Risk Assessment: MOT Models Limited

1. Risk Rating: MEDIUM

The company demonstrates improving profitability and a strong current ratio, but significant intercompany balances owed by the parent entity and a declining cash trajectory temper confidence. The settled debenture in early 2025 is encouraging, but the concentration of debtors within the group structure introduces dependency risk that requires careful monitoring.

2. Key Concerns

Intercompany Debtor Concentration Of the £1,156,091 in debtors, £648,054 (56%) is owed by Zomoto Holdings Limited, the parent company, with a further £482 owed by a fellow subsidiary. This level of intercompany dependency means the company's reported assets are heavily reliant on the parent's ability to pay. If Zomoto Holdings experiences financial difficulty, MOT Models' balance sheet would be materially impaired, and recovery may be complicated by group structure priorities.

Declining Cash Position Cash has fallen from a peak of £557,896 (2022) to £359,110 (2024), a 35.6% decline over two years. While still substantial in absolute terms, this trajectory warrants monitoring—particularly given the company's historical cash constraints (as low as £5,450 in 2017). The cash decline coincides with rising trade debtors, suggesting potential delays in collecting receivables or increased working capital requirements.

Accumulated Historical Losses The Profit and Loss reserve stands at (£1,919,534), reflecting significant historical trading losses. Although this balance has improved year-on-year (from £1,980,332 in 2023, indicating approximately £60,798 profit in 2024), the accumulated deficit remains substantial relative to the share premium account. This limits the company's ability to distribute dividends and suggests a business that has traded through extended periods of unprofitability.

3. Positive Indicators

Strong Liquidity Position Net current assets of £1,277,767 against current liabilities of £237,434 yields a current ratio of approximately 6.4x. The company has ample short-term liquidity to meet obligations, with trade creditors of only £19,699 suggesting minimal pressure from suppliers.

Consistent Profitability Trend Net assets have grown steadily from £565,832 (2015) to £1,280,491 (2024), and the P&L reserve has improved in each recent year. This indicates the business has found a sustainable operating model following earlier loss-making periods.

Debt Reduction and Settled Security Long-term creditors have reduced from £64,000 to £16,000, and critically, the RBS Invoice Finance debenture (a fixed charge over all company assets) was settled on 28 January 2025. This removes a significant encumbrance and improves the company's unencumbered asset position.

Regulatory Compliance Accounts are filed on time (not overdue), the confirmation statement is current, and the company has maintained Active status throughout its near-20-year history. No director disqualification records are noted.

4. Due Diligence Notes

Parent Company Financial Health The single most important item to investigate is the financial position of Zomoto Holdings Limited. With £648,054 owed by the parent (representing approximately 42% of total assets), MOT Models' balance sheet integrity is directly tied to Zomoto's solvency. Obtain and review Zomoto Holdings' latest filed accounts, assessing its net assets, cash position, and any cross-guarantees or group-level financing arrangements.

Cash Flow Reconciliation Request a detailed cash flow statement or management accounts to understand why cash has declined by approximately £198,000 over two years while net assets have increased. The divergence between profit and cash movements may indicate working capital strain, capital investment (note: £12,201 in plant additions in 2024), or cash absorbed by intercompany settlements.

Invoice Factoring Arrangement Although the RBS debenture was settled in January 2025, clarify whether the invoice factoring facility remains in place and on what terms. Understand what proportion of trade debtors was historically subject to factoring and whether the settlement reflects improved cash generation or a replacement facility.

Operating Lease Commitments Future minimum lease payments total £135,275 (£47,900 within one year, £87,375 in years 2-5). Assess whether this relates to the registered office at Ashlyns Hall or other premises, and whether the terms are at market rates. The appearance of lease commitments beyond one year in 2024 (none in 2023) suggests a new or extended lease arrangement.

Related Party Payments The £5,000 annual payment to Jessica Lewis (daughter of two directors) should be verified for reasonableness and whether this constitutes a reportable related party transaction under FRS 102. Confirm this is for genuine services rendered and not a mechanism for extracting value.

Goodwill Amortisation Completion The £3,158,052 goodwill (from the 2006 acquisition) is now fully amortised. Understand the commercial rationale for the original purchase price and whether the underlying business has performed in line with acquisition expectations. This provides context for the accumulated P&L deficit.