Premier Quality Kenya Dairy Business Plan — Financial Plan
Five-year projections: revenue building to KES 21.97m and EBITDA to KES 5.23m, with milk, heifers and manure reported separately.
Financial Plan
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Opportunity
- 3. Why the Fodder Block Is the Business
- 4. The Production Model
- 5. SWOT and Competitive Position
- 6. Housing, Water and Equipment
- 7. Regulatory and Compliance Framework
- 8. Management and Organisation
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Herd Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 9.1 Basis of preparation
- 9.2 Projected income statement
- 9.3 Projected cash flow statement
- 9.4 Projected balance sheet
- 9.5 Funding the herd build
9.1 Basis of preparation
▪ All figures are in Kenya Shillings. The model is built bottom-up from a herd roll-forward rather than from a growth rate applied to an assumed base.
▪ Milk volume is derived from the average milking herd, lactation-adjusted yield and 305 days in milk. Feed is costed per head per day.
▪ Rearing costs for replacement heifers are reported separately from the cost of producing this year’s milk, because conflating them overstates the cost per litre.
▪ Milk is priced at KES 50 a litre with a 4% cooperative deduction, giving a net realised price of KES 48.
▪ Biological assets are carried at cost and are not depreciated. Cull and surplus stock sales are recognised in revenue as they arise.
▪ Depreciation of KES 742 500 a year is charged on fixed assets only, straight line over lives of five to twenty years.
▪ Term debt is KES 10 000 000 at 15.5% over ten years with a three-year principal grace period. Interest is charged on the outstanding balance and principal amortises over the remaining seven years.
▪ Corporate tax is 30%. Kenyan tax losses carry forward indefinitely, and the Years 1 to 3 losses shelter all of the Year 4 and Year 5 taxable profit, so no tax falls in the projection period.
▪ Working capital assumes 21 debtor days, 30 creditor days and 60 days of feed and forage inventory.
▪ No revenue is assumed from on-farm processing, value addition or any activity not described in Section 2.
9.2 Projected income statement
|
KES |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Milk revenue |
3 991 000 |
7 838 000 |
11 496 000 |
14 737 000 |
17 536 000 |
|
Breeding stock, culls and manure |
377 000 |
624 000 |
2 271 000 |
3 371 000 |
4 432 000 |
|
Total revenue |
4 368 000 |
8 462 000 |
13 767 000 |
18 108 000 |
21 968 000 |
|
Feed — milking herd |
(2 833 000) |
(4 894 000) |
(6 455 000) |
(8 046 000) |
(9 331 000) |
|
Feed — rearing replacements |
(343 000) |
(798 000) |
(1 335 000) |
(1 717 000) |
(2 351 000) |
|
Labour |
(1 080 000) |
(1 380 000) |
(1 680 000) |
(1 860 000) |
(1 980 000) |
|
Vet, AI and animal health |
(217 000) |
(410 000) |
(555 000) |
(678 000) |
(793 000) |
|
Overhead and land lease |
(1 540 000) |
(1 720 000) |
(1 940 000) |
(2 120 000) |
(2 280 000) |
|
EBITDA |
(1 645 000) |
(740 000) |
1 802 000 |
3 687 000 |
5 233 000 |
|
EBITDA margin |
-37.7% |
-8.7% |
13.1% |
20.4% |
23.8% |
|
Depreciation |
(742 500) |
(742 500) |
(742 500) |
(742 500) |
(742 500) |
|
Interest |
(1 550 000) |
(1 550 000) |
(1 550 000) |
(1 550 000) |
(1 412 087) |
|
Profit / (loss) before tax |
(3 937 500) |
(3 032 500) |
(490 500) |
1 394 500 |
3 078 413 |
|
Taxation |
— |
— |
— |
— |
— |
|
Profit / (loss) after tax |
(3 937 500) |
(3 032 500) |
(490 500) |
1 394 500 |
3 078 413 |
|
Cumulative profit / (deficit) |
(3 937 500) |
(6 970 000) |
(7 460 500) |
(6 066 000) |
(2 987 587) |
Cost per litre falls from KES 68.20 in Year 1 to KES 39.40 by Year 5 on the cash cost of the milking enterprise — the basis on which the Kenya Dairy Board’s KES 30 to 37 range is quoted. Fully absorbed, including depreciation and interest, the figure falls from KES 95.80 to KES 45.30. Both are shown because a farmer comparing against the KDB range needs the first and a lender assessing whether the enterprise covers its full cost of capital needs the second. The enterprise crosses the net realised price of KES 48 on the fully absorbed measure during Year 4.
9.3 Projected cash flow statement
|
KES |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Profit / (loss) after tax |
(3 937 500) |
(3 032 500) |
(490 500) |
1 394 500 |
3 078 413 |
|
Add back: depreciation |
742 500 |
742 500 |
742 500 |
742 500 |
742 500 |
|
(Increase) / decrease in working capital |
(279 173) |
(387 024) |
(423 000) |
(372 222) |
(347 343) |
|
Cash generated from operations |
(3 474 173) |
(2 677 024) |
(171 000) |
1 764 778 |
3 473 570 |
|
Purchase of in-calf heifers |
— |
(3 200 000) |
(3 200 000) |
(2 000 000) |
— |
|
Debt capital repaid |
— (grace period) |
— (grace period) |
— (grace period) |
(889 761) |
(1 027 674) |
|
Net movement in cash |
(3 474 173) |
(5 877 024) |
(3 371 000) |
(1 124 983) |
2 445 896 |
|
Opening cash |
14 445 000 |
10 970 827 |
5 093 803 |
1 722 803 |
597 820 |
|
Closing cash |
10 970 827 |
5 093 803 |
1 722 803 |
597 820 |
3 043 716 |
Opening cash after the fixed capital expenditure and the first 20 heifers is KES 14 445 000. Cash generated from operations is negative KES 3.47 million in Year 1 and negative KES 2.68 million in Year 2, turns marginally negative at KES 0.17 million in Year 3 and positive from Year 4. Closing cash reaches its low point of KES 600 000 at the end of Year 4, when the last heifer purchase coincides with the second year of principal repayment. That trough is the reason working capital is sized at KES 5 600 000 rather than KES 3 100 000.
9.4 Projected balance sheet
|
KES, at year end |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Biological assets — the herd, at cost |
4 000 000 |
7 200 000 |
10 400 000 |
12 400 000 |
12 400 000 |
|
Property, plant and equipment |
8 157 500 |
7 415 000 |
6 672 500 |
5 930 000 |
5 187 500 |
|
Feed and forage inventory |
522 082 |
935 671 |
1 280 548 |
1 604 877 |
1 920 329 |
|
Trade receivables |
251 310 |
486 855 |
792 074 |
1 041 830 |
1 263 912 |
|
Cash |
10 970 827 |
5 093 803 |
1 722 803 |
597 820 |
3 043 716 |
|
Total assets |
23 901 719 |
21 131 329 |
20 867 925 |
21 574 527 |
23 815 457 |
|
Share capital |
17 345 000 |
17 345 000 |
17 345 000 |
17 345 000 |
17 345 000 |
|
Retained earnings / (accumulated loss) |
(3 937 500) |
(6 970 000) |
(7 460 500) |
(6 066 000) |
(2 987 587) |
|
Total equity |
13 407 500 |
10 375 000 |
9 884 500 |
11 279 000 |
14 357 413 |
|
Term debt — non-current |
10 000 000 |
10 000 000 |
9 110 239 |
8 082 565 |
6 895 602 |
|
Term debt — current |
0 |
0 |
889 761 |
1 027 674 |
1 186 963 |
|
Trade payables |
494 219 |
756 329 |
983 425 |
1 185 288 |
1 375 479 |
|
Total liabilities |
10 494 219 |
10 756 329 |
10 983 425 |
10 295 527 |
9 458 044 |
|
Total equity and liabilities |
23 901 719 |
21 131 329 |
20 867 925 |
21 574 527 |
23 815 457 |
The herd is the largest single asset from Year 2 onward, reaching KES 12 400 000 at cost by Year 4. Total equity falls from KES 17 345 000 at inception to a low of KES 9 884 000 at the end of Year 3 as the accumulated deficit deepens, then recovers to KES 14 353 000 by Year 5. Gearing peaks at 52.6 per cent in Year 3 and falls to 39.7 per cent by Year 5 as the facility amortises and retained earnings rebuild.
9.5 Funding the herd build
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Total |
|
|---|---|---|---|---|---|---|
|
Heifers purchased, head |
20 |
16 |
16 |
10 |
0 |
62 |
|
Cost at KES 200 000 each |
4 000 000 |
3 200 000 |
3 200 000 |
2 000 000 |
— |
12 400 000 |
|
Funded from |
Capital budget |
Working capital reserve |
Working capital reserve |
Working capital reserve |
— |