London, July 06, 2022 — Moody’s Investors Service (Moody’s) has today affirmed Zellis Holdings Limited’s (Zellis or the company) Caa1 corporate family rating (CFR) and Caa1-PD probability of default rating (PDR), as well as the Caa1 ratings on the guaranteed senior secured bank credit facilities. The outlook on all ratings has changed to positive from stable.

“The change of outlook to positive largely reflects the strengthening in Zellis’ operating performance over the past year leading to a material reduction in leverage and broadly break-even free cash flow levels” says Luigi Bucci, Moody’s  lead analyst for Zellis.

“At the same time, while we expect a continued improvement in credit metrics over the next 12-18 months, the company’s interest coverage remains weak and its Moody’s-adjusted leverage is still very high when expensing capitalized R&D costs.” adds Mr Bucci.

A full list of affected ratings is provided towards the end of this press release.


Zellis’ Caa1 CFR mainly reflects its (1) leading position in the niche market for payroll and HR software and services in the UK; (2) high degree of recurring revenue and large exposure to SaaS; (3) track record to date of receiving financial support from Bain Capital; and (4) adequate liquidity supported by Moody’s expectation of positive free cash flow (FCF) over the next 12-18 months.

Conversely, the rating also takes into consideration the company’s (1) high Moody’s-adjusted leverage, which is likely to remain elevated at around 6x-7x over the next 12-18 months (8.5x-9.5x on a R&D expensed basis); (2) low product diversification; (3) high geographical concentration in the UK market; and (4) weak interest coverage metrics.

Moody’s expects Zellis’ revenue to grow organically at around 6%-7% over fiscal 2023-24, ending April. On a reported basis, growth in fiscal 2023 will also be complemented by the acquisition of WRKIT. Current organic growth estimates are driven by the rating agency’s assumption of a mid-single digit growth in percentage terms for the core Zellis division as well as low-teens and low-to-mid-teens percentages for the SMB division, Moorepay, and Benefex, respectively. On a company-adjusted basis, Moody’s expects EBITDA to grow towards £65-70 million by fiscal 2024 from £58 million in fiscal 2022 supported by top-line growth, particularly for high margin cloud solutions, in spite of the negative impact from ongoing wage inflation.

The ongoing weakening in the macroeconomic environment represents a potential source of downside pressure to current Moody’s estimates, especially in fiscal 2024 as visibility on fiscal 2023 revenues is high. The rating agency gains comfort, however, from the recurring nature of Zellis’ revenue base as well as the repricing clauses connected to most of the company’s contracts. The rating agency also notes that performance in Moorepay is likely to be the one more subject to potential pressure because of its exposure to the SMB sector.

The rating agency forecasts Moody’s-adjusted FCF (excluding pension contributions) to continue improving in fiscal 2023 and 2024 towards £10 million and £10-15 million, respectively, although still relying on the interest deferral. While fiscal 2023 will continue to benefit from the full year impact of the interest deferral as part of distressed exchange in 2020, fiscal 2024 will be favourably impacted by this only in the first part of the year. Ongoing improvements will continue to be driven by EBITDA growth but also the reduction in exceptional charges towards £2-3 million per year. This is likely to translate into a Moody’s-adjusted FCF/debt of around 2%-3% and 3%-4% in fiscal 2023 and 2024, respectively (fiscal 2022: 1.5%).

Moody’s-adjusted debt/EBITDA is expected to reduce towards 6.5x and 6x in fiscal 2023 and fiscal 2024, respectively, largely driven by EBITDA growth (fiscal 2022: 7.2x). These levels are somewhat dependent to future levels of debt-funded M&A, as the recent cases of Galileo and WRKIT demonstrate. While credit metrics continue to evidence a general improvement, Moody’s-adjusted leverage on a R&D expensed basis remains very high (fiscal 2022: 10.1x). Moreover, interest cover will remain weak with Moody’s-adjusted EBITDA – capex/interest of around 1x-1.5x in fiscal 2023-24 (fiscal 2022: 1x).


In terms of governance, Bain Capital has been the key shareholder in the company since the carve-out of Zellis from NGA Human Resources in 2017. Bain Capital has actively supported Zellis over the course of fiscals 2020 and 2021 through the injection of £60 million into the business to offset liquidity pressures which came from underperformance and higher-than-expected exceptional costs related to the carve-out and business transformation.


Moody’s views Zellis’ liquidity as adequate, based on the company’s expected positive, although limited, FCF over the next 12-18 months, available cash resources of £9 million and a guaranteed first lien senior secured revolving credit facility (RCF) of £40 million (£8 million drawn) as of April 2022. Moody’s expects internal sources and cash flow generation through fiscals 2023 and 2024 to be more than sufficient to cover cash requirements over the period.

There are no significant debt maturities before January 2024 when the RCF comes due. Guaranteed first-lien senior secured term loan B and second-lien term loan will mature in January 2025 and 2026, respectively. Moody’s notes that a successful refinancing of Zellis’ capital structure will likely be dependent on the company being able to demonstrate full cash servicing of its current interest costs.


The senior secured first-lien bank credit facilities, comprising the term loan B and the RCF, are rated Caa1, in line with the CFR, reflecting the relatively small size of the second-lien facility ranking behind. Pension claims worth £25 million benefit from a security ranking pari passu with the senior secured first-lien facilities.


The positive outlook reflects Moody’s expectation of a continued improvement in operating performance over fiscal 2023 and 2024 leading to deleveraging from current high levels and continued positive FCF generation. The positive outlook also assumes that the company will maintain an adequate liquidity profile while being able to address its upcoming debt maturities.


Upward rating pressure could materialise should Zellis: 1) demonstrate a sustainable track record of revenue and Moody-adjusted EBITDA growth; 2) deliver sustainable FCF generation on a trailing twelve months basis (after interest and exceptional items); 3) reduce Moody’s-adjusted gross debt/EBITDA (after the capitalisation of software development costs) sustainably towards 7.0x.

Conversely, Zellis’ ratings could be downgraded if the company’s: (1) Moody’s-adjusted FCF were to turn negative on a sustained basis; (2) Moody’s-adjusted leverage were to remain above 7x; and more generally (3) chances of a default increased.



..Issuer: Zellis Holdings Limited

….Probability of Default Rating, Affirmed Caa1-PD

….LT Corporate Family Rating, Affirmed Caa1

….Senior Secured Bank Credit Facility, Affirmed Caa1

Outlook Actions:

..Issuer: Zellis Holdings Limited

….Outlook, Changed To Positive From Stable


The principal methodology used in these ratings was Software published in June 2022 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.


Based in Bristol (UK), Zellis is a provider of payroll and HR software, as well as outsourcing services underpinned by its proprietary software, to private and public sector clients in the UK and Ireland. In the twelve months ended April 2022, the group had £176 million of revenue and £58 million of company-adjusted EBITDA.


For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on

Please see for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the issuer/deal page on for additional regulatory disclosures for each credit rating.

Luigi Bucci

Asst Vice President – Analyst

Corporate Finance Group

Moody’s Investors Service Ltd.

One Canada Square

Canary Wharf

London, E14 5FA

United Kingdom

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Richard Etheridge

Associate Managing Director

Corporate Finance Group

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Releasing Office:

Moody’s Investors Service Ltd.

One Canada Square

Canary Wharf
London, E14 5FA

United Kingdom

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454