GIS Declares Strong 2012 Full Year Results.

DOHA, QATAR – Gulf International Services (“GIS” or the “the group”; QE: GISS), the largest sevice 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 ca-tering services, announced its 2012 full year results with revenue of QR 2.2 billion and net profit of QR 464.3 million.

In a statement to the Qatar Exchange, Mr. Ebrahim Al-Mannai, Chief Coordinator, Gulf International Services stated, “The group closed the year with revenue of QR 2.2 billion and net profit of QR 464.3 million, benefiting from growth across all segments and the acquisition of Amwaj Catering Services Limited QSC.” Commenting further on the group’s achievements in 2012, Mr. Al-Mannai elaborated, “The last financial year was significant to the group due to a number of factors. Firstly, 2012 was the best year for the group in terms of revenue, and marks the second best year with respect to profits. Secondly, the group was able to successfully conclude the acquisition of Amwaj. Furthermore, as part of the group’s investment strategy the group also contributed additional funding to expand the capital of its drilling joint venture, Gulf Drilling International.  In the said segment, the accommodation barge, Zikreet, commenced operations in the early part of the year, and two new onshore rigs were put into service in the last quarter of the same year. As for the Aviation segment, Gulf Helicopters Company expanded its operations in the GCC region and launched its flight simulator and pilot training facility in Doha. The aforementioned also reported its highest profits since joining the group.”

Financial Results


Group revenue for the twelve months ended December 31, 2012 was QR 2.2 billion, representing a significant increase of QR 719.4 million, or 49.0%, over the same period last year, and a QR 135.5 mil-lion, or 6.6%, positive variance versus the 2012 budget. Noticeably, the revenue recorded in 2012 was the highest since the group’s incorporation in 2008. The revenue increase was fueled by growth across all segments and the addition of Amwaj on June 1, 2012.

The group’s insurance subsidiary registered record full year gross insurance revenue of QR 624.4 mil-lion, a resolute QR 76.5 million, or 14.0%, improvement on 2011.  The primary drivers for the year-on-year performance were growth in sums insured and premium inflation in the core Energy business, and the ongoing success of the Medical line’s market expansion plan.  Net commission in-come, consisting of management fees and reinsurance commissions, increased by QR 21.3 million, or 56.9%, over 2011.  The creditable overall performance resulted in full year results robustly exceeding budgeted expectations, by QR 59.3 million, or 10.5%.

Aviation segmental revenue totalled QR 513.6 million, a noteworthy improvement on 2011 of QR 70.6 million, or 15.9%.  A number of factors contributed to this increase on last year, the most important of which was a general increase in flying hours, the commencement of new operations within the GCC, the commercial launch of the flight simulator and pilot training facility in Doha in the second quarter of 2012, and the resumption of normal operations in Libya. In the fourth quarter the segment recorded revenue of QR 143.9 million, 16.5% up on the last quarter.  In total, the segment reported a significantly positive variance against budget of QR 25.6 million, or 5.3%. Total helicopter count stood at 41 at the end of 2012 (2011: 40).

Revenue in the Drilling segment closed the year at QR 623.6 million, a notable year-on-year increase of QR 145.0 million, or 30.3%, due to a higher number of rig operating days, the commencement of op-erations of the accommodation barge, and the addition of two onshore rigs. During the prior year, four of GDI’s offshore rigs lost operational days due to planned maintenance activities and / or time spent transitioning between contracts, whereas in 2012 all of these rigs were on contract with minimal planned maintenance activities.  And, by the end of January 2012, the new accommodation barge, Zikreet, commenced operations and year-to-date has contributed QR 50.0 million to group revenue. In total, the segment reported a marginal adverse variance to budget of QR 6.1 million.

The fourth quarter of 2012 represented the second full quarter since the inclusion of Amwaj, as the company contributed QR 427.2 million to full year group revenue.  The company’s main business lines, viz. industrial catering services, corporate hospitality and VIP catering services, made up circa 75% of revenue, with the remainder attributable to manpower and facility services related to the engagement of 2,900 workers distributed over 24 projects within Qatar. In total, the segment reported a significant positive variance against budget of QR 66.0 million, or 17.8%.

Net Profit

Commenting on the group’s net profit Mr. Al-Mannai said, “Net profit for the year was QR 464.3 mil-lion, a year-on-year increase of QR 181.4 million, or 64.1%.  The year-on-year improvement was driven by improved results in all segments, and the addition of Amwaj since June 1, 2012.”

Profit in the Insurance segment significantly improved due to a number of factors, including improved margins, growth in net premiums (v 2011: +QR 52.9 million), higher management fees from Qatar Petro-leum’s group life fund (v 2011: +QR 15.7 million), gains from structured and fixed income instruments (v 2011: +QR 9.0 million), and weak 2011 comparatives. Versus the last quarter, profit improved by QR 23.3 million, or 81.8%, primarily due to higher margins.

Profits in the Aviation segment, the major contributor to the group’s earnings, increased by QR 34.1 million to reach QR 200.6 million, its highest level since the group was incorporated in 2008. This year-on-year performance was aided by strong headline growth, improved available for sale investment closing values (AFS impairment for 2011: -QR 4.6 million), and weak prior year comparatives. The segment maintained margins throughout the year as operating costs remained broadly flat. Profit in the last quarter was up on the previous quarter (v 2012, Q3: +QR 14.1 million), due to incremental margin im-provements. For the full year the segment reported a positive variance of QR 54.1 million, or 36.9%, versus the budget.

The year-on-year positive profit variance in the Drilling segment of QR 61.4 million, can be largely at-tributed to stable drilling operations in 2012, in contrast to the early part of 2011 where the business was disrupted by extended contractual start-up delays (139 days) resulting in the incurring of significant unrecoverable overheads that dampened margins. Profit in the Drilling segment was also aided by the commencement of operations of Zikreet barge in the early part of 2012, and two onshore rigs in the last quarter of 2012. Profit in the last quarter was down on the previous quarter primarily due to start-up costs associated with the two onshore rigs. In total, the segment reported a moderate increase on its budgeted expectations of QR 10.6 million.

For the seven month period ended December 31, 2012, the Catering segment contributed QR 17.0 million to group profit, and was marginally ahead of budget by QR 2.2 million. Segmental profitability remained in line with budgeted expectations.

Financial Position, Cash Flows and Financial Measures

The group’s total assets increased year-on-year by a robust QR 1.7 billion, or 36.8%, closing at QR 6.3 billion, due mainly to the acquisition of Amwaj, debt-funded advanced payments made for a number of drilling and aviation asset purchases, and cash flows from operations.  Despite significant loan re-payments, total loans and borrowings increased on the 2011 close by QR 761.8 million, or 80.3%, to close the year at QR 1.7 billion. The group also reported a closing cash position of QR 823.2 million, a decrease on 2011 of QR 270.4 million, or 24.7%.

Significant Financial Reporting Changes

In May 2011, the International Accounting Standard Board issued IFRS 11 “Joint Arrangements” which superseded IAS 31 “Interests in Joint Ventures”, and is mandatory for annual periods beginning on or after January 1, 2013.

In previous years, the group accounted for its interest in its joint venture using proportionate consoli-dation, which allowed the group to consolidate its proportionate share of each line of the joint ven-ture’s financial statements in accordance with IAS 31 “Interests in Joint Ventures”.

IFRS 11 requires a joint venturer to recognise its interest in a joint venture as an investment and should account for that investment using the equity method.  The group has determined that with the adop-tion of IFRS 11, its interests in Gulf Drilling International will meet the criteria for a joint venture.  Ac-cordingly, from January 1, 2013, on adoption of IFRS 11, Gulf International Services will account for its interest in the above company using the equity method.

The equity method of accounting requires Gulf International Services to present the carrying amount of its investment in its joint venture as a single line item in the statement of financial position, and its share of the joint venture’s net income as a single line item in the statement of comprehensive income.  This change in accounting policy will not affect previously reported net income and shareholders’ equity, but will affect most other line items in the statement of financial position, statement of comprehensive income and statement of cash flows including revenue, gross profit, total assets and total liabilities.

Business Plan (2013 to 2017)

“Further details of the group’s 2013 budget and 5-year business plan will be unveiled during the An-nual General Assembly Meeting slated for March 18, 2013,” continued Mr. Al-Mannai. “However, the following can be shared at this stage: in 2013, revenue is expected to reach QR 2.0 billion, net profit to reach QR 0.5 billion and net assets to total QR 3.1 billion. The market should be aware that the reduc-tion in the reported revenue in 2013 is solely due to the change in the financial reporting method fol-lowing the adoption of IFRS 11, and not due to any operational factors.

“The group has credible plans to further improve profitability, expand the span of operations and di-versify into related services.  Cash generation is expected to remain healthy despite loan repayments.  The outlook is positive, with expectations that offshore daily rates will improve throughout this period, demand for oil and gas-related transportation services will remain strong and capital expenditure by the Qatar Petroleum group of companies will be spurred by a number of new, large oil and gas projects,” stated Mr. Al-Mannai.

Dividend Announcement

Following the group’s significant capital investments during the year, the Board of Directors recom-mends a 26.9% increase in the annual dividend distribution to a total of QR 223.0 million for the year ended December 31, 2012, equivalent to a payout of QR 1.50 per share and representing 15% of the nominal value.


In conclusion, Mr. Al-Mannai said, “Gulf International Services is the premier oil and gas services group in Qatar and in the Middle East, and the future of the group is strong. With strong fundamentals and exciting and ambitious capital investment plans, the Board of Directors and senior management have an unwavering confidence in the prosperous future awaiting our dedicated shareholders.

“I would also like to express my gratitude to H.H. Sheikh Hamad Bin Khalifa Al-Thani, the Emir of the State of Qatar, for his vision and leadership, the Chairman and Managing Director, H.E. Dr. Mohammed bin Saleh Al-Sada, for his wise counsel, and to the senior management of the group companies for their hard work, commitment and dedication in achieving the group’s goals.”