KARTHO HOLDINGS LIMITED

Executive Summary

KARTHO HOLDINGS LIMITED exhibits symptoms of financial strain, notably negative working capital and minimal cash reserves, although it remains solvent through related party support. To improve its financial health, the company should focus on boosting liquidity, reducing reliance on intercompany loans, and enhancing transparency and profitability monitoring. Without these interventions, the company risks worsening financial distress despite its current operational status.

KARTHO HOLDINGS LIMITED - Analysis Report

Company Number: 12936385

Analysis Date: 2025-07-20 13:59 UTC

Financial Health Assessment of KARTHO HOLDINGS LIMITED

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1. Financial Health Score: D

Explanation:
The company's financial "vital signs" reveal significant concerns, particularly with liquidity and working capital. Despite being active and filing accounts on time, the persistent negative net current assets and minimal cash reserves indicate symptoms of financial distress. The company is currently solvent but appears to be relying heavily on related party funding. These factors warrant a cautious rating, reflecting financial strain but not immediate insolvency.

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2. Key Vital Signs:

• Cash Position: £91 (2024) — Extremely low cash balance, a key symptom of tight liquidity and limited buffer for day-to-day operations.

• Current Liabilities: £123,776 (2024) — High short-term obligations compared to current assets.

• Net Current Assets (Working Capital): -£123,685 — A significant negative working capital means the company owes more in the short term than it holds in liquid assets, signaling potential cash flow stress.

• Net Assets / Shareholders' Funds: £100 — Very minimal equity base, indicating high leverage and dependence on external funding.

• Non-current Assets: Investments of £193,619 in subsidiaries — This shows capital tied up in group undertakings but these are not liquid assets.

• Non-current Liabilities: £69,834 owed to group undertakings — This related party debt represents a long-term funding source but increases financial dependence within the group.

• Related Party Transactions: Management fees received are small (£1,180) and the company owes significant amounts to its subsidiary and associated companies, indicating inter-company financing as a lifeline.

• Profitability: The company did not include an income statement, but dividends of £17,300 were paid, suggesting some profitability or distribution from retained earnings or group support.

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3. Diagnosis: Financial Condition Analysis

KARTHO HOLDINGS LIMITED shows symptoms akin to a patient with chronic liquidity deficiency — minimal cash on hand and a persistent working capital deficit point to tight operating conditions and potential difficulty in meeting short-term obligations without external support. The company’s balance sheet is heavily reliant on investments in subsidiaries and funding from related entities, which acts like an IV drip sustaining the business rather than robust internal cash flows.

The very low net assets and high current liabilities are warning signs of financial fragility. However, the company is not in liquidation or administration, which indicates that it is currently managing to meet its liabilities, likely through the financial support of its group companies.

The minimal equity and high intercompany debts suggest limited financial independence and a vulnerability to changes in group dynamics or funding availability. The absence of an income statement limits insight into operational profitability, but dividend payments and management fees hint at some level of positive cash generation within the group.

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4. Recommendations for Financial Wellness Improvement

• Improve Liquidity: The company should focus on increasing its cash reserves through better cash flow management, potentially by accelerating receivables or renegotiating payable terms to reduce short-term liabilities.

• Strengthen Working Capital: Explore options to convert some non-current assets into liquid assets or seek external financing to reduce the negative net current asset position, reducing the risk of liquidity crises.

• Reduce Reliance on Related Party Debt: While intercompany loans provide support, diversifying funding sources (e.g., external investors or bank facilities) can reduce financial risk and increase operational autonomy.

• Operational Transparency: Publishing a full income statement and strategic report can provide clearer insight into profitability and operational health, allowing stakeholders to make informed decisions.

• Cost Control and Profitability Focus: Analyze subsidiary performance closely (especially Scoona Limited) to ensure they generate sustainable profits and cash flows to support the holding company.

• Regular Financial Health Monitoring: Establish routine financial diagnostics (similar to health check-ups) to detect early signs of distress and act promptly.

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