Global Investment Holdings announces Consolidated Net Revenues of 636.1mn TL and an Operating EBITDA of 228.0mn TL in the first half of 2019, which indicate a solid 38% growth compared to a year ago.

Global Investment Holdings (“GIH“ or the “Group”) reports consolidated revenues of 636.1mn TL for the six months of 2019, representing a notable growth of 38% compared to the same period last year; while announcing a consolidated operating EBITDA of 228.0mn TL, marking a remarkable 38% yoy growth. Global Investment Holdings’ Chairman, Mehmet Kutman, stated that “The outstanding financial and operational successes we achieved by the end of first half of the year indicate that GIH has a solid foundation for sustainable and profitable growth. In the remaining periods of 2019, we will continue to work hard to achieve our goals, and add value to our shareholders, employees, suppliers, and national economy.”

Commenting on the results, CFO Kerem Eser stated that “Although our power business still requires some more focus and fine tuning in terms of operational efficiencies, we are more than pleased with the robust performance across nearly all of our businesses in the first half of the year. Solid revenue growth along with EBITDA maximization once again validated our successful business model.”

GIH announced its financial results for the first half of 2019. Consolidated net revenues reached 636.1mn TL compared to 459.6mn TL last year, representing a substantial increase of 38% yoy. Nearly all of the business divisions under the Company contributed to this increase, with Gas and Ports divisions contributing the most.

In the first half of 2019, Operational Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted to 228.0mn TL, compared to 165.6mn TL in the same period last year, which represents a sturdy 38% growth over the same period last year. Gas and Ports divisions were the major contributors to the EBITDA increase.

On a divisional basis, the Group’s ports subsidiary, Global Ports Holding Plc (GPH) welcomed 2.1mn cruise passengers to its consolidated and managed cruise ports in H1 2019, indicating a pleasing growth rate of 26.8% yoy. On an organic basis, passenger volumes grew 8.6% yoy, thanks to the strong volume growth at Ege Port and Valetta Cruise Port. Meanwhile, at all ports including equity accounted associate ports Venice, Lisbon and Singapore, GPH welcomed 3.3mn passengers (H1 2018: 2.7mn, FY 2018: 8.4mn). Furthermore, Turkish cruise ports recorded strong passenger growth; in particular Ege Port’s passenger number increased by 31% in H1 2019 yoy, while outlook for Ege Port continues to strengthen for 2020 and 2021 and reservations for Bodrum and Antalya in 2020 now also shows marked improvement.

On the commercial ports business, volumes were generally under pressure in the period, with General and Bulk cargo volumes declining by 42.4% and container volumes falling by 14.4%. The commercial ports are not immune to the impact of macro-economic factors such as trade tariffs and their associated impact on global trade in general and we believe the general uncertainty around global trade has been the primary driver of the slowdown, particularly at Port Akdeniz.

The Ports division’s revenues were 306.3mn TL at the end of six months of 2019, up by a robust 33% yoy, while operating consolidated EBITDA increased remarkably by 33% yoy, reaching 195.2mn TL. A significant portion of this increase is attributable to the contributions from the GPH’s cruise port operations thanks to a strong overall 26.8% growth in total cruise passenger numbers driven by a combination of organic growth in Valetta Cruise Port and Ege Port, which generate higher than average yield, along with inorganic growth from first time consolidation of new ports. Meanwhile; strong contribution from the equity accounted associate ports, which do not contribute to revenue, supported EBITDA maximization. Furthermore, a favourable currency environment in Turkey resulted in solid financial performance improvement in the period.

Group’s Gas division distributed 72.0mn m3sales volume in H1 2019, compared to 59.1mn m3 for the same period of 2018 (excluding 6.8mn m3 pipeline gas sales). Volume increase was a result of the strategy to increase winter sales and all year constant customer sales in order to eliminate summer peaks. Revenues almost doubled yoy, reaching 171.1mn TL; mainly attributable to the increase of sales volume and better pricing as pass through Botaş tariff increased (H1 2018 including pipeline gas sales of 5.6mn TL for gas balancing). Meanwhile, Gas division’s operating EBITDA reached 34.5mn TL in the period, more than tripling yoy and translating into c.9pp EBITDA margin expansion. Improved efficiency in cost management as well as strong revenue growth supported Naturelgaz’s outstanding profitability improvement in the period.

Power division, which includes co/tri-generation and biomass based renewable power production, reported 61.5mn TL revenues in H1 2019, up by a solid 63% over the same period last year. The increase was mainly attributable to the commencement of 12MW Mardin biomass power plant, selling electricity at the feed-in tariff rate of 13.3 dollar-cent/kWh and pleasing performance of co/tri-gen business. On the EBITDA front, Power business generated -0.4mn TL EBITDA compared to 1.1mn TL in H1 2018. The weakness in biomass was mainly attributable to the customary ramp-up period required during commissioning stage of Mardin, as well as the heavy rainfall in biomass plant regions throughout the period. On the co/tri-generation side, increased gas price was partially offset by the increase in electricity prices, which is expected to be normalized in the coming periods.

Mining division realized 262,664 tons of product sales in the first half of 2019, with an 11% yoy growth. The Mining division’s revenues came out at 51.1mn TL, implying a 64% yoy increase, while operating EBITDA more than doubled yoy, reaching 11.6mn TL. Operational performance improved remarkably during the period thanks to the increase in sales volume, improvement in production performance as well as enhancement in pricing.

The Real Estate division reported revenues of 21.4mn TL and an operating EBITDA of 10.3mn TL in H1 2019, compared to 34.7mn TL and 13.4mn TL, respectively in H1 2018. Higher revenue recognition in Skycity office project upon completion had boosted the numbers in H1 2018.

The Brokerage & Asset Management division reported revenues of 24.6mn TL in H1 2019, indicating a 4% yoy increase, and an operating EBITDA of 0.8mn TL, compared to 1.0mn TL last year.

GIH reported a consolidated net loss of 99.8mn TL in H1 2019, compared to a net loss of 51.0mn TL in H1 2018. Despite higher revenue recognition along with EBITDA maximization, net loss stemmed from non-cash depreciation and foreign currency translation differences incurred on Group’s long term borrowings. Depreciation and amortization charges have increased from 125.9mn TL in H1 2018 to 178.9mn TL in H1 2019; purely resulting from currency valuations, as well as 10.4mnTL additional charge in 1H 2019 from the first time application of IFRS 16. Also, the Group has incurred 62.5mn TL net non-cash foreign exchange losses, compared to 25.8mn TL in the same period last year. Net interest expenses in the period were 101.0mn TL; compared to last year’s 80.4mn TL increase is solely attributable to the weakness in TL against hard currencies.

On the operational front, developments are on track in line with the strategy of growth by means of new acquisitions and investments mainly into core businesses, which are ports infrastructure, clean energy and asset management. On the asset management side, the merger of Actus Asset Management, 90.1% owned subsidiary of GIH, and İstanbul Asset Management combines two of Turkey’s leading asset managers and is a first step in GIH’s asset management growth strategy. GIH plans to strengthen its presence in the sector through new mergers, acquisitions and strategic alliances, including the exercise of the option to purchase majority shares in the merged entity. On the ports side, during the period, significant progress was made in the new port investment strategy, GPH’s joint venture was notified that its bid for the operator of La Goulette, Tunisia had been successful, as well as its joint venture was awarded the cruise port tender for Nassau, Bahamas. Moreover GPH signed a 30-year concession agreement for Antigua and Barbuda where Royal Caribbean has agreed in principle to become an equity partner in the concession. Furthermore, GPH announced a strategic review, after period end, to explore ways to maximise value for all stakeholders and includes a range of potential corporate activity including a sale of certain assets as well as strategic investments and partnerships.

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