20210119 Strategy Transformation Update Board Meeting.pdf

1. Shaker Group
Transformation Office Update
Strategy Road Map 21 – 23
January 2021

2. Content
Page 2
Item
#
1 Transformation Office Update – FY 2020
- Sales Performance Review
- Cost Performance Review
- Preliminary Closing 2020 + Transformation Office Activity Review
- Preliminary Financials 2020
Shaker Strategy & Road Map 2020 – 2023
- Macro Economics & Market Insights
- SWOT Assessment
- Shaker Strategy
- Forecasted Financials 2020 – 2023 (Tentative)
2

3. Transformation Dashboard: Sales continue to grow by 9% on
YTD basis despite the challenges faced by market and supply
Page 3
Channel YTD-Sep Gross Sales in Million
B2C – AC
B2C – HA
B2B
Aftersales
Total
Business
134
72 81
+13%
378
419
261 +45%
316
183
210
-13%
1,237
875
Actual 2019 Budget Actual 2020
954
+9%
84%
90%
58%
61%
77%
332 311
368
-6%
Growth% Ach %
• Drivers: SEEC initiative & Shaker OEM
• Challenges: Shortage of supply from factory
• Strong growth and on Target driven by Midea brand
• Successful launch of Bompani Cookers
• Pipeline of projects is recovering steadily
• Shortage of concealed supply from factory
• Strong growth, but not achieving the target
• 21% de-growth in service and spare parts sales
• HA Portfolio is 40% of the business
• Improved gross margins vs 2019 – 19.3% vs 16.5%

4. Transformation Dashboard: Shaker’s AC business dropped by
9% due to disruptive supply from factory and weak VRF sales
Page 4
AC Segment YTD-Sep Gross Sales in Million
RAC
LCAC
CAC
VRF/ MultiV
Total AC
Business
49
68
139
-28%
76
82
64 -22%
176
142 134
-6%
Budget
Actual 2019 Actual 2020
542
684
494
-9%
85%
83%
76%
35%
72%
250 247
292
-1%
Growth% Ach %
• Driven by SEEC initiative of ~SAR 126MM
• Introduced Shaker OEM on/off (supply from China)
Sales FY 2020 ~SAR 20MM
• Late arrival of Freestanding models & pricing issue
• Supply delays from Factory
• Pipeline is recovering, some projects deliveries got
delayed due to the pandemic
• High pricing gap vs competitors leading to higher
invoicing discounts

5. Transformation Dashboard: Shaker’s HA business increased by
45% driven by Midea, Maytag and Bompani
Page 5
HA Segment YTD-Sep Gross Sales in Million
Maytag
Total HA
Business
Actual 2019
419
Budget Actual 2020
261
378
+45%
113%
76%
60%
90%
65
23 49
+113%
Growth% Ach %
• Reviving of Maytag sales after SASO 2019 issue
• Ariston sales suffered supply issue due to the
pandemic
• Indesit: Liquidating current stock in hand
• Bompani: Supply issue due to pandemic.
Performance and brand acceptance in the market
shows potential for future
• Bissell & Kitchen Aid – Phasing out
Ariston
Indesit
Midea
Bompani
Bissell & KA
102 135 108
+6%
12
5 9
-25%
171
82
152
+109%
0
17
23
41 39 23 -43%
75%
80%
173%

6. Transformation Dashboard: After Sales business grew by 13%,
however aftersales jobs and spare parts declined by 22%
Page 6
Aftersales Segment YTD-Sep Gross Sales in Million
Services &
Spare parts
Retrofits FG
ESCO
Projects
Installations
Total
Aftersales
12
9
14
+37%
1
28
13
+1,316%
7
0
20
Actual 2019 Budget Actual 2020
72
134
81
+13%
85%
83%
76%
35%
72%
62 72
49
-22%
Growth% Ach %

7. Transformation Dashboard: Operating costs reduced by 5% vs
2019 despite the provisions hit
Page 7
Cost Item FY 2020,
in SARMM
Growth% Ach %
Employee costs
Sales commission
Advertising and
promotion
Warranty
Transport & labor
Rent and leasing
(Excluding Rent
Revenue)
Other expenses1
Total
Employee
related
Marketing &
warranty
Other
expenses
Provisions
FY 2020 Target,
in SAR MM
FY 2020 Actual,
in SARMM
12
3
11
4
7
20
15
83
155
5.6
91.1
12.2
1 Includes repairs & maintenance, business travel, office expenses, software and subscriptions
12.2
11.7
12.9
16.5
12
174.2
6
16
6
6
21
4
14
74
147
-10%
115%
71%
-43%
-6%
-42%
-20%
-5%
81%
48%
50%
72%
124%
49%
98%
85%
171%
65%
% of sales 18% 15%

8. Page 8
104 84
60 72 83 81
+36%
261
229
381
271
360 378
+65%
210 190
171
305
210 183
+7%
2018
2017
2016 2020 A
2019
875
2020F
1,708
1,114
773 950 954
+23%
918
550
313 332 317 311
-1%
B2C – AC
B2C – HA
B2B
Aftersales
Total
Business
Channel FY Gross Sales in Million Growth% 18/20A
Sales of 2020A at ~954MM Gross sales with major
improvements across all business segments vs 2018
Breakthrough Program Activities
Core Business Turnaround
 Despite COVID-19 and supply shortage, sales posted yearly
growth of 9% & 23% vs 2018 with portfolio mix skewing
towards HA with higher profitability.
 Gross margin improved from 16.5% to 19.3% on business
 Cost optimized during curfew (saving of >6MM)
 Business returned to profit from 2Q 2020 and FY 2020
Talent Upgrade & Performance
 Appointment of VP finance, Supply Chain Head, and
Aftersales director (Mar 2021) & VP B2B (Mar 2021)
 Optimizing the ERP system under the transformation office
 Revamping the e-commerce and its business integration by
Q4 2020
Principal Management
 Launched Bompani and Shaker AC OEM
 Signed with Panasonic for TV Business (Launched Q4 2020)

9. Page 9
Channel FY Gross Sales in Million Growth% 18/20
Forecasted Financials: 9% growth in top line | Operating
Income Positive | Net Profit ~8MM
SAR ‘000 2019 FY 2020 FCST 2020 FY Change ▲
Gross Sales 874,634 950,000 953,763 ▲ 9%
Sales Discounts & Incentives (%) 9.6% 8.9% 9.0% ▼ 7%
Net Sales 790,675 865,000 868,304 ▲ 10%
Gross Profit 122,333 170,000 166,935 ▲ 36%
Gross Profit (%) 15.5% 19% 19.2% ▲ 24%
Employee Expenses (82,732) (75,000) (74,699) ▼ 10%
A&P Expenses (3,536) (5,000) (6,532) ▲ 85%
Other General Expenses (56,262) (45,000) (46,885) ▼ 17%
Provisions (12,400) (22,000) (20,500) ▲ 65%
Depreciation (16,310) (12,000) (14,145) ▼ 13%
Operating income (48,907) 11,000 4,174 ▲ 109%
Other income, net 7,277 (2,000) (1,121) ▼ 115%
Financial charges (25,499) (17,000) (16,276) ▼ 36%
Share in net income from Subsidiaries 17,524 23,500 28,221 ▲ 61%
Income before Zakat (49,605) 15,500 14,998 ▲ 130%
Zakat (180) (8,500) (6,740) ▲
Net income (%) (49,785) 7,000 8,258 ▲ 117%
Net Income (%) -6.3% 0.8% 1.0% ▲ 115%
Challenges
 Shortage of finished goods material in Q1 2020 due to
locked financial facilities with banks.
 COVID-19 Pandemic in Q2 2020
 VAT + Custom duties increase Q3 2020
 Est. sales opportunity cost ~ SAR 100MM
 Receivables provisions hit of 8.5MM above plan
Achievements
 Despite market disruptions, sales revenue grew by ~9%
 Gross profit improved from 15.5% to 19.2%
 Cost were further managed and optimized by 5% during
pandemic
 Net profit at SAR 8.2MM

10. Content
Page 10
Item
#
1 Transformation Office Update – FY 2020
- Sales Performance Review
- Cost Performance Review
- Preliminary Closing 2020 + Transformation Office Activity Review
- Preliminary Financials 2020
Shaker Strategy & Road Map 2020 – 2023
- Macro Economics & Market Insights
- SWOT Assessment
- Shaker Strategy
- Forecasted Financials 2020 – 2023 (Tentative)
2

11. Macro–economic: de-growth in KSA GDP for 2020 due to global
economic slowdown and COVID-19 Pandemic
Page 11
-0.7%
20F
17A 18A 23F
21F
19A 22F
0.3%
2.4%
-5.4%
3.1% 3.4%
2.5%
32.6 33.4 34.1 34.8 35.5 36.2 36.9
20F
17A 18A 19A 21F 22F 23F
+2%
21.1
23.5 23.3
19.6 20.7 21.5 22.0
20F 23F
19A
17A 18A 21F 22F
+4%
KSA Real GDP Growth, in % KSA Population, in MM KSA GDP Per Capita, in USD Thousands
Source – International Monetary Fund Forecasts
 GDP growth for 2020 was revised to
negative (5.4%) due to the slowdown in
global economy as a result of Covid-19
pandemic
 Average GDP growth 2020 – 23F will be
at 1%
CAGR Growth Rate
56% 44%
Males
Gender Split
Females
33% 35% 25%
40-60
6%
20-40
Age Split
>60
<20
 GDP per capita is expected to drop by
16% in 2021 due to the GDP sharp
degrowth
 Between 2020 and 2023, GDP per
capita is expected to grow by 4%
CAGR Growth Rate

12. Saudi new AC sales market is expected to grow by 2% in the
next 3 years
Page 12
New Sales – in SAR Billion
Source – GFK Data 2019 | Euromonitor | Team Analysis
48%
51%
2022F
47%
2018
52%
2019
48%
47%
49%
2017
2016
47%
52% 53%
4.1
53%
2021F
2020F
53%
53%
47%
53%
4.0
2023F
47%
5.6
5.0
4.1 4.0 3.9 4.1
-11%
+2%
Consumer ACs
Commercial ACs
Key Drivers of growth:
 Energy efficiency programs supported
by the government – i.e. SEEC |
Tarsheed
 Ongoing Mega projects – i.e. NEOM |
Red Sea | Housing projects
 Consumers search for more energy
efficient consumer appliances due to
rising electricity costs

13. Saudi new Home Appliances sales market is expected to grow
by 3% in the next 3 years
Page 13
New Sales – in SAR Billion
Source – GFK Data 2019 | Euromonitor | Team Analysis
20%
3%
4%
35%
2019
25%
4%
25%
7%
2%
2%
5%
2%
2016
35%
19%
7%
19%
4%
3%
5%
3%
8%
2%
2%
2017
24%
2020F
5%
2%
8%
3%
3%
2018
36%
22%
18%
8%
2%
4%
3%
2%
37% 37%
2%
21%
18%
9%
4%
2022F
2%
21%
17%
4%
5%
4%
4%
5.0
2%
2%
2021F
38%
21%
17%
8%
5%
4%
3%
2%
39%
21%
16%
8%
5%
4%
4%
2%
2%
2%
35%
2023F
6.7
6.3
4.7
4.6
4.7
4.9
5.2
-12%
+3%
TV
Dryers
Freezers
Microwave Ovens
Dishwashers
Vacuums
Cookers
Refregirators
WM
Key Drivers of growth:
 Consumers search for more energy
efficient consumer appliances due
to rising electricity costs
 Increasing disposable incomes as
higher number of women join the
workforce
 Housing projects supported by the
government

14. SWOT Assessment
Page 14
Company &
shareholders
Commercial &
route-to-market
Business
enablers
Organization &
operational
efficiency
Industry
KSA macro
Strengths Weaknesses
• Trusted company with solid history backed by strong shareholder
structure
• Strong Brand mix & diversified portfolio target all consumer segments
(HA)
• Solid retail channel partner relationships
• Organized display & promoter activities
• AC local manufacturing arm
• Strong long-term relationships with existing principals
• Geographic coverage & reach in all KSA
• Dynamic cost control approach
• Proactive management
• Strong ERP System
• Lack of clarity on company’s direction (vision and mission)
• Interdepartmental collaboration is not optimal
• Limited AC portfolio targeting high-end segment
• B2C channel sales concentrated on top 10
• B2B segment is still considered as box mover rather than solution
provider
• Declining service quality of the aftersales segment
• Whirlpool and LG product portfolio expansion plan is limited
• Funding and cash management hindering growth
• Lack of automation and digitization within ERP
• Weak governance: Risk management, Policies, processes and
procedures
Opportunities Threats
• Increased focus on energy-efficiency & Mega projects by government
• SEER Initiative – Oct 21
• Weakening competition/distributors raising the opportunity to acquire new
brands
• New JV Manufacturing opportunity
• Young population & women workforce driving increased household
spend
• Intensified competition from Chinese brands (AC)
• Unstable exchange rate and freight cost
• Market adaptation of cutting middleman (the distributor) i.e. extra
• Taxation and increased living costs

15. Strategy Roadmap 2020 – 2023
Page 15
Delivering
Sustainable
& Profitable
Growth
Vision – “To be customers’ preferred choice and brands’ ideal partner in the consumer electronics and
appliances sector in KSA”
Mission – “To provide convenient services and solutions that ease our customers lives”
Core
Business
Core
+
Market & Industry Operations & Efficiency Organization & People
 Beat 1.5BN by 2023
 Become Top 3 in each segment of
the existing business
 B2B Revamp – increase presales
activity & focus on Mega projects
 Revamp after sales (quality and
profitability)
 Boost e-commerce sales (through
Shaker & Channel Partners)
 Add new brands (i.e. Panasonic
MDA & SDA Business)
 JV & New ventures: manufacturing
JV with our partners / Distribution &
logistics arm / e-commerce (new
segment)
 Pull Marketing Strategy: Increase
branding awareness and marketing
activities
 Improve model mix sales (KB &
SDA)
 Optimize supply chain function &
inventory management
 Control operational costs ~15% from
sales
 Secure additional funding sources to
fuel growth – additional SAR 150MM
 Enhance digitization & reporting
 Improve controls, processes and
procedures
 Enforce KPI reviews on periodic
basis
 Develop and retain talents
 Adhere to regulations (MOIC,
MOHR)

16. Page 16
Game Plan
Objectives
Grow the
business to
1.5BN by 2023
Rules
• Provide best in class
service support
• Distribute products that target all
consumer segments
Strategy
• Become market leaders (top 3) in underserved
segments we operate in.
• Expand in new segments like TV business and SDAs
• Defend our position in segments we lead (AC’s, DW, Dryr)
Current Sources of Profits Future Sources of Profits
• Strengthen our B2C and B2B positions
without sacrificing margins
• Strengthen aftersales revenues without
risking quality & operations
Strategy
Challenge
Initiatives
Assets &
Capabilities
• New line of business: Acquiring new
brands or JV partnership
• Develop and boost the e-commerce
business
Improve
product and
margin Mix
Capitalize on
efficient
Distribution
Aftersales
Service
Development
Acquisition of
new brands
Display &
Promoters
coverage
People: Solid industry
knowledge and
experience
Excellent cost
management
ERP
Infrastructure
Supply of FG &
SP
Planning &
Forecasting
E-commerce
revamp
3PL
Agreements
Training &
development
academy
New JV
Agreement
Financing
resources
Facilities &
resources
Go-to-market
knowhow
Brand positioning
& lineup diversity

17. For survival, Shaker has to dominate the consumer segment by
being in the top 3 within each segment (except TV)
Page 17
Market Insights – GFK Data
Source – GFK Data 2019
▲ Expand − Strengthen
▲ ▲ ▲ ▲ ▲ ▲
− − −
−
B2C Strategy
 Acquire 2% market share in TV Segment
with Panasonic – protect GP > 10%
 Maintain share in AC segment (Split and
Window) – maximize GP%
 Expand market share in refrigerator,
freezers, Dishwashers and washing
machine segments with Midea lineup
 Expand cookers share with Bompani
 Maintain Ariston DW share and whirlpool
dryer segment share

18. In addition, Shaker should benefit from its position being a
manufacturing partner and multi-brands distributor
Page 18
Market Insights – GFK Data
Source – GFK Data 2019
▲ Expand − Strengthen
▲ ▲ ▲ ▲ ▲ ▲
− − −
−
Distributor Strategy
 AC Manufacturing joint venture
opportunity targeting Mid-range
consumers is nessecary

19. In addition, Shaker has to defend its market position in single
CAC, while expanding in the VRF segment
Page 19
Market Insights – LG data
Source – LG Data
▲ Expand − Strengthen
▲ −
B2B Strategy
 Maintain share in CAC segment –
maximize GP%
 Expand market share and
conversion rate to VRF segment
(from applied/chillers) – while
protecting GP%
 Invest heavily in pre-sales activity
with LG – target mega projects and
improve sales in Western and
Eastern regions
Others 41%
LG Shaker 12%
Zamil 13%
Carrier
17%
York 17%
TTL Market
100%
Market Size 2,138 1,118 855 165
Annual Growth % -1% 0% -5% 16%
Carrier
14%
Others 46%
York 9%
Zamil 8%
LG
Shaker 23%
Single CAC
40%
Others 23%
Zamil 18%
Trane 13%
Carrier
21%
York 25%
Chiller & Applied
52%
Sam 7%
Midea 5%
Others
20%
Daikin
29%
LG
Shaker
39%
VRF
8%
▲
−

20. Page 20
B2C – AC
B2C – HA
B2B
Aftersales
Total
Business
311 317
+2%
432
378 +14%
183
254
+39%
110
81 +36%
1,114
2020 Actual 2021 Plan
954 +17%
Channel Plan – SAR 000 Growth % Gross Profit % Cont. % 20/21 Key Initiatives
 Maximize SEEC remaining quota for 2021
 Maintain RAC market share and protect GP
 Acquire market share in potential segments
 Maximize GP with product mix and dealer
distribution
 Attack VRF projects – target 40% increase in
sales value
 Maintain CAC share – protect margins
 Revamp after sales – turn to profitable
business
 Protect margins – w/o SP provisions at 29%
 HA Business to contribute ~40% of business
 Target margin of 19.8% and above
14%
22%
22%
23%
19.8%
33%
28%
20F
21P
40%
39%
20F
21P
19%
23%
20F
21P
8%
10%
20F
21P
Short-term plan (2021), maximize HA | B2B AC | Aftersales
With Inventory provisions included:
1- 6MM for FG
2- 7.5MM for Aftersales SP

21. Financials Projections 2021/23 – Tentative
Page 21
SAR ‘000 2019 FY 2020F FY 2021P FY Change ▲ 2022P FY 2023P FY
Gross Sales 874,634 953,763 1,113,500 ▲ 17% 1,350,000 1,550,000
Sales Discounts & Incentives (%) 9.6% 9.0% 7.2% ▼ 6% 8.5% 8.5%
Net Sales 790,675 868,304 1,033,247 ▲ 19% 1,235,000 1,420,000
Gross Profit 122,333 166,935 204,488 ▲ 22% 235,000 270,000
Gross Profit (%) 15.5% 19.2% 19.8% ▲ 3% 19% 19%
Employee Expenses (82,732) (74,699) (84,987) ▲ 14% (85,000) (85,000)
A&P Expenses (3,536) (6,532) (10,000) ▲ 53% (15,000) (17,000)
Other General Expenses (56,262) (46,885) (60,043) ▲ 28% (71,000) (82,000)
Provisions (12,400) (20,500) (12,000) ▼ 41% (6,000) (3,000)
Depreciation (16,310) (14,145) (9,000) ▼ 36% (12,000) (12,000)
Operating income (48,907) 4,174 28,457 ▲ 582% 46,000 71,000
Other income, net 7,277 (1,121) (1,000) ▼ 11% - -
Financial charges (25,499) (16,276) (20,410) ▲ 25% (21,000) (21,000)
Share in net income from Subsidiaries 17,524 28,221 33,400 ▲ 18% 35,000 40,000
Income before Zakat (49,605) 14,998 40,446 ▲ 170% 60,000 90,000
Zakat (180) (6,740) (7,500) ▲ 11% (10,000) (10,000)
Net income (%) (49,785) 8,258 32,946 ▲ 299% 50,000 80,000
Net Income (%) -6.3% 1.0% 3.2% ▲ 235% 4.1% 5.6%
Goals by 2023
 1,500 MM sales
 80 MM Net Profit

22. Thank You