Kasi Kicks 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. Allocation: What You Are Allowed to Sell
- 2. Executive Summary
- 3. The Size Curve: Where Footwear Margin Is Lost
- 4. The Store and the Channel
- 5. SWOT and Competitive Position
- 6. Organisation 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: Allocation, Size Curve and Store Schedules
- C. Appendix C: Funding, Debt and Stock 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 |
R16 130 000 |
Fit-out, systems, opening stock and working capital |
|
Capital invested in the project |
R13 730 000 |
Excluding the working capital line, which flows through the model |
|
Promoter and investor equity |
R10 300 000 |
63.9% of the funding requirement |
|
Project internal rate of return |
39.4% |
Five years plus a terminal value at 5.0x EBITDA |
|
Return to equity |
40.1% |
After debt service and facility movement |
|
Net present value at 15% |
R19 367 480 |
Positive |
|
Net present value at 18% |
R15 608 495 |
Positive |
|
Net present value at 22% |
R11 397 346 |
Positive |
|
Payback period |
5.1 years |
On unlevered project cash flow |
|
Terminal value |
R51 544 550 |
5.0x Year 5 EBITDA |
|
Cumulative profit after tax, Years 1 to 5 |
R10 280 036 |
Turns positive during Year 4 |
A project return of 39.4 per cent and an equity return of 40.1 per cent clear a fifteen per cent hurdle by a wide margin, and net present value remains positive at a 22 per cent discount rate. Two features drive that: the capital requirement is modest relative to the revenue it supports, and contribution of R470 a pair 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 |
|---|---|---|---|
|
3.5x |
36 081 185 |
31.9% |
31.2% |
|
4.0x |
41 235 640 |
34.6% |
34.4% |
|
5.0x |
51 544 550 |
39.4% |
40.1% |
|
6.0x |
61 853 460 |
43.6% |
45.0% |
|
7.0x |
72 162 370 |
47.4% |
49.3% |
9.3 What would improve it
|
Lever |
Effect on Year 5 EBITDA |
Assessment |
|---|---|---|
|
Average selling price 6% higher |
+R4 514 231 |
Constrained by recommended pricing and by what the market bears |
|
Units sold 12% higher |
+R3 313 413 |
Trading density is already demanding at R83 358 per m² |
|
Full-price sell-through 8 points higher |
+R3 310 338 |
Largely a consequence of the size curve rather than an independent lever |
|
Landed cost 8% lower |
+R3 199 550 |
Requires buying power the group does not yet have |
|
Size curve discipline 5 points better |
+R2 069 023 |
Entirely within management’s control, and resourced from Year 1 |
|
Fixed costs 10% lower |
+R1 669 433 |
The weakest lever; cutting store payroll damages conversion |
Three of these six levers are effectively outside management’s control: recommended pricing is set by the brands, landed cost reflects buying power the group does not yet have, and trading density is already demanding. The two that are controllable — sell-through and the size curve — are not independent of one another, and together they account for 29.8 per cent of the total sensitivity swing. That is where the management attention belongs.