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Shaker Group continues to increase efficiency via Turnaround Programme – Interview

Shaker Group continues to increase efficiency via Turnaround Programme – Interview
Shaker plans to retrofit more than 250,000 existing government buildings
1.74% 8.20 0.14

By: Mahmoud Salah El-Deen

Riyadh – Mubasher: Al Hassan Ghazi Ibrahim Shaker is competing over more than 250,000 existing government buildings, in addition participating in some of KSA’s strategic projects, Azzam Saud Almudaiheem, CEO of Shaker, told Mubasher in an exclusive interview.

He added that the company is currently working on its transformation strategy in a move to raise its market share.

In February, Shaker launched its transformation program along with its vision, focusing on four key dimensions including businesses by targeting positive sales.

Mubasher: What are the latest updates on the Breakthrough Program?

Almudaiheem: We’re already seeing a tangible impact from the initiatives introduced as part of our Breakthrough Program. Top and bottom-line results have improved markedly on both a quarterly and a year-on-year basis, with second-quarter revenue increasing by 19.4% at SAR 253.5m. The Group significantly reduced Q2 net losses by 74.5% from last year and operating losses decreased by 80.4%. As at June of this year, our four-pillar roadmap is demonstrating considerable promise as we move from strength to strength. Driven by solid momentum in sales and reductions to working capital, we are excited by our future prospects.

Mubasher: Are you looking to make any adjustments to the plan now that it has launched?

Almudaiheem: Despite the nascency of the Breakthrough Programme, we are already seeing positives changes to performance. As an additional measure driving our transformation, we have introduced a system for aggressively tracking KPIs for key initiatives on a weekly basis to monitor progress. The programme is continuously reviewed, and new initiatives are rolled out from time to time based on the strategic pillars set out when it launched.

Mubasher: Will the Group continue to perform well during the rest of the current year?

Almudaiheem: The aim of the Breakthrough Program is to deliver a positive full-year impact from both an operational and financial perspective. We have already had success in rolling out core initiatives, particularly in sales organization restructuring and cost reduction. While we have experienced difficult periods in a challenging market, we’ve taken measures to address these issues head-on. Our Transformation Program is supported by the long-term potential we see in the market for A/C and home appliances, and we intend to capitalize on every relevant opportunity available in the Kingdom.

Mubasher: What is the group's share of the home appliances market in Saudi?

Almudaiheem: Our market share of the home appliances market stands at around 9-10%.

Mubasher:  What is the group's share of the A/C market in Saudi?

Almudaiheem: Our market share of the retail A/C market stands at around 15%

Mubasher:  Are there any plans to expand Shaker’s presence in stores, how many branches/stores do you currently have?

Almudaiheem: Our presence throughout Saudi Arabia is already extensive, but our first priority is sustained momentum for the Breakthrough Program – from where our medium-term growth will be derived. This is less about increasing a retail or branch footprint, and more about tapping efficiencies and exploiting new channels.

Demand for online retail is on a steep growth trajectory in the Kingdom and we are taking measures to exploit it. Earlier this year we launched the Shaker Online retail platform to increase product exposure for our B2C customers as part of our strategy to grow sales and profitability. Online sales remain embryonic, however, we are working on pricing, delivery and customer experience to maximise their potential. Online retailing aside, we expect the main drivers of our growth to be our strategic B2B customers, projects and retrofitting initiatives.

Mubasher:  How does your competition impact your performance?

Almudaiheem: In the Middle East there is healthy competition in the HVAC market. Amidst an economic downturn, competitors may resort to price reductions to shore up their bottom line, however, our Breakthrough Program focuses on reducing costs and optimising working capital, while upgrading our talent pool.

The Group is taking measures to improve the diversity of its revenue streams by focusing on other business areas, including energy efficiency and retrofitting services.

Mubasher:  What are some of the main challenges you are experiencing?

Almudaiheem: We have experienced a range of macroeconomic challenges in recent years, from sustained market headwinds, increasing competition, muted customer demand and softening real estate and construction sectors. Despite this, we are in a promising position and our latest results are indicative of positive change as we close the gap on net losses and drive revenue growth.

Mubasher:  Are you looking to participate in some of KSA’s strategic projects such as Neom and Red Sea?

Almudaiheem: We’re looking to participate in new and existing strategic projects for the Kingdom. A focus area for us is the Government’s recent commitment of retrofitting over 250,000 existing government buildings. There is a great opportunity here for us, as many of the buildings are 25-30 years old and would require material upgrades to their infrastructure. We do of course intend to bid for mega project opportunities as they arise.

Mubasher:  Do you have a plan to increase your capital, or obtain new financing from banks?

Almudaiheem: Not at the present time – our focus is on optimising the efficiency of our operations as well as our debt position.

Mubasher:  How does the group see the Kingdom's economic transformation within Vision 2030, and how does it benefit from it?

Almudaiheem: We are directly supportive of the targets set out by Vision 2030. We identify particularly closely with its technology and environmental aims, by providing superior technology for the Saudi market and nationwide energy efficiency services. A great example of this is our ongoing collaboration with LG. Our recently established production facility will support the growth of our business as we focus our efforts on developing the AHU category, thereby widening customer access to LG Air Conditioning products. In support of expanding and diversifying Saudi Arabia’s manufacturing sector, we are directly contributing to Vision 2030.