2.

Ratifying Circulated Memos:

a) IC-CIR: 01-2023-01 - Armed Forces
b) IC-CIR: 01-2023-02 - Abu Dhabi Media Company (ADM)
c) IC-CIR: 01-2023-03 - General Authority for Islamic Affairs and Endowments

For the esteemed IC members’ consideration:

• The disputed amount with ADM must be settled. An update on this should be presented in the
next meetings
Legacy case from 2013- Approved by IC to write- off 2Mill –Collection team will negotiate the final settlement amount
• If the contracts are a wet lease, a clause should be added to account for fuel price escalation in future
Armed forces:
a fuel escalation clause will added as part of the contract agreement since it is a transportation contract.
General Authority for Islamic Affairs and Endowments :
this is a lease contract, so there is no fuel risk involved. Hence, the fuel escalation clause is not applicable.
Abu Dhabi Media Company:
this is a lease contract, so there is no fuel risk involved. Hence, the fuel escalation clause is not applicable.

In addition to the above remarks, we suggest that a detailed assessment be conducted for the key accounts that are up for
renewal in 2023 to estimate the gross margins from each contract. The direct expenses must be allocated to each contract
properly to estimate the gross margins. Accordingly, contract value and allocation of buses to each contract should be
optimized for renewal.
Duly noted and this assessment will be done as part of commercial planning for 2023
DUB 20200521_ET Full Project Repor ...
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 3. ESE Contract Ajman School Transportation Contract:

For the esteemed IC members’ consideration: We understand that ET is recommending a discount of 9 million AED to the
current contract with Emirates School Establishment, owing to the ESE’s concerns on ET’s higher price point as compared to its
competitor DTC that may result in potential loss of ET’s contract specifically for Ajman city. Ajman contract represents 4.4% of
ESE total contract value. In this context, we would like to seek a few clarifications from ET management and provide some
suggestions for consideration:

• What is the assumption on DTC’s pricing for the Ajman city’s contract? We must ensure that a 9 million AED discount is
competitive

When conducting an analysis and market study of DTC prices, ET estimated DTC’s prices at an average of AED87,099/bus. Et
currently charges AED24,912,716 with 176 buses for Ajman City annually. DTC is estimated to offer AED15,329,424 for Ajman
city with 176 buses. That is a difference of AED9,583,292. When confirming with ESE, ET found out DTC is cheaper by AED9.2M.

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 3. ESE Contract Ajman School Transportation Contract:
• ET needs to ensure that the profit margins are minimally impacted by the discount offered to ESE. The presented analysis shows an estimated decline
of 100 basis points. ET must work on further optimizing its costs to maintain similar levels of margins. Some additional cost optimization levers that
should be explored:
o Efficient allocation of buses to the different categories offered in schools - Gross margin per seat of each bus must be calculated to allocate the right
bus to each category and price the category accordingly
ET can utilize this improvement for contracts with a per student model to increase gross margins per seat. This will not be applicable to the per bus
model contracts, as some of these contracts specify the types of buses to be used for the service.

o Optimization of overhead costs – Manpower (especially drivers, coordinators, nannies etc.) should be benchmarked with market standards to identify
surplus resources, and headcount should be optimized accordingly
This will be explored and benchmarked against competitors to optimize headcount and reduce costs, while maintaining quality of service. (In plan for
2023)

o Reduction of maintenance costs – A detailed analysis should be conducted on maintenance costs comparing it with industry standards, and ET team
must identify ways to reduce the cost. Few areas to explore could be for example, secure cheaper spare parts, improve driving behavior with incentives,
etc.
A detailed analysis on maintenance cost is in progress, potential opportunities have been identified for cost reductions. For improving driver behavior, a
POC is currently being run with a company to identify optimum routes. The optimum routes can act as a reference, and from the reference, we can
calculate fuel score, KM score, and driver behavior score.

Many initiatives started during Q3 and Q4 during 2022 and will continue in 2023 such us,
• Reduction of outsourcing activities – this will save AED 6 to 7M per annum
• Reduction of over time through increasing productivity – this will save AED 4M per annum
• Purchase some of our spare parts directly for the suppliers rather than dealer – this will save about AED 8 to 10M per annum
• Reduction of head count through introduction of technology – this will contribute to a savings of about AED 2 to 3M per annum
• Please note that some of this initiatives will be a pure cost saving and others will mitigate the risk of inflation.
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 3. ESE Contract Ajman School Transportation Contract:

o Efficient fleet – Explore ways to make the fleet more affordable and fuel-efficient. Procure buses from fewer brands to avail
better volume discounts. Select the right types of buses (in terms of seat capacity) to optimize utilization as per the new routes
50% of buses already budgeted as Eicher for 2023 budget to reduce cost and procure fewer brands. A Procurement strategy on
selected brands will be developed.

• Considering that ESE has historically not been very happy with ET’s service, ET should focus more on customer satisfaction
and improving service levels. This will also help in retaining other contracts. We propose a couple of suggestions, as follows:

o A customer satisfaction survey should be launched with customers across all contracts to gauge satisfaction with the new
services being offered
With regards to the ESE contract, the customer survey is part of the contract and is already submitted by ET to ESE for approval.
For the other contracts, the survey has already been conducted in Q4 2022 and the satisfaction rate and Net Promoter Score
(NPS) has already been calculated.

o A comprehensive study should be conducted to compare ET’s service quality and customer satisfaction vis-à-vis competitors
and learn from the latest trends in school transportation. There is potential to further improve the quality of the service
ESE acknowledged and is pleased with the current advancements in customer service by ET through its continuous digital
transformation and customer experience focus (Official Parent App, Operation Dynamic Dashboard, Customer Relationship
Management). ET is currently working on improving its service quality and be a market leader in this respective.

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4. Budget 2023

For the esteemed IC members’ consideration:

• Page 4 – The budgeted revenue for 2023 seems conservative with only an 8.5% growth over 2022 (translates to only 4%
growth over pre-covid revenue of 2019). Considering ET’s plans to launch digital businesses, improved product catalogues,
and better service quality, we recommend targeting at least 10% growth in revenues

Pre-covid revenue ( i.e. 2019) was including ESE Dubai operation and revenue based on contract signed in 2019, However in
2021 ET has signed a new contract with ESE which was without the Dubai operation and also with price discount on 2019
contract rates, if we normalize the ESE contract with AED 136 Mn (contract value reduction for Dubai operation and price
discount given in 2021) the revenue growth for 2023 will be 8.5% compared to FY 2019 revenue.

2023 revenue growth of 8.5% compared to LE 2022 is the net growth after considering known and potential termination/
non-renewal of certain contracts in T&L and MRO, hence the effective growth is 10.9% and net growth is 8.5% from the base
line revenue of 2022.

The growth projection takes into consideration the current pipeline, and due to the nature of the business, which is largely
tender based, and with a general long lead time for mobilization, we recommend not to stretch the growth target further.

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4. Budget 2023
For the esteemed IC members’ consideration:
• Page 5 - Profit margins estimated from digital and new ventures is quite low – only 4.5%. We
understand that there will be high marketing costs in initial years, but the number still seems
very conservative
We report business like -Last Mile Delivery, SPEA ( Sharjah Private School Association) project under “Digital and New
Ventures”.
Last Mile Delivery project : Lower margin on account of mobilization cost related to additional riders for the Talabat Contract
signed in Q4-2023.
Bus On Demand : Bus on Demand will be launched in 2023 (subject to feasibility study) under the Digital Segment which will
be targeting the B2B segment for On Demand Bus services, 2023 being the year of implementation is expected to result in
loss of AED 2 Mn due to mobilization and marketing cost to promote the new business.
B2C Digital Application : ET will spent AED 1.9 Mn on B2C Digital Application in 2023, which will be launched in 2024 and
expected revenue from:
Workshop/Service or Repair services and promotions – B2C
Used Car Sales – Buying a Car - C2C and B2B2C
Used Car Sales – Selling their Cars – B2C
Lease or Rent a Car – B2C
Road Side Assistance – Emergency repairs and recovery – B2C
Get a License – B2C
Hence, lower margin for year 2023 is mainly on account of Mobilization and Digital application cost expected to be incurred in
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4. Budget 2023

For the esteemed IC members’ consideration:

• Page 7 – Revenues are mainly estimated to come from increase in revenues from charter schools and ESE with modest
increase in government school transportation. What about the expected revenue contribution from private schools? How
many new private schools are targeted for 2023? We recommend ET to develop a comprehensive plan to target private
schools that answers the following: ET’s unique value proposition/ differentiator, target segment, price point, services to be
offered, etc.

AED 8 Mn revenue growth from Private School is estimated for Academic Year 2023-2024 ( starting from Sep-23).

The annualized growth revenue will be AED 24 Mn which will be 18.75% growth to the private schools ( excluding charter
schools) revenue for 2022.

Please find details of targeted market of Private school in different emirates and various services to be offered under the
School transportation segment.

ET identified 196 private schools it can target with its silver & gold tiers based on current pricing model. 60 private schools are
already ET customers. The remaining 136 schools are further analyzed to identify higher revenue (# of students) potential to
apply a targeted sales approach.

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Targeted Private Schools :

Targeted Schools (Emirate)

# of
Total Target City With ET School Type Schools
2023 Open
Opportunity to
Target Dubai Clients
196 Schools 6 TBD 6
Silver & Gold 101
Not Clients
196 95 TBD 95
Clients Private 26
Abu Dhabi 54 Charter 28
95 Private 36
Nursery 1
Not Clients
41 Charter 4

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Service/Product offerring:

Customer Route
Relationship optimization
Management Management

Private School
Monitor all B2B , B2C Route optimization Catalogues :
complaints , request , follow up Management to increase
to improve customer efficiency
Experience.

Intensify Gold
Parents app oversight
Inspection
Silver
Parent App Intensify oversight
Live tracking for Parent Inspection to ensure quality
to increase level of of the buses
safety
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 4. Budget 2023

• Page 10 – The net profits budgeted for 2023 seems quite low – a 29% decline over pre-covid net profits of 2019
• Compared to 2019 the average fuel price has increased by 51% (AED 2.25 in 2019 to AED 3.40 considered for 2023 Budget).
• AED 83 Mn fuel cost increase expected in 2023 compared to 2019 is mainly on account of increased fuel price as the quantity has reduced mainly due to loss of
ESE Dubai operation.
• The fuel price increase impact compared to 2019 is AED 114 Mn partially offset by AED 17 Mn of quantity savings planned for Other major increase is in
manpower cost, however in year 2019 AED 23 Mn worth of Bonus provisions related to prior years was reversed which has resulted in lower manpower cost for
the year 2019.
• Excluding this exceptional item the increase in manpower cost is AED 61 Mn which is in line with revenue increase and to cover the one-off manpower cost
items like AED 9 Mn related to early terminations and retirement,
• AED 2 Mn cost related to achieving the Emiratization target set for 2023.
• Also, employee insurance cost for existing employees has increased by 20% compared to 2019 and as part of regulation requirement all the staff under Norther
Emirates will be provided with medical insurance benefits which will cost additional AED 3 Mn in 2023.

• Increase in finance cost is mainly related to MOF dividend discounting ( AED 16 Mn) which started from FY 2021.

• Operating cost has increased compared to 2019 mainly related to ITC levy fee of AED 9 Mn related to the AD Taxi business
• Also spent on marketing activities is expected to increase in 2023 mainly related to rebranding of company and Digital marketing to promote ET’s services under
B2C segment and new product like Bus on Demand.

• In 2019 SEITCO had contributed AED 21 Mn to ET’s ( 50% share) profit, However in 2023 SEITCO’s total profit will be only AED 4 Mn, of which ET’s share will be
AED 2 Mn which has negative impact on ET’s profit by AED 19 Mn when compared to FY 2019.

If we normalize 2023 profit by adjusting the fuel price increase/quantity impact (AED 83 Mn) , MOF Dividend discounting (AED 16 Mn), increased operating cost due
to regulation requirements( AED 15 Mn) and significant reduction in share of profit from SEITCO( AED 19 Mn), then the margin will be around 9% to 10% to the
targeted revenue.

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4. Budget 2023

For the esteemed IC members’ consideration:

• Page 11 - For year 2023, AED 300 Mn Capex is planned to be used for new investment in acquisition or business expansion.
What profile of new investment opportunities or targets are being planned?

The 300M Capex is a high level estimate which consists of:

• Investment in EV Joint Venture project : AED 75M + AED 25M for charging station infrastructure; other EV initiatives.
• Digital ventures as approved under strategy ( On demand B2C car hire, B2C car service, marketplace for used car, On
demand bus service, Shared car, digital improvement initiatives, digital enablers ) : AED 100M (placeholder value as high
level estimate).
• Geographical expansion – exploring new business opportunities in Saudi , through SEITCO or SAPTCO : AED 100M

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4. Budget 2023

For the esteemed IC members’ consideration:

• Page 16 – ET should plan to reduce the DSO further

Below table has the historical data for DSO:

DSO
Year Days Change
2017 123.00
2018 146.00 23.00
2019 143.00 -3.00
2020 146.00 3.00
2021 149.00 3.00
2022- Target 136.00 -13.00
LE2022 115.00 -21.00
Budget 2023 105.00 -10.00

In 2022 we expect to achieve a DSO of 115 days (the lowest in the last six years) and further reduction of 10 days in DSO is
planned for 2023. The long term target is to reduce DSO even further, however, some actions will require time to implement,
as it among other includes the reducing credit terms when contracts are being renewed.

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4. Budget 2023

For the esteemed IC members’ consideration:

• What is the plan for 2023 for the subsidiaries?

• ETTS: To complete ETTS deal with a sale of 80% (shareholder agreement signed with the approved buyer, pending
payment).
• ESS: To complete divestment of ET’s 80% stake (a financial advisory firm has been appointed to scout for interested buyers
for 80% stake, to send teasers to potential bidders soon).
• ENFM: To complete divestment of ET’s 50% stake (two viable Non-binding offers received, DD ongoing, awaiting binding
offers).
• Reyama: Evaluating feasibility of allowing entry of a new operator to run the operations, to turnaround the company
profitable; to evaluate feasibility of introducing EV as small part of fleet.
• Shurooq: To continue the operations, evaluate feasibility of introducing EV as small part of fleet.
• SEITCO : Continue operations as Tadweer contract expected to be extended by 1 year. To take steps for diversification into
private school transport, other technical services similar to MRO.

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