Executive Summary

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. How Fuel Retail Economics Actually Work
• 3. The Business and Its Revenue Streams
• 4. Market and Site Analysis
• 5. SWOT and Competitive Position
• 6. Regulatory Pathway and Licensing
• 7. Operations Plan
• 8. Management and Organisation
• 9. Capital Requirement and Funding Structure
• 10. Financial Projections
• 11. Break-Even Analysis
• 12. Debt Service and Working Capital
• 13. Investment Returns
• 14. Sensitivity and Scenario Analysis
• 15. Risk Management
• 16. Implementation Timeline
• 17. Exit Options for Investors
• 18. Key Performance Indicators
• 19. Key Assumptions
• 20. 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

1.1 The proposition

Mainstreet Junction Service Station is a proposed greenfield fuel retail development on a high-traffic arterial corridor in Gauteng: an eight-pump forecourt with sixteen nozzles, a 450 m² convenience store, a sublet quick-service restaurant, an automatic car wash and a 60 kWp solar installation. The project requires R44.5 million in total capital, of which R14.5 million is sought as equity, alongside R24.0 million of senior bank debt and R6.0 million of oil company and equipment facilities.

On the base case the site reaches 440 000 litres a month by Year 3 and 480 000 by Year 5, generating Year 5 revenue of R213.6 million, EBITDA of R14.02 million and after-tax profit of R6.95 million. Including a terminal value struck at 4.0 times exit EBITDA, the project returns an unlevered internal rate of return of 21.9 per cent and an equity return of 34.6 per cent, with a net present value of R10.5 million at a 15.5 per cent discount rate.

1.2 Three findings an investor must weigh before anything else

• Fuel generates 83 per cent of turnover but only 63 per cent of gross profit — and none of the upside. The petrol retail margin is regulated in cents per litre, currently around R3.15, and does not rise when the pump price rises. Revenue of R176.0 million in Year 3 converts to just R26.2 million of gross profit, a blended margin of 14.9 per cent. Any investor who anchors on turnover will badly misprice this business.
• The margin of safety on throughput is thin in the opening year. The site must pump 317 638 litres a month in Year 1 to cover its operating costs and debt service, against a planned 340 000 — a buffer of 6.6 per cent. A 15 per cent shortfall against the traffic study takes the project return to 13.0 per cent, below the 15.5 per cent hurdle. The traffic count is not a formality; it is the investment decision.
• Year 1 does not service its own debt on a fully amortising basis. Modelled Year 1 EBITDA of R5.32 million covers debt service 1.19 times, and that is only after structuring a twelve-month capital moratorium on the senior facility. Without the moratorium Year 1 cover would be 0.91 times — a covenant breach in the first year of trading. The funding structure in Section 9 is built around this, and the plan carries a R1.4 million working capital buffer for the ramp.

1.3 Financial summary

1.4 Investment conclusion