Naledi Threads Business Plan — Working Capital and Debt Service
Why stock ties up most of the capital in a boutique, the cash cycle it creates, and debt service cover of 1.54x.
Working Capital and Debt Service
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. The Business
- 3. Market Analysis
- 4. Location Strategy
- 5. Products and Merchandise Strategy
- 6. SWOT and Competitive Position
- 7. Marketing and Sales
- 8. Operations
- 9. People, Compliance and Controls
- 10. Implementation Plan
- 11. Financial Plan
- 12. Break-Even
- 13. Working Capital and Debt Service
- 14. Returns
- 15. Sensitivity and Scenarios
- 16. Risk Management
- 17. Trigger Points and Management Response
- 18. Key Performance Indicators
- 19. Key Assumptions
- 20. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Pre-Opening Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Inventory at year end |
359 048 |
380 661 |
374 902 |
364 893 |
365 102 |
|
Cost of sales |
933 525 |
1 141 983 |
1 237 178 |
1 313 614 |
1 387 389 |
|
Stock turn |
2.6x |
3.0x |
3.3x |
3.6x |
3.8x |
|
Purchases |
1 067 573 |
1 163 596 |
1 231 419 |
1 303 605 |
1 387 598 |
|
Trade payables |
70 197 |
95 638 |
118 081 |
135 718 |
152 066 |
|
Creditor days |
24 |
30 |
35 |
38 |
40 |
|
Trade and other receivables |
9 932 |
12 515 |
13 892 |
14 933 |
15 904 |
|
Movement in working capital |
(73 783) |
1 245 |
26 825 |
26 605 |
15 168 |
Stock turn improves from 2.6 times to 3.8 times, and creditor days from 24 to 40. Both matter more to cash than to profit. Working capital absorbs R73 784 in Year 1 as the store builds toward its first festive season, then releases cash in every subsequent year as supplier terms extend faster than inventory grows — R26 825 in Year 3 alone.
13.1 Debt service capacity
|
R |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Interest |
58 378 |
49 509 |
37 801 |
24 411 |
9 097 |
|
Capital repaid |
36 822 |
81 490 |
93 198 |
106 588 |
121 902 |
|
Total debt service |
95 200 |
130 999 |
130 999 |
130 999 |
130 999 |
|
Loan balance at year end |
403 178 |
321 688 |
228 490 |
121 902 |
— |
|
EBITDA after owner remuneration |
(7 636) |
185 034 |
164 377 |
188 582 |
202 071 |
|
Debt service cover |
-0.08x |
1.41x |
1.25x |
1.44x |
1.54x |
|
EBITDA before owner remuneration |
160 364 |
389 034 |
418 291 |
479 462 |
529 977 |
|
Cover before owner remuneration |
1.68x |
2.97x |
3.19x |
3.66x |
4.05x |
Cover after owner remuneration is negative in Year 1 by construction, then runs between 1.25 and 1.54 times. Before owner remuneration it runs between 1.68 and 4.10 times, which is the range a lender would normally quote. Both are shown because they answer different questions: the first asks whether the business can service its debt while paying the founder a living wage, and the second asks whether it can service its debt at all.