Corporate Credit Rating 2024 for ZKL INVEST LTD: A3- (First Issuance)

modefinance published the Solicited Corporate Credit Rating of ZKL INVEST LTD on the website and the rating assigned to the entity is A3- (First issuance). The analysis revealed that the company's capacity to meet its commitment on financial obligations is strong.

The Company ZKL INVEST LTD was founded in 2017 by Mr. Agostino R. Luongo. It is based in UK and is active in the surety and credit granting market. ZKL’s business consists in arranging bonds and guarantees for all types of industries, with an emphasis on the tender guarantee market for the construction industry. The Company – regulated by the Financial Conduct Authority - has built strong relationships with its clients, allowing it to offer the best risk management solutions. Through the collaboration with a select number of companies in the construction sector, the Company has infact developed an in-depth understanding of these businesses, thereby reducing credit risk. In November 2022, ZKL also expanded its business in Romania with new connections. FY2023 has been a year of growth for the business as evidenced by the financial results, with the increase in revenues from 468 th euros to 1.81 mln euros.

ZKL INVEST LTDhas maintained good health throughout the entire period under consideration. The capital and financial structure is strong and conservative, with almost all assets being financed by equity, equal to 21.22 mln euros (+8.26% YoY) at 31/01/2024. At the end of the financial year 2021, the share capital was increased from £3.3 mln to over £16 mln through a contribution from the sole shareholder. Financial debt is absent. 

The Company’s most significant assets (22.09 mln euros as at 31/01/24) are investments in German government bonds (20.68 mln euros), which ensure a positive financial revenue stream. If needed, these investments can cover the potential liabilities that can arise in the future from the sureties granted. In FY2023, ZKL increased its revenues from 468 th euros to 1.81 mln euros, generating a gross profit of 1.24 mln euro (+251% YoY).
Particularly noteworthy is the improvement in EBITDA from a loss of -261 th euros to a positive result of 621 th euros, resulting in a strong profitability on revenues (34%). A significant source of revenue for ZKL are interest on German treasury bonds, which have covered all operating costs of the company in the last years leading to a positive net profit of1.05 mln euros (+89.19% YoY). 

The Company is run by Mr. Agostino Raffaele Luongo, CEO and owner of FPYIC GROUP CORP, which is the sole shareholder of ZKL. Mr. Luongo is also in charge for the accounting department of ZKL. The legal and IT departments of the Company are supervised by professionals. The Company’s financial statement at 31/01/2024 has been audit by a professional auditing company; however, a more structured organization could have a positive impact on the business.

The Company has a good ranking regarding size and solvency. Looking at profitability, the score of the Company is in line with the average, which can be considered as sufficient. 

The peer group is adequately capitalized in relation to total outstanding debt. Not fully sufficient, on the other hand, is the financial leverage ratio. Current asset and liability management doesn’t show any critical issues. Regarding the profitability, the peer group shows ratios on a sufficient level. 

The surety market in Europe is set to grow in the coming years, with Italy and Germany holding the largest shares. Collaboration between banks and surety companies is a key trend, allowing for better risk management and development opportunities for market players. Regulations are pushing banks to share risks with surety companies, in order to optimize portfolio management. The market is closely tied to the construction sector, which has maintained strong demand even during the pandemic. 

By 2024, with economic recovery and stable interest rates, the market value is expected to return to pre-pandemic levels. The Euro Area experienced a flat growth during 2023 mainly due to the contraction in consumption following the increased inflaction. This led the EBC to tighten the monetary policy. Real GDP growth is expected to remain subdued in 2024, as in 2025. Howerver, the outlook will be affected by numerous uncertainties. 

In the following table, the addressing factors, actions or events that could lead to an upgrade or a downgrade are summarized: 

The present Corporate Credit rating is issued by modefinance under EU Regulation 1060/2009 and following amendments.

The present rating is solicited and is based on both private and public information. The rated entity and/or related third parties have provided all private information used. modefinance had access to some accounts and other relevant internal documents of the rated entity and/or related third parties. Solicited and unsolicited ratings issued by modefinance are of comparable quality, as the solicitation status has no effect on methodologies used. More comprehensive information on modefinance Corporate Credit Ratings are available at http://cra.modefinance.com/en

The present Corporate Credit Rating is issued on MORE Methodology 2.0 and Rating Methodology 1.0. A comprehensive description of both methodologies, as well as information on modefinance Rating Scale and Mappings, is available at http://cra.modefinance.com/en/methodologies.

For information on historical default rates of modefinance Corporate Credit Ratings please refer to ESMA Central Repository and ESMA European Rating Platform.

modefinance refers to default as a company under bankruptcy, or under liquidation status, or under administration or for which missed payments on a financial obligation are officially recorded.

The quality of the information available on the rated entity and used to determine the present rating was judged by modefinance as satisfactory. Please note that modefinance does not perform any audit activity and is not in a position to guarantee the accuracy of any information used and/or reported in the present document. As such, modefinance can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.

The present credit rating was notified to the rated entity in order to identify potential factual errors, as prescribed by the CRA Regulation.
Deadline for the appeal process expired without the notification of factual errors by the Rated Entity.
Modefinance did not provide any ancillary services to the entity. 

The rated entity bought ancillary services provided by modefinance (preliminary rating). modefinance ensures that such situation does not imply a conflict of interest in the issuance of the present credit rating.

Head Analyst - Elisa Graffi, Rating Analyst
elisa.graffi@modefinance.com

Responsible for Rating Approval - Pinar Dilek, Rating Process Manager
pinar.dilek@modefinance.com