- Highest first half revenue and net profit on record
- Increase in revenue of 42.5%
- Net profit up by 58%
- Drilling results increased by 153% due to buy-out of overseas drilling partner, deployment of new drilling assets, and enhanced new contracts
- Gulf Helicopters to expand its fleet
DOHA, QATAR - Gulf International Services (“GIS” or “the group”; QE: GISS), the largest service group in Qatar, with interests in a broad cross-section of industries, ranging from insurance, re-insurance, fund management, onshore and offshore drilling, accommodation barge, helicopter transportation, and catering services, announced its financial results for the six months ended June 30, 2014 with revenue of QR 1.6 billion and net profit of QR 0.5 billion.
In a statement to the Qatar Exchange, H.E. Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry, Chairman and Managing Director of Gulf International Services, stated, “The group closed the first six months with its highest-ever first half results: revenue of QR 1,595.3 million and net profit of QR 463.7 million, increases of 42.5% and 58.2% on the prior year respectively. These record results can be mainly attributed to the ambitious growth plans in all segments, but most notably within the drilling segment where significant progress was made towards completing that segment’s medium-term business expansion strategy.”
Providing further details on the latest developments within the drilling segment, Mr. Ebrahim Al-Mannai, Chief Coordinator, Gulf International Services, stated, “Significant achievements were noted during the second quarter of 2014 in three critical areas - increasing GIS’ ownership interest in GDI, business development initiatives and extensions for expiring onshore drilling contracts. With regards to increasing the group’s equity interest in GDI, GIS completed the buy-out of Japan Drilling Company Limited’s 30% shareholding in Gulf Drilling International for a total consideration of $157.7 million, resulting in GDI becoming a 100% subsidiary of GIS with effect from May 1, 2014. The buy-out contributed an additional profit of QR 40.0 million for two months period ended 30 June 2014.
“Secondly, progress was made by the subsidiary with respect to several business development opportunities: of the three assets expected to be placed into operation during the current year the first, a conventional jack-up rig, Msheireb, was accepted by Occidental Petroleum and commenced operations in May, 2014. The second, a new accommodation lift-boat, Rumailah, has recently been received and will be utilised by Maersk Oil Qatar following its delivery to them in July, 2014. The third asset, a high specification jack-up rig, Dukhan, is still under construction in Singapore and is on schedule to be utilised by Qatar Petroleum upon its expected delivery to them in the fourth quarter.”
In addition, during the quarter, orders were also placed for two, new custom-built land drilling rigs, GDI-7 and GDI-8, following the signing of long-term contracts with Qatar Petroleum for the provision of onshore drilling services. These rigs will take up to 12 months to be constructed in the United States, and are scheduled to be placed into service in the third and fourth quarters of 2015, respectively. And, most recently, GDI announced the purchase of another, high specification, premium offshore rig following the awarding of a new, five-year contract with Qatar Petroleum for the provision of further offshore services. This latest addition is expected to commence operations in the second quarter of 2016.
“With these three new assets,” continued Mr. Al-Mannai, “GDI expects to have a total of twenty-one assets under operation by mid-2016, up from nine at the beginning of 2012. At that point, GDI’s fleet is projected to be comprised of ten offshore rigs, eight onshore rigs, two lift-boats and one accommodation barge.”
In the third area - extensions for expiring onshore drilling contracts - negotiations were successfully concluded with new, five-year term, enhanced contracts being signed during the quarter for four of the subsidiary’s five onshore rigs.
“Gulf Helicopters recently placed firm orders for 15 AW-189 helicopters - AgustaWestland’s latest generation aircraft,” continued Mr. Al-Mannai. “Subject to prevailing market conditions, it is expected that 11 aircraft will be deployed in the next 5 years to bring the total count to 54, with the first 2 helicopters expected to be delivered in the third quarter of 2014.”
Group revenue for the six months ended June 30, 2014 was QR 1,596.4 million, representing a significant increase of QR 477.1 million, or 42.5% over the same period last year, and a material QR 361.9 million or 58.7% improvement on the first quarter.
Revenue in the Drilling segment closed the first half of 2014 at QR 697.6 million, a remarkable year-on-year increase of QR 316.5 million, or 83%. This performance was driven by a combination of factors: the acquisition with effect from May 1, 2014 of Japan Drilling Company’s 30% stake in GDI added QR 103.9 million in revenue, the deployment of the Al-Jassra and Leshat offshore rigs in the second and fourth quarter of 2013 contributed a further QR 131.3 million, and revisions to three rolled-over offshore contracts during the latter part of 2013 and to four onshore contracts during the current quarter. Quarter-on-quarter, revenue was up by QR 174.4 million or 67.0%, principally due to the buy-out of JDC and the onshore contract revisions.
Aviation segmental revenue for the first half increased by a moderate QR 11.7 million, or 3.8%, to total QR 320.0 million, as an increase in the number of helicopters in the fleet (2014, H1: 45 helicopters versus 2013, H1: 43 helicopters) and the success of GHC’s proactive business development strategy which resulted in operations in a number of new territories, were partially mitigated by the end of its long-term relationship with the National Health Authority for providing a helicopter emergency medical service. Compared to the previous quarter, revenue increased by QR 14.1 million or 9.2% due to a increase in business across all lines of business within the segment.
The group’s insurance subsidiary registered gross insurance revenue for the period ended June 30, 2014 of QR 381.1 million, a resolute QR 44.3 million, or 13.2%, improvement on the same period of 2013. The main contributor to this growth was the medical line of business, as an additional 8,000 members joined the Al Koot Global Care Medical Insurance Scheme versus the first half of 2013. The medical line of business has grown by an annual average of circa 20% per year since 2009, and now contributes circa 40% of Al Koot’s annual revenue. Results in the core Energy line remained flat showing a minimal year-on-year growth of 0.3%, in line with Qatar Petroleum’s reduced capital expenditure activity. Revenue slightly down on the first quarter of 2014, by QR 2.2 million, or 1.1%,.
Amwaj Catering Services Limited contributed QR 548.7 million to group revenue, representing the largest segment at 34% of group revenue. Compared to last year, the segment improved by QR 74.3 million, or 15.7%, due to the expansion of the core industrial catering and manpower contracting services to a number of projects throughout Qatar. On a quarterly basis, Amwaj’s performance was similar to the first three months of 2014 with a positive QR 4.6 million, or 1.7%, variance, mainly attributed due to winning contracts in new segments and clients.
Commenting on the group’s net profit Mr. Al-Mannai said, “Net profit for the first six months closed at QR 463.7 million, a significant year-on-year increase of QR 170.6 million, or 58.2%. This year-on-year improvement was driven by the ambitious growth plans across all segments, especially in the Drilling segment.”
The favorable year-on-year positive net profit variance in the Drilling segment of QR 141.2 million, or 153.2%, was driven primarily by a number of factors. Firstly the additional profit attributable to the buyout of the interest held by its overseas drilling partner. The profit contributed from the buyout in the current period is QR 40.0 million for May and June of 2014. Secondly the commencement of Leshat and Msherib operations, Thirdly to higher daily rates received for the three extended offshore rig contracts and fourthly on fewer planned maintenance days. Aviation segment earnings marginally declined by 3.4% on last year as the modest increase in the revenue was fully offset by the increased operating costs. Profit in the Insurance segment reached QR 56.9 million, an increase of QR 4.9 million, or 9.5%, as an increase in major insurance claims were largely offset by the strong gains on the company’s investment portfolio and service fees. Net profit in the Catering segment was QR 67.7 million, up by QR 31.9 million, or 88.9%, as the subsidiary has expanded its business in its core catering business and improved the margins due to reduced operating costs and and the revenue increase.
Significant Financial Reporting Change
In accordance with IFRS 10 Consolidated Financial Statements and with effect from the acquisition date of the entire shareholding of Gulf International Services’ co-joint venturer in Gulf Drilling International, Gulf Drilling International has become a wholly-owned subsidiary of Gulf International Services and financial results has been fully consolidated on a line-by-line basis. Accordingly with effect from 1 May 2014 the financial results of Gulf Drilling International were included in the financial statement of Gulf International Services on a line-by-line basis.
The group accounted for the business combination in the interim condensed consolidated financial statement for the six month period ended June 30, 2014 using the book value as a provisional fair value, as allowed by IFRS 3 “Business Combinations”. As at June 30, 2014 the group has not finalized the Purchase Price Allocation (PPA) for the business combination given, it is allowed to be finalized within one year period from the date of the business combination to reflect the facts and circumstances that existed as of the acquisition date. To perform the PPA the company will conduct a fair valuation of the acquired stake which might recognize certain intangible assets, goodwill or gain from the purchase bargain.
In conclusion, H.E. Dr. Mohammed Bin Saleh Al-Sada said, “Gulf International Services continued its excellent progress from the first quarter. I am confident, that with the company’s strong fundamentals and exciting and ambitious capital investment plans, the company will continue to grow and meet shareholders’ expectations.”