This section presents the full re-underwritten model. Sponsor revenue and EBITDA are preserved exactly; depreciation, financing, tax, the balance sheet, cash flow, coverage and returns are independently derived, and the sponsor’s net-profit line is re-underwritten for comparison. The model is fully integrated, the balance sheet ties to zero every year, and denominated in rand millions.
13.1 Key assumptions
|
Assumption |
Basis |
|---|---|
|
Revenue & EBITDA |
Sponsor projections preserved (R180m→R1.05bn; 8%→21% margin) |
|
Gross margin |
22%→28% (feed-heavy poultry COGS) |
|
Depreciation |
~13-yr blended life, straight-line on the R260m build |
|
Equity |
R130m ordinary equity (50% of funding) |
|
Senior debt |
R100m at 11.5%; 2-yr grace, amortising from Year 3 |
|
Working-capital facility |
R30m revolver, drawn for ramp shortfalls, repaid first |
|
Tax |
27% corporate rate with assessed-loss carry-forward |
|
Working capital |
DSO 30 / DIO 25 / DPO 32 days (short poultry cycle) |
|
Dividends |
Coverage-gated surplus distribution from Year 4 |
Table 13.1 Principal modelling assumptions.
13.2 Projected income statement
|
R million |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Revenue |
180 |
310 |
520 |
780 |
1,050 |
|
Cost of sales |
(140) |
(236) |
(385) |
(569) |
(756) |
|
Gross profit |
40 |
74 |
135 |
211 |
294 |
|
Operating expenses |
(26) |
(36) |
(49) |
(69) |
(73) |
|
EBITDA |
14 |
38 |
86 |
142 |
221 |
|
Depreciation |
(14) |
(18) |
(22) |
(24) |
(27) |
|
EBIT |
0 |
20 |
64 |
118 |
194 |
|
Net interest |
(3) |
(10) |
(13) |
(13) |
(8) |
|
Profit before tax |
(3) |
10 |
50 |
105 |
186 |
|
Tax |
(0) |
(2) |
(14) |
(28) |
(50) |
|
Net profit (re-underwritten) |
(3) |
8 |
37 |
77 |
136 |
|
Net profit (sponsor) |
(6) |
14 |
48 |
92 |
148 |
Table 13.2 Projected income statement.
Key findingRe-underwritten net profit sits below the sponsor’s through the ramp
Preserving EBITDA and applying full depreciation on the R260m build plus realistic financing produces net profit of (3)m, 8m, 37m, 77m and 136m, versus the sponsor’s (6)m, 14m, 48m, 92m and 148m.
The re-underwritten figures run below the sponsor’s in the ramp years and converge by Year 5, with cumulative five-year net profit around R42m (~14%) lower. The business still reaches strong profitability, the point is simply that depreciation and interest on the build weigh more heavily, and a little longer, than the sponsor’s summary implies.
13.3 Projected balance sheet
|
R million |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Net PP&E |
167 |
207 |
236 |
235 |
240 |
|
Inventory |
10 |
16 |
26 |
39 |
52 |
|
Receivables |
15 |
26 |
43 |
64 |
86 |
|
Cash |
15 |
15 |
15 |
15 |
48 |
|
Total assets |
206 |
264 |
320 |
353 |
426 |
|
Payables |
12 |
21 |
34 |
50 |
66 |
|
Senior debt |
55 |
85 |
83 |
67 |
50 |
|
Working-capital facility |
11 |
22 |
28 |
3 |
0 |
|
Deferred tax |
1 |
2 |
3 |
4 |
5 |
|
Equity |
127 |
135 |
172 |
229 |
304 |
|
Total equity & liabilities |
206 |
264 |
320 |
353 |
426 |
|
Balance check |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
Table 13.3 Projected balance sheet. The balance-check row confirms the model ties to zero every year.
13.4 Projected cash-flow statement
|
R million |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Operating cash flow |
(1) |
19 |
46 |
84 |
145 |
|
Investing cash flow |
(180) |
(59) |
(51) |
(23) |
(32) |
|
Financing cash flow |
66 |
41 |
5 |
(61) |
(81) |
|
Net change in cash |
(115) |
0 |
0 |
0 |
33 |
|
Closing cash |
15 |
15 |
15 |
15 |
48 |
Table 13.4 Projected cash-flow statement.
13.5 Funding structure & deployment
The R260 million is funded by R130m of equity (50%), R100m of senior term debt and a R30m working-capital facility. Equity funds the initial build; senior debt is drawn on a schedule to match capex; and the revolver covers ramp-period working-capital shortfalls before being repaid ahead of any distributions.
Analyst flagThe R260m capital base looks light for a R1.05bn-revenue platform
As set out in the Executive Summary, the sponsor’s figures imply a Year-5 asset turnover of about 4.0x (R1.05bn revenue on R260m capital), roughly double the 1.5–2.0x typical of integrated poultry. On a normalised basis, supporting R1.05bn of revenue would require an asset base closer to R500–550m.
In this model the R260m is deployed as requested and incremental growth capex is funded from operating cash flow, which keeps the plan internally consistent. But if the true build cost is higher, as the benchmark suggests, Aviana will need additional capital to reach the Year-5 target, increasing the funding requirement and the eventual share count. This is the most important number in the plan to pressure-test in diligence.
13.6 Debt profile & coverage
|
Coverage metric |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
CFADS (R m) |
9 |
27 |
57 |
90 |
139 |
|
Senior debt service (R m) |
3 |
8 |
27 |
26 |
24 |
|
Senior DSCR |
2.69x |
3.31x |
2.08x |
3.43x |
5.70x |
|
Gross debt / EBITDA |
4.71x |
2.81x |
1.30x |
0.49x |
0.23x |
|
Net debt / EBITDA |
3.64x |
2.41x |
1.12x |
0.39x |
0.01x |
|
Gearing (%) |
34.2% |
44.1% |
39.3% |
23.4% |
14.1% |
Table 13.5 Coverage and leverage. Senior principal has a two-year construction grace; Year-1 coverage reflects interest-only service.
NoteCoverage is tight early by design, then strengthens sharply
Gross debt/EBITDA opens near 4.7x, unavoidable for a green-field where EBITDA is small relative to the asset base, before de-levering below 1.0x by Year 4 as the ramp completes. Senior DSCR, once amortisation begins in Year 3, runs above 2.0x and reaches 5.7x by Year 5. The early leverage is a start-up feature, not a red flag, provided the two-year grace, the equity cushion and a debt-service reserve carry the business through to cash generation. The de-leveraging profile thereafter is strong.
13.7 Margin build
The EBITDA margin builds from around 8% to 21% over the plan. This is not a uniform assumption but the product of three compounding effects: operating leverage as fixed processing, cold-chain and overhead costs are spread across rising volumes; an improving product mix as premium branded packs and value-added lines grow their share; and scale efficiencies in feed procurement and farm operations. The pace of this margin build is a key sensitivity, it depends on delivering both the volume ramp and the premium mix shift, and diligence should test each.
13.8 Working-capital cycle
Poultry has a short, favourable working-capital cycle: birds move from grow-out to processing to sale quickly, inventory turns fast, and retail and foodservice receivables are collected in around 30 days. With inventory near 25 days and payables around 32 days, the cash-conversion cycle is short, a genuine advantage that limits the working-capital drag as volumes scale, and the reason a R30m revolver is adequate for a business heading toward R1bn of revenue.
13.9 Scenario & break-even analysis
|
Scenario |
Y5 revenue |
Y5 EBITDA |
Assessment |
|---|---|---|---|
|
Upside |
R1,155m |
R260m |
Faster ramp, stronger premium realisation |
|
Base case |
R1,050m |
R221m |
Sponsor plan preserved |
|
Downside |
R861m |
R155m |
–18% revenue, –3pp margin |
Table 13.6 Scenario summary.
13.10 Returns
|
Return metric |
Value |
Note |
|---|---|---|
|
Project IRR (as funded, R260m) |
78% |
Inflated by understated capital base |
|
Project IRR (capital-normalised, ~R520m) |
44% |
Realistic asset intensity |
|
Sponsor stated IRR |
23–30% |
Sponsor’s (conservative) range |
|
Equity IRR (levered) |
64% |
On R130m equity, 11.7x MOIC |
|
Payback |
~5.2 yrs |
Consistent with sponsor 5–6 yrs |
Table 13.7 Returns summary.
Key findingThe returns are strong — so the constraint is execution and capital, not IRR
On the sponsor’s EBITDA, even normalising the capital base to a realistic ~R520m, the project IRR is around 44%, above the sponsor’s own 23–30% range. On the as-funded R260m base the modelled IRR is higher still (78%), but that figure is inflated by the understated capital and should not be relied upon.
The implication is important: the economics are attractive whichever capital base is used, so the return math is not what should decide this investment. What should decide it is whether the aggressive volume-and-brand ramp can be delivered, and whether the business is adequately capitalised to reach the Year-5 target. Fund it properly and execute the ramp, and the returns follow; under-fund it or miss the ramp, and no headline IRR will protect the outcome.
13.11 Base-case KPI dashboard
|
KPI |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Revenue growth |
— |
72% |
68% |
50% |
35% |
|
Gross margin |
22% |
24% |
26% |
27% |
28% |
|
EBITDA margin |
8% |
12% |
17% |
18% |
21% |
|
Net margin (re-underwritten) |
-1.7% |
2.6% |
7.1% |
9.8% |
13.0% |
|
Birds processed (m) |
3.2 |
5.4 |
8.8 |
12.8 |
16.8 |
|
Senior DSCR |
2.69x |
3.31x |
2.08x |
3.43x |
5.70x |
|
Gross debt / EBITDA |
4.71x |
2.81x |
1.30x |
0.49x |
0.23x |
|
Closing cash (R m) |
15 |
15 |
15 |
15 |
48 |
Table 13.8 Base-case key performance indicators.
13.12 Covenant & lender-protection framework
The financing is structured to protect lenders through the loss-making build, with milestone drawdowns, a debt-service reserve and covenants tested from the amortisation period.
|
Protection |
Proposed structure |
|---|---|
|
Minimum DSCR covenant |
≥ 1.30x, tested from first amortisation (Year 3) |
|
Leverage cap |
Gross debt/EBITDA ceiling stepping down over the tenor |
|
Debt-service reserve |
DSRA funded to ~22m (forward debt service) |
|
Construction grace |
Interest-only on senior debt through Years 1–2 |
|
Milestone drawdowns |
Capital released against verified build milestones |
|
Security |
Farms, plant, hatchery, cold-chain, inventory, guarantees |
|
Distribution lock-up |
No dividends until coverage and reserve tests are met |
Table 13.9 Proposed covenant and lender-protection framework.
StrengthThe structure concentrates protection where the risk sits
The lender-protection package is built around the Year 1–3 danger zone: interest-only grace preserves cash through the build, milestone drawdowns prevent capital release ahead of progress, and the debt-service reserve and distribution lock-up ring-fence cash for debt service before any equity reward. Once the ramp completes, the strong DSCR and rapid de-leveraging make the covenants comfortable, the hallmark of a sensibly structured green-field facility.