Iceland received a positive outlook from credit agency Moody’s this week, despite having reported “somewhat weaker” than expected results.
A comment issued by the credit rating agency said that it still expects “the company to reduce its debt and its Moody’s adjusted gross debt to EBITDA leverage ratio over the next 12-18 months,” The Grocer reported.
In the 12 months to 29 December 2023, EBITDA at the frozen food retailer amounted to £289m, which meant that gross debt to EBITA ratio was 5.2x – higher than the 5.1x in September and the 4.5x predicted by Moody’s for the year.
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Iceland’s gross debt rose by £40m from £1.44bn in the three months to December following a store expansion programme, with seven new stores opened in 2023 and a new lease liability taken on a warehouse and distribution site to open in 2025.
The retailer plans to invest in 15 to 20 more stores in the 2025 financial year, which Moody’s said would use up some of its free cash flow, however this currently remains “strong” at £146m.
While the agency provided Iceland with an optimistic outlook, it did not upgrade the supermarket’s credit rating as Kantar data for the second half of 2023 saw its grocery market share continue to be “largely flat” between 2.1% and 2.4%.
In 2022, Iceland’s debt rating was downgraded by Moody’s from B2 to B3 after the grocer fell to a pre-tax loss in 2021.
Grocery Gazette has approached Iceland for further comment.
