Is Robert Walters (LON:RWA) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Robert Walters plc (LON:RWA) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Robert Walters's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Robert Walters had UK£25.0m of debt, an increase on UK£14.6m, over one year. However, its balance sheet shows it holds UK£55.1m in cash, so it actually has UK£30.1m net cash.

A Look At Robert Walters' Liabilities

We can see from the most recent balance sheet that Robert Walters had liabilities of UK£160.6m falling due within a year, and liabilities of UK£52.9m due beyond that. On the other hand, it had cash of UK£55.1m and UK£154.1m worth of receivables due within a year. So its liabilities total UK£4.30m more than the combination of its cash and short-term receivables.

Given Robert Walters has a market capitalization of UK£89.1m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Robert Walters also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Robert Walters can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Robert Walters

In the last year Robert Walters had a loss before interest and tax, and actually shrunk its revenue by 14%, to UK£836m. We would much prefer see growth.

So How Risky Is Robert Walters?

Although Robert Walters had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of UK£17m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Robert Walters you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.