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, 2013 with revenue of QR 1.1 billion and net profit of QR 0.3 billion.
In a statement to the Qatar Exchange, Mr. Ebrahim Al-Mannai, Chief Coordinator, Gulf International Services stated, “The group closed the first half with revenue of QR 1.1 billion – the group’s highest first half revenue on record, and an almost 90% increase on the prior year, and net profit of QR 0.3 billion, which was just under 50% up on the prior year. All segments contributed to this extremely positive year-on-year growth.”
Commenting further on the group’s achievements during the first half of this year, Mr. Al-Mannai elaborated, “Gulf International Services’ performance during the first half of this year was a success largely attributable to the ambitious growth plans of each segment. GIS witnessed the inauguration of a new state-of-the-art rig, an addition of four new helicopters to the fleet and an increase in the medical insurance line of business by securing new policyholders. The Group all in all reported the highest revenue since inception.”
Providing details on the most notable developments of the second quarter of 2013, Mr. Al-Mannai stated, “Firstly, Gulf Helicopters Company entered into a contract with for two AW-139 helicopters in support of that company’s petroleum operation in Malaysia. The Drilling segment witnessed a number of significant events during the last few months. His Excellency Dr. Mohammed Bin Saleh Al Sada, Minister of Energy and Industry, Chairman and Managing Director of Gulf International Services, inaugurated one of the most technologically advanced offshore drilling rigs to ever work in the State of Qatar, Al-Jassra. GDI already secured a four year contract for this rig with Maersk Oil for drilling and well work-over activity in Qatar’s largest offshore oil field, the Al-Shaheen field. Lastly, GDI signed three contracts providing for the continued use of its offshore rigs: two with Qatar Petroleum covering the Al-Doha and Al-Zubarah rigs and one with Occidental Petroleum of Qatar LTD covering the Al Rayyan rig.”
Group revenue for the six months ended June 30, 2013 was QR 1.1 billion, representing a significant increase of QR 528.1 million, or 89. 4 % over the same period last year, and a QR 144.1 million, or 14.8%, positive variance versus the 2013 budget. The revenue recorded in the first half of 2013 was the highest since the group’s incorporation in 2008, and was fueled by growth across all segments.
The group’s insurance subsidiary registered record half year gross insurance revenue of QR 336.8 million, a resolute QR 52.5 million, or 18.4%, improvement on 2012. 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 which saw a number of new businesses join the Al Koot Global Care Medical Insurance Scheme. Net commission income, consisting of management fees and reinsurance commissions, increased by QR 7.0 million, or 35.3% over 2012. The results were in line with the budget for the half year.
Aviation segmental revenue totalled QR 308.3 million, an exceptional improvement on 2012 of QR 62.1 million, or 25.2%. A number of factors contributed to this increase on last year - new contracts entered into, revised contract rates and an increase in the number of helicopters in the fleet in operation (2013, Q2: 44 helicopters versus 2012, Q2: 40 helicopters). In total, the segment reported a noticeable positive variance against budget of QR 39.8 million, or 14.8%.
Revenue in the Drilling segment closed the period ending June 30, 2013 at QR 381.1 million, a remarkable year-on-year increase of QR 82.7 million, or 27.7%. This performance was largely driven by the commencement of operations of the Al Jassra offshore rig and Dixie Patriot lift boat, higher day rates for Al Zubarah and Al Rayyan, as well as the addition of two land rigs, GDI-5 and GDI-6. In total, the segment exceeded the budget by QR 34.3 million, or 9.9%.
The first half of the year represented the first full results for the catering business, Amwaj Catering Company. The company contributed QR 474.1 million to group revenue, representing the largest contributing segment at 42.4% of total group revenue. The company’s main business lines, viz.industrial catering services, corporate hospitality and VIP catering services, made up circa 70% of revenue, with the remainder attributable to manpower and facility services related to the engagement of approximately 2,900 workers distributed over 24 projects within Qatar. Compared to last year, the segment outperformed results by QR 413.2 million. However, last year’s first half results only included revenue from the date of the company’s acquisition, June 1, 2012. In total, the segment reported a significant positive variance against budget of QR 101.6 million, or 27.2%.
Commenting on the group’s net profit Mr. Al-Mannai said, “Net profit for the year was QR 293.1 million, a significant year-on-year increase of QR 96.6 million, or 49.2%. The year-on-year improvement was driven by the ambitious growth plans across all segments. The group also exceeded the budget by QR 65.3 million, or 28.7%.”
Profit in the Insurance segment increased by QR 19.0 million, or 58.2%, largely in line with the growth in revenue. Aviation segment earnings increased on the first six months of 2012 by QR 30.5 million to reach QR 125.8 million. This year-on-year performance was also aided by strong revenue growth as the segment maintained margins throughout the year on broadly flat operating costs. Additionally, the segment reported a positive variance of QR 55.6 million, or 79.1%, versus the budget, mainly due to increase in operations and cost efficiency.
The year-on-year positive net profit variance in the Drilling segment of QR 18.0 million, or 24.7%, was mainly due to strong operations in 2013. Segmental profit was also aided by the commencement of operations of Al Jassra during the second quarter of 2013, and was despite Al Wajba’s 104 days of routine maintenance (2013, Q1: 49 days; 2013, Q2: 55 days). The segment reported a positive variance on its budgeted expectations of QR 37.8 million or 69.6%.
Net profit in the Catering segment was QR 35.8 million, up by QR 31.1 million, and was ahead of budget by QR 11.0 million, or 44.1%.
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 consolidation, which allowed the group to consolidate its proportionate share of each line of the joint venture’s financial statements in accordance with IAS 31.
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 adoption of IFRS 11, its interests in Gulf Drilling International meets the criteria for a joint venture. Accordingly, from January 1, 2013, Gulf International Services accounted 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.
In conclusion, Mr. Al-Mannai said, “Gulf International Services showed significantly improved results during the first half of this year. 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.”