The drilling segment of Gulf International Services (GIS) has started to show signs of recovery, the Group’s chairman said on Sunday.
Speaking at the company’s annual general assembly meeting, GIS Chairman Sheikh Khalid bin Khalifa Al Thani said, “Post-pandemic recovery for the Group remained uneven, with aviation and insurance segments continuing to demonstrate a persistent improved set of results, while the drilling segment remained under pressure until the first half of the year. However, with the latest strategic realisations, the drilling segment has started to show signs of recovery.”
“We have achieved successful deployment of all the rigs under Gulfdrill JV’s fleet. Going forward, with Gulfdrill JV becoming fully operational, it is expected to bring additional revenue streams for the segment and improved operational cash flows to the Group,” Sheikh Khalid said.
Since the start of 2021, the chairman said, “Oil and gas industry showed positive signs of recovery with constructive macroeconomic drivers.”
“Within the catering segment, macroeconomic tailwinds were not immediately felt as the segment continues to remain impacted with depressed margins due to industry-specific COVID-linked restrictions,” he said.
“Our strategy going forward will continue to emphasise on achieving cost efficiency across all its segments and will continue to implement new measures, which could further transform operations, via creating an additional layer of defence to an already lean organization,” he said.
“Relentless efforts are being placed to achieve an efficient and effective debt structure for the Group, which is a key ingredient of our corporate strategy. These plans which are currently under process would bring an additional layer of financial sustainability to the Group, with opportunities to expand our footprints, and consequently improve our competitive positioning,” he said.
Going forward, he said, “Our group companies will continue their efforts in maintaining their market share while looking ahead to improve asset utilization, and building a resilient future to create long term shareholder value.”
Manager Privatized Companies Affairs Dept at QatarEnergy Mohammed Jaber Al Sulaiti, who also spoke on the occasion, said, “Group posted a net profit of QR54 million, up by 117 percent from, a net loss of QR319 million compared to last year. Group’s total revenue for 2021 slightly improved by 3 percent QR3 billion compared to 2020.”
“Moving onto the segmental performance, starting with the drilling segment, the recovery in the oil and gas industry coupled with ease of restrictions amid COVID-19 outbreak started to realise mainly from the second half of the year, as day-rates for the off-shore segment improved from last year’s depressed rates. Furthermore, most of the previously suspended on-shore rigs were redeployed, during the year. Also, with GulfDrill JV becoming fully operational since mid of this year, has improved the business dynamics of the segment,” he said.
“In terms of segment’s financial performance, the segment reported a net loss of QR201 million, compared to last year’s loss of QR453 million, while the segment revenue reached QR1 billion for 2021, up by 10 percent compared to last year. The reduction in losses was mainly attributed to growth in segmental revenue, coupled with a decline in the segment’s finance cost compared to last year, and absence of one-off impairment losses which were booked during last year,” he said.
In the aviation business, he said, “The recovery in the oil and gas industry led to an increased demand for the off-shore aviation services worldwide, which in turn contributed to higher flying hours within both, the domestic and international operations, and led to an improved financial performance for the year. Moreover, successful renewal of contracts in the international business reassured segment’s position in the international markets, while MRO business also recorded positive growth.”
In terms of the segment’s financial performance, the aviation segment reported segmental revenue of QR722 million for 2021, up by 5 percent compared to last year. The growth in revenue translated into a growth in the segment’s net earnings to reach QR221 million, compared to QR116 million for last year.
Moving onto the insurance segment, the segment managed to build up its strong performance, achieved throughout the period by further expanding both the medical and general lines of businesses, where successful renewal of major contracts and additional coverage for major contracts within the energy line of business were main highlights.
Additionally, he said, “The segment continued to expand its footprints within domestic SME market, specifically within the medical line of business and added new clients during the year. In terms of segment’s financial performance, the segment reported segmental revenue of QR988 million for 2021, up by 1 percent compared to last year. The growth in revenue translated into a growth in the segment’s net earnings to reach QR 60 million, with an increase of 16 percent as compared to last year. This strong growth in net profits was also supported by a robust recovery within the segment’s investment portfolio on the back of the recovery in capital markets.’
“Catering segment continued to remain under pressure with restrictions mandated since the start of pandemic in relation to food delivery, transportation and manpower accommodation. This has affected the segment’s performance in terms of lowered revenues, coupled with an additional layer of costs incurred in order to comply with the requirements leading to negative margins for the segment since the pandemic. However, despite stiff market challenges faced during the period, the segment was able to win new contracts within manpower line of business,” he said.
In terms of the segment’s financial performance, the segment reported segmental revenue of QR361 million for 2021, down by 11 percent compared to last year. The decline in revenue and higher operating cost incurred on account of COVID-related restrictions, translated into a decline in the segment’s net earnings to reach a net loss of QR 15 million.
About restructuring of debt, he said, “The current levels of debt have a significant impact on the Group’s net earnings, as finance cost is one of the key cost ingredients and especially limits the drilling segment, considering the major amount of Group’s debt relates to the drilling segment. The effect of finance cost is so large that a substantial part of the free cash flows generated each year is used to pay interest and to meet the obligations in relation to the credit facilities, which ultimately affects our bottom line cash position and hence leads to our inability to payout dividends.”
“Currently various scenarios and options are being considered and evaluated that would allow the management, as well as all the other stakeholders, to apprehend better certainty with a stable view of the market in relation to Group’s debt profile and repayment ability,” he said.
“We hope that we will be able to achieve our targeted direction in relation to the funding strategy, which could lead to an optimum funding level with an efficient and effective interest cover for the Group which could unlock future growth opportunities, and could translate into realizable shareholder value creation while offering greater confidence and sustainability in turbulent times,” he said.