ReclaimHub — Projected Cash Flow & Debt Service
The projected cash flow and debt service and the debt-service-cover profile underpinning ReclaimHub.
Section 20 · Business Plan
Projected Cash Flow & Debt Service
The projected cash flow and debt service and the debt-service-cover profile underpinning ReclaimHub.
Cash remains positive throughout because equity is front-loaded and
the warehouse facility funds the bulk of book growth. Debt-service
coverage, however, is the plan’s key credit weakness in the ramp
years.
| Line item (R m) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA | (40) | 95 | 420 | 1,050 | 2,100 |
| Tax paid | -0 | -0 | (8) | (148) | (423) |
| Change in working capital | (27) | (59) | (117) | (207) | (326) |
| Capital expenditure | (205) | (196) | (199) | (217) | (343) |
| Equity in book growth | (30) | (73) | (135) | (288) | (425) |
| Equity drawdown | 900 | 500 | 0 | 0 | 0 |
| Term debt (net of repay) | 600 | 280 | (200) | (200) | (200) |
| Net interest | (75) | (140) | (165) | (221) | (332) |
| Closing cash | 1,123 | 1,532 | 1,127 | 896 | 947 |
20.1 Working capital & cash conversion
The business ties up capital in two places: retail inventory and the
pawn loan book. Both scale with revenue, and both are partly
self-funding — inventory through supplier payables, the book through the
warehouse facility — which is why the equity requirement is far smaller
than the gross assets deployed. The table below isolates the
equity-funded working-capital drag.
| Line item (R m) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Inventory (period-end) | 40 | 122 | 288 | 576 | 1,026 |
| Trade payables (period-end) | 13 | 37 | 85 | 166 | 290 |
| Increase in inventory | (40) | (83) | (166) | (288) | (450) |
| Increase in payables | 13 | 24 | 48 | 81 | 124 |
| Equity funding of book growth | (30) | (73) | (135) | (288) | (425) |
| Net equity-funded WC & book | (57) | (131) | (252) | (495) | (751) |
The key insight for a lender is that the warehouse facility does the
heavy lifting on the book, so the equity-funded portion of book growth
is only 25% of the gross increase. Combined with payables offsetting
inventory, the net equity call for working capital and the book is a
fraction of the R3.8bn book — which is precisely why the plan is
fundable with R1.4bn of equity, provided the warehouse facility
exists.
20.2 Debt-service coverage
Base-case DSCR on the corporate term debt is -0.9x, 0.1x, 0.7x, 1.4x,
2.2x across Years 1–5. It is below 1.0x in Years 1–3 — and below 1.0x
through Year 4 in the downside — because term-debt amortisation begins
after the one-year grace while the business is still net loss-making.
Cash does not run out (the equity buffer covers it), but a lender
relying on operating cash flow to service term debt is not covered until
Year 4.
shortfall
The coverage gap is a structuring problem with structuring solutions:
(1) extend the term-debt grace period to 24–30 months so amortisation
begins only once EBITDA is firmly positive; (2) fund a debt-service
reserve account of 6–12 months’ service at close; (3) sequence equity
drawdown ahead of debt so the balance sheet is equity-heavy through the
loss ramp; (4) consider a cash-sweep rather than fixed amortisation,
tying repayment to actual cash generation. With these in place, the
effective coverage profile is materially stronger than the
fixed-amortisation DSCR shown above.
Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of ReclaimHub Retail Group (Pty) Ltd.