PENDRAGON (DESIGN & BUILD) LIMITED

Risk Rating: HIGH The company presents a high-risk profile primarily driven by severe liquidity constraints. With only £551 in cash against £2.57 million in current liabilities, the business is entirely dependent on the timely collection of debtors and the continued forbearance of creditors and bankers to meet its obligations. The explicit going concern dependency noted in the accounts further elevates the financial risk.

Key Concerns: * Critical Liquidity Position: The company holds virtually no cash (£551) as of 31 August 2025, a persistent trend observed over several historical periods. This is insufficient to cover even minimal operational overheads or the £53,407 currently owed in taxation and social security, let alone the £979,132 owed to banks within one year. * Going Concern Dependency: The directors explicitly state that adoption of the going concern basis relies on the "continued support of the directors, shareholders and other creditors." This indicates a material uncertainty regarding the company's ability to continue as a going concern without external financial support, which is a significant red flag for solvency. * Heavy Creditor Encumbrance and Bank Debt: The company has multiple fixed and floating charges over its assets (including a recent charge to DBW Investments (3) Limited in February 2024). Bank loans and overdrafts have increased substantially from £860,341 to £1,170,999, with bank overdrafts alone doubling from £306,048 to £626,943. The reliance on short-term overdraft facilities to fund operations is inherently unstable.

Positive Indicators: * Positive Net Assets: Despite the liquidity squeeze, the company maintains a positive net asset position of £150,846, which has grown from £119,201 in the prior year (though it is worth noting the current period covers 18 months). * Longevity and Compliance: Incorporated in 1984, the company has a decades-long operating history in the construction sector. It is currently compliant with filing requirements, with no overdue accounts or confirmation statements. * Debtor Book: The company holds £2.83 million in current assets, overwhelmingly represented by trade and other debtors (£2.83 million). If these debts are recoverable and current, they theoretically cover the current liabilities.

Due Diligence Notes: * Debtor Recoverability: The most critical area for investigation is the £1.67 million in trade debtors and £1.15 million in "other debtors." An investor must ascertain the aging of these debts. In the construction sector, disputed invoices or delayed payments are common; if a significant portion of this debtor book is overdue, the company is at immediate risk of default. * Overdraft Security and Terms: The £626,943 overdraft facility requires scrutiny. It is vital to determine if this facility is committed, its expiry date, and whether the bank has the right to call it in on demand. Given the floating charges, the bank holds significant power over the company's operations. * Related Party Loans: The £83,450 owed to shareholders is listed as non-interest bearing and repayable on demand. Investigation is needed to confirm whether shareholders have formally committed to not demanding repayment while the company remains in a precarious cash position. * Accrued Income Estimates: The accounts note that accrued income is based on management's best estimate of the stage of completion. Given the subjectivity involved in construction contract accounting, an investor should review the underlying contracts to ensure revenue has not been aggressively recognized. * DBW Investments (3) Limited: The recent floating charge granted in February 2024 to this entity should be investigated. It is unclear if this is a related party, a debt funder, or an asset-based lender, but its presence suggests a new layer of secured debt that ranks ahead of unsecured creditors. * PSC Discrepancies: The PSC register shows overlapping ownership thresholds (e.g., two individuals owning 50-75%, and another owning >75%). This should be clarified to understand the true control and potential conflicts at the shareholder level.