RTS TREE SERVICES LTD

Executive Summary

RTS TREE SERVICES LTD has shown positive financial progress with improved net assets and cash position compared to previous years, indicating recovering business health. Despite this, the company continues to face liquidity challenges due to negative working capital, signaling the need for improved cash flow management and careful financial planning. With focused efforts to optimize working capital and strengthen reserves, the company’s financial outlook can stabilize and improve further.

RTS TREE SERVICES LTD - Analysis Report

Company Number: SC678644

Analysis Date: 2025-07-29 12:41 UTC

Financial Health Assessment for RTS TREE SERVICES LTD

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1. Financial Health Score: C

Explanation:
RTS TREE SERVICES LTD shows some signs of recovery from prior years' financial strain, moving from negative net assets in 2023 to positive net assets in 2024. However, the company still exhibits symptoms of liquidity stress, with net current liabilities persisting and cash flow appearing constrained despite improvement. The company’s financial "vital signs" suggest cautious optimism but highlight ongoing challenges that require active management to avoid relapse.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Net Assets	7,523	-1,914	Improvement from negative to positive net assets indicates partial recovery in overall value.
Net Current Assets (Working Capital)	-15,403	-32,612	Persistent negative working capital signals short-term liquidity problems ("symptom of distress").
Cash at Bank	6,866	1,197	Significant increase in cash reserves, a "healthy cash flow" indicator improving liquidity.
Debtors (Receivables)	3,257	11,800	Sharp decrease in debtors may indicate improved collections or reduced sales; needs monitoring.
Current Liabilities	25,526	45,609	Decrease in short-term debt reduces pressure but still considerable liabilities due.
Fixed Assets (Net Book Value)	22,926	33,195	Reduction in fixed assets could reflect disposals or depreciation; manageable given scale.
Share Capital	1	1	Minimal share capital; company financed primarily through retained earnings and liabilities.

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3. Diagnosis

RTS TREE SERVICES LTD has been experiencing financial strain typical of a small, young enterprise operating in a capital-intensive sector such as landscape services. The "symptoms" in prior years included negative net assets and severely negative working capital, akin to "critical vital signs" in patient diagnostics. However, the latest accounts reveal a turnaround with positive net assets and a marked increase in cash reserves, suggesting recent efforts to stabilize finances are taking effect.

The persistent negative working capital (-£15,403) indicates the company still struggles to cover short-term obligations with current assets, which is a liquidity "warning symptom." However, the reduction in current liabilities and improved cash position signal a better ability to meet immediate financial demands compared to previous years.

The decrease in debtors is a double-edged symptom: it could mean more efficient cash collection (a healthier sign) or declining sales (a potential concern). The company’s low share capital and reliance on retained earnings with minimal external equity suggests limited financial cushioning against shocks.

Overall, the financial "pulse" of RTS TREE SERVICES LTD shows improvement but remains vulnerable, requiring cautious optimism.

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4. Recommendations

1. Improve Working Capital Management:

   • Enhance invoicing and collections processes to reduce debtor days and increase cash inflow.
   • Negotiate longer payment terms with suppliers to ease the cash outflow timing without damaging supplier relationships.

2. Strengthen Liquidity Reserves:

   • Maintain or grow cash reserves to buffer against unexpected expenses or seasonal fluctuations in cash flow.
   • Consider short-term financing options to bridge gaps but avoid overleveraging.

3. Monitor Fixed Assets:

   • Review asset utilization and consider whether disposals or upgrades could improve operational efficiency without compromising capacity.

4. Financial Planning and Forecasting:

   • Implement detailed cash flow forecasts to anticipate periods of tight liquidity and plan accordingly.
   • Prepare contingency plans to manage financial downturns or unexpected costs.

5. Explore Equity Injection:

   • Given the minimal share capital, consider potential equity investment or additional capital contributions to improve the financial base and reduce reliance on debt.

6. Regular Financial Health Checks:

   • Conduct periodic reviews of key financial indicators to detect early signs of distress and take corrective action promptly.

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