Successful Breakthrough Program, supported by agile response to Covid-19, have returned the Group to profitability for the first time since Q3 2016
Riyadh, Saudi Arabia, 18th August 2020: Shaker Group (“Al Hassan Ghazi Ibrahim Shaker Co.”, the “Company” or the “Group”), Saudi Arabia’s leading importer, manufacturer and distributor of Air Conditioners and Home Appliances, has announced its financial results for the 6-month period ended 30 June 2020. Revenue of SAR 488.75 million improved by 8.4% from H1 2019. The Group recorded a first half net profit of SAR 1.79 million, compared to a net loss of SAR 38.68 million in H1 2019, and the operating profit for the 6-month period was SAR 3.36 million, compared to an operating loss of SAR 25.43 million the previous year. First half gross profit was SAR 101.48 million, improving by 24.8% year-on-year.
The Company has achieved profitable results for the first time since Q3 2016, driven by the success of its Breakthrough Program turnaround strategy, and supported by an agile response to the Covid-19 pandemic. Operational efficiencies and structural changes have been introduced across the business, in line with the Breakthrough Program, which was launched in Q1 2019. The Company’s portfolio of brands has continued to grow, with Bompani added to the Home Appliances segment in H1 2020.
Eng. Azzam Saud Almudaiheem, Chief Executive Officer at Shaker Group, commented:
“We are very pleased to be reporting a return to profitability, on the back of strong performance during the first half, and in spite of challenging market conditions. Healthy bottom-line results were driven by strong growth in revenues, coupled with reduction and control of expenses, along with our agility in responding to the headwinds created by the Covid-19 pandemic. The Group was successful in mitigating the impact of pressure on sales early in the second quarter, with improving sales in May and June partially supported by customers ramping-up purchasing ahead of increased VAT. Our product mix remains critical to future success, with higher margin Home Appliances having increased their share of sales by more than 10% year-on-year. Growth in sales to major projects was steady, and still represents a relatively untapped opportunity.”
H1 2020 financial performance highlights
• Total revenue of SAR 488.75 million improved by 8.4% on H1 2019
• Gross profit of SAR 101.48 million improved by 24.8% on H1 2019
• Operating profit of SAR 3.36 million improved from a loss of SAR 25.4 million in H1 2019
• Net profit of SAR 1.79 million improved from a loss of SAR 38.69 million in H1 2019
“With the inventory liquidation process completed in 2019, and our product portfolio better aligned with market requirements, we have grown sales and improved margins. Structural changes to our B2C sales infrastructure are now complete, with enhancements to B2B sales still underway, which means we can still expect to achieve higher levels of efficiency in 2020 and 2021.
While the impact of Covid-19 put pressure on sales at traditional retail outlets, and caused some supply chain disruption, our response has been effective. We have utilized the Saudi government’s private sector support package and were agile in pivoting the sales and distribution model to recover quickly. The strengthening of our relationships with dealers, as part of the Breakthrough Program, has been vital. Their e-commerce platforms were essential for maintaining and growing sales volumes. Going forward, the growth of our own e-commerce platform will be important for diversifying sales channels.”
H1 2020 Breakthrough Program highlights
Breakthrough Program initiatives in H1 2020 have achieved the following year-on-year outcomes:
Core Business Turnaround
• Sales revenue in Saudi Arabia increased by 7.9% in Q2 2020 compared to the same period in 2019, and grew by 10.5% in H1 2020 compared to H1 2019
• Employee costs in Saudi Arabia were further optimized and reduced, decreasing by 25% on a quarterly basis, and by 13% on a first half basis, compared to 2019
Talent Upgrade Plan • Completed roll-out of the Talent Upgrade Plan at senior level, and restructuring of the sales organization model, with the plan evaluated and revisited on an ongoing basis
• Performance Management System rolled-out and now operating across the business
• Execution and tracking of key turnaround initiatives conducted on an ongoing basis
• Creation and roll-out of new initiatives subject to business needs and market dynamics
Strategic Moves • Extension of agreements with key principals completed
• Joint collaboration with principals on strategic initiatives
Mohammed Ibrahim Abunayyan, Chief Strategy & Transformation Officer at Shaker Group, commented:
“The first half results, and our return to profitability, are evidence not only of the impact of the Breakthrough Program, but of the strength and agility that we have built into our business during the last 18 months. In challenging macroeconomic conditions, with unprecedented headwinds created by the Covid-19 pandemic, management has demonstrated a high level of foresight and versatility in responding to challenges and in exploiting the commercial opportunities that we have identified and created. Our Talent Upgrade Plan is of particular note, given the role it has played in building a top-quality management team, along with a better organised and more targeted sales organization. In these results we have a lot to be proud of, and we are looking forward to building on our achievements during the coming quarters.”
Covid-19 impact and response
The Board and management has continued to address the impact of the Covid-19 pandemic and put in place mitigating plans. A number of the Group’s dealers had to temporarily close showrooms and stores in line with government measures to prevent the spread of the virus, which put pressure on traditional retail sales. As Kingdom-wide curfews have eased, showrooms and stores have also begun to re-open.
Shaker Group and its dealers were successful in pivoting sales and distribution to alternative channels, alleviating pressure on traditional retail, although some projects faced delays. With the easing of preventive measures and the gradual return of normal economic activity, sales improved to levels stronger than those achieved in H1 2019. The Group acted quickly to utilize available private sector support packages, actively manage down fixed and variable costs, shore up working capital, and maintain operations at optimal capacity.
Given the fluidity of the pandemic situation both locally and internationally, it is not possible to make accurate forecasts for its future impact on performance. Further updates regarding material developments in relation to Covid-19 will be provided by the Company, as required.
Having launched its e-commerce platform in 2019, Shaker Group will build on its extensive portfolio of international Home Appliance brands, taking advantage of emerging retail channels that will better serve customers while achieving efficiencies across the sales and distribution process.
Long-term growth avenues continue to include the Saudi Energy Efficiency Center’s (SEEC) high-efficiency AC initiative, the development of the Saudi housing strategy, and private sector support initiatives. The Group will continue to exploit its market share of the Multi V product range to bid for projects throughout 2020 and 2021, and an attractive opportunity is presented by Tarshid, the Saudi government’s National Energy Services Company, which is tasked with retrofitting assets owned by public or government entities – among them 2 million street lights, 110,000 government buildings, 35,000 schools, 100,000 mosques and 2,500 hospitals and clinics. The Group will continue to bid for a healthy portion of these projects.
Shaker Group, which is listed on Tadawul (symbol: SHAKER), is a leader in the Saudi market as both a distributor for international electrical brands and a local manufacturer of LG Air Conditioners. The Company’s portfolio brands include LG Air Conditioners, as well as Indesit, Ariston, Maytag, Midea, Bompani and Bissell in the home appliances segment. In 2015, the Group increased its stake in the UAE’s Emirates Energy Management Services (EMS) from 20% to 74%, and in establishing ESCO, as a business unit of Shaker Group, took an important strategic step towards diversifying operations and revenue streams.