RELAX 2000 ran up EUR 181k of interest in a year its operations lost money

The interest was there, the operating profit was not

In 2025 RELAX 2000, spol. s r.o. booked EUR 181k of interest expense. In the same calendar year its operations lost EUR 1.6m. A year earlier, in 2024, the company still made an operating profit of EUR 325k. The figures are in euros and cover the company on its own, under Slovak accounting standards (SK GAAP). A spol. s r.o. is the Slovak limited liability company, the standard form for a private business.

Interest cover is the simplest test a bank applies: operating profit divided by interest cost. It shows how many times the business could pay its lenders from what it earns. When operating profit is negative, there is nothing to divide. The interest still has to be paid, but the money for it comes from cash in the bank, from new borrowing or from the owners, not from selling goods or services at a profit.

The loss is not a rounding matter. Revenue was EUR 12.1m, against EUR 13.6m in 2024, and the operating margin moved from 2.4% to -13.5%, a swing of 15.9 pp. After interest and tax, the net result was a loss of EUR 1.8m, compared with a small profit of EUR 40.2k the year before.

Costs did not shrink with the sales

The usual reasons interest cover collapses are three: borrowing grows faster than earnings, rates on floating loans reset higher, or operating profit falls while the debt stays where it is. At RELAX 2000 the third reason is the one the figures carry most clearly.

Revenue fell by EUR 1.5m, or 11.0%. Operating profit fell by EUR 2.0m. The profit lost was larger than the revenue lost. That only happens when costs do more than fail to follow sales down: on balance, they went up. A business with a heavy fixed base (staff, premises, machines, leases) feels a drop in sales almost in full at the profit line. RELAX 2000 felt more than that.

The loss is not simply a matter of depreciation either. Depreciation, the accounting charge for wearing out equipment and buildings, rose from EUR 450k in 2024 to EUR 667k in 2025. That is a real increase, and it suggests the company had more assets to write off than before. But even with depreciation added back, the company's EBITDA (operating profit before depreciation and amortisation) was negative at EUR 970k, after a positive EUR 774k in 2024. The EBITDA margin moved from 5.7% to -8.0%. In plain terms, the day to day business consumed money before any charge for the wear on its assets.

The accounts do not say whether the interest bill reflects more debt or dearer debt. What they do show is enough for the main point: the operating side stopped paying for the financing side.

A loss in the books, more cash in the bank

One figure seems to pull the other way. Cash at the end of 2025 stood at EUR 1.6m, up from EUR 339k a year earlier, a rise of 360.9%. A company that lost money from operations ended the year holding more of it.

That is not a contradiction, but it does need an explanation. Cash can rise in a loss-making year when a company collects old receivables, runs down its stock, sells assets or borrows. The balance sheet shrank: total assets fell from EUR 13.6m to EUR 10.4m. A shrinking balance sheet alongside more cash fits a company turning other assets into money. The accounts do not separate these sources; the cash flow statement for 2025 would show which one did the work.

Equity tells the rest. It fell from EUR 4.3m to EUR 2.5m, a drop of 42.1%, and the fall of EUR 1.8m matches the size of the net loss. The loss went straight through the owners' capital. The equity ratio, the share of assets financed by the owners rather than by creditors, moved from 31.9% to 24.2%. Equity is still positive and the company still has a buffer. It is a thinner buffer than it was twelve months earlier.

So the cash line looks comfortable, and I would not mistake it for strength. Money raised by selling assets or collecting debts can be spent once. Interest is charged every year.

The sum to run in your own company

If your business carries a loan, open last year's income statement and divide operating profit by interest expense. If the result is comfortably above one, the business pays its lenders from its own earnings. If it is close to one, a single weak quarter changes that. If it is below zero, as at RELAX 2000 in 2025, your lenders are being paid from your reserves.

Then run the uncomfortable version. Take a year in which sales fall as much as they fell in your worst recent year, keep your fixed costs where they are, and put your floating loan rates up to the level the bank could reasonably reset them to. Do the division again. That number, not the one from a good year, is the one to bring to your next conversation with the bank.

Finally, ask your finance team one question: if sales dropped next month, which costs would fall within a quarter and which would not? At RELAX 2000, costs did not follow revenue down. In most companies the honest answer to that question is a longer list than the owner expects.

RELAX 2000 ended 2025 with more cash and less of everything else that pays for it: less revenue, less equity, no operating profit. The interest was paid, and I would watch whether 2026 brings an operating result that can pay it again, because a balance sheet can cover a lender only for so long.