North West Egg Sales Business Plan — Debt Serviceability and Break-Even
Debt service cover against the 1.20x covenant, and a break-even egg price only 8% below the planned realisation.
Section 29 of 31
Debt Serviceability and Break-Even
Jump to section
- 0. Executive Summary
- 1. Investment Thesis
- 2. Company Overview
- 3. Location
- 4. Problem and Value Proposition
- 5. Products and Pricing
- 6. Industry Analysis
- 7. Market Sizing
- 8. Customers and Channels
- 9. Competitive Landscape
- 10. Competitive Positioning
- 11. Business Model and Unit Economics
- 12. Go-to-Market Strategy
- 13. Operating Model
- 14. Farm Infrastructure and Capital Expenditure
- 15. Biosecurity and Animal Health
- 16. Management and Organisation
- 17. Strategic Plan
- 18. SWOT Analysis
- 19. Risk Analysis
- 20. ESG and Sustainability
- 21. Implementation Roadmap
- 22. Financial Plan: Key Assumptions
- 23. Financial Plan: Revenue Build
- 24. Financial Plan: Projected Income Statement
- 25. Financial Plan: Projected Cash Flow
- 26. Financial Plan: Projected Balance Sheet
- 27. Funding Requirement and Structure
- 28. Debt Serviceability and Break-Even
- 29. Returns, Scenarios and Sensitivity
- 30. Investment Case and Next Steps
Debt is serviceable in the base case, but the break-even egg price is only 8% below plan: the cushion is real and thin
Debt service cover ratio (covenant 1.20x)
| Category | DSCR, reserve-smoothed | DSCR, raw cash basis |
|---|---|---|
| Y2 | 1.53 | 1.32 |
| Y3 | 1.46 | 1.68 |
| Y4 | 1.24 | 1.02 |
| Y5 | 1.55 | 1.79 |
Year 3 break-even egg price (R per dozen)
| Category | R per dozen |
|---|---|
| EBITDA break-even | 20.87 |
| Pre-tax profit break-even | 25.06 |
| Debt-service break-even | 25.2 |
| Planned realised price | 27.29 |
Break-even, Year 3
| Measure | Value | ||||
|---|---|---|---|---|---|
| Income per dozen | R29.44 | ||||
| Variable cost per dozen\* | R2.09 | ||||
| Contribution per dozen | R27.34 | ||||
| Flock and fixed costs | R36.3m | ||||
| Break-even volume | 1.33m doz | ||||
| Break-even hen-day | 78% | ||||
| Margin of safety | 8% | ||||
| First EBITDA-positive month | Month 2 | ||||
| Cumulative EBITDA positive | Month 6 | ||||
| Debt metrics | Y1 | Y2 | Y3 | Y4 | Y5 |
| Debt service (R m) | 3.0 | 5.4 | 5.4 | 5.4 | 5.4 |
| Interest cover (EBITDA / interest) | 1.2x | 2.7x | 3.2x | 3.3x | 4.5x |
| Debt / EBITDA | 9.0x | 3.1x | 2.6x | 2.5x | 1.8x |
| Net debt / EBITDA | 7.8x | 2.4x | 1.7x | 1.6x | 0.7x |
| Closing debt (R m) | 28.5 | 26.3 | 23.8 | 21.0 | 17.8 |
*Packaging and delivery only. Once hens are housed, feed and flock costs behave as fixed, which is why lay rate matters so much.
Year 1 debt service is interest only. Raw Year 4 DSCR of 1.02x reflects three flock purchases in one year, met from the reserve.