KSTAYS LTD

Executive Summary

KSTAYS LTD has made progress moving from negative to positive net assets and has reduced its long-term debt substantially, reflecting early financial recovery. However, the company suffers from severe working capital deficits and liquidity risks, which require urgent attention to prevent operational disruption. With focused management on cash flow, debt restructuring, and revenue enhancement, the financial outlook can improve, but the current position remains fragile.

KSTAYS LTD - Analysis Report

Company Number: 13643928

Analysis Date: 2025-07-19 12:41 UTC

Financial Health Assessment of KSTAYS LTD as at 30 September 2024

---

1. Financial Health Score: C

Explanation:
KSTAYS LTD shows some improvement in net assets and shareholders' funds compared to the previous year, moving from a negative to a small positive net asset position. However, it still exhibits symptoms of financial distress, particularly in working capital management and high levels of long-term debt. The company's financial "vital signs" suggest fragile health that requires careful management to prevent deterioration.

---

2. Key Vital Signs

• Net Assets: £10,728 (Positive but very low)
  Interpretation: Net assets have improved from a deficit of £2,296 in 2023 to a positive but marginal £10,728 in 2024. This is like a patient recovering from anemia—there is improvement but still not fully robust.

• Shareholders' Funds: £10,628 (Positive)
  Interpretation: Shareholders’ equity has turned positive, indicating the business is technically solvent, but the buffer is very thin.

• Fixed Assets: £293,517 (Stable)
  Interpretation: The company holds significant fixed assets in property, which are relatively stable in value. This is akin to having a strong skeleton but soft tissues (working capital) need care.

• Current Assets vs Current Liabilities:

  • Current Assets: £35,354 (including £34,370 cash)
  • Current Liabilities: £184,402
  • Net Current Assets (Working Capital): -£98,387 (Negative)
    Interpretation: A critical symptom of distress is the large negative working capital, indicating the company may struggle to meet short-term obligations. This is similar to a patient whose vital signs (pulse, blood pressure) are unstable.

• Long-term Liabilities: £184,402 (Reduced from £283,840)
  Interpretation: The company has successfully reduced its long-term debt by about £100k, which is a positive sign of financial management.

• Cash Position: £34,370
  Interpretation: The company has a reasonable cash balance, which provides some liquidity cushion.

• Debtors: £984 (Significant reduction from £16,941 in 2023)
  Interpretation: Drastic reduction in receivables may indicate better collection or fewer sales on credit, improving cash flow but potentially signaling reduced business activity.

---

3. Diagnosis

KSTAYS LTD is showing early signs of recovery with a positive net asset position and reduced long-term liabilities after previously operating at a deficit. However, the company is still burdened by very weak working capital, with current liabilities far exceeding current assets. This imbalance suggests liquidity risks that could hamper day-to-day operations if not managed carefully.

The fixed asset base in real estate is strong and stable, which is a vital backbone for the business. The cash reserves provide some breathing room, but the company must urgently address short-term liabilities and improve cash flow management.

The significant drop in debtors may reflect improved collections or decreased sales on credit terms, which affects revenue recognition and future cash inflows. The company’s reliance on loans and other creditors indicates a need for cautious financial strategy to avoid over-leverage.

Overall, the financial "symptoms" point to a company in a fragile but improving state—a "convalescent patient" who requires ongoing care and monitoring to avoid relapse.

---

4. Recommendations

1. Improve Working Capital Management:

   • Negotiate longer payment terms with creditors or refinance short-term debts to reduce immediate pressure.
   • Accelerate debtor collections and consider stricter credit control policies to enhance cash inflows.

2. Debt Restructuring:

   • Explore options to refinance or restructure long-term loans to reduce interest burden and improve cash flow stability.

3. Enhance Revenue Streams:

   • Investigate opportunities to increase turnover and diversify income sources to stabilize and grow cash generation.

4. Regular Financial Monitoring:

   • Implement monthly cash flow forecasting and key financial ratio monitoring to catch any early signs of distress.

5. Cost Control:

   • Review expenses rigorously to maintain lean operations, especially given the limited working capital.

6. Stakeholder Communication:

   • Maintain transparent communication with shareholders, creditors, and suppliers regarding financial plans and liquidity status.

---