Mainstreet Junction Business Plan — Financial Projections

Five-year projections: revenue to R213.6m and EBITDA to R14.02m, with fuel, shop, food and car wash reported separately.

Financial Projections

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10.1 Assumptions
10.2 Projected income statement
10.3 Projected cash flow statement
10.4 Projected balance sheet

10.1 Assumptions

Assumption	Value	Note
Opening throughput	340 000 litres a month	Ramping to 480 000 by Year 5
Petrol and diesel split	52% / 48%	Corridor site with light-commercial and taxi traffic
Petrol retail margin	R3.15 a litre	Regulated under the Regulatory Accounting System; escalated 5% a year
Diesel realised margin	R2.45 a litre	Unregulated at retail; discounted to fleet customers
Blended margin, Year 1	R2.814 a litre	Weighted at the product split above
Shop gross margin	27%	Forecourt convenience norm
Shop turnover growth	18% / 12% / 8% / 6%	Years 2 to 5, plus 5% price inflation
Operating cost escalation	6.5% to 9.0% a year	Wages 6.5%, utilities 9.0%, other 7.0% to 8.0%
Depreciation	R2 133 333 a year	15-year straight line on R32.0m, excluding land and working capital
Corporate tax	27%	Standard South African rate; Year 1 assessed loss carried forward
Discount rate	15.5% project, 18.0% equity	Project hurdle and equity hurdle respectively
Exit assumption	4.0 times Year 5 EBITDA	Conservative for a licensed freehold site with a quick-service tenant

10.2 Projected income statement

R’000	Year 1	Year 2	Year 3	Year 4	Year 5
Fuel revenue	102 506	126 624	146 252	162 290	175 901
Shop revenue	16 200	20 072	23 604	26 767	29 792
Car wash, services and QSR rental	4 740	5 426	6 185	7 024	7 950
Total revenue	123 446	152 123	176 041	196 081	213 643
Fuel gross profit	11 481	14 183	16 381	18 173	19 702
Shop gross profit	4 374	5 419	6 373	7 227	8 044
Car wash, services and QSR gross profit	2 602	2 979	3 396	3 856	4 365
Gross profit	18 543	22 631	26 160	29 224	32 020
Gross margin	15.0%	14.9%	14.9%	14.9%	15.0%
Operating costs	(13 219)	(14 722)	(15 741)	(16 831)	(17 997)
EBITDA	5 324	7 909	10 418	12 393	14 023
EBITDA margin	4.3%	5.2%	5.9%	6.3%	6.6%
Depreciation	(2 133)	(2 133)	(2 133)	(2 133)	(2 133)
Interest	(3 510)	(3 408)	(3 100)	(2 757)	(2 375)
Profit / (loss) before tax	(319)	2 368	5 185	7 503	9 515
Taxation	—	(553)	(1 400)	(2 026)	(2 569)
Profit / (loss) after tax	(319)	1 815	3 785	5 477	6 946
Net margin	-0.3%	1.2%	2.1%	2.8%	3.3%

Figure 14. Gross margin against operating costs, as a share of revenue.

Two observations. First, net margin never exceeds 3.3 per cent of revenue — which is exactly what South African fuel retailers report, and why industry bodies describe net margins of one to five per cent. Second, Year 1 is loss-making after depreciation and interest at minus R0.32 million, a normal outcome for a greenfield forecourt in its ramp year but one that must be funded rather than hoped away.

10.2b The Year 1 ramp

Quarter	Throughput, litres a month	Share of mature volume	What is happening
Months 1–3	260 000 to 300 000	54% to 63%	Awareness building; loyalty enrolment; the shop format establishing
Months 4–6	310 000 to 340 000	65% to 71%	Commuter routine forming; the quick-service tenant driving footfall
Months 7–9	345 000 to 370 000	72% to 77%	Fleet and light-commercial accounts opening on diesel
Months 10–12	375 000 to 400 000	78% to 83%	Approaching the Year 2 run rate; car wash bundling established
Year 1 average	340 000	71%	The modelled Year 1 figure is the average, not the exit rate

The distinction between the Year 1 average and the Year 1 exit rate matters for the break-even reading. Cash break-even in Year 1 is 317 638 litres a month, and the site is below that line for roughly the first five months of trading and above it thereafter. The working capital buffer of R1.4 million exists to fund precisely that period, and the debt service reserve exists because the first interest payment falls due before the site reaches the line.

10.3 Projected cash flow statement

R’000	Year 1	Year 2	Year 3	Year 4	Year 5
EBITDA	5 324	7 909	10 418	12 393	14 023
Movement in working capital	1 278	(370)	(320)	(261)	(223)
Taxation paid	—	(553)	(1 400)	(2 026)	(2 569)
Operating cash flow after tax	6 602	6 986	8 698	10 106	11 231
Interest paid	(3 510)	(3 408)	(3 100)	(2 757)	(2 375)
Capital repaid	(973)	(2 700)	(3 007)	(3 350)	(3 733)
Free cash flow to equity	2 119	879	2 591	3 999	5 123
Distributions to shareholders	—	—	(1 892)	(2 738)	(3 473)
Net movement in cash	2 119	879	698	1 260	1 650
Opening cash	1 400	3 519	4 398	5 096	6 357
Closing cash	3 519	4 398	5 096	6 357	8 007

Figure 15. Cash flow and free cash flow to equity.

Free cash flow to equity accumulates to R14.71 million across the five years against R14.5 million subscribed — a surplus of R211 000. In plain terms the equity is barely repaid from operations alone within the projection period, which is why Section 13 concludes that the terminal value rather than the trading cash flow is what the equity investor is actually buying.

10.4 Projected balance sheet

R’000, at year end	Year 1	Year 2	Year 3	Year 4	Year 5
Land, buildings and forecourt equipment	38 367	36 233	34 100	31 967	29 833
Fuel and shop inventory	2 177	2 691	3 126	3 493	3 819
Trade and other receivables	1 353	1 667	1 929	2 149	2 341
Cash and cash equivalents	3 519	4 398	5 096	6 357	8 007
Total assets	45 415	44 990	44 252	43 965	44 000
Share capital	14 500	14 500	14 500	14 500	14 500
Retained earnings less distributions	(319)	1 495	3 388	6 126	9 599
Total shareholders’ funds	14 181	15 995	17 888	20 626	24 099
Senior bank term debt	24 000	22 376	20 556	18 519	16 237
Oil company and equipment facility	5 027	3 952	2 764	1 451	—
Trade and other payables	2 208	2 667	3 044	3 369	3 664
Total liabilities	31 235	28 994	26 364	23 339	19 901
Total equity and liabilities	45 415	44 990	44 252	43 965	44 000

Figure 16. Balance sheet — asset composition.

Total assets are broadly flat across the projection at R44 million to R45 million: the depreciation charge on the forecourt and buildings runs at R2.13 million a year against cash accumulation of a similar order, so the balance sheet composition shifts from fixed assets to cash rather than growing. Shareholders’ funds rise from R14.18 million to R24.10 million as retained earnings accumulate net of the distributions permitted from Year 3.

Previous section9. Capital Requirement and Funding Structure

Next section11. Break-Even Analysis