Is SysGroup (LON:SYS) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that SysGroup plc (LON:SYS) does have debt on its balance sheet. But is this debt a concern to shareholders?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is SysGroup's Net Debt?

As you can see below, SysGroup had UK£4.82m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. But it also has UK£8.12m in cash to offset that, meaning it has UK£3.31m net cash.

How Strong Is SysGroup's Balance Sheet?

We can see from the most recent balance sheet that SysGroup had liabilities of UK£8.32m falling due within a year, and liabilities of UK£5.21m due beyond that. On the other hand, it had cash of UK£8.12m and UK£5.25m worth of receivables due within a year. So these liquid assets roughly match the total liabilities.

Having regard to SysGroup's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the UK£13.4m company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, SysGroup also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SysGroup's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for SysGroup

In the last year SysGroup had a loss before interest and tax, and actually shrunk its revenue by 7.4%, to UK£20m. That's not what we would hope to see.

So How Risky Is SysGroup?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year SysGroup had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through UK£920k of cash and made a loss of UK£2.2m. But the saving grace is the UK£3.31m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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. To that end, you should be aware of the 2 warning signs we've spotted with SysGroup .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.