Camelia Botnar Ltd - 2011 accounts

[ In which we look at Camelia Botnar Ltd's 2011 accounts and wonder how they continue to manage to turn only a small gross profit when their labour is free. We also note the continuing charitable donations to and interest-free loan from the Camelia Botnar Foundation and ponder on why they don't just net everything out. See Part 3 of the series for background.]

Camelia Botnar Ltd. (CBL) have just delivered their accounts for the year ending 31 December 2011. As promised, here's the analysis.

Key points:

• Compared to 2010, turnover and cost of sales were similar: 788K and 685K vs 759K and 636K, giving about a 4% increase in turnover but a reduction in gross profit from 16% to 12%. That's roughly what we'd expect if material costs were dominant rather than fixed costs.
• The entire operating profit plus a small amount of interest was wiped out by a charitable gift (89K), presumably to the Camelia Botnar Foundation in the same way that 2010 gifted most but not all of its profit (90K) to them. Note that this does not relate to the loan that CBF gave CBL, which still seems to be outstanding.
• Cash in hand dropped a little from 175K to 148K but still looks healthy.
• Amount due to creditors within 1 year was practically unchanged (180K). This is weird. It implies that the 180K of loans, nearly all (165K) from the CBF, was rolled over by a year. Why are they doing this rollover instead of extending the term of the loan over a number of years? Given a fairly steady business state, they're not going to be able to repay it next year without wiping out most of their cash in hand and donation to CBL; there's just going to be another roll-over. This looks like an artificial accounting structure to me, and I'd be fascinated to learn its purpose.
• Amount due to creditors beyond 1 year has dropped from 55K to 20K; the breakdown of creditors on page 7 implies they paid off about 35K of loan principal overall in 2011, 32K of which went to CBF.
• P+L account has remained static at 146K +/- 500 (due to 1K in tax paid in 2011). Looks like the CBL accounts are being carefully managed to balance out almost exactly neutral in profit. The 50K in share capital wholly owned by CBF is worth around 190K if CBL were wound up now.
• Tangible fixed assets dropped significantly, from 392K to 277K, due to 129K of disposals (near-matching depreciation on those assets). That looks like most of their TFAs are written off over 3 years, but for some reason they're not being replaced this year. Is this just a 1-year glitch, an efficiency measure, or are they actually anticipating scaling down operations?
• CBL continues to benefit from apprentices and supervisors from CBF working at no cost to CBL. And yet their profit margin continues to drop.

I'm now waiting for the Camelia Botnar Foundation accounts for 2011 to be scanned and uploaded by the Charities Commission. I'm itching to see how they're reporting their interactions with CBL. I'm also curious that their income of £3,230,568 is within 1% of their spending of £3,233,150; how have they managed this balancing act so well?