Essence Premium Catering Business Plan — Break-Even
Break-even at 86.7% of Year 5 revenue, and what that unusually thin margin of safety means for contract retention.
Break-Even
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. Why Ekurhuleni
- 3. The Market and the Segment Trap
- 4. Contribution by Segment
- 5. SWOT and Competitive Position
- 6. Winning and Keeping Contracts
- 7. Tendering Into the Public Sector
- 8. Unit Economics and Prime Cost
- 9. Working Capital
- 10. The Five-Year Build and Its Gates
- 11. Funding
- 12. People and Production
- 13. Food Safety and Compliance
- 14. Financial Projections
- 15. Break-Even
- 16. Sensitivity and Scenarios
- 17. Risk Management
- 18. Implementation Timeline
- 19. Returns
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
|
Measure |
Value |
Basis |
|---|---|---|
|
Variable cost |
(70.9% of revenue) |
Food, consumables, distribution, energy, maintenance and 60% of labour |
|
Contribution margin |
29.1% |
What each additional rand of revenue leaves behind |
|
Fixed cost base, Year 5 |
R7.16m |
Rent, overhead and the fixed 40% of labour |
|
Break-even revenue |
R24.59m |
Fixed cost divided by the contribution margin |
|
As a share of Year 5 revenue |
77.3% |
|
|
Margin of safety |
22.7% |
|
|
Interest, Year 5 |
R874’000 |
Across eight facilities |
|
Break-even revenue including finance cost |
R27.60m |
The operative measure |
|
As a share of Year 5 revenue |
86.7% |
|
|
Margin of safety including finance cost |
13.3% |
|
|
One percentage point of food cost |
R318’000 |
At Year 5 volume |
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Revenue, R’000 |
3 546 |
8 304 |
15 485 |
23 335 |
31 819 |
|
Contribution margin |
27.5% |
28.2% |
27.7% |
28.3% |
29.1% |
|
Fixed cost base, R’000 |
1 452 |
2 482 |
4 070 |
5 637 |
7 157 |
|
Break-even revenue, R’000 |
5 280 |
8 801 |
14 693 |
19 919 |
24 595 |
|
Position against break-even |
Below |
Below |
Above |
Above |
Above |
A margin of safety of 13.3 per cent is thin. It means the business can lose roughly an eighth of its revenue before it stops covering costs — and a single large contract can be worth more than that. This is the arithmetic behind the concentration limit in Section 10 and it is the number an investor should test hardest.
15.1 What moves break-even
|
Change |
Effect on break-even revenue |
Comment |
|---|---|---|
|
Food cost one point lower |
Roughly R950 000 lower |
The largest controllable lever; R318 000 straight to EBITDA |
|
Overhead R100 000 lower |
Roughly R344 000 lower |
Also the line most easily allowed to drift upward |
|
Labour one point lower |
Roughly R560 000 lower |
Shift utilisation and production planning |
|
Event mix five points higher |
Roughly R1.90m lower |
R85.48 a cover against R9.92 an industrial meal |
|
Government mix ten points higher |
Roughly R1.15m higher |
R0.09 a meal earns almost nothing toward fixed cost |
|
Interest R100 000 lower |
Roughly R344 000 lower |
Why the working capital facility should be sized, not maximised |
Segment mix moves break-even more than any cost line. Shifting five points of revenue from contract feeding to events lowers the break-even by R1.90 million, and adding ten points of government meals raises it by R1.15 million. The mix decisions in Section 4 are therefore break-even decisions, taken years before the break-even is calculated.