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Powerpointpresentation 111208023204 Phpapp01

  2. 2. Table of contents 1.0 Executive Summary Chart: Highlights 1.1 Company Summary 2.0 Investment Philosophy 3.0 Market Analysis Summary 4.0 Strategy and Implementation Summary 4.1 Competitive Edge 4.2 Marketing Strategy 4.3 Sales Strategy 4.4 Milestones Table: Milestones Chart: Milestones 5.0 Management Summary 6.0 Financial Plan Table: Financials Chart: Profit Monthly Chart: Profit Yearly Chart: Sales Monthly Chart: Sales by Year 6.1 Projected Cash Flow Chart: Cash
  3. 3. 1.0 Executive SummaryCYGNETS strategy will be to source investment funds from private funders.CYGNET aims to operate in the commercial and industrial property sector.Investor funds will be lodged in an investment account with Deloittes & Touche and KPMG.CYGNET will source properties for development and re-investment and will operate the administrationaccount.This is done on a call off from the Investment Account, and is subject to extensive viability and due diligencechecks and balances.All profits and returns on sales will be held in a Distribution Account and paid to investors as per instructionsheld.Technological advancements also permit for other economically feasible distribution channels, such asseparately managed portfolios for large accounts.
  4. 4. Commercial property values will increase in a volatile economy‘The question that many investors are asking right now is how commercial real estate prices will react to arenewed recession, increased inflationary pressures and low medium-term interest rates.Based on property prices of well-let properties, as well as the outstanding performance of listed property, localcommercial real estate has performed well, even in a distressed economic environment.This would suggest that real estate is more of a stagnation hedge rather than an inflation hedge.Many commercial property sector experts are remarkably uniform in their assessments.Upticks in inflation and increased vacancies will likely cause cap rates to increase slightly, a negative effect thatwill be more or less offset by better fundamentals and therefore higher cash flows.The net expected effect is that property prices will hold firm in the short term, and may even increase in certainsectors such as well positioned retail and industrial properties.Recent activity on the auction floors shows that investors are now chasing yields.Commercial real estate is seen as one of the safest investments to park capital during volatile equity andexchange rate environments.We believe that there are seven main reasons why commercial real estate prices will hold for now, and certainsectors will see price increases:
  5. 5.  Reason #1 A Reserve Bank bias towards low interest rates: Over recent months, interest rates have held steady. Investors know that in this environment interest rates will remain low and fixed-rate mortgage debt remains reasonably priced. Reason #2 Urbanization and the influx of people from other African states: Although urbanization certainly has its critics, the upside is that economic development and open borders have bolstered the growth and development of South African cities. Moreover, South Africa’s main metropolitan areas continue to attract entrepreneurially minded migrants from neighboring countries and smaller provinces. Reason #3 Uncertainty overhangs in the equities market: The broader equities market has been unpredictable. Corporate profits have been stable and governance is strong. However, price-earnings (P/E) ratios have fallen and the market is generally moving sideways. A large amount of uncertainty originates from three major sources: commodity prices, the Rand and domestic politics. Reason #4 The supply side has slowed: At one stage, there was great concern that we were building too many new shopping
  6. 6. centers, office blocks and industrial centers. However, with localized exceptions, supply has moderated andhas slowed down in the medium term. Reason #5 Momentum in listed properties flow: Looking at the strength of listed real estate, capital is starting to flow towards selected commercial property. Reason #6 Improved risk management: We believe that cap rate compression may be coming to commercial real estate. It has previously come in the form of higher P/E ratios to the broader equities, so why not real estate? In fact, there are very good financial economic reasons for lower long-run cap rates (and they are not just related to lower interest rates). Reason #7 South African corporations are doing well: Despite the occasional bad results from certain listed companies involved in construction and property development, our local companies have done really well. Notwithstanding a recessionary environment since late 2008, we have not seen one listed company go bust as we did a decade ago. Auction Alliance Press Release
  7. 7. Transport corridors present the next big property opportunitiesThe next big opportunity in the property market would be along the transport corridors within cities and thatlinked cities rather than in circular nodes, said Francois Viruly, a property consultant and professor at theSchool of Construction Economics and Management at UCT.This was already evident along all the transport nodes in all the metropolitan areas in South Africa, such asaround the Gautrain, he told an SA Property Owners Association brokers forum last week.Viruly said new cities would develop in South Africa and with urbanization there would be an additional 10million people in Johannesburg, which would lead to an increased need for high density housing."This means the residential property market will start competing with the commercial property market forspace. There will be many more opportunities, especially on the outskirts of the central business districts, anddouble storey shacks because land will become more valuable as property prices increase.“Viruly said the increased population in cities would lead to bigger retail centers and new opportunities, addingthe property market environment in the next 10 to 15 years would be one where public transport played a rolein providing commercial property opportunities and Chinese investors moved into the market.He said the property market now played a more prominent role in the countrys economic policy and theReserve Bank was paying more attention to this market because it did not want to see another boom.However, Viruly said in the longer term there would be important structural changes in the market with thecommercial and residential markets competing more for space.Viruly said much work had been done on social housing in central business districts by converting vacantoffices into residential but the prices were now too high for the market.He anticipated old industrial estates would be the focus for residential opportunities.Viruly said a slowdown in the economy made it extremely difficult for the commercial property market toperform because tenants could not afford higher rentals.
  8. 8. He said there was a very clear correlation between the economy and the property market, adding that themoment the economy "kicks up 1 percent" it increased property market returns by 3 percent.However, he said the property market only started moving again after four consecutive quarters of economicgrowth.Viruly said the South African property market had a natural vacancy rate of between 7 percent and 8 percentand at the moment vacancies were above this level, which meant rental increases would not beat inflation.Viruly expected rentals to start exceeding inflation from the third quarter of 2013 and an increase inconstruction from next year onwards.Viruly said brokers should not expect to do many deals involving new developments because the propertymarket was still in the cycle of mopping up vacant space.Big new developments, such as major office towers, would not come to market until 2014, 2015 and beyond. Business Report “The Case for Whole Stock Portfolios." One of the underlying tenets is that specialization within equity portfolio management has gone too far; thus resulting in sub-optimal portfolios. CYGNET is structured as a close corporation designed to capitalize on industry research performed by one of the founding members, Sagren Pillay. The team presents this business plan as a "start from scratch" outline of what a successful property portfolio management organization should look like as the industry evolves in response to political, social, technological, and global sentiment. CYGNET will offer high net worth investors’ opportunity to maximize profits and capital growth elements in exchange for contributions to Cygnets operating capital and for providing seed funds to establish the investment products described herein. This document alone does not constitute an offer of any type, nor does it provide any guarantee, financial, or otherwise. Risks associated with the CYGNET FINANCIAL SERVICES business plan are not limited to those detailed in this document.
  9. 9. Chart: Highlights
  10. 10. 1.1 Company SummaryCYGNET FINANCIAL SERVICES is structured as a Close Corporation, incorporated in the Republic of SouthAfrica.It has been designed to capitalize on property industry research performed by one of the foundingmembers, Sagren Pillay.This company is unique because it differs substantially from the way most existing investmentmanagement firms operate.Many of the firms created in the last 15 years were started by the departure of portfolio managers from thecountrys largest banks, insurance companies, and brokerage firms.Generally, these individuals were deep in investment management but novice as it concerns the businessand operating side of running an organization.The investment plan for CYGNET is different.CYGNET has been founded by managers and entrepreneurs with in-depth knowledge of all aspectsconcerning property investment organizations.Professional talent will be acquired and retained by offering key individuals and professional servicecompanies’ competitive compensation to include equity stakes.
  11. 11. 2.0 Investment PhilosophyCYGNET believes the goal of South African property portfolios should be to outperform the broad market, asmeasured by the JSE Index.Exposure to economic sectors will roughly approximate those of the benchmark.Our view is that any deviation from the benchmark represents a bet, or in our case, a calculated risk thatwill determine over or under performance.Portfolios will also maintain market cap exposure to large cap (>R400 million), mid cap (R100 million toR400 million), and small cap (<R 100 million) properties.Like weightings to economic sectors, the weight of the portfolio allocated to large, medium, or smallproperties represents a bet relative to the benchmark.On average, our portfolios will hold roughly 1/3 of their value in large cap assets, and 2/3 of their value inmid and small cap assets.This distribution among capitalization ranges represents a modest bet that mid and small cap assets willoutperform, consistent with studies showing small property portfolios outperform larger property portfoliosin the long run.
  12. 12. We believe our process will be successful in the future for the following reasons:1.It provides the opportunity to outperform the market without taking undue risks, whilst havingownership.2.It does not concentrate heavily in a narrow segment of the market (e.g. residential, agricultural), thusportfolios are more likely to maintain a stable performance base when certain areas rotate out of favorand prompt redemptions.3.It simplifies investors portfolios by reducing the number of managers or funds they need in their overallproperty allocation.4.As in most cases, investment opportunity at ground level (development projects) will generally allowthe investor a far greater return on their investment in a shorter period.5.Capital growth is taxed at lower rates than normal profits.The decision-making process is one of consensus. The portfolio management team meets weekly todiscuss the portfolio and any changes to it. In rare cases, if we fail to reach a consensus decision, theCEO will act as the arbiter, usually prompting for additional research, but if necessary, providing a finaldecision. Our investment model is one in which portfolio managers are also analysts. This concept ofportfolio managers/analysts making decisions on a team was recognized and adopted for its provensuccess in a few select firms that have been extremely successful from both an investment and businessperspective. Portfolio manager/analyst responsibilities include idea generation, due diligence, andcompletion of research projects directed by the CEO. While each portfolio manager/analyst hasexperience in various areas, they are generalists in the sense that they are not assigned specific sectorresponsibilities. We find this allows individuals to remain stimulated by their jobs.
  13. 13. Professional project teams of Architects, Engineers and Construction Companies will be utilized to ensure compliance and comprehensive project analysis.
  14. 14. Listed property outshines all share for a sixth monthListed property last month posted higher returns than the JSE all share index for the sixth consecutive monthbut was overshadowed by the performance of the bond market.The Property Loan Stock Association of SA (PLSA) reported yesterday that the listed property sector achievedan overall monthly return of 2.6 percent last month, which was up from the 1.4 percent return achieved inJuly.By comparison, the all share index last month achieved a return of minus 1.8 percent. However, the all bondindex reported a 7.4 percent return in August.Property loan stocks, which form part of the listed property sector, posted a return of 2.5 percent last monthcompared with 1.3 percent in July.There has been a steady resurgence of listed property prices since March after losing 7 percent in totalreturns between January and mid-March due to the negative impact of inflationary risks at the beginning ofthe year on all interest-rate sensitive asset classes.Norbert Sasse, the chairman of the PLSA, said the returns of listed property overall easily outpaced inflation,which meant the sector was a good hedge against inflation.Sasse, who is the chief executive of Growthpoint Properties, said the listed property sector was fastapproaching R140 billion in market capitalization and the PLSA expected the sector to continue growing in thelong term.The highest return in the listed property sector last month was achieved by property loan stock Fortress B,with a return of 17.6 percent. It also posted the best year-to-date performance to last month, with a 51.5percent return.
  15. 15. Two other loan stocks, Acucap and Fortress A, are achieving double-digit returns for the year to date.Keillen Ndlovu, the head of property funds for Stanlib, said in a blog for the PLSA website that eight listedproperty companies, representing about 60 percent of the listed property sector on the JSE, releasedannual financial results last month and posted a weighted average income growth of 6.8 percent.Ndlovu said this was not bad compared with the average inflation rate of 4 percent, although there weresome notable disappointments, such as Hyprops lower-than-expected income growth and Emiraforecasting negative income growth.He added that there was a general downward trend in overall vacancies across the portfolios reporting andthe retail sector, especially the larger shopping centre’s, continued to do better than other sectors."The retail sector, and particularly bigger shopping centers, continues to outperform the office andhospitality sectors, which are still feeling the effects of a weaker economy and oversupply," he said.However, Ndlovu stressed there were still some major risks to note and at macro level, slower economicgrowth and rising bond yields were a concern for asset managers, while steep increases in operating costs,particularly utilities and taxes, were making it difficult for landlords to negotiate better rentals withtenants.Ndlovu said Stanlib was forecasting a slowdown in income growth to about 5.5 percent for the coming yearwith an 8.4 percent forward yield for the listed property sector, which was likely to be better than cash andbonds.Business Report
  16. 16. 3.0 Market Analysis Summary Much of our analysis focuses on the commercial and industrial segment of the property investment industry because it is such a large component of the overall landscape. We have additionally provided information as it pertains to the management of separately managed portfolios (i.e. "separate accounts"). To understand the data here, one must understand that separate account managers must register their firms with the FSB. Thus, they are known as "Financial Service Providers." For CYGNET, the technologies we have selected will enable us to capitalize by utilizing both product types. Our analysis supports the 10% to 12% projected capital growth rates by outside sources. Profits on development projects can be as high as 26%, with rental portfolios returning 8, 5% per annum. Probably the most important aspect to these projections is the factors that will fuel these rates of growth. The following section contains some of the key variables to creating this growth environment. Medium cost housing projects are also viable investments in the three to five year term. All are expected to have a positive impact on the investment industry for at least the next five to ten years.
  17. 17. Government asks private sectors help with housingHuman Settlements Minister Tokyo Sexwale has made a plea to businesses, individual stakeholders, privatesector institutions and donor agencies to "go the extra mile" and assist the government in reducing thehousing backlog to prevent social unrest erupting.The Department of Human Settlements was unable to address the burden of the housing backlog on itsown, Sexwale said at the launch of the "Each One Settle One" campaign at the JSE yesterday.The campaign aims to mobilize various stakeholders, including the top 200 JSE-listed companies, to assistthe department in providing decent shelter to more than 2 million households living in squatter camps, aswell as in informal settlements.Sexwale said the number of informal settlements in the country had grown from 800 when he was Gautengpremier to 2 500 today.The housing backlog under his watch had increased from 2.1 million houses when he became minister to2.3 million, despite his department building 200 000 houses a year.Sexwale attributed this situation to the increasing number of households and the decrease in the size ofhouseholds, admitting that the government had got itself into "a very tight situation since 1994" byproviding free houses for the poor."It was not the best thing to do. We cant provide free housing forever but we have got to do that becausewe cant turn our backs against the poor. Its not their fault they are in that situation," Sexwale said.He stressed that the new campaign was not aimed at bringing all corporate social investment involvinghousing under one umbrella.
  18. 18. The government knew about the social investment by corporates. The campaign was aimed at telling corporates"what is not happening"."We have to go the extra mile. Something else has to be done. We need all hands on deck," he said.Sexwale warned that if there was a second recession in the country it would introduce social instability."The protests of our people are beginning to get violent every day. Its worrying. The police are shooting everyday.Lets work together to try and stem the tide.“Sexwale said housing was not just a social expenditure item but an economic dynamo because it contributedmassively to economic growth."It stimulates the whole financial system and when it doesnt happen, the world starts burning and we justdont know where it ends.“He said it was easy for firms to hide behind corporate social investment but it would "not keep this problem atbay".A social investment desk had been created in the department to manage the activities of the campaign andprojects on a project-by-project basis.Khanyisile Kweyama, the executive head of human resources at Anglo American Platinum, said it embraced thecampaign and was contributing R1.4 billion towards facilitating the building of 20 000 houses for its employeesover the next 10 years.Leon van Schalkwyk, the group executive of strategic finance at Impala Platinum, said it had a proven trackrecord in community-based housing solutions through its extensive home ownership programme in the NorthWest to uplift its employees, which had resulted in the construction of more than 1 500 freestanding units overa three-year period.It therefore made perfect business sense to get involved in this campaign, he said.
  19. 19. Business Report 4.0 Strategy and Implementation SummaryThe key to managing an asset portfolio is to develop a successful profile, develop a pattern of success, and showthat pattern can be repeated in the future. After which time, successful products should be aggressively marketed ifcapacity to manage additional assets exists. While a three to five-year period may seem like millennia compared tothe technology world, it is really quite reasonable considering the fact that private equity investors in limitedpartnership vehicles are generally satisfied with a 10-year waiting period that exists prior to a return of their capitalinvestment. Based on the developmental timeline associated with investment products, this plan provides a financialoutline of CYGNETS funding targets for the first few years of operations. We will focus chiefly on Mixed Use Projects.4.1 Competitive EdgeCompanies are nothing but men and women and their work. That which comes forth from a company is only asfine as the effort put into it.A customer is a person who brings us his wants-it is our job to fulfill those wants. The above quotes reflect the philosophy and ethos of CYGNET. Only by fine effort and effective control will weaccomplish and attain our goals and those of our investors. CYGNET will centralize and standardize all property management systems, controls, responsibilities and personnel. Unlike other investment companies who generalize and pay dividends to all clients in their portfolios, we will striveto manage each client on a personal basis, and to maximize returns for each and every client.4.2 Marketing StrategyCYGNET is based in Kwa-Zulu Natal and has excellent local knowledge of markets, trends and developmentnodes in the region. Our initial focus will be to invest locally, before expanding into other regions. This will onlybe done via thorough market analysis and project planning.We will utilize our website to find investment properties and opportunities, as well as to market our portfolios.We are registered with the Debt Control Council. The Estate Agency Affairs Board (EAB79202/L) and with theFinancial Services Board (FSP No. 43587) to ensure legal compliance.We will charge an Administration Fee to our clients based on investment levels. Fees will approximate 2% ofinvestment returns.
  20. 20. 4.3 Sales StrategyCygnets property investment portfolio will be initially offered through an FSB registered administration fund.Technological advancements also permit for other economically feasible distribution channels such asseparately managed portfolios for large account sizes.Based on our large, medium and small cap projects, revenue streams will be continuous from year 3. Ideally,clients should look to invest in the medium to long term to maximize profitability and returns.CYGNET generates its revenue from Administration Fees for services rendered on behalf of its clients.The chart and table below provide a more detailed look at our projected sales strategy.4.4 MilestonesCYGNET will strive to have projects in place and capitalization of R 2, 3 billion by 2015.This is a bold plan, but is highly achievable given the available projects and infrastructural changes that arebeing effected in South Africa. We have attached Large, Medium and Small Cap targets as per our initial market analysis.
  21. 21. Table: MilestonesMilestonesMilestone Start Date End Date Budget Manager DepartmentLarge Cap 2012/01/01 2015/01/01 R400,000,000 SP ProjectLarge Cap 2013/01/01 2016/01/01 R400,000,000 SP ProjectLarge Cap 2014/01/01 2017/01/01 R400,000,000 SP ProjectMed Cap 2012/01/01 2014/04/01 R250,000,000 SP ProjectMed Cap 2013/06/01 2015/12/01 R250,000,000 DL ProjectMed Cap 2014/03/01 2016/07/01 R250,000,000 SP ProjectSmall Cap 2012/01/01 2013/06/01 R100,000,000 DL ProjectSmall Cap 2012/06/01 2013/12/01 R100,000,000 DL ProjectSmall Cap 2013/07/01 2014/03/01 R100,000,000 DL ProjectSmall Cap 2014/03/01 2015/09/01 R100,000,000 DL ProjectTotals R2,350,000,000
  22. 22. Chart: Milestones
  23. 23. 5.0 Management SummaryCYGNET has compiled a management team, and will employ candidates for other key positions, should it berequired. We would prefer to use outside consultants and professional teams on a project basis, andaccording toeach entities specific strengths.Sagren Pillay is the managing member of the corporation. Sagren has been involved in company managementforthe past fifteen years. He is a member of the Debt Control Council of South Africa.David Larkan is a registered and practicing accountant. David graduated and was articled with KPMG, prior togoing into private practice. He also holds a CEA qualification. David has been in the accounting profession forthepast 22 years and in the property industry for seven years. 6.0 Financial PlanThe primary goal of the first full quarter of operation will be to secure funding from outside investors. Prior tothispoint, CYGNET has already set up the corporation and registering the firm and its products with the DCC.The amount sought from investors will be approximately R 900 million, which should see the business throughtoprofitability near the completion of the third year.At no point will we spend 100% of investor funds on acquisition of assets. On new investments, typically,after aperiod of 8 months income will come on stream. We have planned net profit levels at 25% per annum.
  24. 24. Capital growth and profits will only be realized upon redemption of properties and sale of assets. This is done onproject completion.There are a few items worthy of note as it pertains to our forecasts. Most likely, excess cash will be re-deployedinto the business once a level of sustainability in revenue has been achieved. The primary purpose of this type ofreinvestment would focus on a "second stage" marketing plan to increase distribution. A word of note is also warranted as it pertains to the cash flow statement. One appealing feature of theinvestment industry is that collection of fees (i.e. revenues) is highly certain because fees are frequently chargeddirectly to the clients accounts. For this reason, revenue certainty is very high and is directly related to theamount of assets under management. Common practice in the investment management industry is to bill at eachquarter-end. For example, our management fee of 1.50% would be applied to our clients accounts four times peryear at 0.35%.Simply put, the economic motivation is great. Growth rates for the asset management industry are projected torange from 20% to 25% in each of the next three years. The demographic, economic, political and social evidencesupporting these projections make this one of the most attractive industries due to the high degree of certainty inthe estimates. We believe the certainty coupled with the above average growth rate distinguishes this opportunityfrom other venture investments. Additionally, our conservative estimates outline a plan-to-profitability over aperiod much shorter than typical venture investments that sometimes require up to ten years to harvest profits.
  26. 26. Cygnet Investment Proposal 1. INVESTORS  4. PROJECTS Investor/s funds will be places into an interest CYGNET will manage the property investment bearing investment account, held by KPMG / portfolio, as well as all legal matters, liaison with Deloittes. developers, architects, contractors and professional bodies. All costs in this regard are covered by our management fee. 2. KPMG /Deloittes KPMG /Deloittes hold funds on call in an  5. DISTRIBUTION ACCOUNT investment account on behalf of the investor/s. They will be responsible for all due diligence and Once sales commence and income is generated, audit requirements on the Investment, Operating monies will be placed into the distribution and Distribution Accounts. account. Investor is paid monthly, or as per instruction. CYGNET is paid a management fee of 2% on a monthly basis. KPMG / Deloittes is paid 3. CYGNET a management fee of 1% on a monthly basis. Cygnet will source properties and development These fees are added onto the prime interest opportunities. Upon ratification by Investor and rate and charged to the development, or third KPMG / Deloittes, funds placed into Operating party. The investor is paid at the prevailing Accounts for purchase and development or interest rate of 7%. investment into property. Our objective is to secure a minimum of 15% equity stake on behalf of the  6. DISTRIBUTION OF PROFITS Investor, which will secure further profit and capital gains on completion of the projects. All profits on developments are paid into the distribution account and distributed and paid according to investor instructions. These profits are in addition to the interest account and we estimate these to be a minimum of 15%. These profits are longer term investments and are released on completion or sale of the project.
  27. 27. Monthly Returns Investor 7% Interest Cygnet Financial Services 2% Fee Fund distribuator 1% Fee
  28. 28. Expected Yield Interest Equity Sales Capital 100 P E 60 R C E 30 N 0 15 0 13 T 15 0 15 0 0 15 A 15 10 15 G 10 10 E 10 10Year 1 Year 2 Year 3 Year 4 Year 5
  29. 29. Investment CycleOUT Investor IN Investment Returns Account Managers Investment Account Distribution Account Operating Account Cygnet Project Sourcing Project Management Projects Capital Interest Equity Sales
  30. 30. Investor Hypothesis Investor places investment funds of USD 100M, which are fully utilized in a development project. Anticipated returns will be as follows: USD Interest – 10%per annum – 5 years 36,000,000 Sales – 100% sold year 5 – 15% 15,000,000 Capital gain – year 5 – 22% 87,000,000 Total Revenue 138,000,000 The above revenues are in addition to the repayment of capital investment at start-up. Taxes and audits will be handled by the Account Managers. Cygnet will source; check viability and track progress and proceeds of the specific developments, as well as professional contractors, clients and related services.
  31. 31. Table: FinancialsBeginning BalanceOpening Balance Cash & Checking R0 R203,000,000 R348,400,000Plus Money ReceivedNew Investment R900,000,000 R1,000,000,000 R1,100,000,000New Loans R0 R0 R0Sales R420,000,000 R500,000,000 R650,000,000Other R0 R0 R0Subtotal Money Received R1,320,000,000 R1,500,000,000 R1,750,000,000Less Money SpentDirect CostsDirect Cost of Sales R316,000,000 R375,000,000 R487,500,000Other Costs of Sales R0 R0 R0Normal Operating ExpensesPayroll and Payroll Taxes, Benefits, Etc. R0 R0 R0Rent and Utilities R0 R0 R0Sales and Marketing Expenses R0 R0 R0Administration Fees R6,000,000 R6,600,000 R7,200,000Other OutflowsPayments of Taxes R20,000,000 R23,000,000 R28,000,000Debt Payments R0 R0 R0Purchase of Assets R775,000,000 R950,000,000 R1,150,000,000Other R0 R0 R0Subtotal Money Spent R1,117,000,000 R1,354,600,000 R1,672,700,000Ending BalanceEnding Balance Cash and Checking R203,000,000 R348,400,000 R425,700,000Profit Before Interest and TaxesSales R420,000,000 R500,000,000 R650,000,000 Less Cost of Sales (R316,000,000) (R375,000,000) (R487,500,000)Gross Margin R104,000,000 R125,000,000 R162,500,000 Less Operating Expenses (R6,000,000) (R6,600,000) (R7,200,000)Profit Before Interest and Taxes R98,000,000 R118,400,000 R155,300,000Net Cash Flow R203,000,000 R145,400,000 R77,300,000
  32. 32. Chart: Profit Monthly
  33. 33. Chart: Profit Yearly
  34. 34. Chart: Sales Monthly
  35. 35. Chart: Sales by Year
  36. 36. 6.1 Projected Cash FlowThe chart and table below highlight the cash flow statement for the company. It includes the anticipatedinvestment required in the first year. No dividends have been distributed. We would expect dividends tobe payable on completion of various projects, and subsequent sale and re-investment of funds into newventures, subject to investor requirements and instructions. Chart: Cash
  37. 37. Table FinancialsFinancials Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecBeginning BalanceOpening Balance Cash & R0 R0 R399,500 R24,000 R323,500 R323,000 R222,500 R322,000 R247,500 R273,000 R293,500 R214,000 R208,500Checking ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000Plus Money ReceivedNew Investment R0 R400,000 R0 R400,00 R0 R0 R100,000 R0 R0 R0 R0 R0 R0 ,000 0,000 ,000New Loans R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Sales R0 R0 R0 R0 R0 R0 R0 R105,000 R105,000 R105,000 R105,000 R0 R0 ,000 ,000 ,000 ,000Other R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Subtotal Money Received R0 R400,000 R0 R400,00 R0 R0 R100,000 R105,000 R105,000 R105,000 R105,000 R0 R0 ,000 0,000 ,000 ,000 ,000 ,000 ,000Less Money SpentDirect CostsDirect Cost of Sales R0 R0 R0 R0 R0 R0 R0 R79,000, R79,000, R79,000, R79,000, R0 R0 000 000 000 000Other Costs of Sales R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Normal Operating ExpensesPayroll and Payroll Taxes, R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Benefits, Etc.Rent and Utilities R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Sales and Marketing R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0ExpensesAdministration Fees R0 R500,000 R500,000 R500,00 R500,000 R500,000 R500,000 R500,000 R500,000 R500,000 R500,000 R500,000 R500,000 0Other OutflowsPayments of Taxes R0 R0 R0 R0 R0 R0 R0 R0 R0 R5,000,0 R5,000,0 R5,000,0 R5,000,0 00 00 00 00Debt Payments R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Purchase of Assets R0 R0 R375,000 R100,00 R0 R100,000 R0 R100,000 R0 R0 R100,000 R0 R0 ,000 0,000 ,000 ,000 ,000Other R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0Subtotal Money Spent R0 R500,000 R375,500 R100,50 R500,000 R100,500 R500,000 R179,500 R79,500, R84,500, R184,500 R5,500,0 R5,500,0 ,000 0,000 ,000 ,000 000 000 ,000 00 00
  38. 38. Ending BalanceEnding Balance Cash and R0 R399,500 R24,000 R323,500 R323,000 R222,500 R322,000 R247,500 R273,000 R293,500 R214,000 R208,500 R203,000Checking ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000Profit Before Interest andTaxesSales R0 R0 R0 R0 R0 R0 R105,000 R105,000 R105,000 R105,000 R0 R0 ,000 ,000 ,000 ,000 Less Cost of Sales R0 R0 R0 R0 R0 R0 (R79,000, (R79,000, (R79,000, (R79,000, R0 R0 000) 000) 000) 000)Gross Margin R0 R0 R0 R0 R0 R0 R26,000, R26,000, R26,000, R26,000, R0 R0 000 000 000 000 Less Operating Expenses (R500,00 (R500,0 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 (R500,00 0) 00) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0)Profit Before Interest and (R500,00 (R500,0 (R500,00 (R500,00 (R500,00 (R500,00 R25,500, R25,500, R25,500, R25,500, (R500,00 (R500,00Taxes 0) 00) 0) 0) 0) 0) 000 000 000 000 0) 0)Net Cash Flow R399,500 (R375,5 R299,500 (R500,00 (R100,50 R99,500, (R74,500, R25,500, R20,500, (R79,500, (R5,500,0 (R5,500,0 ,000 00,000) ,000 0) 0,000) 000 000) 000 000 000) 00) 00)