Credit rating
A key pillar in Stedin Group's financial policy is to maintain good access to the available sources of financing, including the money and capital markets. It is important to that end that existing and potential capital providers have proper insight into Stedin Group's credit rating.
Stedin Holding N.V. and Stedin Netbeheer B.V. each have a credit rating with the rating agency Standard & Poor’s (below: S&P). This rating consists of a long-term rating with outlook and a short-term rating. The outlook indicates the expected change in the long-term rating for the coming years.
The most recent rating awarded by S&P in November 2021 is A- with a stable outlook for the long term and A-2 for the short term. This rating is unchanged from 2020.
The most important ratio for Stedin Group is the ratio of Funds from Operations (below: FFO) to the net debt ratio for freely available cash and cash equivalents (Net debt), which is a customary ratio in the market for the sustainability of debt. S&P applies a multi-year average of this ratio as part of its assessment of the credit rating. Stedin Group presents this figure only at year-end 2021 and 2020.
The calculation of this ratio follows the figures in these financial statements, supplemented with the adjustments applied by S&P. These analytical adjustments are made in order to enhance the comparability of the figures as well as the financial position between Stedin Group and other businesses. The main adjustment concerns the perpetual subordinated bond loan as an instrument with a 50% equity component and a 50% debt component (by contrast to IFRS, where it is part of equity in its entirety). In addition, pension liabilities are included in the S&P definition of debt.
The calculation is set out in the table below:
x € 1 million | 2021 | 2020 |
|---|---|---|
EBITDA* | 485 | 461 |
-/- Interest paid | -87 | -57 |
-/- Tax paid | 1 | 10 |
-/- S&P adjustments** | -14 | -11 |
S&P - Funds from Operations | 385 | 403 |
Non-current interest-bearing debt | 2,676 | 2,826 |
Current interest-bearing debt | 531 | 276 |
Lease liabilities | 74 | 81 |
-/- Cash and cash equivalents | -133 | -83 |
IFRS - NET DEBT | 3,148 | 3,100 |
+ S&P adjustments** | 261 | 261 |
S&P - NET DEBT | 3,409 | 3,361 |
FFO / Net Debt – S&P adjusted | 11.3% | 12.0% |
- * Profit before income tax adjusted for depreciation, amortisation, net interest payable, profit of group entities sold, revaluations and share of minority interests.
- * These adjustments are published by S&P on behalf of Stedin Group for 2020.
Current and non-current interest-bearing debt, interest paid and tax paid in accordance with these financial statements. Lease liabilities are part of non-current interest-bearing debt and are presented separately for comparative purposes.
The FFO/Net Debt ratio decreased to 11.3% in 2021, from 12.0% in 2020. The €18 million decrease in FFO was driven mainly by higher interest paid owing to the early redemption of the USPP loans. The net debt ratio (Net Debt) at year-end 2021 was €48 million higher than in 2020 due to short-term cash loans. Total interest-bearing loans outstanding increased by €105 million.
Tax paid in 2021 was €11 million higher, as a refund had been received in 2020 arising from the adjustment of the advance payment in 2020, whereas this reverted back to an expense, as usual, in 2021. The higher operating profit of €7 million was attributable to higher capitalised own production.
S&P adjustments can be viewed in the S&P rating report of November 2021 (which is available via the Investor Relations website) on the basis of figures in the 2020 financial statements. For the most recent rating reports, see our website: http://www.stedingroep.nl/investor-relations.
