Fish Master Premier Business Plan — Break-Even and Debt Service
The volumes needed to cover the cost base, and debt service cover across the three-year principal grace period on the term loan.
Break-Even and Debt Service
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Positioning
- 3. Why the Hatchery Is the Business
- 4. Regulatory Position
- 5. The Production System
- 6. SWOT and Competitive Position
- 7. Route to Market
- 8. Management and Governance
- 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 Production Schedules
- C. Appendix C: Funding, Debt and Grant Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 10.1 Break-even
- 10.2 Debt service
10.1 Break-even
Break-even is expressed in fingerlings rather than in tonnes because that is where the contribution is. The grow-out farm contributes nothing until Year 4, so until then every rand of fixed cost and debt service has to be covered by the hatchery.
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Fixed costs: labour and overhead, R |
2 940 000 |
3 570 000 |
4 140 000 |
4 560 000 |
4 850 000 |
|
Grow-out contribution, R |
(2 595 000) |
(1 652 000) |
(462 000) |
579 600 |
975 000 |
|
Fingerlings to cover fixed costs |
3 354 545 |
3 164 848 |
2 789 091 |
2 412 364 |
2 348 485 |
|
Fingerlings to cover fixed costs and debt service |
3 927 273 |
3 737 576 |
3 361 818 |
3 633 296 |
3 569 417 |
|
Fingerlings actually sold |
0 |
600 000 |
1 400 000 |
2 100 000 |
2 600 000 |
|
Headroom, fingerlings |
(3 927 273) |
(3 137 576) |
(1 961 818) |
(1 533 296) |
(969 417) |
The enterprise crosses break-even including debt service during Year 4, when 2.1 million fingerlings sold exceeds the 1.98 million needed. In Year 3 the shortfall is 1.05 million fingerlings, and in Years 1 and 2 the requirement is beyond anything the hatchery can produce at that stage of its ramp. That is what the capital structure exists to fund.
|
Break-even measure at Year 5 |
Value |
Interpretation |
|---|---|---|
|
Fish price break-even |
R91.6 per kilogram |
Against a realised R98.10. The margin is R6.50 and there is no room below it |
|
Fingerlings needed to cover fixed costs and debt service |
3 569 417 |
Against 2.6 million sold |
|
Feed price break-even |
R29.89 per kilogram |
Against R25.50 assumed. A 20% rise removes R1 026 499 of Year 5 profit |
|
Combined stress: fish price −10% and feed +20% |
(R145 246) |
Two ordinary adverse movements take the enterprise below break-even |
10.2 Debt service
|
R |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Opening balance |
7 000 000 |
7 000 000 |
7 000 000 |
7 000 000 |
5 930 462 |
|
Interest at 13.5% |
945 000 |
945 000 |
945 000 |
945 000 |
800 612 |
|
Capital repaid |
— (grace period) |
— (grace period) |
— (grace period) |
1 069 538 |
1 213 926 |
|
Total debt service |
945 000 |
945 000 |
945 000 |
2 014 538 |
2 014 538 |
|
Closing balance |
7 000 000 |
7 000 000 |
7 000 000 |
5 930 462 |
4 716 536 |
|
EBITDA |
(3 118 000) |
(1 305 000) |
1 104 000 |
3 221 000 |
4 391 000 |
|
Cover with the three-year grace |
n/a |
n/a |
1.17x |
1.60x |
2.18x |
|
Cover with the two-year grace |
n/a |
n/a |
0.62x |
1.81x |
2.47x |
|
Gearing |
35.6% |
42.9% |
45.5% |
38.4% |
28.4% |
Interest of R945 000 a year is charged on the full facility through the grace period because no principal is repaid before Year 4. Capital then amortises over the remaining five years at an annuity of R2 014 538, and the Year 5 current portion of R1 377 806 represents the Year 6 amortisation.