Vela Footwear — Sensitivity & Scenario Analysis
The sensitivity and scenario analysis — base, upside and downside cases across volumes, pricing, input costs and the exit multiple, and the impact on returns, including the 26.3% downside IRR.
Section 16 · Business Plan
Sensitivity & Scenario Analysis
The sensitivity and scenario analysis — base, upside and downside cases across volumes, pricing, input costs and the exit multiple, and the impact on returns, including the 26.3% downside IRR.
A single base case overstates certainty. This section tests how
Vela’s Year-5 EBITDA and net profit respond to movements in the two
variables that matter most — revenue (volume and price) and materials
cost — and presents an integrated downside scenario that drives the
conservative return used in the investment case.
Single-variable sensitivities
Holding all else constant, the table below shows Year-5 EBITDA and
net profit under independent shocks to revenue and to materials cost
(expressed as a change in materials as a share of sales).
| Scenario | Y5 EBITDA (R’000) | vs base | Y5 net profit (R’000) |
|---|---|---|---|
| Revenue +10% | 152,822 | +12.6% | 87,952 |
| Revenue +5% | 144,244 | +6.3% | 81,690 |
| Base case | 135,666 | — | 75,427 |
| Revenue -5% | 127,088 | -6.3% | 69,165 |
| Revenue -10% | 118,509 | -12.6% | 62,903 |
| Materials -3pp of sales | 159,761 | +17.8% | 93,017 |
| Materials +3pp of sales | 111,570 | -17.8% | 57,838 |
| Revenue -10% & Materials +3pp | 96,823 | -28.6% | 47,072 |
Interpreting the sensitivities
- Revenue is the dominant driver. A 10% revenue
shortfall reduces Year-5 EBITDA by roughly 13%, reflecting the operating
leverage in the model — fixed costs do not fall with volume. - Materials cost bites hard. Because materials are
the largest cost, a three-percentage-point increase in materials as a
share of sales cuts Year-5 EBITDA by a similar order to a 10% revenue
fall. - The combined downside compounds. Revenue 10%
lower and materials three points higher together reduce Year-5 EBITDA to
roughly R97 million — about 29% below base — yet the business remains
profitable and cash-generative.
Integrated downside case
The investment case carries a deliberately stressed downside: revenue
10% below plan, materials three percentage points higher as a share of
sales, and exit at a lower 4.0x EBITDA multiple instead of 4.5x. Under
these combined assumptions the project still returns an internal rate of
return of 26.3% — below the 41.9% base case, but comfortably above a
typical cost of capital. This is the return investors should anchor on,
with the base case treated as upside.
cycle, not just steady-state margins
The sensitivities above flex steady-state Year-5 outcomes. The more
dangerous stresses for a greenfield are dynamic: a slower volume ramp in
Years 1–2, stretched debtor days, or a materials-price spike during the
build. These hit liquidity and covenant compliance before they hit
Year-5 profitability. Lenders and investors should run the model with a
delayed ramp and extended working-capital cycle to confirm that the R85
million revolving facility and the grace period remain adequate — this
is where the real risk concentrates.
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.