SUMMARY OF RISK FACTORS
D- Risks Related to the Offer Shares
4. THE COMPANY
4.3 Competitive Advantages, Strengths and Strategies of the Company .1 Competitive Advantages and Strengths of the Company
The off-plan sales model enables Retal to complete construction in phases and better focus on high-quality design, flexible planning and development to deliver customized offerings that meet market needs.
According to a market study conducted by Knight Frank, the demand for off-plan projects in Saudi Arabia, especially residential projects, is increasing due to customers who want to take advantage of the affordability and flexibility offered by such projects compared to purchasing existing properties. The market study also focuses on mortgage market growth, which positively reflects on Retal’s clients to finance their homes. As a result, developers are able raise the funds required to sell units in record time, transferring collection risks to specialized financing institutions.
4.3.1.2 Integration of the development and quality control system across Retal’s subsidiaries
Retal consists of the Urban Development Unit in addition to a group of subsidiaries that operate in concert to achieve integration in the following areas: (1) infrastructure development, (2) design and engineering consultancy, (3) project management, (4) construction and contracting, (5) property management, (6) facilities management. This integrated service platform provides the ability to ensure efficiency and quality control across all operations, to close the development cycle and after sales services.
Retal Group thus uses the latest digital solutions that enhance business flow, optimize costs, as well as increase speed and adaptability. In addition, Retal Group has strong partnerships with both the public and private sectors and has forged strategic alliances with industry leaders, service providers and leading financial institutions to support ecosystem integration.
4.3.1.3 Well-established brand and track record
Since its establishment in 2012G, Retal has built a unique real estate portfolio that includes more than 30 completed and under construction projects, representing a total of 7,284 residential units in various regions of the Kingdom of Saudi Arabia, of which about 2,957 units were completed as of 30 September 2021G.
Over the years, the Company has built a good reputation in terms of quality and trust, and, in turn, has managed to become a leader in the field of off-plan sales in the Saudi market, backed by its internal and societal sustainability, significant expansion in the market, large customer base, trusted partners and shareholders.
Retal has been setting the standards for residential and commercial urban development for nearly a decade, with a track record of quality, excellence and value. Retal is at the forefront of urban innovation and advances in the Kingdom of Saudi Arabia. The customer experience provided by Retal is on par with global developers in terms of technology adoption, customer needs, adherence to delivery schedules, and after sales customer services.
In recognition of its achievements, Retal has received many prestigious awards and market accreditations, the latest of which was the 2020G “Best Real Estate Developer in the Kingdom” award from the MoMRAH for the second year in a row. The award is in recognition of Retal’s achievements and continued success in building residential units for the Nesaj Town projects in partnership with the National Housing Company. These certifications best evidence Retal’s industry-leading capabilities to provide real estate solutions and projects of exceptional quality and value.
4.3.1.4 Highly qualified leadership and solid corporate governance
Retal is led by a highly qualified professional and specialized team, which contributed to enabling the Company to realize high achievements and secure a reputation of excellence and extensive experience in the real estate sector, in addition to its proven record in the field of housing development by providing high-end services and innovative solutions that achieve the highest international standards and best practices with more than 1,000 talented experts.
Retal’s management constantly encourages everyone in the Company to adopt a productive and results-oriented approach to developing their careers, supported by customized training programs and knowledge-sharing avenues that enable Retal staff to possess strong emotional and intellectual qualities, as well as a sense of responsibility and integrity in their day-to-day work.
Retal’s governance structure sets out clear roles and responsibilities for the management team, Board, Shareholders and other stakeholders to build an environment of trust, transparency, and accountability, which forms the cornerstone of Retal’s commitment to promoting long-term investment, financial stability, and business integrity, thereby supporting stronger growth and more inclusive and sustainable societies.
4.3.1.5 Strong financial performance
The Company has a proven track record of achieving steady growth across key financial metrics, as the its total revenues witnessed a significant increase during the years from 2018G to 2020G, with a significant increase from SAR 209 million in 2018G to SAR 587 million in 2020G (which represents a CAGR of 67.6%) supported by a wide range of high quality residential and mixed-use projects across the Kingdom, supported by the off-plan sales model.
Retal maintains a unique mix of risks and returns supported by a significant historical growth in the Company’s total sales and net income over the past few years, where the Company recorded a net profit that rose from SAR 3 million to SAR 99 million from 2018G to 2020G, (representing 500% of the Company’s total profits).
Despite Retal expanding its business over the past two years, it has been able to distribute more than 80% of its net income as dividends, which proves that the expansion formula and dividends distribution can be balanced to maximize shareholder value.
4.3.2 The Company’s Strategies
The Company’s core strategies that aim to lay solid foundations for sustainable growth depend on the following:
4.3.2.1 Expand its market share in the Kingdom by providing high quality products in different market sectors The Company constantly seeks to provide high quality cultured value through its projects, in line with the Kingdom’s 2030 vision, to establish urban development, develop and encourage built environment and meet increasing market demand.
The government estimates that the demand for housing units will reach 4 million units by 2030G, with a demand gap of 2 million units. This is primarily due to the Royal Commission for the City of Riyadh’s plan to double the population growth in Riyadh from 7.5 million in 2020G to 15 million in 2030G.
The government has put forward various initiatives with the aim of supporting real estate sector development, such as providing affordable housing for Saudi citizens, and several financing programs to increase home ownership percentage to 70% in 2030G, compared to 47% in 2017G. The government housing program was designed to facilitate home ownership procedures and led to a doubling of supply and demand through its programs that provide housing solutions in cooperation with the private sector, which led to an increase in the percentage of home ownership to about 60% in 2020G.
The Company offers a wide range of housing units, from affordable housing units to high-end housing units. Since its inception, the Company’s portfolio includes more than 7,000 housing units that meet market demand across various categories.
In light of the demographic trends supported by large-scale government initiatives, the Company seeks to increase its leadership position and raise its market share in the housing development sector in the Kingdom by taking advantage of various opportunities that serve different market sectors, with a primary focus on the main urban cities of Riyadh, Dammam and Jeddah, which, according to the market study, comprise about 65.0% of the Saudi population.
4.3.2.2 Achieve a flexible and transparent governance structure to ensure alignment between the Company and its subsidiaries in order to speed up the decision-making process
The Company is committed to a well-defined governance framework based on specific and clear roles and responsibilities aimed at organizing and aligning entities at the subsidiary level with regard to the Company’s strategic objectives, in order to ensure proper decision-making and adopt mechanisms for maintaining the latter, while creating an environment characterized by responsiveness and transparency for key stakeholders (such as Shareholders, customers and regulators).
The adopted strong governance framework is in line with best market practices and complies with the standards of the Capital Market Authority, which serves the objective of enhancing the Company’s responsibility through an efficient and effective oversight, supervision and risk management mechanism.
4.3.2.3 Enhance digital transformation to improve business efficiency and productivity in order to improve the customer experience
The Company constantly strives for a leadership position and immediate dependence on the market environment and changing business requirements.
The spread of the Covid-19 virus at the start of 2020G resulted in a large-scale economic slowdown, which has led to business interruptions due to public health restrictions imposed by the government, which in turn led to the curtailment of commercial activities and limited access to customers across different sectors to reduce face-to-face interactions in response to the measures imposed due to the global pandemic.
In light of the above, the Company seized the opportunity by creating an online platform that features unique virtual key elements, such as an interactive 360-degree tour of its residential offerings, online selling services with booking options and a high degree of customization features for units (for luxury products). The strict government restrictions imposed during the curfew period helped boost the use of the Company’s virtual solutions. As a result, the Company was well-equipped to adopt to changing business requirements and thus was able to book many units of the Ayala Al-Nakheel luxury project during the curfew period without the need for face-to-face dealings by providing unique customization services in terms of location, type, house layouts and facade design options to provide convenient remote interactions with clients.
The Company aims to be ready to identify growth opportunities under different market conditions in order to achieve the ultimate goal of further encouraging a customer-centric culture and enhancing customer experience.
4.3.2.4 Create strong brand awareness through strategic alliances and unconventional marketing methods
The Company is constantly keen to expand its communication network with customers through its strategic partnerships and innovative marketing methods to enhance its brand recognition and market position.
Through its comprehensive business lines that constitute an integrated system that meets market requirements, (from design to post-delivery services), the Company has expanded its customer base in light of its outstanding capabilities in development and implementation, which led the Company to achieve great success in creating a strong brand name associated with high quality products.
The Company succeeded in attracting reservations for about 700 units in Nesaj Town Riyadh within 96 hours of its launch on the Sakani platform, and 170 units in Nesaj Town Al-Khobar within one hour during 2021G, which indicates the position of the Retal brand in the market backed by its marketing strategies that have been successfully implemented.
On 04/08/2021G, the Company also entered into a strategic partnership with Alpha Capital, where it launched a real estate development fund that raised more than half a billion Riyals to invest in the “Marasi Al-Khobar” project located between Dammam and Al-Khobar, as part of a strategic 7.5 billion Riyals partnership, which contributes to achieving part of the Company’s future plans.
Furthermore, the Company aims to deliver unique value to its customers by continuing to capitalize on its existing partnerships and strategic expansion of its alliances and partnerships with global brands and industry leaders to expand product offerings, expand its customer network and develop a competitive advantage over its peers in order to ultimately achieve growth and maintain its successful position in the long term.
4.3.2.5 Ensure adherence to high quality standards
The Company aims to adhere to strict quality controls during all stages of development, in order to achieve the highest quality standards and to link the Company’s brand name to unparalleled levels of quality in the market. The Company believes that keeping its strategic focus on delivering current and future projects at a distinguished level of quality is a top priority, led by distinguished design, appropriate price for the target group and delivery in record time, which will enable it to maintain and enhance its current position in the market.
4.3.2.6 Develop and attract outstanding talent
The Company aims to attract, retain and nurture distinguished national talents in various fields by providing numerous advantages that enhance a positive and supportive work environment to ensure opportunities for professional growth, which aims to consolidate the Company’s reputation as one of the preferred work environments for the stability of eminent competencies.