The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today affirmed its BB- issuer rating on Hungarian catering company GVC George's Venture Capital Zrt. (GVC) and revised the Outlook to Stable from Positive. Scope has also affirmed the senior unsecured debt rating at BB-, in line with issuer rating.

The Stable Outlook reflects Scope’s expectation that credit metrics will develop in line with the current financial risk profile assessment despite the expectation that EBITDA margin* will come under pressure in the medium term. In addition, GVC’s shareholder-friendly policies and investments in associated companies may limit financial flexibility.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BB- (unchanged). GVC benefits from its leading position in Hungary’s public catering market, supported by long-term relations with public institutions (mainly schools) and a stable portfolio of catering contracts across the country. The company’s ability to pass on higher wage and raw material costs to customers through inflation-linked agreements contributed to better-than-expected performance in 2024, with 4% growth YoY in revenue and 10% in EBITDA.

Profitability remained solid in 2024, driven by pricing adjustments, cost savings and recurring supplier rebates that supported EBITDA. Scope expects that GVC’s implementation of regional centres nationwide will support expansion and improve operational efficiency, helped by predictable demand in the education and social segments. However, Scope also foresees EBITDA margins to decline in the medium term, primarily due to low profitability margins anticipated in healthcare catering, where GVC plans to increase its exposure.

The business risk profile is, however, constrained by the company’s limited geographic and sector diversification, with revenues dependent on publicly funded catering contracts in Hungary. While GVC is broadening operations, these efforts are still in the early stage. Customer concentration is also high and the labour-intensive nature of GVC’s services may limit scaling-up.

Financial risk profile: BBB- (revised from BB+). GVC’s financial risk profile is stronger than its business risk profile given the cash-generating nature of its business.

Leverage as measured by debt/EBITDA improved below 2.0x and funds from operations exceeded 50% as of FY 2024 thanks to EBITDA growth and the stable capital structure. Scope expects both metrics to remain strong into the medium term. The agency does not expect indebtedness (including leases) to increase significantly. The leverage assessment excludes netting of cash as the high cash balance is expected to be partly utilised rather than serve as the sole liquidity buffer.

Free operating cash flow (FOCF) coverage, however, is more constrained. In 2024, FOCF/debt declined to 15% due to increased capex and equity investments in agribusiness entities (not consolidated). Scope expects the ratio to fluctuate within the 13%–25% range over the next few years. This will reflect growing investment needs but balanced by cash generated, which is expected to cover both dividends and debt repayments without requiring external funding.

Liquidity: adequate (unchanged). The adequate liquidity assessment is driven by the limited short-term debt position (primarily from amortisation of the outstanding bond from 2026) and the sound EBITDA cash conversion. While growth-related investment will likely put FOCF under pressure, the cash position of HUF 6.8bn (at YE 2024) and the available HUF 1.2bn in credit facilities provide a sufficient buffer.

Scope highlights that GVC’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 7.0bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 10 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is two notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: -1 notch (revised from credit-neutral). The negative rating adjustment reflects continued concerns around governance and transparency (credit-negative ESG factor), particularly in relation to shareholder distributions. In 2024, despite the formal dividend cap outlined in the bond covenant, the group executed additional dividend-like payments through subsidiaries, which, while not breaching the letter of the covenant, raise concerns about governance practices.

The one-time relaxation of the dividend cap for 2025 also highlights GVC’s willingness to seek exceptions to the bond covenants. While GVC has stated that future distributions will remain in line with original terms, the growing performance forecasted may necessitate further flexibility.

Further, Scope has limited visibility regarding the financial benefit of GVC’s agribusiness investments and the broader corporate structure, including cross-ownership, intercompany loans and guarantees to non-consolidated affiliates. These factors, along with recurring inconsistencies in management disclosures, continue to constrain overall transparency and oversight.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that credit metrics will develop in line with the current financial risk profile assessment despite the expectation that EBITDA margin will decline below 15% in the medium term, driven primarily by high inflation and costs related to integration and new market entry. The Outlook also incorporates Scope’s view that GVC will continue to engage in shareholder-friendly policies and investments in associated companies, which may limit financial flexibility. However, the Outlook does not reflect the execution of any significant M&A over the medium term.

The upside scenarios for the ratings and Outlook are (collectively):

1. Debt/EBITDA remaining below 2.0x
    
2. Successful execution of the company’s growth ambitions
    
3. Elimination of Scope’s concerns regarding the company’s governance

The downside scenarios for the ratings and Outlook are (individually):

1. Debt/EBITDA sustained above 3.0x
    
2. Further deterioration in transparency and governance

Debt rating

Scope has affirmed the BB- rating on senior unsecured debt, which includes the HUF 7.0bn bond (ISIN HU0000360235), in line with the issuer rating.

The debt rating is based on a hypothetical liquidation scenario as of end-2026, for which Scope computed an ‘above average’ recovery for holders of senior unsecured debt, which assumes attainable liquidation values. However, senior unsecured debt is not rated higher than the issuer rating given the company’s small size, the potential introduction of new debt to finance growth and the company’s vulnerability to internal and external developments that could quickly impact the value of claims at default.

Environmental, social and governance (ESG) factors

ESG factors negatively affect the credit ratings due to concerns over governance and transparency. The increasing volume of intercompany transactions with the owner, the dividend-like payments, and the intercompany guarantees provided over the past years have been factored into Scope's conservative assessment of the financial risk profile and in the supplementary rating drivers.

All rating actions and rated entities

GVC George’s Venture Capital Zrt.

Issuer rating: BB-/Stable, Outlook change

Senior unsecured debt rating: BB-, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and Outlook, (General Corporate Rating Methodology, 14 February 2025; European Business and Consumer Services Rating Methodology, 15 January 2025), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation   YES
With access to internal documents                                       YES
With access to management                                                 YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entities’ Related Third Parties, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings and Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlook are UK-endorsed.
Lead analyst: Lucas Nathan Pozza Pessoa, Senior Analyst
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 22 September 2020. The Credit Ratings/Outlook were last updated on 25 July 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.