The Barbados-based multinational corporation, Goddard Enterprises Limited (GEL), has been downgraded a notch by the Trinidad-based ratings agency, the Caribbean Information and Credit Ratings Services Ltd (CariCRIS).
CariCRIS said in a statement on Thursday that it had downgraded GEL by one notch the assigned issuer/corporate credit ratings to Cari A+ (foreign and local currency ratings), from Cari AA- on the regional rating scale.
It has also maintained a negative outlook on the ratings, due to uncertainty associated with the group’s performance in the second half of the financial year as a result of the COVID-19 pandemic.
It said the ratings indicate that the level of creditworthiness of the company, adjudged in relation to others in the region, was “good”.
“Should performance decline more than that assured in our financial projections, we would likely further lower the group’s ratings,” said CariCRIS.
“The lowering of the ratings of GEL is being driven by the expected deterioration and cash flow and debt protection metrics as a result of the negative effects of the COVID-19 pandemic, which together with the historically low global commodity prices, present significant downside risks to the key economies in which GEL operates,” it added.
GEL, which is listed on the Barbados Stock Exchange, operates in more than 26 industries across several countries in the Caribbean, North and Latin America, employing over 5,000 people.
For the six months ending March 31, 2020, the conglomerate recorded a net income of $30.7 million, a decline of 5.1 per cent when compared to the same period last year.
The company had indicated in its report last month that the pandemic had placed “us all in uncharted and very uncertain waters”.
The board of directors indicated that the virus had resulted in a negative impact to the group’s catering division due to the reduction in airline travel, which began in March.
Revenues for the group increased by eight per cent for the review period as top-line growth was achieved in all divisions across the group. However, net profit from operations before gains/losses was $30 million, compared to $32 million in the prior year.
“This represents a decline of 6.3 per cent and is attributable to an 11 per cent reduction in the catering division from the initial effects of COVID-19,” the company had reported.
GEL said its main concern was its catering and ground handling division, adding that it expected a material financial impact since the future of the business, the timing of recovery and the post-recovery levels are very uncertain at this time.
CariCRIS said there were several factors that could lead to a lowering or the improvement in the rating and outlook of the group.
Factors that could lead to a lowering of the ratings include a decline in the effective debt service coverage ratio to less than one time for two consecutive years, a decline in revenue of more than 10 per cent per annum for two consecutive years due to challenging economic conditions in the group’s main markets and an end of year financial performance that is materially lower than that projected by CariCRIS.
On the other hand, factors that could lead to an improvement in the ratings and outlook include revenue increases by more than ten per cent per annum for two consecutive years and an improvement in the effective debt service coverage ratio to more than 2.5 times for two consecutive years.
“Nevertheless, GEL’s good credit worthiness ratings are being driven by the group’s wide geographic and industry diversity, which tempers the impact of revenue volatility, together with its continued good profitability notwithstanding the challenging conditions,” said CariCRIS.
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