Frame & Field Studios Business Plan — Investment Analysis
The project and equity returns, the exit assumption behind them, and what the numbers do and do not support.
Investment Analysis
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. What Artificial Intelligence Has Taken, and What It Has Not
- 2. Executive Summary
- 3. Service Lines, Clients and Pricing
- 4. Capacity: The Shooting Day and the Editing Day
- 5. SWOT and Competitive Position
- 6. Organisation, Rights and Compliance
- 7. Financial Plan
- 8. Break-Even and Debt Service
- 9. Investment Analysis
- 10. Sensitivity and Scenario Analysis
- 11. Risk Analysis
- 12. Implementation Roadmap
- 13. Key Performance Indicators
- 14. Key Assumptions
- 15. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capacity, Mix and Cost Schedules
- C. Appendix C: Funding, Debt and Working Capital Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 9.1 Returns
- 9.2 What the return depends on
- 9.3 What would improve it
9.1 Returns
|
Measure |
Base case |
Comment |
|---|---|---|
|
Total funding requirement |
R11 860 000 |
Capital expenditure plus working capital and pre-opening cost |
|
Capital invested in the project |
R9 260 000 |
Equipment, fit-out and pre-opening; working capital flows through the model |
|
Promoter and investor equity |
R5 900 000 |
49.7% of the funding requirement |
|
Project internal rate of return |
28.9% |
Five years plus a terminal value at 4.5x EBITDA |
|
Return to equity |
29.7% |
After debt service and facility movement |
|
Net present value at 15% |
R7 230 954 |
Positive |
|
Net present value at 18% |
R5 237 017 |
Positive |
|
Net present value at 22% |
R2 997 286 |
Positive |
|
Payback period |
5.1 years |
On unlevered project cash flow |
|
Terminal value |
R24 023 632 |
4.5x Year 5 EBITDA |
|
Cumulative profit after tax, Years 1 to 5 |
R3 015 631 |
Turns positive during Year 5 |
A project return of 28.9 per cent and an equity return of 29.7 per cent clear a fifteen per cent hurdle comfortably, and net present value remains positive at a 22 per cent discount rate. That is a stronger headline than most services businesses produce, and it rests on two features: the capital requirement is modest relative to revenue, and contribution per billable day is high once the fixed base is covered.
9.2 What the return depends on
|
Exit multiple of Year 5 EBITDA |
Terminal value (R) |
Project IRR |
Equity IRR |
|---|---|---|---|
|
3.0x |
16 015 755 |
22.1% |
20.2% |
|
4.0x |
21 354 340 |
26.8% |
26.8% |
|
4.5x |
24 023 632 |
28.9% |
29.7% |
|
5.0x |
26 692 925 |
30.9% |
32.3% |
|
6.0x |
32 031 510 |
34.5% |
37.1% |
9.3 What would improve it
|
Lever |
Effect on Year 5 EBITDA |
Assessment |
|---|---|---|
|
Day rates 10% higher |
+R2 808 840 |
The largest lever, and the one most under external pressure |
|
AI rate pressure 2 points a year lighter |
+R2 315 388 |
Outside the studio’s control; determined by client benchmarking behaviour |
|
Editing ratio 15% better |
+R515 235 |
Capped, because shooting then becomes the constraint |
|
Direct costs 12% lower |
+R1 250 400 |
Second shooters and crew; real but bounded |
|
Utilisation 8 points higher |
+R0 |
Nothing at all on its own; editing binds first |
|
Editing and utilisation moved together |
+R2 576 175 |
The only combination that produces a material gain |
The last two rows are the operating instruction. Utilisation on its own is worth nothing at maturity because editing binds; editing on its own is worth little because shooting then binds. The pair is worth R2 576 175. Every other lever in the table is either outside the studio’s control or bounded, which makes matched capacity growth the only reliable route to improving the return from inside the business.