Sakhile Construction Business Plan

Investor-ready general building contractor business plan: R8.97m deployed, CIDB Grade 1GB to 6GB, Year 5 turnover R52.00m.

Sakhile Construction — general building contractor site team, South Africa

Business Plan & Funding Proposal · South Africa

General Construction Business — South Africa

Sakhile Construction · A Working Capital Business That Happens To Build Things.

A general building contractor in South Africa, climbing the CIDB grading ladder from
Grade 1GB in Year 1 to Grade 6GB by Year 5 and running eighteen contracts a year at R52.00 million of
turnover. R8.97 million of capital deployed — R3.20 million founder equity and R6.50 million growth
equity at Year 3, alongside R9.40 million of asset finance and a R7.50 million invoice discounting
facility.

R8.97mCapital deployed

1GB → 6GBCIDB grade

R52.0mYear 5 turnover

66 daysCash conversion cycle

Read the executive summary →

The plan names itself accurately: a working capital business that happens to build
things. Sakhile climbs the CIDB ladder from Grade 1GB to 6GB over five years, which lifts the single-contract limit
from R0.5 million to R13.0 million and takes turnover to R52.00 million. But the number that governs
the outcome is not the margin — it is the R9.62 million of debtors, retention and work in progress locked up
by Year 5, close to three times that year’s EBITDA, on a 66-day cash conversion cycle. Construction consumes
cash as it grows, and this plan is unusually direct about the consequence: profit after tax is negative until Year 5
and operating cash turns positive only in that final year. What is being funded is the gap between doing the work and
being paid for it.

The plan at a glance

Six measures that determine whether this contractor and its funding stand up.

R8.97mCapital deployed over five yearsR3.20m founder equity and R6.50m growth equity at Year 3, alongside R9.40m asset finance and a R7.50m discounting facility.

1GB → 6GBCIDB grade, Year 1 to Year 5Each grade lifts the single-contract limit from R0.5 million to R13.0 million, and grade is what decides which work may be bid.

18.5%Working capital as a share of turnoverR9.62 million tied up at Year 5. This is the number that defines the business, not the margin.

66 daysCash conversion cycleThe gap between paying for work and being paid for it — funded by the discounting facility rather than by profit.

6.8%Year 5 EBITDA marginOn R52.00 million of turnover. Construction margins are thin by nature; volume and cash discipline do the work.

Year 5Operating cash turns positiveProfit after tax is negative until Year 5. Growth consumes cash in this industry, and the plan says so plainly.

Where the money actually goes

What the building work earns against what the payment cycle ties up — and why the second number is the business.

R3.52mYear 5 EBITDAWhat the building work earns at 6.8% of turnover once the company is operating at Grade 6GB.

against

R9.62mLocked in working capitalDebtors, retention and work in progress at Year 5 — nearly three times the year’s EBITDA. Funding that gap is the actual business.

Five years of trading

Turnover and EBITDA on the base case. Gross margin and debtor days are the two assumptions that matter most, and both are stressed in Section 16.

Turnover and the grading ladder

Turnover is a function of CIDB grade. Each step lifts the single-contract limit — from R0.5m at 1GB to R13.0m at 6GB — and the number of contracts run rises from 6 to 18.

Year 1 1GB

R4.20m

Year 2 3GB

R9.50m

Year 3 4GB

R19.00m

Year 4 5GB

R34.00m

Year 5 6GB

R52.00m

EBITDA and margin, Year 3 onward

Years 1 and 2 run EBITDA deficits of R206,000 and R48,000. Even after EBITDA turns, profit after tax stays negative until Year 5 — construction margins are thin and financing them is not free.

Year 3

R0.55m · 2.9%

Year 4

R1.84m · 5.4%

Year 5

R3.52m · 6.8%

Why this plan works

The grade is the licence to bidCIDB grading decides which contracts a builder may tender for at all. Moving from 1GB to 6GB lifts the single-contract ceiling from R0.5 million to R13.0 million, and each step has to be earned in capital and completed work.

Growth consumes cash before it produces itWorking capital rises to R9.62 million by Year 5 — nearly three times that year’s EBITDA. A contractor that wins more work without funding the gap fails while its order book is full.

Retention is capital you have earned but cannot useMoney held back on every contract, released long after the work is done. It sits on the balance sheet as an asset and behaves like an interest-free loan to the client.

Private work first, deliberatelyPrivate clients pay faster than public ones. The plan builds a track record and a cash base on private contracts before taking on the payment cycle that comes with government work.

Thin margins make estimating the whole disciplineGross margin runs 15.8% to 18.7% and EBITDA margin reaches only 6.8%. At those levels a mispriced tender or an unrecovered variation removes the profit on a contract entirely.

Financial snapshot

Four charts from the plan. The full set of twenty-four appears throughout the sections below.

Figure 7. The working capital bridge at Year 5.

Figure 9. The cash conversion cycle and its components.

Figure 14. Turnover against the cost stack.

Figure 16. Cash flow — operating cash turns positive only in Year 5.

Twenty-two sections and five appendices. Every page carries full navigation, a section outline and links to the sections either side of it.

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Important NoticeBasis of preparation, data sources, forward-looking statement caveats and confidentiality terms. Please read first.

Appendices

Confidential. This document has been prepared in support of a funding proposal by
Sakhile Construction and may not be reproduced or distributed without written consent. Projections are forward-looking
statements based on the assumptions registered in Appendix C and are not guarantees of future performance.