Research Update: Fresh Food Retailer ZF Invest Upgraded to 'B' On Strong Operating Performance And Deleveraging; Outlook Stable

ZF Invest's operating performance for the fiscal year 2024 (ending Sept. 30) will significantly exceed our previously published forecasts, on the back of sustained positive traffic momentum and market share gains. We anticipate about 20% revenue growth in fiscal 2024 and an S&P Global Ratings-adjusted EBITDA margin exceeding 10%. We expect this will reduce adjusted leverage to 6.5x from 8.8x in fiscal 2023 (including the shareholder loan), while free operating cash flow (FOCF) after leases will grow to about €76 million in line with the previous year. We therefore raised our long-term issuer credit rating on ZF Invest to 'B' from 'B-'. At the same time, we raised our issue rating on the group's term loan B (TLB) to 'B'

...- ZF Invest's operating performance for the fiscal year 2024 (ending Sept. 30) will significantly exceed our previously published forecasts, on the back of sustained positive traffic momentum and market share gains. - We anticipate about 20% revenue growth in fiscal 2024 and an S&P Global Ratings-adjusted EBITDA margin exceeding 10%. We expect this will reduce adjusted leverage to 6.5x from 8.8x in fiscal 2023 (including the shareholder loan), while free operating cash flow (FOCF) after leases will grow to about 76 million in line with the previous year. - We therefore raised our long-term issuer credit rating on ZF Invest to 'B' from 'B-'. At the same time, we raised our issue rating on the group's term loan B (TLB) to 'B' from 'B-'. Our recovery rating on this instrument was affirmed at '3' (recovery prospects: 55%). - The stable outlook reflects our view that ZF Invest will achieve sustainable high sales growth thanks to store openings across all banners (notably Fresh and Grand Frais)...

Research Update