Research Update: IT Service Provider Centurion Newco (Engineering) Outlook Revised To Negative On High Exceptional Costs; 'B-' Affirmed

Centurion Newco SpA (Engineering)'s very high S&P Global Ratings-adjusted leverage for full-year 2023, sustained high exceptional costs, and negative free cash flow before factoring raise doubts about the trajectory of key credit parameters, eclipsing the steady growth of the company's reported revenue and EBITDA. In our current base case, we foresee exceptional costs dropping from 2024, which together with continuous EBITDA growth should lead adjusted debt to EBITDA to improve toward 10x by 2025, with free operating cash flow (FOCF) after leases rebounding to about €11 million this year. We affirmed our 'B-' ratings on Engineering and its senior secured notes; the recovery rating remains at '3', and we have revised our rounded recovery estimate to 50% from 55%, since

...- Centurion Newco SpA (Engineering)'s very high S&P Global Ratings-adjusted leverage for full-year 2023, sustained high exceptional costs, and negative free cash flow before factoring raise doubts about the trajectory of key credit parameters, eclipsing the steady growth of the company's reported revenue and EBITDA. - In our current base case, we foresee exceptional costs dropping from 2024, which together with continuous EBITDA growth should lead adjusted debt to EBITDA to improve toward 10x by 2025, with free operating cash flow (FOCF) after leases rebounding to about 11 million this year. - We affirmed our 'B-' ratings on Engineering and its senior secured notes; the recovery rating remains at '3', and we have revised our rounded recovery estimate to 50% from 55%, since the company's use of factoring has increased. - The negative outlook indicates that we could lower the rating if the company's quarterly results this year suggest exceptional costs or adjusted leverage may not reduce...

Research Update