Nordic Credit Rating (NCR) said today that it had assigned a 'BBB+' long-term issuer rating to Norway-based IT infrastructure provider Atea ASA. The outlook is stable. An 'N3' short-term issuer rating was also assigned.
Rating rationale
The long-term rating reflects Atea's low financial leverage as a result of strong operating cash flow and modest investment requirements. It also reflects the company's strong position as the largest provider of IT infrastructure in each of its markets in the Nordic and Baltic regions and the third largest provider in Europe. We see the company's focus on the public sector as an additional credit strength due to the sector's relatively low cyclicality.
The rating is constrained by Atea's moderate, albeit stable, EBITDA margins, which result primarily from its 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 current global supply chain disruptions.
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 reflects our expectation that the supply chain will improve, effectively reducing the need for both inventories and interest-bearing debt. Atea has announced its intention to increase mergers and acquisitions, but in our opinion this will focus on small targets using excess cash, and will not affect leverage significantly. We could raise the rating to reflect EBITDA margins sustainably in excess of 8% and a commitment to an NCR-adjusted net debt/EBITDA ratio below 1.5x. We could lower the rating to reflect NCR-adjusted net debt/EBITDA above 2.0x for a protracted period, enduring supply chain issues resulting in lower sales and declining EBITDA margins, or loss of market position.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | BBB+ |
| Outlook: | Stable |
| Short-term issuer credit rating: | N3 |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 18 Feb. 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022 and NCR's Rating Principles published on 24 May 2022. For the full regulatory disclaimer please see the rating report.