Product and Service
Companies included in hospitality food service sector in food service industry are primarily providers of food and service to business, education, and healthcare institutes and public facilities.
Demand for Product and Service
As our sales data indicates, the demand for hospitality food and service has been stable in the past several years. While probably decreasing, the demand from traditional resource of revenue such as industry& business and healthcare sectors still keep strong and the demand from education and sport& leisure increased. We think certain economy and demography factors have worked behind the changes.
The Sector
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Generally, the demand for hospitality food and service has been stable in the past several years.
- The demand from traditional resource of revenue such as industry& business and healthcare sectors still keep strong while slightly declining.
- The demand from education institutes and sport& leisure facilities has increased in the past three years.
Causes behind the trend
General economic condition is considered as the major factor behind change in demand for hospitality food. While economy recovery has continued in the past years, the growth has been, to less extent, reflected on employment including employment rate and employees’ benefits. However, the growing economy has driven entertainment industry to go forward. At the same time, we can also find the answers from demographic changes for factors behind increase and decrease in education and healthcare sectors.
Industry Future
We think the accelerating recovery of economy will eventually help lift up demand from industry and business and trend in demographic changes will be also favourable to hospitality food industry in education and healthcare sectors.
Numbers
General Financial Performance of Companies In the Sector
It seems that revenue increase varies among different sectors in the past several years according to a typical company’s data. The organic revenue (excluding impacts of foreign currency) has increased by 2-3% annually primarily attributable to increase in sport& leisure and education sectors. International contribution to the increase in revenue has been significant. However, we have seen a general decrease in industry, business, and healthcare, which are usually major resource of its revenue.
The typical gross margin (including food and labor costs) is around 7-8% in 2018. The typical SG&A as percentage of sales has been around 2% and the operating margin is between 4- 5%.
The typical enterprise Price/EBI ratio: 37 (interest/EBI ratio of 52%). The required return rate of equity investors as indicated by the stock price seems similar with borrowing costs.
