Centurion Newco S.p.A.

The stable outlook reflects our expectation that Engineering's leverage--after peaking at around 8.0x in 2020--will continue to reduce, driven by EBITDA growth and underpinned by supportive market trends and Engineering's solid positioning and superior technical capabilities. We also expect it to maintain its solid cash flow conversion by maintaining FOCF to debt at least above 5%. We could lower the rating if EBITDA growth is lower than we expect, leading to adjusted leverage rising to well above 9.0x. We could also lower the rating if FOCF to debt weakens significantly toward 0%. In our view, this could result from weaker-than-expected operating performance, either due to slower economic recovery in 2021 or increasing competition from larger peers bringing down pricing. The

...Centurion NewCo (Engineering) benefits from having contracts with the Italian public sector (23% of 2020 revenues) and financial institutions (23%), which have been very resilient during the pandemic. IT services are underpenetrated in Italy compared with other European countries. This, coupled with COVID-19-related disruptions that have increased the need for digitalization, has helped Engineering expand its revenue. The pandemic prompted the public sector (central and local administrations) to invest more in the digitization of public services, with a special focus on data protection, data analytics, and cybersecurity--fields in which Engineering is active. Moreover, the government has recently announced that part of Italy's 221 billion share of the EU recovery package will be used for fully digitalizing public administration, among other things. On the private sector side, transformative activities are being fueled by structural changes as banks, insurance companies, and health care...

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