Financial Projections

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. A Note on the Name
• 3. The Market and Why Scale Is the Enemy
• 4. The Product Strategy
• 5. SWOT and Competitive Position
• 6. Route to Market
• 7. Unit Economics and Prime Cost
• 8. Returns: The Wholesale Bakery Tax
• 9. Energy
• 10. The Five-Year Build and Its Gates
• 11. Funding
• 12. People and Production
• 13. Food Safety and Compliance
• 14. Financial Projections
• 15. Break-Even
• 16. Sensitivity and Scenarios
• 17. Risk Management
• 18. Implementation Timeline
• 19. Returns
• 20. Key Performance Indicators
• 21. Key Assumptions
• 22. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

14.1 Basis of preparation

• All amounts are in nominal South African rand. Revenue is built from units baked per day across 306 trading days, the product mix and price by line, less returns at the rate shown.
• Prime cost — ingredients, packaging and labour — is modelled as a percentage of net revenue and falls from 69.1 per cent to 63.2 per cent. Energy, rent, distribution and maintenance are stated separately.
• R96 000 of opening ingredients and pre-opening payroll is a period cost and is charged to income in Year 1. The R128 000 working capital reserve funds opening trading and is carried as cash.
• Depreciation is charged on the capitalised element of capital expenditure, net of the R180 000 landlord installation allowance, over the useful lives of the fit-out, ovens, equipment and vehicles.
• Interest and capital derive from the facility-level schedules in Appendix C across seven instruments.
• Trade debtors are modelled at 32 days on the wholesale share of revenue only, because retail is cash on sale.
• Corporate income tax is applied at 27 per cent with assessed losses carried forward subject to the section 20 limitation. No tax arises within the projection.
• The balance sheet is derived rather than plugged; shareholders’ funds roll forward from the two equity subscriptions and retained earnings, and the closing cash position reconciles exactly to the cash flow statement.

14.2 Projected income statement

EBITDA turns positive in Year 2 at R64 000 and reaches R1.92 million in Year 5. Profit after tax arrives in Year 4 at R25 000 and reaches R751 000 in Year 5, after depreciation of R751 000 and interest of R417 000. Assessed losses of R1.73 million accumulate across Years 1 to 3 and shelter the Year 4 and Year 5 taxable profits entirely under the section 20 limitation, so no tax is payable and R958 000 of loss remains unutilised.

14.3 The cost base as a share of revenue

Overhead falls from 16.2 per cent of revenue to 8.1 per cent — a halving, and by far the largest single contributor to the margin improvement. Prime cost contributes 5.9 points and distribution 1.4. The three together are what take the EBITDA margin from minus 7.8 per cent to 11.2 per cent. Overhead is where the operating leverage lives, and it is also the line most easily destroyed by adding management ahead of volume.

14.4 Projected cash flow

Operating cash flow is negative in Years 1 and 2 and turns positive in Year 3 at R330 000, reaching R1.82 million in Year 5. Closing cash never falls below R309 000, which occurs at the end of Year 1 and is the tightest point in the plan. Cash peaks at R1.32 million in Year 3 after the growth equity subscription and is drawn down again by the Year 4 retail investment.

14.5 Projected balance sheet

Shareholders’ funds fall from R859 000 at the end of Year 1 to R300 000 at the end of Year 2 as accumulated losses erode the founder’s subscription, recover to R1.74 million on the Year 3 growth equity, and reach R2.51 million by Year 5. That dip is the honest shape of a start-up that loses money for three years, and it is the reason the growth equity is subscribed in Year 3 rather than raised as further debt: at the end of Year 2 the balance sheet would not support additional gearing.