the business plan structure -bmom5203 part 2

Name: Mohd. Norizam Md. Salleh (CGS00534317)

Part 2: of 40

Table of Contents

1.0 EXECUTIVE SUMMARY ........................................................................... 3

1.1 INTRODUCTION ......................................................................................... 3

1.2 THE COMPANY ......................................................................................... 3

1.3 COMPANY HISTORY .................................................................................. 4

2.0 CURRENT SERVICES .............................................................................. 6

2.1 COMPANY MISSION ................................................................................... 6

2.2 KEYS TO SUCCESS ................................................................................... 6

3.0 SITUATION ANALYSIS............................................................................. 7

3.1 COMPETITIVE ADVANTAGES....................................................................... 7

3.2 ECONOMIC FORCES .................................................................................. 7

3.3 TECHNOLOGICAL FORCES ......................................................................... 8

3.4 SOSIO- CULTURAL FORCES...................................................................... 12

3.5 LEGAL AND REGULATORY FORCES ........................................................... 12

4.0 BUSINESS ANALYSIS............................................................................ 15

4.1 OPPORTUNITIES ..................................................................................... 15

4.2 STRENGTH ............................................................................................. 15

4.3 WEAKNESS ............................................................................................ 16

4.4 TREAT ................................................................................................... 16

5.0 MARKET ANALYSIS SUMMARY ........................................................... 17

5.1 MARKET SEGMENTATION......................................................................... 17

6.0 STRATEGY AND IMPLEMENTATION SUMMARY ................................ 19

6.1 COMPETITIVE EDGE ................................................................................ 19

6.2 MARKETING STRATEGY ........................................................................... 19

6.3 SALES STRATEGY ................................................................................... 20

6.4 SALES FORECAST................................................................................... 20

7.0 MANAGEMENT SUMMARY.................................................................... 22

7.1 PERSONNEL PLAN .................................................................................. 22


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7.2 MACHINERIES/EQUIPMENTS PLAN ............................................................ 23

7.3 EXPERIENCE AND EXPERTISE ................................................................... 23

8.0 FINANCIAL PLAN ................................................................................... 24

8.1 IMPORTANT ASSUMPTIONS ...................................................................... 24

8.2 BREAK-EVEN ANALYSIS ........................................................................... 24

(FAST4CAST BUSINESS PLAN) ...................................................................... 25

8.3 PROJECTED PROFIT AND LOSS ................................................................ 25

8.4 PROJECTED CASH FLOW AND FUNDING OPTION........................................ 29

8.5 PROJECTED BALANCE SHEET .................................................................. 29

8.6 BUSINESS RATIOS .................................................................................. 31

9.0 PROJECT CONTROLS AND EVALUATIONS........................................ 32

9.1 FINANCIAL CONTROLS ............................................................................. 32

9.2 PERFORMANCE STANDARDS .................................................................... 32

9.3 MONITORING PROCEDURES.................................................................... 33

9.4 PERFORMANCE AUDIT ............................................................................ 34

9.5 PERFORMANCE ANALYSIS ....................................................................... 35

10.0 CONCLUSION ....................................................................................... 36

APPENDIX A: CASH FLOW FOR THE PAST 3 YEARS PERIOD. .............. 37

APPENDIX B: PRO FORMA CASH FLOW FOR NEXT 3 YEARS PERIOD. 38

APPENDIX C: BALANCE SHEET FOR THE PAST 3 YEARS. .................... 39

APPENDIX D: PRESENTATION SIDES. ...................................................... 40


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1.0 Executive Summary

1.1 Introduction

The objective of this paper is to study and determine the new market/technology that the company can invest for its future growth and expansion. A Business Plan for 2011 Proposal is to be submitted to seek a mandate and approval from the top management. Our proposal is for the company participate to participate in “High Speed Broad Band to Homes” project and invest in a new technology, which is the installation of infrastructure fiber optic using micro trenching method. For the past ten years the company core business are installation of varies types of telecommunication cables and carry out maintenance works for some telecommunication company (“Telcos”) using conventional methods namely “open cut” or using “horizontal directional drilling” method. These industries were quite established and there is no room for further expansion. But since most of the “Telcos” are now turn to provide “High Speed Broad Band to Homes” e.g. Telecom, Maxis, Time and etc. the new management had instructed a group of employees to study the potential field and to grab the opportunity in line with national vision to increase the internet speed to business and to household. The “High Speed Broad Band to Homes” not only will increase the internet speed at par to the develop countries but it also offers additional content e.g. telephone line, cable TV, games and others. These sharing facilities not only shall reduce the customer time in managing lesser utilities bills (one stop centre) but in the same time they also can enjoy some saving especially in the long run. 1.2 The Company

Established in year 2000, Cableconst Sdn Bhd has grown to become one of the leading specialised contractors in the telecommunication infrastructure works. Cableconst has a wide range of experience and excellent track record in the installation and lying of telecommunications, civil engineering and horizontal directional drilling works. With more than 70 well trained permanent employees, Cableconst has to date completed more than 500 km of fibres optic cable construction works throughout Malaysia, all involving the Survey and Design and Outside Plant works that serve the industrial, commercial and residential users. Poses it’s own a few horizontal directional drilling (HDD) machines are an advantages to Cableconst.. With these machineries Cableconst is capable of carrying out works at the most rigorous and busy interchange or commercial district with minimal disruption to traffic e.g. crossing railways and highways and activities at the local area.


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Cableconst is a certified ISO 9000: 2000 company, a class “B” contractor registered with Pusat Khidmat Kontractor (PKK) and registered Grade G5 contractor with CIDB. Executive Director Dato’ Sukri Ahmad and Ir. Razali Awang the Managing Director is currently hold the company’s stock. 1.3 Company History

Dato’ Sukri Ahmad and Ir. Razali Awang started the company back in year 2000 when both of them had leave Telecom Malaysia. With a good connection and technology know how, they had started the business from one telecommunication company to another. Starting with RM 100 thousand as paid up capital the company had grew tremendously and now their paid up had reach RM 3 Million. But since last couple of years the company growth had reduced and their profit margin had started to decline. The after tax net profit for the year 2008, 2009 and 2010 had reduced from 435,875.00, 360,333.00 and 270,785 respectively. In 2010 the company's management realised that the company have no more grown sufficiently. Although the sales are increases by 5% annually but the after tax net profit are decline each years. Therefore they had came to the conclusion that the firm have to explore a new market in order keep grow.


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Figure 1: Three Years Past Performances.

Table 1: Three Years Past Performances.

2008 2009 2010

(RM) (RM) (RM) Sales 3,500,000 3,675,000 3,858,750

TOTAL SALES 3,500,000 3,675,000 3,858,750

Less : Cost of sales Purchases 105,000 110,250 115,763 Sub-total 105,000 110,250 115,763 Less : Project cost Site office 24,000 26,400 29,040 Project insurances 7,000 7,700 8,470 Staff (site) salary 600,000 660,000 726,000 EPS/Socsp/PCB 84,000 92,400 101,640 SALES 5,000 5,500 6,050 Water and electricity 5,000 5,500 6,050 Pettycash 60,000 66,000 72,600 Extra-ordinary expenses 5,000 5,500 6,050 Suppliers 700,000 770,000 847,000 Sub-contractors 700,000 770,000 847,000 Sub-total 2,190,000 2,409,000 2,649,900

Gross profit / (loss) 1,205,000 1,155,750 1,093,088

Less : Management Cost Director's remuneration 192,000 211,200 232,320 Insurance 10,000 11,000 12,100 Office rental 48,000 52,800 58,080 Printing and stationeries 2,400 2,640 2,904 Staff (office) salary 180,000 198,000 217,800 EPS/Socsp/PCB 52,080 57,288 63,017 Telephone and fax 12,000 13,200 14,520 Water and electricity 5,000 5,500 6,050 Sub-total 501,480 551,628 606,791 Depreciation Depreciation of fixed assets 50,000 50,000 50,000 Finance cost Interest on loan 80,000 80,000 80,000 Total expenses 631,480 681,628 736,791

Net Profit / (Loss) Before Tax 573,520 474,122 356,297

Net Profit / (Loss) After Tax 435,875 360,333 270,785

% GROSS PROFITS 34% 31% 28% % NET PROFIT / (LOSS) 12% 10% 7% GROSS PROFITS PER MONTH 100,417 96,313 91,091 NET PROFIT / (LOSS) PER MONTH 36,323 30,028 22,565


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2.0 Current Services

Cableconst currently is an OSP maintenance contractor to Messrs Fibercomm Sdn Bhd. and panel contractor to other “Telcos” namely Celcom, Telecom, Maxis, Fiberail and Digi. Currently Cableconst offers the following comprehensive works;

1) Survey and design works for telecommunication works.

2) Installation of telecommunication cables using overhead poles, open cut

and HDD methods

3) Blowing, pulling and slicing cables and all it associated works.

4) Connection to customer premises.

5) Civil works.

6) OSP maintenance works.

7) Emergency repair works.

2.1 Company Mission

In the past, implementation works usually carried out using the open cut and HDD method, with the buying of micro trenching machine the company shall have the capability to also offer to use micro trenching techniques in their works and the most crucial one is to get participate in this business as this new techniques had become a new era for telecommunication installation works. Therefore the company's management came to the conclusion that the firm need to alter its primary target market segment and allowing greater access to investment funds to further fuel its growth.This step shall allow the company to grow further. Shall this proposal is approved by the management we plan to implement this change by early of 2010. 2.2 Keys to Success

The “High Speed Broad Band to Homes” is booming at the moment. In order to achieve a defendable position in this environment, Cableconst must concentrate on the following tasks.

• To participate in “High Speed Broad Band to Homes”. • Secure at least five large scale commercial contracts over the next three

years. • Expand our customer base through expansion into other geographic areas

to retain a sufficient level of profitability. • Increase marketing expenditures by 300% in the first year to increase profit.


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3.0 Situation Analysis

3.1 Competitive Advantages

Having our HQ in Kuala Lumpur is an advantage to us as it is a central position. This shall ease us to mobilise our team to every part of the country. This is important as most of the “Telcos” having their project almost every part of peninsular Malaysia. We also have a counterpart in Sarawak and Sabah which will help us to participate in the Borneo Island. With a good track record in carry out our past job especially within the urban areas, customer satisfaction and a good relation with most of the local authorities, Cableconst has all the advantages to win some job. With intention to procure minimum four unit micro trenching machine in which not many contractor are willing to do so shall add to our advantages. With most of the “Telcos” are participating, the market is growing so fast that the demands are currently greater than the supply. At least RM 15 Billion is to be spent to build up the infrastructure and the entire system in the next 10 to 15 years. Currently the contractors are insufficient and this is an excellent opportunity for us to gain the market share and a defensible position in the industry. Since to grow a specialist contractor technically know how and have a good reputation with the local authorities is not an overnight job therefore we foresee the future is 3.2 Economic Forces

We shall require about RM 500,000.00 thousand to buy the necessary machineries and equipments. On top of that we also need to source some funding preferably “revolving working capital” to finance the additional increase sales. The SME bank is top priority despite it offers facilities for infrastructure companies at a good interest rate Cableconst had already have some facilities. This shall expedite the additional loan since we have a good track record. Since “High Speed Broad Band to Homes” is inspired by our Federal Government we might enjoy a lower interest rate. Due to the same reason we do not anticipate


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3.3 Technological Forces

Participating in “High Speed Broad Band to Homes” works shall involve some new technology and machineries. Some part of the cable laying works shall require micro trencher in order to lay micro ducts using micro trenching techniques and the balance the conventional method still be applied. This technology is new to our country but it has been used in developed country since the past five years. A company in engineering and construction field need to evolve and keep adapting to new technologies to move forward and to survive.


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3.4 Sosio- cultural Forces

This new technology is very environmental friendly whereby big trench excavations are no more required or shall be limited especially within the commercial and residential areas, noise level are low because only involve small cutting machines, less disturbance to traffic as less import/export of excavated/backfill material are required, less dump trucks, less excavation machines, less dust and etc. This is in conjunction to S. Prakash Sethi’s management approaches to Corporate Social Responsibilities. Therefore we anticipate the complaint from public and the local authorities are much lesser to the conventional method. In other words despite the “High Speed Broad Bans to Homes” will prosper the economy, IT industries and business communities this new technology shall bring benefit to the customer, public and the environment. 3.5 Legal and Regulatory Forces

Knowing that this technology is new to our country, Cableconst through our good relation with the local authorities had taken our initiatives to approach some of them to propose for the new method. As anticipated the results are very welcoming. “High Speed Broad Band to Homes” is inspired by our Federal Government therefore we do not anticipate government will give any decision that might affect this industry. In the other hand currently the “Telcos” are enjoying a lot of incentive and subsidies. Below are one of the approval received for this technique;

i) Approval letter from MPS, MPSJ/KEJ/JL-SJ/100-7/15 Jld. 12( ) dated 28/10/2010.


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ii) Approved micro trenching typical drawing; RGSB/HUAWEI/SD/LAT/2 rev. 0.


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4.0 Business Analysis

“High Speed Broad Band to Homes” is booming at this moment, the business growths for the past one year are tremendously. Most of the “Telcos” are participating and do not to be left out from this race. This growth level is expected to continue for at least the next five years within the urban areas and another 5-10 more years throughout Malaysia. One of the prime reasons for this growth is because the high speed broad band/internet has become a necessities and the way of life. Nowadays IT base market and the information technology has become very important in our life.

4.1 Opportunities

With most of the “Telcos” are participating in “High Speed Broad Band to Homes”, the market is growing so fast that the demand is currently greater than the supply. The contractors are currently insufficient. This is an excellent opportunity to gain market share and a defensible position in the industry.

4.2 Strength

Our strength is we have been in this line for the past ten over years. We not only have trained and high qualified and professional workers but we also owned related machineries and equipments. “High Speed Broad Band to Homes” is not a totally using new technology as most of it works are actually requires a mixture with the conventional ways. We have a good contact with the entire industries player, all the “Telcos” and even with many of the local authorities.


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4.3 Weakness

Our setbacks are currently we do not own any micro trenching machine and train workers to handle the machine. But the good news is we have source the machines suppliers e.g. Husqvarna, MK Cutter, Ditch Witch (all are US brand) and Eastern Environmental (Local Company that fabricate their own machine in China). Shall we require the machine urgently we can buy the machine and the working tools from Eastern Environmental which only requires two weeks to be delivered. On the man powers we believed our experience in using the normal road cutter shall be applied here as the machines are quite similar except the cutting capacity and the cutting blade are bigger. 4.4 Treat

Being a specialist contractor, currently it is not many competitors are there in this field. The competitors namely Komasi, Kosi, Drill Ditch, Panca Delima and maybe ten more companies but not many are willing to invest on machineries and equipment. With a good track record in carry out our past job especially within the urban areas, customer satisfaction and a good relation with the local authorities, Cableconst has all the advantages to penetrate the market, especially when we bought the micro trenching machine in which not many contractors had owned and willing to invest on new technology. With most of the “Telcos” are participating the market is growing so fast that the demand is currently greater than the supply. The contractors are not enough. This is an excellent opportunity to gain market share and a defensible position in the industry. One of the greatest limiting factors in telecommunication industry one day the technology used will be end. But we anticipate, this will only happen at least in 10 to 15 years from now. By then we are also need to keep evolve to keep track to the newer technologies.


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5.0 Market Analysis Summary

Due to highly demand forecast on this business especially on the economic point of view, the life style is changing towards IT base, the services and the contents offer, our expectation is this project shall increase the company revenue at 10% per annum in the next five years. This forecast is also base on the market announcements where the company like Telecom and Maxis had announced they are going to spend RM 13 Billion and RM 5 Billions in their five years expansion plan on “High Speed Broad Band to Homes”. This is yet to consider the investment that going to be made by the other “Telcos”. This makes this business are very attractive and sexy. We shall be concentrating on the customers that will provide us with the greatest margin, in other words those clients who offer a good price. This is because most of the “Telcos” are practicing a standard Schedule of Rates (SOR) and once the panel contractor are selected the new registration are freeze. Theoretically the business is very big but we would propose for Cableconst not to be greedy. There shall be a big jump on the first year as we anticipate increasing of company sales from RM 4 Million to RM 12 Million. Reason for this increase is because currently there are not many contractors available as most of them are occupied by all the “Telcos”. 5.1 Market Segmentation

We anticipate that all our present clients (all the “Telcos”) shall sooner or later use this new installation method. For time being we shall concentrate on Telecom and Maxis as they had started to use this method. In long run we shall concentrate to the customers that can provide us with the greatest margin, and those that can offer us a continuously contract e.g. can offer us a long term contract. Therefore all “Telcos” e.g. Telecom, Maxis, Time Telecom, Jalenas, Fibercomm and etc shall be approached and we shall register our company with them.


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Figure 2: Market Analysis (Pie)

Table 2: Market Analysis (Pie) and Annul Forecast Increament.

Forcast Year 2011 2012 2013 2014 2015

RM RM RM RM RM

Project Provider

Yearly Growth (Million) (Million) (Million) (Million) (Million)

Telecom 10% 4.00 4.40 4.84 5.32 5.86

Maxis 10% 3.00 3.30 3.63 3.99 4.39

Jalenas 10% 2.10 2.31 2.54 2.80 3.07

Others 10% 3.00 3.30 3.63 3.99 4.39

Total 10% 12.10 13.31 14.64 16.11 17.72


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6.0 Strategy and Implementation Summary

Cableconst plans to market itself through a variety of methods. We will also approach and try to get registered as a panel contractor to the new “Telcos” company and to those we have yet to be registered. We will also maintain our present client in order to ensure continues job from them. Cableconst has been able to gain a very advantageous supplier contract that will allow Fosse to obtain its materials at a significant discount. This will allow the company to underbid its rivals and make better margin. 6.1 Competitive Edge

In the construction industry the primary ways to compete are through low cost or better project management. One of the most important processes for winning a contract is the bid process. Cableconst has a unique competitive edge over most of its competitors. En. Abu Seman, is the nephew of Ir. Razali Awang, he is the General Manager to one of the major construction material suppliers. Through this relationship, has been able to gain a very advantageous supplier contract allowing Cableconst to obtain its materials at a significant discount. With this edge the company can underbid its rivals and achieve a low cost leadership role. Owned HDD machine and the new micro trenching machine is also an advantages to Cableconst as less sub let works is required and they can control their work themselves and less relying on outside resources. 6.2 Marketing Strategy

Cableconst shall remain service all the “Telcos” that it’s has been registered and also plans to register with the others and the new coming “Telcos” as well. First, we will leverage our pre-existing contacts with all the “Telcos” that we are registered with. While lobbying and participate in tenders we shall approach the “Telcos” and try to get Cableconst to be registered with them. We will also publish advertisement in commercial construction trade magazines, engineering and telecommunication bulletin e.g. IEM, Board of Engineers Bulletin and etc.


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6.3 Sales Strategy

The most critical part of sales is not the marketing, but the bidding process, in which companies offer their designs, services, material quality, project timeline estimates, and costs. The company that offers the best combination of these variables is the most likely to get the contract. Therefore very detailed project planning, including supply agreements, labour needs, subcontractors, presentation, and other factors, is crucial for Cableconst in winning contracts. We will be designing a standardized method for doing this with all our contracts, with an emphasis on quality, timeliness, and low cost to outbid our competitors. 6.4 Sales Forecast

Although the sales forecasts are based on conservative estimates but due to the very strong demand we expected the sales in 2011 to have a big jump by 300% from the sale of year 2009. After that, we plan sales growth to be more consistently by 10% increment for each year.

Figure 3: Forecast Sale for Three Years.


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Table 3: Forecast Sales for Next Three Years

2011 2012 2013

(RM) (RM) (RM)

Sales 12,100,000 13,310,000 14,640,000

TOTAL SALES 12,100,000 13,310,000 14,640,000

Less : Cost of sales

Purchases 363,000 381,150 400,208

Sub-total 363,000 381,150 400,208

Less : Project cost

Site office 48,000 52,800 58,080

Project insurances 24,200 26,620 29,282

Staff (site) salary 2,057,000 2,262,700 2,488,970

EPS/Socsp/PCB 287,980 316,778 348,456

Traveling expenses 20,000 22,000 24,200

Water and electricity 20,000 22,000 24,200

Pettycash 100,000 110,000 121,000

Extra-ordinary expenses 30,000 33,000 36,300

Suppliers 2,783,000 3,061,300 3,367,430

Sub-contractors 2,783,000 3,061,300 3,367,430

Sub-total 8,153,180 8,968,498 9,865,348


Less : Management Cost

Director's remuneration 232,320 255,552 281,107

Insurance 12,100 13,310 14,641

Office rental 58,080 63,888 70,277

Printing and stationeries 2,904 3,194 3,514

Staff (office) salary 217,800 239,580 263,538

EPS/Socsp/PCB 63,017 69,318 76,250

Telephone and fax 14,520 15,972 17,569


Sub-total 606,791 667,470 734,217

Depreciation

Depreciation of fixed assets 150,000 150,000 150,000

Finance cost

Interest on loan 280,000 280,000 280,000

Total expenses 1,036,791 1,097,470 1,164,217

Net Profit / (Loss) Before Tax 2,547,029 2,862,882 3,210,228

Net Profit / (Loss) After Tax 1,884,802 2,118,533 2,375,569

% GROSS PROFITS 30% 30% 30%

% NET PROFIT / (LOSS) 16% 16% 16%

GROSS PROFITS PER MONTH 298,652 330,029 364,537

NET PROFIT / (LOSS) PER MONTH 157,067 176,544 197,964


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7.0 Management Summary

Cableconst's management consists of Executive Director Dato’ Sukri Ahmad and Ir. Razali Awang the Managing Director will concentrate on client contacts and bidding along with overall management of the company. En Zaman Samsuri the company's Senior Project Manager shall coordinating all project management and concentrating on cost controls, suppliers, day-to-day project supervision, labour relations, etc.. En Rahmat Osman our contract/procurement manager will handle client satisfaction, invoicing, permitting, and general book keeping. Most of our labour needs will be met through direct intake. The company is planning to expand it personnel to add a few project manager, project engineer, quantity surveyor, supervisors and safety officers as soon as the number of projects increases. These additional staff will have the following duties:

• Plan, manage and supervise the projects • Direct supervision of all work at the job site. • Quality control. • Scheduling subcontractors and material deliveries. • Verifying and insuring that all work is done in accordance with plans. • Insuring that all work is performed in accordance with all OSHA guidelines.

In addition, as business increases, we will hire additional project managers, project engineers, quantity surveyor, safety officers and supervisors as needed. 7.1 Personnel Plan

Our personnel expansion will be focused on the number of temporary labourers we will employ. The table below gives our estimate of labour costs.


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Table 4: Additional Personnel Plan No 2011 2012 2013 Project Manager 2 168,000.00 168,000.00 168,000.00 Project Engineer 4 144,000.00 144,000.00 144,000.00 Quantity Surveyor 2 72,000.00 72,000.00 72,000.00

Safety Officer 2 144,000.00 144,000.00 144,000.00 Supervisor 8 288,000.00 288,000.00 288,000.00 General Workers 40 720,000.00 720,000.00 720,000.00 Total of Workers 58 58 58 58 Total Additional Payroll 1,536,000.00 1,536,000.00 1,536,000.00

7.2 Machineries/Equipments Plan

Our machineries/equipment expansion will be based how many micro trenching machine that we will buy. The table below gives our estimate of additional labour costs. Table 5: Investment on Additional Machineries/Vehicles.

No 2011 2012 2013 Micro Trencher 4 218,000.00 60,000.00 60,000.00 One Tone Lorry 4 200,000.00 50,000.00 50,000.00 Road cutter 4 14,000.00 3,500.00 3,500.00

Water pump 4 8,000.00 2,000.00 2,000.00 Water tank 4 4,000.00 1,000.00 1,000.00 Generator 4 12,000.00 3,000.00 3,000.00 Total of Workers 24 24 6 6 Total Additional Payroll

478,000.00 119,500.00 119,500.00

7.3 Experience and expertise

Being an OSP contractor for the past ten years, Cableconst had almost enough experiences and expertises to participate in the High Speed Broad Band to Homes projects. The works are mostly the same, except for a few new equipments, some different method of construction and some fine tune on overall works process. All in all the conventional method using open cut and HDD are still required to be used in some areas.


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8.0 Financial Plan

The following sections are Cableconst financial projections for next three years. These tables represent a conservative estimate of revenues, expenses, and growth. As mentioned earlier due to the very strong demand and insufficient of OSP contractors, we expected the sales in 2011 to have a big jump by 245% from the sale of year 2009. After that, we anticipate the sales growth to be more consistently by 10% increment for each year. We plan on basing dividend payouts on overall performance and health of the company and may decide to retain such earnings for future growth. 8.1 Important Assumptions

The following is our estimate of our financial assumptions based on previous experience.

Table 6: General Assumptions

Plan Years 2011 2012 2013

Current Interest Rate 8.00% 8.00% 8.00%

Long-term/Leasing Interest Rate 8.00% 8.00% 8.00%

Tax Rate 26.00% 26.00% 26.00%

Other 0 0 0

8.2 Break-even Analysis

Our break even analysis is based on average monthly fixed costs, which in turn, is based on historical figures, plus our average cost per sales. This estimate is also based on experiences however because of our wide range of potential projects, its accuracy lessens. The average variable costs are based on industry standards.


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(Fast4Cast Business Plan)

8.3 Projected Profit and Loss

The following is our best estimate of future revenues and costs, based on current market trends, past performance, and perceived revenue of our new target market. It is a norm in construction line that the claims will only comes 90 to 120 days from the day we started works. That is why we forecast the first claim will only reach us on the fourth month (April). However, we have anticipated this by buffering ourselves with sufficient cash reserves previously. Expected sales in 2011 will have a big jump of 245% from the


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sale of year 2010. The net profit percentage for the next three years shall be 16% consistently compared to 12%, 10% and 7% for the year 2008, 2009 and 2010 respectively.

Figure 4: 2011 Forecast Monthly Profit/Loss

Figure 5: Forecast Sales by Year


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Figure 6: 2011 Forecast Gross Margin/Loss Monthly

Figure 7: Forecast Gross Margin/Loss Yearly


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Table 7: Pro Forma Profit and Loss for Next Three Years 2011 2012 2013

(RM) (RM) (RM)

Sales 12,100,000 13,310,000 14,640,000

TOTAL SALES 12,100,000 13,310,000 14,640,000

Less : Cost of sales

Purchases 363,000 399,300 439,200

Sub-total 363,000 399,300 439,200 Less : Project cost Site office 48,000 52,800 58,080

Project insurances 24,200 26,620 29,282

Staff (site) salary 2,057,000 2,262,700 2,488,970

EPS/Socsp/PCB 287,980 316,778 348,456

Traveling expenses 20,000 22,000 24,200


Pettycash 100,000 110,000 121,000

Extra-ordinary expenses+B59 30,000 33,000 36,300

Suppliers 2,783,000 3,061,300 3,367,430

Sub-contractors 2,783,000 3,061,300 3,367,430

Sub-total 8,153,180 8,968,498 9,865,348


Less : Management Cost

Director's remuneration 232,320 255,552 281,107

Insurance 12,100 13,310 14,641

Office rental 58,080 63,888 70,277

Printing and stationeries 2,904 3,194 3,514

Staff (office) salary 217,800 239,580 263,538 EPS/Socsp/PCB 63,017 69,318 76,250

Telephone and fax 14,520 15,972 17,569


Sub-total 606,791 667,470 734,217 Depreciation

Depreciation of fixed assets 150,000 150,000 150,000 Finance cost

Interest on loan 280,000 280,000 280,000 Total expenses 1,036,791 1,097,470 1,164,217

Net Profit / (Loss) Before Tax 2,547,029 2,844,732 3,171,235

Net Profit / (Loss) After Tax 1,884,802 2,105,102 2,346,714

% GROSS PROFITS 30% 30% 30%

% NET PROFIT / (LOSS) 16% 16% 16%

GROSS PROFITS PER MONTH 298,652 328,517 361,288

NET PROFIT / (LOSS) PER MONTH 157,067 175,425 195,560


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8.4 Projected Cash Flow and Funding Option.

We do not expect to have any serious cash flow problems running this project provided the company allocate RM 2 Million surplus cash of 2010 P & L. This fund is to be used to finance the project temporarily especially during the first three month. On the third month we shall have about RM 477,385.00 shortage but this can be covered by short term loan or by applying “Revolving Working Capitol” from SME bank or invoice financing from other factoring houses. In the pro forma cash flow we had also considered the interest loan for the “Revolving Working Capitol” and as well as the new leasing for the proposed new machineries/vehicles RM 478,000.00 for 2011 and subsequent RM 119,500.00 each year for 2012 and 2013. The leasing commitment will be end in five years. The Pro Forma cash flow for next three years, please refer to Appendix B.

8.5 Projected Balance Sheet

The following is a presentation of assets and liabilities. Because we have low debt, our net worth is higher than other comparable companies.


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Table 8: Pro Forma Balance Sheet for Next 3 Years.

i FIXED ASSETS 2011 2012 2013

Machineries/Equipment RM 1,200,000.00 RM 1,050,000.00 RM 900,000.00

Accumulated depreciation RM (150,000) RM (150,000) RM (150,000)

Net Book Value RM 1,050,000.00 RM 900,000.00 RM 750,000.00

RM 1,050,000.00 RM 900,000.00 RM 750,000.00

ii CURRENT ASSETS

Cash and bank balance RM 2,184,801.61 RM 4,389,903.38 RM 6,786,617.52

Trade and other debtors RM 500,000.00 RM 450,000.00 RM 300,000.00

RM 2,684,801.61 RM 4,839,903.38 RM 7,086,617.52

iii CURRENT LIABILITIES

Trade and other creditors RM 50,000.00 RM 50,000.00 RM 40,000.00

RM 50,000.00 RM 50,000.00 RM 40,000.00

iv NET CURRENT ASSETS (ii)-(iii)

RM 2,634,801.61 RM 4,789,903.38 RM 7,046,617.52

v NET ASSET (i) + (iv) RM 3,684,801.61 RM 5,689,903.38 RM 7,796,617.52

vii. FINANCED BY :

Share capital RM 3,100,000.00 RM 3,100,000.00 RM 3,100,000.00

Fund deposits/Additional capital

RM RM 0.00 RM 0.00

Net profit / (loss) year 1 RM 1,884,801.61 RM 1,884,801.61 RM 1,884,801.61

Net profit / (loss) year 2 RM 2,105,101.77 RM 2,105,101.77

Net profit / (loss) year 3 RM 2,346,714.15

EQUITY RM 4,984,801.61 RM 7,089,903.38 RM 9,436,617.52

vi. LONG TERM LIABILITY

Term Loan RM 300,000.00 RM 600,000.00 RM 1,000,000.00

Leasing RM 1,000,000.00 RM 800,000.00 RM 640,000.00

RM 1,300,000.00 RM 1,400,000.00 RM 1,640,000.00

vii NET EQUITY RM 3,684,801.61 RM 5,689,903.38 RM 7,796,617.52


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8.6 Business Ratios

The following is a presentation of industry standard ratios vs. our own projections. For the most part, we follow the industry averages. We expect to see the growths for over the next two years to be consistent. Table 9: Ratio Analysis

2011 2012 2013

Sales Growth 245.71% 10.00% 9.99%

Fixed Asset

Net Book Value 133.33% -14.29% -16.67%

Current Asset -8.65% 80.27% 46.42%

Current Liabilities 25.00% 0.00% 80.00%

Net Current Asset -9.11% 81.79% 47.11%

Net Asset 13.42% 54.42% 37.03%

Equity 23.11% 42.23% 33.10%

Long Term Liability 62.50% 7.69% 17.14%

Net Equity 13.42% 54.42% 37.03%


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9.0 Project Controls and Evaluations

9.1 Financial controls

Our computer-based financial management system shall be used. With this system we can review our sales and marketing activities on regular basis. This will allow us to analyse the profitability of sales and these data can be use in our future tender/job. 9.2 Performance standards

Three objectives to measure the project success is whether the project is completed within estimated time, budgeted cost and within client’s acceptable performance, safety and sustainability. Therefore in today’s construction market every project with acceptable sizes shall have it owns Project Quality Manual Plan. A good quality plan will identify all of the organization external and internal customers, cause the design of a process that produce the features desired by the customers, bring in suppliers early in the process, cause the organization to be responsive to changing customers need and prove that the process is working and that quality goals are being met.

Project Quality Plan should be written with the objective to provide project management with easy access to quality requirements and should have ready availability of the procedures and standards thus mentioned.

The following list provides you the various Quality Elements that should be included in a detailed Project Quality Plan:

• Company Quality Policy. Describes and summarized the project’s quality objectives.

• Quality Objectives. Describes the project’s quality objectives.

• Management Responsibility. Describes the quality responsibilities of all stakeholders.

• Documented Quality Management System. This refers to the existing Quality Procedures that have been standardized and used within the organization.

• Design Control. This specifies the procedures for Design Review, Sign-Off, Design Changes and Design Waivers of requirements.

• Document Control. This defines the process to control Project Documents at each Project Phase.


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• Purchasing. This defines Quality Control and Quality Requirements for sub-contracting any part / whole part of the project.

• Method Statement. Defines step by step how to carry out each specified works.

• Test Plan. Procedures for Test Plan shall indicate the procedure and the codes/standards used.

• Inspection Testing. This details the plans for Acceptance Testing and Integration Testing.

• Non-conformance. This defines the procedures to handle any type of non-conformance work. The procedures include defining responsibilities, defining conditions and availability of required documentation in such cases.

• Corrective Actions. This describes the procedures for taking Corrective Actions for the problems encountered during project execution.

• Quality Records. This describes the procedures for maintaining the Quality Records (metrices, variance reports, executed checklists etc) during project execution as well as after the project completion.

• Quality Audits. An internal audit should be planned and implemented during each phase of the project.

• Training. This should specify any training requirements for the project team.

• Handover project. All requirements to close up project e.g. final inspection/testing, documentation etc.

9.3 Monitoring procedures

Quality Assurances shall be used as monitoring procedures. It is a process of evaluating the formal activities, managerial process and overall project performance on a regular basis to ensure that the project will satisfy the required quality standards.

Quality assurance includes all the activities related to satisfying the relevant quality standards for a project. Another goal of quality assurance is continuous quality improvement. Benchmarking can be used to generate ideas for quality improvements. Quality audits in the other hand helps to identify lessons learned that can improve performance on current or future projects. It is the quality assurance function that tries to manage for the project scope, cost and time are fully integrated.

The monitoring procedures must be sufficient to achieve the required objectives expected by the organization. In this regard the procedures must not only be specific and detailed listing all the requirements, but also need to include all the steps to be


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taken to ensure that those requirements and standards are met. Quality assurance (i.e. final product testing) should be independent of the project itself (as well as the project manager). This comes down from the project management guidelines for effective quality assurance, and builds on a broad-based, organizational approach to standards-based product testing.

The Project Management Institute Guide to the Body of Knowledge (PMBOK) refers to quality assurance as the management section of quality management. This is the area where the project manager can have the greatest impact on the quality of his project. (Harold Kerzner, 2009)

Therefore the management process and procedures are important and these processes must be closely observed to guide the project to achieve it’s success.

The process and the result of Quality Assurance shall summarise as follows;

The Input includes: Quality Management Plan, results of quality control measurements and operational definitions.

Methods used: quality planning tools and techniques and quality audits.

Output includes: quality improvement.

9.4 Performance Audit

Periodic, independent, and documented examination and verification of activities, records, processes, and other elements of a quality system to determine their conformity with the requirements of a quality standard such as ISO 9001 : 2008, established quality procedures and policies.

Any failure in their proper implementation may be published publicly and may lead to a revocation of quality certification. Quality Audit is also called as conformity assessment or quality system audit.

The audit shall ensure that the followings are followed;

i) The planned quality for the project will be met.

ii) The products are safe and acceptable for use.

iii) All pertinent laws and regulations are followed.

iv) Whether the project progress is well tracked.

v) Data collection and distribution system are accurate and adequate.

vi) Proper corrective action is taken when required.

vii) Improvement opportunities are identified.


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viii)Whether the usage of resources and raw material is follow the budget.

9.5 Performance Analysis

The process of monitoring specific project results shall be determine to comply with relevant quality standards and identifying ways to eliminate causes of unsatisfactory performance. Such activities include continually monitoring process, identifying and eliminating problem cause, use of statistically process control to reduce the variability and to increase the efficiency of the process.

Buy conducting the Quality Control the organisation’s quality objectives are being control and are to be met.

A good quality control system shall;

i) Select what to control

ii) Set standards that provide the basis for decisions regarding possible corrective action

iii) Establish the measurement method used

iv) Compare the actual results to the quality standards

v) Act to bring nonconforming process and material back to the standard based on the information collected.

vi) Monitor and calibrate measuring devices

vii) Include detailed documentation for all process

Overall the Quality Control shall be summarised as follows;

Input includes: work results, Quality Management Plan, operational definitions, and checklists.

Methods used include: inspection, quality control charts, and compare to diagrams, statistical sampling, flowcharting, Six Sigma, Pareto analysis and trend analysis.

Output includes: quality improvements, process improvement, acceptance decisions, completed checklists, and process adjustments.

With that the company can improve its performance, quality, works process, profit, in making decisions and etc.


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10.0 Conclusion

Our recommendation are as follows;

� To participate in “High Speed Broad Band to Homes”.

� To invest in the new technology (micro trenching) consist of new/additional machineries and personel.

The reasons;

� Increase sales by 245% in the first year and subsequently 10% each years.

� Increase profit by ~612% on the first year and about 11% on subsequent years.

� Due to the shortfall on the capable contractor we anticipate this business is going to be our “Stars” referring to “BCG Growth – Share Matrix”.

� Got very big growth potential if we are willing to invest more.


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Appendix A: Cash Flow For the Past 3 Years Period.


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Appendix B: Pro Forma Cash Flow for Next 3 Years Period.


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Appendix C: Balance Sheet for the Past 3 Years.

Balance Sheet for the Past 3 Years.

i FIXED ASSETS 2008 2009 2010

Machineries/Equipment RM 500,000.00 RM 450,000.00 RM 400,000.00

Accumulated depreciation RM (50,000) RM (50,000) RM (50,000)

Net Book Value RM 450,000.00 RM 400,000.00 RM 350,000.00

ii CURRENT ASSETS

Cash and bank balance RM 1,984,404.80 RM 2,235,255.08 RM 2,758,914.64

Trade and other debtors RM 250,000.00 RM 300,000.00 RM 180,000.00

RM 2,234,404.80 RM 2,535,255.08 RM 2,938,914.64

iii CURRENT LIABILITIES

Trade and other creditors RM 50,000.00 RM 50,000.00 RM 40,000.00

RM 50,000.00 RM 50,000.00 RM 40,000.00

iv NET CURRENT ASSETS (ii)-(iii)

RM 2,184,404.80 RM 2,485,255.08 RM 2,898,914.64

v NET ASSET (i) + (iv) RM 2,634,404.80 RM 2,885,255.08 RM 3,248,914,64

vii. FINANCED BY :

Share capital RM 3,000,000.00 RM 3,010,000.00 RM 3,010,000.00

Fund deposits/Additional capital

RM 10,000.00 RM 0.00 RM 0.00

Net profit / (loss) year 1 RM RM 424,404.80 RM 424,404.80

Net profit / (loss) year 2 RM 350,850.28 RM 350,850.28

Net profit / (loss) year 3 RM 263,659.56

EQUITY RM 3,434,404.80 RM 3,785,255.08 RM 4,048,914.64

vi. LONG TERM LIABILITY

Term Loan RM 300,000.00 RM 350,000.00 RM 400,000.00

Leasing RM 500,000.00 RM 550,000.00 RM 400,000.00

RM 800,000.00 RM 900,000.00 RM 800,000.00

vii NET EQUITY RM 2,634,404.80 RM 2,885,255.08 RM 3,248,914.64


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Appendix D: Presentation Sides.