Verdant Fungi Farms Business Plan — Break-Even and Debt Service
Cumulative break-even at 4.25% contamination, and debt service across the two-year capital moratorium.
Break-Even and Debt Service
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Structure
- 3. How a Mushroom Farm Makes Money
- 4. Contamination and the Oyster Ceiling
- 5. SWOT and Competitive Position
- 6. Operations and the Room Build
- 7. Compliance and Food Safety
- 8. Management and Team
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Production and Capital Schedules
- C. Appendix C: Funding, Debt and Working Capital Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 10.1 Break-even
- 10.2 Debt service
10.1 Break-even
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Gross margin |
52.7% |
57.8% |
59.6% |
61.5% |
62.4% |
|
Overhead plus debt service, R |
4 706 000 |
5 546 000 |
7 921 257 |
8 336 257 |
8 641 257 |
|
Break-even revenue including debt service, R |
8 929 791 |
9 595 156 |
13 290 700 |
13 554 889 |
13 848 168 |
|
Planned revenue, R |
4 559 000 |
8 471 000 |
14 858 000 |
16 958 000 |
18 268 000 |
|
Break-even as a share of planned revenue |
195.9% |
113.3% |
89.5% |
79.9% |
75.8% |
|
Equivalent kilograms at break-even |
160 000 |
168 885 |
236 642 |
238 137 |
241 875 |
|
Headroom, R |
(4 370 791) |
(1 124 156) |
1 567 300 |
3 403 111 |
4 419 832 |
Break-even is crossed during Year 3, when planned revenue of R14.86 million clears a break-even of R14.28 million. By Year 5 break-even sits at 75.8 per cent of planned revenue — a margin of safety of R4.42 million, which in operating terms is 241 875 kilograms against a plan of 319 073. That is a workable but not generous margin, and it reflects a 62 per cent gross margin carrying a R6.59 million overhead and a R2.05 million debt service.
|
Break-even measure at Year 5 |
Value |
Interpretation |
|---|---|---|
|
Gross margin |
62.4% |
Blended across button at 57%, oyster at 80% and substrate at full margin |
|
Break-even revenue including debt service |
R13 848 168 |
Against R18 268 000 planned |
|
Break-even as a share of planned revenue |
75.8% |
A margin of safety of 24.2 points |
|
Equivalent volume |
241 875 kg |
Against a plan of 319 073 kg |
|
Break-even contamination rate |
4.25% |
The point at which cumulative five-year profit turns negative |
10.2 Debt service
|
R |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Opening balance |
8 200 000 |
8 200 000 |
8 200 000 |
7 214 743 |
6 101 403 |
|
Interest at 13.0% |
1 066 000 |
1 066 000 |
1 066 000 |
937 917 |
793 182 |
|
Capital repaid |
— (moratorium) |
— (moratorium) |
985 257 |
1 113 340 |
1 258 075 |
|
Total debt service |
1 066 000 |
1 066 000 |
2 051 257 |
2 051 257 |
2 051 257 |
|
Closing balance |
8 200 000 |
8 200 000 |
7 214 743 |
6 101 403 |
4 843 328 |
|
of which current portion |
0 |
985 257 |
1 113 340 |
1 258 075 |
1 421 625 |
|
of which non-current portion |
8 200 000 |
7 214 743 |
6 101 403 |
4 843 328 |
3 421 703 |
|
EBITDA |
(1 237 000) |
418 000 |
2 986 000 |
4 136 000 |
4 814 000 |
|
Debt service cover |
n/a — EBITDA negative |
0.39x |
1.46x |
2.02x |
2.35x |
|
Gearing |
47.2% |
53.1% |
48.8% |
40.1% |
29.8% |
Gearing peaks at 54.5 per cent at the end of Year 2, when the accumulated deficit is deepest and the facility has not begun to amortise, and falls to 34.3 per cent by Year 5.