Mainstreet Junction Business Plan

Investor-ready petrol station business plan: R44.5m project, 8 pumps and 450 m2 convenience store on a Gauteng corridor, 21.9% project IRR.

Mainstreet Junction Service Station — forecourt, canopy and convenience store

Business Plan & Investment Proposal · Gauteng arterial corridor

Petrol Filling Station Business Plan — South Africa

Mainstreet Junction Service Station · A Volume Business Wearing A Revenue Business’s Clothing.

A licensed freehold forecourt, convenience retail and quick-service destination on a Gauteng
arterial corridor — 8 pumps and 16 nozzles, a 450 m² convenience store, an automatic car wash and 60 kWp
of solar, moving 340,000 litres a month rising to 480,000. Total project cost of R44.5 million: R14.5 million
equity, R24.0 million senior bank debt at 12.0 per cent and a R6.0 million oil company facility at
10.5 per cent.

R44.5mTotal project cost

480 000 LA month by Year 5

R213.6mYear 5 revenue

21.9%Project IRR

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The plan describes itself as a volume business wearing a revenue business’s
clothing, and the numbers bear that out precisely. Mainstreet Junction turns over R213.6 million by Year 5 and
earns R14.02 million of EBITDA on it — a 6.6 per cent margin, on a gross margin of 15.0 per cent
that barely moves across five years because the fuel margin is set by regulation rather than by the operator. What
the operator actually controls is throughput, which rises from 340,000 litres a month to 480,000, and the non-fuel
lines: a 450 m² convenience store, quick-service food and an automatic car wash contributing
R37.7 million by Year 5. Cash break-even at 324,000 litres a month against 340,000 at opening leaves an
unusually narrow margin in Year 1, which is also when debt service cover is thinnest at 1.19 times.

The plan at a glance

Six measures that determine whether this forecourt and its funding stand up.

R44.5mTotal project costR14.5m equity at 32.6%, R24.0m senior bank debt at 12.0% and a R6.0m oil company and equipment facility at 10.5%.

15.0%Gross margin, held flatOn R213.6m of Year 5 revenue. The fuel margin is regulated, so this ratio barely moves however well the site trades.

324 000 LCash break-even a monthAgainst 340,000 litres at opening. The site must very nearly hit its opening volume assumption from day one.

R37.7mYear 5 non-fuel revenueShop, quick-service food and car wash. Small against turnover, but it is where the recoverable margin sits.

21.9% / 34.6%Project and equity IRRThe gap between them is gearing. The project return is the more conservative measure of the asset.

1.19xYear 1 debt service coverRising to 2.30x by Year 5. The first year is the tight one, and it coincides with the volume ramp.

Why turnover misleads here

What the business turns over against what it actually earns — the gap a regulated fuel margin creates.

R213.6mYear 5 revenueA figure that makes the business look like a large enterprise. Turnover is the least informative number on a forecourt’s income statement.

produces only

R14.02mYear 5 EBITDAA 6.6% margin on a 15.0% gross margin that regulation holds flat. This is a volume business, and the plan says so on its own cover.

Five years of trading

Revenue and EBITDA on the base case. Monthly throughput and the shop basket are the two assumptions that matter most, and both are stressed in Section 14.

Revenue build, and the litres behind it

Revenue is litres multiplied by a regulated price. Throughput rises from 340,000 litres a month to 480,000, and the shop and car wash add R37.7m of the Year 5 total.

Year 1

R123.4m · 340 000 L/m

Year 2

R152.1m · 400 000 L/m

Year 3

R176.0m · 440 000 L/m

Year 4

R196.1m · 464 900 L/m

Year 5

R213.6m · 480 000 L/m

EBITDA and margin — note the scale against revenue

EBITDA reaches R14.02m on R213.6m of revenue. The margin never exceeds 6.6%, which is what a regulated fuel margin does to a business that looks enormous on turnover.

Year 1

R5.32m · 4.3%

Year 2

R7.91m · 5.2%

Year 3

R10.42m · 5.9%

Year 4

R12.39m · 6.3%

Year 5

R14.02m · 6.6%

Why this plan works

Turnover is the wrong measureR213.6 million of revenue produces R14.02 million of EBITDA. On a forecourt the regulated fuel margin fixes the gross percentage, so revenue tells a funder almost nothing about the size of the business.

Litres are the real unitEverything scales with throughput: 340,000 litres a month at opening rising to 480,000. Cash break-even sits at 324,000, which leaves very little room in the first year.

The shop is where margin is recoverableFuel margin is set by regulation; convenience retail, quick-service food and the car wash are not. R37.7 million of Year 5 non-fuel revenue is small against turnover and large against profit.

Licensing is the gating itemSite and retail licences under the Petroleum Products Act, plus environmental authorisation, determine when construction can start. No amount of capital shortens that path.

Year 1 is the tight yearDebt service cover of 1.19x coincides with the volume ramp and a marginally negative profit after tax. Cover reaches 2.30x by Year 5, but the risk is concentrated at the front.

Financial snapshot

Four charts from the plan. The full set of twenty-four appears throughout the sections below.

Figure 3. Why a rising pump price is not good news.

Figure 5. Gross profit by stream, Years 1 to 5.

Figure 17. Throughput against break-even thresholds.

Figure 18. EBITDA, debt service and cover ratio.

Twenty-two sections and five appendices. Every page carries full navigation, a section outline and links to the sections either side of it.

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Important Notice and Basis of PreparationBasis of preparation, data sources, forward-looking statement caveats and confidentiality terms. Please read first.

Appendices

Confidential. This document has been prepared in support of a funding proposal by
Mainstreet Junction Service Station and may not be reproduced or distributed without written consent. Projections are forward-looking
statements based on the assumptions registered in Appendix C and are not guarantees of future performance.