Rating Rationale
Today´s rating action is driven by Scope´s revision of its Corporate Rating Methodology published on March 28, 2014. In particular, the rating reflects the negative impact of the more conservative framework applied by Scope when assessing the financial risk profile of the company. It also factors in a higher weight given to future risks related to market dynamics and Homair’s core business lines.

The reason for this revision of Scope´s rating methodology lies in the growing interest of investors in the SME segment across Europe and the need for more forward-looking credit risk analysis of corporate issuers. Forward-looking assessments include an in-depth analysis of the issuer´s future capacity to manage business risks in a changing market environment. The evolution of this rating methodology also reflects Scope´s commitment to providing consistent ratings and rating methodologies across all of its rating activities, including Financial Institutions, Structured Finance and SME Corporates across Europe.

BUSINESS RISK PROFILE

Market Dynamics
The camping and caravanning market has shown strong growth since 2007. Scope believes that Homair’s main focus on France is positive: the French market is the second largest in the world after the US and has almost doubled in the past six years. Homair clearly profits from the development of its core market, showing steady revenue growth (y-o-y minimum of 7%). But even in declining markets, such as Spain, Homair was able to increase turnover.

Due to its size and granular competitor structure, the company benefits from economies of scale.

Business Risks Exposure
However, even if Homair’s core market is currently soaring, Scope believes its dependency on the outdoor hotel business could become a handicap. This focus on a single product/business line increases the risks of losing market share if consumer preferences or the environment change. Moreover, with fixed costs accounting for about 60% of turnover, Scope sees a risk that Homair would not be able to reduce fixed costs rapidly to cover any longer-term revenue shortfalls.

In addition, the seasonality of the outdoor hotel business could negatively impact the group’s future development.

Scope sees further risks in Homair’s approach of having subsidiaries for almost every market due to the complex legal structure spread over different jurisdictions.

Management & Structure
Scope considers Homair’s industry-specific know-how gained through its long-standing experience in the sector to be outstanding. The company’s expertise in its core business (outdoor hotel business) and its geographical exposure generated significant growth in the past, with revenues rising for the seventh year in a row since the company was listed on Alternext. Furthermore, the group has always reported an operating profit, enabling it to pay dividends since 2011. It has also significantly increased liquidity reserves during the last three years.

FINANCIAL RISK PROFILE

In 2013, Scope notes the positive impact of an equity ratio at 32%, a relatively high gross operating margin of 54% and an outstanding cash position illustrated by a Quick ratio of 170%. However Scope’s action reflects the more conservative ratio calibration of its revised rating methodology.

There are two aspects to Homair’s performance: on the one hand it has enjoyed strong revenue growth (+175%) for the past seven years, but on the other hand, income on ordinary activities has been very volatile (+/- 37%) with 2013 figures in line with those of 2007.

However, Homair’s gross margin of 54%, which is higher than those of its competitors, proves its ability to generate economies of scale.

Homair’s equity ratio of 32% provides the company with a solid balance sheet structure considering the seasonal nature of its business and compares favourably with its main competitors, which generally exhibit lower levels.

The company maintains a substantial position of cash and liquid assets amounting to EUR 21m and a stable level of net debt to EBITDA of 3.64 at the end of FY 2013.

OUTLOOK

Homair’s stable outlook is driven by the 8% to 10% growth anticipated in the outdoor hotel business and the company’s strong market positioning combined with its qualitative strengths in terms of management and related expertise for mid-term developments.

About Groupe Homair Vacances S.A.
Groupe Homair Vacances is specialized in the European outdoor hotel sector, where the company has been operating for 20 years with its two established brands (Homair Vacances and Al Fresco) as a pure provider of mobile homes. The company has been listed on Alternext in Paris since 2007.

More information about Scope on www.scoperatings.com.

REGULATORY DISCLOSURES

Important information
Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings GmbH, Berlin, District Court for Berlin (Charlottenburg) HRB 145472, directors: Thomas Morgenstern, Florian Schoeller.

The rating has been prepared by Philipp Wass, Lead Analyst.
Responsible for approving the rating: Thomas Morgenstern, Managing Director.

Rating history
16.04.2014 Rating withdrawn at the request of the issuer
16.04.2014 BB+ outlook stable
31.03.2014 BBB- under review for downgrade
10.04.2013 BBB- outlook stable

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings but for a fee based on a mandate of the rated entity.

As at the time of the analysis, neither Scope Ratings GmbH nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings GmbH or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of Information for the rating
Annual financial statements, annual reports/semi-annual reports of the rated entity/issuer, external market reports, external market reports, data provided by the issuer or/and external data providers, website of the rated entity/issuer, research Scope Group.
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
The rated entities have been given the opportunity to examine the rating action prior to publication. Following that examination, the rating was not modified.

Methodology
The methodology applicable for this rating (Corporate Rating Methodology published in March 2014) is available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
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Rating Agency
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Competent supervisory authority
European Securities and Markets Authority (ESMA)
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