Does Plus Group Holdings (HKG:2486) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Plus Group Holdings Inc. (HKG:2486) does carry debt. But is this debt a concern to shareholders?

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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. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Plus Group Holdings's Debt?

As you can see below, at the end of June 2025, Plus Group Holdings had CN¥87.9m of debt, up from CN¥35.0m a year ago. Click the image for more detail. However, it does have CN¥149.2m in cash offsetting this, leading to net cash of CN¥61.2m.

How Healthy Is Plus Group Holdings' Balance Sheet?

We can see from the most recent balance sheet that Plus Group Holdings had liabilities of CN¥317.7m falling due within a year, and liabilities of CN¥2.48m due beyond that. On the other hand, it had cash of CN¥149.2m and CN¥538.4m worth of receivables due within a year. So it can boast CN¥367.4m more liquid assets than total liabilities.

This luscious liquidity implies that Plus Group Holdings' balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Plus Group Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Plus Group Holdings

Although Plus Group Holdings made a loss at the EBIT level, last year, it was also good to see that it generated CN¥39m in EBIT over the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Plus Group Holdings will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Plus Group Holdings has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last year, Plus Group Holdings saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Plus Group Holdings has CN¥61.2m in net cash and a decent-looking balance sheet. So we don't have any problem with Plus Group Holdings's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Plus Group Holdings has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.