature over two years suggests these may not be trading assets.

3. Other Creditors (£87,599): Understand what this comprises. Given it represents 27% of current liabilities, the nature of these obligations (deferred income, accruals, related-party balances) is material to assessing true liability pressure.

4. Provisions (£18,323): Determine what these provisions relate to—legal claims, warranty obligations, or restructuring costs—and assess adequacy.

5. 2020 Anomaly: Net assets fell to just £70,457 in 2020 (with total liabilities of £505,053 against assets of £512,251). Understand what occurred—was this a large loss, dividend, or reclassification? The subsequent recovery suggests resilience, but the vulnerability exposed at that point is relevant.

6. Stock Reduction: Stocks declined 40.6% from £126,290 to £75,000. Determine whether this reflects intentional inventory management, reduced contract pipeline, or write-downs.

7. PSC Structure: Four individuals with significant influence or control (including a PSC—Mr Paul Booth—who is not listed as a director) creates potential for governance complexity. Understand decision-making dynamics and whether there are shareholders' agreements in place.

8. Sector Context: The SIC code (41100—Development of building projects) differs from the website description (storage systems and partitioning). Clarify the actual trading activities to assess sector-specific risks.