Verisure Midholding AB

The stable outlook reflects our expectation that, over the next couple of years Verisure will continue to increase its subscriber base by 8%-12%, leading to strong revenue and EBITDA growth, while installation costs will result in FOCF remaining negative until at least 2021. We could raise the rating if continued growth in EBITDA reduces adjusted debt to EBITDA to sustainably below 7x, supported by a more conservative financial policy. An upgrade would also require that revenue and EBITDA at least remain stable. 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

...Verisure has solid growth prospects, with the residential monitoring market remaining broadly underpenetrated in Europe. Penetration in Verisure's addressable market is still low, at about 9.4%. In some European countries that Verisure recently entered, for example in Italy, and Germany, penetration is below 9%. We expect this will increase in coming years as large players like Verisure continue to invest in marketing and sales initiatives and push for higher sales. We also expect average revenue per user (ARPU) will improve, with a compounded annual growth rate exceeding 2% over the next few years, supported by inflation and the sale of new innovative products. Increasing market penetration coupled with increasing ARPU will provide solid growth prospects for Verisure where we expect revenue to increase at a solid CAGR of 10%-15% for next few years. Business growth in 2020 remained resilient with 11% revenue growth in the first nine month of 2020, despite a temporary slowdown in subscriber...

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