Gulf International Services Q.P.S.C. ($GISS)

Hello, and welcome to Gulf International Services. Please note that this call is being recorded. I would like to remind everyone that there will be no question for today's call. I'd like to hand the call over now to Bobby Sarkar. Please go ahead.

Thank you, Gail. Good afternoon, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Gulf International Services First Quarter 2026 Results Conference Call. So on this call from Qatar Energy's Privatized Companies Affairs Group, we have Abdulla Al-Hay, who is the Manager of Privatized Companies Affairs; Sami Mathlouthi, who is the Assistant Manager in Financial Operations; and Rashid Al-Mohannadi, who is the Head of IR and Communications. So I would now like to turn the call over to Rashid. Rashid, please go ahead.

Thank you, Bobby. Good afternoon, and thank you all for joining us. Before we go into the business and performance updates of GIS, I would like to mention that this call is purely for the investors of GIS and no media representatives should be attending this call. Moreover, please note that this call is subject to GIS disclaimer statements as detailed on Slide #2 of the IR deck. Now we can move on to the call. On Sunday, 26th of April 2026, GIS published its results for the 3-month period ended 31st of March 2026. And today, in this call, we'll go over these results and provide you with an update on key financial and operational highlights. Today on this call, along with me, I have Mr. Abdulla Yaaqob Al-Hay, Manager for Privatized Company Affairs Department; and Sami Mathlouthi, Assistant Manager for Financial Operations; and Mr. Saoud Alabdulghani, Senior Financial Management Analyst. We have structured our call as follows. First, I'll provide you with a quick insight on GIS ownership structure, competitive advantages and overall governance structure. Secondly, Sami will brief you about the latest business update. Then Sami will take you into GIS key financial and performance matrices. And finally, Saoud will provide you with segmented performance and review. To start with, as detailed on the IR deck, the ownership structure of GIS comprises of QatarEnergy with 10% stake being the parent shareholder, whereby GRSIA with 21.9% stake is the largest shareholder. As detailed on the IR deck, QatarEnergy provides most of the head office function through a service level agreement. The operation of GIS subsidiaries are independently managed by their respective Board of Directors, along with senior management team. The BOD structure is detailed on the Slide #7 of the IR deck. In terms of the competitive advantages, as detailed on Slide #8, all of GIS group companies are strategically placed having a significant market share in their respective business sectors within Qatar. For example, drilling business is holding the majority of market share in the offshore drilling service in Qatar. Similarly, the aviation business of GIS is a sole provider of helicopter services in Qatar oil and gas service and being one of the largest operator in the MENA region. In terms of the insurance business, it's one of the leading medical insurance providers in Qatar. For catering, the transaction of AMWAJ with Shaqab and Atyab has established a local champion in the catering services. All of the above is supported by experienced senior leadership having expertise in their relevant business segment. In terms of the governance structure of GIS, you may refer to the IR deck, which covers various aspects of GIS code of corporate governance in detail. I will now hand over to Sami. Over to you, Sami.

Thank you, Rashid. Within the Drilling segment, GDI operational performance reflects varying dynamics between its offshore and onshore segments. Offshore activities has been temporarily scaled back with several rigs suspended at the direction of the clients. In contrast, onshore drilling operations have remained stable with GDI continuing to deliver services in alignment with the client requirements. The segment remains focused on optimizing utilization and maintaining readiness to support clients as and when market conditions evolve. In the Aviation segment, Gulf Helicopter continues to navigate a challenging operations landscape and a reduction in flying activities. Gulf Helicopter remains committed to focusing on cost optimization, asset readiness and operational stability to ensure the segment remains well positioned for when market conditions improve. In the Insurance segment, Al-Koot has maintained solid operational continuity. The resilience of the segment's operating model has ensured steady performance during the period, reinforcing Al-Koot's position as a consistent contributor to the group. Now we can move to the performance overview. GIS has reported results for the 3-month period, which ended 31st of March 2026, with a net profit of QAR 76 million, down by 66% compared to the same period of last year. We also reported earnings of QAR 0.041 per share compared to QAR 0.119 per share for the same period of last year. The group reported a 7% decline in revenue, which is attributable to lower contributions from the Drilling and Aviation segments. The Drilling segment experienced reduced revenue due to lower asset utilization as several rigs remained off contract during the period, affecting performance across both offshore and onshore operations with financial performance further influenced by several offshore rigs suspended. While Aviation segment also recorded a revenue decrease, driven mainly by lower flying hours from the domestic operations, coupled with reduced activity in the maintenance, repair and overhaul, particularly lower spare parts sales. These declines were partially offset by stronger results in the Insurance segment, where revenue increased largely within the medical line of business. Overall profitability declined, reflecting the combined impact of lower revenue across the Drilling and Aviation segments in addition to higher operational costs, driven mainly by increased net claims in the insurance segment, particularly within the medical line of business and higher direct costs from the Aviation segment. On a quarter-on-quarter basis, revenue for Q1 2026 was lower compared to the previous quarter by 4% primarily due to reduced contributions from the Drilling segment following GIS announcement on 4th of March 2026. Consequently, several offshore rigs were suspended. The Drilling segment revenue was further impacted by lift-boat undergoing planned maintenance throughout the quarter. In addition, the insurance segment recorded lower revenue due to expired policy that are planned for renewal in the subsequent quarter. In contrast, the Aviation segment reported higher revenue, supported by increased contribution from the MRO business, driven by a rise in engine repair activity. Overall, the group recorded a 28% decline in net profit compared with the previous quarter. This was mainly attributable to the overall reduction in revenue, coupled with lower investment income in the insurance resulting from unfavorable capital market conditions. The decline in net profit was further impacted by the absence of a one-off reversal of doubtful debt provision on aged receivables that was recognized in the previous quarter within the Aviation segment as well as a net monetary loss arising from the hyperinflationary accounting adjustment related to Redstar Türkiye. As of 31st of March 2026, the group maintained a strong asset base with QAR 11.4 billion in total assets and healthy liquidity position during the period. While total cash balances declined to QAR 0.9 billion, this movement reflects planned outflows relating to the 2024 dividend -- 2025 dividend distribution and insurance claim settlements. I will now hand over to Saoud to cover the financial review.

] Thank you, Sami. Let's proceed with the segmental review, beginning with the Drilling segment. The Drilling segment recorded a 25% decline in revenue for the 3-month period ended 31st March 2026, reflecting reduced activity level across both offshore and onshore operations. Offshore revenue was primarily impacted by the expiry of the contractual term for jack-up rig lease from an international shipyard, which completed its operation as planned in Q3 2025, resulting in the absence of related revenue during the current period. Onshore performance was similarly affected as several rigs remained off contract at the reporting date, leading to lower asset utilization and reduced revenue generation. Additionally, revenue from the lift-boat and barges segment declined, due to [indiscernible] lift-boat undergoing scheduled major maintenance throughout the quarter. As a result of the significant reduction in revenue, net loss of $0.2 million was recorded for the 3-month period ended 31st March 2026. On a quarter-on-quarter basis, the segment reported a net loss. This was primarily driven by lower revenue by 10% as a result of the ongoing conflict, which suspended several offshore rigs in addition to one lift-boat undergoing planned maintenance for the full quarter. Moving to the Aviation segment. The Aviation segment recorded a year-on-year 6% decline in revenue, primarily due to lower MRO activity driven by reduced spare part sales. Domestic operation also experienced a decline with overall flying hours decreasing as aviation activity was maintained at minimum level. The decline in both MRO and domestic revenue was partially offset by improved performance in the International segment, supported by higher revenue from [ Laby ] operations. The Aviation segment also reported a 52% decline in net profit compared to the previous year, primarily driven by lower overall revenue and higher operating costs. In addition, higher revaluation foreign currency exchange losses were recognized, along with recording of a net monetary loss arising from hyperinflation accounting adjustments related to Redstar Aviation Turkey compared to a gain in the prior year. Collectively, these factors resulted in a reduction in bottom line profitability for the period within the Aviation segment. On a quarter-to-quarter basis, segment revenue for Q1 2026 increased compared to the previous quarter by 4%, driven mainly by higher contribution from the MRO business, supported by increased engine repair activity. This improvement was partially offset by lower revenue from the domestic segment due to lower flight demand during the final month of the quarter. Profitability for Q1 2026 declined by 12%, primarily due to the absence of a one-off reversal of doubtful debt provisions on [indiscernible] receivable that was recognized in the previous quarter, together with a net monetary loss arising from hyperinflationary accounting adjustments related to Redstar Aviation Turkey. Now we can move to the insurance segment. The insurance segment delivered a 15% increase in revenue for the 3-month period ended 31st March 2026. This performance was driven primarily by continued growth in the medical line of business. Growth was supported by the recognition of earned premiums from major prior-year policies, renewal of key contracts at higher premium rates and the addition of new medical contracts. However, segmental net earnings recorded a 31% decrease compared to last year, mainly due to higher net gains reported within the Medical segment, which impacted overall bottom line profitability. On a quarter-on-quarter basis, the segment's revenue for Q1 2026 decreased by 5%, mainly due to the timing of policy renewals. Several policies expired during the period and are expected to be renewed next quarter with the related revenue to be recognized then. Q1 2026 profitability was 39% lower quarter-on-quarter, mainly impacted by reduced revenue and lower investment income on the back of unfavorable movement in the capital market. We can conclude our segment review with the catering. The catering segment witnessed an increase in share of revenue by 4% compared to the same period of last year, mainly due to higher revenue reported by the catering segment. The segment share of net profit witnessed a 14% decrease as compared to the previous year, mainly due to higher direct costs. Share of revenue marginally increased by 2% compared to the previous quarter, while share of profit decreased by 45%, mainly reflecting the impact of cost normalization following prior year [ reverses ]. With that, we conclude our call. We'd like to thank our investors for their continued trust and support, and we look forward to speaking with you again during the next earnings call.

Okay. Thank you. I want to thank GIS's management for taking the time to go with the presentation, and then we will pick this up again next quarter. Thanks, everyone.

Thank you.

Thank you.

Thank you, everyone, for joining. You may now all disconnect. Have a nice day ahead.