Mainstreet Brick Business Plan — Key Assumptions
Every volume, price, cost, capital and funding assumption behind the model, stated so a funder can test each one independently.
Key Assumptions
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. The Unit Economics of Brick Making
- 3. Market Analysis
- 4. Products and Positioning
- 5. SWOT and Competitive Position
- 6. Site, Plant and Production
- 7. Route to Market and Sales Strategy
- 8. Regulatory, Environmental and Quality Compliance
- 9. Management and Organisation
- 10. Capital Requirement and Funding
- 11. Financial Projections
- 12. Break-Even Analysis
- 13. Debt Service and Working Capital
- 14. Investment Returns
- 15. Sensitivity and Scenario Analysis
- 16. Value Creation Levers
- 17. Risk Management
- 18. Implementation Timeline
- 19. Conditions for Success and Exit Options
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Depreciation Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 21.1 Volume, price and margin
- 21.2 Cost, capital and funding
21.1 Volume, price and margin
|
Assumption |
Year 1 |
Year 5 |
Basis |
|---|---|---|---|
|
Installed capacity |
1 345 000 units a month |
1 345 000 units a month |
Two shifts on a semi-automatic static hydraulic press |
|
Capacity utilisation |
66.0% |
96.0% |
Below cash break-even in Year 1 by design |
|
Units produced |
10.65 million |
15.49 million |
Across four products at the modelled mix |
|
Breakage and rejects |
3.0% of production |
3.0% of production |
Material consumed, no sale realised |
|
Stock brick price |
R1.85 |
R2.29 |
Ex-works; escalated 5.5% a year |
|
M140 block price |
R8.60 |
R10.66 |
Ex-works; escalated 5.5% a year |
|
Cement price escalation |
7.5% a year |
7.5% a year |
Two points above the selling price escalation |
|
Aggregate escalation |
6.5% a year |
6.5% a year |
Delivered pricing |
|
Gross margin |
32.8% |
29.2% |
Compresses 3.6 points on the escalation spread |
|
Cement as a share of revenue |
28.2% |
29.8% |
The single largest controllable input |
|
Bad debt provision |
1.5% of revenue |
1.5% of revenue |
A deliberate charge against contractor default |
21.2 Cost, capital and funding
|
Assumption |
Value |
Basis |
|---|---|---|
|
Operating costs, Year 1 |
R9.60 million |
82.7% of Year 1 gross profit; ten line items detailed in Appendix B.3 |
|
Salaries and wages |
R3.48 million escalating at 6.5% |
Approximately 34 permanent positions at full production |
|
Electricity and utilities |
R1.32 million escalating at 9.0% |
Three-phase supply for press, mixer and compressors |
|
Delivery and vehicle running |
R1.56 million escalating at 7.5% |
An 8-tonne truck with crane; the 100 km radius constraint |
|
Capital budget |
R18.41 million |
Plant, mobile equipment, yard, professional fees, inventory and working capital |
|
Committed working capital facility |
R1.80 million at 12.5% |
Beyond the capital budget; total funding R20.21 million |
|
Depreciation |
R1 506 400 a year |
10-year straight line on R15.06 million of plant and equipment |
|
Equity |
R6.30 million |
31.2% of total funding; ordinary shares |
|
Development finance |
R8.50 million at 11.5% |
7-year term with a twelve-month capital moratorium |
|
Equipment finance |
R3.61 million at 13.0% |
5-year amortising, secured on plant and vehicles |
|
Debtor days |
40 days |
One day is R174 000 at Year 5 revenue |
|
Creditor days |
35 days |
Trade payables against materials and operating costs |
|
Raw material stock |
25 days |
Cement and aggregate on hand |
|
Corporate tax |
27% |
Year 1 assessed loss carried forward and set off in Years 2 and 3 |
|
Discount rates |
16.5% project, 20.0% equity |
Start-up manufacturing risk in a cyclical sector |
|
Exit multiple |
3.5 times Year 5 EBITDA |
The project clears its hurdle only at 4.0 times and above |