Page 12 - MCOM MODEL ANSWER 2

P a g e | 12

down the fine in Nakolia amongst others. Given the limited time left, that is, only 75 days to the
end of this financial year, we can hardly see how this can be achieved.

RECOMMENDATION

The Board should prepare itself to issue an Earnings Warning to the markets as we approach
year end. It is clear that turning the situation around is almost impossible given that we only
have about 75 days left to the end of the financial year. Even if we could turn around the

challenges with the projected savings from the SSC Project, it will hardly make a material
impact on these numbers.

ACTIONS

Investor Relations should work with Group Communications to prepare to issue an Earnings
Warning to the markets, ideally a few weeks before announcement of results. The Group CFO
should urgently take the actions proposed below in relation to the SSC Project to squeeze out

more savings in the last 75 days.

Shares Center Center (SSC) Project

This issue is a weakness in our updated SWOT analysis. We identified new transactions to be

escalated to the SSC in Sadimba to help repeat the same savings of S$6.6 billion we achieved
in 2014 over 4 years starting this 2016. We expected again to escalate 5.3 million transactions
over the next 4 years, 25% each year with 1.6 million transactions from Sadimba, 1.9 million

from Nakolia and 1.8 million from MCOM (All others). As of today, 1.67 million have been
transferred. Going by the schedule, 1.51 million should have been transferred (5.3* 25% *
12/10.5). The total cost of processing these transactions across the MCOM group before the

SSC Project was started is estimated at S$14,164 million. New costs amounting to S$7,685
million (BAC) was to be created at the SSC in Sadimba to handle these transactions which

when netted of and adjusted for Payroll savings in Nakolia (All Others) of S$120 million,
providing this S$6.6 billion saving. This is the cost that the SCC itself must not exceed if the
savings was to be realised over the next 4 years. Our key observations include:

SCHEDULE VARIANCE

This measures the pace at which we are proceeding to transfer the transactions to the SSC.
The expectation is that we transfer 25% each year. As of now, MCOM Sadimba is ahead of that
schedule by 160% whilst Nakolia is behind by 40% and MCOM (All others) behind by 24%

Overall, we are ahead of Schedule by 31%. It may be that the geographical proximity between
Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2016'
www.charterquest.co.za | Email: thecfo@charterquest.co.za