Shaker Group reports Q1 2019 results

Riyadh, Saudi Arabia: 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 3-month period ended 31 March 2019. Revenue of SAR 197.3 million improved by 14.2% from Q4 2018, while a net loss of SAR 27.4 million was reduced by 71% compared with the previous quarter. The Group’s operating loss for the quarter was SAR 19.6 million, decreasing by 77.6%.

The decrease in Shaker Group’s quarterly net and operating losses, as compared with Q4 2018, was driven by an increase in sales of 14.2%; a 19% decrease in operating and other expenses; reductions in the cost of goods; and an improvement of SAR 1.5 million in share of associate losses.

Eng. Azzam Saud Almudaiheem, Chief Executive Officer at Shaker Group, commented:

“At Group level, our quarter-on-quarter performance has improved substantially – giving us confidence in the recent and future impact of our Breakthrough Program. Of particular importance has been sales performance in our principal operating market of Saudi Arabia, where revenues have increased by 9.8% on the previous quarter. Meanwhile, on a year-on-year basis our Saudi operations have seen measurable improvements to both top- and bottom-line results, with revenues improving by 6.5%, gross profit growing by 3.6% and our net loss narrowing by 20% due to a high level of expense control.”

Year-on-year, the first quarter net loss increased by 33.2% due mainly to the weaker performance of the Company’s subsidiary Energy Management Services Company (“EMS”) in the UAE. Operational efficiencies continue to be introduced across the business, in line with the Breakthrough Program turnaround strategy. Efficiency improvement highlights included a year-on-year reduction of 22.6% (SAR 7 million) in employee costs and a reduction of 10.2% (SAR 6 million) in total expenses.

Almudaiheem continued:

“Despite the challenges of subdued market demand and strong competition, we are pleased to see the positive impact that our sales strategy is delivering from quarter-to-quarter. These improving results are supported by the Breakthrough Program, which is now well-established across the Company. Once we have completed stock liquidation to comply with SASO regulation we anticipate lower pressure on margins, which should deliver tangible improvements to the bottom-line.”

Q1 2019 Breakthrough Program highlights

Breakthrough Program initiatives in Q1 2019 have achieved the following year-on-year outcomes:

Core Business Turnaround

Saudi Arabia sales revenue improved by 6.5%, driven by growth in sales to strategic customers in the consumer segment, the commercial / projects segment, and after-sales services

At the working capital level, inventory of finished goods and spare parts in Saudi Arabia was reduced by 42%

Cost efficiency highlights:

• Employee cost decreased by 23% with Saudi Arabia FTE count reduced to 655
• Rent and leasing expenses in Saudi Arabia reduced by 28%

Talent Upgrade Plan

• 13+ critical senior management positions hired and filled
• Completion of restructuring of B2C Sales into channel focus

Performance Infrastructure

• Bi-weekly Transformation meetings
• Weekly sales meetings for B2C and B2B
• Monthly Sales meetings (all categories)
• Pipeline meetings with principals

Strategic Moves

• Extension of dealer agreements with key principals
• Ongoing collaboration with principals on strategic projects 

Mohammed Ibrahim Abunayyan, Chief Strategy & Transformation Officer at Shaker Group, commented:

“With the Breakthrough Program now well-established, and having realised material results during its pilot phase, we are pleased to be reporting quarterly performance improvements that are directly linked to its main initiatives. Of particular importance have been the ‘Core Business Turnaround’, in which we have focused on improving the impact of our Sales strategy while optimizing working capital and increasing the resource efficiency of the business; and the ‘Talent Upgrade Plan’, which is demonstrating the effectiveness of a channel-focused sales force. We’re looking forward to reporting on further Breakthrough Program achievements during the coming quarters.”

Q1 2019 financial performance highlights

• Total revenue of SAR 197.3 million improved by 14.2% on Q4 2018 and decreased by 8.2% on Q1 2018
• Gross profit of SAR 33 million improved by 247.4% on Q4 2018 and decreased by 37.4% on Q1 2018
• Operating loss of SAR 19.6 million decreased by 77.6% on Q4 2018 and increased by 185.1% on Q1 2018
• Net loss of SAR 27.4 million decreased by 71% on Q4 2018 and increased by 33.2% on Q1 2018

Outlook 2019

Shaker Group will maintain progress toward its 2019 objectives by strengthening its operating model through the Breakthrough Program, built on four pillars for improving performance: Core Business Turnaround (CBT), which focuses on achieving profitable sales while delivering excellence in cost management; Talent Upgrade Plan (TUP), which seeks to attract and develop talent at the Company while improving organisational structure and rationalising headcount; Performance Infrastructure (PI), which will drive improvements to the processes and architecture of the business, as well as enhancing reporting methods; and Strategic Moves (STR), strengthening relationships with principals and business partners and exploring opportunities beyond core operations, to ensure an unparalleled value proposition to customers.

Growth avenues

Key growth avenues for the Group include the development of the Saudi housing strategy, and private sector support initiatives adopted by the government, which will reflect positively on marketing opportunities for the Company's products. In addition, the Saudi Energy Efficiency Center’s (SEEC) high-efficiency AC units initiative is expected to positively support Shaker Group’s product market share.

The Group will exploit its market share of the Multi V product range to bid for projects during the year, in light of the current real estate strategy adopted by the Saudi government, in addition to private sector projects, which are expected to achieve a recovery bolstered by government support for the national economy. In this regard, 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. Shaker Group intends to bid for a healthy portion of these projects as they become available.

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 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.

-Ends-

About: Shaker Group

Shaker Group was founded in 1950 and was amongst the first in Saudi Arabia to introduce Air Conditioning & Home Appliances for Saudi consumers. Shaker Group is the exclusive importer and distributor of several leading international brands; including Maytag, Ariston, Indesit, Midea and Bissell in Saudi Arabia, and the sole distributer of LG Air Conditioners in Saudi Arabia. ESCO, as a business unit of Shaker Group, provides Energy Solutions. Shaker Group has been a publicly listed company on the Saudi Stock Exchange (Tadawul) since 2010. Throughout the years, Shaker Group has positioned its name within the top Saudi companies, providing a range of integrated solutions in terms of Air Conditioners and Home Appliances in the Saudi market and the region. For more information, visit: http://www.shaker.com.sa/

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© Press Release 2019