1. Risk Rating: HIGH

Justification: The company shows a persistently minimal net asset base (£2) despite significant fixed assets (~£123k) and substantial long-term liabilities (~£125k). The near equivalence of fixed assets to long-term liabilities with negligible shareholder equity indicates high financial leverage and potential solvency issues. The absence of employees and very low current assets relative to current liabilities further elevate liquidity risk.

2. Key Concerns:

• Solvency Risk: Net assets remain at £2 consistently over multiple years, suggesting the company's liabilities almost entirely offset its assets. This may indicate insufficient capital buffer to absorb losses or meet obligations if asset values decline.

• Liquidity Concerns: Current assets (£4,117 in 2024) are significantly lower than current liabilities (~£125k), which raises concerns about the company's ability to cover short-term obligations without refinancing or asset liquidation.

• Operational Stability: The company reports no employees and is classified as a micro entity, implying limited operational scale. The financial statements offer no profit and loss detail, but the static net asset position suggests limited or no retained earnings growth, potentially reflecting low or negative profitability.

3. Positive Indicators:

• Compliance: Company filings are up to date with no overdue accounts or confirmation statements, reflecting good regulatory compliance.

• Stable Ownership and Management: Both directors have been in place since incorporation, and there is clear transparency regarding persons with significant control, which reduces governance uncertainty.

• Asset Base: The company holds substantial fixed assets relative to its size, indicating some tangible backing for its operations.

4. Due Diligence Notes:

• Investigate the nature of the fixed assets and confirm their realizable value, as these underlie the company’s balance sheet strength.

• Review profit and loss statements and cash flow details (not provided) to assess operational performance, revenue streams, and cash generation capacity.

• Examine the structure and terms of the significant long-term liabilities (~£125k) to understand repayment obligations and refinancing risks.

• Assess whether the company is reliant on external funding or guarantees from the directors or related parties, given the minimal equity.

• Verify the absence of employees and understand how the business operates operationally (outsourcing, director involvement, etc.).

• Consider industry conditions in property management and real estate activities (SIC codes 68100, 68209, 68320) for external risks affecting sustainability.

Executive Summary

Scotts Property Management Ltd exhibits high financial risk characterized by minimal equity, significant long-term liabilities closely matching its fixed assets, and limited liquidity. While regulatory compliance is satisfactory and management appears stable, the company’s financial structure raises concerns regarding its ability to meet obligations and sustain operations without additional capital or asset disposition. Further detailed financial and operational due diligence is recommended to clarify these risks.