New co. contract logistics

NewCo. Contract LogisticsInvestment Proposal

By Hashim Al-Fatayerji

0560002340

NewCo. Contracts Logistics 2

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Agenda

Executive Summary

Industry Overview

Financial Model

Financial Projections

SWOT Analysis

Opportunity

7 Organization Chart


Executive Summary:

NewCo. will aim to attract clients who want to outsource their warehousing and distribution operations by providing them with integrated end to end services

NewCo. services will include value added services (packaging, cross ducking, reverse logistics….etc)

The attractiveness of the new venture is based on: Few players in the market most of which are small Growth potential in future logistics offering and geographical growth potential across MENA Vertical integration into other services including freight forwarding and transportation

NewCo. focus will be on growth locally by growing its warehousing capabilities to 120,000 m2, while growing its fleet to 300 vehicles in 5 locations across Saudi Arabia within the next 5 years

Total estimated capital investment SR 20m

The NewCo. will finance growth from local bank loans estimated at SR 40m over the duration of the first 5 years

The investment is expected to deliver an average ROE of 15% over the next 5 years

There is an opportunity to launch a Contract logistics (warehousing & distribution) business with the potential of becoming one of the largest companies in Saudi Arabia in 5 years


Global Logistics Market Breakdown

Series1

Outsourced 8.4%

In-house 91.6%

Freight Forwarding

• Non asset-based service that dispatches shipments via asset based carriers and arranges space for shipments those carriers include sea, air and rail

Contract Logistics (Warehousing & Distribution)

Key logistics ServicesTotal Market value is at US$ 8.3T

Source: Armstrong and Associates, Bain & Co.

• Asset-based or asset-light services that improve, warehousing, distribution with scaled and customized value-added services for client

Transport Management

• Full Truck Load(FTL) and Less than Truck load (LTL) products are moved between two points cross city or cross country


The global Market

Highly Fragmented Logistics market share of Major Players

8%

4%4%

2%2%1%1%1%1%1%

75%

DHL Kuehne + Nagel DB Schenker Nippon ExpressC.H. Robinson Worldwide CEVA Logistics DSV SinotransPanalpina SDV (Bolloré Group) Others

Source: Armstrong and associates At Kearney Reports

• Fragmented industry (4,000 global Players) Concentrated at top end with 10 companies earning 25% revenues of the market in 2014

• Continues consolidation of industry through private equity investments and M&As

• Major Acquisitions: 2015 OPX acquisition of Conway and ND Logistics

• $700 B is 2014 estimate of global SCL market

• Key growth drivers include burgeoning global commerce expanding supply chains, deeper corporate reliance on outsourcing services


Saudi Arabia Economic Market

Favorable Macro Economic

ConditionsIn Saudi Arabia

Improving Business Environment in

Saudi Arabia

Real Demand for logistics

Largest economy in the MENA Region. GDP as of 2013: USD 750 B Sustainable GDP Growth : over 2.5% p. a Increase need to outsource due to the economic downturn

Saudi Arabia’s FDI inflow is the highest in the MENA region Ranked 44th by world bank most attractive country in the world for doing business Improving competitiveness and ease of doing business in Saudi Arabia

Large with high potential: estimated at USD 20 B in 2015 7% expected growth rate in 2015


Opportunity Small & medium companies face continuous challenges to manage their operations

Integrated Services Providers

Current Competitive Landscape Service Gap

• No particular focus on warehousing & distribution

• Limited expertise

• Limited regional coverage

• Lack of integrated solutions

• Delay in delivery

• Limited customization capabilities

• Limited technological capabilities

Automotive

Consumer

Electronics

Healthcare

Construction

Industrial

Client Pain Points

• Non-core Process

• Increasing Complexity

• Technology & Regulations

• Rising costs

• Scale Economics

• Knowledge/Expertise

• Best Process

• Greater Coverage

• Flexibility


NewCo. StrategyFocus on Contract Logistics Solutions

Strategy

• Vision: To become the most respected and admired logistics partner

• Mission: bring value and competitive advantage through best in class logistics solutions

Dedicated Services

Distribution Services

Warehousing Services

Operational Excellence Growth Focus Innovation

Talent & Culture

Information Technology


Warehousing

Turnkey transportation service

Drivers Vehicles Routing & scheduling Management &

administrative support

Solutions design and analysis labor balancing and distribution

synergies across sites A range of dedicated and multi-

customer transportation solutions to meet your service needs

Best practice operational processes, controls and management information

Description :

Logistics Services

For customers who want to outsource entire warehousing, transportation, procurement, engineering and IT services

For customers who still want to manage their overall distribution, but want to outsource vehicle management, drivers, route planning & deliveries

Services:

Distribution Offerings:

NewCo. Business ModelService Offering

Dedicated

For customers who still want to manage their distribution moves, but want to outsource the warehousing operations from it

Inventory management Order processing Bar-coding, re-packaging &

labeling Order fulfillment, pick and

pack, etc. Retail store distribution Return management

programs


Wide Range of potential clients across Saudi Arabia


Service OfferingWarehousing

Y1 Y2 Y3 Y4 Y5 -

10 20 30 40 50 60 70 80 90

0%

10%

20%

30%

40%

50%

60%

Revenue Growth

Y1 Y2 Y3 Y4 Y5

HubsGrowth 1 2 4 8 12

Warehousing Revenue Revenue Expectation in SR m

• We aim to attract S&Ms companies who have continuous expansion needs and warehousing challenges

• We have based our assumptions on 80% pallets utilization and low revenue price base

• Expansion will be in the main Saudi cities and we could grow regional after Saudi leadership positioning is achieved

• Key advantages will be advanced IT system, efficient handling and service flexibility


Service Offering……..Continues Value Added Services:

• Value added service should become a key advantage point of our company positioning

• Our offering flexibility will guarantee long term relationship with the client and upsell on the existing offering

• Those services have not been included in the forecasted revenue due uncertainty and fragmentation of market needs

• The award of those services will be considered as separate project and separate cost structure

Sorting & Consolidating

Light assembly & sub-assemblyManufacturing support

Technical Inspection Cargo loading & unloading

Customized packaging

Customized labelingKittingReverse Logistics


Service Offering…..ContinuesDistribution

• Distribution is strategic because its an easier entry point for the customers and opens the opportunity for contract logistics services

• Service will include most types of trucks and trailers and will grow based on client demand

• Depreciation will be based on 6 years with 30% salvage value

• Resourcing drivers will be the main challenge, however we are planning to attract young Saudis with competitive incentive plan

Y1 Y2 Y3 Y4 Y5 -

5

10

15

20

25

30

35

0%

10%

20%

30%

40%

50%

60%

70%

80%

Distrebution R Growth

Distribution Revenue Revenue Expectation in SR m

Y1 Y2 Y3 Y4 Y5

Fleet Growth 18 53 110 190 290


Geographical Growth plan

Year Expansion Plan

Y1 Jeddah

Y2 Dammam

Y3 Riyadh

Y4 Jubail

Y5 Abha


Performa Income Statement (SR m)

• The company will continue to improve its margins with more economies of scale

• Revenue model is based on:

• 45 SR per pallet monthly income from warehousing with 80% space utilization

• 18,000 SR average monthly income from trailer distribution services

• 6,500 SR monthly income from truck distribution

Y1 Y2 Y3 Y4 Y5RevenueWarehousing 6,601,500 15,403,500 30,807,000 58,374,000 89,262,000 Distribution 1,545,000 4,986,000 11,283,000 20,436,000 32,445,000

Total Revenue 8,146,500 20,389,500 42,090,000 78,810,000 121,707,000

Depreciation 359,000 1,087,000 2,453,000 4,501,000 7,143,000 Insurance 84,375 253,125 590,625 1,096,875 1,771,875 Maintenance 30,900 99,720 225,660 408,720 648,900 Fuel 30,000 90,000 210,000 390,000 630,000

Gross Profit 7,642,225 18,859,655 38,610,715 72,413,405 111,513,225

Salaries 9,699,380 15,834,020 28,729,275 45,621,110 64,677,830 Rent 1,000,000 2,000,000 4,000,000 8,000,000 12,000,000 G & A 1,364,800 1,793,600 2,830,800 4,148,800 5,466,800 Other Dep 942,125 1,408,250 2,261,125 3,887,500 4,571,750 Bad Debt 81,465 203,895 420,900 788,100 1,217,070

Operating Cost 13,087,770 21,239,765 38,242,100 62,445,510 87,933,450

Operating Profit (5,445,545) (2,380,110) 368,616 9,967,895 23,579,776

Interest - 250,000 416,667 500,000 500,000 Zakat - - - 236,697 576,994

Net profit (5,445,545) (2,630,110) (48,051) 9,231,198 22,502,781 -67% -13% 0% 12% 18%

Proforma Income Statement


Performa Cash Flow Statement ( SR m)

• Capital investment will be SR 20 m

• Total borrowing will be around SR 40m within the acceptable debt ratio for banks

• All proceeds will be focused on financing growth mainly in financing assets and salaries

• We might require more borrowing based on more contracts awards of the business services

Y1 Y2 Y3 Y4 Y5

Cash Beginning of the year 20,000,000 9,495,221 11,350,380 7,351,665 2,832,329 Cash In Warehousing 5,941,350 13,863,150 27,726,300 52,536,600 80,335,800 Distribution 1,390,500 4,487,400 10,154,700 18,392,400 29,200,500 Equity Raised Debt Raised 10,000,000 10,000,000 10,000,000 10,000,000

Total Cash In 7,331,850 28,350,550 47,881,000 80,929,000 119,536,300 Total Cash Available 27,331,850 37,845,771 59,231,380 88,280,665 122,368,629

Cash OutInsurance (84,375) (253,125) (590,625) (1,096,875) (1,771,875) Maintenance (24,450) (86,950) (203,370) (376,910) (607,570) Fuel (25,000) (80,000) (190,000) (360,000) (590,000) Salaries (7,759,504) (12,667,216) (22,983,420) (36,496,888) (51,742,264) Rent (1,000,000) (2,000,000) (4,000,000) (8,000,000) (12,000,000) G & A (1,364,800) (1,793,600) (2,830,800) (4,148,800) (5,466,800) Capex (3,810,000) (7,500,000) (13,920,000) (21,060,000) (27,720,000) Opex (3,768,500) (1,864,500) (3,411,500) (6,505,500) (6,505,500) Zakat - - - (236,697) (576,994) Debt Interest Payment - (250,000) (3,750,000) (7,166,667) (10,500,000)

Total Cash out (17,836,629) (26,495,391) (51,879,715) (85,448,337) (117,481,003)

Cash Position 9,495,221 11,350,380 7,351,665 2,832,329 4,887,626

Cash Flow Projections


SWOT Analysis

Strength:

Strong network of clients in need of supply chain logistics services

Strong relationship with all the existing dealers with good rates and payment terms

Limited competition

Large market demand

Opportunities:

To be leading full service provider in the MENA Region Potential for future vertical integration with other industry

focused companies Active M & A industry

Weaknesses:

Capital Intensive Industry Might receive some resistance from clients staff Resourcing experienced and competent team Developing the IT system might become costly

Threats:

Unexpected regularity risk Political Risk Failure to finance growth requirements Failure to manage growth


Proposed Organization Chart

CEO

CFO COO Regional Managers

Marketing Manager IT Manager HR Manager Finance

Manager


Thank You

New co. contract logistics

Business

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