Global Investment Holdings reports Consolidated Net Revenues of 323.5mn TL in the first quarter of 2020, representing a notable increase of 24% compared to the same period last year; while announcing an Operating EBITDA of 85.1mn TL, implying an 8% growth yoy

Global Investment Holdings’ Chairman & CEO, Mehmet Kutman, stated that “Before commenting on the first quarter of 2020 financial results, I want to emphasise that the health and safety of our employees is always our first thought and never more so than at this challenging time in the face of the global coronavirus crisis. Ensuring the business continuity and providing humanitarian assistance to our employees and across our regions of presence are our key priorities today. At the same time, we must act responsibly to protect the long-term success of GIH and deliver on our commitments to all stakeholders that rely on our global role.”

Drawing attention to the good results and careful risk management that ensured Global Investment Holdings’ steady performance in this challenging environment, the Chairman continued: The impact of COVID-19 came late in what was until that point a good quarter. The strength of Global Investment Holdings lies in our diversification by business, geography and currency, which allows us to remain resilient through the developing economic downturn. Over the last 30 years, GIH has successfully overcome many challenges. Despite all the challenges we face as a consequence of COVID-19, I am confident that GIH will emerge from this pandemic, well placed to continue to serve the communities and economies in which we operate, and our shareholders.

The Chairman further stated “As the world is facing unprecedented times with the novel COVID-19 outbreak whose impact we began to feel late in the quarter, we managed to close the first quarter of this year with overall good performance thanks to our 30 years of experience and robust infrastructure. We preserved our financial structure through our diversified portfolio, foreign currency earning activities, meticulous risk policies and efficient management. We maintained a disciplined approach to cost management through the first quarter, while not losing sight of our long-term strategic priorities, which will position our businesses well when the recovery comes.”

Mr. Kutman added that “Whilst we maintained our momentum in the first quarter of the year, the outcome for the remainder of 2020 remains challenging and uncertain. We have adequate liquidity and solvency headroom and management will continue to monitor and regularly review the longer term impact of the COVID-19 pandemic on the Group. At the same time, we are taking all appropriate actions to preserve cash, reduce and defer both capital spending and operating costs and secure additional financing in order to strengthen and maintain our liquidity.

GIH announced its financial results for the first quarter of 2020. Consolidated net revenues reached 323.5mn TL compared to 260.4mn TL last year, representing a robust increase of 24%. This strong performance was broad based, with particularly pleasing growth from power division in the period.

In the first three months of 2020, Operational Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted to 85.1mn TL, compared to an EBITDA of 78.7mn TL in the same period last year, which represents an 8% growth. The power division was the major contributor to the EBITDA increase.

On a divisional basis,
The gas division, achieved 32.3mn m3 sales volume in Q1 2020, compared to 31.3mn m3 for the same period of 2019. The higher volume was achieved by focusing on new customer acquisitions to reduce the effects of seasonality and increase market share. Revenues surged by 16% yoy, reaching 84.9mn TL; mainly attributable to the increase in sales volume generated by new sales channels and enhancement in pricing. Meanwhile, the gas division’s operating EBITDA reached 14.2mn TL in the quarter, up by 7% yoy. The gas division managed to expand EBITDA generation in Q1 2020 thanks to the strong revenue growth, increase in gas margin and effective cost management.

The ports division’s revenues were 130.5mn TL at the end of first three months of 2020, up by 18% yoy, while operating consolidated EBITDA fell by 6% yoy to 62.9mn TL. The adverse effect of COVİD 19, coupled with the unfavourable impact of the uncertainties around global trade on commercial operations, put pressure on margins. The travel restrictions imposed globally following the widespread outbreak of the Covid-19 virus, have had a materially negative impact on the cruise business. The realised impact on our operations during the quarter has been relatively minor. This is due to the seasonal nature of the Mediterranean cruise season, with the peak summer season not starting until May. While cruise operations continue to be significantly impacted by the Covid-19 crisis, there are signs that some cruise ships could resume sailing in Q3 2020. At the same time, the inherent flexibility in GPH’s business model, including the extensive use of outsourced service providers, means that many of our costs expand and contract in line with cruise traffic or cargo volumes, which should help to protect margins. On the other hand, the ports division’s financials benefited from the first time contribution from our Caribbean ports, as well as the favourable currency environment in Turkey.

Passenger volumes rose 146% yoy to 1.25m in Q1 2020, driven by the first time contribution from the new Caribbean ports. Despite the Covid-19 impact, the reported passenger and revenue figures highlight the strong contribution that our new Caribbean ports are expected to make to the portfolio in the years ahead, both in terms of financial contribution and in terms of the geographic and seasonal balance that they bring to the portfolio.

The power division, which includes co/tri-generation- along with biomass- and solar-based renewable power production, reported 54.8mn TL revenues in the period, more than doubling yoy. The increase was mainly attributable to the commencement of 10.8MW Mardin solar power plant, selling electricity at the feed-in tariff rate of US$0.133/kWh and the pleasing performance of power plants. With all plants fully under operation, the division’s EBITDA has also improved substantially from -1.9m TL in Q1 2019 and reached 10.9mn TL in Q1 2020. The outstanding EBITDA growth is mainly attributable to solid operational performance in power plants as well as first time consolidation effect of the high margin solar based renewable power plant.

The mining division realized 117,736 tons of product sales in Q1 2020, down by 12% yoy, mainly due to slower demand from export markets. The division reported revenues of 24.0mn TL, slightly down 6% yoy due to slower demand from export markets, while operating EBITDA for the quarter was 4.5mn TL, down by 25% yoy. Product demand mix from the customers focusing primarily on bulk products for the period resulted in decrease in profit margins, which is expected to be recovered in the following quarters with expected orders for processed product lines.

The real estate division reported revenues of 9.8mn TL and an operating EBITDA of 3.9mn TL in the first quarter of the year, compared to 11.7mn TL and 6.0mn TL, respectively in same period last year. Higher revenue recognition in real estate sales had boosted the numbers in Q1 2019.

The brokerage & asset management division reported revenues of 19.5mn TL in Q1 2020, indicating a 42% yoy increase, while operating EBITDA almost tripled yoy, reaching 4.7mn TL. Strong operational performance can be attributed to the increase in trading volumes, as well as effective cost management.

GIH reported a consolidated net loss of 131.0mn TL in the first quarter of 2020, compared to a net loss of 82.4mn TL in in the same period last year. Despite higher revenue recognition along with EBITDA maximization, the net loss stemmed mainly from non-cash depreciation and foreign currency translation differences incurred on Group’s long term borrowings. Depreciation and amortization charges have increased from 85.3mn TL in Q1 2019 to 111.3mn TL in Q1 2020, purely as a result of foreign currency valuations. Also, the Group has incurred 71.0mn TL net non-cash foreign exchange losses, compared to 51.8mn TL in the same period last year. Net interest expenses in the quarter were 71.2mn TL, compared to previous year’s 45.0mn TL, and the increase is solely attributable to the weakness in TL against hard currencies.

Covid-19 crisis management and actions
The Covid-19 pandemic led to unprecedented restrictions on the movement of people, goods and services worldwide. Great swathes of the global economy came to a halt as the world battles a health care crisis unseen in modern times. The COVID-19 continues to affect all geographies in which GIH operates. The Group is faced with a vastly changed economic landscape and murky outlook. With its core business in particular, cruise operations, virtually on hold due to temporary global travel restrictions, the challenges of 2020 will be immense. Yet, there are signs that some cruise ships could resume sailing in Q3 2020.

Looking at the possible consequences of the crisis, the board and senior management works on various scenarios to ensure proactive management for any probable outcome. While there is a significant amount of uncertainty over the immediate future, the plans have been put in place to protect the business from the impact of this unprecedented crisis, by reducing costs, conserving cash, and safeguarding the balance sheet.

The business line which is affected the most from COVID-19 is our ports division. Yet, the inherent flexibility in the ports division’s business model, including the extensive use of outsourced service providers, means that many of the costs expand and contract in line with cruise traffic or cargo volumes. Clearly in the current circumstances such costs in the Cruise operations have currently dropped to almost zero. The port division has taken further actions to reduce the cost base and conserve cash. Operating expenses across the ports group have now been reduced by 75% for May to Dec 2020, generating a full year 2020 operating expenses reduction of 60%. Additional cost savings measures are taken across all group companies even if revenue generation has not been, and is not expected to be affected from Covid-19 crisis.

Across the portfolio, all but essential maintenance capex has been suspended and will remain suspended until the situation becomes clearer and the global economy starts to return towards normal. Capex at the new ports, Nassau Cruise Port and Antigua Cruise Port, in the Caribbean is expected to continue as planned.

In Antigua, the Group’s cash investment was paid from the Group’s cash resources in 2019 and the balance of the required investment will be funded through an already committed bank loan from a syndicate of lenders. In Nassau, the design and engineering of the marine components of the project has been completed and the construction is expected to commence in June 2020, with an expected completion date of April 2022. The scheduled capex over the next 12 months of up to 130mn USD is to be fully financed by bond issuance in both local and international markets and the remaining portion of 30mn USD of the existing bridge loan of 50mn USD is to be converted into a long term loan on same terms of the bond.

Nassau Cruise Port has recently raised 150mn USD through the issuance of a 20-year bond. Such a successful action during the biggest crisis the travel industry has ever faced, is testament to both the strength of our transformational plans for Nassau Cruise Port and the continued long term attractiveness of the cruise industry.

SHARE: