Vela Footwear — Financial Plan & Assumptions
The financial plan and key assumptions — volumes and pricing by product line, the cost structure, capacity utilisation, the capital structure, tax and the macroeconomic inputs underpinning the projections.
Section 10 · Business Plan
Financial Plan & Assumptions
The financial plan and key assumptions — volumes and pricing by product line, the cost structure, capacity utilisation, the capital structure, tax and the macroeconomic inputs underpinning the projections.
Every figure in this plan derives from a single three-statement
financial model. This section sets out the assumptions that drive that
model — revenue, cost, working capital, tax and financing — so that each
projection can be traced to a transparent driver and tested. The posture
throughout is deliberately conservative: headline revenue is built
bottom-up from volume and price, while profit is struck after full
depreciation, full interest and tax.
Revenue assumptions
Revenue is modelled bottom-up as pairs produced multiplied by average
selling price, per segment. Volume ramps with capacity and contract
wins; ASPs rise modestly year-on-year for inflation and mix. The mix
shifts toward higher-margin safety footwear, which lifts blended ASP
from roughly R312 to R351 per pair and underpins gross-margin
expansion.
Cost structure
Cost of goods comprises materials (chiefly leather and soling
polymers), direct labour and manufacturing overhead. Materials are the
dominant cost, consistent with footwear manufacturing economics. As
volume scales, fixed overhead is spread across more pairs and
procurement leverage improves, driving the gross-margin gains. Operating
expenses below the gross-profit line cover selling and distribution,
marketing, administration and design / R&D.
Key operating assumptions
| Driver | Assumption | Basis |
|---|---|---|
| Volume ramp | 0.62m pairs (Y1) → 2.19m pairs (Y5) | Capacity fill plus contract acquisition |
| Blended ASP | R312 → R351 per pair | Inflation pass-through and mix shift |
| Materials | ~52% of revenue, easing with scale | Leather and polymer input intensity |
| Direct labour | ~14–16% of revenue | Stitching / lasting labour intensity |
| Manufacturing overhead | ~8–9% of revenue | Utilities, maintenance, depreciation recovery |
| Selling & distribution | ~6.6% of revenue | Contract-led commercial model |
| Marketing | ~3% of revenue | Brand build in casual segment |
| Depreciation | R15.1m per annum (straight-line) | Plant, buildings and equipment |
| Corporate tax | 27% with assessed-loss carryforward | South African corporate tax regime |
Working capital
Working capital is a material driver of cash in a growing
manufacturer, and the model treats it explicitly. The plan assumes the
following steady-state working-capital terms, with the resulting
balances growing in line with revenue:
- Debtor days (DSO): ~52 days — reflecting
contract and retail payment terms. - Inventory days: ~72 days — raw leather,
work-in-progress and finished-goods stock across three lines. - Creditor days (DPO): ~45 days — supplier terms
on materials and consumables.
The net effect is a substantial working-capital investment that grows
each year, funded by the initial R62 million injection and the revolving
facility. This is the principal reason early-year operating cash flow is
negative even as EBITDA turns positive.
Financing assumptions
| Facility | Amount | Rate | Term / structure |
|---|---|---|---|
| Senior term debt | R80.0m | 11.75% | 8-year, 2-year capital grace |
| IDC concessional facility | R50.0m | 8.50% | 10-year, 2-year capital grace |
| Revolving working-capital facility | R85.0m limit | 12.50% | Undrawn at close; auto-managed to cash floor |
| Ordinary equity | R98.0m | — | Sponsor and strategic investor |
| CTFLGP capital grant | R18.0m | — | Capital contribution at close |
deliberate choice
The model preserves an ambitious but defensible revenue and EBITDA
build, then derives net profit conservatively — full straight-line
depreciation of R15.1 million a year, full interest on drawn facilities,
and 27% tax once assessed losses are exhausted. No capitalisation of
operating costs and no smoothing of the Year-1 and Year-2 losses are
applied. Where assumptions are optimistic — principally the speed of the
ramp — they are flagged, not hidden.
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 Vela Footwear Manufacturing (Pty) Ltd.