Global Investment House - Initial Comments on 2009 Financials

More detailed analysis will require a copy of GIH's complete 2009 financials, but here are some initial  and very quick comments.  All amounts rounded to nearest KD 1 million.

LIABILITIES & EQUITY

We'll start here because GIH's central issue is now management of its capital structure, repayment of liabilities while maintaining sufficient capital to support debt market funding (based on the assumption that GIH is a going concern and intends to continue business after repaying its debt). 

1. Total Liabilities and Equity declined KD420 million.
2. Total Liabilities down KD303 million.
3. Total Equity down KD 117 million.

LIABILITIES

1. As noted above, a KD303 million decline.
2. GIH has changed its presentation from the original 2008 annual report and from that in its 3Q09 annual report.  Something that makes analysis a bit more difficult.  What was the change?  Previously, Wakala deposits were broken out.  KD143.5 million at 31 December 2008.  KD44.6 million at 3Q09.  I'm always a bit suspicious when presentation changes like these occur which are not caused by the implementation of new accounting standards.  What could be the reason?  Without the 2009 notes, it's not clear if all Wakala have been repaid.  But I'm guessing they have.  Looking at GIH's 3Q09 financials, we see that some KD23 million in Wakala were repaid during the first nine months of 2009 along with KD18 million in other short term borrowings for a total of KD41 million.  In the full year 2009 KD34 million of short term borrowings are shown as being repaid.  Hard to explain how GIH could unrepay roughly KD6 million (lower figure reflects impact of rounding to nearest million).  Perhaps there will be something in the notes.  What we do know looking at 31 December 2008 and 30 September 2009 is that Wakala were down some KD99 million.  Since Wakala no longer appear as a separate category, they may have been reduced to zero.  In which case KD143 million would have been repaid.  Of which it would appear only KD23 million in cash.  The rest through asset swaps.  You'll recall that GIH had borrowed some rather large unconscionable amounts from Global MENA Financial Assets.   Now if I remember things correctly, GIH said it had stopped all payments to creditors in December 2008.  So these creditors got out.  The rest of GIH's creditors are "stuck" in a multi-year restructuring.
3. In fact on a gross basis - excluding GIH's bonds - borrowed funds have decreased some KD191 million from FYE 2008 to FYE 2009.  Repayments of only KD34 million are shown in GIH's Consolidated Cashflow Statement so the rest were either forgiven (highly unlikely) or settled via asset exchanges. 
4. Also GIH's bonds were down some KD29 million.  This brings the decline to KD220 million.
5. For a company with a debt standstill, it sure seems a lot of debt was "retired" during 2009.
6. Finally "Other Liabilities" are down some KD83 million.  Looking at the 3Q09 financials, this appears to have been concentrated in Payable for Investment Properties which was down some KD63 million at 30 September 2009.  We'll have to wait for the full 2009 report to determine what were the sources of the other KD20 million.

 EQUITY 

1. Two movements in Equity which resulted in the overall KD117 million decline.  
2. A reduction in controlling interests share of Equity by approximately KD141 million.  This is the net loss of KD148.8 million offset by a variety of factors, primarily a KD11 million increase in fair value on available for sale assets not taken through the P&L.
3. An increase in non controlling interests equity position by KD24 million (from KD36.3 mm to KD59.9 million).  Unclear what is behind this.  Perhaps, GIH sold shares in some of its associates to other shareholders?  There are a couple of tantalizing cash inflows in the Investing Activities section of GIH's 2009 Consolidated Cashflow Statement.  But without details its hard to say.

ASSETS

1. Two major drops. 
2. Financial Assets Fair Valued Through the P&L of KD173 million.
3. KD103 million in Investments in Associates.
4. To be looked at in more depth when full financials are available.

INCOME

1. Without the notes, I don't see much point in spending a lot of time on revenues.  Net net they were about the same as in 2008.   A loss of more than KD40 million. The question is when GIH can turn this around.  If it is to remain a going concern, it needs to get revenues going again.  Cost cutting is only to get it so far.
2. GIH's net income improved primarily from lower impairment provisions - roughly KD125 million lower than 2008.
3. A few items caught my eye.  Personnel Expenses were KD12 million in 2009 versus KD7 million in 2008.  Is this separation payments?   It doesn't look like there's a footnote for this expense category, but we'll have to wait until the 2009 financials to see if there's a further explanation.  Perhaps even curiouser is the treatment of these expenses in 3Q09 financials  when PE for the first nine months of 2009 and 2008 are shown as KD 7 million and KD 15 million.
4. Other operating expenses were KD20 million versus KD 14 million in 2008.  Cost of the restructuring?  Also a similar anomaly in 3Q09 financials where the respective numbers for the first nine months of 2009 and 2008 are shown as KD14 million and KD8 million.
5. Also interesting is the share of the net loss attributable to non controlling shareholders.  It's 0.38% for 2009 and 1.05% for 2008.  Non controlling interests of course are not necessarily in all of GIH's in the same percentage.  From 3Q09 financials, it seems there was a turnaround in 3Q.