Thaba Goats Business Plan — Returns and Net Asset Value

A Year 5 net asset value of R1.40m, of which R902,000 is breeding herd, and what the founders earn across the horizon.

Returns and Net Asset Value

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  • 21.1 What the enterprise is worth
  • 21.2 How to read the return

21.1 What the enterprise is worth

A livestock enterprise is valued on its assets rather than on an earnings multiple, because the herd is both the productive capacity and the store of value. Net asset value is therefore the primary return measure and reported earnings the secondary one.

Measure

Value

Basis

Year 5 total assets

R3.70m

Infrastructure R1 760k, breeding herd R902k, growing stock R279k, stores and cash

Year 5 debt outstanding

R2.27m

Five facilities, all amortising

Year 5 net asset value

R1.40m

Against R250 000 of founder capital and R1.37m of grants

Breeding herd value

R902k

300 does and 12 bucks; the productive capacity

Return on capital deployed

27.3%

Year 5 EBITDA against R2.45m of cumulative capital

Return on capital deployed, cash basis

14.9%

Year 5 cash EBITDA on the same base

Year 5 debt service cover

1.26x

Cash EBITDA over interest and scheduled principal

Net asset value and the breeding herd
Figure 24. Net asset value and the breeding herd.

Net asset value reaches R1.40 million by Year 5. Of that, R860 000 is the breeding herd and R1.29 million the infrastructure, offset by R2.27 million of debt. The founder contributed R250 000 and R1.37 million came as non-repayable grants, so the equity built is substantially a function of the grant architecture as well as of the farming.

21.2 How to read the return

Basis

Value at Year 5

Comment

Net asset value

R1.40m

The floor; what the assets are worth if the earnings are disbelieved

Breeding herd alone

R902k

Realisable within a season through traders; the most liquid asset on the farm

Return on capital deployed

27.3%

Includes non-cash herd growth

Return on capital deployed, cash basis

14.9%

The number a lender should use

Owner remuneration drawn, Years 1 to 5

R690 000

Paid before EBITDA is struck; part of the founder’s return

Assessed loss carried forward

R219k

Shelters roughly the first R219 000 of Year 6 profit