Global Investment Holdings, a diversified conglomerate operating in 13 different countries across four continents, announced its audited results for the twelve months ending 31 December 2020.

Global Investment Holdings reported Consolidated Net Revenues of 1,330mn TL in 2020, excluding IFRIC 12 impact of 298.8mn TL; while announced a Consolidated Operating EBITDA of 327.7mn TL. Quarterly results were solid with the bottom line marking 19.9mn TL net profit in Q4 2020 as opposed to a net loss of 44.7mn TL in Q4 2019.

Global Investment Holdings’ Chairman & CEO, Mehmet Kutman, stated that “2020 was a year unlike any other we have lived through. While infectious diseases remain a part of global life and we have always recognised the possibility that they may impact our lives, our expectations were generally of a localised serious outbreak, or maybe a bad global flu season. The novel coronavirus was definitely not localised, nor was it merely a bad flu.”

The Chairman continued “Before commenting on the 2020 financial results, let me begin by thanking healthcare workers throughout the world, but specifically those working in countries in which we operate. We have had friends and family of global employees catch the virus, and indeed some cases of employees themselves falling ill. But thanks in large part to the efforts of doctors and nurses, we have had no casualties.”

Drawing attention to the results and careful risk management, the Chairman further stated: “Global Investment Holdings companies did not plough through 2020 oblivious to the damage being inflicted on the world, but with obvious exceptions generally weathered it better than some might have feared. Our first discussions about the emerging situation in Wuhan took place in the last week of January and the first week of February 2020, with the first company-wide measures announced soon afterwards, and though these were initially in the form of travel restrictions, they were very quickly and substantially ramped up. We also quickly moved to reduce costs, and in some cases extreme measures were taken. I would like to thank all employees for their understanding and patience.“ Mr. Kutman added that “Even in times of unexpected volatility and great challenge, there is much to be positive about at Global Investment Holdings. We continue to execute an exceptional performance across the Group – and continue to dream big for the future.

Commenting on the results, The Chief Financial Officer of the Group, Ferdağ Ildır, stated that “The results for the year were significantly impacted by the outbreak of Covid-19, which has had a devastating impact on both global economies and global travel sectors, particularly from late February 2020 onwards. We went into this pandemic in a strong position with healthy levels of capital and liquidity, however undoubtedly profits are lower in a period where our focus has rightly been on the safety and well-being of our teams and ensured business continuity. 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. Our main target was to maintain and improve the results while we placed greater importance on being efficient, competitive and profitable in our core businesses.”

Global Investment Holdings reported 1,330mn TL revenues (excluding the impact of IFRIC 12) for 2020, down by 8% yoy. Negative impact of COVID-19 on particularly ports, mining and real estate divisions overshadowed the pleasing revenue growth in power and brokerage & asset management divisions. Covid-19 outbreak put material pressure on revenues. If this pandemic had not occurred, total consolidated net revenues could have registered a 39% increase yoy to around 2,004mn TL. Nevertheless, the mining and real estate divisions’ performances in the second half showed remarkable improvement compared to the first half as pandemic restrictions were partially eased.

At the end of 2020, consolidated Operational Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted 328.7mn TL, compared to an EBITDA of 563.3mn TL in 2019. The notable solid contribution from the power and brokerage & asset management divisions in particular was offset by the expected weak performance of the ports and real estate divisions in the year. Covid-19 outbreak pressured EBITDA as well. If such pandemic had not occurred, total consolidated operating EBITDA had been forecast to jump nearly 50% to 844.4mn TL.

On a divisional basis,
Naturelgaz, compressed natural gas distributor, has sustained its solid financial position despite Covid-19 impacts thanks to its operational capability, efficient cost management structure and new business development efforts. The gas division distributed 173.4mn Sm3 sales volume in 2020, compared to 167.1mn Sm3 for 2019, reflecting the impact of Socar LNG merger back on 30 October 2020. On the financial front, revenues increased by 6% yoy, reaching 452.1mn TL, mainly reflecting the addition of LNG revenues as a result of SOCAR LNG merger. Operating EBITDA came out at 96.0mn TL in the year, down 5% yoy and translating into a 21.2% EBITDA margin (23.6% in 2019). Despite the gross margin was broadly flat yoy at 29%, such decline has stemmed from Opex increase due to the ongoing expenses of the recently acquired stations in the last 2 months, which will start to generate margins in-line with outstanding stations in the coming years.

The business line which is affected the most from Covid-19 is the ports business. The ports division reported 395.9mn TL revenues (excluding the impact of IFRIC 12), down by 41% yoy, while consolidated adjusted EBITDA fell by 71% yoy to 127.1mn TL. Due to the application of IFRIC-12 for Nassau Cruise Port the capex incurred for this project is accounted for as revenue including a gross profit margin of 2%. IFRIC-12 had impact of 298.8mn TL (42.6mn USD) on revenues in 2020. The expenditure for the construction activities is recognised as operating expenses. The margin is non-cash. The ports division benefited from the Q1 pre-pandemic first time contribution from the Caribbean ports, as well as the favourable currency environment in Turkey. However, 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 adverse effect of Covid-19, coupled with the unfavourable impact of the uncertainties around global trade on commercial operations, put pressure on margins. Despite the materially negative impact of Covid-19 on our operations; the inherent flexibility in GPH’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, which should help to reduce costs and preserve cash. The ports business, Global Ports Holding Plc has changed its calendar year from March to March; hence, they have notified us that they will announce their 15-month results not before July 2021.

The power division, which includes co/tri-generation- along with biomass- and solar-based renewable power production, reported 261.8mn TL revenues in the year, increased remarkably by 76% 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 operational plants. With all plants fully under operation, the division’s EBITDA has also improved substantially to 96.2mn TL in 2020, registering more than 5-fold increase yoy (18.3mn TL in 2019). The eye-catching 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 366,511 tons of product sales in 2020, down by 24% yoy, mainly due to the Covid-19 lockdown in export markets. The mining division reported revenues of 88.7mn TL, down 8% yoy, while operating EBITDA for the year fell by 17% yoy to 27.1mn TL. Such decline has stemmed from the lockdown in Europe especially during the first half of the year. However, both sales volume and profitability recovered remarkably in the second half of the year with improving demand from the export markets. The division’s revenue generation surged considerably in the second half of 2020, surpassing first half levels by 57%. Similarly, the division reported an EBITDA of 20.1mn TL in H2 2020, almost tripling compared to the first half of 2020.

The other business line which was seriously negatively impacted by Covid-19 was the real estate business. The real estate division reported revenues of 29.4mn TL and an operating EBITDA of 11.9mn TL in the year, compared to 42.5mn TL and 21.1mn TL, respectively in same period last year. The weakness was driven mainly by the lower rent revenues particularly throughout H1 2020 due to the safety precautions against Covid-19, as Van Shopping Centre has remained closed partially in March and entirely in April and May. On the other hand, the real estate division has started to recover as pandemic restrictions were partially eased and reported improved second half results. The division’s revenue generation picked up in H2 2020, surpassing first half levels by 30%, while EBITDA generation reached 9.0mn TL in H2 2020, tripling compared to H1 2020.

In 2020, the financial services subsidiaries shone. The brokerage & asset management division reported revenues of 101.3mn TL in 2020, indicating a robust 89% yoy increase, while operating EBITDA increased 12-fold, reaching 31.7mn TL as opposed to last year’s 2.7mn TL. The outstanding performance was attributable to the increase in trading volumes, as well as effective cost management.

GIH reported a consolidated net loss of 298.6mn TL in 2020, compared to a net loss of 131.0mn TL in 2019, while quarterly results were solid with the bottom line marking 19.9mn TL net profit in Q4 2020 as opposed to a net loss of 44.7mn TL in Q4 2019. The net loss in 2020 stemmed mainly from non-cash depreciation and foreign currency translation differences incurred on Group’s long term borrowings. The bottom line incorporated 667.5mn TL non-cash charges, of which 474.2mn TL are depreciation and amortization and 193.3mn TL net foreign exchange losses. When adjusted for the non-cash charges, the bottom line turns to positive. Depreciation and amortization charges have increased from 370.2mn TL in 2019 to 474.2mn TL in 2020, purely as a result of foreign currency valuations. 87.2mn TL (84%) of the increase in Depreciation and amortization was due to the depreciation of Turkish Lira against hard currencies. Also, the Group has incurred 193.3mn TL net non-cash foreign exchange losses, compared to 76.0mn TL in 2019. The Group’s net interest expenses in the year was 319.1mn TL (45.5mn USD), as opposed to 253.9mn TL (44.8mn USD) a year ago. 63.0mn TL (96.7%) of the increase in net interest expenses was due to the depreciation of Turkish Lira against hard currencies.

Major operational developments
On the operational front, developments are on track in line with the growth strategy by means of new acquisitions and investments mainly into core businesses, which are ports infrastructure, clean energy and asset management. During the reporting year, the strategic focus remained on the core businesses and how best to insulate the Group from the impact of Covid-19.

A major development on the ports side during 2020, to position the Group as a pure-play global cruise port operator, was the divestment of our concession in Port Akdeniz. Agreed in October, this was finalised in January, with the sale being made to QTerminals of Qatar. The sale’s successful closing is an essential element of the Group’s refinancing strategy for the Eurobond. On 7 January 2021, it had been published a refinancing proposal to the holders of 250mn USD 8.125% Senior Unsecured Notes due 2021. This proposal aims to address the upcoming maturity and provide the business with a more stable, deleveraged capital structure. The Scheme Meeting will be held virtually on 26 March 2021. Moreover, as part of its global expansion strategy, the Group continuously monitors potential public and private acquisitions around world. For example, on 13 November 2020, the Group announced that its partner, Baleària group, has been awarded a 35-year concession for the ferry and cruise port of Valencia in Spain, which the Group will operate and manage for the period of the concession; in addition, on 16 November 2020, the Group announced that the Port Network Authority of the Ionian Sea had awarded the Group with a 20-year concession to manage the services for cruise passengers in the port of Taranto in Italy. These have enhanced and further strengthened the Group’s presence in the cruise sector’s core markets.

During the year, Global Investment Holdings took major steps forward with its natural gas efforts. In the second core business area, Naturelgaz, the compressed natural gas subsidiary, took a significant step towards its inorganic growth strategy and signed an SPA to purchase 100% of SOCAR Turkey LNG Satış A.Ş. on February 6, 2020. The acquisition has been successfully concluded at a total consideration of 32.4mn TL and the purchase price has been fully paid, in cash. Moreover, on 10 February 2021, Naturelgaz signed an agreement with Petrol Ofisi to create synergies in the Auto CNG business. Such developments will further strengthen the position of Naturelgaz in LNG, bulk CNG, and auto-CNG businesses; increasing volume and geographical coverage while diversifying the product portfolio.

In the third core business line, subsidiary Actus Asset Management and Turkey’s largest domestic and independent asset management company İstanbul Asset Management have finalized their merger, creating the largest domestic and independent asset management company in Turkey. GIH has an option to buy additional 40% of the shares in the merged entity.

Covid-19 crisis management and actions
Covid-19 outbreak was declared as a pandemic by the World Health Organization (WHO) on March 11, 2020 and precautions taken against the pandemic continue to cause unfavourable results in operations and negatively affect economic conditions in all countries which are exposed to the epidemic. As a result of pandemic, asset prices, liquidity, foreign exchange rates, interest rates and many other subjects have been affected, and the ultimate severity of the outbreak is uncertain at this time.

Group; from the very beginning, closely keeps monitoring all developments and takes necessary measures in order to effectively manage the negative impact of the Covid-19 outbreak on its consolidated financial position, consolidated financial performance and consolidated cash flows. The Group’s key focus areas for the coming period are, deleveraging, positive FCF generation, operational profitability and efficiency. Group will also keep on doing its duties in the best way, carry out innovative and pioneering works and add value to every field that it operates.

The business line which is affected the most from Covid-19 is our ports division. Then comes real estate (shopping malls), also there is a relatively minor impact on our mining business. The business lines are susceptible to the uncertainties regarding Covid-19. While the recent development of effective Covid-19 vaccines is an encouraging development, the duration and spread of Covid-19 impact in the World and in Turkey has not been clearly estimated, as the severity and duration of the impact become clearer, a more distinct and healthy assessment can be made by the Group management for medium and long term.

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