December 30, 2008

To : All Shareholders

It is less than a month since I last wrote to you but the gathering pace of the decline in local economic activity prompts me to write again with some urgency to put in place a defensive plan of action and to prompt a series of pre-emptive strikes against what is developing into a major localized recession.


Budgets for 2009 can be torn up – the focus has shifted from profitability and is now firmly fixed on damage limitation and our survival intact.


The present status, and future outlook, for economy is bleak and the velocity of the fall is spiraling downwards. This is not the time to sit back and adopt a “wait and see” policy but to act decisively to downsize our businesses and put up the barricades against the losses and misfortunes which others are already suffering. I have been a situation like this before resulting from over-optimism and unpreparedness in the 1980’s, although not of the same severity as this situation, and you have to believe me that the experience is very testing. To some of you, my response to the present threat might seem to be over-reaction but my experience compels me to believe that it is better to err on the side of caution. One of the most revealing tests of a good manager is whether he can guide his business through bad times and you, each one of you, now face that test.


Slowdown of economy has been largely foreseen in our previous communications so we have been spared the worst effects so far but there is very much further downside to come – the only sure thing is that the worst gets worse for the foreseeable future. So, what I propose is an Action Plan which protects those parts of our business which are most vulnerable to the decline, promotes those parts which might prosper from it and generally downsizes our structure until the future picture becomes clearer. I, personally, believe that it is too soon to make the assumption that the economy will ever again boom in the way it has in the recent past and I also believe we have to look well beyond 2009 for any significant level of recovery. So we must be set for a long period of declining, or at best stagnant, economic activity.


This is what I suggest we do about it ----




I propose that we form a council, initially comprised of all CEO’s but drafting in other executives as required, to share experience and ideas and to take collective decisions on material issues. This council, or War Cabinet if you like, should meet at least once a week and we should, at the same time, step up the interaction at all levels of our staff to make sure that a lesson learned in one place is not lost in another.


For the first meeting I propose an ambitious agenda which I hope you will all think about:



  • Separate those of our businesses which might be severely damaged and “moth-ball” them.

  • Identify those of our businesses which should be downsized significantly but allowed to continue.

  • Pick out carefully those activities which might prosper in these circumstances and foster them, but under a tight programme of scrutiny and supervision.



  • Take all necessary steps to preserve important customer/client relationships, profit being a secondary consideration.

  • Draw up a list of essential employees and make sure we keep them.



Cut back on bank exposure, especially short-term callable lines, with immediate implementation of plans for:

  • Aggressive collection of Receivables

  • Substantial reduction of non-strategic inventories, if necessary heavy discounting for cash to prevent Inventory from simply migrating to Receivables.

  • Press supplies to ease and extend their terms for Suppliers’ Credit.

  • Scrap all plans for non-strategic capital expenditure.



  • We can reasonably expect that, there will be increases in indirect taxation (at least) and a lot of that will be labour related. So we must get ahead of that eventuality:

  • Draw up complete lists of all employees and JUSTIFY each one you decide to keep, preserving the best and keeping tabs on those we shall need if and when we decide to gear up again. This is no time for sentiment and we must be ruthless.

  • In the implementation of (a) make sure your intentions are clearly broadcast to mitigate the effects on productivity. Maintenance of staff morale is going to be a very challenging test in the months ahead and we must have incentive schemes in mind if we are threatened by the loss of essential people.



  • No item of cost should be considered so small as to escape our attention. Draw up a detailed plan and do a line-by-line scrutiny, eliminating all but essential items. (I have asked Head Office staff to send you suggested list of potential reductions)

  • Look carefully at out-sourcing as a means of reducing costs and headcount.


THIS IS JUST A STARTING AGENDA. There will be crises and important issues, some arising from the Unforeseen Consequences of other actions which we talked about before, but we have taken the right steps so far and if we work together, helping each other, we can survive this upheaval and perhaps emerge even stronger. Excessive downsizing now is a much wiser step than underestimating the need: gearing up again when things improve can be achieved with relative rapidity.

I am not afraid of what is ahead of us because I know that we are one of the best managed groups in Dubai and we have the skills and determination to come through this crisis. We cannot be sure of powerhouse effect of growth that we were used to but when the worst is over we can rebuild and I expect there will be many bargains and new opportunities for us if we act prudently now.

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