Research Update: LGC Science Group Holdings Ltd. Downgraded To 'B-' On Weaker-Than-Expected Operating Performance; Outlook Stable

Volume declines in U.K.-based life sciences measurement and testing solutions company LGC Science Group Holdings Ltd.'s (LGC's) Biosearch and Axolabs businesses, partly offset by solid growth in the group's clinical diagnostics and assurance business, resulted in a weaker-than-expected operating performance in fiscal year 2024 (ended March 31, 2024). Coupled with higher exceptional costs that resulted from duplicate running and ongoing restructuring activities, we estimate S&P Global Ratings-adjusted debt to EBITDA will remain high at 12x-13x (8x-9x without the payment-in-kind securities) in fiscal years 2025 and 2026. In the next 12-24 months, we anticipate LGC's capital expenditure (capex) pipeline will continue to constrain free operating cash flow (FOCF) generation, with negative FOCF also before expansionary capex in fiscal year 2025. LGC

...- Volume declines in U.K.-based life sciences measurement and testing solutions company LGC Science Group Holdings Ltd.'s (LGC's) Biosearch and Axolabs businesses, partly offset by solid growth in the group's clinical diagnostics and assurance business, resulted in a weaker-than-expected operating performance in fiscal year 2024 (ended March 31, 2024). Coupled with higher exceptional costs that resulted from duplicate running and ongoing restructuring activities, we estimate S&P Global Ratings-adjusted debt to EBITDA will remain high at 12x-13x (8x-9x without the payment-in-kind securities) in fiscal years 2025 and 2026. - In the next 12-24 months, we anticipate LGC's capital expenditure (capex) pipeline will continue to constrain free operating cash flow (FOCF) generation, with negative FOCF also before expansionary capex in fiscal year 2025. LGC will additionally face a heightened cash interest burden amid the high interest rate environment and the loss of favorable hedging arrangements....

Research Update