Moody's lifts AI Avocado view to stable

Moody's Investors Service said it changed the outlook of AI Avocado Holding BV (Unit4) and its rated subsidiary, AI Avocado BV, to stable from negative.

The agency also said it assigned a stable outlook to all of the ratings.

The stable outlook reflects a strong improvement in Unit4's operating performance in the first three quarters of 2018, characterized by growth in the company's adjusted debt-to-EBITDA to 5.8x as of the end of September 2018, versus 7.9x in December 2017, Moody's said.

The strong earnings growth was driven by a sharp reduction in personnel costs of €27 million versus last year and drove the increase in EBITDA following large scale staff reductions in 2017, the agency said.

The ratings reflect the group's solid position in the mid-market sector of its core geographies, high switching costs for some of the group's products and low customer churn, Moody's said.

The ratings are primarily constrained by high competition in its markets, the lack of revenue growth in 2017 and 2018 and relatively weak free cash flow in 2018, the agency said.

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