Bin Hendi Enterprises

2011 - 2012

Budget review - Draft

 Comparison of 2010 – 11 and 2009 – 10
Projected Audited
Variance
Particular Actual Actual
2010 - 11 2009 - 10 Amount % age

Sales 369,165,981 425,601,744 (56,435,763) -13%

Gross Profit 227,459,356 248,493,235 (21,033,879) -8%
EBIDA (16,421,350) (6,484,467) (9,936,883) -153%
Net Profit / (loss) (48,612,936) (57,944,651) 9,331,715 16%

Operating ratios

Gross margins 62% 58%

EBIDA % -4% -2%
Net margins -13% -14%

Note: The above figures does not include impairment losses of AED 20.9 million during 2009 – 10 which will increase
losses to AED 78 million during 2009 – 10.
Graphical analysis
500,000,000

400,000,000

300,000,000

2010 - 11
200,000,000
2009 - 10

100,000,000

0
Sales Gross profit EBIDA Net profit / (loss)

(100,000,000)
Comparison of 2009-10 Performance Vs 2010-11
 The Groups' revenues have decreased by 56.6 million (13%) i.e. from AED 425.6 million during 2009 –
10 to AED 369 million during 2009 – 10. This decrease is mainly on account of decrease in the
divisional revenues of Food & beverages (AED 19.1 million) , Retail Fashion (AED 39.9 million) and
Accessories division (AED 4.1 million) totaling to AED 63.05 million. This decrease has been partially
offset by increase in revenues of Watches & Jewellery division by AED 6.6 million in comparison to
previous year.

 Gross margins of the Group have increased significantly by 4% i.e. from 58% during 2010 – 11 to 62%
during 2010 – 11. This increase is mainly on account of improvement in margins of Retail Fashion,
Watches & Jewellery and accessories division due to arrival of new stocks to the outlets due to
improvement in LC openings/ payments to suppliers during the second half of the year as compared
to previous year.

 The Group’s losses have increased at the EBIDA level by AED 9.9 million i.e. from AED 6.5 million
during 2009 – 10 to AED 16.4 million during 2010 – 11. This increase is mainly due to increase in
losses of F&B division by AED 10.1 million and Retail Fashion division by AED 9.6 million which has
been partially offset by significant decrease in losses of Jewellery & Accessories Division.

 Despite 13% decrease in revenues the Group has still managed to decrease its losses by AED 9.3
million i.e. from AED 57.9 million during 2009 – 10 to AED 48.6 million during 2010 – 11. This decrease
is mainly due to significant cost cutting efforts made during the year.
 Divisional Breakup of results
All amounts are in AED million

Sales Gross profit EBIDA Net Profit / (loss)

Division
2010-11 2009-10 2010-11 2009-10 2010-11 2009-10 2010-11 2009-10

Food & Beverages 180.05 199.08 135.56 153.29 (10.55) 5.53 (21.46) (29.39)

Retail Fashion 140.20 180.11 71.50 86.84 (6.86) 2.77 (13.58) (14.64)

Watches & Jewellery 35.87 29.26 13.10 9.96 0.06 (11.11) (16.06) (4.12)

Accessories 13.04 17.15 7.30 8.36 0.93 (3.67) (6.85) (0.47)

369.17 425.60 227.46 258.45 (16.42) (6.48) (57.94) (48.61)

Note: The above figures does not include impairment losses of AED 20.9 million during 2009 – 10 which will increase
losses to AED 78 million during 2009 – 10.
Divisional revenue contribution to the group
2010 - 11 2009 - 10

10% 3% 7% 4%
Food & Beverages
49% 47% Food & Beverages

38% Retail Fashion

42% Retail Fashion

Watches &
Watches & Jewellery
Jewellery
Accessories
Accessories
Budget 2011 – 12

Budgeted Projeceted
Variance
Particular Actual Actual
2011 - 12 2010 - 11 Amount % age

Sales 410,042,357 369,165,981 40,876,376 11%

Gross Profit 261,203,293 227,459,356 33,743,937 15%

EBIDA 51,687,345 (16,421,350) 68,108,695 415%

Net Profit / (loss) 17,985,831 (48,612,936) 66,598,767 137%

Operating ratios

Gross margins 64% 62%

EBIDA % 13% -4%
Net margins 4% -13%
Graphical analysis
500,000,000

400,000,000

300,000,000
Budgeted 2011 - 12
200,000,000
Actual 2010 - 11
100,000,000

0
Sales Gross Profit EBIDA Net Profit /
(loss)
(100,000,000)
Revenue contribution 2011 – 12
(Budget) 2011 - 12 (Actual) 2010 - 11

10% 5% 10% 3%
Food & Beverages
42% 49% Food & Beverages

43% Retail Fashion

38% Retail Fashion

Watches &
Watches & Jewellery
Jewellery
Accessories
Accessories
Budget Commentary
 The Group has budgeted revenue growth of AED 40.9 million (11%) i.e. from AED 369.2 million during
2010 – 11 to AED 410 million during 2011 – 12. This increase is mainly on account of increase in
revenues of Retail Fashion by AED 35.3 million, Watches & Jewellery by AED 3.9 million and
Accessories by 6.8 million totaling to AED 46.1 million. The above increase is partially offset by
decrease in revenues of F&B division by AED 5.2 million. The expected decrease is on assumption of
sale of Second Cup during 2011 – 11.

 The Group is expected to increase its gross margins further by 2% i.e. from 62% during 2010 – 11 to
64% during 2009 – 10. This increase will be contributed by increase in gross margins of Retail Fashion
as the Division. Retail Fashion is expected to contribute 43% to sales during 2011 – 12 as compared to
38% during 2010 – 11 which will increase the gross margins as well.

 The Group has also budgeted profit of AED 51.7 million at the EBIDA level and net profit of AED 17.9
million.
Breakeven sales analysis
Food &
Retal Fashion Jewellery Accessories Total
Beverages

Total revenues 175,496,146 174,864,675 40,104,995 19,867,674 410,333,490

Variable costs 74,097,100 44,099,690 21,911,997 8,730,278 148,839,065

Variable costs % to sales 42% 25% 55% 44% 36%

Gross profit 101,399,046 130,764,986 18,192,998 11,137,396 261,494,425

Gross margin % 58% 75% 45% 56% 64%

Fixed costs 84,144,032 132,968,345 17,954,812 8,441,406 243,508,595

Fixed costs % to sales 48% 76% 45% 42% 59%

Net profit / (loss) 17,255,015 (2,203,360) 238,186 2,695,990 17,985,830

Net margins % 10% -1% 1% 14% 4%

Breakeven sales 145,632,072 177,811,105 39,579,934 15,058,377 382,110,370

Sensitivity analysis
5% decrease in 10% decrease in 15% decrease
@ 10% increase
sales & 1% in sales & 2% in in sales & 5% in
in sales
margins margins margins

Total Revenues 389,816,816 369,300,141 348,783,467 451,366,839

Variable costs 145,295,280 141,341,161 143,952,378 163,722,971

Gross margins 244,521,536 227,958,980 204,831,088 287,643,868

Fixed costs 243,508,595 243,508,595 243,508,595 243,508,595

Net profit / (loss) 1,012,941 (15,549,615) (38,677,507) 44,135,273

Comments
The Company is expected to achieve a revenue of only AED 28 million over the breakeven point. It is very
necessary to keep all the important aspects to achieve these targets in mind as 10% deviation from
budgets, even 5% - 10% will result in losses as compared to budgeted profits.

In order to achieve the budgeted results it is very important to make sure that goods are available to all
the outlets on timely basis in order to make the operational staff responsible for achieving budgeted
targets.

Budgeted revenues in all the divisions are subject to Capital investments in some of the outlets. It is also
necessary to make sure the availability of funds to outlets on a timely basis so the renovation can be done
within budgeted time frame.
 Breakup of fixed costs
% age
Retail % age Food & % age % age % age of
Jewellery Accessories Total
Fashion of sales Beverages of sales of sales of sales Total
sales
Operational fixed costs

Outlet rent 28,068,122 16% 36,459,409 21% 4,974,073 12% 2,376,705 12% 71,878,310 18%
Salaries & benefits 13,677,114 8% 36,920,383 21% 3,146,910 8% 1,531,639 8% 55,276,046 13%
Outlet operating expenses 5,451,998 3% 20,543,262 12% 1,265,576 3% 1,237,164 6% 28,498,000 7%
Overheads 8,940,746 5% 18,953,168 11% 2,700,000 7% 1,173,529 6% 31,767,443 8%
Selling & marketing
expenses 4,636,842 3% 3,401,916 2% 1,000,000 2% 400,000 2% 9,438,758 2%
Total 60,774,821 35% 116,278,138 66% 13,086,558 33% 6,719,037 34% 196,858,556 48%

Non operational fixed

costs
Inventory provisions 4,497,442 3% - - - - - 4,497,442 1%
Finance Cost 11,013,415 6% 1,984,606 1% 3,626,778 9% 664,022 3% 17,288,820 4%
Depreciation 7,858,354 4% 14,298,712 8% 1,241,476 3% 1,058,347 5% 24,456,889 6%
Total 23,369,210 13% 16,283,318 9% 4,868,254 3% 1,722,369 1% 46,243,152 11%

Total Fixed costs 84,144,032 48% 132,561,456 76% 17,954,812 45% 8,441,406 42% 243,101,708 59%
Budgeted capital expenditure
During 2011-12 the Group has budgeted Capital expenditure of AED XXX million with the following divisional breakup:

All amounts are in AED million

New outlets Renovation Conversion Total

Food & Beverages - 8.25 2.50 10.75

Retail Fashion - 3.60 1.60 5.20
Watches & Jewellery - - - -
Accessories - - - -
- 11.85 4.10 15.95

Conversions:
Hugo Boss Orange Deira City Centre will be converted into Polistis and G.F Ferre Mercatto Mall will be
converted in My Kids during June 2011. Café Havana Mall of Emirates will also be converted into Burj Al
Hamam.

Renovations:
F&B Division has a budget of AED 8.25 million for renovation as some of the concepts really require
renovation in order to boost sales. Major expenditure on renovation will on Japengo Mall of Emirates (AED
2.2 million), China Times Deira City Centre and Jumairah (AED 1.5 million), Burj Al Hamam Showmax (AED 1.1
million) and Japengo Palms trip AED 1 million).
Requirements
Periodic Performance Review:

Monthly management meetings shall be carried out by the Top management with the Brand VPs and divisional
finance managers in variances from budgets shall be discussed in detail in order to take corrective measures on a
timely basis.

Loan Restructure of Bin Hendi Enterprises:

In current situation Group require to restructuring of bank loans to match the cash flow requirements of business.
This will help in improving the financial and cash flow situation significantly as repayment to banks will be in line with
the cash generated by the business in future years.

For restructure of bank loans, additional funding of AED 65 – AED 70 million is required. With the restructuring in
place we will also be able to get adequate working capital facilities from the banks to cater our increasing business
requirements.

Quarterly Stock Review:

Quarterly stock review shall be carried out by the top management along with Divisional VPs in order measure the
inventory levels on a periodic basis. This will help avoiding inventory pile ups and give measures to review the
divisional performances.
Requirements (continued)
Review of current wage & commission structure:

It is also vital for the Group to review its current wage & incentives system for the operational staff as it is very
important to keep the operational staff motivated which can bring significant improvement to the Group’s
performance.

Sales & Marketing Strategy:

In order to boost sales in retail its very necessary to invest in marketing. A clear marketing strategy and budgets shall
be submitted by the Divisional VPs with revenue growth expected from those investments.

New outlets Feasibility:

For all new locations proper feasibility shall be the submitted along with a business plan by the Divisional Head.