Dubai: A casual acquaintance with Anan Fakhr Al Deen and one would think he was the archetype of a corporate high-flier.
There's the dapper suit, the pleasing manner and an attention to detail, which a private banker or a consultant to blue-chip companies could easily identify with.
But as the newly installed chief executive of Damas jewellers, Fakhr Al Deen's operational role is far removed from such roles.
His immediate priority is to turn around a company that is awash in debt and struggling with corporate malfeasance issues.
Fakhr Al Deen's task has been made that much more onerous as jewellers say the local precious metals and jewellery market has never operated on well-defined and codified rules.
Deals have historically been brokered on nothing more than a handshake and an expression of goodwill that the terms will be met.
Fakhr Al Deen indicated he felt he had the experience and tactical nous to make it work at Damas.
There were all his years spent at the helm of the World Gold Council's regional operations where he said he built a network of alliances with some of the most high profile people in the business.
All of these are bound to come in handy now.
Fakhr Al Deen says if he has his way, he's going to shake up the old order of doing things, at the very least within his own company.
He makes it clear in conversation with Gulf News, that nothing less will do.
GULF NEWS: While you are focused on the financial restructuring, what's your strategy going to be on the operational side? There's a feeling Damas has overstretched itself on the geographical expansion.
Anan Fakhr Al Deen: To be honest, the expansions were quite valid at the time. However, because of the new realities — whether it be on account of the global recession and the state of the jewellery market in itself — we are reviewing all that.
What I can assure everybody is that wherever we have a presence, our decision to continue will have to be justified by a business plan.
Will this mean a scaling down on the India presence?
The only decision we are taking with regard to India is "What next?". It's the third largest jewellery market in the world, the largest gold market in the world, and we have to be there.
The joint venture (with the Gitanjali Group) has a number of shops — branded d'damas — active on the ground. What we doing now is actively seeking expert opinion in terms of what is the next step, the segments that we need to be in.
Is it the same status for your Saudi operations?
Consumer sentiments have changed, and the buying power too has shifted.
What we have now in Saudi Arabia is a retail presence that covers all consumer segments.
What will be done now is realign these around niches.
The focus will be on the upper-middle and higher clientele and turn into a boutique operator.
We have 40 odd stores there, we are reviewing our expenses, these will be restructured and the outlets restocked around niche products.
We are going to have a smaller number of stores catering to an upscale buyer. The final figure I reckon will be in the 30s and will be a mix of high street and in-mall locations.
In effect, you are retooling all of Damas's overseas operations?
The general outline is Damas is clearly identified as the leading jewellery retailer network in the region. Anything that does not support this position, we no longer want to be a part of.
Associations with fashion houses and with jewellery manufacturers in countries where we are not present are being cancelled.
It was one of the first things we had to focus upon once the financial restructuring process started. The higher cost of capital once the recession started too had to be factored in.
We can't be all over the place.
Will it mean Damas solely focuses on retail rather than working as an integrated operator in the jewellery business?
Retail is clearly going to be the main driver; as far as manufacturing goes. Where it can support the retail side, it will be retained. It will no longer be an investment portfolio element on its own.
Part of the restructuring requires that our core market had to be defined, and every effort geared to aggressively protect — and grow — our marketshare.
Will this mean an exit from wholesale?
We were inactive for almost a year in wholesale, only reactivated it in the last three to four weeks.
Yes, the margins are lower, but it provides the volumes.
It's easier to reconnect being in the B2B space if you have the right goods at the right prices. Our B2B clients are very loyal to us. If you are used to doing business with us for 20 years, it's not going to be easy for anyone to change the supply chain.
In two to three months, the wholesale side should be back to normal.
With gold prices being what they are, is there any change in the way Damas sources its requirements of the metal?
The business model Damas historically followed is we do not speculate — we borrow gold unfixed, we sell and then immediately fix it at the spot rate. This is how we have dealt with volatility in gold prices.
Over the last few months because of the financial restructuring we had to buy certain quantities on a fixed basis. Our objective was to take any step to protect the business.
Right now we are buying gold on both fixed and unfixed positions. I hope once things return to normalcy, we will go back to the original business model and where we have a number of natural hedges.
Do you intend to turn yourself into an exclusive brand retailer even in the UAE?
Presently there are four shop concepts that Damas operates here. But the more concepts there are, the higher will be our costs and so too the need to have so many stores built around each concept.
There was a huge expansion plan followed at the time, it was the right thing to do. At one point during the boom, your sales depended on the number of stores. The more stores you opened, higher would be the sales.
In terms of stores, Dubai alone has more than 100. Obviously times have changed. By the end of our operational strategy review, these will be visible.
Will it mean exiting certain price categories at the lower end of the jewellery market?
This is our home market. We were the pioneers in exploring new consumer segments. We are the family brand when it comes to jewellery.
I do not see a situation where we stop offering all possible consumer choices in the UAE.
A lot of the operational strategy review will, of course, depend on the ongoing financial restructuring. What's the progress on that?
We have now re-established the internal audit function, and a compliance officer has been hired who comes from a regulator background.
Also re-established is the risk assessment function within the company. All through this, we are in constant dialogue with Dubai Financial Services Authority. Continuous updates are provided and things are progressing well on that front.
What have you done to all the "toxic" properties that Damas has?
Damas jewellery is the listed company and has nothing to do with Damas Real Estate anymore. At one time both entities had the same set of owners.
Most of the toxic assets have to do with Damas Real Estate. We have our own property assets but which have nothing to do with Damas Real Estate.
A lot of criticism has been directed at the company and its new board after you appointed the Abdullah brothers - the original promoters - as advisors. Isn't that diluting the corporate governance side of things?
For an outsider it might look like that. But in the jewellery business, most of the deals done in the past were on the basis of a handshake. I have been touring the markets and find there are assets of ours with external parties without not a single document to support the contention.
Without bringing the same people who have the history, the influence and the details, plus the power to bargain, it would be impossible to track down all the deals made in the past. It has worked for us.
Over the past three to four weeks, we have managed to recover a huge amount of money owed to us. From these recoveries and accounts receivables, we are making good progress on the financial restructuring.
Are the Abdullah brothers associated with the company on a full-time basis?
No, strictly on a needs basis. They were given the assignment because we felt there was a role for them.
What of the funds they were to return to Damas? They missed the first one, didn't they?
Under the settlement agreement they signed with Damas, the first agreement was not to be considered a default. From a legal point of view, there is no violation.
They have an obligation to us and have pledged shares as collateral. If we have to use these pledged shares, it automatically dilutes their stake (which is a combined 52 per cent).
A few years ago, Damas had acquired interests in Europe. What will happen to these?
The overseas assets are being liquidated, in fact most of them already are. Italy is going through a difficult economic period and for a foreign company to do business there is extremely difficult.
What is the exact status on your debt payments?
The financial restructuring with the banks is ongoing. The standstill agreement expired on June 30 and we have an extension deal. There is a verbal agreement to extend it to end of September. I hope to sign off on this in the next few days.
The standstill is designed to give us enough time to renegotiate our payments terms with the banks and that's almost done. This should most likely be done in August and allow us to make our payments over a period of time.
What of your short-term cash requirements?
If you look at our cash position for the next six years, we are perfectly fine with the amount of working capital agreed upon with the banks. They have allowed us to keep the working capital at existing levels.
When do you expect to finalise all the details of new operational strategy?
The idea is to submit the business plan to the board before November. We are still mapping the process towards reaching that point.
Will all this at some point mean you have to take a decision on lay-offs?
I haven't reached that position, but I suspect I will.
It does seem a lot of heartburn will be involved in the cleaning up process.
Tough decisions have to be made, but I have the support of all involved - the board and the staff - in taking them. There's a lot at stake, but we will get it right.
