Hellastat Industry Snapshots

CATERING

October 2008

Contents:

Strategic Review

2

Summary of Financial Indicators

5

The Major Companies

6

Industry Financial Ratios

7

Industry Financial Statements

8

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2

Strategic Review

Major points of the sector: The catering sector consists of three sub-sectors: event catering, business and

industry catering (B&I) and in-flight catering and services. 3.000 companies operate in the Greek market, the size of which is estimated at

€392,5 mn. The sub-sector of event catering accounts for the biggest share of the total market (51%), the

B&I catering accounts for 32% and the share of the in-flight catering and services is 17%. Event catering is estimated at €200 mn. The majority of the sector’s companies operate in

this sub-sector, as the barriers to entry are particularly low. In particular, the sub-sector compromises of few big companies based in the two main urban centres (Athens and Salonica) and numerous small and medium sized enterprises (SMEs) that are, for the most part, limited partnerships, general partnerships or individual entrepreneurs. Due to the large number of companies, the sub-sector’s concentration is low. The 4 biggest firms control 11% of the market.

Companies that operate in similar sectors (confectioneries, bakeries and restaurants) also offer event catering services. In addition, there are plenty, usually big, hotels that offer catering services outside their premises (outside catering).

In the B&I sub-sector only a small number of firms operate, as the demands in initial capital and equipment are particularly high. Consequently, these firms are big in terms of turnover. The market is around €124,5 mn. and the biggest 4 companies control 53% of the market. Competition is mainly focused in pricing policy and less in meal quality, advertising and quality management certifications.

Finally, in-flight catering and services is a particular sub-sector that is characterized of high barriers to entry, as by definition the demands of specialization and capital are extremely high. The Greek market is an oligopoly with total value around €68 mn. The dominant enterprises control 80% of the total market.

As far as the development of the sector is concerned, event catering and B&I catering sub-sectors have grown in the recent years and this trend is expected to continue for the next 3 years, thanks to favourable demand conditions.

On the contrary, in-flight catering and services sub-sector has shown stability. However, in the near future the sub-sector is expected to fall, due to particular conditions that affect the airline sector (e.g. rising cost of fuels).

Event catering companies’ costs compromises of labour costs (40%), raw material costs (35%) and various costs (25%). On the contrary, the B&I companies have higher expenses in raw materials and less in labour.

Due to the direct relation of the companies’ activities to food safety and hygiene, a strong legal framework is essential. The current legal framework tries to meet the sector’s needs, but fails to do so, as it is very complicated, it is not strictly applied in practise and has several deficiencies.

3

Strategic Review

The dynamic environment of the sector features the following aspects:

Substantial investments in equipment and infrastructure.

Collaborations with important enterprises.

Development of both the meals and the services offered.

Increased demand for events by individuals and the private sector.

Increase of sales and earnings before taxes (EBT) for most companies.

Negative surplus trading cycle.

The rising opportunities for the companies of the sector are summarised

in the following:

Substantial development of the B&I sub-sector.

Significant growth potential in chilled meals.

New themes for events making.

Increasing number of services offered.

Cooperation of numerous companies for mass ordering of raw materials to

achieve reduction of cost.

Offer of catering services in low prices in periods of low demand to fight

seasonality.

Development of corporate websites for better recognition from the public.

Cooperation of event catering companies with hosting venues.

Increasing number of enterprises that offer meals to their employees.

Strengths & Opportunities:

4

Strategic Review

Weaknesses & Threats:

The weak points of the sector are the following:

Small market size.

Lack of unskilled personnel and lack of training faculties for the

essential specialized labour force.

Important seasonality that raises difficulties for the financial planning

and the attractiveness of suitable human capital.

Important raise of raw materials costs.

Complicated and vague legal framework.

Barriers to entry to different sub-sectors.

High concentration in B&I and in-flight catering and services sub-

sectors.

Hotels have a comparative advantage to the event catering

companies, as they combine both catering services and venue.

Catering services offered by companies of other sectors (e.g.

confectioneries etc).

Limited size of the market of chilled meals in comparison with abroad.

The major threats of the sector are the following:

The fuels’ rising prices put a burden on the in-flight catering and

services companies.

The high levels of concentration result to oligopoly conditions that

result in defining the prices as well as the quality of the services

offered.

The financial crisis leads to a reductions of events hosting by both

individuals and private firms.

Unfair competition may lead to problems for the sector’s companies.

5

Summary of financial indicators

The turnover of the 35 companies in the sample increased by 6,9% to €280,93

mn. in 2007. 66,7% of the enterprises improved their turnover in comparison

with last year.

The gross results were €97,02 mn., increased by 9,3% since 2006. The gross

profit margin further improved to 34,7%.

EBITDA reached €60,56 mn. in 2007, increased by 53,7%, while particularly increased were

EBT (€16,94 mn. from €5,52 mn. in 2006). Finally, the sector’s companies have a low margin

of EBT (2,0% in 2007). 19 companies were profitable in 2007 and 11 had losses.

The trading cycle was -86 days in 2007 and this has also been the case in the previous years.

Quick ratio is constantly falling and in 2007 it was 0,82. On the contrary, the acid test

improved to 0,73 (from 0,61 in 2006).

The debt to equity ratio improved in 2007 (3,40 from 3,53 the previous year).

Population: Key Statistics

Population per turnover size

Above € 2,5 mn. Sales increase

Between € 0,3 mn.and € 2,5 mn. Sales reduction

Between € 0 mn. and € 0,3 mn. Median sales growth

Median earnings growth

Profitable

Increase 2007 trend 2007 trend

Decrease

Loss reversal Debt to equity 3,40 + 1,14 -Loss making Asset turnover 1,10 - 0,62 +Increase Quick ratio 0,82 + 1,24 +Decrease EBITDA margin 10,6% + 9,4% +Profit reversal Net margin 2,0% + 2,7% +

RoE 14,5% + 4,6% +3

3

11

3

5

19

12

4

35

18

11

6

2007

55,4%

44,6%

4,3%

6,4%

20 - (66,7% of the sample)

10 - (33,3% of the sample)

2,5%

26,2%

Catering Economy median

2007

Key ratiosEconomy medianCatering

6

The major companies

Key Figures [2007] Sales Gross results EBITDAEarnings

before taxesTotal Assets Equity capital

Current liabilities

1 HELLENIC CATERING SA 76,68 18,08 8,82 7,61 68,88 44,65 20,03

2 OLYMPIC CATERING SA 58,69 19,78 9,62 6,73 54,15 6,23 39,99

3 KOMBATSIARIS BROS SA 24,03 11,40 3,35 1,79 13,46 2,61 6,96

4 ABELA HELLAS SA 12,50 4,48 0,52 0,05 17,73 3,56 8,84

5 EUREST AIRCRAFT SERVICES HELLAS SA 11,58 3,57 0,23 -0,48 10,45 1,82 5,51

6 EUREST - PLATIS SA 11,06 4,09 -0,37 -0,47 4,74 -0,43 4,82

7 QUALITY TASTE SA 8,74 5,88 0,31 0,20 3,50 1,36 1,83

8 FRESH GOURMET SA 7,72 3,51 2,74 0,55 17,30 2,88 8,12

9 PLATIS SA 7,37 3,81 0,25 0,01 4,86 0,90 3,96

10 VAVOURAKIS E. SA 7,09 0,69 -0,02 -0,42 15,17 0,40 11,08

11 CHOUTOS CATERING SA 6,77 2,92 0,75 0,56 2,91 0,70 2,21

12 INTERCATERING SA 6,70 2,77 0,74 0,39 3,83 0,65 3,18

13 AGAPITOS GASTRONOMIA SA 6,59 2,70 0,25 0,14 6,68 0,91 3,32

14 SIDERIS P SA 5,21 1,57 0,74 0,08 7,65 1,67 3,18

15 ARIA GEFSEON GIANAKOS P SA 4,93 1,11 0,66 0,09 3,83 0,85 2,98

16 POT AND PAN FOOD SERVICE SA 4,56 1,56 0,47 0,13 7,01 2,18 4,35

17 LA FOURCHETTE SA 4,37 2,19 0,85 0,25 4,41 1,25 2,11

18 SODEXHO HELLAS SA 4,31 2,01 -0,34 -0,05 1,45 -0,47 1,76

19 ATHENS GOLF CLUB SA 2,09 1,46 -0,23 -0,34 1,92 1,12 0,79

20 BLUE WATER SA 1,64 1,06 0,11 0,11 0,62 0,37 0,25

21 MACEDONIA CATERING SA 1,57 0,76 0,47 0,43 1,95 1,40 0,44

22 PAPADOPOULOS CH SA 1,46 0,37 0,22 0,05 2,07 1,84 0,23

23 ALFA SA 1,17 0,49 0,20 0,18 0,53 0,21 0,32

24 PAPAGIANNIS SA 0,84 0,14 0,00 -0,07 1,93 0,51 0,87

25 KAPPA FOODS SA 0,79 0,11 0,28 -0,11 2,09 0,16 0,24

26 GASTRONOMY SAMARTZIS SA 0,68 0,02 -0,20 -0,22 0,44 -0,15 0,59

27 PANORAMA CATERING SA 0,53 0,29 0,01 0,01 0,45 0,06 0,39

28 KONTOUZOGLOU A AND CO SA 0,51 0,01 0,17 -0,05 2,51 2,29 0,22

29 ELET SA 0,50 0,14 0,07 -0,02 0,33 0,04 0,28

30 VARSOS CATERING SA 0,23 0,05 -0,11 -0,21 2,37 0,85 1,52

7

Industry financial ratios

Trading Cycle

106

104

98

22

20

18

215

193

202

87

86

69

250 200 150 100 50 0 50 100 150

2005

2006

2007

Receivables Inventory Trade creditors Trading Cycle

Financing received Financing granted

7,73%

12,78%

14,53%

10,63%

4,85%

3,23%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

2005 2006 2007

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

Asset turnover Debt to Equity EBITDA margin RoE

Capital structure, efficience and return on equity

Industry Financial Ratios

2007 2006 2005 2007 2006 2005 2007 2006 2005Capital Structure

Current liabilities to sales 0,48 0,45 0,46 0,53 0,52 0,55 0,59 0,59 0,54

Short term bank debt to sales 19,5% 17,1% 16,4% 22,8% 23,1% 25,7% 25,7% 25,5% 23,5%

Debt to equity 3,40 3,53 4,64 3,37 3,92 6,52 1,14 1,09 1,04

Debt to total assets 76,9% 79,8% 83,7% 72,6% 74,5% 77,5% 57,3% 56,3% 54,4%

Interest coverage 4,51 3,54 2,46 7,04 9,08 6,19 3,14 3,09 3,57

Current liabilities to assets 52,4% 64,6% 66,7% 58,2% 62,4% 64,4% 46,3% 46,8% 45,6%

Operating current liabilities to assets 26,5% 24,5% 30,6% 29,9% 27,4% 31,2% 27,5% 28,3% 27,6%

Operating current liabilities to total current liabilities 53,9% 44,5% 46,5% 52,9% 46,6% 50,0% 90,9% 91,8% 92,5%

Liquidity

Quick ratio 0,82 0,67 0,83 1,00 1,01 1,03 1,24 1,22 1,23

Acid test 0,73 0,61 0,68 0,86 0,90 0,91 0,99 0,98 0,98

Trading Cycle -86 -69 -87 -74 -65 -77 46 42 37

Days sales outstanding 98 104 106 116 121 117 140 135 124

Days in inventory 18 20 22 24 21 25 72 71 67

Days in accounts payable 202 193 215 215 207 218 166 164 154

Inventory to current assets 7,5% 9,0% 9,1% 8,6% 8,6% 10,8% 21,1% 21,6% 21,9%

Inventory to assets 3,9% 3,9% 4,4% 4,5% 4,2% 4,9% 13,7% 13,7% 13,9%

Efficiency

Receivables turnover 3,68 3,47 3,40 4,17 3,57 3,65 2,00 2,06 2,27

Inventory turnover 20,13 17,62 16,16 24,46 24,63 22,78 5,16 5,19 5,51

Assets turnover 1,10 1,17 1,08 1,23 1,28 1,18 0,62 0,62 0,65

Administration expenses to sales 12,3% 11,4% 11,5% 12,5% 12,3% 12,7% 9,7% 9,9% 9,7%

Selling expenses to sales 17,5% 19,2% 23,5% 20,6% 19,2% 22,0% 10,5% 10,6% 10,1%

Total operating expenses to sales 33,9% 33,6% 37,5% 33,7% 32,5% 33,9% 21,8% 22,2% 21,1%

Interest expenses to sales 1,53% 1,58% 1,54% 2,49% 2,15% 2,04% 1,72% 1,58% 1,47%

Extraordinary expenses to sales 0,40% 0,30% 0,23% 0,62% 0,55% 0,61% -0,04% -0,05% -0,02%

Profitability & Return on capital

Gross margin 34,7% 33,0% 28,0% 35,1% 32,4% 29,7% 27,8% 27,2% 26,7%

EBIT margin 3,1% 4,2% 1,4% 3,3% 3,0% -0,7% 5,2% 4,5% 4,9%

EBITDA margin 10,6% 7,7% 4,8% 8,8% 8,0% 3,8% 9,4% 8,9% 9,3%

EBT margin 2,0% 1,3% 0,4% 0,8% 0,7% -3,2% 2,7% 2,2% 2,6%

Return on assets 2,2% 0,8% 0,6% 2,7% 2,0% -1,5% 1,5% 1,1% 1,4%

Return on equity 14,5% 12,8% 3,2% 12,2% 20,0% 0,2% 4,6% 3,6% 4,1%

Median Average excluding outliers Economy median

8

Industry financial statements

Balance Sheet

2007 2006 2005 2007 2006 2005 2007/2006 2006/2005 2007/2005

Formation expenses 2,74 3,85 3,83 1,0% 1,6% 1,7% -28,7% 0,4% -15,4%

Fixed assets 104,23 101,51 101,43 39,3% 43,5% 45,6% 2,7% 0,1% 1,4%

Participations 14,51 12,81 12,03 5,5% 5,5% 5,4% 13,3% 6,5% 9,8%

Current Assets 142,59 113,89 103,28 53,8% 48,8% 46,5% 25,2% 10,3% 17,5%

Inventory 16,22 13,22 14,89 6,1% 5,7% 6,7% 22,7% -11,2% 4,4%Receivables 96,23 77,79 64,68 36,3% 33,3% 29,1% 23,7% 20,3% 22,0%Cash & securities 30,13 22,87 23,71 11,4% 9,8% 10,7% 31,7% -3,5% 12,7%

Transitory accounts 1,14 1,36 1,66 0,4% 0,6% 0,7% -16,2% -18,2% -17,2%

Total Assets 265,21 233,41 222,23 100,0% 100,0% 100,0% 13,6% 5,0% 9,2%

Equity capital 80,43 65,06 68,14 30,3% 27,9% 30,7% 23,6% -4,5% 8,6%

Share capital 74,54 68,95 65,07 28,1% 29,5% 29,3% 8,1% 6,0% 7,0%Reserves & retained earnings 5,89 -3,89 3,06 2,2% -1,7% 1,4% 38,7%

Provisions 0,86 1,15 0,88 0,3% 0,5% 0,4% -25,4% 31,0% -1,2%

Long term liabilities 40,06 32,95 35,59 15,1% 14,1% 16,0% 21,6% -7,4% 6,1%

Reserves & retained earnings 21,12 13,71 14,37 8,0% 5,9% 6,5% 54,0% -4,5% 21,2%Other 18,94 19,24 21,23 7,1% 8,2% 9,6% -1,5% -9,4% -5,5%

Current liabilities 140,35 131,95 115,66 52,9% 56,5% 52,0% 6,4% 14,1% 10,2%

Suppliers 62,02 49,62 50,09 23,4% 21,3% 22,5% 25,0% -0,9% 11,3%Checks & notes payable 21,42 15,84 13,76 8,1% 6,8% 6,2% 35,3% 15,1% 24,8%Short-term bank debt 37,05 38,23 26,53 14,0% 16,4% 11,9% -3,1% 44,1% 18,2%Taxes and social contibutions 4,89 5,42 4,98 1,8% 2,3% 2,2% -9,9% 8,9% -1,0%Dividends payable 0,99 0,52 0,33 0,4% 0,2% 0,1% 91,6% 54,8% 72,2%Intercompany liabilities 3,24 3,83 2,71 1,2% 1,6% 1,2% -15,4% 41,3% 9,4%Other 10,74 18,50 17,26 4,1% 7,9% 7,8% -41,9% 7,2% -21,1%

Transitory accounts 3,51 2,31 1,97 1,3% 1,0% 0,9% 52,1% 17,5% 33,6%

Total Equity & Liabilities 265,21 233,41 222,23 100,0% 100,0% 100,0% 13,6% 5,0% 9,2%

Off-balance sheet accounts 21,44 14,00 14,90 8,1% 6,0% 6,7% 53,2% -6,0% 20,0%

Profit & Loss Statement

Sales 280,93 262,68 246,75 100,0% 100,0% 100,0% 6,9% 6,5% 6,7%

Gross results 97,02 88,72 79,43 34,5% 33,8% 32,2% 9,4% 11,7% 10,5%

Gross margin 34,5% 33,8% 32,2%Administration expenses 27,65 26,99 24,88 9,8% 10,3% 10,1% 2,4% 8,5% 5,4%Selling and distribution expenses 57,94 53,89 52,24 20,6% 20,5% 21,2% 7,5% 3,2% 5,3%

EBITDA 30,56 19,88 13,82 10,9% 7,6% 5,6% 53,8% 43,8% 48,7%

EBITDA margin 10,9% 7,6% 5,6%

EBIT 21,04 10,21 4,87 7,5% 3,9% 2,0% 106,0% 109,6% 107,8%

EBIT margin 7,5% 3,9% 2,0%

Earnings before taxes 16,94 5,52 1,44 6,0% 2,1% 0,6% 206,9% 282,2% 242,5%

EBT margin 6,0% 2,1% 0,6%

Income taxes 5,99 5,19 3,24 2,1% 2,0% 1,3% 15,3% 60,4% 36,0%Financial Statements under IFRS for fiscal years 2005-2004, either detailed or condensed, may not be comparable to 2003 Greek GAAP data

Amounts in mn € TREND ANALYSISCOMMON SIZE