Fitch Ratings has affirmed Sri Lanka-based retailer Abans PLC’s (Abans) National Long-Term Rating at ‘BBB+(lka)’ with a Stable Outlook.
The affirmation reflects Fitch’s view that Abans will continue to make meaningful progress towards improving its net leverage, defined as lease-adjusted debt net of cash/operating EBITDAR, to around 6.0x by the end of the financial year to March 31, 2019 (FY19). We expect this to be supported by a recovery in profitability because the company will be better able to pass through costs to customers, as well as operating efficiencies and moderating capex and investments.
Abans’ net leverage improved significantly to 6.8x in the 12 months to end-June 2018 from 7.2x at FYE18 and 7.7x at FYE17. However we may take negative rating action in the next six to 12 months if Abans deviates from its deleveraging trend.
Abans’ rating also reflects its strong market position in consumer durables retail in Sri Lanka, its extensive brand portfolio supported by a wide distribution network and a well-managed hire-purchase (HP) business, which are partly offset by its investment in a large real estate project.