SA Premier Poultry Business Plan — Financial Plan

Five-year projections with full income statement, cash flow and balance sheet: revenue to R282.95m and EBITDA to R38.87m.

Financial Plan

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7.1 Basis of preparation
7.2 Unit economics
7.3 Income statement
7.4 Fixed costs and capital
7.5 Working capital
7.6 Cash flow
7.7 Balance sheet
7.8 Funding

7.1 Basis of preparation

▪ All figures are in South African Rand and exclude VAT.

▪ Revenue is built from birds processed, dressed yield, product mix and price per kilogram, plus by-product recovery and contract slaughter fees. It is not a growth rate applied to an assumed base.

▪ Live bird purchases are modelled at R24.50 per kilogram live, escalating at 6.0% a year. Selling prices escalate at 5.8% — marginally slower, so the spread compresses gently across the projection.

▪ Processing costs are built per bird and escalate at 6.2%. Fixed costs escalate at 5.5%.

▪ The second shift is added in Year 4, adding R4 650 000 of annual fixed cost and R14 200 000 of capital expenditure.

▪ Depreciation is straight-line over asset lives of 7 to 20 years, giving R5 882 381 a year on a single shift and R7 065 714 once the second-shift capital is in service.

▪ Tax is at 27% with assessed losses carried forward, subject to the section 20 limitation capping the set-off at the higher of R1 million or 80% of taxable income.

▪ Working capital assumes 38 debtor days, 21 days of stock and 7 days to pay growers.

7.2 Unit economics

Per bird processed, own account	Amount	Note
Dressed carcass revenue	R70.41	1.423 kg at R49.48/kg
By-product revenue	R5.22	Feet, heads, giblets and rendered meal
Total revenue per bird	R75.63
Live bird purchase	(R47.77)	1.95 kg at R24.50/kg — 63.2% of revenue
Inbound transport and crating	(R1.35)
Gross margin per bird	R26.53	35.1% of revenue
Processing cost	(R7.65)	See Section 6.3
Contribution per bird	R18.88	25.0% of revenue
Contract slaughter contribution	R2.68	R9.60 fee less R6.92 cost

7.3 Income statement

R	Year 1	Year 2	Year 3	Year 4	Year 5
Dressed product revenue	53 023 933	92 292 432	124 450 011	185 685 799	256 285 228
By-product revenue	3 931 168	6 842 516	9 226 663	13 766 654	19 000 861
Contract slaughter fees	4 429 431	4 891 879	4 784 175	6 327 072	7 667 721
Total revenue	61 384 533	104 026 827	138 460 849	205 779 525	282 953 809
Live bird purchases	(36 981 740)	(64 494 727)	(87 135 638)	(130 263 386)	(180 139 970)
Live birds as a share of revenue	60.2%	62.0%	62.9%	63.3%	63.7%
Processing costs	(8 953 715)	(13 603 489)	(17 095 780)	(25 012 506)	(33 873 223)
Fixed cash costs	(19 623 884)	(20 703 197)	(21 841 873)	(28 503 398)	(30 071 085)
EBITDA	(4 174 807)	5 225 414	12 387 558	22 000 234	38 869 531
EBITDA margin	-6.8%	5.0%	8.9%	10.7%	13.7%
Pre-opening costs, non-recurring	(5 420 000)	—	—	—	—
Depreciation	(5 882 381)	(5 882 381)	(5 882 381)	(7 065 714)	(7 065 714)
Operating profit / (loss)	(15 477 188)	(656 967)	6 505 177	14 934 520	31 803 817
Finance costs	(5 762 072)	(5 762 072)	(5 762 072)	(5 034 432)	(4 226 534)
Profit / (loss) before tax	(21 239 260)	(6 419 039)	743 105	9 900 088	27 577 283
Taxation	—	—	—	(534 605)	(2 317 183)
Profit / (loss) after tax	(21 239 260)	(6 419 039)	743 105	9 365 483	25 260 100
Cumulative profit / (deficit)	(21 239 260)	(27 658 299)	(26 915 194)	(17 549 711)	7 710 389

Figure 13. Cost structure as a percentage of revenue. Live birds are close to two-thirds of every rand of sales.

Losses of R21 239 260 in Year 1 and R6 419 039 in Year 2 accumulate to R27 658 299 of assessed loss. Under the section 20 limitation the set-off in any year is capped at the higher of R1 million or 80 per cent of taxable income, so the Year 3 profit before tax of R743 105 is sheltered in full. Year 4 profit before tax of R9 900 088 is sheltered to R7 920 070, leaving R1 980 018 taxable and a charge of R534 605. Year 5 exhausts the remaining loss and carries a charge of R2 317 183, giving a total of R2 851 788 across the projection.

7.4 Fixed costs and capital

Fixed cost	Annual	Note
Salaries and wages, excluding line operators	7 403 884	Line operators are costed per bird
Depreciation	5 882 381	Non-cash; added back in EBITDA
Property lease and municipal rates	3 060 000
Refrigeration and plant maintenance contract	2 180 000
Standby generation and utilities base load	1 320 000
Insurance — assets, product liability, business interruption	1 280 000
Security, cleaning and administration	880 000
Food safety certification, laboratory and audits	820 000
Fleet standing costs and licensing	780 000
Marketing, trade support and listings	720 000
Professional fees, audit and compliance	620 000
Effluent compliance monitoring and permits	560 000	Monitoring, permits and compliance testing
Total fixed costs	25 506 265	of which cash R19 623 884

Capital expenditure	Amount	Life
Processing line — stunner, scalder, plucker, evisceration, chiller	19 600 000	12 years
Blast freezer, cold store and chilled holding	13 200 000	15 years
Building, civil works and food-grade finishes	12 800 000	20 years
Effluent treatment plant and water reticulation	7 100 000	15 years
Portioning, deboning and packaging equipment	6 400 000	10 years
Refrigerated distribution vehicles, 5 units	4 800 000	7 years
Standby generation and electrical reticulation	2 900 000	12 years
Live bird reception, lairage and crate wash	2 100 000	12 years
Professional fees, registration and commissioning	1 900 000	10 years
Rendering and by-product handling	1 450 000	12 years
Laboratory, quality and traceability systems	1 180 000	8 years
Offices, ablutions, change rooms and hygiene barriers	1 100 000	20 years
Total capital expenditure	74 530 000
Second shift capital, Year 4	14 200 000	Funded from operating cash flow

The processing line, cold store and building together are R45 600 000 — 61 per cent of the capital programme — and all three are sized for the second shift from the outset. That is the decision that makes the Year 4 step economic: R14 200 000 of incremental capital buys 6 000 additional birds a day against an original R74 530 000.

7.5 Working capital

Figure 14. Working capital employed against the committed facility.

R	Year 1	Year 2	Year 3	Year 4	Year 5
Trade receivables, 38 days	6 390 718	10 830 190	14 415 102	21 423 622	29 458 205
Inventory, 21 days	2 642 862	4 493 322	5 996 876	8 933 681	12 313 088
Less: trade payables, 7 days	(709 239)	(1 236 885)	(1 671 094)	(2 498 202)	(3 454 739)
Working capital employed	8 324 341	14 086 627	18 740 884	27 859 101	38 316 553
Committed facility	24 000 000	24 000 000	24 000 000	24 000 000	24 000 000
Headroom / (shortfall)	15 675 659	9 913 373	5 259 116	(3 859 101)	(14 316 553)
Facility drawn at year end	971 220	7 270 164	11 895 848	24 000 000	15 371 510

7.6 Cash flow

R	Year 1	Year 2	Year 3	Year 4	Year 5
Profit / (loss) after tax	(21 239 260)	(6 419 039)	743 105	9 365 483	25 260 100
Add back: depreciation	5 882 381	5 882 381	5 882 381	7 065 714	7 065 714
Add back: pre-opening costs funded at day zero	5 420 000	—	—	—	—
Movement in working capital	(8 324 341)	(5 762 286)	(4 654 257)	(9 118 217)	(10 457 452)
Cash generated from operations	(18 261 220)	(6 298 944)	1 971 229	7 312 980	21 868 362
Capital deployed	— (funded at close)	—	—	(14 200 000)	—
Debt capital repaid	— (moratorium)	— (moratorium)	(6 596 913)	(7 324 553)	(8 132 451)
Net movement before facility	(18 261 220)	(6 298 944)	(4 625 684)	(14 211 573)	13 735 911
Facility drawn / (repaid)	971 220	6 298 944	4 625 684	12 104 152	(8 628 490)
Closing cash	3 000 000	3 000 000	3 000 000	892 579	5 999 999

Figure 15. Cash flow — two years of consumption before the plant repays.

Opening cash after the capital programme and pre-opening spend is R20 290 000. Operations consume R18 261 220 in Year 1 and R6 298 944 in Year 2, turn to R1 971 229 in Year 3 and reach R21 868 362 by Year 5. The facility is drawn progressively, peaking at the full R24 000 000 in Year 4 when the second-shift capital and the working capital build coincide, and is partially repaid in Year 5.

7.7 Balance sheet

R, at year end	Year 1	Year 2	Year 3	Year 4	Year 5
Plant, line, cold store and vehicles, net of depreciation	68 647 619	62 765 238	56 882 857	64 017 143	56 951 429
Inventory	2 642 862	4 493 322	5 996 876	8 933 681	12 313 088
Trade receivables	6 390 718	10 830 190	14 415 102	21 423 622	29 458 205
Cash	3 000 000	3 000 000	3 000 000	892 579	5 999 999
Total assets	80 681 199	81 088 750	80 294 835	95 267 025	104 722 721
Share capital and quasi-equity	48 000 000	48 000 000	48 000 000	48 000 000	48 000 000
Retained earnings / (accumulated loss)	(21 239 260)	(27 658 299)	(26 915 194)	(17 549 711)	7 710 389
Total equity	26 760 740	20 341 701	21 084 806	30 450 289	55 710 389
Term facilities — non-current	52 240 000	45 643 087	38 318 534	30 186 083	21 159 062
Term facilities — current	0	6 596 913	7 324 553	8 132 451	9 027 021
Working capital facility drawn	971 220	7 270 164	11 895 848	24 000 000	15 371 510
Trade payables	709 239	1 236 885	1 671 094	2 498 202	3 454 739
Total liabilities	53 920 459	60 747 049	59 210 029	64 816 736	49 012 332
Total equity and liabilities	80 681 199	81 088 750	80 294 835	95 267 025	104 722 721

Figure 16. Balance sheet — asset composition.

Net book value of the plant declines from R68 647 619 to R56 951 429 as depreciation runs, stepping up in Year 4 when the second-shift capital is commissioned. Total equity falls from R48 000 000 at inception to a low of R20 341 701 at the end of Year 2 and recovers to R55 710 389 by Year 5. Gearing peaks at 74.6 per cent at the end of Year 2 and falls to 46.8 per cent by Year 5.

7.8 Funding

Source	Amount	Share	Terms
Equity	48 000 000	47.9%	Promoter and investor equity, first loss
DFI quasi-equity	24 240 000	24.2%	Subordinated; a food security and job creation mandate
Senior debt	28 000 000	27.9%	Eight years at 11.03% with a two-year capital moratorium
Total funding requirement	100 240 000	100.0%
Working capital facility	24 000 000		Committed at drawdown; fully drawn in Year 4

Use of funds	Amount	Share
Plant and equipment	74 530 000	74.4%
Working capital and pre-operational cost	25 710 000	25.6%
Total	100 240 000	100.0%

Seventy-two per cent of the structure is equity or quasi-equity. That proportion is not conservatism for its own sake: it is what makes a two-year capital moratorium and a Year 3 covenant start acceptable to a senior lender financing a plant that loses money for two years by design.

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Next section8. Break-Even and Debt Service