International Design Group SpA

The stable outlook on IDG reflects our estimate that IDG will successfully intergrate Flos, Louis Poulsen, and B&B Italia in the next 12 months. We expect IDG will improve its S&P Global Ratings' adjusted EBITDA margin to 22%-23% by the end of 2020, supported by premium price positioning, lower nonrecurring costs, and the initial effect of cost synergies. We assume that reported FOCF will exceed €25 million in 2020, supported by IDG's asset-light business model. We project that in 2020 IDG will maintain S&P Global Ratings-adjusted debt to EBITDA of 5.5x-6.0x and EBITDA interest coverage of 2.5x-3.0x. We could lower the rating if FOCF weakens and approaches zero, and if EBITDA interest coverage falls to 2.0x or less. In our

...The U.S. and Asia Pacific offer positive growth opportunities while expansion outside Europe brings some risks. International Design Group (IDG) has a consolidated position in its core European markets, mainly Italy and the Nordics, thanks to well-known brands, including Flos and Louis Poulsen in lighting and B&B Italia in high-end design furniture. S&P Global Ratings believes IDG's expansion in other markets, including the Americas, and in Asia-Pacific where it currently generates roughly one third of sales, will drive growth. To increase its presence in these markets, the group needs to establish the right distribution channel and implement effective marketing strategy. We believe risk related to international expansion is mitigated by IDG's increased scale after integrating Flos, B&B Italia, and LP into a single company, as well as by IDG's solid reputation with globally recognized designers and architects. Delays in establishing the new organizational structure has pushed back delivery...

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