Investment Risk Analysis: Markey Developments LLP (OC309589)

1. Risk Rating: HIGH

The LLP exhibits a sharply deteriorating financial position over the most recent financial year, with net assets declining by approximately 75% year-on-year, net current liabilities emerging, and a critically thin cash position of £3,362. The dramatic increase in current liabilities from £562,620 to £1,525,211 within a single year, combined with insufficient liquid resources to meet short-term obligations, presents significant solvency and liquidity concerns.

2. Key Concerns

i. Severe Deterioration in Net Assets

Net assets fell from £1,651,107 (March 2024) to £408,289 (March 2025) — a decline of approximately £1.24 million. Over the four-year period shown, net assets have fallen from £1,928,251 to £408,289, representing a cumulative erosion of nearly 79%. Without access to the profit and loss account (filleted under small entity exemptions), the precise drivers of this decline cannot be fully determined, but the magnitude is alarming.

ii. Net Current Liabilities and Minimal Cash

The LLP moved from net current assets of £1,038,900 to net current liabilities of (£203,918) in a single year. Cash at bank stands at just £3,362. Current liabilities of £1,525,211 substantially exceed current assets of £1,321,293, meaning the partnership cannot meet its short-term obligations from liquid resources alone. Settlement of obligations is now dependent on realizing fixed assets (investments and investment property) or securing additional financing.

iii. Unexplained Surge in Creditors

Current liabilities increased by approximately £962,591 (from £562,620 to £1,525,211) in one year. Simultaneously, "other amounts" due to members fell from £1,556,067 to £261,961 — a reduction of approximately £1.29 million. This may indicate significant member withdrawals, reclassification of member loans to external creditors, or new borrowing. Without the P&L account or detailed creditor notes beyond what is provided, the nature and terms of these liabilities require urgent clarification.

3. Positive Indicators

• Long-standing entity: Incorporated in October 2004, the LLP has operated for over 20 years, suggesting historical operational viability.
• Fixed asset base: The LLP holds £612,207 in fixed assets, comprising investment properties (£50,612) and investments (£561,595), which may provide a source of realizable value if required.
• Compliance status: All filings are current and not overdue. The confirmation statement and accounts are up to date, and the LLP maintains active status with no insolvency proceedings.
• Stable ownership: Two designated members (Anthony and Xxxxxx Xxxxxxxxname shown to subscribers) with equal PSC control between 25–50% each, indicating a stable, family-controlled structure with aligned interests.
• Going concern assertion: The members have stated they have a reasonable expectation of adequate resources to continue in operational existence, though this assertion should be tested against the evidence above.

4. Due Diligence Notes

1. Composition of current liabilities: The breakdown of the £1,525,211 in creditors falling due within one year (Note 7) is critical. Determine what proportion represents trade creditors, bank loans, member loans, and other obligations. The terms, security, and repayment schedule of any new borrowing must be established.

2. Member withdrawals vs. external borrowing: The simultaneous decline in "other amounts" due to members and increase in creditors suggests either significant capital withdrawals by members or a restructuring of obligations. Clarify whether members have extracted capital, potentially weakening the LLP's financial position.

3. Nature and valuation of investments: The £561,595 in investments (Note 5) represents the largest fixed asset. Determine whether these are publicly traded securities, unlisted equity, or loans/investments in related parties. If unlisted, the reliability of their carrying value should be assessed, particularly given the LLP's accounting policy permitting cost less impairment where fair value cannot be measured reliably.

4. Debtors recoverability: Debtors stand at £1,316,431, down from £1,585,329. Given that this represents the largest current asset, the age profile, credit quality, and collectability of these receivables are essential to understanding whether the LLP can service its short-term obligations.

5. Profit and loss account: The LLP has utilized the filleted accounts exemption and has not filed a P&L. Request the full accounts including the P&L to understand whether the net asset decline is driven by trading losses, revaluation deficits, impairments, or member distributions.

6. Investment property valuation: The investment property is carried at £50,612 at fair value. Confirm whether this is supported by an independent valuation and assess whether the carrying value reflects current market conditions.

7. Related party transactions: Given the family structure and the presence of significant investments, investigate whether any related party transactions exist that could affect the LLP's financial position or create conflicts of interest.

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