Highest third quarter year to date revenue since inception
• Revenue up on 2012 by over 60%
• Net profit improved on last year by over 40%
• Strong results aided by ambitious growth in all segments
• Noteworthy growth across all segments
• Significant improvement in cash position, gearing
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, accommo-dation barge, helicopter transportation, and catering services, announced its financial results for the nine months ended September 30, 2013 with revenue of QR 1.7 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 third quarter with year-to-date revenue of QR 1.7 billion - an increase of 64.0% on the prior year, and net profit of QR 0.5 billion - achieving the highest third quarter year-to-date results since inception and a 44.3% year-on-year increase. This positive growth was due to the ambitious growth plans in all segments, and the acquisition last year of Amwaj Catering Services Limited.”
Recent News
Insurance Segment
Providing details on the most notable developments of the third quarter of 2013, Mr. Ebrahim Al-Mannai, Chief Coordinator, Gulf International Services, stated, “As part of the insurance segment’s growth plan, Al Koot is actively seeking new opportunities in the market, especially in the medical insurance line. As per the business plan, the medical line of business is expected to contribute over 45% to segmental revenue by 2017 (2013, Q3 Ytd: over 35%). To this end, the company successfully managed to secure a number of major, new clients during this year and in turn has increased the number of medical policyholders.”
Aviation Segment
In the aviation segment, the 5-year business plan expects to add 10 new helicopters to the fleet by the end of 2017 to reach a total of 51 helicopters. During the year, Gulf Helicopters Company added two new helicopters and wrote off one helicopter, reaching a total of 43 helicopters.
Mr. Al-Mannai commented on the achievements during the quarter for the aviation subsidiary, “It is with pleasure that we previously announced that the AW-139 intermediate twin engine helicopter fleet operated by Gulf Helicopters Company achieved the milestone of 40,000 flying hours.
“Furthermore, Gulf Helicopters Company and Quality Aviation Instruments entered into a joint venture for component repair facilities to be located in Doha, Qatar. The repair shops are expected to begin operations in late 2013 or early 2014, and will add value to GHC’s business by diversifying the service base.”
Drilling Segment
Mr. Al-Mannai commented on the drilling segment by stating, “The drilling segment is expected to witness ambitious growth in the coming years. Having already placed one of three new build jack-up rigs into service this year, two additional new build jack-up rigs plus a refurbished jack-up rig will be added to the fleet by the end of next year (for a grand total of nine jack-up rigs) along with a new build lift boat.”
Catering Segment
The catering business has strong fundamentals and expects to grow in line with Qatar Petroleum’s expansion plan. That being said, the catering segment continues to actively seek opportunities from the non-oil and gas market.
Financial Results
Revenue
Group revenue for the nine months ended September 30, 2013 was QR 1.7 billion, representing a significant increase of QR 661.1 million, or 64.0%, over the same period last year, and a QR 231.7 million, or 15.8%, positive variance versus the 2013 budget. The revenue was mostly contributed by the catering segment, followed by the aviation segment.
The group’s insurance subsidiary registered gross insurance revenue of QR 517.7 million, a resolute QR 78.2 million, or 17.8%, improvement on 2012. The main contributor to this growth was the medical line of business, along with the growth in sums insured and premium inflation in the core Energy business. Results are also up on last quarter by 3.4% mainly due to the growth in the medical business. As for the business plan expectations, the year-to-date target was exceeded by 3.4%.
Aviation segmental revenue totalled QR 463.2 million, which is a significant improvement on last year by QR 93.5 million, or 25.3%. 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 (2013, Q3: 43 helicopters versus 2012, Q3: 41 helicopters). Compared to last quarter, results were slightly lower (2013, Q3: QR 154.9 million versus 2013, Q2: QR 159.1 million) mainly due to lower operations in other services offered in Qatar. In total, the segment reported a noticeable positive variance against budget of QR 60.5 million, or 15.0%.
Revenue in the Drilling segment closed the period ending September 30, 2013 at QR 620.3 million, a remarkable year-on-year increase of QR 165.1 million, or 36.3%. This performance was driven largely by the offshore sector, which contributed QR 71.9 million of additional revenue compared to last year. The increase is due primarily to the commencement of Al Jassra offshore rig and to higher day rates being received for Al Zubarah and Al Rayyan.
Additional contributions to the overall revenue improvement also came from the two land rigs, GDI-5 and GDI-6 that were in full operation since the beginning of the year (v 2012, Q3 Ytd: +QR 42.7 million), a lift boat (v 2012, Q3 Ytd: +QR 47.3 million) and an accommodation barge (v 2012, Q3 Ytd: +QR 3.1 million). Quarter–on-quarter, the results were higher by QR 31.1 million, of which the offshore sector contributed QR 28.7 million. In total, the segment was in line with expected results.
Elaborating, Mr. Al-Mannai said, “Current results are aided by the commencement of Al Jassra offshore rig operations, as this is the first full operational quarter for the rig.”
Amwaj Catering Services Limited contributed QR 713.5 million to group revenue, representing the largest contributing segment at 42.1% 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 489.4 million. However, last year’s results only included revenue from the date of the company’s acquisition, June 1, 2012. On a quarterly basis, Amwaj’s performance was similar to the previous quarter (v 2013, Q2: +QR 6.2 million). In total, the segment was in line with expected results.
Net Profit
Commenting on the group’s net profit Mr. Al-Mannai said, “Net profit for the year was QR 459.2 million, a significant year-on-year increase of QR 140.9 million, or 44.3%. The year-on-year improvement was driven by the ambitious growth plans across all segments. Gulf International Services has also achieved and exceeded its full year net profit budget of QR 456 million.”
Profit in the Insurance segment increased by QR 16.3 million, or 26.7%, largely in line with the growth in revenue. Aviation segment earnings increased compared to the nine months ended 2012 by QR 47.9 million to reach QR 187.5 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 82.2 million, or 78.0%, versus the budget, mainly due to an increase in operations and improved cost efficiency.
The favorable year-on-year positive net profit variance in the Drilling segment of QR 43.5 million, or 36.5%, was driven primarily by the to strong performance from offshore operations in 2013. Segmental profit was aided by the commencement of Al Jassra operations during the second quarter of 2013, which helped offset the 104 days of planned maintenance (2013, Q1: 49 days; 2013, Q2: 55 days) undertaken for Al Wajba. The segment reported a positive variance on its budgeted expectations of QR 8.9 million or 5.8%.
Net profit in the Catering segment was QR 49.2 million, up by QR 35.9 million, and was ahead of budget by QR 11.9 million, or 31.8%.
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 meet 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.
Conclusion
In conclusion, H.E. Dr. Mohammed Bin Saleh Al-Sada said, “Gulf International Services showed significantly improved results during the 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.”