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10 • 2017 ANNUAL REPORT
2017 ANNUAL REPORT • 11
Message From the CEO
sales and higher-than-average capacity utilization rates
across service centers, with the ramp-up in business al-
lowing us to press on with plans to expand our workshop
network in Minya, Aswan, Tanta, Marsa Matrouh and
Damietta within the next two years and a truck and bus
workshop in Abu Rawash in the pipeline.
TheTire division alsoperformed exceptionallywell during
the year, with profitability mounting every quarter. The
segment reinforced its brand portfolio with the distribu-
tion of additional reputable brands this year, and their
efforts bore fruit in the early months of 2018 when the
division began distributing Turkish-made tuk-tuk tires, a
profitable segmentwhereweexpect to leverageour strong
market position.With the aimof sustaining growth in the
truck-bus radial segment, the division also commercial-
ized Pirelli and Pharos Truck tires in February 2018.
As for GB Capital, the business posted consistently strong
performance throughout the year while maintaining a
healthy loan portfolio quality and coverage ratio well over
100%. The company played a significant role in overall
revenue growth throughout the year and is expected to
post similarly strong performance in the coming period in
amarket that is increasingly looking for financingoptions.
All in all, our extensive experience in the industry has
taught us thatwithflexibility and carefully outlined strat-
egies, not only can we navigate rocky terrains, but we can
come out a better, leaner, transformed operation.
Lastly, I would like to conclude with a sincere word of
thanks to our Board of Directors and Senior Management
for their prudent guidance and solid execution; our staff
for their relentless hard work and dedication that has
servedas thebackboneof our success throughout the year;
and all other stakeholders that have put their faith in GB
Auto’sability toweather the stormandcontinue toprovide
customers with the exemplary service they have come to
expect of us and derivemaximumvalue for shareholders.
Message from
the
CEO
Experience has taught
us that with flexibility
and carefully outlined
strategies, we can
come out a better,
leaner, transformed
operation.
Increase in group
revenue
15.5%
Dr. Raouf Ghabbour, CEO
KPIs —was a prudent step in providing a true reflection of
the business’s net debt, facilitate more accurate valuations
and reveal hiddenvalue in the company’s share.
Throughout the year, GB Auto & Auto Related worked tire-
lesslytomaintaintightcontrol onoperatingcosts, having im-
plementedmeasures that sawSG&Aas a percentage of sales
kept within acceptable levels. We rationalized headcount
across all functions, adopting a more targeted approach
to our marketing expenses and explored means through
which tomaximize energy efficiency inour premises.
For the Passenger Car division, the start of 2017 was
largely geared toward inventory reduction and clearing
low-margin car units from themarket and replacing them
with more profitable ones. By the end of the year, we were
seeing clear signs that the macroeconomic challenges
which resulted in an industry-wide slump were receding.
And while the passenger car market is operating at levels
50.0% below last year, consumers are adapting to new
market prices. As we approach 2018, we are seeing signs
that volumes are steadily recovering and are now back to
our traditional market share level north of 30.0%.
Asweanticipated lastyear, theMotorcycleandThree-Wheel-
er divisionmade aneven faster recovery thanPassengerCars
considering three-wheelers both serve demand for transpor-
tation and are themselves revenue-generating for their own-
ers. Segment volumes picked up sharply as early as March
2017, with the market already making a recovery toward
normal levels, particularly in the three-wheeler segment.
Auto-related lines of business were instrumental this year.
For one, Commercial Vehicles & Construction Equipment
made a sharp recovery toward the end of the year, with the
division outperforming the overall market despite a 50.0%
volume slump.The segment is poised for acceleratedgrowth
in the quarters to come as appetite rises for our product
lineup in the private building and tourism sectors — a
breakthrough after we successfully ventured into the urban
transport and intercitybusmarkets.
After-saleswas a vital component of our recovery story as
well, with our solid reputation for quality service cement-
ing customers’ confidence in us. This translated to strong
There ismuchtounpackabout theevents thatunfolded
during the year. Following the liberalization of the
Egyptianpound inNovember 2016, we found ourselves
withaparalyzedmarket as the currencywas still in the
early stages of finding its footing and everyone — the
business community and consumers alike — was ad-
justing to thedislocation. As such, wewere facedwitha
new reality that forced us to shift our business strategy
and evolve GB Auto Group intomore than just an au-
tomotive leader, but a fully diversified player.
Theshiftinstrategyallowedustocapitalizeonourstrong,
high-margin auto-related and financing businesses that
saw us through a year where the automotive industry
was just beginning to make a recovery. To anchor this
strategy, in the second quarter of the year we adopted a
newdisclosure structure that separately reportsour core
automotive under GB Auto & Auto Related and high-
marginfinancingbusinessesunderGBCapital.The two
businesses are sharply different in terms of financing
and capital structure as well as underlying risks. To that
end, the separation of reporting — with independent