RTK RETAIL LIMITED

Executive Summary

RTK Retail Limited is currently exhibiting financial distress characterized by negative net assets, weak liquidity, and increased debt burden, placing it at risk of solvency issues. Immediate actions focusing on cash flow improvement, debt restructuring, and cost control are essential to stabilize the company’s financial health and ensure its ongoing viability.

RTK RETAIL LIMITED - Analysis Report

Company Number: 12858240

Analysis Date: 2025-07-29 18:26 UTC

Financial Health Assessment of RTK Retail Limited (as of 30 September 2023)

---

1. Financial Health Score: D

Explanation:
RTK Retail Limited's financial health presents several warning signs indicative of distress. The company is showing negative net assets (shareholders' deficit), persistent working capital deficits, and a significant increase in long-term borrowings. These symptoms suggest a fragile financial condition that requires prompt attention to avoid further deterioration. While the business remains active, the current financial indicators place it in a below-average health category.

---

2. Key Vital Signs

Metric	2023 Value	Interpretation
Net Assets	-£2,190	Negative net assets signal that liabilities exceed assets, a symptom of financial strain.
Net Current Assets (Working Capital)	-£16,104	Negative working capital shows the company owes more short-term than it owns, indicating liquidity stress.
Cash at Bank	£687	Critically low cash reserves, likened to a patient with a weak pulse, risking inability to meet immediate expenses.
Debtors	£15,781	Increase in trade debtors may indicate slower collections, potentially tightening cash flow.
Fixed Assets	£115,400	Stable asset base, but largely offset by liabilities; assets are illiquid compared to liabilities.
Long-term Borrowings	£101,486	Significant increase from prior year (+46%), adding financial burden via interest and repayments.
Interim Dividends Paid	£48,000	Payouts despite financial strain could exacerbate liquidity issues; akin to a patient expending energy when frail.
Employee Count	13 (average)	Moderate staffing level for a small retail operation, impacting fixed cost structure.

---

3. Diagnosis

RTK Retail Limited is exhibiting symptoms of financial distress, particularly in liquidity and solvency:

• Liquidity Weakness: The company has a negative working capital position (-£16,104), meaning current liabilities exceed current assets. This is a warning sign that the firm may struggle to pay short-term debts. Moreover, cash reserves have drastically fallen from £11,622 in 2022 to only £687 in 2023, indicating a near "cash-starved" state.

• Solvency Risk: Net assets have slipped from a small positive £229 in 2022 to a negative £2,190 in 2023. This "negative equity" implies the company's total liabilities now outweigh its assets, a critical red flag akin to a failing vital organ.

• Rising Debt Burden: Long-term borrowings have increased sharply by nearly 50%, from £69,282 to £101,486. This additional debt load introduces higher fixed costs (interest and principal repayments), potentially straining future cash flows.

• Dividend Payments: Despite these warning signs, the company paid interim dividends of £48,000, up from £35,250. This cash outflow may be ill-advised given the liquidity constraints and could worsen the financial condition.

• Asset Base and Operations: Fixed assets have increased modestly, showing some investment in tangible and intangible assets (including goodwill). However, these assets are not easily convertible to cash, so they do not alleviate the immediate liquidity "symptoms."

• Trade Debtors and Inventory: Debtors have increased, which could indicate slower customer payments, while stock levels have risen to £42,382 from £30,000, tying up cash in inventory.

Overall, RTK Retail Limited is in a precarious financial state, showing signs of both liquidity and solvency concerns, with a weakened cash flow "heartbeat" and an increasing debt "burden." The company is likely facing operational and financial challenges that need urgent management intervention.

---

4. Recommendations

To improve the financial wellness of RTK Retail Limited, the following actions are advised:

1. Improve Cash Flow Management:

   • Accelerate collection of trade debtors through stricter credit control and incentives for early payment.
   • Review inventory management to reduce stock levels and free up cash tied in unsold goods.

2. Restructure Debt:

   • Engage lenders to negotiate better repayment terms or refinance to reduce immediate pressure on cash flow. Consider extending maturities or lowering interest rates if possible.

3. Suspend or Reduce Dividends:

   • Temporarily halt dividend payments to conserve cash, prioritising business survival over shareholder returns during financial strain.

4. Cost Control:

   • Review fixed and variable costs rigorously, including staffing levels and operational expenses, to reduce cash outflows.

5. Explore Additional Capital Injection:

   • Consider raising equity capital or securing additional funding to bolster net assets and restore solvency.

6. Regular Financial Monitoring:

   • Implement tighter financial reporting and forecasting to detect early symptoms of distress and act proactively.

7. Strategic Business Review:

   • Evaluate business model and market positioning to improve profitability and sustainable growth.

---

Executive Summary