Fortune Business & Property Brokers Contact: Phil Mulcahy ... · Kulin is located in the heart of the WA Wheatbelt only 283kms south east of Perth. Internationally renowned social

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Fortune Business & Property Brokers Licensee Midtime Pty Ltd ABN 91073446983 IBM Building Level 3 1060 Hay Street West Perth WA 6005 Postal: PO Box 1344 Canning Bridge WA 6153 Telephone: (08) 9315 2700 Facsimile: (08) 9315 2755 Email: [email protected] Web: www.fortune.net.au&

Contact: Phil Mulcahy

Phone: 9315 4401

Mobile: 0418 689 423

Fax: 08 9321 0320

Email: [email protected]

Website: www.fortune.net.au&

Kulin&TS&&&DS&profile&.docx&&&&&&&&&&&&&&&&&&&&&&Created&on&24/04/2017&2:34&PM&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Page&2&of&18&

NOTE

1. THE TWO BUSINESSES ONLY MAY BE PURCHASED AND THE BUSINESS PREMISES LEASED WITH A FIRST RIGHT OF REFUSAL TO BUY PREMISES.

OR

2. THE BUSINESS PREMISES AND PROPERTY MAY BE PURCHASED BY ONE PARTY OR RELATED PARTIES ON A WALK IN WALK OUT BASIS WITH SIMULTANEOUS SETTLEMENT OF BOTH THE BUSINESS AND THE FREEHOLD PROPERTY.

I.E.

3. NO OFFERS ON THE PROPERTY ONLY WILL BE CONSIDERED.



• EXTENSIVE LAND AREA (2024M2) CURRENTLY UNDER-UTILIZED.

• EXTENSIVE WAREHOUSE, WORKSHOP AND RETAIL AREA (APPROX 531M2 OF

FLOOR AREA) ALSO UNDER-UTILIZED.

• OUTSTANDING OPPORTUNITY TO BETTER UTILIZE LAND AND BUILDINGS BY

VALUE ADDING TO THE BUILDING AND BUSINESS.

ADD a) A MECHANICAL WORKSHOP

b) ACQUIRE A WHEEL ALIGNMENT FACILITY RATHER THAN SUBCONTRACTING

OUT.

c) MAKE APPLICATION TO BECOME AN AGENT FOR ROYAL AUTOMOBILE

CLUB (RACWA).

d) ACQUIRE EQUIPMENT TO ALLOW THE BUSINESS TO ENGAGE IN THE

PROCESS KNOWN AS COOKING TYRES

e) EXPAND THE RETAIL SPARE PARTS FACILITY.

f) LEASE OUT PORTION OF PREMISES TO OTHER COMPATIBLE BUSINESSES

E.G. AUTO ELECTRICAL, FUEL DEPOT, NURSERY ETC

• CURRENT OWNERS (HUSBAND & WIFE TEAM) HAVE TRADED SINCE 1986 (31

YEARS) AND HAVE BECOME TIRED AND NOW WISH TO RETIRE.

• HEREIN LIES AN OUTSTANDING OPPORTUNITY FOR A YOUNGER PERSON OR

PERSONS TO BUILD ON THESE EXISTING AND WELL ESTABLISHED CURRENTLY

PROFITABLE BUSINESSES AND MAKE BETTER USE OF EXCELLENT PREMISES.!

!


PRICE

FREEHOLD LAND AND BUILDINGS $185,000

TWO BUSINESSES – A) KULIN TYRE SERVICE

B) KULIN DELIVERY SERVICE

PLANT & EQUIPMENT $90,000

GOODWILL $50,000

TOTAL $140,000 Plus Stock at Valuation

STOCK ESTIMATED $46,000

TOTAL FREEHOLD AND & BUSINESSES $325,000 PSAV


KULIN Kulin is located in the heart of the WA Wheatbelt only 283kms south east of Perth. Internationally renowned social entrepreneur and community enthusiast Peter Kenyon has rated Kulin as one of the top 5 best towns in Australia.

The Kulin Region community is progressive, proactive, safe and friendly. As a community, they have achieved some incredible things:

• Our famous Kulin Bush Races are an award winning, 100% voluntarily coordinated and run event

• We have the biggest Waterslide in Regional WA. • Our Tin Horse Highway is recognised as the Wheatbelt’s most popular tourist drive. • Our state-of-the-art Freebairn Recreation Centre is the hub of community life. • Kulin opened the very first Bendigo Community Bank Branch in WA. See more • We were the first town to build a combined FESA and Emergency Services building.

For more on Kulin go to www.kulin.wa.gov.au/news/kulin-rated-as-one-of-top-5-towns-in-australia


THE LAND

The land is relatively flat and appears to be well drained. The land comprises of two 1012m2 lots (Total 2024m2 – half an acre). All of the land (with the exception of the buildings) has either compacted gravel or bitumised hard standing.

TITLE PARTICULARS – Refer Annexure A

61 Day St. Lot 33 Plan 228753 Certificate of Title Volume 1183 Folio 276.

63 Day St - Lot 34 Plan 228753 Certificate of Title Volume 2006 Folio 324.

LAND DIMENSIONS

Lot 33 and 34 are both 20 metre wide and 50 metres long and run lengthways in a NW, SE direction. Lot 33 has frontage to both Day St and High St. Both lots have rear access via a right of carriageway/laneway.

LAND USE Workshop/Tyre Retail/Distribution Services/LP Gas Agency ZONING Industrial. THE BUILDINGS – See Sketch/Site Plan Annexure - B There are two substantial buildings located on the site plus a toilet block and a small storage shed used for gas bottle storage. The building facing High St comprises a brick façade frontage with the remaining construction being of corrugated iron with a concrete floor. This building houses a retail area for motor oils, batteries, belts and other limited motor vehicle parts. There is also an office and small kitchen/crib room. Approximately one half of the building is used as a pick-up and drop-off storage point (Depot) for Kulin Delivery Service. This area also contains racks for some tyre and hose storage. The building is approximately 245m2 and is connected to all services. On the western and some of the southern boundary is a 3-metre verandah used for under cover parking. The second major building is an approximately 286m2 corrugated iron warehouse with concrete floors and has all services connected. This building is used mainly for tyre storage and tyre fitting with its approximately 30-metre length facing Day St. The building has very high and very wide sliding doors allowing heavy vehicles access. This building faces a north/east south/westerly direction and traverses the boundary of 61 and 63 Day St. (See Aerial Photo Annexure C). The buildings are in excellent condition and suitable for servicing large, heavy-duty vehicles. The land surrounding the buildings is extensive and allows easy access and egress and manoeuvrability for heavy duty, articulated, oversized vehicles.


THE BUSINESS

There are two businesses run from the business premises

1. Kulin Tyre Service

2. Kulin Delivery Service

1. Kulin Tyre Service. This business, through the choice of the current proprietors limits itself to tyre supply, repair and fitting, supply of motor oil and limited supply of mechanical accessories such as batteries, fan and industrial belts and industrial hoses and clamps. The business is not involved in any way in providing mechanical services even to the extent that wheel alignment jobs are sub contracted out to a local mechanic. Through choice the current proprietor rarely accedes to the fitting of tyres off the business premises. Herein lies a huge opportunity for a new owner to acquire a vehicle to go to the customer to supply and fit tyres away from the business premises. The business also acts as an Agent for Origin Energy for the supply of household LPG gas bottles. Delivery of gas bottles is limited to the town site only.

2. Kulin Delivery Service. Three overnight trucking companies (Toll Ipec Pty Ltd, Quality Transport and Startrack Express) deliver to the business depot premises on a daily basis. Kulin Delivery Service then sorts freight and delivers as required within the town area only. Alternatively the addressee may pick up from the Kulin Delivery Service premises. Agents are paid by freight companies for sorting and delivery on a consignment and weight/volume basis. Pick ups only occur on request and are of course charged.

HOURS OF TRADING

Monday to Friday 7.00am to 5.00pm

Saturday 7.00am to 11.00am

Sunday Closed.

EMPLOYEES

There are two full time working partners. Neither pay themselves but rather share the profits of the businesses. Owners wages therefore do not therefore appear on the payroll as an expense. Note however that an allowance of $41,000 plus 9.5% Super has been added to expenses when calculating the price of the business on the basis that a Buyer may be a single person and may have to employ someone in lieu of one of the current working partners. The minor wage expense in the Profit and Loss Statements relates to work experience students and this has been added back (deleted from expenses) on the basis that their


employment is a gesture of goodwill and training for the students rather than a necessary real expense to the business. REGISTERED BUSINESS NAMES

1. Kulin Tyre Service. 2. Kulin Delivery but known as Kulin Delivery Service.

Both business names would be transferred to the Buyer at settlement.

PLANT AND EQUIPMENT

A comprehensive list of all plant and equipment is incorporated in this profile as Annexure D.

LICENCES HELD - Refer Annexure E

The current owners trading as Kulin Tyre Service hold 1) A Motor Vehicle Repair Business Licence For A Firm (Licence # MRB 458) issued by the

Department of Commerce WA. This licence gives licence to carry on the business of motor vehicle repairing at or from 61-63 Day St, Kulin. The Buyer would have to acquire such a licence to be authorised to fit tyres.

2) A Certificate of Authorised Premises issued by the Dept of Commerce WA which licences the owner to carry on a business that consists of or includes the carrying out of repair work at or from 61-63 Day St, Kulin. Such a certificate would have to be acquired by a Buyer.

3) A Motor Repairer’s Certificate issued by the Department of Commerce which confirms the individual has the skills and competence to perform the noted class(es) of repairer work.

THE LEASE

Should Buyers wish only to acquire the business for $140,000 PSAV ($47,000 estimated) and not the property, then a new lease would be provided to the Buyer at settlement. Conditions of the lease will include, but not be limited to the following

1) Commencement Date – On Settlement 2) Term – 10 years 3) Option Periods 2 x 5 years 4) Total Term With Option Periods 20 Years 5) Commencement Rent $25,000 Plus GST Plus Outgoings 6) Rent Reviews

a) Annually to CPI b) Market Every Five Years

7) Lessee to have first right of refusal on freehold property. Conversely Lessor to have first right of refusal on business

8) Lessee to be responsible for all repairs and maintenance on the whole property except those repairs of a structural nature.


SUMMARY OF PROFIT AND LOSS

A. Kulin Tyre Service

N.B. A copy of the accountant prepared profit and loss statements which form part of Sellers tax returns are included in this document as Annexure F.

2017 % 2016 % 2015 % 2014 % 2013 % 2012 %

Sales 607,692 100 573,596 100 678,817 100 646,686 100 627,482 100 648,832 100

Cost of Sales 419,998 69.1 428,972 74.8 512,467 75.5 476,091 434,744 401,418

Gross Profit 187,694 30.8 144,624 25.2 166,350 170,595 192,738 247,414

Income Gross Profit 187,694 144,624 166,350 170,595 192,738 247,414 Ins Claim (1) - - 500 - - - Int Rec'd (2) 1,425 1,245 1,599 1,767 2,846 3,142 Total Income 189,119 145,869 168,449 172,362 195,584 250,556

Expenses 44,090 55,289 45,171 37,291 50,340 36,946

NOP 145,029 90,580 123,278 135,071 145,244 213,610

Add Back Ins Claim - - -500 - - - Int Rec'd (1) -1,425 -1,245 -1,599 -1767 -2846 -3142 Depreciation 8,088 11,550 7,882 2,637 3,875 5,535 Int Pd (2) 9 1 - 5 3 23 Capital Exp Write Off (3) - -

- - 4,500 -

Repairs & Main (4) 7,000 - - - - Employees (6) 9,883 14,005 12,867 11,099 3,955 Wages in lieu female partner (5)

-41,600 -41,600 -41,600 -41,600 -41,600 -41,600

Super in lieu female partner (5 -3,952 -3,952 -3,952 -3,952 -3,952 -3,952 Wages Assoc person (5) - -

- - 5,100 5,200

Adjusted NOP $106,149 $72,217 $97,514 $103,261 $121,423 $179,629 Av Net Adjusted Profit 6 years

$113,366


Notes on above Profit and Loss Statements

1) Insurance Claim – Non-Operational 2) Interest Received/Paid – Non-Operational 3) Capital Expenses Write Off - Non-Operational 4) Repairs and Maintenance. In 2016 R&M expenses of $7000 relates to the

bitumising of portion of the yard. This is a capital improvement, which has been expensed for tax purposes.

5) Owners Wages. The Seller (a married couple) advise they work per week approximately a) Male Partner – 44 hours b) Female Partner – 40 hours. Neither pays themselves but simply take drawings. There are therefore no owners wage expenses in the Profit and Loss Statement. In establishing a selling price of a business it is now standard business broker practice to allow for one owners wage as a real ongoing recurring expense on the basis that the Buyer may be a single person who would have to employ wages staff in lieu of another working partner. Therefore an allowance has been made of 40 hours X $20 per hour = $800 per week = $41,600 plus 9.5% super has been negatively added back (i.e. now allowed as an expense in the P&L).

6) Donations are high. This expense relates to proceeds from discarded batteries, which are donated to the local Lions Club. They have not been added back but left as an expense for marketing.

7) Wages Employees. This expense in the P&L relates to high school students who after school are employed by the business for work experience and are paid. Fortune regards this as a credible expense to add back (delete from P&L) on the basis that the payment of work experience students is a gesture of goodwill and not really a true operational expense.

Kul in De l ivery Serv ice .

N.B. A copy of the accountant prepared profit and loss statements which form part of Sellers tax returns are included in this document as Annexure G.

2017 2016 2015 2014 2013 2012

Sales 36,257 35,001 32,395 27,230 25,414 29,861

Expenses 8,228 12,511 6,815 7,025 7,440 8,659

NOP 28,029 22,490 25,580 20,205 17,974 21,202

Add Back Depreciation - 472 673 962 1,373 1,331


Adjusted NOP $28,029 $22,962 $26,253 $21,167 $19,347 $22,533

Av Net Adjusted Profit 5 years $23,382

KDS Average Net Adjusted Profit

$23,382 - 6 years

KTS Average Net Adjusted Profit

$113,366 - 6 years

Average Net Adjusted Profit KDS & KTS combined

$ 136,748 - 6 years

ESTABLISHMENT OF ASKING PRICE – ANY BUSINESS

A business is an investment just like any other investment. If you were to invest in a rental property you would look at the rental return offered and the possibility of a capital gain. For an investment of cash in a term deposit you would consider the interest rate offered. Investment properties offer returns (rent) of anywhere from 4% to 12% or more depending on location and type. Term deposits (cash) can range from as little as 0% to 6% or 7%. A business on the other hand can offer returns of 25% to over 100%!!

Buying a business is an investment like any other. You have to consider the return. Normal investment rules apply - the higher the risk the greater the returns. The lower the risk, the lower the return.

Gone are the days when you added up the business assets and then add one years' net profit as goodwill. Astute purchasers particularly with professional advice require more.

Arriving at a price for a small business is not guess-work using Return on Investment or ROI. ROI is the time it takes to recoup the money invested based on the actual return of a business. If it takes two years to get your investment back you are in effect getting an annual return of 50%.

ROI is your yardstick used by Business Valuers and Business Brokers to determine the price of a business based on sales of similar businesses across Australia.

ROI is now the yardstick used by Business Valuers and Business Brokers to determine the price of a business based on sales of similar businesses across Australia. Return On Investment is the adjusted net profit of the business divided by the total purchase price expressed as a percentage.

That is ROI% = Adjusted Net Profit x 100

Purchase Price OR Purchase Price = Adjusted NOP x 100

ROI%


ESTABLISHMENT OF SUITABLE ROI – KULIN TYRE SERVICES AND KULIN DELIVERY SERVICE

Fortune has to hand a database of like businesses recently sold. The subject business falls under 3 categories; namely Transport, Service Industries and Trades.

Transport businesses recently sold show a range of from 56% to 90%. Service Industry businesses show a range of from 45% to 85% and Trades businesses show a range of from 55% to 100%.

The higher range ROI businesses refer to less profitable, more isolated, less established businesses with a higher risk factor. Remember the higher the ROI the greater the risk, the lower the price.

In establishing a suitable ROI for the subject businesses the following factors have been taken into account.

1 ) Locat ion o f Ku l in i s on ly 2 .5 hours S .E o f Per th and i s loca ted in a we l l -es tab l i shed re l i ab le ra in fa l l a rea . Ku l in i s one o f the more p rogress ive towns in the wheatbe l t and has an exce l len t range o f se rv i ces and fac i l i t i e s .

2 ) The bus iness has been es tab l i shed fo r 31 years and has an exce l len t , cons i s tent , re l i ab le p ro f i t t rack record .

3 ) The p remises f rom wh ich the bus iness opera tes a re outs tand ing w i th an exce l len t co rner exposure in the CBD o f Ku l in . The g rounds and bu i ld ings a re spac ious and idea l l y lend themse lves to add i t iona l and compat ib le bus inesses be ing combined e .g . mechan ica l se rv i ces , o ther t rades , ea r th -mov ing , pav ing , bu i ld ing supp l ies e tc .

4 ) Pro f i t s a re cons i s tent and can be improved w i th bet te r u t i l i sa t ion o f the bu i ld ing p rem ises and g rounds .

Accordingly a 60% ROI factor has been adopted for these businesses.

BUSINESS PROFIT AFTER CONSIDERATION OF FAIR MARKET RENT

The combined businesses average net adjusted profit over 6 years has been established at $136,748. Note this is after the allowance of one owner operator working a 40-hour week at $20 per hour.

From this profit has to be deducted rent for the business premises on the basis that the property could be owned by a third party, in which case the business would be paying market rent on the property. In other words the actual business profit after the consideration of rent needs to be established.


ESTABLISHMENT OF FAIR MARKET RENT

Comparative rents are hard to establish in Kulin. However Fortune has rental evidence in nearby Corrigin and Quairading. Generally, rental returns in these wheatbelt centres ranges from 10% to 13%. Fortune recently sold Quairading Tyre and Battery Supplies where the rent return was 12%. Similarly Fortune has an offer on Corrigin Tyrepower where the price paid for the freehold represents an 11.64% return from rent currently paid.

Actual rent at Quairading for a very similar standard premises and size of property was $25,000 plus GST plus outgoings. Based on this a market rent of $25,000 plus GST plus outgoings has been determined for Kulin Tyre and Kulin Delivery Service premises. The business is easily able to sustain this rent and leave adequate profits for an owner operator after allowing $41,600PA plus Super to a staff member partner.

Note: an allowance in wages expenses of $41,600 plus Super has been already made in lieu of a second working partner/owner.

NET ADJUSTED PROFIT AFTER PAYMENT OF MARKET RENT

Net Adjusted Profit $136,748

Less Rent $25,000

Net Ad jus ted P ro f i t A f te r Rent $111 ,748

ESTABLISHMENT OF ASKING PRICE – KULIN TYRE AND DISTRIBUTION SERVICES

Price = Adjusted Net Profit x100 ROI

111,748 x 100 60

= $186,247

Adopt $186,000

This has been broken down as follows

P lan t and Equ ipment $90 ,000

Goodwi l l and L i cence $50 ,000

Tota l $140 ,000 P lus S tock a t Va lua t ion

S tock es t imated $46 ,000


ESTABLISHMENT OF ASKING PRICE – FREEHOLD LAND AND BUILDINGS

Method 1 . Compara t i ve Sa les

1. Quairading

The most recent comparative sales was 5-9 Jennaberring Road, Quairading. This is the premises of Quairading Tyre and Battery Supplies and sold in October 2016 for $240,000. The improvements were a very similar standard to the subject premises at Kulin. The land at Quairading comprises 3 x 1012m2 adjacent lots whereas the subject land comprises only 2 x 1012m2 adjacent lots.

2. Corrigin

9 Kunjin Street, Corrigin sold March 2017 (under offer not yet settled) for $395,000 land and improvements. Land is twice the size of the two 1012m2 lots at Kulin and comprises 4 x 1012m2 with excellent exposure as has Kulin. Improvements at Corrigin are also considerably larger with Corrigin having substantial sheds with concrete floors, hydraulic hoists and sophisticated fixed plant. Rent of $46,000 plus GST plus outgoings showed an 11.64% return on the achieved selling price of $395,000.

3. Kulin

5 High Street, Kulin. Sold 05/06/2014 for $440,000. Similar sized lot of 2 x 2012m2 adjacent lots but substantially more improvements than the subject. The land is occupied by a extensive retail building housing the towns IGA supermarket. The IGA is diagonally opposite the subject on the corner of Day and High Streets, Kulin.

Method 2 . Cap i ta l i sa t ion o f Fa i r Market Rent

Fair Market Rent has been established at $25,000 P.A. Plus GST Plus Outgoings.

Fair market rent in similar wheatbelt towns represents from 11% to 14% generally for similar properties and improvements. Accordingly an 13.5% capitalisation rate has now been adopted for Kulin Tyre and Kulin Delivery Service.

Return = Rent x100 Price or Price = Rent x 100 Return $25,000 x 100 13.5

= = $185,185

Adopt $185,000 Land and Improvements


WAYS TO IMPROVE/INCREASE BUSINESS

1. Mobile Truck Service

A mobile truck service allowing the business to go to the customer would greatly enhance the sales and profitability of the business. Such a service would avoid costly delays incurred by customers in having to bring vehicles into the business premises thus incurring substantial down-time for the customer.

2. Add a Mechanical Workshop. The premises are spacious enough to incorporate a mechanical workshop. This would provide a one-stop service point for tyre fitting and mechanical repairs. A mechanic could either be employed or part of the premises sub-let to a qualified mechanic.

3. Better Uti l isation of Premises

The premises has the capacity to either employ or sub-let space for the inclusion of compatible trades such as an auto-electrician or fuel depot or building supplies, etc.

4. Acquisit ion of More Plant

This could allow tyre cooking, wheel alignment, etc.

5. Increase Retail ing of Spare Parts and Accessories

The premises are spacious enough to achieve this.

SUMMARY

Land and Improvements $185 ,000

Bus iness

P lan t and Equ ipment $90 ,000

Goodwi l l / L i cences $50 ,000

Tota l $140 ,000 PSAV $140 ,000 PSAV

Tota l $325 ,000 PSAV

S tock Es t imated $46 ,000


CONCLUSION

Herein lies an outstanding opportunity to acquire two profitable businesses with the additional possibility of value adding to the business.

Further there is the opportunity to acquire freehold property with an initial return of 11.11%. The investment is safe as the rent is paid by a business with a 31 year successful trading record and located in a very progressive and wealthy rural centre.


Disclaimer

Information contained in this profile is subject to the following disclaimer.

The information in this profile has been compiled from information supplied by the vendors of the relevant property/business. Fortune Business and Property Brokers has no reason to doubt its accuracy. However, Fortune Business and Property Brokers cannot guarantee the accuracy or content of this report. Nor can Fortune Business and Property Brokers take any responsibility for any estimate, projections, errors or omissions.

Accordingly, all interested parties are recommended to seek independent financial and legal advice concerning the relevant property/business.

EXCLUSIVE)AGENTS)FORTUNE(BUSINESS(AND(PROPERTY(BROKERS(

ALL(ENQUIRIES(

PHIL(MULCAHY(

(08)(9315(4401((or((0418(689(423([email protected]((www.fortune.net.au((

www.realcommercial.com.au((

Documents

Fortune Business & Property Brokers Contact: Phil Mulcahy ... · Kulin is located in the heart of the WA Wheatbelt only 283kms south east of Perth. Internationally renowned social