GIH H1 2021 Financials Results: Progressing Despite Tough Conditions 20 August 2021

Global Investment Holdings ("GIH"), a diversified conglomerate operating in 12 different countries across four continents, announced its consolidated interim results for the six months ended 30 June 2021 and other recent highlights.

Global Investment Holdings reported Consolidated Net Revenues (excluding IFRIC 12 Construction Revenue) of 625.9mn TL in the first half of 2021; while announced a Consolidated Operating EBITDA of 107.4mn TL.

Global Investment Holdings' Chairman & CEO, Mehmet Kutman, stated that "Covid-19 has, of course, continued to create challenges during the first half of 2021 with the global uncertainty causing many businesses and organisations to be cautious on their spending plans and with travel restrictions still in place in many parts of the world, resulting in further 'right-shifting' of certain expected revenues. Because of this our first half year financials are therefore down on H1 2020, which had record results for the first three months before the Covid-19 pandemic had any real impact. However, interim results for the first half of 2021 are ahead of the second half of 2020 demonstrating recovery is underway and we believe that, providing the expected easing of restrictions and the resultant recovery continues, 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 "I am thrilled with the progress we made in this active first half of 2021, successfully delivering on a number of key strategic initiatives in line with our long-term growth strategy. The Group's key focus areas for the coming period 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. This year we target to continue decreasing our net debt rapidly and have already made good progress towards this goal so far. The Group has been taking solid effective steps to stabilise its liquidity position and manage its long & short-term debt obligations through i) the completion of the sale of the Group's largest commercial port, Port Akdeniz, ii) the successful IPO of its natural gas subsidiary, Naturelgaz, on Borsa Istanbul, iii) equity injection through a rights issue in GIH, vi) completion of the refinancing of Eurobond, and the anticipated IPO of Consus Energy. These all aim to provide the Group with a more stable, deleveraged capital structure. All these efforts, coupled with the encouraging initial signs coming from the ports business, indicate a more positive outlook looking ahead."

Commenting on the results, The Chief Financial Officer of the Group, Ferdağ Ildır, stated that "The financial performance of the Group in the first half of 2021 reflects broader ongoing Covid-19 challenges. Despite this, our businesses have delivered a solid performance, supported by a highly skilled and talented workforce. Our H1 results reflect not only an improving global economic environment but evidence the operational improvements we have put in place and the acceleration of many of these initiatives last year. Whilst significant uncertainty remains, and the recovery is likely to take some time, we remain confident in the resilience and flexibility of the Group's businesses model, and its ability to execute on its growth strategy and build market share as demand recovers. In parallel, we will continue to evaluate internal and external opportunities that will deliver value for shareholders, in particular the significant potential to enhance future growth."

Global Investment Holdings reported 625.9mn TL revenues (excluding IFRIC 12 Construction Revenue) for the half of 2021, up by 5% yoy. Negative impact of Covid-19 on particularly ports and real estate divisions partially offset the pleasing revenue growth in all other divisions. H1 2020 revenues included contribution from Port Akdeniz, the sale process has been completed in January 2021, amounting 105.2mn TL. Excluding the contribution from Port Akdeniz for H1 2020, total consolidated net revenues could have registered a 28% increase yoy. Nevertheless, this indicates a strong period, considering Q1 2020 did not suffer from any Covid-19 impact. The sequential trend in H1 2021 compared to H2 2020 shows a continuing improvement in performance across the Group, as the underlying businesses activity strengthens.

In the first half of 2021, consolidated Operational Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) amounted 107.4mn TL, compared to an EBITDA of 147.6mn TL in the same period last year. The notable solid contribution from the power, mining and brokerage & asset management divisions was partially offset by the weak performance of the ports divisions in the period. Meanwhile, Port Akdeniz had a major contribution to H1 2020's financials with 74.6mn TL in EBITDA. Excluding the contribution from Port Akdeniz for H1 2020, consolidated operating EBITDA in H1 2021 could have increased nearly by half.

On a divisional basis,
The gas division has improved 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 88.8mn Sm3 sales volume in H1 2021, representing a notable increase of 29% compared to the same period last year. The higher volume was mainly due to the increase in City Gas 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 sales volume. On the financial front, revenues increased by 26% yoy, reaching 231.9mn TL, mainly reflecting the addition of LNG revenues as a result of SOCAR LNG merger. Operating EBITDA came out at 36.3mn TL in the period, up slightly by 2% yoy and translating into a 15.7% EBITDA margin. Despite the 31% increase in gross margin yoy, limited increase in EBITDA stemmed from Opex increase due to Socar merger as well as one-off IPO related expenses.

The business line which is affected the most from Covid-19 is the ports business. The ports division reported 68.6mn TL revenues (excluding IFRIC 12 impact of 176.3mn TL for H1 2021 and 144.6mn TL for H1 2020), down by 66% yoy, while consolidated adjusted EBITDA was a loss of 22.8mn TL (84.4mn TL positive EBITDA in H1 2020). The limited return to cruise activity drove the declines in passenger volumes, revenue and EBITDA. H1 2020 figures were heavily boosted by the first time contribution of our new ports in Nassau and Antigua, while Port Akdeniz, although the sale process has been completed in January 2021, has a major contribution to the H1 2020's financials with 105.2mn TL in revenues and 74.6mn TL in EBITDA. As we look to the future, many of our cruise ports have already started to welcome passengers in 2021, however, volumes remain small, yet this number has and will continue to grow, and the majority of our ports have started to receive calls. And we have good news from the Caribbean: the opening of the Caribbean cruise market has happened with homeport operations in Nassau in June and in Antigua in July (first time for Nassau and Antigua). While we expect to see an increase in cruise activity in Q3 2021, it is, as yet, unclear how the ramp up of cruise operations globally and on a regional level will shape up.

The power division, which includes co/tri-generation- along with biomass- and solar-based renewable power production, posted 165.9mn TL revenues in the half year, increasing remarkably by 37% yoy. With all plants fully under operation, the division's EBITDA has also improved substantially to 64.7mn TL in H1 2021, registering a robust 73% growth yoy. The eye-catching financial performance during the half year was mainly attributable to pleasing operational performance in power plants and upward trend in electricity prices.

The mining division realized 236,785 tons of product sales in the first half of 2021, up by 45% yoy, mainly due to strong feldspar demand from export markets. The mining division reported revenues of 72.5mn TL, more than doubling yoy. The operating EBITDA was 27.8mn TL, increasing almost 4-fold yoy and delivering a 38.3% operating EBITDA margin, showing significant improvement compared to the same period last year (20.3% in H1 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 disclosed revenues of 11.8mn TL and an operating EBITDA of 2.4mn TL in the first half of the year, compared to 12.8mn TL and 2.9mn TL, respectively in H1 2020. The weakness was driven mainly by the lower real estate sales and rental revenues due to the safety precautions against Covid-19.

In H1 2020, the financial services subsidiaries shone. The division has remarkably increased the number of transactions during Covid-19 crisis which was reflected positively on its financials. The brokerage & asset management division reported revenues of 73.8mn TL in H1 2021, indicating a robust 84% yoy increase, while operating EBITDA almost tripled, reaching 31.6mn 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 417.7mn TL in the first half of 2021, compared to a net loss of 237.4mn 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 532.6mn TL non-cash charges of which 173.2mn TL are depreciation and amortization, 227.1mn TL net foreign exchange losses and 132.3mn TL one-off expenses. Had the pandemic not occurred and fx rate remained the same, GIH could have reported a consolidated net profit at the bottom-line.

Depreciation and amortization charges, despite the depreciation of Turkish Lira against hard currencies, have decreased from 233.7mn TL in H1 2020 to 173.2mn TL in H1 2021, purely as a result of Port Akdeniz's sale depreciation effect. Also, the Group has incurred 227.1mn TL net non-cash foreign exchange losses, compared to 121.3mn TL in the first half of the last year. The Group's net interest expenses in the half year was 155.2mn TL, as opposed to 151.8mn TL a year ago. The bottom line incorporated 132.3mn TL one-off expenses, most of which are non-cash. Majority of the non-cash impairment provision relates to Venezia & Adria impairment, amounting 87.4mn TL.

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 million, 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.

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 the 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.

In the third core business line, Capital Markets Board approves GIH's application to exercise its option to buy additional 40% of Istanbul Asset Management.

At the holding level, The Board of Directors of Global Investment Holdings had resolved to increase the issued share capital of the Company by 324,111,590.07 TL, from 325,888,409.93 TL to 650,000,000 TL, to be paid in cash. In this context; 324,111,590.07 new shares were offered to the existing shareholders, for 15 days, between 4th - 18th August 2021 at the value of TL1.5 per share. Out of that amount, 322,843,560.77 shares (99.6% of the offer) was used by the existing shareholders as pre-emptive rights, while the remaining 1,268,029.30 shares will be offered to the public on the Stock Exchange at the price to be set on Borsa Istanbul, which will not be lower than the price for the exercise of pre-emptive rights of TL1.50 per share, for 2 business days starting from 23rd August 2021. The capital increase indicates gross proceeds of 486,167,385 TL, which will be predominantly used to pay off debt at the Holding level, significantly reducing net interest expenses in the following quarters.