Construction Engineering Business Plan

Indonesia EEC

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Financial Plan

The following sections present the financial analysis for Indonesia EEC.

7.1 Important Assumptions

The accompanying table lists Indonesia EEC's main assumptions for developing its financial projections. The most sensitive assumption is collection days. Indonesia EEC would like to improve collection days to take pressure off of its working capital.

General Assumptions
1999 2000 2001 2002 2003
Plan Month 1 2 3 4 5
Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0

7.2 Break-even Analysis

The following table and chart summarize the Break-even Analysis, including monthly units and sales break-even points.

Break-even Analysis
Monthly Revenue Break-even $905,693
Assumptions:
Average Percent Variable Cost 54%
Estimated Monthly Fixed Cost $416,619

7.3 Projected Profit and Loss

The detailed monthly pro-forma income statement for the first year is included in the appendix. The annual estimates are included below.

Pro Forma Profit and Loss
1999 2000 2001 2002 2003
Sales $100,000,000 $105,000,000 $116,000,000 $125,000,000 $135,000,000
Direct Cost of Sales $54,000,000 $56,700,000 $62,640,000 $67,500,000 $72,900,000
Power System Studies $58,000 $60,900 $63,945 $67,142 $70,499
Total Cost of Sales $54,058,000 $56,760,900 $62,703,945 $67,567,142 $72,970,499
Gross Margin $45,942,000 $48,239,100 $53,296,055 $57,432,858 $62,029,501
Gross Margin % 45.94% 45.94% 45.94% 45.95% 45.95%
Expenses
Payroll $223,848 $246,290 $270,919 $298,011 $327,808
Sales and Marketing and Other Expenses $4,610,000 $4,875,000 $5,430,000 $5,850,000 $6,310,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $6,000 $6,500 $7,000 $7,500 $8,000
Utilities $72,000 $72,000 $72,000 $84,000 $84,000
Insurance $6,000 $6,000 $7,000 $7,000 $8,000
Rent $48,000 $48,000 $48,000 $48,000 $48,000
Payroll Taxes $33,577 $36,944 $40,638 $44,702 $49,171
Other $0 $0 $0 $0 $0
Total Operating Expenses $4,999,425 $5,290,734 $5,875,557 $6,339,213 $6,834,979
Profit Before Interest and Taxes $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521
EBITDA $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $10,235,644 $10,737,092 $11,855,125 $12,773,411 $13,798,630
Net Profit $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891
Net Profit/Sales 30.71% 30.68% 30.66% 30.66% 30.66%

7.4 Projected Cash Flow

Cash flow projections are critical to the company's success. The monthly cash flow is shown in the chart, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here in the following table. Detailed monthly numbers are included in the appendix.

Pro Forma Cash Flow
1999 2000 2001 2002 2003
Cash Received
Cash from Operations
Cash Sales $50,000,000 $52,500,000 $58,000,000 $62,500,000 $67,500,000
Cash from Receivables $53,281,049 $52,129,167 $57,184,167 $61,832,500 $66,758,333
Subtotal Cash from Operations $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333
Expenditures 1999 2000 2001 2002 2003
Expenditures from Operations
Cash Spending $223,848 $246,290 $270,919 $298,011 $327,808
Bill Payments $66,791,937 $73,194,155 $79,537,301 $85,870,683 $92,709,626
Subtotal Spent on Operations $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434
Net Cash Flow $36,265,265 $31,188,721 $35,375,946 $38,163,806 $41,220,899
Cash Balance $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638

7.5 Projected Balance Sheet

The following Balance Sheet table shows healthy growth of net worth and a strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
1999 2000 2001 2002 2003
Assets
Current Assets
Cash $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638
Accounts Receivable $7,416,667 $7,787,500 $8,603,333 $9,270,833 $10,012,500
Other Current Assets $920,380 $920,380 $920,380 $920,380 $920,380
Total Current Assets $70,852,311 $102,411,866 $138,603,645 $177,434,952 $219,397,518
Long-term Assets
Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965
Total Assets $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483
Liabilities and Capital 1999 2000 2001 2002 2003
Current Liabilities
Accounts Payable $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Paid-in Capital $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900
Retained Earnings $30,031,333 $60,738,264 $92,949,539 $128,514,913 $166,835,146
Earnings $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891
Total Capital $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937
Total Liabilities and Capital $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483
Net Worth $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8711, Engineering Services, are shown for comparison.

Ratio Analysis
1999 2000 2001 2002 2003 Industry Profile
Sales Growth 14.29% 5.00% 10.48% 7.76% 8.00% 7.10%
Percent of Total Assets
Accounts Receivable 10.29% 7.51% 6.15% 5.19% 4.54% 35.40%
Other Current Assets 1.28% 0.89% 0.66% 0.52% 0.42% 38.30%
Total Current Assets 98.27% 98.80% 99.11% 99.30% 99.44% 77.40%
Long-term Assets 1.73% 1.20% 0.89% 0.70% 0.56% 22.60%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.17% 5.75% 4.71% 3.97% 3.47% 44.50%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 11.70%
Total Liabilities 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%
Net Worth 90.83% 94.25% 95.29% 96.03% 96.53% 43.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 45.94% 45.94% 45.94% 45.95% 45.95% 0.00%
Selling, General & Administrative Expenses 15.24% 15.26% 15.29% 15.29% 15.28% 81.80%
Advertising Expenses 0.03% 0.04% 0.04% 0.04% 0.04% 0.20%
Profit Before Interest and Taxes 40.94% 40.90% 40.88% 40.87% 40.88% 2.50%
Main Ratios
Current 10.71 17.18 21.04 24.99 28.62 1.69
Quick 10.71 17.18 21.04 24.99 28.62 1.37
Total Debt to Total Assets 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%
Pre-tax Return on Net Worth 62.52% 43.96% 35.59% 29.78% 25.92% 6.00%
Pre-tax Return on Assets 56.79% 41.43% 33.91% 28.60% 25.02% 13.60%
Additional Ratios 1999 2000 2001 2002 2003
Net Profit Margin 30.71% 30.68% 30.66% 30.66% 30.66% n.a
Return on Equity 46.89% 32.97% 26.69% 22.33% 19.44% n.a
Activity Ratios
Accounts Receivable Turnover 6.74 6.74 6.74 6.74 6.74 n.a
Collection Days 60 53 52 52 52 n.a
Accounts Payable Turnover 10.44 12.17 12.17 12.17 12.17 n.a
Payment Days 29 32 29 29 29 n.a
Total Asset Turnover 1.39 1.01 0.83 0.70 0.61 n.a
Debt Ratios
Debt to Net Worth 0.10 0.06 0.05 0.04 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $64,238,199 $96,449,474 $132,014,848 $170,335,081 $211,730,972 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.72 0.99 1.21 1.43 1.63 n.a
Current Debt/Total Assets 9% 6% 5% 4% 3% n.a
Acid Test 9.59 15.87 19.73 23.69 27.31 n.a
Sales/Net Worth 1.53 1.07 0.87 0.73 0.63 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a
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General Assumptions
1999 2000 2001 2002 2003
Plan Month 1 2 3 4 5
Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0
Break-even Analysis
Monthly Revenue Break-even $905,693
Assumptions:
Average Percent Variable Cost 54%
Estimated Monthly Fixed Cost $416,619
Pro Forma Profit and Loss
1999 2000 2001 2002 2003
Sales $100,000,000 $105,000,000 $116,000,000 $125,000,000 $135,000,000
Direct Cost of Sales $54,000,000 $56,700,000 $62,640,000 $67,500,000 $72,900,000
Power System Studies $58,000 $60,900 $63,945 $67,142 $70,499
Total Cost of Sales $54,058,000 $56,760,900 $62,703,945 $67,567,142 $72,970,499
Gross Margin $45,942,000 $48,239,100 $53,296,055 $57,432,858 $62,029,501
Gross Margin % 45.94% 45.94% 45.94% 45.95% 45.95%
Expenses
Payroll $223,848 $246,290 $270,919 $298,011 $327,808
Sales and Marketing and Other Expenses $4,610,000 $4,875,000 $5,430,000 $5,850,000 $6,310,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $6,000 $6,500 $7,000 $7,500 $8,000
Utilities $72,000 $72,000 $72,000 $84,000 $84,000
Insurance $6,000 $6,000 $7,000 $7,000 $8,000
Rent $48,000 $48,000 $48,000 $48,000 $48,000
Payroll Taxes $33,577 $36,944 $40,638 $44,702 $49,171
Other $0 $0 $0 $0 $0
Total Operating Expenses $4,999,425 $5,290,734 $5,875,557 $6,339,213 $6,834,979
Profit Before Interest and Taxes $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521
EBITDA $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $10,235,644 $10,737,092 $11,855,125 $12,773,411 $13,798,630
Net Profit $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891
Net Profit/Sales 30.71% 30.68% 30.66% 30.66% 30.66%
Pro Forma Cash Flow
1999 2000 2001 2002 2003
Cash Received
Cash from Operations
Cash Sales $50,000,000 $52,500,000 $58,000,000 $62,500,000 $67,500,000
Cash from Receivables $53,281,049 $52,129,167 $57,184,167 $61,832,500 $66,758,333
Subtotal Cash from Operations $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333
Expenditures 1999 2000 2001 2002 2003
Expenditures from Operations
Cash Spending $223,848 $246,290 $270,919 $298,011 $327,808
Bill Payments $66,791,937 $73,194,155 $79,537,301 $85,870,683 $92,709,626
Subtotal Spent on Operations $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434
Net Cash Flow $36,265,265 $31,188,721 $35,375,946 $38,163,806 $41,220,899
Cash Balance $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638
Pro Forma Balance Sheet
1999 2000 2001 2002 2003
Assets
Current Assets
Cash $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638
Accounts Receivable $7,416,667 $7,787,500 $8,603,333 $9,270,833 $10,012,500
Other Current Assets $920,380 $920,380 $920,380 $920,380 $920,380
Total Current Assets $70,852,311 $102,411,866 $138,603,645 $177,434,952 $219,397,518
Long-term Assets
Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965
Total Assets $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483
Liabilities and Capital 1999 2000 2001 2002 2003
Current Liabilities
Accounts Payable $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545
Paid-in Capital $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900
Retained Earnings $30,031,333 $60,738,264 $92,949,539 $128,514,913 $166,835,146
Earnings $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891
Total Capital $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937
Total Liabilities and Capital $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483
Net Worth $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937
Ratio Analysis
1999 2000 2001 2002 2003 Industry Profile
Sales Growth 14.29% 5.00% 10.48% 7.76% 8.00% 7.10%
Percent of Total Assets
Accounts Receivable 10.29% 7.51% 6.15% 5.19% 4.54% 35.40%
Other Current Assets 1.28% 0.89% 0.66% 0.52% 0.42% 38.30%
Total Current Assets 98.27% 98.80% 99.11% 99.30% 99.44% 77.40%
Long-term Assets 1.73% 1.20% 0.89% 0.70% 0.56% 22.60%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.17% 5.75% 4.71% 3.97% 3.47% 44.50%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 11.70%
Total Liabilities 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%
Net Worth 90.83% 94.25% 95.29% 96.03% 96.53% 43.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 45.94% 45.94% 45.94% 45.95% 45.95% 0.00%
Selling, General & Administrative Expenses 15.24% 15.26% 15.29% 15.29% 15.28% 81.80%
Advertising Expenses 0.03% 0.04% 0.04% 0.04% 0.04% 0.20%
Profit Before Interest and Taxes 40.94% 40.90% 40.88% 40.87% 40.88% 2.50%
Main Ratios
Current 10.71 17.18 21.04 24.99 28.62 1.69
Quick 10.71 17.18 21.04 24.99 28.62 1.37
Total Debt to Total Assets 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%
Pre-tax Return on Net Worth 62.52% 43.96% 35.59% 29.78% 25.92% 6.00%
Pre-tax Return on Assets 56.79% 41.43% 33.91% 28.60% 25.02% 13.60%
Additional Ratios 1999 2000 2001 2002 2003
Net Profit Margin 30.71% 30.68% 30.66% 30.66% 30.66% n.a
Return on Equity 46.89% 32.97% 26.69% 22.33% 19.44% n.a
Activity Ratios
Accounts Receivable Turnover 6.74 6.74 6.74 6.74 6.74 n.a
Collection Days 60 53 52 52 52 n.a
Accounts Payable Turnover 10.44 12.17 12.17 12.17 12.17 n.a
Payment Days 29 32 29 29 29 n.a
Total Asset Turnover 1.39 1.01 0.83 0.70 0.61 n.a
Debt Ratios
Debt to Net Worth 0.10 0.06 0.05 0.04 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $64,238,199 $96,449,474 $132,014,848 $170,335,081 $211,730,972 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.72 0.99 1.21 1.43 1.63 n.a
Current Debt/Total Assets 9% 6% 5% 4% 3% n.a
Acid Test 9.59 15.87 19.73 23.69 27.31 n.a
Sales/Net Worth 1.53 1.07 0.87 0.73 0.63 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a