Financial Plan

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Business
• 3. Why the Mill Is the Business
• 4. Market Analysis
• 5. SWOT and Competitive Position
• 6. Production and Operations
• 7. The Outgrower Scheme
• 8. Organisation and Compliance
• 9. Financial Plan
• 10. Break-Even and Debt Service
• 11. Investment Analysis
• 12. The Finance Rate Decides This Project
• 13. Risk Analysis
• 14. Implementation Roadmap
• 15. Key Performance Indicators
• 16. Key Assumptions
• 17. Conclusion and Recommendation
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital and Cost Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

9.1 Basis of preparation

▪ All figures are in Nigerian Naira and exclude VAT.

▪ Revenue is built from hectares, yield, milling recovery and price per kilogram. It is not a growth rate applied to an assumed base.

▪ Production costs are built per hectare per crop from current input prices, and multiplied by two crops a year.

▪ Prices escalate at 11.5% a year and input costs at 13.5%. Input costs are assumed to rise faster than output prices, which is the pattern Nigerian farmers have experienced.

▪ Depreciation is straight-line over asset lives from 6 to 20 years, giving a charge of ₦58 916 667 a year.

▪ Interest is charged on the outstanding balance. With a two-year capital moratorium no principal is repaid before Year 3, so Year 3 interest is charged on the full ₦713 653 000.

▪ Companies income tax is 30%, with an assumed three-year agricultural relief period, after which the Year 1 assessed loss is set off before tax is charged.

▪ The ₦60 000 000 grant is credited to shareholders’ funds as a capital contribution at inception rather than released to income, so it does not flatter EBITDA in any year.

▪ Pre-operational costs of ₦54 000 000 are charged against reserves at day zero and are reflected in the opening balance sheet rather than in the Year 1 income statement.

▪ Working capital assumes 30 debtor days, 21 creditor days and 45 days of inventory, with paddy purchases paid within seven days of delivery.

▪ No revenue is assumed from land appreciation, carbon credits, or any activity not described in Section 2.

9.2 Revenue build

9.3 Projected income statement

The pattern is characteristic of a capital-intensive agricultural venture with a long establishment period: a punishing first year at 60 per cent of area and 4.30 tonnes per hectare, then rapidly improving margin as area and yield both rise against a fixed cost base that grows only with inflation. Between Year 1 and Year 3 revenue rises 175 per cent while total operating costs rise 98 per cent.

9.4 Projected cash flow statement

Opening cash after capital expenditure, capitalised land and outgrower costs, and the pre-operational charge is ₦307 653 000. Cash generated from operations is negative ₦120 471 000 in Year 1 as the working capital cycle builds alongside the loss, turns positive in Year 2, and reaches ₦226 018 000 by Year 5. Closing cash never falls below ₦187 189 860, and the two-year moratorium is what makes that true: had capital been repayable from Year 1 the position would be materially tighter.

9.5 Projected balance sheet

Property, plant and equipment falls from ₦623 083 333 to ₦387 416 665 across the projection as depreciation of ₦58 916 667 a year runs against no replacement capital in the first five years. Total equity opens at ₦326 000 000 — ₦320 000 000 of promoter equity plus the ₦60 000 000 grant, less the ₦54 000 000 pre-operational charge — falls to ₦193 832 963 after the Year 1 loss, and recovers to ₦728 832 963 by Year 5. The Year 5 current portion of term debt is ₦122 844 640, representing the Year 6 amortisation on a facility with three years still to run.

9.6 Working capital and the cash cycle

Net working capital rises from ₦140 million in Year 1 to ₦283 million by Year 5, absorbing cash in every year of the projection. Two features of the rice cycle drive it. Land preparation begins roughly five months before the first bag is sold, so a full production cycle must be funded before any revenue arrives. And paddy is bought from outgrowers in a short harvest window, in cash, within seven days of delivery, while the resulting rice is sold across the following months.