Verdant Fungi Farms Business Plan — Financial Plan

Five-year projections with full income statement, cash flow and balance sheet: revenue to R18.27m and EBITDA to R4.81m.

Financial Plan

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9.1 Basis of preparation
9.2 Projected income statement
9.3 Projected cash flow statement
9.4 Projected balance sheet
9.5 Capital requirement and funding

9.1 Basis of preparation

▪ All figures are in Rand and exclude VAT. The model is built from shelved area, yield per square metre, crops per room and crop retained, rather than from a growth rate applied to an assumed base.

▪ Grown volume is area multiplied by crops multiplied by yield. Sold volume is grown volume less contamination and less a 5.5% provision for product not sold inside shelf life.

▪ Button is realised at R50.18 a kilogram farmgate and oyster at R108.09 a kilogram to restaurants, delis and specialist retail. Spent substrate is sold as a soil conditioner.

▪ Contribution is struck at line level: button 57%, oyster 80%, and spent substrate at effectively full margin. Bought-in Phase III compost is the largest single direct cost.

▪ Depreciation is built from a phased asset schedule: growing rooms and site works over fifteen years, oyster house over twelve, climate control and solar over ten, cold chain over eight, and technical advisory over three.

▪ Term debt is R8 200 000 at 13.0% over eight years with a two-year capital moratorium. Interest is paid from Year 1; principal from Year 3.

▪ Corporate income tax is 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 32 debtor days, 30 creditor days and 18 days of compost and substrate stock.

9.2 Projected income statement

R	Year 1	Year 2	Year 3	Year 4	Year 5
Button revenue	3 794 000	6 768 000	12 130 000	13 447 000	14 299 000
Oyster revenue	656 000	1 537 000	2 467 000	3 237 000	3 687 000
Spent substrate	109 000	166 000	261 000	274 000	282 000
Total revenue	4 559 000	8 471 000	14 858 000	16 958 000	18 268 000
Direct costs	(2 156 000)	(3 572 000)	(6 002 000)	(6 537 000)	(6 864 000)
Gross profit	2 403 000	4 898 000	8 856 000	10 421 000	11 404 000
Gross margin	52.7%	57.8%	59.6%	61.5%	62.4%
Overhead	(3 640 000)	(4 480 000)	(5 870 000)	(6 285 000)	(6 590 000)
EBITDA	(1 237 000)	418 000	2 986 000	4 136 000	4 814 000
EBITDA margin	-27.1%	4.9%	20.1%	24.4%	26.4%
Depreciation	(915 166)	(1 299 445)	(1 581 667)	(1 581 667)	(1 581 667)
Interest	(1 066 000)	(1 066 000)	(1 066 000)	(937 917)	(793 182)
Profit / (loss) before tax	(3 218 166)	(1 947 445)	338 333	1 616 416	2 439 151
Taxation	—	—	—	(87 286)	(131 714)
Profit / (loss) after tax	(3 218 166)	(1 947 445)	338 333	1 529 130	2 307 437
Net margin	-70.6%	-23.0%	2.3%	9.0%	12.6%
Cumulative profit / (deficit)	(3 218 166)	(5 165 611)	(4 827 278)	(3 298 148)	(990 711)

Figure 16. Cumulative profit after tax and the peak deficit.

9.3 Projected cash flow statement

R	Year 1	Year 2	Year 3	Year 4	Year 5
Profit / (loss) after tax	(3 218 166)	(1 947 445)	338 333	1 529 130	2 307 437
Add back: depreciation	915 166	1 299 445	1 581 667	1 581 667	1 581 667
Movement in working capital	(29 632)	(227 376)	(365 819)	(132 412)	(79 030)
Cash generated from operations	(2 332 632)	(875 376)	1 554 181	2 978 385	3 810 074
Capital deployed	— (funded at close)	(4 175 334)	(3 666 668)	—	(-4)
Debt capital repaid	— (moratorium)	— (moratorium)	(985 257)	(1 113 340)	(1 258 075)
Net movement in cash	(2 332 632)	(5 050 710)	(3 097 744)	1 865 045	2 552 003
Opening cash	11 091 998	8 759 366	3 708 656	610 912	2 475 957
Closing cash	8 759 366	3 708 656	610 912	2 475 957	5 027 956

Figure 17. Cash flow — three years of consumption before the farm pays for itself.

Opening cash after the Year 1 construction programme and the debt drawdown is R11 091 998. Cash generated from operations is negative R2.33 million in Year 1 and negative R0.88 million in Year 2, turns to R1.55 million in Year 3 and reaches R3.81 million by Year 5. Closing cash reaches its low point of R610 912 at the end of Year 3, when the final two rooms are commissioned and the first principal repayment falls due in the same twelve months. That trough is what the equity provision is sized against.

9.4 Projected balance sheet

R, at year end	Year 1	Year 2	Year 3	Year 4	Year 5
Rooms, plant and infrastructure, net of depreciation	8 592 836	11 468 725	13 553 726	11 972 059	10 390 392
Compost and substrate stock	106 323	176 153	295 989	322 373	338 499
Trade receivables	399 693	742 663	1 302 619	1 486 729	1 601 578
Cash	8 759 366	3 708 656	610 912	2 475 957	5 027 956
Total assets	17 858 218	16 096 197	15 763 246	16 257 118	17 358 425
Share capital	12 400 000	12 400 000	12 400 000	12 400 000	12 400 000
Retained earnings / (accumulated loss)	(3 218 166)	(5 165 611)	(4 827 278)	(3 298 148)	(990 711)
Total equity	9 181 834	7 234 389	7 572 722	9 101 852	11 409 289
Term debt — non-current	8 200 000	7 214 743	6 101 403	4 843 328	3 421 703
Term debt — current	0	985 257	1 113 340	1 258 075	1 421 625
Trade payables	476 384	661 808	975 781	1 053 863	1 105 808
Total liabilities	8 676 384	8 861 808	8 190 524	7 155 266	5 949 136
Total equity and liabilities	17 858 218	16 096 197	15 763 246	16 257 118	17 358 425

Figure 18. Balance sheet — asset composition.

Net book value of rooms, plant and infrastructure peaks at R13.55 million at the end of Year 3 once the final two rooms are commissioned, then declines as depreciation runs against a completed capital programme. Total equity falls from R12.40 million at inception to a low of R7.23 million at the end of Year 2 and recovers to R11.41 million by Year 5. Gearing peaks at 54.5 per cent in Year 2 and falls to 34.3 per cent by Year 5.

9.5 Capital requirement and funding

Item	R	Note
Six button growing rooms — structure, insulation, shelving	7 600 000	Phased three, then one, then two; the dominant capital item
Climate control, air handling and filtration	3 400 000	Temperature, humidity, CO2 and filtered air with positive pressure
Oyster house — pasteurisation, inoculation, fruiting rooms	2 150 000	Includes clean room for inoculation, the highest-risk step for contamination
Cold room, packhouse and cold chain vehicle	1 780 000	Non-negotiable given five to seven day shelf life
Solar, backup generation and water	1 320 000	Climate control failure loses a crop, not merely a day’s trading
Site works, roads, biosecurity and fencing	620 000	One-directional clean-to-dirty workflow designed into the layout
Technical advisory and pre-operating costs	480 000	Imported growing expertise through the first two crops
Facility and infrastructure	17 350 000	Phased three rooms, then one, then two
Working capital	3 250 000	Compost, substrate and payroll ahead of first sales, plus three loss-making years
Total capital deployed over five years	20 600 000	Funded by R12.40m equity and R8.20m term debt

Year	Capital deployed (R)	What is commissioned
Year 1	9 508 002	Three growing rooms, climate plant, cold chain, packhouse, solar, site works
Year 2	4 175 334	Fourth room and the oyster house
Year 3	3 666 668	Final two rooms and climate plant
Year 4	—	No capital deployed
Year 5	-4	Residual commissioning
Total	17 350 000

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