2014IMP801Ass1NarteyJB

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UNIVERSITY OF PRETORIA

FACULTY OF EBIT

Graduate School of Technology and Management

Surname &

initials

NARTEY BERNARD

JOSCELYN Student nr 10045989

Course code : IMP 801

Name of lecturer : DR. MICHIEL C. BEKKER

Due date : 21ST AUGUST, 2014

Date of submission : 21ST AUGUST, 2014

Title of assignment : BUSINESS CASE- INDIVIDUAL ASSIGNMENT 1




RETAIL OF LIQUEFIED PETROLEUM GAS

BUSINESS CASE

PROPOSERS

BIL GLOBAL LIMITED,ACCRA, GHANA




TABLE OF CONTENTS PAGES

Executive Summary 4

1.0 Basic Information 5

2.0 Bu siness Descrip tion 6-10

3.0 Opportu nity 11-13

4.0 Mark etin g 14-15

5.0 Operatio ns 16

6.0 Techno logy 17

7.0 Risk & Mit igating Factors 18

8.0 Time Scales 19

9.0 Finan ce 20-26

10.0 Conc lusio ns 26

Addendum

Financial Analysis




EXECUTIVE SUMMARY

The purpose of this business plan is to seek backers or supporters for a proposed 17,000litre (8 metric tonnes) LPG retail station that the company intends to build and operate at thePrampram Township near Accra.

The proposed project is estimated to cost $72,064. The owners have raised $4,064 and theyare expecting both in cash or in-kind the difference of $68,000 from other sources.

BIL GLOBAL Limited is a private limited liability company registered under the CompaniesCode 1963 (Act 179).

The company was incorporated on 17th January 2001 and is authorized to undertake thefollowing business: Building and Road Construction Suppliers of general goods Sales and distribution of LPG & cylinders.

The project is located at the Prampram township, a suburb of Accra.

Negotiations are currently underway to acquire a 100” x 80” (0.23 acres) plot of land onlease or rent from SSNIT for the project.

BIL Global Limited is owned by Mr. JB Nartey and Miss Caroline Tagoe. Mr.J.B.Nartey is aGhanaian trained civil engineer with over twenty (20) years of civil engineering experience.Miss Caroline Tagoe has over thirty (30) years experience in petroleum products retail andmanagement,

The key indicators of this business case in a synopsis are:

Sales are estimated to be $241,552 ,$277,785,$319,453,$367,371 in years 1,2,3

and 4 respectively.

Corresponding Net Incomes (losses) after tax are $12,286, $18,411, $23,115,

$29,519 in years 1,2,3 and 4 respectively.

Cumulative net income through to year 4 is $83,331

The target markets for BIL Global Limited are the residents of the Prampram Township andits immediate environs. The Prampram Township and its environs are markets with greatpotential. It is conservatively estimated that the area alone needs about 155.7 metric tonnesof gas a year. Annual population growth is between 2.5% and 5% therefore demand for LPGwill certainly grow. BIL Global Limited is closer to the residents of the Prampram Townshipand its environs than any other LPG station in the area.




1.0 BASIC INFORMATION

1.1, Name Of Business: BIL GLOBAL Limited

1.2, Physical Address: Prampram, Site4, Accra, Ghana

1.3, Postal Address: C/O PMU/ADB P.O. Box 4191, Accra, Ghana

1.4, Contact Person: Mr. Joscelyn Bernard Nartey

1.5, Tel. 0243-679459/0244-128904, 021-242417

1.6, Fax: 021-221047

1.7, E-mail: [email protected]




2.0 BUSINESS DESCRIPTION

2.1 Background

2.1.1 History

BIL GLOBAL Limited is a new business that was incorporated as a Private Limited

Liability Company under the Ghana Companies Code, 1963 (Act 179). The

Company received its Certificate of Incorporation in August 1995.

The company has over the past years been operating door – to - door services on a

small scale for the residents of the Prampram Township.

It currently has staff strength of two (2), which consist of the owners who operate it on

part time basis during the weekends.

Owing to the increasing number of clients and the desire of the owners to rejuvenate

and expand its operations, it is seeking funds to establish a LPG filling plant for the

households and commercial bakers in and around the Prampram Township.

The proposed LPG station will have a work force of five, comprising the managing

director, two fillers, a security man and a book/sales keeper (recorder). It projects an

annual turnover of $241,552 during its first year of operation and intends to increase

annual sales by 15% within its first four (4) years of operation, which will translate into

$367,371 in its fourth year of operation.

The core business activity of the company is the retailing of LIQUEFIED

PETROLEUM GAS (LPG) to residents and commercial and pr ivate car users’ in-and-

around Prampram, a new and fast developing township near Tema.




2.1.2 Goals

The Greater Accra Region is the destination of much of the charcoal produced in

Ghana.

The goal of the Company is to facilitate the ready availability of and access to LPG by

residents of the region.

It aims to commercially promote LPG as cleaner alternative to wood and charcoal to

its immediate community. It believes that by embarking on this mission it will

ultimately reduce deforestation and the ailments that accompany the use of charcoal

and firewood due to indoor pollution.

Also, the retailing LPG will offer employment opportunities and contribute to the

national budget through its tax revenue it will pay to the Government in fulfillment of

the Government Golden Age of Business Policy.

2.2 Core Activities Of Proposed Business

The Company will operate Liquefied Petroleum Gas filing plant and Electronic

Dispenser. It will also test the market with LPG accessories such as stoves and

cylinders during its operation. If it proves successful it will within its 6 months of

operation add sale of LPG cylinders as one of its service lines. In the future itintends to acquire its own LPG tanker which will be used to supply LPG from the

Tema Oil Refinery to Customers such as Restaurants in its catchments area with

larger cylinders at their premises and to its own filling plants.




2.3 Location

The company is located in within the Prampram Township, a suburb of Accra.

The township is made up of 611 individual flats or houses. Individuals or companiesown the flat or houses.

The company will serve residents in these township and its environments. Theproposed site is linked by good road network and reliable telephone systems.

It is about 15km (15minutes drive) from the Tema oil refinery the source of LPG inGhana

2.4 Service Description

2.4.1 The Service

The Company will be engaged in the retailing of Liquefied Petroleum Gas.Customers will bring their empty cylinders to the station to be filled with the LP Gas.

Automobiles that run on LPG will also be served with the electronic vehicle dispenserat the station.

Liquefied Petroleum Gas is a by- product from the Tema Oil Refinery. It is composedof about 20% propane and 80% butane. It is on a large scale for cooking and heatingpurposes in households and commercial houses. It also used for powering vehicles.It is clean and convenient to use.

Through aggressive education and marketing by the Government through GhanaNational Petroleum Corporation (GNPC), and competitive pricing. Ghanaians havecome to accept the use of Liquefied Petroleum Gas both at households andinstitutional levels.

2.4.2 Existing Customer Behavior

Targeted customers are residents of the Prampram Township who use LPG. Thesecustomers have to travel over 38km to the nearest LPG station in Tema to purchasethe product. There are five bakeries in the town that are urging us on to establish thestation to ensure reliable and close of fuel for their business.

It is expected that when the station source is established residents who hitherto usecharcoal will move to LPG, as they will not have to travel far for the product. Againresidents who use charcoal have to descend from their kitchens to light their charcoalstoves outside and then carry then inside once the charcoal is lighted.

The national demand for LPG has increased consistently for the past 5 years and it isexpected that residents who hitherto do not use the product will switch to LPG astheir standard of living improves.




2.5.0 Expected Change In Customer Behavior

There is the potential for customers to change from the use of charcoal and firewoodin preference for liquefied petroleum gas for their domestic and commercial cooking.The size and provision for ventilation in the kitchen of these flats make it veryinconvenient to use charcoal due to the smoke that emanates from the burning of thecharcoal. LPG is neat and convenient to use. It is portable and cooks faster thancharcoal. It is expected that with the establishment of the station in the flats it shallentice customers who hitherto used charcoal to switch.

In terms of price, delivery and storage, LP Gas offers better advantage.Moreover, there is growing awareness amongst urban and rural dwellers to use LPGas provided their ‘city sponsors’ (these refer to wealthier family members who live inthe city) provide them with both the locally manufactured LP Gas stoves andcylinders.

2.5 Suppliers

2.5.1 As a matter of national petroleum policy, only authorized and certified Oil MarketingCompanies can source, distribute and retail Petroleum products. There are eighteen

if such marketer in the country of Ghana Oil Company (GOIL) is the market leader interms of distribution outlet and volumes of sales.

2.5.2 Goil pioneered the installation of LPG filling plants in different part of the countryduring the government of Ghana’s national LPG promotion campaign in 1990. It hasseveral distribution tanker s and is far ahead of its competitors in the marketing ofLPG in Ghana. It is the first company to introduce the LPG auto dispensers in thecountry and at a stage offered the auto dispensers free of charge as part of itssupport to its clients. As a national marketer, it is the only marketing company withan LPG depot close to refinery and therefore has an incomparable track record forconsistency and reliability of supplies.

Other major companies, which are in the forefront of distributing LPG, are allied oilcompany ltd (ALLIED) and Glory Oil Company Ltd. All of these Companies are beenmade with GOIL and ALLIED for supplies. Negotiations on terms of supply, training,maintenance support and lead-time for supplies are ongoing.

2.5.3 The pricing of petroleum products is regulated by government institute called NationalPetroleum Tender Board (NPTB). There is a standard formula for determining pricesof fuel products and retail prices are uniform Country- wide.




2.6 Ownership Structure

2.6.1 The authorized shares of the company is 15million shares of no par value, and theissued shares currently stands at 8 million, fully paid-up shares of no par value.

2.6.2 All of these shares are presently held by Mr. Joscelyn Bernard Nartey (60%). MissCaroline Tagoe (40%). The current share structure makes the company a closely

held one ie held by only a few individuals.

2.6.3 Of these two shareholders, Mr. J. B. Nartey is the Managing Director and will beprimarily responsible for the day- to –day management of the Company’s operations.He will have specific responsibilities for finance and accounting strategic, planning,budgeting, acquisition and marketing. He is very industrious, focused, enthusiasticand passionate about seeing the dreams come into fruition.Miss Caroline Tagoe, who happens to be the mother of the Managing Director, hasover Twenty – five (25) years experience in the fuel retail business. She currentlyowns a SHELL fuel service station on the Castle Road, near the West Africa ExamsCouncil (WAEC) , Accra. As a Director of BIL GLOBAL Limited she will becontributing to the operations of the Company by offering advice and guidance in the

area of fuel retail, accounting and Finance of the Company.

Apart from Mr. J. B. Nartey who will be working full time with the Company the othershareholder will not be directly involved in the day –to day operation of the Company.

2.7 Legal Considerations

2.7.1 The company was incorporated as a private limited liability company on January 17,2001 and has been registered under the Act 152 of 1962 4, Registration of theIncorporated Private Partnership Act with the name BIL GLOBAL Limited

2.7.2 The Company has applied to the Energy Commission of Ghana, the statutory organ

of the Government, for license to operate a Liquefied Petroleum Gas filling stationand to sell LP Gas products to the General Public.

2.7.3 The Company is currently working on its Environmental Management Plan togetherwith Personnel of the Environmental Protection Agency of Ghana. This permit is apre- requisite for operating an LPG station.




3.0 OPPORTUNITY

3.1 Customer DescriptionThe expected customer – base of the Company’s operations can be classified intothree main groups. These are households, small scale businesses mainly breadbakeries, commercial and private vehicles.

3.1.1 Households:The Prampram Township is made up of separate houses all of which use LPG. Bypersonal experience, averagely a 14.5kg of LPG is used for 4 weeks. Thus there isan existing demand for 8,860kg of LPG every month by the households alone. It isexpected that residents in the vicinity of the township will also adopt our company astheir reliable source of LPG due to it’s proximity to them.

According to the housing and population census of the year 2000, 136,347households in the Greater Accra region use LPG. A large portion if these householdsare located in Prampram (where the Company will be sited), Dawenhya, Afienya,New and Old Ningo which consist of 26,727 households. On the basis that thesesuburbs are middle income settlements, it can safely be estimated that over 70% ofthese households use LPG for their cooking needs. The company expects to attract10% of these households that use LPG Though there have been no empirical

studies to support this assertion, investigation at the only LPG station in the districtrevealed that daily sales run in excess of 150,000kg of LPG a month. During theperiod when the company operated door –to door services during the weekends forthe residents of the township, it average filled 30 cylinders.

Thus for the services of households, an existed demand of 35,000kg is estimated,

3.1.2 Bakeries: There are 5 operational bakeries in the township that have indicated their willingnessto rely on the company for their LPG supplies and are eagerly waiting for theCompany’s operation to take off. There are other bakeries that this analysis did notinclude. It is expected that these bakeries will also support our company. The table

represents the LPG demands profile of these bakeries visited.Table 1: LPG Demand

Bakery Location Monthly LPG Consumption(kg)

Super Janet Bakery H/No. A 166/21 594 Auntie Joe Bakery H/No. 9 378No name mentioned H/No. 11 281

`` H/No. 10 230.5`` H/No. 5 101.5

Total 1,585

3.1.3 Vehicles:

12 taxis out of 21 taxis that plying the Prampram- Tema, Afienya, Dawhenya and Ashiaman route use LPG. A significant number of privately own vehicles in the flatsalso run on LPG. Unfortunately it has been difficult to estimate their consumption asthe drivers interrogated do not monitor their consumption per mileage.




3.2 Geographical Area

3.2.1 The company, as mentioned elsewhere in this report will operate in Accra specificallyPrampram and its immediate environments. These is the hope to expand itsoperation to Regions outside Accra in the future.

3.3 Competition

3.3.1 The company’s operations will face no serious competition. The only competition in

the district is a GOIL filling plant and other stations located in Tema and Ashiamanbut it’s far from the Prampram Township and residents without vehicles have to boardcommercial vehicle to procure LPG. The market for LPG is huge and our operationsare not expected to have much impact on the operations of our competitor.

3.4 Competitive advantage

3.4.1 BIL GLOBAL Limited is poised to succeed as a community LPG station serving thecooking needs of the residents of Prampram. Having been resident in township forthe past 15 years and also a native of the town, the managing director has goodrelations with most of the residents and it is highly expected that they will support theoperations of the company by patronizing its services. The proximity of the station to

its targeted market will cause it to have an edge over its competitors. Further morethe combination of the dealers and filling plant margin that will accrue to the companyis fairly attractive and together with the size of the market the investment will realizeits returns in the shortest possible time.

3.5 Strengths And Weaknesses

3.5.1 The company has its strength in the following ways:

1 Location Of Filling PlantsThere are no serious competitions in the location. Since the existing competitors do

not satisfy the demand of their customers.

2 Management StyleThe company will institute a management that motivates, and pay incentive bonusesto the staff based on productivity.

3 Cost ConsciousnessThe company will be conscious of its operational overheads. This is exemplified inthe use of competent part –time accounting for the maintenance of its accountingrecords instead of full –time staff. This notwithstanding, the company intends toemploy a full – time accountant, if its operations expand enough to merit theengagement.




3.5.2 The company have its weaknesses in the following ways:

1 The weakness of the company is in the fact that it will be a new business andtherefore may face the challenge of meeting its expected sales targets. Thisweakness is strengthened by the overwhelming support by the residents association,bakers and individuals that were interviewed during the fact finding phase of thebusiness for the setting up of the LPG station.

2 Secondly, the reliance on private transporters to deliver LP Gas hinders the

operations of the company. This is because, despite formal arrangements,transporters are not obliged to deliver LP Gas orders, and it is trade practice thatdiversions of products meant for location are diverted to other unauthorized locations.

3.5.3 The company will address this weakness by registering with more than one OilMarketing Company to ensure reliable supplies.




4.0 MARKETING

4.1 Costing And Pricing

The company has no control over both costing and pricing of LP Gas products in thecountry. The government, through its authorized body, National Petroleum TendersBoard, determines the retail price and various margins due to stakeholders.However, the price is reviewed in line with the rise and fall of oil price on the world

market and the general economic circumstances prevailing in the country. Below isthe LPG price build – up which took effect from August 2005. (@ ¢9,200/ $)

Table 2: LPG Price Build upCost Break Down Price Build Up (¢) Price Build Up ($)

Ex – Refinery Price 4.235.11 0.46Excise Duty @ 15% 635.26 0.07

Excise Duty Specific 100.00 0.01

Promotional Levy 640.00 0.07

Cross Subsidy (1,840.42) (0.20)Sub- Total 3,769.95 0.41

Filling Plant Margin 429.23 0.05

Dealers Margin 314.55 0.03

Marketers Margin 257.47 0.03

Transporters Margin (UPPF) 377.21 0.04

Distribution CompensationMargin

30 0.00

Ex – Pump Price 5,178.41 0.56

As a dealer and filling plant owner, the company shall be due to the dealers and filling plantmargins which is ¢456 per every kilogram of LPG sold. There are ongoing negotiations withthe GOIL and Allied capital to pay part of the marketer’s margin to the company as anincentive to market the product since they are not prepared to contribute to the investmentand to be assured of our loyalty to them.




4.2 Marketing Plan

Presently the company is targeting existing LPG users in the community and itsimmediate environments. The main activities that will be undertaken to market theexistence and operation of the station will be:

Banners; during the construction phase of the station banners bearingthe inscription, “PRAMPRAM LPG STATION OPENING SOON” willbe mounted along strategic roads in the community and the district as

a whole. When the station commences operation another banner withthe inscription STATION OPENED will be made.

Sign Boards; miniature sign boards that indicate direction to thestation shall be constructed and fixed at strategic points in the district.

Leaflets and Hand Bills; leaflets shall be published and handed outto commercial vehicle and taxi drivers in the vicinity and residents ofthe Prampram township during residents association meetings ofwhich the managing director is a member. Brochures indicating theusefulness and productive applications will also be published anddistributed.

Bakeries; the main thrust of the marketing efforts of the companyshall be target at bakeries who will present an assured market for the

company. Working Hours; the company shall operate on all days in the year.

During public holidays and Sundays it shall operate from 12:00am to6:00pm. It shall be opened for work from 6:00am to 6:00pm duringordinary days.

Safety; the company shall undertake educational campaigns on thesafe use of LPG for its customers from time to time to allay the fears ofpotential customers of the use of LPG.




5.0 OPERATIONS

5.1 The Entrepreneur

The livewire of the company is Mr. J. B. Nartey who is 38 years old has been workingfull time with the Agricultural Development Bank of Ghana for the past 12 years as acivil engineer/ project officer in the loans and advances department. He isresponsible for construction or development credit appraisals in the bank. He

developed interest in LPG when in 1997, he begun selling LPG (filling of cylinders)for her office colleagues for a fee. Realizing the frustration faced by fellow residentsof the township in securing LPG and the cost involved in hiring taxis for this purposehe embarked on a door – to door service. He gathered cylinders together, hired atruck and fill at the nearest filling station. During each weekend he filled an averageof 30 cylinders a week. He is also a Secretary to the Board of Directors of M38Ventures Limited who happens to be a beneficiary of your program.Owing to the potential the product has in the township and its immediateenvironments he intends to resign and pursue this business full time when therequired funding has been sought and the station established.He holds a BSc. Degree in civil engineering from the Kwame Nkrumah University ofScience and Technology (KNUST), Kumasi, Ghana. He is also an honorary member

of the Ghana Institute of Engineers (GHIE). He has very strong skills in IT andproject management.

5.2 Key Operational Functions

5.2.1 Product is purchased directly from the oil marketing company (GOIL) and this is doneby bank transfer receipt sent to the area office of the marketing company. A requestis made by the area officer and product is delivered within 48 hours. Stock levels willbe taken daily at 5:45 am and recorded before work starts and it is again taken afterclose of work and recorded.

To fill cylinder, the customers’ cylinder is taken to the filling point by a filling attendantand he indicated the size of the cylinder to the recorder who will double as thecashier. The customer will in turn pay to the cashier the required amount for the sizeof the cylinder and receive a chit which would be used to collect the filled cylinderfrom the filling attendant.

5.2.2 LP Gas products procurement, ordering and delivery shall be the sole responsibilityof the managing director. The managing director shall also work closely with thecashier on issues relating to record keeping, stocking and distribution

5.3 PersonnelThe company shall employ 2 experienced filling attendants, cashier/sales record

keeper and a security officer. Contacts have been made with some of thesepersonnel who have working experience with some LPG stations in the city of Accra.

To ensure harmony and good relationship, the managing director will have biweeklymeeting with staff to discuss common and peculiar problems and also shareexperience to continually improve the operations of the company and maintaincustomers.




6. TECHNOLOGY

6.1 Technology Choice

6.1.1 The technology used in the distribution, storage and dispensing of LP Gas isuniversal and standard. The equipment comprises an overhead tank, fitted withinlet and outlet passages for the intake and discharge of the LP Gas. Because ofthe weight of the tank, it is mounted on a reinforced concrete platform. The gastruck discharges the LP Gas in the tank through the intake passage. There is agauge that reads at any given time the quantity of the gas in the tank, and thisensures monitoring.

6.1.2 The LP Gas sales are dispensed into gas cylinders of different weights, but themostly used cylinders are 14.5 kg and 25kg. When the gas is disposed into thecylinders, they are then weighed on an industrial scale so as to establish theveracity of the weight so dispensed. After each sale, an invoice and waybill areraised to cover the sale. Payments are effected to the attendant/ cashier for dailycollection by the bank.

6.1.3 The procedure for dispensing gas into vehicles is very similar to ordinary filling

station, where both the customer and the attendant read the gauge for theamount and quantity.

6.2 Application Of Technology

The LP Gas technology, as mentioned elsewhere in this report, is universal andeasy to apply. Nevertheless, the company ensures the safest working standards.Before customers are served, the attendant checks the valve of the cylinders tomake sure that no leakage exists. In situations where leakages are detected,new washers are fitted at no cost to the customer. Furthermore, customers willbe prevented from entering the filling point.

6.3 Evidence Of Application

LPG filling stations have been operating in Ghana since the early 1990’s.Currently there are several of these stations spread over the whole country.




7. RISK AND MITIGATING FACTORS

Table 3: Risk and Mitigating factorsRisk Mitigative ActionsDifficulty to obtain customers There is a growing demand and market for LPG

within the locality. The local suppliers cannot copewith the demand surge.

High Interest rates on bond The principals intend negotiating a fixed andaffordable interest rate on the term loan

Public vandalism 24 hour private security services and securitysystems will be solicited for the facility.

Theft and fire Property will be adequately insured against fire andtheft.

Management Competence The owners are competent, experienced andprofessional business people. With many years ofexperience in their professional life and industry. Itis believed that they will manage the propertyrental business efficiently.

Competition There is only one LPG supplier in the locality andtheir capacity and service quality come nowherenear the kind of facility that BIL Global Limitedintends to offer to the local community. Customersatisfaction is our ultimate goal and our closeproximity to the customers; we believe would havea unique advantage over our competitor.




8. TIME SCALES

The project intends achieving the following milestones within the six(6) month period ofthe project development in order to fulfill the project objectives:

Table 4: Project Time Scales

ItemNo.

Project Stage/Phase KeyDeliverable

Due date/Deadline

Responsible Person

1 Business Registration CompanyRegistrationDocuments

15/06/14 Project Initiators

2 BusinessCase development

BusinessCase

31/07/14 External Consultants

3 Arrangements forFinancing

ApprovedFunding

21/08/14 Ned bank

4 Land Acquisition &Documentations

Deed ofTransfer &

permits


5 Construction Work A equippedandfurnishedLPG station


6 Plant & EquipmentInstallation

Hired &TrainedStaff


7 ProjectLaunch/Commissioning/Commencement

ProjectCommencement

10/01/15 Project Initiators &Invited Guests




9. FINANCE

9.1 Important Assumptions

BIL Global Limited's plan depends on the assumptions that are made in the followingtable. These are annual and monthly assumptions that show the consistent growth ofthe company.

Some of the underlying assumptions of our financial projections are as follows:

A healthy growth trend in the LPG retail market, along with a continued strong localeconomy.

Stay in line with the continuing advances in renewable energy technology. The company anticipates that its sales growth rate of 15% per year. Management will solicit $68,000 of debt financing to acquire plant, equipment and

operate the facility. The company will capitalize this venture with $4,064. 8% annual increase in operational cost per year. 6 months moratorium on principal payments 7% fixed interest rate on term loan

9.2. Funds Required

At this time, the principals are seeking to raise $68,000 via a traditional four (4) year term loan for the land acquisition, construction, equipping, furnishing and operation ofthe LPG facility at Prampram, Accra .They will capitalize this venture with $4,064 ofequity.

Please refer to Addendum 2 attached for details.




9.3 Source of Funds/Funds Utilization

The project will be financed as follows:

Table 5: Source of Funds /Funds Utilization ($)Description LOAN Own funds Other Total

Pre-operationalexpenses - 394 - 394Initial inventory/rawmaterial 15,300 - - 15,300

Land & buildings 2,075 2,075 - 4,150

Plant & equipment 41,100 - 41,100

Vehicles 8,000 - 8,000Office furniture &equipment - 1,120 - 1,120

Working capital 1,000 1,000 - 2,000

Total 67,475 4,589 - 72,064




The term loan will be used for the initial inventory, land acquisition, construction,plant, equipment, vehicles, furnishing and working capital for operation of the facility.

The equity will be utilized for pre-operational expenses, land acquisition, construction,furnishing and working capital for operation of the facility.

9.4 Projected Income Statement ($)

With a total investment of $72,064 the company’s revenue base is expected to be$241,552 in year one and rise significantly to $367,371 in year four.

Gross margins also average at 12% of sales and this also compares favorably withthe industry average of 5%.

We are projecting a healthy gross margin for the entire four(4) year duration of theproject. This is an aggressive projection that will help our efforts to keep total cost ofsales low while increasing gross margin. We will also have very low marketing costs,due to the public exposure to the units, and good word of mouth around the Prampramarea.

The Net profit after interest and tax (NPAIT) grows from a $12,286 in year one to$29,519 in the fourth year.








9.5 Break-even Analysis

With per month variable costs, the breakeven profit and cash the company needs tocover its yearly costs is shown in the addendum attached. According to the calculations,the company will break-even within its first year of operation.

Please refer to Addendum 3 attached for details




9.6 Projected Cash Flow ($)

The company's cash flow projections showed positive cash balances or reserves

throughout the 4-year period under review. A healthy development for the company.


9.7 Internal Rate of Return and Net Present Value

The discounted cash flow analysis detailed in Addendum gives the internal rate ofreturn of 18% after debt servicing at four (4) years annuity. This is higher than the

weighted average cost of capital (WACC)) of 7% to the project.

The Net present value (NPV) also indicated a substantial positive figure of $61,145.50.

Please refer to Addendum 4 attached for details

9.8 Discounted payback period (DPP)

The projections show that total investment with accrued interest will be paid off by year

two (2).

Refer to Addendum 4 attached for details.




10. CONCLUSIONS

The evaluation of the project indicates that the project is financially viable. The project has

an internal rate of return (IRR) of 18%, which is higher than the weighted average cost of

capital (WACC) to the project (7%).

The projected income statement and cash flows have both confirmed increase in profits,

cash flow position and distributable income.

The potential of BIL Global Limited in Prampram is enormous. Granting sustainable good

management the company is expected to achieve the entire targets set in the plan.

The potential of BIL GLOBAL Limited is enormous. Granting sustainable good management

and planning, the company is expected to achieve all the target set in the plan.




Addendum 1; Basic Financial Data

Name of business: BIL GLOBAL LIMITED

Name of entrepreneur: Mr Joscelyn Bernard Nartey

Foreign exchange rate (amount per $1): 9 250

Company tax rate: 27.0%

Price per Unit 5384

Addendum 2; Funds Required & Sources ofFundsFunds required and sources of funds ($)

$ Description LOAN Own funds Other Total

Pre-operational expenses 394 Pre-operational expenses - 394 - 394

Travel costs 24 Ini tial inventory /raw material 15 300 - - 15 300

Research costs 20 Land & buildings 2 075 2 075 - 4 150

Opening Soon Banners 150 Plant & equipment 41 100 - 41 100

Permits and licences 200 Vehicles 8 000 - 8 000 Other - Office furniture & equipment - 1 120 - 1 120

Working capital 1 000 1 000 - 2 000

Initial inventory/raw material 15 300 Total 67 475 4 589 - 72 064

Share of funds 93.6% 6.4% 0.0% 100.0%

Cost of Funds 7.00 5.00

Weighted cost 0.066 0.003 - 0.069 <============WACC

Total capital expenditure 54 370

Loan details

Land & buildings 4 150 Loan amount ($) 68 000

Leasehold land improvements 3 000 Term of loan (years) 4

Re-zoning - Interest rate (pa) 7%

Fencing 250 Payment frequency quarterly

Utility connection 235 Number of instalments 16

Building 565 Quarterly instalment ($) 4 910

Other 100 Grac e peri od on princ ipal 6 months

Plant & equipment 41 100 Repayment schedule: Principle Interest Instalment Balance

LP G overhead tank (28,500 kg) 25 000 Disbursement 68 000

LPG Electronic Dispenser 8 000 Quarter 1 - 1 190 1 190 68 000

2 Avery 250M/Ton Scale 2 000 2 - 1 190 1 190 68 000

3-Phase Electronic Generator & Pum 5 000 3 3 720 1 190 4 910 64 280

7000 l it re Polytank water reservoi r 600 4 3 785 1 125 4 910 60 496

Pipes gas and water sprinkler system 500 5 3 851 1 059 4 910 56 645

6 3 918 991 4 910 52 727

Vehicles 8 000 7 3 987 923 4 910 48 740

Vehicle 1 8 000 8 4 057 853 4 910 44 683

Vehicle 2 - 9 4 128 782 4 910 40 555

Other - 10 4 200 710 4 910 36 356

11 4 273 636 4 910 32 082

Office furniture & equipment 1 120 12 4 348 561 4 910 27 734 Office furniture 1 000 13 4 424 485 4 910 23 310

Office equipment - 14 4 502 408 4 910 18 808

2 Bucket filled with Sand 20 15 4 580 329 4 910 14 228

Other (Fire Extinguishers) 100 16 4 661 249 4 910 9 567

17 4 742 167 4 910 4 825

18 4 825 84 4 910 0




Addendum 3; IncomeStatementIncome statement ($):

Sales forecast: Year 1 Year 2 Year 3 Year 4

Sales in units 415 000 477 250 548 838 631 163

Price per unit (cedis) 5 384 5 384 5 384 5 384

Sales (cedis) 2 234 360 000 2 569 514 000 2 954 941 100 3 398 182 265

Sales ($) 241 552 277 785 319 453 367 371

Breakeven (cash) 149 390 203 822 215 753 300 184 Breakeven (profit) 139 168 124 363 126 825 121 379

Sales 241 552 277 785 319 453 367 371

Gross profit 28 986 33 334 38 334 44 085

Gross profit % 12.0% 12.0% 12.0% 12.0%

Overhead expenses 16 700 14 924 15 219 14 565

Rent or Property taxes 1 080 1 134 1 191 1 250

Electricity 720 756 794 833

Telephone, fax, cell 120 126 132 139

Marketing 720 756 794 833

Owners remuneration 354 372 390

Salaries and wages 1 836 1 928 2 024 2 125

Transport & travel 420 441 463 486

Maintenance 236 248 260 273

Computer costs 110 116 122 128

Legal fees 59 62 65 68

Pre-operational expenses 394 - - -

Unforseen expenses 32 34 36 38

Interest 4 695 3 826 2 689 1 723

Depreciation 6 278 6 278 6 278 6 278

Net profit before tax 12 286 18 411 23 115 29 519

Tax -

Net profit after tax 12 286 18 411 23 115 29 519



JB NARTEY 2014IMP801Ass1NarteyJB pdf Page 29

Addendum 4; Cash flowforecastCash flow forecast ($)

Description Year 0 Year 1 Year 2 Year 3 Year 4

Sales 241 552 277 785 319 453 367 371

CASH INFLOW

Sales 0 241 552 277 785 319 453 367 371

Total inflow - 241 552 277 785 319 453 367 371

CASH OUTFLOW

Pre-operational Expenses 394 - - - -

Raw material purchases 227 866 244 451 281 119 323 287

Capital expenditure 54 370 - - -

Overhead expenses 13 374 8 646 8 941 8 288

Tax - - -

Principal repayment 7 504 15 813 16 949 27 734.16

Total outflow 54 764 248 744 268 910 307 009 359 309

Net Flows( Surplus / Deficit) (54 764) (7 192) 8 876 12 444 8 062

Bank balance (54 764) (61 956) (53 080) (40 636) (32 574)

Discounted Net flows (54 764) (6 721) 7 752 10 158 6 151

WACC® 0.07

GUESS® 0.10

IRR 18%

NPV 61 145.50

NPVg 58 723.52

DPP(yrs) 1.78