Global Investment Holdings, a diversified conglomerate operating in 13 different countries on 4 continents, today announces its half year results for the six months ended 30 June 2020.

Global Investment Holdings reports Consolidated Net Revenues of 739.9mn TL in the first half of 2020, representing an increase of 16% compared to the same period last year; while announcing an Operating EBITDA of 147.6mn TL.

Global Investment Holdings’ Chairman & CEO, Mehmet Kutman, stated that “The results for the six months 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.”

The Chairman continued “The macroeconomic, consumer and competitive backdrop for the second half of the year contains considerable uncertainties. Given the ongoing uncertainty and risks from COVID-19, we are cautious on the speed of recovery but remain confident in the Group’s ability to fulfil its longer-term growth ambitions.”

Mr. Kutman added that “Looking ahead, our robust and diversified portfolio and our capable management team give me confidence that we will continue to provide our shareholders with sustainable returns through responsible investment. I would like to thank our employees around the globe for their solidarity and perseverance during these challenging times.” 

Commenting on the results, The Chief Financial Officer of the Group, Ferdağ Ildır, stated that “We had a solid start to the year, followed by a slowdown in economic activity since late February due to COVID-19 pandemic. The public health and economic crisis linked to COVID-19 intensified during second quarter of the year, creating an extremely challenging market environment. This crisis has had an unprecedented impact on our businesses and the communities we serve across the world. Despite the uncertainty that surrounds us today, we continue to take actions to protect our performance, conserve cash and plan for future growth, all underpinned by a strong balance sheet. We are confident that by maintaining a steadfast focus on our strategic priorities of operational excellence and efficiency, while ensuring continuous effective cost management, we are well-positioned to capitalise on the opportunities these challenging times create.”

GIH announced its financial results for the first half of 2020. Consolidated net revenues reached 739.9mn TL compared to 636.1mn TL last year, representing an increase of 16%. The revenue growth over the period was broad based, with particularly pleasing growth from power and brokerage & asset management divisions. Covid-19 outbreak put material pressure on revenues. If such pandemic had not occurred, total consolidated revenues would have registered 49% increase yoy.

In the first half of 2020, Operational Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted to 147.6mn TL, compared to an EBITDA of 228.0mn TL in the same period last year. 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 period. Covid-19 outbreak pressured EBITDA as well. If such pandemic had not occurred, total consolidated operating EBITDA would have registered 26% increase yoy.

On a divisional basis,

The gas division distributed 68.7mn Sm³ sales volume in H1 2020 as opposed to 72.0mn m³ for the same period of 2019, mainly due to the impact of the Covid-19 pandemic. The lockdown measures between March and May, and the contraction in economic activity have affected the production capacity of some customers. In addition, the delay of the season openings in tea and asphalt sectors caused a forward shift in purchases for the whole year. These shifts do not affect the annual sales volume, but may cause changes in volume phasing. On the financial front, revenues increased by 7% yoy, reaching 183.7mn TL; mainly attributable to the enhancement in pricing. Meanwhile, the gas division’s operating EBITDA reached 35.7mn TL, up by 4% yoy and translating into a 19.5% EBITDA margin. The gas division managed to expand EBITDA generation through H1 2020 thanks to the strong revenue growth, increase in gas margin and effective cost management.

The ports division’s revenues were 348.0mn TL at the end of first half of 2020, up by 14% yoy, while operating consolidated EBITDA fell by 57% yoy to 84.4mn 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 margin of 2%. In Q2 2020, IFRIC-12 increased reported revenue by 144,6mn TL (22.0mn USD) and EBITDA by 3.2mn TL (0.5mn USD). The expenditure for the construction activities is recognised as operating expenses. The margin is non-cash. 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 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.

The global cruise industry effectively shut down in Q2 2020, for the first time in its history and as a result our cruise ports have experienced a sharp fall in revenues. Overall in H1 2020 the ports division welcomed 1.3mn cruise passengers with a 35.7% decline compared to the same period last year. The passenger number refers to consolidated and managed portfolio, hence excluding equity accounted associate ports La Goulette, Lisbon Singapore and Venice. With the strong first time contribution from the new ports in the Caribbean in Q1 2020 helping to offset the impact of the shutdown of the cruise industry in Q2 2020. While cruise operations continue to be significantly impacted by the Covid-19 crisis and volumes remain very low versus historical standards, the ports division expects a steady increase in cruise ship calls and passenger volumes over the remainder of the year. And it is encouraging to note that the cruise line partners continue to report strong bookings for 2021. In the meantime, the ports division continues to work closely with all relevant partners and health authorities on the safe return to cruising across its portfolio.  On the commercial ports business, while the commercial ports are exposed to global economic growth and macro-economic factors, which have been impacted by Covid-19, trading at these ports in Q2 has been broadly in line with Q1 trading. General & Bulk Cargo volumes grew 27.3% yoy in H1 2020, while TEU throughput fell by 13.8% yoy in H1 2020. Despite the Covid-19 crisis, Q2 General & Bulk Cargo volumes rose 3.5% qoq and Q2 TEU Throughput fell just 10.6% qoq.

The power division, which includes co/tri-generation- along with biomass- and solar-based renewable power production, reported 120.8mn TL revenues in the period, almost 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 operational plants. With all plants fully under operation, the division’s EBITDA has also improved substantially from negative 0.4m TL in H1 2019 to 37.5mn TL in H1 2020. 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 163,525 tons of product sales in H1 2020, down by 38% yoy, mainly due to the Covid-19 lockdown in export markets. The mining division reported revenues of 34.5mn TL, down 32% yoy, while operating EBITDA for the period fell by 39% yoy to 7.0mn TL. Such decline has stemmed from the lockdown in Europe; however both sales volume and profitability are expected to recover during the second half of the year with the increasing demand from the export markets.

The real estate division reported revenues of 12.8mn TL and an operating EBITDA of 2.9mn TL in the first half of the year, compared to 21.4mn TL and 10.3mn TL, respectively in same period last year. The weakness was driven mainly by the lower rent revenues throughout H1 2020 within the scope of safety precautions against Covid-19, as Van Shopping Centre has remained closed in part of March and whole of April and May.

The brokerage & asset management division reported revenues of 40.2mn TL in H1 2020, indicating a sturdy 63% yoy increase, while operating EBITDA increased substantially, reaching 11.6mn TL as opposed to 0.8mn TL in H1 2019. The outstanding performance was attributed to the increase in trading volumes, as well as effective cost management.

GIH reported a consolidated net loss of 237.4mn TL in the first half of 2020, compared to a net loss of 99.8mn TL in 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. The bottom line incorporated 355.0mn TL non-cash charges, of which 233.7mn TL are depreciation and amortization and 121.3mn TL net foreign exchange losses. When adjusted for the non-cash expenses, the bottom line turns to positive. Depreciation and amortization charges have increased from 178.9mn TL in H1 2019 to 233.7mn TL in H1 2020, purely as a result of foreign currency valuations. Also, the Group has incurred 121.3mn TL net non-cash foreign exchange losses, compared to 62.5mn TL in the same period last year. The Group’s net interest expenses in the period was 149.6mn TL (23.2mn USD), as opposed to 101.0mn TL (18.0mn USD) a year ago. 18mn TL (37%) of the increase in net interest expenses was due to the depreciation of Turkish Lira against hard currencies.

Covid-19 crisis management and actions

Currently the world is facing unprecedented challenges due to the COVID-19 pandemic. The pandemic hit industries and the global economy as a whole so fast and to such an extent and with such a severity which nobody could have predicted. Around the globe, the tourism, catering, hospitality, travel and aviation industries are the ones most affected as countries are closing their borders, suspending flights and enforcing strict travel restrictions within the context of their measures implemented to contain pandemics.

2020, marking the 30^th anniversary of the Group foundation, continues to be a uniquely challenging year due to the impact of COVID-19. Despite the gradual easing in the measures taken by the governments across all our operations, there are still uncertainties going forward and in some operating regions challenges related to COVID-19 persist.

Ever since the beginning of the crisis, the Group has acted quickly and attempted to prepare in the best possible way for future market requirements by immediately reducing its running costs to a significant extent. 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. Despite the Group being particularly affected by the pandemic in all divisions and countries at a time, the board and senior management is convinced that the strong innovative power, the flexible corporate culture and a very focused team will cope very well with the challenges of the competition, and the Group will emerge stronger from this crisis.

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 the ports division. Looking into the remainder of 2020, the near term outlook for cruise remains highly uncertain. Yet, a number of cruise lines have recently commenced sailings and more are planning to do so over the remainder of 2020. However, understandably there remains considerable uncertainty over these sailings. Looking into 2021 and beyond, it is very encouraging to see such strong booking trends across the cruise industry and across all regions. While on-board distancing measures will mean cruise ship occupancy levels are likely to be down in 2021, the level of continued consumer demand is very encouraging for 2021 and beyond. In light of the exceptional circumstances that have engulfed the cruise industry, the board and management took several significant actions to protect the balance sheet and long term future of the business. These actions have resulted in cash costs in a no cruise environment being reduced to such an extent that management believe GPH can remain in operation even under a scenario of no cruise ships calling at its cruise ports until 2022.

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