Home ECONOMY Higher costs threaten KK Security’s credit rating, warns agency

Higher costs threaten KK Security’s credit rating, warns agency

by biasharadigest
Companies

Higher costs threaten KK Security’s credit rating, warns agency

Security guards
Security guards at a past event. FILE PHOTO | NMG 

Security firm Kenya Kazi (KK) needs to improve earnings this year to maintain its rating as a borrower with an average to adequate ability to repay its debt.

South Africa ratings agency Global Credit Ratings said the company and its related parties, which have issued long-term unsecured debt, risk losing their current ratings of BBB for long term credit and A3 for short term credit.

The BBB rank is the second spot among companies with average credit quality relative to other issuers or obligations in the same country.

The A3 designation means there is average certainty of timely payment of short-term obligations relative to other issuers or obligations in the same country.

GCR issued the ratings with a negative outlook, signalling downgrading if the company’s earnings do not improve in the short-term.

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KK Security’s revenue growth last year failed to keep up with costs, including that of rebranding following its acquisition by multinational Gardaworld Security Corporation.

This saw the company’s earnings before interest, tax, depreciation and armotisation (Ebitda) margin drop to five percent last year from seven percent in 2018.

“GCR could lower the ratings if KK’s Ebitda margins do not improve towards the seven percent level, which will put pressure on the debt to Ebitda and interest coverage ratios,” the ratings firm said in a statement.

“Rising refinancing risks, such as those coming in 2022, or a reduction in the weighted average maturity of the funding profile could also bring down the ratings.”

GCR said the current rating reflects KK’s strong competitive position in security business.

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