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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB/Stable issuer rating of Vöröskő Ltd. Scope has also affirmed the BB senior unsecured debt rating.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BB- (unchanged). Scope’s assessment of business risk profile reflects the issuer’s established position in the Hungarian market but is constrained by its small size compared to international peers and lack of geographical diversification.

With revenues of HUF 107bn (EUR 0.2bn) in FY 2025 (+17% YoY), Vöröskő is the second largest consumer electronics retailer in Hungary, behind Ceconomy (BBB-/Stable). Scope considers the issuer's market share of around 13%-17% to be well protected from competition, underpinned by i) the issuer's strong position as a retailer of home improvement products (mainly small and large household appliances); and ii) its membership in Euronics International Ltd. (Europe's largest consumer electronics buying group), which provides brand recognition and pricing power.

Limited geographical diversification constrains the business risk profile. In 2025, the company entered the Croatian market; however, this is expected to contribute only limited revenue in the medium term. As a result, the issuer’s geographical reach remains largely confined to the Hungarian market, exposing it to the country’s demand volatility.

Product diversification is good. Vöröskő offers a wide range of household appliances and consumer electronics. The latter are more sensitive to intra-year seasonality (Black Friday and Christmas), technological changes, and logistics disruption as the products are often shipped from distant suppliers. Over the years, Vöröskő has expanded its offer to services and now provides marketing, warranties and brokerage. While none constitute strong diversification away from actual sales, they do consolidate the group’s market positioning. Vöröskő also offers financing services in cooperation with local banks, which grants the issuer a bonus on sales from the banks.

Profitability, measured by Scope-adjusted EBITDA*, declined to 5.5% in FY 2025 from 6.0% in FY 2024, after being for three years above 6%. This was driven by i) the issuer’s focus on growing market share; and ii) higher retail tax in the last financial year, as the amount is calculated on turnover. Scope anticipates that the margin will remain relatively stable throughout the forecast period, supported by easing inflation and a reduction in retail tax burden. Scope sees limited opportunities for margin growth in the medium term, as entry into Croatia (in 2025) is likely to yield modest returns, competition remains intense, and ancillary services still have a limited contribution.

Financial risk profile: BB+ (unchanged). The financial risk profile remains robust, fuelled by the strong cash position and the resilient EBITDA.

The Debt/EBITDA remained below 2.0x in FY 2025, underpinned by consistent profitability and a robust cash position. Looking ahead, Scope anticipates that leverage will remain broadly stable, supported by continued EBITDA growth and the lack of additional financing requirements, reflecting the strong liquidity profile. This prudent financial position provides flexibility to manage operations and pursue strategic initiatives without increasing leverage.

Scope assessed debt protection using the EBITDA interest and operating lease cover, which replaces the previously applied EBITDA interest cover, following our rating methodology change announced on June 25, 2025. Despite the substantial lease obligations typical for an electronics retailer, the ratio has consistently remained above 2x in recent years and is expected to stay at this level. The agency anticipates that lease repayments and interest will grow broadly in line with EBITDA, while interest expenses are likely to remain stable or slightly decline, supported by the amortisation of the bond starting in 2027.

The free operating cash flow/debt ratio peaked at 36% in FY 2025, driven by slower inventory growth, improved payables days, and lower-than-expected capex, up from 14% in the prior year, and has shown reduced volatility in recent years, remaining positive since 2023. Scope expects this metric to stay positive over 2026–2028, albeit at lower levels of between 5% and 20%, as capital expenditures are projected to be higher than in FY 2025.

Liquidity: adequate (unchanged). Liquidity is adequate, supported by the absence of obligations in the near term (with bond amortisation beginning in 2027 at 10% yearly), significant cash on hand (HUF 8.3bn as at June 2025), and an expected free operating cash flow of HUF 962m in 2026. Liquidity is further strengthened by an unused overdraft facility of HUF 5.3bn, expiring in 2027, and an additional unused overdraft line of HUF 2bn, expiring in 2049. Scope considers the cash balance held as at June 2025 as conservative as the issuer typically holds the highest levels in December following the peak trading season.

Vöröskő’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 7bn) if the debt rating of the bond stays below B for more than two years (grace period) or drops below B- (repayment within 90 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is three notches. Scope sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: credit-neutral (unchanged). Supplementary rating drivers have no impact on the issuer rating.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that leverage will remain at around or below 2x, supported by EBITDA growth and the absence of additional financing needs. Scope also expects debt protection to remain stable, given that interest expenses are largely fixed and lease obligations are increasing in line with EBITDA.

The upside scenario for the ratings and Outlook is:

1. Improved business risk profile with significant growth in size and geographic reach, a scenario which Scope considers remote at present

The downside scenarios for the ratings and Outlook are (individually):

1. Debt/EBITDA approaching 4x
    
2. EBITDA and operating leases cover approaching 1.7x

Debt rating

Scope has affirmed the BB rating of Vöröskő’s senior unsecured debt. The assessment considers a hypothetical default scenario in 2028 and is based on a going concern status. The HUF 18bn enterprise value that is available to creditors compares to the HUF 7.3bn credit line (assumed to be fully overdrawn) and the HUF 5.6bn senior unsecured bond and results in a 100% recovery. However, Scope has refrained from up-notching the rating due to the possibility that the bond might be refinanced and consequently have a higher amount than the anticipated debt.

In January 2022, Vöröskő issued a HUF 7bn senior unsecured bond (ISIN: HU0000361241) through the Hungarian Central Bank’s Bond Funding for Growth Scheme. HUF 4.3bn of the bond proceeds were used for purchasing, opening and renovating warehouses and stores. The bond has a tenor of 10 years and a fixed coupon of 4.75%. Bond repayment is in six tranches starting from 2027, with 10% of the face value payable yearly, and 50% balloon payment at maturity.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Vöröskő Ltd.

Issuer rating: BB/Stable, affirmation

Senior unsecured debt rating: BB, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Retail and Wholesale Rating Methodology, 25 June 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Claudia Aquino, Associate Director
Person responsible for approval of the Credit Ratings: Karl Yuan Pettersen, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 13 January 2022. The Credit Ratings/Outlook were last updated on 16 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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