Conclusion and Recommendation

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Business and the Regulated Price
• 3. Licensing, Safety and Compliance
• 4. Market and Customers
• 5. SWOT and Competitive Position
• 6. Operations
• 7. Financial Plan
• 8. Break-Even and Debt Service
• 9. Investment Analysis
• 10. Sensitivity and Scenario Analysis
• 11. The Margin Squeeze
• 12. Risk Analysis
• 13. Implementation Roadmap
• 14. Key Performance Indicators
• 15. Key Assumptions
• 16. Conclusion and Recommendation
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Volume, Price and Cost Schedules
• C. Appendix C: Funding, Debt and Working Capital Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

Quick and Efficient Gas is a licensed LPG refill shop in a market with durable demand, a hard asset base and a regulated selling price. Its distinguishing decision is to fill cylinders rather than swap them, which raises the margin per kilogram from R6.40 to R10.64 in exchange for a filling licence and a materially heavier compliance burden.

At maturity the shop generates R16 785 851 of revenue and R1 536 764 of EBITDA on R4 041 000 of capital, returning 20.3 per cent at project level and 22.9 per cent to equity.

16.1 What the numbers support

▪ A viable owner-operated business. Break-even at 30.9 fills a day against a plan of 47, a margin of safety of 34.4 per cent.

▪ A financeable structure from Year 3. Debt service cover of 1.66 to 2.48 times, on 48 per cent gearing with a three-month capital moratorium and full repayment by Year 5.

▪ A genuine unregulated profit pool. Accessories and services contribute 28.4 per cent of gross profit from 22.8 per cent of revenue, and they are the only prices the shop sets itself.

▪ Employment. Six jobs at wages above the national minimum of R30.23 an ordinary hour, including a skilled SAQCC-registered role.

16.2 What the numbers do not support

▪ Any pricing strategy. The ceiling is gazetted at R42.00 per kilogram and adjusted monthly. Competition is on convenience and service, or on discounting below the cap.

▪ A thinly capitalised start. R4 041 000 is required and committed at drawdown. The compliance and vessel costs are not optional and cannot be deferred.

▪ Year 1 or Year 2 covenants. Cover of negative 0.47 times and 0.84 times will breach a standard test. This must be structured for, not discovered.

▪ Immunity from the margin squeeze. A sustained two-point divergence between gas cost and the regulated ceiling removes about R766 344 of annual gross profit and there is no internal remedy.

16.3 Recommendation