Gulf International Services (GIS or the Group), yesterday reported a net profit of QR54m for the year ended 31 December 2021, with an earnings per share of QR0.029.
Commenting on the Group’s financial and operational performance for the year ended 31 December 2021, GIS’ Board of Directors, said: “As we enter a post-pandemic recovery phase, our Group companies demonstrated resilience. Our strategic alignment with our customers within the drilling segment was a key achievement and new contracts won internationally for the first time in the segment’s history”.
“Moreover, the ease of pandemic linked restrictions reflected positively on our asset utilization, especially within our aviation segment internationally. Also, owing to our aggressive market penetration strategy within the insurance segment, we successfully enhanced our presence within general insurance line of business and SME sector within medical insurance.”
“Going forward, we look forward to build a resilient future via persistent improvement to our asset utilization, while keeping ourselves competitive by achieving cost efficiencies with an eye on sustainability to ensure long term value creation.”
Group’s revenue for the year ended 31 December 2021 amounted to QR3.1bn, with an increase of 3 percent compared to last year. Revenue growth from insurance, aviation and drilling segments was mainly offset by a negative growth in revenue from catering segment.
Group reported an EBITDA of QR550m and recorded a net profit of QR54m for the year ended 31 December 2021. The growth in Group revenues led to an overall increase in net earnings. Moreover, an impairment provision amounting to QR308m booked during last year, significantly impacted last year’s profitability compared to current year.
Group’s finance cost declined by 21 percent to reach QR129m, compared to QR162m for last year, against a backdrop of lower interest rates and repayment of some loans. Similarly, general and administrative expenses declined by 7 percent on account of continued optimization initiatives.
Moreover, the performance of Group’s investment portfolio was positively impacted by a recovery in capital markets, and a variance amounting to QR23m was noted on account of unrealized gains on revaluation of investment securities, when compared to last year.
Group’s total assets remained relatively flat during the year and stood at QR9.9bn as at 31 December 2021, compared to last year. Cash and short-term investments stood at QR698m, up by 1 percent as compared to 31 December 2020.
Total debt at Group level amounted to QR4.3bn as at 31 December 2021. Current levels of debt continue to weigh on the Group’s net earnings, as finance cost is one of the key cost ingredients, and specifically limits drilling segment’s ability to accomplish the required profitability.
Revenue for Q4-21 represented an increase of 4 percent compared to Q3-21, mainly on account of growth in revenue from aviation, catering and drilling segments, partially offset by a decline in revenue from insurance segment.
Net profit for Q4-21 amounted to QR13m with a reduction of 69 percent compared to Q3-21. This was mainly linked to a foreign currency revaluation loss from GHC’s Turkish subsidiary and impairment provisions relating to receivables within GHC. Moreover, insurance segment also witnessed a decline in net earnings during Q4-21 due to an unrealized loss reported on its investment portfolio, amid negative movements in Capital markets. Drilling segment also furthered its losses, due to higher accruals in relation to operational costs.
Recovery for the Group, following constructive macroeconomic drivers along with improved oil price dynamics, remained uneven where aviation and insurance segments continued to demonstrate persistent improved set of results versus last year. Drilling segment remained under pressure until first half of the year, however, the segment started to show signs of recovery since Q3-21.
The catering segment did not take advantage of macroeconomic tailwinds immediately. The sector suffered from COVID-linked restrictions and challenges that affected the hospitality industry and induced lower revenues, with higher operating costs. Nevertheless, the segment started to show signs of recovery since Q4-21.
Drilling segment witnessed a recovery since second half of 2021, driven by several factors including revised rig rates within the off-shore segment which took effect from July’21; coupled with certain suspended rigs being re-deployed and commenced operation since Q3-21.
Moreover, Gulfdrill JV became fully operational with the deployment of the remaining three rigs during first half of 2021, despite delays caused by COVID-19 restrictions.Aviation segment continue to witness improved performance with better flying activity within both domestic and international operations on account of ease of travel restrictions, coupled with successful renewal of some inter-national aviation contracts.
Also, additional contributions from MRO business continued to support the segment’s financial performance. Moreover, during the year, Turkish subsidiary and Moroccan joint venture added a new aircraft each, in order to meet increased market demand.
This was in addition to a new helicopter (AW139) being added to the domestic fleet during the year, as a back-up to the existing fleet. Insurance segment managed to build up its strong performance by further expanding both the medical and general lines of busi-nesses, where successful renewal and / or additional coverage for major contracts within the energy line of business were the main highlights
Additionally, the segment continued to expand its footprints within domestic SME market, specifically within the medical line of business and added new clients.Catering segment continue to remain under pressure with restrictions mandated since the start of the pandemic in relation to food delivery, transportation and manpower accommodation sectors. This has affected the seg-ment’s performance in terms of lowered revenues, coupled with additional layer of costs incurred in order to comply with the requirements leading to negative margins for the segment. However, despite stiff market challenges, the segment was able to win new con-tracts within manpower line of business.
Especially, during Q4-21 the segment came back strongly and reported its first quarterly profit for the year, as the hospitality industry survives back to back pandemic waves.Drilling segment reported a revenue of QR1bn for the year ended 31 December 2021, up by 10 percent compared to last year. Growth in revenue was mainly driven by comparably higher newly implemented rig day-rates for the offshore fleet, which took effect from July’21.
In addition, two of the suspended rigs commenced operations during Q3-21, which positively added to the segment’s topline. Moreover, deployment of three additional rigs as part of Gulfdrill JV’s fleet during Q2-21, had a positive impact on segment’s revenue trajectory, amid higher management fees. Segment reported a net loss of QR201m for the year ended 31 December 2021, compared to a net loss of QR453m for last year.
The reduction in losses was mainly attributed to growth in segmental revenue, coupled with a decline in the segment’s finance cost com-pared to last year, on account of lower interest rates and repayment of some loans. Also, absence of one-off impairment losses which were booked during last year (QR217m) contributed positively to the segment’s current year’s comparative performance. Aviation segment reported a total revenue of QR722m for the year ended 31 December 2021, with an increase of 5 percent com-pared to last year.
The increase was mainly attributed to higher flying activity recorded within both domestic and international oper-ations, coupled with growth in revenue noted across all the busi-nesses within the segment. Seg-ment’s net profit reached QR221m, representing an increase of 91 percent compared to last year, mainly on account of revenue growth. Segment revenue for Q4-21 versus Q3-21 increased by 3 percent, mainly due to continued improvement in flying hours.
However, Q4-21 profitability declined by 27 percent in com-parison to previous quarter’s net earnings, as the segment booked foreign currency revaluation losses on results from the Turkish sub-sidiary amounting to QR21m and impairment provisions recognized in relation to overdue receivables amounting to QR13m.Revenue within the insurance segment for year ended 31 December 2021, increased by 1 percent as compared to last year, to reach QR988m.
Growth in pre-miums from general insurance line of business, almost entirely offset against decline in premiums from medical line of business.Segmental net earnings increased by 16 percent as compared to last year, to reach QR60m.
Strong growth in net profits was mainly supported by a robust recovery within the segment’s investment portfolio on the back of recovery in capital markets. Unrealized gain on revaluation of investment portfolio contributed QR15m positively towards segment’s net earnings for the year ended 31 December 2021 in comparison to last year.
Catering segment reported a revenue of QR361m, with a decline of 11 percent as compared to last year. This was mainly due to ongoing COVID-19 related restric-tions which resulted in lower number of meals being served across majority of catering loca-tions. This was in addition to loss of some contracts within both manpower and catering segments, which adversely affected overall growth.
The segment reported a net loss of QR15m for the year ended 31 December 2021, com-pared to a net loss of QR10m last year, mainly due to lowered margins and declining revenues. With the current post-pandemic recovery phase and current year’s financial performance, the Board of Directors believes that a dividend payment in 2021 would bring an additional burden on the Group’s liquidity position and may create obstacles to our future plans of achieving long-term sustainability, while reducing our reliance on external sources of finance.
Hence, the Board of Directors recommends no dividend payment for the financial year ended 31 December 2021, in order for the Group to deploy the retained funds to capture the present and future opportunities and remain financially flexible with current debt structure.GIS will host an IR earnings call with investors to discuss its financial results, business outlook and other matters on 22 February at 1:30 p.m. Doha time
