Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB+' long-term issuer rating on Norway-based IT infrastructure provider Atea ASA. The outlook is stable. The 'N2' short-term issuer rating was also affirmed.
Rating rationale
The affirmation of the long-term issuer rating reflects Atea's continued strong performance and stable operating margins. It also reflects stable leverage metrics despite slowing demand and growth.
In addition, the long-term rating reflects Atea's strong position as the largest provider of IT infrastructure in each of its markets in the Nordic and Baltic regions. We view its focus on the public sector as an additional credit strength due to the sector's relatively low cyclicality. The rating is further supported by strong operating cash flows, modest investment requirements, and low financial leverage.
The rating is constrained by Atea's moderate EBITDA margins, which stem primarily from a focus on reselling IT hardware and software, while the high-margin service business generates less than 20% of revenues. The rating is also constrained by the cyclicality of IT investments, especially in the private sector and by recent supply chain disruptions.
We have lowered our assessment of Atea's financial ratios to reflect lower-than-expected EBITDA and leverage metrics in 2023 and slower projected growth through 2026 compared with our expectations last year.
Stable outlook
The stable outlook reflects our expectation that the market for IT infrastructure will continue to grow at a healthy rate with stable margins in the years ahead. It also factors in our expectations of normal supply chain conditions with stabilised working capital levels. Moreover, the outlook reflects our belief that Atea will make no major debt-financed acquisitions or significantly increase financial leverage.
We could raise the rating to reflect revenue growth that continues to outpace market growth, increased operating efficiency leading to EBITDA margins above 8%, and a commitment to NCR-adjusted net debt/EBITDA below 1.5x and EBITDA/net interest above 15x.
We could lower the rating to reflect NCR-adjusted net debt/EBITDA above 2.5x for a protracted period, an adverse change in market dynamics, or supply chain issues resulting in lower sales and declining EBITDA margins.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
Contacts:
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.