Global Investment Holdings (“GIH”), a diversified conglomerate operating in 13 different countries across four continents, announced its consolidated results for the nine months ended 30 September 2021 and other recent highlights.

Global Investment Holdings reported Consolidated Net Revenues (excluding IFRIC 12 Construction Revenue and revenues from Port Akdeniz which was sold in January 2021) of 1,052.0mn TL in the first nine months of 2021 with a 33% YoY increase; while announcing a Consolidated Operating EBITDA (excluding Port Akdeniz) of 189.7mn TL with a 46% YoY increase.

Global Investment Holdings’ Chairman & CEO, Mehmet Kutman, stated that “Obviously, it has been a very tough year and a half, and we have been discussing about Covid-19 and its material negative impact on our business lines since its emergence in March 2020. Now, it certainly is the time to look ahead; and I am very delighted to look at such a positive outlook for our businesses, especially the ports business. The pandemic may not be fully over, yet, we now have vaccines and successful roll-out, advanced treatments and enhanced health & safety protocols in place for protection against Covid-19, hence easing Covid-19 related restrictions. Thankfully today, the global cruise industry is operating almost normally and with gradual return to service, most cruise lines expect close to 100% fleet deployment in Summer 2021, in time for the peak summer season. Parallel to such backdrop, the improvement in performance has gained momentum in Q3 2021 across our Group. In September 2021, for the first time since pre-Covid-19, all of our cruise ports received calls, a significant milestone in the continued recovery of our cruise ports. On a like-for-like basis, during September 2021, our cruise ports received 53% of the calls and 30% of the passengers received for the same period in 2019, representing a ten-fold increase in passengers compared to May 2021. Accordingly, our ports division’s revenue generation in the third quarter alone, has well surpassed the revenue generation in the first half of the year. Also, I am pleased to see that our ports division re-started generating positive EBITDA in the third quarter thanks to the decelerating impact of Covid-19. Our results are demonstrating that recovery is underway and we believe that, continuing ease on restrictions, together with our strong pipeline we are on track to deliver a strong performance for 2021 and we are confident in our future forecasts.”

The Chairman continued “We have been quite successful in delivering on a number of key strategic initiatives in line with our long-term growth strategy so far this year. On the ports side, we have signed a 20-year agreement with the Port of Kalundborg to provide services for cruise passengers in Kalundborg Port, Denmark. I am also thrilled because Kalundborg Port will be GPH’s first cruise port in the Northern European cruise port market, marking an important milestone in the continued development and growth of the company. On asset management side, we exercised our option and increased our stake in Istanbul Asset Management from 26.6% to 66.6%. I am very pleased that we have successfully completed this transaction and become the majority shareholder in such a robust company, in line with our strategy to grow in the non-bank financial services and asset management business. Thanks to synergy created by the two companies over the years, Istanbul Asset Management managed to double its AUM since the merger in September 2020, reaching 12.8bn TL (6.4bn TL at the end of 2020), and becoming the largest native independent asset management company. More on the finance front; we established a 100% subsidiary of GIH, GYH Danışmanlık ve Yönetim Hizmetleri A.Ş. to collect the Group’s financial services companies under one roof. Accordingly, GIH shares in İstanbul Portföy Yönetimi A.Ş. and Global Menkul Değerler A.Ş have been transferred to this new subsidiary of the Group.”

The Chairman concluded, “The Group has been taking solid effective steps to stabilise its liquidity position and manage its long & short-term debt obligations through i) completion of the refinancing of Eurobond ii) the successful IPO of its natural gas subsidiary, Naturelgaz, on Borsa Istanbul, iii) equity injection through a rights issue in GIH, vi) the completion of the sale of the Group’s largest commercial port, Port Akdeniz, and the anticipated IPO of Consus Energy. We have completed the capital increase process of GIH, which resulted in total proceeds of TL 487,180,209 to GIH. As promised, we have used the total amount of the funds from the Capital Increase in debt repayment, melting down holding solo gross debt nearly by half. These all aim to provide the Group with a more stable, deleveraged capital structure. All these efforts, along with the encouraging outlook on the ports side, we keep our positive stance looking ahead.”

Commenting on the results, The Chief Financial Officer of the Group, Ferdağ Ildır, stated that “As known, the Group’s key focus areas are, deleveraging, positive FCF generation, operational profitability and efficiency. The 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. For 2021, we had targeted to continue decreasing our net debt rapidly and have made good progress towards this goal so far. In line with such focus, we have completed the capital increase process of GIH in the third quarter, with total proceeds of TL 487,180,209 to GIH. The total amount of the funds from the capital Increase were used in repayment of the TL Bonds (amounting 172.2mn TL as of 30.09.2021 and an additional 17.3mn TL in October 2021) and the Euro31.3mn bank loan in accordance with the fund utilization report, decreasing holding solo gross debt by nearly half as of 30.09.2021, which in turn should significantly reduce net interest expenses in the following quarters.”

Global Investment Holdings reported 1,052.0mn TL revenues (excluding IFRIC-12 Construction Revenue and revenues from Port Akdeniz, which was sold in January 2021) for 9M 2021, indicating a solid 33% YoY growth on the back of gas, power, mining and brokerage & asset management divisions. The sequential trend in 9M 2021 compared to 9M 2020 shows that the improvement in performance has gained momentum in Q3 2021 across the Group, in line with the decelerating impact of Covid-19 and strengthening activity in underlying businesses.

At the end of 9M 2021, Global Investment Holdings’ consolidated operating EBITDA increased nearly by half (46%) yoy and reached 189.7mn TL, driven by a notable solid contribution from the power, mining and brokerage & asset management divisions. EBITDA generation began to gain pace in Q3 2021 across the Group, in line with the decelerating impact of Covid-19 and strengthening activity in underlying businesses.

On a divisional basis,
Naturelgaz maintained its solid financial position despite Covid-19 impact thanks to its operational capability, efficient cost management structure and increased operations in CityGas business line. Sales volume reached 139.2mn Sm3 in Q3 2021, representing an increase of 14% compared to the same period last year. The higher volume was mainly due to the increase in CityGas sales, while inorganic growth achieved by the acquisition of LNG and CNG operations of SOCAR Turkey at the end 2020 has also made a significant contribution to the increase in LNG sales volume. Revenues increased by 24% yoy, reaching 403.6mn TL, reflecting the increase in CityGas revenues and the addition of LNG revenues as a result of SOCAR LNG merger. Naturelgaz’ operating EBITDA decreased by 9% to TL 66.1 million. Despite the 10% increase in gross profit yoy, decrease in EBITDA stemmed from Opex increase due to Socar merger as well as one-off IPO related expenses. Naturelgaz’s net debt amounting 85.5 mn TL at the end of 2020, has turned into 40 mn TL net cash surplus as of 30.09.2021.

On the ports side, Cruise passenger volumes surged by 679% in the third quarter of 2021 compared to the second quarter of 2021 (498.7k in Q3 2021 vs 64.0k in Q2 2021) reflecting the steady return to activity across the cruise industry following the disruption caused by the Covid-19 pandemic. In September 2021, for the first time since pre-Covid-19, all of our cruise ports received calls, a significant milestone in the continued recovery of our cruise ports. On a like-for-like basis, during September 2021, our cruise ports received 53% of the calls and 30% of the passengers received for the same period in 2019. Representing a ten-fold increase in passengers compared to May 2021. There is a significant variation in trends across our network of cruise ports, however, activities levels are continuing to accelerate in all ports and the current itineraries of cruise lines point to a continued pick-up in activity levels. Most cruise lines expect close to 100% fleet deployment in Summer 2021. The ports division’s revenues (excluding IFRIC-12 Construction Revenue and Port Akdeniz, Antalya which was sold in January 2021) stood at 157.1mn TL in 9M 2021, up by 19% yoy; while operating consolidated adjusted EBITDA marked a loss of 21.5mn TL (-7.3mn TL in 9M 2020). Revenues and EBITDA in 9M 2020 benefited from the pre-pandemic first time contribution from the Caribbean ports. In line with the decelerating impact of Covid-19 due to the gradual easing of travel restrictions and the increase in the number of cruise ships returning to sailing, Ports’ consolidated revenue nearly tripled in the third quarter of 2021 YoY, reaching 82.5mn TL. Ports re-started generating positive EBITDA in Q3 2021 at 1.2mn TL as opposed to -17.1mn TL in Q3 2020 (excluding Antalya). Pleasing revenue generation of the ports division in the third quarter 2021, coupled with the support from the current operational data and strong demand, we keep our positive stance on a faster recovery from Covid-19.

The power division, which includes co/tri-generation- along with biomass- and solar-based renewable power production, generated 247.9mn TL revenues, soaring by 31% yoy, mainly driven by the pleasing performance of the operational plants. Likewise, the division generated 95.4mn TL EBITDA in 9M 2021, surging by 46% YoY.

The mining division realized 384,323 tons of product sales in the first 9 months of 2021, up by 42% yoy, mainly due to strong feldspar demand from export markets. The division announced revenues of 120.8mn TL in 9M 2021, more than doubling YoY. The operating EBITDA was 43.2mn TL, almost tripling yoy and delivering a 35.7% operating EBITDA margin, showing significant improvement compared to the same period last year (25.1% in 9M 2020). Besides the volume growth, effective cost control measures as well as dominancy of hard currency denominated revenues were factors supporting the improvement in profitability during the period.

The other business line which was seriously negatively impacted by Covid-19 was the real estate business. The real estate division posted 21.9mn TL revenues in 9M 2021, compared to 22.0mn TL a year ago. Lower real estate sales were partially compensated by the increase in rental revenues. The real estate division reported an operating EBITDA of 9.4mn TL, compared to 7.9mn TL a year ago, indicating a pleasing 18% increase. The improvement is mainly attributable to the increasing contribution from higher EBITDA generating rental operations.

The brokerage & asset management division revenues reached 103.7mn TL, a solid 62% increase yoy; while operating EBITDA increased by 2.5 times, reaching 43.8mn 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 398.7mn TL in 9M 2021, compared to a net loss of 318.5mn TL in the same period last year. The net loss stemmed mainly from non-cash depreciation and foreign currency translation differences incurred on Group’s long term borrowings as well as non-cash and non-operating one-off expenses. The bottom line incorporated 471.2mn TL non-cash charges of which 266.2mn TL are depreciation and amortization, 205.0mn TL net foreign exchange losses. Meanwhile, 150.4mn TL one-off expenses include IPO expenses, project expenses, and IFRS related adjustments such as non-cash impairment provision which relates to Venezia & Adria impairment, amounting 87.7mn TL. Had the pandemic not occurred and FX rate remained the same, net loss would be minimal, the bottom line would be close to positive or positive. Depreciation and amortization charges, despite the depreciation of Turkish Lira against hard currencies, have decreased from 332.3mn TL in 9M 2020 to 266.2mn TL in 9M 2021, purely as a result of Port Akdeniz’s sale depreciation effect amounting 110.0 mn TL. If FX rate remained the same, depreciation and amortization expense would be 45.1mn TL lower (excluding the amortization effect of Port Akdeniz). Also, the Group has incurred 205.0mn TL net non-cash foreign exchange losses, compared to 216.8 mn TL in 9M 2020. The Group’s net interest expenses in 9M 2021 was 216.5mn TL, as opposed to 229.9mn TL a year ago. Furthermore, if FX rate remained the same YoY, net interest expense would be 39.7mn TL lower in 9M 2021.

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 period, the strategic focus remained on the core businesses and how to best insulate the Group from the impact of Covid-19.

A major development on the ports side during the period, to position Global Ports Holding Plc (GPH) as a pure-play global cruise port operator, was the divestment of our concession in Port Akdeniz. Agreed in October 2020, this was finalised in January 2021, with the sale being materialized to QTerminals of Qatar. The sale’s successful closing was an essential element of the Group’s refinancing strategy for the 250mn USD 8.125% Senior Unsecured Notes due 2021 (Eurobond) issued by GPH’s wholly-owned subsidiary Global Liman Isletmeleri A.S. On 7 April 2021, an offer was launched for up to 75mn USD of Eurobond, which was expired on 16 April 2021. Following the unmodified Dutch Auction procedure conducted in connection with the Offer, the total amount of cash used in connection with the Offer is 44.7mn USD excluding accrued interest on the Notes validly tendered and accepted. Following the completion of the tender offer, 200.3mn USD of Eurobond remained outstanding. GPH completed its five-year loan agreement for up to 261.3mn USD, with leading global investment firm Sixth Street, managing assets in excess of 50bn USD. As a result, GPH has concluded the early repayment of the 200.3mn USD Eurobond outstanding amount, plus accrued interest. This new investment from Sixth Street will strengthen GPH’s balance sheet and provide flexible growth capital for GPH to pursue expansion opportunities at a dynamic juncture in the global cruise industry. Last but not least, as part of its global expansion strategy, GPH continuously monitors potential public and private acquisitions around world. For example, on 30 April 2021, GPH has signed a 20-year concession agreement to manage the cruise passenger terminal of the Port of Taranto, Italy. This has enhanced and further strengthened the GPH’s presence in the cruise sector’s core markets. Another recent development on the ports side, GPH has signed a 20-year lease agreement with the Port Authority of Kalundborg to manage the cruise services in Kalundborg Port, Denmark in October 2021. Kalundborg Port will be GPH’s first cruise port in North Europe, marking an important milestone in the continued development and growth of the Group. Kalundborg is located in the north western region of Denmark and is just over one hour from Copenhagen city centre. The geographic location of the port means that it can provide cruise lines with a time saving and fuel-efficient alternative to Copenhagen Cruise Port. Kalundborg is a cruise destination that has historically received just a handful of cruise calls per season. However, with a new 500m quay completed in 2019 and with the addition of GPH’s global expertise and know-how, we expect to drive strong growth in cruise traffic at the port over the years ahead. As part of the lease agreement, subject to certain milestones, GPH will invest up to €6m by the end of 2025 into a purpose-built cruise terminal. GPH currently expects to take over cruise port operations before the end of the current financial year.

During the year, Global Investment Holdings took major steps forward with its natural gas efforts. In the second core business area, Naturelgaz, the non-pipeline natural gas subsidiary, took a significant step towards its growth strategy and started to float on Borsa Istanbul as of 1st April 2021 following the completion of exceptionally successful IPO. The IPO has received overwhelming investor demand, with 75.3 times domestic individual investor oversubscription, 28.8 times domestic institutional investor oversubscription, and 3.5 times international institutional investor oversubscription with a total demand exceeding 15.5bn TL. Norges Bank Investment Management, out of Norway, acquired 8.3% of the total shares offered in the IPO. Naturelgaz received gross proceeds of 127mn TL which will be used to develop and expand its business. The Company, while improving its leadership position in Turkey, also envisages expanding its operations to Sub-Saharan countries where lack of pipeline infrastructure is an opportunity to transport natural gas to power and industrial plants. Moreover, on 10 February 2021, Naturelgaz signed an agreement with Petrol Ofisi to create synergies in the Auto CNG business. Such development 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.

Furthermore, Consus Enerji, fully-owned subsidiary of Global Investment Holdings, operating in renewable energy generation and energy efficiency, applied to the Capital Markets Board to get approval to amend the Articles of Association for the purpose of the IPO.

GIH completed its capital increase process. Accordingly, GIH raised its issued share capital in cash, from TL325,888,409.93 to TL650,000,000. The capital increase resulted in total proceeds of TL 487,180,209.05 to GIH. The total amount of the funds from the Capital Increase were used in repayment of the TL Bonds and the Euro bank loan in accordance with the fund utilization report, which should significantly reduce net interest expenses in the following quarters

In the third core business line, pursuant to Capital Markets Board’s approval to exercise its option to buy additional 40% of Istanbul Asset Management in September 2021, GIH exercised its option and increased its stake in Istanbul Asset Management from 26.6% to 66.6%, becoming the largest shareholder; and hence paving the way for full consolidation. Through the exercise of the option, Global Investment Holdings acquired 5,673,600 shares, with a nominal value of 1 TL each, corresponding to 40% of the share capital of Istanbul Asset Management for a consideration of TL77,352,322, which has been fully paid in cash. Meanwhile, existing managing partners’ (Hasan Turgay OZANER, Tufan DERİNER and Alpaslan ENSARİ) stake stands at 22.3% after the transaction.

More on the finance front, 100% subsidiary of GIH, GYH Danışmanlık ve Yönetim Hizmetleri A.Ş. has been established to collect the Group’s financial services companies under one roof. All of the shares corresponding to 66.6% of Istanbul Portföy Yönetimi A.Ş. and 75% of the capital of Global Menkul Değerler A.Ş have been transferred to this new subsidiary.

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