Qatar- GIS reports QR3bn revenue in 2020

Gulf International Services (‘GIS' or ‘the Group'), one of the largest diversified service groups in Qatar with interests in oil and gas drilling, insurance, helicopter transportation and catering services, yesterday reported a net loss of QR319m for the year ended December 31, 2020. Group's revenue for the year ended December 31, 2020 amounted to QR3bn, and remained at the same level of last year. Revenue growth from the aviation and insurance segments was entirely offset by reduction in revenue from the drilling and catering segments. 2020 was a challenging year for the Group companies, as the oil and gas industry witnessed severe volatilities coupled with the global economic downturn amid COVID-19 outbreak, and created another layer of downward pressures, while the Group companies were relentlessly working to recover from the previous down cycle within the oil and gas industry. These unprecedented external factors led to significant cuts in oil and gas exploration, production and maintenance activities across the globe and negatively affected the Group entities in terms of operational and financial performance for the year. Moreover, impairment of assets within the drilling and aviation segment, has also contributed significantly to the Group's net losses for the year ended 31 December 2020. The decision of the assets impairment was taken after taking into consideration the age and technical capabilities of those rigs and aircrafts and future marketability for those assets. Excluding the impact of one-off, non-cash impairment losses, the Group's bottom line profitability reached to a net loss of QR10m for the financial year 2020. In light of the momentous macro challenges, demand for the drilling rigs worldwide has fallen drastically amid projects deferrals or cancellation, which in turn led to a reduction in rates of rigs, globally. Consequently, days-rates at Gulf Drilling International (GDI) level were also negatively affected and were re-priced. This was coupled with modification of contract terms and temporary rig suspension, specifically within the on-shore fleet, negatively impacting the overall performance of the segment. However, despite the underlying external factors, which remains out of the segment's control, GDI placed efforts to withstand these challenging conditions in order to mitigate the business and operational risks. The segment made continuous efforts to optimize cost in all possible areas of business, to provide financial flexibility, while ensuring that safety and performance standards are not compromised. Additional rigs are expected to commence operations in various phases during first half of 2021, which will unlock solid future growth opportunities for the segment

In terms of topline performance, the aviation segment continued the growth momentum and was able to sustain its margins, while expanding its footprints internationally via winning several new short-terms contracts during the year and further pushing ahead with the growth of MRO business into new markets. The insurance segment witnessed significant growth in terms of premiums, amid successful renewal of existing contracts with clients, along with improved price terms. Moreover, the segment was able to gain new SME clients in its medical line of business, which further added value to the top line. Al Koot Insurance currently stands as the second largest company, in terms of gross written premiums within the medical insurance business in Qatar. During the year, catering segment successfully won new catering and manpower contracts, with higher occupancy levels at the site camps. The Group reported an EBITDA of QR565m for the year ended December 31, 2020. Results were positively impacted, underpinned by growth in revenue within the aviation segment on the back of strong operational performance owing to market expansion strategy, specifically in the international markets, growth within the domestic fleet and MRO business. Similarly, insurance segment continued its positive trajectory while building on premiums on the back of aggressive market expansion strategies and successful contract renewals coupled with favorable pricing terms. The Group also benefitted from the continued current low interest rates, which positively impacted the financial performance for the year 2020, where Group's finance cost declined by 31 percent to reach QR162m, as compared to QR237m for last year. Revenue for the fourth quarter of 2020 represented a moderate increase of 4 percent, compared to the third quarter of 2020, mainly on the back of growth from aviation segment, where, segmental revenue grew by 32 percent, on a quarter-on-quarter basis. The growth in aviation segment's revenue was backed by improved flying hours within the domestic segment, revenue growth from the Turkish subsidiary; Red Star aviation, and better revenue generated from MRO business due to increased maintenance and overhaul work performed in relation to a domestic contract. The Group's total assets declined by 8 percent during the year, to reach QR10bn as at December 31, 2020, compared to last year. On the liquidity front, the closing cash, including short-term investments, stood at QR691m, down by 24 percent as compared to 31 December 2019. The total debt at Group level stood at QR4.4bn as at 31 December 2020. With new market dynamics and post COVID-19 outlook, the Group management is still working closely with all stakeholders including the financial advisor, to reformulate a funding strategy, including capital and debt restructuring, and finalize a new sustainable restructuring and refinancing program, which would be financially viable for debt serviceability in the long term. Given the level of uncertainty amid macroeconomic dynamics, going forward, it is anticipated that with some stability reached at the macro level, there could be a new funding strategy formulated, which could lead tooptimum funding levels, with an efficient and effective interest cover for the Group, while unlocking future growth opportunities, that could translate into realizable shareholder value creation.

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