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Feasibility Study Astron Energy Service Station Muizenberg

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Feasibility Study: Astron Energy (Pty) Ltd Service Station Muizenberg

Feasibility study for a new Caltex branded service station development at:

Rem. of Erf 164232 Cnr Prince George Drive and St. Georges Street, Muizenberg, Western Cape

Fuel Only

Prepared by Ralph McKellar of McKellar & Associates

Prepared by Ralph McKellar of McKellar & Associates

[email protected]

083 629 3173



CONTENTS

SUBJECT

EXECUTIVE SUMMARY

BACKGROUND

THE PROPOSED NEW FACILITY – A CALTEX BRANDED SERVICE STATION

THE PROPOSED DEVELOPMENT IN THE CONTEXT OF THE CAPE TOWN METRO

THE LOCATION AND TRADING AREA ANALYSIS

CONSUMER BEHAVIOUR

THE PROPERTY

TRAFFIC STATEMENT

VOLUME PROJECTIONS

EFFECTS ON THE TRADING AREA AND OTHER SERVICE STATIONS

WORKFORCE IMPACT

FINANCIAL VIABILITY

CAPITAL REQUIREMENTS AND FUNDING PLAN

CONCLUSION

ANNEXURE 1 – TRAFFIC COUNTS

ANEXURE 2 – OPERATING EXPENSES



EXECUTIVE SUMMARY

Background Overview

Astron Energy (Pty) Ltd (Astron Energy) intends building a service station and other allied retail businesses on

vacant property that it owns on the Remainder of Erf 164232 located at the corner of Prince Georges Drive and St

Georges Street, Muizenberg (Co-ordinates 34.5.55.86S and 18.28.51.05E). Current zoning is General Business –

Sub-Zone B1 with service station approval.

Astron Energy will continue to own the property and build a service station, convenience store, car wash and a

branded convenience retail complex which will then be leased to a suitably qualified and trained HDSA business

person.

Feasibility Study Objectives

This feasibility study sets out to establish the viability of the proposed development and will form part of the

support documentation required by the Controller of Petroleum Products for the Site and Retail licence

application.

Feasibility Study Outcomes

This feasibility study shows that this new development is viable and meets the objectives of the Petroleum

Products Act 120 of 1977, specifically section 2B as well as Employment Equity goals of the Liquid Fuels Charter.

The following points summarise this outcome:

• Viability & Return on Investment (ROI): Fuel volumes are expected to reach 326 329 litres per month

of combined fuel, split 80:20 Petrol:Diesel in Year 3. This equates to 3 915 949 litres per annum

producing a turnover of R 58 317 430, a Gross Profit of R5 247 509 and a Net Profit of R2 229 757 before

tax and finance charges.

Using fuel allocated working capital for the operational business only, the NPV is a positive of R 2 748

185,51 after 5 years including paying back the Retailers interest free loan within the first 5 years.

Profitability will improve dramatically once this loan has been paid and the Retailer will have a viable

business going forward. The development of this facility in this location makes good financial and

business sense. It provides a positive ROI and positions the new business in a growth community with

future potential.

• Competitor Analysis: An extensive analysis of the local volume potential using sophisticated estimation

techniques and on site observation, coupled with a potential volume draw ranking exercise, indicates that

all viable service stations within a 3km radius of the new development will remain so. There are currnetly

6 service stations operating with a 3km radius of this proposed development with a total volume of 1 730

000 litres and a site average of 289 000 litres per month. It is estimated that 141 000 litres per month

(8%) will come from this area. The balance will be drawn from the scattering of service stations that

surround this area and from which it’s customers are drawn.

• Area Analysis: Area analysis shows a trading area where population density is well established,

upgrading, expanding and growing, where traffic is drawn from local area inhabitants as well as via a

commuter corridor from neighbouring suburbs. The customer base is convenience driven and would

benefit from a well-tailored convenience and fuel offering.

• Employment Opportunities: This new fuel development will provide a total of 25 new permanent jobs

during the operational phase (Petrol Attendants = 18, Cashiers = 4, Management = 1, Administration = 2)

as well as a further 12-15 permanent jobs in the car wash and fast foods side of the business. Temporary

jobs will also be created for local inhabitants during construction. This aligns well with South Africa’s

Broad-based Black Economic Empowerment (BBB-EE) goals in terms of employing individuals from

different Genders, Race Groups, HDSA backgrounds and from within the local community.

• Business Ownership: The business model proposed for this development supports the Liquid Fuels

Charter by putting 100% of the operation of the business 100% into HDSA hands.

BACKGROUND



Astron Energy (Pty) Ltd (Astron Energy) owns a vacant piece of property Remainder of Erf 164232 located at the

corner of Prince Georges Drive and St Georges Street, Muizenberg (Co-ordinates 34.5.55.86S and

18.28.51.05E). It was purchased with the intention of developing a service station and other allied retail

businesses. The required formal approval process was undertaken and in June 2008, after the submission of a

full Environmental Impact Assessment, a Record of Decision (RoD) approving the full project was issued by the

Department of Environmental Affairs and Development Planning. However, due to various circumstances, the

development was put on hold and the RoD subsequently lapsed in 2010.

Circumstances have now changed such that Astron Energy are now keen to develop the service station and other

allied retail businesses on this same property as a Company Owned Retailer Operated (CORO) business. This

location is seen as their best option having evaluated other potential alternative properties in the same area. It is

currently zoned correctly for the desired service station development at General Business – Sub-Zone B1.

It is Astron Energy’s intention to own the property and build a service station, convenience store, car wash and a

branded convenience retail complex that meets the local consumers needs, offering the highest quality and

service standards. The property and business will then be leased to a suitably qualified and trained HDSA

business person or entity. This new complex will provide a needed service to the local residents, the growing local

business community as well as passing commuters, put the business ownership into HDSA hands and provide

new jobs and skills development during construction and operation.

This feasibility study will determine the viability of the proposed business as well as support the required approval

documentation needed to ensure that all the necessary statutory, property and operational licenses, agreements,

studies and approvals are in place.

THE PROPOSED NEW SERVICE STATION AND RETAIL CO-BRANDED FACILITY

It is Astron Energy’s intention to develop a customer focused service station and allied retail business complex

that meets the needs of the local community and passing motorists.

Taking into account the specific requirements of the local growing business and residential community the

intention is to build and offer the following services and benefits:

Service Station

• Vehicle fuelling: a free flowing 4-island toll gate Caltex branded forecourt offering petrol and diesel

using the most modern storage (5 x 30kl underground tanks), dispensing and point of sale equipment

whilst complying with all the applicable Health, Safety, Security and Environmental requirements.

Convenience Centre

• Franchised Convenience Store: a branded alliance convenience store offering basic convenience

foods and household and personal items as well as selected fast foods under known franchises.

• Customer convenience: ATM, toilets, parking, quick payment options amongst others.

Car Wash

• Branded Carwash and Valet: a branded car wash and valet service offering drive-through convenience

and customer waiting facilities.

Fast Food Convenience

• Co-Branded Fast Food: a third party branded alliance providing a still to be determined fast food offering

suitable to the local area requirements.

Site Development Plan

The intended draft layout is shown below.



This new facility will provide the following benefits:

• Facilities: Developing a community based convenience facility that meets the needs of this growing

community, providing a high quality of retail offering, branded convenience and standards of service

• Ownership: Puts 100% business ownership into HDSA hands

• Employment Opportunities: Creates new jobs & skills development and provides a much-needed

service to the local community by:

o Employing people from within the community

o Providing temporary jobs (during the construction phase) as well as permanent jobs (during the

operational phase)

o Employing previously unemployed as opposed to people who are already employed

o Ensuring that all opportunities offer a fair Gender balance between Male & Female staff

o Focusing on employing people from HDSA backgrounds

• Upgrading Area: Transforming a currently vacant and unused property into a modern convenience

establishment with community-focused and visually pleasing facilities.

THIS NEW DEVELOPMENT IN CONTEXT OF THE BROADER CAPE TOWN METRO

The population of the City of Cape Town Metro is estimated to be >4.5 million people with an annual growth rate

of approximately 1-2% over the last 10 years. It is estimated that there are approximately 1 260 000 households

at an average growth rate of 1,6%. Urbanisation is growing, urban spread is occurring and with that the greater

need for community and commuter facilities. Light passenger car ownership is over the 1 000 000 mark with 46%

of households owning more than 1 car. Private vehicles account for 40% of the trips to work with mini-bus taxis



accounting for 30% of the public transport trips. The cost of transport is a high expenditure item in the average

household (23% direct cost/income amongst low-medium income commuters). With car ownership comes the

requirement of private garaging and therefore larger homes. The current declining rail usage is moving

commuters to private vehicles.

The City has a well-developed road and rail network developed radially around the Central Business District with

good penetration into the surrounding suburbs. However, continued growth has seen an increase in traffic, and

therefore an increase in daily commute time (20-25% in the last 4 years), and has placed a burden on the

economy, resources and the City’s transportation system.

The City of Cape Town’s Spatial Development Framework 2040 provides priorities and guidelines to their

capacity and investment focus to cope with the current and future expansion and outlines services and

infrastructure developments anticipated to ensure consumer’s needs and ever growing demands are met.

The City of Cape Town has an Integrated Transport Plan 2018-2023 outlining its strategic view and proposed

developments for the future. This recognises the growing need for identified Urban Transformation Zones as well

as Strategic Commuter Corridors and Integration Hubs.

The Muizenberg Metro is a key part of these considerations and developments and forms part of the Southern

development and commuter corridor.

THE MUIZENBERG METRO

The Muizenberg Metro has a population of 36 857 people and contains 12 245 households, largely formal

dwellings. The Metro is made up of a number of smaller municipalities and suburbs ranging from informal housing

developments through middle-income housing and high-density developments to business and commercial parks.

Despite the land constraints the current high growth in commercial and high-density residential developments is

planned to continue into the mid-term future through reclamation and renewal of existing land and properties.

The proposed Astron Energy service station development is situated close to the Muizenberg Municipality which

has a population of 5 537 people and contains 1 977 households, 99% of which are formal. Muizenberg has been

through significant urban renewal and status change in the last decades. From previously being one of South

Africa’s most fashionable seaside resorts through a period where the beachfront was virtually derelict and visitors

were restricted to local surfers through a period of local focus and investment that has seen a revival into a

significantly upgraded seaside resort community and holiday destination surrounded by a demographic mix of old

and new residential property, high density developments, lifestyle care centres and progressive business parks. It

is now a desired location for local and international investment, sports and cultural events and tourists and day

visitors.



OVERHEAD VIEW OF THE MUIZENBERG MUNICIPALITY

THE PROPOSED SERVICE STATION TRADING AREA

This proposed Service Station development site is located at the Southern end of the Muizenberg Metro in the

suburb of Costa da Gama, 0,5km from the False Bay coastline and 29km from the Cape Town CBD. It is situated

on Prince George Drive surrounded by a growing development of high-density residential complexes. Prince

George Drive is an extension of the M5 Freeway and one of the primary North/South commuter corridors between

the Southern Coastal towns and the commercial areas of the Cape Town Metro and the CBD of Cape Town, the

other being the M4 Lakeside road. Prince George Drive is a primary route for some commuters and a desired

alternative for others such as commuters from the False Bay Coastline, the M2 and Mitchels Plain via Baden

Powell Drive.



This location is within a rapidly growing middle to upper income old traditional and newly developed residential

area surrounded by high-density developments and growing business parks. It is a commuter corridor as well as

a destination in it’s own right. The trading area is commuter rich with convenience-orientated shoppers.

The recent steady influx of good investment seekers accompanied by on-going infrastructure upgrades and

modernization of the existing older homes has raised the desirability and economic status of this area.

The growing and expanding False Bay coastal belt provides an increasing feed of new commuters and shoppers.

TRADING AREA ANALYIS

The area to the North

To the far North of the site is the CBD of Cape Town and the commercial nodes of the Southern Suburbs of Cape Town. These are high attractors of business and retail commuters utilizing the Prince George Drive corridor.

Closer are found the adjacent residential suburbs of Retreat (35 709 people, 8 316 households, Lavender Hill 32 598 people and 6 504households), Vrygrond (18 498 people and 5 235 households), Sheraton Park (3 111 people, 840 households), Steenberg (4 168 people, 1 062 households), as well as a growing number of high density housing developments and lifestyle centres. The Capricorn Park shopping centre, located 1km north of the site, is a major attraction for shoppers in the area.

The Marina da Gama residential development (3 390 people, 1 419 households), groundbreaking when it was

originally developed, is still considered a desired residential location.

The residential suburbs encompass a mix of income groups so housing ranges from low density residential to

middle income high density housing complexes.

The area to the West



To the West of the site lies the older residential suburbs of Muizenberg (5 537 people, 1 977 households) and

Lakeside (3 801 people, 1 530 households). Combined these have a population of 9 338 people and contain 3

507 formal housholds.

The area to the South

To the South lies the coastline of False Bay with restricted development opportunities and environmental

management controls. However the Southern False Bay Coastline, it’s historical significance already a major

drawcard for visitors and tourists, is a rapidly developing residentail and commercial coastal belt.

From Muizenberg to Simonstown older establishments are being carefully developed to retain the authentic look

and fell of the existing historical nature of this important route but to expand and upgrade where needed to ensure

economic viability, growth and sustainability. With this upgrading and modernisation, vacant land is also being

developed. The suburbs are now expanding to the point where Clovelly and Glencairn are almost joind up to the

growing developements of Noordhoek in the West, still retaining the natural beauty of the local environment whilst

adding to the density factor.

These new commuters will make use of the Prince George Drive corridor as one of their routes to the CBDs and

commercail zones of the Cape Metro.

The area to the East



The area to the East contains the Capricorn Business and Technology Park offering world-class conference

facilities and extensive business opportunities in a well-protected environment. Extensions of the business park

are still being developed and offer a growing alternative to the traditional congested business areas within the

Cape Metro.

High-density housing developments and lifestyle complexes have been expanding in this highly sought after area

with land reclamation providing additional growth opportunities. Amongst these are Villa D’Algarve (200

residential units), Ocean Villas (45 residential units), Fisherman’s Village (200 residential units), Capricorn Beach

(630 residential units) to name a few.

Further to the East commuter support for this location would come from the Strandfontein, Pelican Park, Mitchels

Plain as well as the wine land areas where commuters would use Baden Powell Drive as an alternative to the M2.

The new vehicle re-fuelling facility as well as the associated retail offering being planned at this service station will

provide this area with a much needed quality convenience offering that currently underserved for this location.

CONSUMER BEHAVIOUR

This new service station development will become a convenience destination as well as an essential transport

corridor fuelling point for the wide range of potential customers within this trading area. These potential customers

are an eclectic mix of local residents, passing commuters, local business owners and employees and local and

international visitors.

The local residents are consumers from middle and higher income brackets. They are largely families,

established and early starters with busy lifestyles as well as singles and retirees. The employed amongst them

would commonly commute to their place of employment in the morning, returning in the evening. Children would

be dropped and fetched from local schools mornings and afternoons. Evenings and weekends would often be

spent seeking entertainment facilities and retail complexes (shopping retail ‘therapy’). Vehicles are important to

them and there is a premium on owning more than one vehicle per family. Travel by car is a norm. Commuting is

a given.

Interconnectivity is an important aspect of their lives and loyalty is rewarded and appreciated.

Their buying behaviour is a regular visit to the retail store for daily and weekly use items. They are discerning

buyers with an eye for value and a quality bargain. They are price conscious and discerning buyers. They are

however brand conscious and aspirational with a taste for quality and image enhancing products. Convenience,



availability and late shopping hours are important to them. They are convenience shoppers and above average

consumers of fast foods.

Local business owners are price, added value and convenience driven. They would consider fuelling and added

value convenience services as an essential part of their business operation. Fast food and convenience food

offerings are important to their staff. They would utilize these facilities in the early morning, on the way home and

at lunch times. Value, quality and choice are important.

Passing commuters are generally destination focused, busy and selective. Time is of the essence. Convenience

and choice are important to them. Their car is part of their daily grind and well-located fuel and food offers are

part of their morning and evening daily top-ups.

THE PROPERTY – LOCATION OBSERVATION

The Astron Energy owned property is currently vacant land with Prince George Drive running along the Western

boundary and St Georges Street running along the Southern boundary. Eastbourne Road is an unused service

cul-de-sac road on the Eastern boundary. The site is walled on the Northern boundary. The North and Eastern

neighbours are a lifestyle village. To the South across St Georges Street is a high-density upper income

residential development. To the East across Prince Georges Drive is the middle-income suburb of Muizenberg.

GPS Co-ordinates are -34.098862, 18.481010.

Google map

The available property is one Erf and measures approximately 4 300m2.

The intention is to construct the new fuelling facilities and retail facilities as per the indicated Site Development

Plan with access onto St Georges Street and Eastbourne Road.

Zoning

It is currently zoned General Business – Sub-zone B1 which is suitable for a service station and allied retail

businesses.

Business Rights and Licenses



The necessary rights and licenses to operate will be applied for as per the required procedure to ensure

compliance. Amongst these will be the following, for which consultants have been appointed in each specialist

field:

• Environmental Impact Assessment (EIA)

• Traffic Impact Assessment (TIA)

• Site layout and Design

• Site and Retail Operating Licenses

TRAFFIC IMPACT

EXISTING ROAD LAYOUT AND CONDITION

Prince Georges Drive

Prince Georges Drive is a North/South municipal road with two lanes in each direction separated by a solid

planted barrier. It is hard surfaced with formal sidewalks and is in good condition. It has a speed limit of

60km/hour.

St Georges Street

St. Georges Street is a blacktop local east/west feeder road in good condition with formal sidewalks. It has a

speed limit of 60km/hour.

The intersection between Prince George Drive and St Georges Street is stop street controlled on St Georges

Street.

Eastbourne Road

Eastbourne Road is a cul-de-sac and is currently unused. It will be upgraded as necessary to serve as an

alternate entrance/exit to the new service station development.

TRAFFIC COUNTS

Metered 12 hour traffic counts (06h00 – 18h00) at 15-minute drop intervals for all transport types were conducted

on Prince Georges Drive opposite the proposed site in both directions as well as in both directions on St Georges

Street during February 2019. (Refer Annexure 1)

All vehicle traffic counts

Daily counts over 12 hours of all vehicles showed a daily total of 15 139 vehicles passing the site in all

directions. Of these 6 090 were Southbound and 6 751 were Northbound on Prince Georges Drive and 1 045

were Eastbound and 1 253 were Westbound on St Georges Street.

Light vehicle and mini-bus taxis only

For the purposes of the service station portion of this study only the light vehicles and taxis are applicable and

these have been used to calculate the fuel volumes.

Daily counts over 12 hours of light vehicle and mini-bus taxis only shows a total of 14 851 vehicles passing the

site. Of these 6 074 were Southbound and 6 504 were Northbound on Prince Georges Drive and 1 042 were

Eastbound and 1 231 were Westbound on St Georges Street.

To achieve a 24hour estimated count a factor of 25% has been added to the 12hour counts.

The 24hour estimate is therefore 18 564 total light vehicles and mini-bus taxis. Of these 7 593 were Southbound

and 8 130 were Northbound on Prince Georges Drive and 2 841 were Eastbound and Westbound on St Georges

Street.



The morning peak is 07h30 to 08h30 and afternoon peak is 15h30 to 16h30 in both directions.

TRAFFIC GENERATION IMPACT

The proposed service station property is located on the East side of Prince George Drive.

Both the Southbound and Westbound lanes provides good range visibility of the site. However only the

Southbound lane provides easy vehicular access for commuters into St Georges Street.

The Northbound traffic is restricted by a median and potential users of the service station will therefore be

required to cross the Southbound lane north of the site at the crossing point at Windermere Road, about 80m

north of the site and then double back to enter the site.

The Southbound lane will therefore be regarded as primary and the Northbound lane as secondary.

All the vehicles travelling on St Georges Street will have easy access to the site with no restrictions so they will all

be regarded as primary.

Traffic draw rates

The publication “South African Trip Generation Rates” published by the national DOT, RR92/228 (1995)

recommends a trip generation rate for a filling station of 4-5% of the traffic on the adjacent road.

Oil industry assessments will use this range as a base and will range from 2-5% based on a multitude of

impacting factors.

Taking into account the dynamics of this location, the traffic flow patterns as well as fuel industry norms for this

location type and area, the following traffic draws and subsequent fuel volume potential can be calculated.

Draw off the primary lane i.e. Prince Georges Drive Southbound, will be 3,5%.

Draw off the secondary lane i.e. Prince Georges Drive Northbound, will be 1,5%.

Draw off St Georges Street will be 5% of all traffic.

VOLUME PROJECTIONS

Using the above metered traffic count data and draw rates applied to the taxi and light motor vehicles only, the

potential volume can be calculated.

24 hour count light passenger vehicles and taxis only

Lane

24/Hr Light

Traffic Count

Total

Peak Period

AM

Peak Vehicle

/ Hr AM

Peak Period

PM

Peak Vehicle /

Hr PM

Prince George Drive

Southbound – Prime 7 593

07h30-

08h30 540

15h45-

16h45 799

Prince George Drive

Northbound - Secondary 8 130

07h30-

08h30 418

15h45-

16h45 749

St George Street – both

directions 2 841

06h30-

07h30 530

16h45-

17h45 250

Total 18 564

• Traffic counts based on 15 minute drops counted over a 12hour period in February 2019 – taxis and light

vehicles.



• 24 hour counts estimated by adding 25% to 12 hour counts.

Volume estimation - monthly

Traffic Direction Daily Light

Vehicle 24

hour

count

Stop

Generation

Rate

Daily

Vehicle

Stops

Average fill

per visit

/litres

Days

per

month

Monthly All

Fuel Sales

Estimate

Prince George Drive

Southbound – Prime 7 593 3,5% 266 22 28 163 705

Prince George Drive

Northbound - Secondary 8 130 1,5% 122 22 28 75 121

St George Street – both

directions 2 841 5% 142 22 28 87 503

Total 18 564 530 326 329

• An average fill of 22 litres per visit is estimated for this assessment based on the area demographics.

• A 28-day month is used.

• An 80:20 petrol diesel split will be assumed based on area performance and dynamics.

The following table shows monthly projections of petrol and diesel volume for 5 years based on the above

calculations:

Monthly Sales

Litres Year 1 Year 2 Year 3 Year 4 Year 5

Petrol 208 851 234 957 261 063 261 063 266 285

Diesel 52 213 58 739 65 266 65 266 67 876

Total Fuel 261 063 293 696 326 329 326 329 334 161

Monthly Sales:

• Year 1 = 80% potential



• Year 4 & 5 = Petrol growth = 2%. Diesel growth = 4%.

Whilst these sales volumes are primarily based on traffic counts and draw projections they are also reliant on the

offering at the site being a high quality branded fuel outlet supported by a selection of area demanded retail and

convenience services.

EFFECTS ON OTHER SERVICE STATIONS

The following competitor analysis will indicate the current direct trading area volume, the volume and retail

offering of the competitive sites and rank the estimated potential impact of this service station on the area and the

sites within the area.

A 3km radius is initially used to isolate a broad potential trade impact area.



3km service station trading area - competitors

This 3km area contains 6 currently operating service stations (2 BP, 1 Caltex, 1 Engen, 1 Shell and 1 Total),

providing fuel plus a range of retail and added value service offerings. These are tabulated and ranked below

using the indicated ranking scale. The approximately 3km area has been further divided into 3 impact areas.

Whilst proximity provides an indicator of potential available volume, ranking gives an indication of potential draw

and leakage based on natural boundaries, traffic corridors, source and destination logistics, local trading

customer proposition and current customer offers.

Ranking scale used in the tables below:

• 1: In direct trading pattern - High Impact

• 2: In indirect trading pattern – Medium Impact

• 3: In peripheral trading pattern – Marginal Impact

• 4: On the outer limits – Little or no Impact

• 5: Possible impact should conditions change – Either not Pumping or Due for Potential Closure

Actual site volumes, and therefore estimated volume losses, are not known but have been professionally

estimated using sophisticated estimation techniques as well on site observation.

2 KILOMETER RADIUS – 2 SITES

Rank

Brand Name & Address

Road Distance km

Est. monthly fuel Volume

Est. Loss once site opens

% of site Vol

Food and other offers

Comments



1 BP Capricorn Park Motors, Prince George Drive, Capricorn Park

1,8 390 000 58 000 15% - BP Express shop

-Wild Bean Cafe

- ATM - Adjacent to KFC - Adjacent to Pick ‘n Pay shopping centre and MacDonalds

- 4 islands, toll gate free flow

- complex entrance and exit flow a negative

- limited visibility to passing traffic

-shopping centre will always be a large commuter drawcard

1 Engen Eastlake Convenience Centre, Prince George Drive, Eastlake

0,2 290 000 35 000 12% -Quickshop -Corner Bakery

- Steers - ATM

- 4 islands, toll gate free flow

- easy access and egress onto Prince George Drive

- limited visibility

Impact Assessment

2 km area volume litres

monthly

Site average Volume leakage to new site

% of area

volume moving

Capacity to absorb volume loss

680 000 340 000 93 000 14% Good - based Engen Eastlake drawing off secondary traffic flow and BP Capricorn reliant on shopping centre support. Both site will remain viable.

Sites Ranked 1

BP Capricorn Park

The largest volume impact will be felt by the BP site at the Capricorn Park shopping centre some 1,8km North of

the proposed new Astron Energy site. It has a free flowing toll-gate island configuration. It suffers from poor

visibility from passing traffic on Prince George Drive and the entrance and exit configuration are quite complex.



BP Capricorn Park

Being part of a shopping centre complex it is largely a destination site and will therefore always be reliant on the

shopping centre as it’s main draw-card. This site has an average mix of customer retail convenience offers

coupled with those of the shopping centre complex that will maintain the robustness of the packaged offer. Whilst

it will be impacted by the new Astron Energy site it will still remain viable based on it’s retained volume and robust

offering and the shopping centre traffic draw. No staff jobs should be lost.

Engen Eastlake Convenience Centre

With direct access and egress onto Prince George Drive and a 4 island toll-gate island configuration this site has

average traffic flow. It suffers from poor visibility off the primary lane i.e. Northbound on Prince George Drive.

There is no access for Southbound traffic on Prince George Drive due to the median.

Engen Eastlake

It has an adequate retail convenience offering. The Astron Energy new site will impact volumes at this site but it

will still remain viable with no jobs lost.



2 – 3 KILOMETER RADIUS – 4 SITES

R

a

n

k

Brand Name &

Address

Roa

d

Dista

nce

km

Est.

Volume

Est.

Loss

once

site

opens

% of

site

Vol

Food and

other offers

Comments

2 BP Elite/Mace

Motors,Main

Road,

Muizenberg

2,2 170 000 20 000 12% - Kiosk

- Panel

beating and

spray

painting

- hand car

wash

- car sales

- 4 square layout

- access and egress direct to main road

- both lanes of traffic

- low level of customer focus

3 Total Total

Lakeside,

Main Road

Lakeside

4,3 280 000 15 000 5% - Shop - ATM - Car wash - community post boxes - adjacent to shopping centre

- 3 island toll gate - traffic off

secondary service

road

- difficult egress

3 Caltex Coniston

Motors,

Military Road

3,1 310 000 8 000 3% - Shop

- other

businesses

- 4 square forecourt, tight, difficult when busy

- not convenience

focused

3 Shell Community

Motors,

Military Road

3,1 290 000 5 000 2% - Shell shop - Workshop - adjacent to shopping strip

- egress onto secondary road - good basic

convenience offer

Impact Assessment

2 - 3km area volume litres

monthly

Site average Volume leakage to new site

% of area

volume


1 050 000 263 000 48 000 18% Good – estimated volume pull allows all sites that are currently viable to remain viable. The site already on the margin will need to improve their customer offer.



Sites Ranked 2

BP Elite (Mace) Motors

BP Elite Mian Road Muizenberg is an older site with a very limited convenience offering and customer focus. The

current 4 square layout is not free flowing. The site profitability is currently marginal on fuel and the focus has

been on car repairs, washes and sales as a key profit centre.

BP Elite Main Road Muizenberg

Whilst this site is on a traffic route that is not prime for the new Astron Energy site it will lose some volume to the

site mainly because it is not customer focused and not providing the services and facilities that the customers in

that area need. It is estimated that at least 1 job will be lost here.

Sites Ranked 3

Total Lakeside

Total Lakeside has a difficult traffic flow through 3 toll gate islands with no direct access to the main road. It has

an inconvenient access and egress configuration off a service road.

Total Lakeside



The customer conveneince offer is limited and unfocused. It draws destination traffic from the adjacent shopping

centre and reamins vaible largely as a result of this support. It is not on the primary route to lose volume to the

new Astron Energy site but it will be imapcted slightly by a supririor customer focused offering. It will however

remain viable and no jobs will be lost.

Caltex Coniston Motors

This Caltex site is located in Military Road which is not in the direct impact area of the new Astron Energy site.

Caltex Coniston Motors Military Road

However a small volume will be lost due to the better customer offer being presented at the new site by those

customers that use Military Road as their route to the M3 and Main Road. This site will remain viable and no jobs

will be lost.

Shell Community Motors Military Road

As with Coniston Motors above some volume will be lost but it will remain viable and no jobs will be lost.

Shell Community Motors Military Road



The extended 2-3km radius area will see small volume shifts from most sites when the new site is complete. As

customers realise that the new site services their convenience needs at all hours the late night and retail focused

customer will begin changing their buying habits. This resultant volume shift will not cause any of these sites to

become non-viable.

Total area impact

0- 3 km area

volume litres

monthly

Site average Volume

leakage to

new rebuild

% of

area

volume


1 730 000 289 000 141 000 8% Excellent – volume spread across all sites. Limited

major impact on any one site. No change to

current viability.

The volume draw from most sites in the trade area is largely scattered and small due to the large area from which

this corridor site draws its volume. The economic and population growth in the surrounding area cater for future

growth. Distinct trade boundaries and traffic corridors allow each currently viable site to remain profitable.

It is therefore proposed that the impact on each service station, except one, in the 3km radius will be small

enough to be absorbed. Job losses will be at an absolute minimum. The jobs created by this new site will absorb

more than is lost to the area.

This growing area will benefit from a new facility that provides for the local customer’s fuel and convenience

needs providing a customer-focused facility that will also bring new volume to this area. This will potentially

benefit all sites in the area.

LOCAL WORKFORCE IMPACT

This new development will positively increase the overall employment in the area by adding temporary

employment during the construction phase and permanent employment during the operational phase.

During the operational phase a total of 25 new permanent jobs will be created to service the fuel section as

follows:

• Petrol Attendants = 18

• Cashiers = 4

• Management = 1

• Administration = 2

The above job count focuses solely on the fuel requirements. Additional permanent jobs will be generated as a

result of the car wash (4), food offers (2-3), franchised food offer (6-10).

This development could therefore create an additional 40 new permanent jobs.

It is also feasible that temporary jobs will be required from the local community for ad hoc work requirements

during operations.

Few jobs, if any, will be lost by other competing businesses as a result of this development.

FINANCIAL VIABILITY

In this Service Station development the developer/owner and the retailer will be separate entities. The developer

will be Astron Energy and the retailer will be an appointed business entity operating the business only.

For the purposes of this Feasibility Study the financial requirements and feasibility will be done for the retailer

only.

Whilst the retail convenience offering will be part of the full development, this study will develop the detail on the

fuel section only.



RETAILER PERSPECTIVE (FUEL ONLY)

Monthly Turnover & Margin

Based on the traffic draw calculations done above, the following monthly fuel volumes, turnover and income for a

5year period can be attained.

Combined Monthly Fuel Sales, Turnover and Gross Income

MONTHLY Year 1 Year 2 Year 3 Year 4 Year 5

Sales litres

Petrol 208 851 234 957 261 063 266 285 271 610

Diesel 52 213 58 739 65 266 67 876 70 592

TOTAL FUEL SALES 261 063 293 696 326 329 334 161 342 202

Turnover R

Petrol 2 971 944 3 410 306 3 865 013 4 021 160 4 183 615

Diesel 764 915 877 740 994 772 1 055 255 1 119 414

TOTAL TURNOVER 3 736 860 4 288 046 4 859 786 5 076 415 5 303 029

Income

Petrol 279 860 321 139 363 958 378 662 393 960

Diesel 56 390 64 707 73 335 77 794 82 523

TOTAL INCOME 336 249 385 846 437 292 456 455 476 483

Growth factors:





Pricing (March 2019):

• Retail Petrol: R14,23.

• Diesel price: R14,65. Competitive for the local area.

• 2% increase until Year 5 (selling price predictions of fuel are difficult so a conservative estimate used).

Margins (March 2019):

• Petrol – R1,34 (full margin = R1,98, split Oilco R0,64 and retailer R1,34 as per latest RAS/BSS

allocations at Dec 2018)

• Diesel R1,08 - (based on Wholesale Price of R13,57 for this grid and competitive area selling price).

• Margins were escalated at a constant 2% through until Year 5.

Annual Turnover and Income

Based on the monthly pricing and margin assumptions above the following annual picture emerges.



ANNUAL Year 1 Year 2 Year 3 Year 4 Year 5

FUEL SALE LITRES

Petrol 2 506 207 2 819 483 3 132 759 3 195 414 3 259 323

Diesel 626 552 704 871 783 190 814 517 847 098

TOTAL LITRES 3 132 759 3 524 354 3 915 949 4 009 932 4 106 421

TURNOVER

Petrol 35 663 330 40 923 672 46 380 161 48 253 920 50 203 378

Diesel 9 178 984 10 532 885 11 937 269 12 663 055 13 432 969

TOTAL TURNOVER 44 842 315 51 456 556 58 317 430 60 916 975 63 636 347

INCOME

Petrol gross profit 3 358 318 3 853 670 4 367 492 4 543 939 4 727 514

Diesel gross profit 676 676 776 486 880 017 933 522 990 280

TOTAL INCOME 4 034 994 4 630 155 5 247 509 5 477 461 5 717 794

Operating Expenditure Operating expenses for the first 5 yearts are detailed in Annexure 2.

Goodwill

No goodwill is applicable to this new to industry site.

CAPITAL REQUIREMENTS AND FUNDING PLAN

This funding requirement is limited to the fuel portion of the business only.

Asset Cost R Funding plan

Office equipment 50 000 100 % retailers loan

Fuel stock 1 910 000 100 % retailers loan

Staff uniforms 220 000 100 % retailers loan

Goodwill 100 % retailers loan

TOTAL 2 180 000

• Retailers loan = long term, interest free, unsecured, no fixed payments

• Bank or institution loan = negotiated interest rate (assume prime less 1% = 9,75%) payable over 20 years

– currently not applicable.

Working capital



• Fuel stock: R1 910 000 at March 2019 prices. Tank capacity 5 x 30 000 litres = 150 000 litres. (Ulp – 90

000l x R12,25 = R 1 102 500; diesel 60 000l x R13,57 = R814 200. Total = 1 1916 700).

• Uniforms: Staff uniforms for 18 attendants and 4 cashiers will require an initial capital outlay of R220 000.



PROJECTED CASH FLOW STATEMENT – FUEL ONLY

Projected Cash Flow Statement Year 1 Year 2 Year 3 Year 4 Year 5

FUEL SALES LITRES

Petrol 2 506 207 2 819 483 3 132 759 3 195 414 3 259 323

Diesel 626 552 704 871 783 190 814 517 847 098

TOTAL LITRES 3 132 759 3 524 354 3 915 949 4 009 932 4 106 421

TURNOVER

Petrol 35 663 330 40 923 672 46 380 161 48 253 920

50 203 378

Diesel 9 178 984 10 532 885 11 937 269 12 663 055

13 432 969

TOTAL TURNOVER 44 842 315 51 456 556 58 317 430 60 916 975

63 636 347

INCOME

Petrol gross profit 3 358 318 3 853 670 4 367 492 4 543 939 4 727 514

Diesel gross profit 676 676 776 486 880 017 933 522 990 280

TOTAL INCOME 4 034 994 4 630 155 5 247 509 5 477 461 5 717 794

EXPENSES

TOTAL EXPENSES 2 670 999 2 839 991 3 017 753 3 180 187 3 351 578

PROFIT BEFORE FINANCE CHARGES 1 363 995 1 790 164 2 229 757 2 297 274 2 366 217

FINANCE CHARGES

Retailers loan 438 000 438 000 438 000 438 000 438 000

Bank loan 0 0 0 0 0

Oilco loan recovery margin on all fuel

0 0 0 0 0

Oilco recovery (brand etc) at 2,26% of Retail Margin (+-4cpl) on all fuel 125 310 140 974 156 638 160 397 164 257

SUB-TOTAL 563 310 578 974 594 638 598 397 602 257

PROFIT BEFORE TAX 800 685 1 211 190 1 635 119 1 698 877 1 763 960



NPV

Fuel Portion Only

Based on the above projected income statement and using the full fuel allocated Capex, a positive NPV of R 2 748 185 after Year 5 is achieved.

Year Cashflow In (R) Cashflow Out (R)

Year 0 - 2 190 000

Year 1 800 685

Year 2 1 211 190

Year 3 1 635 119

Year 4 1 698 877

Year 5 1 763 960

NPV R 2 748 185

Assumptions:

Fuels:

Growth factors:





Pricing (March 2019):

• Retail Petrol: R14,23.

• Diesel price: R14,65. Competitive for the local area.

• 2% increase until Year 5 (selling price predictions of fuel are difficult so a conservative estimate used).

Margins (March 2019):

• Petrol – R1,34 (full margin = R1,98, split Oilco R0,64 and retailer R1,34 as per latest RAS/BSS

allocations at Dec 2018)

• Diesel R1,08 - (based on Wholesale Price of R13,57 for this grid and competitive area selling price).

• Margins were escalated at a constant 2% through until Year 5.

Expenses:

• Expenses to increase at 6% per annum over the 5 year period (except where noted).

• Salaries in line with local area MICFA recommendations:

o Attendant compliment of 18. Rated at R29,19/hour.

o Cashier compliment of 4. Rated at 30,72/hour.

Finances:

• Retailers loan = long term, interest free, unsecured, no fixed payments. However, for NPV and cashflow

position assumed to be paid off in 5 years in equal annual instalments



o Total fuel capex allocation: Capital requirement R2 190 000 (R1 9200 000 fuel stock, R220 000

uniforms, R50 000 equipment).

Rate of return:

• Rate of return for the 5year period: 10%.

CONCLUSION

This Feasibility Study has comprehensively analysed the new development, it’s viability and it’s impact on the

local business environment. It concludes that the Service Station complemented by an array of convenience

services is a lucrative and sustainable project with a positive impact on the local area and it’s residents with the

following benefits:

• Viable Return on Investment

• Marginal / Minimal Impact on Competitor Sites

• Uplifting Status of Neighbourhood

• Bridging Gap of Lack of Convenience Services to Resident & Commuters in Area

• Additional Employment Opportunities for individuals of all Genders, Race, Walks of Life

• Business operation – 100% HDSA owned.

---------------------------------------------------------------------------------------------------------------------------------------------------

ANNEXURE 1

TRAFFFIC COUNTS

TUESDAY 5 FEBRUARY 2019

HOURLY COUNT 15MINUTE DROP INTERVALS



276

364

448

649

509512

552

638

732

764

699

608

777786

711

561

635608

700699

720721

876

806

0

100

200

300

400

500

600

700

800

900

1000

6:00 - 7:007:00 - 8:00

8:00 - 9:009:00 - 10:00

10:00 - 11:0011:00 - 12:00

12:00 - 13:0013:00 - 14:00

14:00 - 15:0015:00 - 16:00

16:00 - 17:0017:00 - 18:00

Hourly Traffic Volume

Northbound &

Southbound Hourly Traffic Volum

es -Tuesday 5 Feb 2019(Southbound includes Left Turn into St G

eorges and Left Turn out of St Georges)

Northbound

Southbound







ANNEXURE 2

OPERATING EXPENSES

Expenses Year 1 Year 2 Year 3 Year 4 Year 5

1.0 Financial Expenses 341 342 384 728 430 055 452 853 477 010

1.1 Bank Fees: Bank Charges 297 142 337 876 380 392 400 210 421 209

1.2 Bank Fees: Credit Card Losses

2 200 2 332 2 472 2 620 2 777

1.3 Bank Fees: Credit Card Swipe Machine

4 000 4 240 4 494 4 764 5 050

1.4 Cash Collection Fees 30 000 31 800 33 708 35 730 37 874

1.5 Cash Shortage 8 000 8 480 8 989 9 528 10 100

2.0 Human Resources

1 780 275

1 872 919

1 970 413

2 073 012 2 180 986

2.1 Membership Fees 3 000 3 180 3 371 3 573 3 787

2.2 Owners Remuneration 360 000 381 600 404 496 428 766 454 492

2.3 Total Attendants Wages

1 008 806

1 059 247

1 112 209

1 167 820 1 226 210

2.4 Total Cashier Wages 235 930 247 726 260 112 273 118 286 774

2.5 Total Admin Salaries 143 000 150 150 157 658 165 540 173 817

2.6 UIF 15 662 16 445 17 267 18 131 19 037

2.7 Skills Levy 13 877 14 571 15 300 16 065 16 868

2.8 MIBCO 15 164 16 074 17 039 18 061 19 145

3.0 Services 154 000 163 240 173 034 183 416 194 421

3.1 Audit Fees 18 000 19 080 20 225 21 438 22 725

3.2 Security 72 000 76 320 80 899 85 753 90 898

3.3 Insurance 58 000 61 480 65 169 69 079 73 224

3.4 Professional Fees 3 000 3 180 3 371 3 573 3 787

3.5 Legal Costs 3 000 3 180 3 371 3 573 3 787

4.0 Utilities 170 000 180 200 191 012 202 473 214 621



4.1 Electricity & Water 170 000 180 200 191 012 202 473 214 621

4.2 Rates and Taxes (Owner) 0 0 0 0 0

5.0 Maintenance, Repairs & Housekeeping 18 000 19 080 20 225 21 438 22 725

5.1 Maintenance & Repairs (Buildings) 0 0 0 0 0

5.2 Maintenance & Repairs (Forecourt + P&T) 0 0 0 0 0

5.3 Cleaning Materials 18 000 19 080 20 225 21 438 22 725

6.0 Social Responsibility & Entertainment

25 000 26 500 28 090 29 775 31 562

6.1 Staff Welfare 8 000 8 480 8 989 9 528 10 100

6.2 Donations 5 000 5 300 5 618 5 955 6 312

6.3 Entertainment 12 000 12 720 13 483 14 292 15 150

7.0 General Operational Expenses 104 500 110 770 117 416 124 461 131 929

7.1 Advertisements 26 000 27 560 29 214 30 966 32 824

7.2 Stationery 14 000 14 840 15 730 16 674 17 675

7.3 Staff Uniforms 15 000 15 900 16 854 17 865 18 937

7.4 Motor Vehicle Expenses 25 000 26 500 28 090 29 775 31 562

7.5 Computer Expenses 6 500 6 890 7 303 7 742 8 206

7.6 Ad hoc Expenses 18 000 19 080 20 225 21 438 22 725

7.7 General Expenses 10 000 10 600 11 236 11 910 12 625

7.8 Rental: Driveway / Property 0 0 0 0 0

7.9 Subscriptions 4 500 4 770 5 056 5 360 5 681

7.10 Travel & Accommodation 8 000 8 480 8 989 9 528 10 100

8.0 Telecommunications 37 500 39 750 42 135 44 663 47 343

8.1 Telephone & Fax 30 000 31 800 33 708 35 730 37 874

8.2 Internet 7 500 7 950 8 427 8 933 9 469

9.0 Fuel Related Expenses 40 381 42 804 45 372 48 095 50 980

9.1 Evaporation 20 191 21 402 22 686 24 047 25 490

9.2 Operational Gains & Losses 20 191 21 402 22 686 24 047 25 490



Total Expenses

2 670 999

2 839 991

3 017 753

3 180 187 3 351 578

Notes:

• General:

o Expenses based on a factored combination of historical benchmarks, future projections, BSS

norms and RAS recommendations.

o General increase at 6% per annum over the 5year period except where noted.

• Specific:

o 1.1, 1.2, 1.3: Assumed income split of turnover: Dr. Card = 20%, Cr. Card = 20%, Cash = 60%.

Fee rates: Dr. Card = 0,65%, Cr. Card = 1,20%, Cash = 0,29%.

o 1.4: 5 collection days per week. Rate per collection Year 1 = R650.

o 2.3, 2.4: Salaries in line with local area MICFA recommendations and MIBCO negotiations:

o Attendant compliment of 18. Rated at R29,19/hour.

o Cashier compliment of 4. Rated at R30,72/hour.

o 160 hours per month.

o Wages increase 5% per annum.

o 2.6, 2.7: UIF & Skills levy = 1% annual salaries

o 2.8: MIBCO Rates January 2019

o 7.8: Driveway rental to be determined between Astron and Retailer

Documents

Feasibility Study: Astron Energy (Pty) Ltd Service Station ...€¦ · business going forward. The development of this facility in this location makes good financial and business