Torque Precision Auto Business Plan — Investment Analysis
A 46.3% project IRR and 39.5% return to equity on a four-times exit multiple, with the return tested against alternative exit assumptions.
Investment Analysis
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Opportunity
- 3. How a Workshop Actually Makes Money
- 4. Accreditation and Compliance
- 5. SWOT and Competitive Position
- 6. Operations and the Bay Build
- 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 Operating Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 11.1 Returns
- 11.2 Sensitivity of the return to the exit assumption
- 11.3 What would improve the return
11.1 Returns
|
Measure |
Base case |
Comment |
|---|---|---|
|
Capital deployed over five years |
R8 000 000 |
Equipment, fit-out, parts stock, working capital and contingency |
|
Promoter and investor equity |
R5 400 000 |
68% of capital deployed |
|
Asset finance |
R2 600 000 |
Drawn against equipment at 13.75%, five years per tranche with a two-year capital moratorium |
|
Project internal rate of return |
46.3% |
Five years plus a terminal value at 4 times Year 5 EBITDA |
|
Return to equity |
39.5% |
No distributions in the projection period; value realised on the terminal position |
|
Money multiple on equity |
5.28x |
Terminal equity of R28 538 671 against R5 400 000 subscribed |
|
Terminal value |
R22 092 000 |
4x Year 5 EBITDA of R5 523 000 |
|
Net present value at 20% |
R7 938 807 |
Positive |
|
Net present value at 25% |
R5 769 097 |
Positive |
|
Cumulative profit after tax, Years 1 to 5 |
R3 333 230 |
Start-up losses recovered during Year 5 |
|
Year 5 EBITDA run rate |
R5 523 000 |
On R8 000 000 of cumulative capital |
11.2 Sensitivity of the return to the exit assumption
|
Exit multiple of Year 5 EBITDA |
Terminal value (R) |
Project IRR |
Terminal equity (R) |
Equity IRR |
|---|---|---|---|---|
|
3x |
16 569 000 |
39.1% |
23 015 671 |
33.6% |
|
4x |
22 092 000 |
46.3% |
28 538 671 |
39.5% |
|
5x |
27 615 000 |
52.5% |
34 061 671 |
44.5% |
|
6x |
33 138 000 |
58.0% |
39 584 671 |
48.9% |
The base case applies four times Year 5 EBITDA. Independent workshops are typically valued on a multiple of sustainable earnings, with the multiple driven by the proportion of contracted fleet work and the durability of the technician team rather than by bay count. At three times the project still returns 39.8 per cent; at six times it returns 56.4 per cent. Readers should substitute their own multiple, and should form a view on the technician team before they do.
11.3 What would improve the return
|
Lever |
Effect on Year 5 EBITDA |
Assessment |
|---|---|---|
|
Posted rate at R875 rather than R795 |
+R1 299 330 |
The largest single lever, and the workshop controls it directly. Still R225 below the dealer mid-point |
|
Utilisation 88% rather than 81% |
+R1 115 688 |
A diary outcome: marketing, reputation and fleet contracts |
|
Efficiency 117% rather than 110% |
+R821 426 |
A people outcome. Paid for through the efficiency bonus |
|
Leakage 4% rather than 7% |
+R416 525 |
Quote discipline and rework control. Invisible on the price list |
|
A second site once the first exceeds 80% |
Not modelled |
Only after utilisation is proven; the plan explicitly defers this |
|
Insurer and warranty-administrator panel work |
Included at about 10% |
Referred on published standards once accreditation and track record are in place |