Risk Analysis: Probitas Enterprise Solutions Limited

1. Risk Rating: HIGH

Justification: The company has experienced a severe deterioration in its financial position in the year ending March 2024, with shareholders' funds collapsing by approximately 73% from £304,328 to £82,544. This represents a loss of £221,784 retained in the business, wiping out the majority of accumulated reserves. Total liabilities now stand at 8.4 times the company's equity, and net current assets have narrowed to just £42,713 against current liabilities of £693,732 — leaving virtually no margin for operational setbacks.

2. Key Concerns

a) Severe Equity Erosion and Probable Significant Trading Loss The profit and loss reserve fell from £301,324 to £79,540, indicating the company incurred a substantial loss in FY2024. This is not an isolated event — the longer-term trend shows shareholders' funds have declined from £656,742 (2016) to £82,544 (2024), representing an 87% decline over eight years. The company appears to be consuming its capital base at an unsustainable rate.

b) Dangerously Thin Working Capital Position Net current assets fell from £283,916 (2023) to £42,713 (2024), a decline of 85%. The current ratio stands at approximately 1.06:1 (£736,445 current assets against £693,732 current liabilities). For an IT consultancy with 22 employees, this provides no meaningful buffer. A moderate delay in debtor collections or an unexpected liability could push the company into a net current liability position.

c) Concentration of Liabilities in Taxation and Social Security Taxation and social security creditors total £511,303, representing approximately 74% of all current liabilities. This is an unusually high proportion and may indicate that Corporation Tax, VAT, or PAYE liabilities are being carried forward rather than settled promptly. If HMRC were to demand payment, the company's cash reserves of £271,592 would be insufficient to cover this single creditor class.

3. Positive Indicators

a) Revenue-Generating Capability and Operational Continuity The company has traded for approximately 19 years since incorporation in 2005 and maintains a consistent headcount of 22 employees across both 2023 and 2024. Trade debtors of £464,853 (though down from £560,769) suggest ongoing revenue generation and an active client base.

b) Cash Remains Meaningful Despite the decline from £352,450 to £271,592, the company retains a material cash balance. Cash represents approximately 35% of total assets, which provides some short-term operational flexibility.

c) Investment in Fixed Assets The company invested £31,256 in computer equipment during FY2024, increasing tangible fixed assets from £10,412 to £29,831. This may indicate continued investment in the business's delivery capability, which would be inconsistent with a company preparing to wind down.

d) Regulatory Compliance All filings are current. Accounts made up to 31 March 2025 have been filed, and the confirmation statement is up to date. No overdue filings are recorded.

4. Due Diligence Notes

a) Profit and Loss Account Not Filed The company has elected not to include the profit and loss account in its filed statements, which is permissible for small companies. This means revenue, cost of sales, and operating profit figures are unavailable from public records. The magnitude and source of the FY2024 loss cannot be determined — it could arise from trading losses, write-downs, or one-off items. Requesting management accounts is essential.

b) Related Party and Group Structure Probitas Group Ltd holds more than 75% of shares and voting rights and has the right to appoint and remove directors. It is unclear whether inter-company transactions exist that may affect the company's financial position. The £10,000 fixed asset investment noted in the balance sheet should be investigated to determine if this is a loan or investment in a related entity. Trade creditors and other creditors may include balances owed to group companies.

c) Director Changes Richard Clive Wheeler resigned as director on 6 February 2026, and Joanine Terblanche has been appointed. Robert Appleyard, who signed the FY2024 accounts on 13 December 2024, is no longer listed as a current director. Multiple director departures at a company experiencing significant financial deterioration warrants investigation into the circumstances.

d) Taxation Creditor Composition The £511,303 taxation and social security creditor should be broken down to understand whether this represents Corporation Tax, VAT, or PAYE/NIC liabilities. The age and status of these liabilities — particularly whether any time-to-pay arrangements exist with HMRC — would significantly affect the solvency assessment.

e) Trade Debtor Quality Trade debtors decreased from £560,769 to £464,853. It is unclear whether this reflects improved collections, lower revenue, or write-offs. Given that trade debtors represent approximately 60% of current assets, the quality and collectibility of this balance is critical to liquidity.

f) Missing Years No financial data is available for years ending March 2020 and March 2021, which corresponds to the COVID-19 period. Understanding the company's performance during this period may provide context for the current trajectory.