Risk Assessment: THORBURN GROUP LIMITED

1. Risk Rating: MEDIUM

Justification: While the company demonstrates long operational history (since 1992), growing turnover, and a clean audit opinion, there are material concerns around the dramatic decline in cash reserves, thinning profit margins, and significantly increased liabilities. The ongoing capital expenditure programme (relocation) and leverage expansion warrant careful monitoring.

2. Key Concerns

Concern 1: Severe Cash Deterioration

Cash has declined from £2.72M (May 2020) to £430K (November 2024) — an approximately 84% reduction over four years. While the strategic report references investment in infrastructure and the new site relocation in Duns, the scale of cash depletion is disproportionate to profit generation. With only £430K cash against £16M turnover, working capital flexibility is significantly constrained.

Concern 2: Margin Compression Despite Revenue Growth

Turnover grew from £14.06M (2023) to £16.01M (2024) — a healthy 14% increase. However, profit before tax fell from £207K to £141K — a 32% decline. This represents a pre-tax margin of approximately 0.9%, which is exceptionally thin for a manufacturing/construction business. The directors acknowledge exposure to steel and raw material price risk, and this margin pressure leaves virtually no buffer for operational disruption or cost overruns.

Concern 3: Liability Expansion

Total liabilities have grown from £1.64M (May 2019) to £4.99M (November 2024) — a threefold increase. The asset base has also grown, but the leverage profile has shifted materially. Without a breakdown between current and long-term liabilities, the maturity profile of these obligations is unclear, creating uncertainty around refinancing risk.

3. Positive Indicators

• Consistent Revenue Growth: Turnover has grown from approximately £9.8M to £16M over recent years, demonstrating genuine market demand and operational scaling.

• Strengthening Equity Position: Net assets/shareholders' funds have grown steadily from £4.39M (2016) to £4.43M (2024), indicating retained earnings are accumulating rather than being distributed, and the company is not eroding its capital base.

• Clean Audit Opinion: The auditor (Greaves West & Ayre) issued an unqualified opinion with no material uncertainties regarding going concern. This provides independent corroboration of the company's viability.

• Regulatory Compliance: All filings are current and not overdue. The company maintains a full accounts category and appears to meet all statutory obligations.

• Long-Established Operations: Over 30 years of trading history, with stable family ownership and a clear market niche in agricultural and commercial steel buildings.

• Healthy Order Book: The strategic report states current and future order book is satisfactory, suggesting near-term revenue visibility.

4. Due Diligence Notes

1. Liability Composition: The filed data does not provide a breakdown of current vs. non-current liabilities. It is essential to determine how much of the £4.99M liability is due within 12 months versus long-term. This directly impacts liquidity assessment.

2. Working Capital Position: Net current assets (current assets minus current liabilities) cannot be calculated from available data. Given the cash position, understanding trade debtor collection and creditor payment terms is critical.

3. Debt Facility Terms: The company banks with Royal Bank of Scotland. The nature, duration, and covenants of any borrowing facilities should be examined, particularly whether the relocation was debt-financed and what repayment obligations exist.

4. Director Resignations: Three directors resigned on 4 April 2025 (A E Thorburn, P J D Morris, Mrs G C Thorburn), while GWA CoSec Ltd resigned as corporate secretary in June 2026. The timing and rationale for these departures — particularly during a period of significant capital investment — should be investigated.

5. Year-End Change: The financial year end changed from 31 May to 30 November between 2020 and 2021. Understanding why this change was made and whether it affects period-on-period comparability is important.

6. Related Party Transactions: As a family-controlled business with three PSCs each holding 25-50% ownership, related party transactions (director loans, inter-company dealings, property arrangements) should be scrutinised in the full accounts notes.

7. Capital Expenditure Details: The new site relocation appears to be the primary driver of cash outflow and liability increase. Understanding the total capital committed, stage of completion, and whether all obligations are reflected in the balance sheet is essential.

8. Profitability Trajectory: The declining margin warrants investigation into whether this reflects one-off relocation costs, structural pricing pressure, or input cost inflation that cannot be passed to customers.