Global Investment House "Global" announced today its results for the full year ended 31 December 2008.

Key points of the results:

Results comprise profits from fee-based businesses (asset management, investment banking and brokerage) impacted by unrealized losses on investments and impairment provisions from Principal Investments and Loans & Advances, resulting in an overall loss

•  Fee-based business generated operating profits amounting to KD50.4 million during 2008 representing an increase of KD20.8 million over 2007
• Unrealized losses and impairment charges relating to investments and intangible assets amounted to KD297.4 million for the year ended 31 December 2008
• Impairment charge for credit losses in loans and advances book and other assets amounted to KD22.1 million, compensated by an increase of KD7.0 million in interest and similar income over 2007 
• As a result, Global reported a profit of KD45.2 million from asset management, investment banking and brokerage lines of business and an overall net loss for the year of KD257.6 million (KD0.225 per share), down from a profit of KD91.4 million in 2007 (KD0.100 per share)

Global's principal investment book’s annual returns declined to a loss of 36% against a return of 19% in the previous year. The performance of Global’s principal investment book was adversely affected by the unprecedented decline in the capital and debt markets of the Gulf Co-operation Council (“GCC”) and the wider Middle East & North Africa (“MENA”) regions and repercussions for private investments.   Decline in general market equity indices during 2008 varied between 36% to 55% (Source: Bloomberg and Kuwait Stock Exchange data).

Despite the reported net loss in 2008 Global continues to have net assets/positive equity of KD303.5 million and a book value per share of KD0.247.

As a result of the loss incurred in 2008, the Global Board proposes not to pay a dividend for the year ended 31 December 2008. In reaching this decision the Board felt that it was necessary to focus on strengthening Global's  capital position, which is expected to enable the Company to emerge from its current challenges with a stronger platform to grow

Global's auditors have not been able to obtain sufficient reliable audit evidence to determine whether the group will be able to reach an agreement to restructure its debt obligations and continue as a going concern and consequently are not expected to express an opinion on the consolidated financial statements.

However, Global's auditors are expected to opine that Global has kept proper books of account and that Global's financial statements comply with all other legal and regulatory requirements and to report that, except in relation to agreement on the restructuring of the group's debt obligations, they have obtained all the information and explanations they required for the purposes of their audit.

Debt default and progress on restructuring process

• As previously announced, on 15th December 2008, Global defaulted on the repayment of a syndicated facility triggering cross-default provisions in the group’s other indebtedness. On 18th December 2008 Global appointed HSBC Bank as financial adviser to renegotiate the existing credit facilities' terms with the lending bank group. 

• Global presented a comprehensive restructuring plan to its lending bank group in February 2009 and has assisted in the completion of a valuation of the Company’s principal investments and real-estate portfolio, prepared by a financial adviser appointed by the lending bank group

• Global continues to explore a number of solutions to meet its financing requirements and has made progress in restructuring its indebtedness in discussions with the lending banks

• Global has continued to meet all its debt service payments as they fall due

• Although much work remains to complete the restructuring, Global remains confident that by working cooperatively with stakeholders, a sustainable, long term financing solution for the Company is likely to be achieved in the coming months

Cost cutting measures

• Global has materially reduced its operating costs by over 20%. This has been achieved by decreasing its workforce by 10%, scaling back salaries and cancelling all 2008 related bonus payments

Implementation of a new management structure

• As announced on 10 March 2009 Global has restructured its management framework to enhance corporate governance

• Global believes that these steps will help create a firm foundation for the Company to deliver value to all stakeholders throughout this period of market difficulty and beyond

Focus on Global’s fee-based business

• Global had previously relied on two main revenue streams; principal investments and fee-generating businesses, namely asset management, investment banking and brokerage

• The Company has decided to focus on and continue to develop its fee-generating businesses as these have proven to be the core strength behind the Global brand

• The assets of the principal investments business will be realized in a orderly fashion over the medium term with the proceeds primarily used to repay the debt obligations

• Fee and commission income increased by 69% from KD30.1 million to KD51.0 million, stemming from a KD2.3 million increase (a 14% increase over 2007) in management fees on assets under management (AUM) related fees and a KD18.3 million increase (a 274% increase over 2007) in investment banking fees

• Assets under Management (“AUM”) experienced a net inflow of new funds of KD160 million in 2008 partially mitigating the overall impact of a decline in AUM arising from a decline in Net Asset Value (“NAV”).  As a consequence, the AUM decline was marginal from KD2.3 billion in 2007 to KD2.2 billion, a decrease of 6%

Commenting on the results, Maha Al-Ghunaim, Chairperson and Managing Director of Global, said: “2008 was a year of unprecedented global market turbulence.  Global has not been immune to this and we unfortunately reported our first ever loss in 2008.  This has been caused, in a large part, by unrealized losses on our investments and as a result we are renewing our focus on fee generated income, which has always been profitable and in which we demonstrated continued growth in 2008.

We are aware of our need to honour our obligations to all of our stakeholders going forward and we have taken immediate steps to place Global in the best possible position to deliver value in these turbulent markets. I am pleased that we are making good progress on a number of these fronts.

Although we have not yet agreed terms for the restructuring of our debt obligations, I am convinced that we are up to the challenge and will emerge from this period of market dislocation as a stronger Company, able to deliver and serve our clients even more effectively and deliver value for our shareholders.”