Verisure Midholding AB

The stable outlook reflects our expectation that, over the next 12 months Verisure will continue to increase its subscriber base annually by 11%-13%, leading to strong revenue and EBITDA growth, while installation costs will result in FOCF remaining negative until at least 2020. We could lower the rating if leverage exceeded 8.0x on a prolonged basis, coupled with negative FOCF. We expect that such a scenario would stem from a deterioration of Verisure's operating performance, for example through higher attrition or a loss in market share, likely stemming from increased competition or technological shifts in the industry. We could raise the rating if continued growth in EBITDA reduces adjusted debt to EBITDA to sustainably below 7x, supported by a more

...Verisure Midholding AB's has solid growth prospects, with the residential monitoring market remaining broadly under-penetrated in Europe. Penetration in Verisure's addressable market is low, at about 13%. It is lower in some European countries that Verisure recently entered, for example in Italy, the U.K. and Germany penetration is below 11%. We expect this will increase in coming years as large players like Verisure continue to invest in technologically innovative products and push for higher sales. We also expect average revenue per user (ARPU) will increase by at least 2% annually in the next few years, driven by the sale of more integrated products and some inflation. Increasing market penetration coupled with increasing ARPU will provide solid growth prospects for Verisure, and we expect solid annual revenue growth of about 15%-17% for the next few years. Despite strong growth in EBITDA, FOCF is likely to remain close to break-even for the next couple of years.While we expect S&P Global...

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