Risk Analysis: Thomson Gray Limited

1. Risk Rating: MEDIUM

While the company remains technically solvent with positive net assets of £757,449 and has maintained active trading for over 20 years, the pronounced deterioration in key financial metrics—particularly the severe cash depletion and rapid liability growth—elevates risk beyond LOW. The declining trend in net assets and extremely thin cash position warrant heightened scrutiny, though the underlying business appears to retain operational viability.

2. Key Concerns

Severe Cash Deterioration Cash has declined from £530,798 (2020) to £9,993 (2025)—a 98% reduction over five years. More immediately, cash fell 92% in just one year (from £125,848 to £9,993). With current liabilities of £1,883,686, the company has virtually no liquid buffer. This level of cash depletion creates significant vulnerability to any disruption in trade debtor collections or unexpected expenditure.

Rapid Liability Expansion Outpacing Asset Growth Total liabilities increased from £859,274 (2022) to £1,883,686 (2025)—a 119% increase in three years. Trade creditors alone rose from £636,626 to £990,246 (55% increase year-on-year), which may indicate the company is stretching supplier payment terms to manage cash flow. Finance lease obligations have also surged, with current obligations increasing from £28,113 to £108,361 and long-term from £23,200 to £138,043.

Erosion of Shareholders' Equity Net assets have declined steadily from £982,762 (2022) to £757,449 (2025), representing a 23% erosion over three years. Retained earnings fell from £763,833 to £716,015 in the latest year, indicating the company traded at a loss. The consistent downward trajectory suggests ongoing profitability challenges that are not being addressed.

3. Positive Indicators

Established Business with Long Track Record Incorporated in 2004, the company has operated for over 20 years in the quantity surveying sector. This longevity demonstrates resilience and market position, with an active website and continued operations.

Positive Net Asset Position Despite the declining trend, net assets remain positive at £757,449. The company is not technically insolvent, and the balance sheet still shows a meaningful equity cushion relative to the business size.

Compliance and Governance All filings are current with no overdue accounts or confirmation statements. The company maintains a board of 10 directors and a company secretary, suggesting adequate governance oversight. No director disqualification records are apparent.

Asset Investment Signals Confidence Significant additions to property, plant, and equipment (£312,365 in the latest year, predominantly in land and buildings at £308,488) suggest management confidence in the long-term operational footprint. This investment may partly explain the increased finance lease obligations and cash depletion.

4. Due Diligence Notes

• Trade Debtors Quality: Trade debtors increased from £1,051,702 to £1,699,153 (61% increase). Investigate whether this reflects revenue growth, extended payment terms, or collection difficulties. Request an aged debtor schedule and assess provision adequacy.

• Profitability: The income statement has not been delivered (small company exemption). The decline in retained earnings of £47,818 suggests a loss for the year. Obtain full profit and loss information to understand the underlying trading performance and margin trends.

• Finance Lease Commitments: Finance lease obligations have increased substantially. Request details on the nature of leased assets, associated terms, and future minimum lease payment obligations to assess ongoing cash flow commitments.

• Employee Reduction: Average employee numbers fell from 78 to 65 (17% decline). Clarify whether this reflects redundancy costs (which may have contributed to losses), restructuring, or natural attrition, and assess the impact on service delivery capacity.

• Trade Creditor Payment Terms: The 55% increase in trade creditors may indicate delayed payments. Investigate whether suppliers are being paid within agreed terms or if the company is experiencing working capital pressure.

• Related Party Transactions: Given the number of directors (10) and PSC structure (two individuals each owning 25-50%), investigate any related party balances or transactions that may not be apparent from the filleted accounts.

• Cash Flow Forecasting: Given the critically low cash position, request forward-looking cash flow projections and assess whether existing banking facilities or debtor realisation will be sufficient to meet near-term obligations.