Copperfrontline Logistics Business Plan — Investor Returns and Recommendation

The US$4.4m for 65% of the company, the FY2032 to FY2034 harvest view, and what the plan recommends.

Investor Returns and Recommendation

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15.1 The five-year picture
15.2 Why the horizon is the whole question
15.3 What the numbers support
15.4 What the numbers do not support
15.5 Recommendation
15.6 Sources and application over the full holding period

15.1 The five-year picture

Figure 23. Equity money multiple, exiting at year five against holding to year eight.

FY2031 exit	Enterprise value	Net debt	Equity value	Proceeds to investor	Multiple	Return
3.5x EBITDA	US$9.13m	US$5.40m	US$3.73m	US$2.42m	0.55x	-11%
4.5x EBITDA	US$11.74m	US$5.40m	US$6.34m	US$4.12m	0.94x	-1%
5.5x EBITDA	US$14.35m	US$5.40m	US$8.95m	US$5.82m	1.32x	6%
6.5x EBITDA	US$16.96m	US$5.40m	US$11.56m	US$7.51m	1.71x	11%

Net debt at FY2031 is US$5.40m — asset finance of US$5.37m and the term facility of US$0.21m, less cash of US$0.18m. At year five the company owns 54 vehicles with an average age of about two years, carrying that finance against them. Selling at that point means selling a fleet whose debt the seller has serviced and whose productive life the buyer will enjoy.

15.2 Why the horizon is the whole question

A vehicle in this plan is financed over six years and works for eight. Between the end of amortisation and the end of life there are two to three years in which the truck earns its full contribution against no debt service at all. That period contains most of the equity return, and a year-five exit gives all of it away.

Figure 24. The harvest years — fleet held flat as the asset finance amortises away.

US$ million, fleet held flat with no further vehicle purchases	FY2032	FY2033	FY2034
EBITDA	2.57	2.51	2.46
Debt service	(1.25)	(0.61)	—
Debt service cover	2.06x	4.11x	Fully repaid
Replacement provision	(0.72)	(0.72)	(0.72)
Taxation	(0.25)	(0.33)	(0.39)
Free cash flow after tax	0.35	0.85	1.35
Investor share of distributions	0.23	0.55	0.88

FY2034 exit, held through amortisation	Enterprise value	Proceeds at exit	Distributions received	Total to investor	Multiple	Return
4.0x EBITDA	US$9.84m	US$6.40m	US$1.66m	US$8.06m	1.83x	8%
5.0x EBITDA	US$12.30m	US$8.00m	US$1.66m	US$9.66m	2.20x	10%
6.0x EBITDA	US$14.76m	US$9.59m	US$1.66m	US$11.25m	2.56x	13%
7.0x EBITDA	US$17.22m	US$11.19m	US$1.66m	US$12.85m	2.92x	15%

What an investor is actually buying

A fleet that repays its own finance over six years and then throws off cash for three more. Held to FY2034 the equity returns 2.20 times money at a mid-case valuation, with an internal rate of return of 10 per cent and US$1.66m of distributions received along the way, against 1.62 times on a year-five exit at the equivalent valuation. The difference is not performance — the business is the same business in both cases — it is horizon. The uncomfortable corollary is that this is a modest return for the risk taken: a startup haulier on a three-jurisdiction corridor, exposed to freight rates it does not set, diesel it cannot hedge, borders it does not control and two funded rail programmes being built against its route. An investor should be satisfied that ten per cent compensates for that before proceeding, and should note that the figure assumes the plan is delivered.

15.3 What the numbers support

▪ A genuine and quantified operating mechanic. A loaded round trip contributes US$3 392 against US$349 with an empty return leg. The whole business is the return leg, it is measurable weekly, and it is entirely within management’s control.

▪ Sound unit economics at scale. A 38.2 per cent contribution margin and a 26.7 per cent EBITDA margin at 54 vehicles, with overheads at 11 per cent of revenue — a normal ratio for cross-border haulage.

▪ A pre-committed and survivable downside. Halting deliveries at the FY2028 trigger produces a smaller company rather than a failed one, and preserves both cover and the asset base.

▪ A real harvest. US$1.66m of distributions across FY2032 to FY2034 as the asset finance amortises to nil, from a fleet with three years of life remaining.

15.4 What the numbers do not support

▪ A five-year investment. 1.62 times at year five against 2.20 times held to year eight. An investor whose horizon ends at year five should not participate.

▪ A venture return at any horizon. Ten per cent at the mid case held to FY2034. This is an asset-backed infrastructure return, not a growth-equity one.

▪ Growing faster than this plan does. Cover is below the conventional covenant until FY2031 on the base case. Additional equity does not relax that constraint, because the constraint is EBITDA against debt service rather than capital availability.

▪ Ordering the fleet before the return-leg business exists. At a 40 per cent fill FY2031 EBITDA is US$0.98m against debt service of US$1.90m.

15.5 Recommendation

Proceed, on the seven conditions precedent and with an eight-year holder

This plan rests on a narrow proposition: that a well-run cross-border haulier on the Dar es Salaam corridor can complete 2.05 round trips per truck per month at a 78 per cent northbound fill rate, and that doing so produces a 38.2 per cent contribution margin and a 26.7 per cent EBITDA margin at a fleet of 54 vehicles. Three things should be tested in diligence ahead of all others: whether the written northbound arrangements actually exist and who they are with, whether a financier will sign an asset finance facility with build-phase covenant relief on a disclosed sub-covenant cover profile, and the investor’s own view of how much southbound bulk volume the TAZARA and Lobito programmes take off the road by FY2034. The first two determine whether the plan is executable; the third determines what the asset is worth at the end of it.

The question a reader should hold onto is not whether copper will move to port. It will. The question is whether this company can secure enough northbound freight to make the return leg pay, and hold border dwell times low enough to complete the trips the plan assumes. Both are answerable before capital is drawn, which is why they are the first two conditions precedent rather than the first two years of trading.

15.6 Sources and application over the full holding period

Over FY2027 to FY2034	US$ million	Note
Equity subscribed	(4.40)	65% of the share capital at inception
Asset finance drawn	7.90	75% of each vehicle, secured on that vehicle
Term facility drawn	0.90	Depot, workshop and secure yard at Kitwe
Capital expenditure	(12.76)	Of which vehicles are US$10.53m
Cumulative EBITDA to FY2031	5.60	Four years of build followed by one profitable year
Cumulative debt service to FY2031	(5.53)	Principal and interest across the build phase
Harvest EBITDA, FY2032 to FY2034	7.54	Fleet held flat at 54 vehicles
Harvest debt service	(1.86)	Amortising to nil by FY2034
Distributions to the investor	2.55	Of which US$1.66m is the investor’s 65% share

Read across the full eight years rather than the five, the shape of the investment is clear: US$4.40m of equity levers US$8.80m of debt into a US$12.76m asset base, the debt is serviced out of trading over six years, and the equity takes the residual value of the fleet plus three years of unlevered cash flow. That is an infrastructure structure rather than a growth one, and it is why the return is expressed as a multiple over eight years rather than as a growth rate.

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