Gulf International Services (GIS or the Group; QE ticker: GISS), yesterday reported revenue of QR1.4bn for the six-month period ended 30 June 2021, a reduction of 8% compared to H1-20.
Revenue growth from insurance segment was entirely offset by reduction in revenue from all the other segments.
The Group reported an EBITDA of QR245m, while the Group posted a net loss of QR0.8m for the six-month period ended 30 June 2021. The decline in Group revenues led to an overall decline in bottom line profitability.
Finance cost for H1-21 decreased by 34%, to reach QR65m, compared to QR98m in H1-20, on the back of the drop in interest rates. Similarly, general and administrative expenses declined by 10% on account of continued optimization drive.
Moreover, strategic investments repositioning in both equities and fixed income asset classes coupled with recovery in capital markets resulted in a recovery amounting to QR44m on account of unrealized gains on revaluation of investment securities, when comparing current period’s investment portfolio performance with H1-20.
Oil and gas industry continue to show positive signs of recovery with constructive macroeconomic drivers, on the back of effective vaccination campaigns leading to ease of lockdown restrictions in major markets linking to heightened economic activity.
However, the post-pandemic recovery within the Group remained uneven, with Aviation and Insurance segments reported improved set of results, while the macroeconomic tailwinds were not immediately felt within the drilling segment, which continue to remain under pressure, engulfed with rig suspensions and depressed rig day-rates.
With revised rig day-rates for off shore fleet and Gulfdrill JV’s fleet becoming fully operational, the drilling segment is expected to improve on its performance matrix entering into second half of this year.
Since the start of pandemic, Group’s drilling segment had undergone rate reduction, together with suspension of certain rigs within onshore fleet, which brought an additional layer of challenges to the segment.
However, on a positive note, a key milestone has been achieved by Gulfdrill JV with the deployment of the remaining three jack-up premium rigs; “Java Star”, “W-Castor” and “W-Tucana” during Q2-21.
Going forward, with all the five JV rigs being operational, would result in additional revenue streams for the segment and improved operational cash flows for GDI.
Moreover, starting from July’21, the new rig day-rates applicable for off shore fleet will take effect, which is expected to positively impact the segment’s topline.
Performance of the aviation segment improved compared to last year. COVID-19 related travel restrictions, which affected the transport demand last year for the oil and gas companies remained relaxed during the period.
As a result, higher flying hours were recorded on an overall basis, which affected the overall segment’s performance.
Additional topline contributions from MRO business were also recorded, as a new contract was awarded to GHC during the current year. Furthermore, contracts in Libya and Angola has been successfully extended.
The insurance segment managed to build up on the strong performance achieved throughout the period by further expanding both the medical and general lines of business, coupled with successful renewal of major contracts and additional coverage obtained for major contracts within the energy segment.
Additionally, the segment continue to expand its footprints within the domestic SME market, specifically within medical line of business and added new clients during the period.
The revenue for Q2-21 represented a moderate increase of 3%, compared to Q1-21, mainly on account of growth in revenue from aviation and drilling segments, offset by decline in revenue from insurance.
The overall growth in Q2-21 revenue versus Q1-21 was mainly attributed to improved flying hours with better MRO activities within the aviation segment and deployment of three new rigs within the fleet of Gulfdrill JV during Q2-21.
Net profit for Q2-21 amounted to QR4.8m increased by 186% compared to Q1-21. The improvement was mainly due to constructive growth in bottom-line profitability across all the segments, on account of healthier topline by certain segments. However, higher interest rates contributed negatively towards the bottom-line.
The Group’s total assets increased by 5% during the year, to reach QR10.5bn as at 30 June 2021, compared to last year. On the liquidity front, the closing cash, including short-term investments, stood at QR718m, up by 4% as compared to 31 December 2020.
Total debt at Group level stood at QR4.5bn as at 30 June 2021. Current levels of debt continue to impact the Group’s bottom line earnings.
Continued efforts are underway to achieve a sustainable funding strategy, which could lead to an optimum funding levels, with an efficient and effective interest cover for the Group.
The drilling segment reported a revenue of QR440m for the six-month period ended 30 June 2021, down by 16% compared to last year.
The reduction in revenue was primarily due to the ongoing rig suspension within the onshore fleet. In addition, rig day-rates continued to remain depressed since July’20. This was partially offset by the deployment of three additional rigs as part of the Gulfdrill JV’s fleet during Q2-21, on account of rig management fee reported as part of segmental revenue.
The segment reported a net loss of QR132m, compared to a net loss of QR44m for H1-20. This notable increase in net loss was primarily attributed to negative growth in revenue.
However, this was partially offset by lower interest rates, with a QR31m decline in segment’s finance cost was noted compared to H1-20.
Segment revenue for Q2-21 versus Q1-21 increased by 22% to reach QR242m compared to Q1-21. The increase in revenue was mainly on the back of deployment of three new rigs under Gulfdrill JV. The overall growth in segmental revenue for Q2-21 translated into better bottom-line performance for the segment versus Q1-21.
Aviation segment reported a total revenue of QR338m for the six-month period ended 30 June 2021, down by 1% compared to 1H-20. This reduction in revenue was mainly due to the lower revenue from international segment.
This was partially offset by increase in MRO revenue owing to a new contract won domestically and improved flying activity on an overall basis.
The segment net profit, reached QR111m, representing an increase of 18% compared to H1-20.
The increase in the bottom-line profitability was mainly supported by realized savings in operating costs, due to lower repair and maintenance costs.
This was slightly offset by overall decline in topline for the segment.
Segment revenue for Q2-21 versus Q1-21 increased by 5%, mainly due to improved flying activity and MRO related revenue. Q2-21 profitability improved by 25% in comparison to previous quarter’s bottom-line performance, mainly on the back of positive revenue growth.
Revenue within the insurance segment for the six-month period ended 30 June 2021, increased by 2%, as compared to H1-20, to reach QR481m.
The growth in revenue was mainly due to higher premiums from the general insurance segment.
The general insurance segment has performed well during the year, where, major clients has been retained and renewed with enhanced coverage and prices.
Moreover, the segment further expanded its international footprints by winning new energy contracts in Africa, Middle East and other Asian countries.
The segment net profit for H1-21, increased by 161% compared to H1-20, to reach QR33m. The strong growth in bottom line profitability was mainly supported by significant improvement in premiums, in addition to strong recovery within the investment portfolio on the back of recovery in capital markets.
Unrealized gain on revaluation of investment portfolio contributed QR40m towards the segment’s bottom line earnings for H1-21 in comparison to H1-20.
In terms of claims, there had been an increase compared to the previous period, especially within the medical line of business driven by ease of restrictions.
Segment revenue for Q2-21 versus Q1-20 decreased by 12%, mainly due to lesser premiums with certain policies being expired without renewal.
On the other hand, Q2-21 profitability improved by 13% in comparison to Q1-21, on the back of higher investment income and lowered claims, partially offset by decline in segmental revenue.
The catering segment reported a revenue of QR172m, with a decline of 24% compared to H1-20. This was mainly as a result of lowered number of meals served across majority of catering locations, due to COVID-19 restrictions.
This was in addition to demobilization of some contracts within both manpower and catering contracts during Q4-20, which affected the overall growth of segmental revenue for 2021.
Reduction in revenue has been partially offset as new contracts are won within manpower segment and higher occupancy levels achieved in the accommodation camps.
The segment reported a net loss of QR9m for six-month period ended 30 June 2021, compared to a net profit of QR5m for H1-20, mainly due to lowered margins and declining revenues. Segment revenue for Q2-21 remained flat versus Q1-21, however, profitability declined on account of higher operational cost.
GIS will host an IR earnings call with investors to discuss its financial results, business outlook and other matters on Monday, 9th August 2021 at 1.30pm Doha time.
The IR presentation that accompanies the conference call will be posted on the ‘financial information’ page within the Investor Relations section at GIS’ website.
