Doha: Gulf International Services (“GIS” or “the Group”; QE ticker: GISS), yesterday reported a net profit of QR 290m for the year ended December 31, 2022, with an earnings per share of QR0.156.
The Group witnessed strong financial performance for the year ended December 31, supported by all the segments. The drilling segment witnessed a strong recovery due to combination of factors including comparatively higher rig day-rates, improved asset utilization as more rigs became operational, and successful contract renewal with extended tenors. In addition, new contracts for liftboats were won internationally in KSA and Maldives, which helped diversifying the segment’s revenue streams and supported the overall growth for the drilling segment.
The aviation segment was able to sustain its growth momentum in terms of strong top-line performance mainly driven by better flying activity coupled with comparatively higher contributions from the MRO business.
The insurance segment built upon its strong performance by further expanding its general line of business. The catering segment continue to demonstrate improved set of results on the back of realizations from the new contracts won last year and in addition to the realizations from the contracts related to the FIFA 2022 World Cup.
Group’s revenue for the year ended 31 December 2022 amounted to QR 3.7bn, with an increase of 19 percent compared to last year. Revenue growth from aviation, drilling and catering segments led to an overall increase in the Group revenue.
However, this was partially offset by negative growth noted in revenue from the insurance segment.
The Group reported an EBITDA of QR 807m and recorded a net profit of QR 290 m for the year ended 31 December 2022. Growth in the Group’s revenues led to an overall increase in net earnings. On the other hand, the Group’s direct costs increased by 9 percent, mainly linked to increased commercial activity.
Group’s finance cost significantly increased by 41 percent to reach QR182m, as a result of persistently higher interest rates.
Net monetary losses arising from the accounting impacts of hyperinflation from GHC’s Turkish subsidiary (QR -11 million) also contributed negatively to the Group’s profitability. In addition, general and administrative expenses also increased by 9 percent on a year-on-year basis, mainly linked to increase noted across all the segments, amid overall increase in commercial activity and general inflationary impacts.
Moreover, performance of the insurance segment’s investment portfolio was negatively impacted, amid volatilities in capital markets, and a decline of QR 48 million (-97%) was noted on account of investment income versus last year.
This decline was mainly linked to unrealized losses booked on revaluation of held for trading investment securities.
Revenue for 4Q-22 increased by 8% compared to 3Q-22, mainly on account of better revenue reported from insurance, catering and drilling segments, which was slightly offset by negative movement in topline from the aviation segment.
On the other hand, net profit for 4Q-22 declined by 76% compared to 3Q-22. This shortfall in the Group’s net earnings was mainly attributed to the following factors: • Reduction in revenue within the aviation segment (mainly from international operations) and hyper-inflation loss of QR 19 million reported for the current quarter; • Higher general and administrative expenses reported within the drilling segment on account of higher accruals along with higher finance costs; • Lower investment income from the insurance segment due to higher unrealized losses on held for trading securities.
Revenue for 4Q-22 increased by 18% compared to 4Q-21, mainly on account of higher revenue growth achieved by all the segments, amid improved business dynamics for all of the segments since the start of current year.
Net profit for 4Q-22 increased by 86% compared to 4Q-21. This growth in the Group’s bottom-line profitability was mainly linked to better performance reported by aviation, insurance and catering segments, which was partially off-set by negative bottom-line performance by drilling segment.
The Group total assets increased by 10% during the current year compared to 31 December 2021 and stood at QR 10.9 billion as at 31 December 2022.
Cash and short-term investments stood at QR 1.1 billion, up by 64% compared to 31 December 2021. Growth in cash and cash equivalents is mainly attributed to an overall increase in the Group’s profitability, coupled with improved cash flow generation.
Total debt at the Group level amounted to QR 4.29 billion as at 31 December 2022. Current levels of debt continue to weigh on the Group net earnings, as finance cost is one of the key cost elements and specifically limits the drilling segment’s ability to accomplish its desired profitability. GIS management is in continuous discussions with the key stakeholders to restructure the debt, with a target to achieve greater flexibility to manage its liquidity and ease pressure on the Group’s financial position.
The drilling segment reported a revenue of QR 1.3 billion for the year ended 31 December 2022, up by 26% compared to last year. The revenue growth has largely been linked to comparatively higher rig day-rates implemented for the offshore fleet since the mid of last year (July’21). Also, redeployment of two onshore suspended rigs, along with commencement of operations of GDI-8, positively contributed to the segment’s topline performance for the current year.
Moreover, full deployment of Gulfdrill JV’s fleet since 2Q-21, had a positive impact on the segment revenue for YE-22 on account of comparatively higher management fees.
The segment reported a net loss of QR 90 million for the year ended 31 December 2022, compared to a net loss of QR 201 million for last year. Significant reduction in losses was mainly attributed to growth in segmental revenue, partially offset by higher operating cost on account of increased activity.
On a quarter-on-quarter basis, losses for the segment increased by QR 33 million mainly due to higher accruals in relation to operational costs. Also, higher finance cost affected segment’s bottom-line profitability on a quarter-on-quarter basis. This was partially offset by slightly higher revenues which increased by 5% versus 3Q-22. Growth in the segment revenue was mainly linked to higher rig utilization achieved during the current quarter, as another onshore rig (GDI-8) became operational during the quarter.
The aviation segment reported a total revenue of QR 915 million for the year ended 31 December 2022, with an increase of 27% compared to last year. The increase was mainly attributed to higher flying activity recorded within domestic and international operations, coupled with growth in revenue noted across all the operations, including MRO business and international locations, especially Turkey and Angola. The segment’s net profit reached QR 310 million, representing an increase of 40% compared to last year, mainly due to growth in revenue. GHC recorded the highest net profit in its history.
The segment revenue for 4Q-22 versus 3Q-22 decreased by 9%, mainly due to lowered international flying activity, especially shortfall in revenue noted from the Turkish subsidiary & Angolan operations during the current quarter versus 3Q-22. Q4-22 profitability also declined by 51% mainly due to downward movement in segmental revenue on a quarter-on-quarter basis coupled with net monetary losses arising from the accounting impacts of hyperinflation from GHC’s Turkish subsidiary which also contributed negatively to the segment’s profitability.
Revenue within the insurance segment for the year ended 31 December 2022 decreased by 9% as compared to previous year, to reach QR 898 million. The decline in revenue was mainly linked to loss of two insurance contracts within the medical line of business, since the start of current year. The decline was partially offset by growth in premiums from the general insurance line of business, on account of renewals of existing contracts with wider coverage and scope.
On the contrary, the segment net earnings increased by 18% as compared to previous year, to reach QR 71 million. The growth in bottom line profitability was mainly supported by an overall decline in claims, which decreased by 37% on a year-on-year basis. Whereas negative performance of the segment’s investment portfolio amid volatilities in capital markets weighed on the segment’s profitability. A decline of QR 48 million (-97%) was noted on account of investment income2 for the current year versus last year. This decline was predominantly linked to the unrealized losses booked on revaluation of held for trading investment securities.
The segment revenue for 4Q-22 versus 3Q-22 increased by 24%, mainly due to growth noted in premiums from the medical insurance line of business due to winning new contracts. The segment’s profitability for 4Q-22 also improved by 13% in comparison to 3Q-22, mainly linked to overall growth noted in segmental revenue, being partially off-set by the negative performance of the segment’s investment portfolio, as lower investment income2 was reported during 4Q-22 versus 3Q-22, with a decline of QR 17 million was noted during 4Q-22 versus 3Q-22. This was mainly linked to the unrealized losses booked on revaluation of held for trading investment securities during the current quarter.
The catering segment reported a revenue of QR 568 million, with an increase of 57% compared to last year. Revenue increase was mainly driven by the growth noted within the manpower segment on the back of realizations from a new contract won during latter part of last year. Additionally, certain contracts were renewed within the manpower & catering segments with broader scope improving the overall service volumes for the segment. The segment was able to significantly reduce its losses and turned to profits with a net profit of QR 9 million noted for the year ended 31 December 2022 compared to a net loss of QR 15 million for last year, mainly due to higher revenues and better margins.
On a quarter-on-quarter basis, catering segment continued its positive trajectory of its topline during 4Q-22 mainly due to improved revenue from the realizations of the FIFA 2022 World Cup related contracts. In this regard, the segmental revenue grew by 19% versus 3Q-22. The segment reported a net profit of QR 8 million during 4Q-22 versus a net profit of QR 2 million during 3Q-22. Growth in bottom-line profitability was mainly linked to better revenue growth achieved during the current period.
