Canvas Crest Event Structures Business Plan — Financial Plan

11.1 Basis of preparation

The projections are built from a single-source financial model in which every statement, profit and loss, balance sheet and cash flow, derives from one set of assumptions, and the balance sheet is programmatically asserted to balance in every year. Management’s headline revenue and EBITDA targets are preserved exactly as provided for Years 1–3 and extended on a consistent margin path for Years 4–5. All line items below EBITDA are independently re-derived: depreciation from a full asset register at component-level useful lives; interest from the actual amortisation profile of the proposed facility; and taxation at the current South African corporate rate of 27% with assessed-loss carry-forward applied. Figures are in United States dollars, the Company’s planning currency given import-denominated capex and partially hard-currency revenue; rand exposure is addressed in the risk section.

Analyst flagThree sponsor figures have been corrected in this plan — transparently.

(1) Tax: the sponsor applied 28%; South Africa’s corporate rate has been 27% for years of assessment ending on or after 31 March 2023, and 27% is used throughout. (2) Depreciation: the sponsor’s US$90–120k per annum is inconsistent with a US$1.30 million depreciable asset base; the re-derived charge of US$205–357k reflects component-level useful lives (tents 8 years, vehicles and equipment 5, fit-out 10, technology 3). (3) Interest: the sponsor showed interest rising from US$40k to US$50k, which implies growing debt; the proposed facility amortises, so interest declines from US$101k to US$20k. The corrections reduce headline net profit in early years but materially improve the plan’s credibility, EBITDA and cash generation are unchanged.

11.2 Start-up capital and use of funds

Figure 8. *Use of the US$1.60 million raise. Fleet assets — the revenue-generating and lender-securable core — absorb 69% of proceeds.*

Item	Amount (US$)	Treatment
Premium tent inventory	600,000	Capex — 8-year life
Furniture & event equipment	180,000	Capex — 5-year life
Transport fleet	250,000	Capex — 5-year life
Warehouse & office fit-out	150,000	Capex — 10-year life
Installation equipment	80,000	Capex — 5-year life
Technology systems	40,000	Capex — 3-year life
Initial marketing	50,000	Expensed within Year 1 opex
Working capital	250,000	Debtor and inventory build
Total investment required	1,600,000	—

11.3 Projected profit and loss

US$	Year 1	Year 2	Year 3	Year 4	Year 5
Revenue	1,600,000	2,500,000	3,800,000	5,200,000	6,900,000
Cost of sales	(800,000)	(1,150,000)	(1,700,000)	(2,370,000)	(3,210,000)
Gross profit	800,000	1,350,000	2,100,000	2,830,000	3,690,000
Operating expenses	(520,000)	(720,000)	(980,000)	(1,218,000)	(1,482,000)
EBITDA	280,000	630,000	1,120,000	1,612,000	2,208,000
Depreciation	(205,333)	(220,333)	(257,000)	(293,667)	(357,000)
Interest (senior facility)	(100,800)	(80,640)	(60,480)	(40,320)	(20,160)
Profit before tax	(26,133)	329,027	802,520	1,278,013	1,830,840
Income tax (27%)	0	(81,781)	(216,680)	(345,064)	(494,327)
Net profit after tax	(26,133)	247,246	585,840	932,949	1,336,513

Gross margin holds at the sponsor’s 50% in Year 1, improving with contract mix to approximately 53% by Year 5. EBITDA margin expands from 17.5% to 32.0% on utilisation and route density. The Year 1 net loss of US$26,133 is a ramp-up loss, not a structural one: it converts to a US$247k profit in Year 2 and US$1.34 million by Year 5, with the Year 1 assessed loss carried forward against Year 2 taxable income under South African tax law.

Figure 9. *Year 3 profit bridge: US$3.80 million of revenue converts to US$586k of net profit after cost of sales, operating expenses, the full re-derived depreciation charge, interest and tax at 27%.*

11.4 Projected balance sheet

US$	Year 1	Year 2	Year 3	Year 4	Year 5
Fixed assets (net book value)	1,094,667	1,054,334	1,057,334	1,103,667	1,166,667
Trade debtors	197,260	308,219	468,493	641,096	850,685
Inventory (consumables & spares)	40,000	57,500	85,000	118,500	160,500
Cash and equivalents	158,433	170,759	440,400	1,003,543	1,924,207
Total assets	1,490,360	1,590,812	2,051,227	2,866,806	4,102,059
Trade creditors	108,493	153,699	220,274	294,904	385,644
Senior term debt	768,000	576,000	384,000	192,000	0
Share capital	640,000	640,000	640,000	640,000	640,000
Retained earnings	(26,133)	221,113	806,953	1,739,902	3,076,415
Total equity & liabilities	1,490,360	1,590,812	2,051,227	2,866,806	4,102,059

The balance sheet is asset-backed throughout: net fixed assets of US$1.09 million at the end of Year 1 against senior debt of US$768k provides opening asset cover of approximately 1.4x, strengthening every year as the facility amortises and the fleet grows. Gearing (debt to equity plus retained earnings) falls from 1.25x at close to zero by the end of Year 5. The model asserts assets equal to equity plus liabilities in every projection year.

Figure 10. *Balance sheet composition: the asset side (left bars) is dominated by the revenue-generating fleet and accumulating cash; the funding side (right bars) shows debt amortising to zero as equity builds.*

11.5 Projected cash flow

US$	Year 1	Year 2	Year 3	Year 4	Year 5
EBITDA	280,000	630,000	1,120,000	1,612,000	2,208,000
Tax paid	0	(81,781)	(216,680)	(345,064)	(494,327)
Working capital movement	(128,767)	(83,253)	(121,199)	(131,473)	(160,849)
Operating cash flow	151,233	464,966	782,121	1,135,463	1,552,824
Initial fleet & infrastructure capex	(1,300,000)	0	0	0	0
Expansion capex	0	(180,000)	(260,000)	(340,000)	(420,000)
Investing cash flow	(1,300,000)	(180,000)	(260,000)	(340,000)	(420,000)
Equity and debt drawdown	1,600,000	0	0	0	0
Interest paid	(100,800)	(80,640)	(60,480)	(40,320)	(20,160)
Principal repayments	(192,000)	(192,000)	(192,000)	(192,000)	(192,000)
Financing cash flow	1,307,200	(272,640)	(252,480)	(232,320)	(212,160)
Net cash movement	158,433	12,326	269,641	563,143	920,664
Closing cash	158,433	170,759	440,400	1,003,543	1,924,207

Figure 11. *Cash flow by activity. Operating cash flow turns strongly positive from Year 2, funding expansion capex internally while the facility amortises; closing cash builds to US$1.92 million.*

11.6 Funding structure and debt service

The proposed structure is US$960,000 of senior term debt (60% of the raise) at an indicative 10.5% per annum over five years, secured by a general notarial bond over the tent and equipment fleet, instalment-sale or bond security over the transport fleet, cession of contract receivables and business insurance policies, and personal or sponsor suretyship as negotiated. Equity of US$640,000 (40%) is subscribed by the founders and incoming investors. The base model conservatively assumes straight-line amortisation from Year 1; the recommended structure adds a 12-month principal grace period, which the Year 1 cash position comfortably accommodates and which resolves the covenant pressure identified below.

Figure 12. *DSCR against an assumed 1.20x covenant on the conservative straight-line amortisation case. Year 1 breaches and Year 2 is thin — the basis for the recommended grace period and reserve account.*

Analyst flagDSCR of 0.52x in Year 1 and 1.05x in Year 2 — the facility as modelled needs structural protection.

On straight-line amortisation, cash flow available for debt service covers only 52% of Year 1 debt service; the shortfall is funded from the raise’s working-capital allocation, which is survivable but is not what working capital is for. Three structural fixes, in combination, make the facility bankable: (i) a 12-month principal grace period (interest-only Year 1), which lifts Year 1 coverage above 1.4x on interest-only service and re-profiles principal over Years 2–5; (ii) a debt service reserve account of six months’ debt service (~US$130k) funded at close; and (iii) a covenant holiday until the first full peak season has been trading for twelve months, with the first DSCR measurement at month 12. From Year 3 the ratio exceeds 2.0x and the facility deleverages rapidly.

11.7 Year 1 quarterly profile

Annual figures conceal the seasonality that determines Year 1 survival, so the plan is managed against the quarterly profile below (Year 1 assumed to commence July, placing the first full peak season in Q2–Q3 of the financial year). Revenue phasing reflects the demand calendar; costs are substantially fixed, which is why the winter quarters are loss-making by design and funded by the working-capital allocation.

US$	Q1 (Jul–Sep)	Q2 (Oct–Dec)	Q3 (Jan–Mar)	Q4 (Apr–Jun)	Year 1
Revenue	160,000	560,000	544,000	336,000	1,600,000
Cost of sales	(80,000)	(280,000)	(272,000)	(168,000)	(800,000)
Operating expenses	(130,000)	(130,000)	(130,000)	(130,000)	(520,000)
EBITDA	(50,000)	150,000	142,000	38,000	280,000
EBITDA margin	(31%)	27%	26%	11%	17.5%

The Q1 EBITDA loss of approximately US$50,000, the launch quarter, trading before the fleet is fully deployed, is the deepest cash-consumption point of the plan and the analytical justification for both the US$250,000 working-capital allocation and the recommended interest-only first year on the senior facility. From Q2 the business is cash-generative in every quarter of the plan.

11.8 Financial ratio summary

Ratio	Year 1	Year 2	Year 3	Year 4	Year 5
Gross margin	50.0%	54.0%	55.3%	54.4%	53.5%
EBITDA margin	17.5%	25.2%	29.5%	31.0%	32.0%
Net margin	(1.6%)	9.9%	15.4%	17.9%	19.4%
Return on assets	(1.5%)	13.2%	24.2%	28.4%	30.1%
Debt / (equity + retained earnings)	1.25x	0.67x	0.26x	0.08x	0.00x
Current ratio	2.1x	2.4x	3.6x	5.2x	7.4x
Interest cover (EBITDA / interest)	2.8x	7.8x	18.5x	40.0x	109.5x
Asset cover (fixed assets / debt)	1.42x	1.79x	2.60x	4.83x	n/a (nil debt)

11.9 Break-even analysis

Figure 13. *Accounting break-even on the Year 1 cost base falls at approximately US$1.65 million of annual revenue — marginally above the Year 1 target, consistent with the small Year 1 accounting loss.*

On the Year 1 cost structure, fixed costs of approximately US$826k comprising operating expenses, the full depreciation charge and Year 1 interest, against a 50% contribution margin, accounting break-even falls at roughly US$1.65 million of annual revenue. The Year 1 plan of US$1.60 million therefore lands marginally below accounting break-even (the source of the small re-derived net loss) while remaining comfortably above cash break-even of approximately US$1.24 million once non-cash depreciation is excluded. From Year 2, revenue exceeds accounting break-even by a widening margin, and operating leverage does the rest.

11.10 Key indicators and returns

Indicator	Sponsor original	Analyst re-derived	Comment
Initial investment	US$1.60m	US$1.60m	Unchanged
Gross margin (Y1)	50%	50%	Preserved
EBITDA margin (Y3)	29.5%	29.5%	Preserved
Net margin (Y3)	18.0%	15.4%	Full depreciation & 27% tax
Break-even	~3 years	Y2 (accounting)	Y1 near-miss; Y2 clears
Project IRR	24–28%	44.9% (5.0x exit)	Exit-multiple dependent — see 11.11
Payback (EBITDA less tax)	4.5–5 years	2.9 years	Faster on re-derived cash

11.11 Returns sensitivity

Figure 14. *Project IRR under combinations of exit EV/EBITDA multiple (3.0x–6.0x) and EBITDA underperformance (0–30%). The plan remains double-digit accretive across most of the grid.*

Analyst flagReported IRR is heavily exit-multiple dependent.

At a 5.0x Year 5 EV/EBITDA exit, project IRR is approximately 44.9% — well above the sponsor’s own 24–28% estimate. But the majority of that return is realised in the terminal value, not interim cash flow. At a 3.0x exit with a 20% EBITDA shortfall, IRR compresses to the low teens. Equity investors should underwrite the operating plan on the conservative corner of the sensitivity grid and treat multiple expansion as upside, not base case. Comparable rental-asset businesses in the region have transacted between 3.5x and 5.5x EBITDA depending on contract cover and fleet age at exit.

11.12 Analyst opinion on financeability

Taken together, the re-derived statements support a clear conclusion: this is a financeable transaction with one structural condition. The asset cover is strong (fixed assets exceed senior debt by 1.4x at close, rising each year), the deleveraging profile is rapid, and from Year 2 the cash generation comfortably services the facility, the Year 5 interest-cover ratio of over 100x is that of a business that has substantively outgrown its debt. The condition is Year 1: on straight-line amortisation the plan breaches a 1.0x DSCR in its first year, and no presentation of annual averages should be allowed to obscure that. With the 12-month principal grace and six-month debt-service reserve recommended in Section 11.6, the same facility is serviced in every period including the structured downside case in Section 12.2. Lenders are therefore being asked to price a seasonality-and-ramp bridge of one year, secured on new, insured, movable assets with an active secondary market, a well-understood credit, provided it is structured as one.