Moody's Says Nord Anglia Education's (NORD) FY16 Results Inline with Expectations; Affirms Ratings

November 30, 2016 7:50 AM EST

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Moody's Investors Service says Nord Anglia Education, Inc (NAE)(NYSE: NORD) reported results for the fiscal year ended August 2016 that were broadly in line with expectations and have no impact on its B1 corporate family rating (CFR) or negative rating outlook.

NAE reported FY2016 revenue growth of 49.4% year-on-year to $856 million, boosted by contributions from acquired schools, but adversely impacted by the depreciation of the RMB and the EUR against the USD. Reported EBITDA grew 58.6% to $207.3 million, aided by the addition of acquired schools and tuition fee increases in excess of cost inflation, offset by higher growth at lower margin schools and higher costs for operations in China.

"NAE's leverage remains high for its B1 rating, with adjusted debt to EBITDA of about 7.2x for FY2016. We expect its leverage will remain around 7.0x for the next 12-18 months, owing to acquisitions and modest pressure on margins," says Joe Morrison, a Moody's Vice President and Senior Credit Officer.

NAE is in the process of negotiating amendments to its credit agreement to lower interest costs on its $867 million senior secured term loan B as well as drawings under its $125 million senior secured revolver. If successful, reduced interest costs would be modestly credit positive.

At end-August 2016, NAE's $372 million in cash holdings were more than sufficient to cover the $5 million in short-term debt and expected capital expenditures of around $85 million, as well as potential acquisition expenditures of around $200 million.

NAE's stable and predictable cash flows, which stem from demand for its premium educational services, continue to support the rating. Moody's expects that NAE will be disciplined in executing its acquisition strategy, acquiring individual schools in existing markets that are accretive to earnings and cash flow.

The principal methodology used in this rating was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.



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