ACRA ASSIGNS A+(RU) TO HENDERSON FASHION GROUP PUBLIC JOINT-STOCK COMPANY AND A+(RU) TO ITS BONDS

The credit rating of Henderson Fashion Group Public Joint-stock Company (hereinafter, HENDERSON or the Company) is based on the strong business assessment, high corporate governance, and the medium market position. The financial profile assessment takes into account very high profitability, very strong liquidity, low leverage with high coverage, as well as the medium size of business and cash flow.

HENDERSON fashion house is one of the largest chains of fashionable men’s clothing stores in Russia. The Company offers a collection of clothes, footwear, and accessories under its own brand and has 170 stores across more than 60 Russian cities. The chain’s flagship store is located at 9 Kuznetsky Most Street in Moscow. Besides its offline business, HENDERSON is actively developing an online store and expanding its presence in Russia’s key e-commerce marketplaces. The Company has been present on the Armenian market since 2022 as an international franchise.

KEY ASSESSMENT FACTORS

Strong operational profile. The Company develops, produces, and retails products in the men’s clothing segment, which ACRA assesses as having moderate cyclicality of demand. The production process of HENDERSON includes the creation of its own designer lines that take into account the preferences of Russian consumers, while the retail chain is made up of stores in shopping centers of varying class with a high geographic diversification in all eight of Russia’s federal districts. All the stores are managed by the Company. In addition, the online sales segment is developing dynamically, with its share of total revenue steadily increasing. HENDERSON actively invests in developing its brand and uses all the main promotion channels — outdoor advertising, the internet, the press and online fashion media, and social networks. As a competitive player in a fragmented market in terms of several categories, HENDERSON offers a collection in the classic men’s clothing segment, as well as in smart casual, casual, and its active lifestyle line. In terms of price positioning, products are in the middle and upper middle segments of the market.

Strong corporate governance. The Company has a consistent and successful strategy that enables it to actively develop and ensures growth of operational and financial metrics. HENDERSON is effectively implementing a strategy of reopening stores with a new design and expanding retail space. The Company is managed by a board of directors, four of whom are independent. The board of directors includes and audit and risks committee and a committee for remuneration and nominations. The average work experience of the Company’s management team is 17 years. HENDERSON has certain procedures for reducing financial risks, and also uses financial hedging instruments to minimize currency risks.

Medium size and very high profitability. FFO before fixed payments and taxes increased to RUB 8.5 bln in 2024, while its weighted value from 2023 to 2028, according to ACRA’s estimates, exceeded RUB 10 bln. The weighted average value of revenues for the same period was RUB 26 bln. These indicators correspond to a medium score for size of business as per the Agency’s methodology. The FFO margin before fixed payments and taxes was 41% in 2024.

Low leverage. According to ACRA’s projections, the weighted ratio of adjusted total debt to FFO before fixed payments for 2023–2028 will be 3.6x and the ratio of total debt to FFO before net interest payments will be 0.3x. As of the end of 2024, the ratio of total debt to FFO before fixed payments was 0.4x. The Company’s debt portfolio consists of a medium-term bond, as well as short-term revolving credit lines provided by major Russian banks. Borrowings are ruble-denominated and have fixed rates. The weighted ratio of FFO before fixed payments to fixed payments is 1.9x for 2023 to 2028.

Medium cash flow. As of the end of 2024, the Company had a positive free cash flow (FCF) before dividends on the back of consistently high operating profitability, but the indicator was negative taking into account dividends. In view of capital expenditures planned by the Company for 2026–2028, as well as plans to pay dividends on an annual basis, according to the Agency’s estimates, FCF after dividends in the forecast period from 2026 to 2028 will be neutral or moderately positive.

The very strong liquidity stems from the Company having considerable free limits under credit lines and funds that exceed upcoming repayments in the short term.

KEY ASSUMPTIONS

• Revenues growing by 15% annually from 2026 to 2028;

• The investment program being carried out as per the Company’s business plan;

• Annual dividend payments at no less than 50% of net profits.

POTENTIAL OUTLOOK OR RATING CHANGE FACTORS

The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

• Stronger competitive position of the Company coupled with significant growth of the size of business and further diversification of sales channels and profitability maintained at the same level.

A negative rating action may be prompted by:

• Leverage increasing coupled with the weighted ratio of adjusted total debt to FFO before fixed payments exceeding 4.0x, the ratio of weighted total debt to FFO before fixed payments exceeding 1.0x, deterioration of debt service metrics, and the weighted ratio of FFO before fixed payments after lease payments to interest payments falling below 1.5x.

RATING COMPONENTS

Standalone creditworthiness assessment (SCA): а+.

ISSUE RATINGS

Rationale. The issue represents senior unsecured debt of the Company. Due to the absence of either structural or contractual subordination of the issue, ACRA regards it as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. As per ACRA’s methodology, the detailed approach was applied to determine the credit rating, according to which the recovery rate for the issue belongs to category I, and therefore the credit rating of the issue is equal to the Company’s credit rating and is set at A+(RU).

KEY ISSUE PROPERTIES

Sources: ACRA, issuer’s data

REGULATORY DISCLOSURE

The credit ratings have been assigned to Henderson Fashion Group Public Joint-Stock Company and the issue of Henderson Fashion Group Public Joint-Stock Company based on the following methodologies: the Methodology for Assigning Credit Ratings to Non-Financial Corporations under the National Scale for the Russian Federation to calculate the SCA and determine the credit rating and the credit rating outlook of Henderson Fashion Group Public Joint-Stock Company under the national scale for the Russian Federation, Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation to determine the credit rating of the bond issue under the national scale for the Russian Federation, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities to ensure consistent and uniform application of ACRA’s methodologies, rating scales, models, and key rating assumptions.

A credit rating of Henderson Fashion Group Public Joint-Stock Company assigned under the national scale for the Russian Federation has been published for the first time. A credit rating of the issue (ISIN RU000A10BQC8) assigned under the national scale for the Russian Federation has been published for the first time.

The credit rating of Henderson Fashion Group Public Joint-Stock Company and its outlook and the credit rating of the bond issue are expected to be revised within one year.

The credit ratings were assigned based on data provided by Henderson Fashion Group Public Joint-Stock Company, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS accounting (financial) statements of Henderson Fashion Group Public Joint-Stock as of December 31, 2024.

The credit ratings are solicited and Henderson Fashion Group Public Joint-Stock Company participated in their assignment.

In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to Henderson Fashion Group Public Joint-Stock Company during the year preceding the rating action.

No conflicts of interest were discovered in the course of credit rating assignment.