TIDMCGEO
RNS Number : 2753J
Georgia Capital PLC
15 August 2023
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS) [1]
GEL '000, unless otherwise Jun-23 Mar-23 Change Dec-22 Change
noted (unaudited)
Georgia Capital NAV overview
NAV per share, GEL 73.28 67.72 8.2% 65.56 11.8%
NAV per share, GBP 22.12 21.41 3.3% 20.12 9.9%
Net Asset Value (NAV) 3,034,597 2,880,450 5.4% 2,817,391 7.7%
Liquid assets and loans issued 418,586 379,877 10.2% 438,674 -4.6%
-2.3 -3.7
NCC ratio [2] 17.4% 19.7% ppts 21.1% ppts
Georgia Capital Performance 2Q23 2Q22 Change 1H23 1H22 Change
Total portfolio value creation 205,567 (14,446) NMF 282,461 (465,266) NMF
of which, listed and observable
businesses 149,951 18,646 NMF 170,791 (189,061) NMF
of which, private businesses 55,616 (33,092) NMF 111,670 (276,205) NMF
Investments [3] 3,423 142,584 -97.6% 20,423 144,156 -85.8%
Buybacks [4] 34,455 27,488 25.3% 53,720 53,540 0.3%
Dividend income 121,661 32,226 NMF 148,074 34,421 NMF
of which, regular dividend
income 93,463 32,226 NMF 9 8,613 34,421 NMF
of which, one-off dividend 49,
income [5] 28,198 - NMF 4 61 - NMF
Net income / (loss) 178,288 (16,432) NMF 258,923 (501,678) NMF
Private portfolio companies'
performance(1, [6]) 2Q23 2Q22 Change 1H23 1H22 Change
Large portfolio companies
Revenue 332,934 307,132 8.4% 651,113 622,165 4.7%
EBITDA 41,962 36,371 15.4% 82,255 76,363 7.7%
Net operating cash flow 10,811 34,611 -68.8% 29,477 63,276 -53.4%
Investment stage portfolio
companies
Revenue 46,183 41,980 10.0% 84,725 85,121 -0.5%
EBITDA 15,595 17,307 -9.9% 25,957 30,050 -13.6%
Net operating cash flow 15,292 18,322 -16.5% 18,919 24,599 -23.1%
Total portfolio [7]
Revenue 528,629 470,720 12.3% 1,006,522 905,671 11.1%
EBITDA 68,454 63,771 7.3% 122,999 117,808 4.4%
Net operating cash flow 16,082 51,915 -69.0% 49,331 83,485 -40.9%
KEY POINTS
Ø Record 2Q23 NAV per share of GEL 73.28, up 8.2% q-o-q, driven
by continued growth in BoG's value and the robust operating
performance of the private portfolio companies
Ø Net Capital Commitment (NCC) ratio down 2.3 ppts to 17.4% in
2Q23, resulting from the continued growth in portfolio value, and a
significant increase in cash and liquid funds balances (up 16.5% in
2Q23)
Ø GEL 121.7 million dividend income from the portfolio companies
in 2Q23
Ø Issuance of US$ 150 million bonds on the Georgian market,
enhancing the financial flexibility of GCAP and securing the
refinancing of the existing US$ 300 million Eurobonds, while
continuing the strategically important deleveraging programme
Ø From the US$ 300 million outstanding GCAP Eurobonds, US$ 283.4
million has been repurchased and cancelled to date, with the
remaining US$ 16.6 million to be bought back and cancelled during
3Q23
Ø Completed the buyout of the minority shareholders in Retail
(Pharmacy) to increase our stake to 97.6%
Conference call: An investor/analyst conference call will be
held on 15 August 2023, at 14:00 UK / 15:00 CET / 9:00 US Eastern
Time. Please register at the Registration Link to attend the event.
Further details are available on the Group's webpage .
CHAIRMAN AND CEO'S STATEMENT
I am pleased to present another remarkably strong performance
for the second quarter of 2023, which demonstrates the significant
strategic, financial, and operational progress of Georgia
Capital.
Record-high NAV per share of GEL 73.28 in 2Q23. In 2Q23 NAV per
share (GEL) increased robustly by 8.2%, mainly resulting from
positive value creation across our portfolio companies. Value
creation across our listed and observable portfolio amounted to GEL
150.0 million (5.2 ppts positive impact on the NAV per share). This
reflects the robust performance of BoG's share price (up 6.4% in
2Q23) and strong value creation in the water utility business, the
latter reflecting the application of the put option valuation to
GCAP's 20% holding in the business. Value creation across our
private portfolio businesses amounted to GEL 55.6 million (1.9 ppts
impact), reflecting the continued strong performance of our
non-healthcare businesses and a rebound in the earnings growth of
our healthcare businesses, as they continue a gradual return to a
pre-pandemic operating environment. In 2Q23, we launched a US$ 10
million share buyback and cancellation programme under which we
bought back 1,000,000 shares (US$ 10 million). This together with
the share buybacks for the management trust had a 2.1 ppts positive
impact on the NAV per share in 2Q23. The NAV per share growth was
partially offset by management platform related costs and net
interest expense (-0.6 ppts impact). In GBP terms, the NAV per
share growth in 2Q23 was 3.3%, reflecting GEL's slight depreciation
against GBP by 4.6% in 2Q23.
We accomplished important milestones on our key strategic
priority of deleveraging GCAP. In 2023, we devoted significant
resources to address the upcoming maturity of JSC Georgia Capital's
US$ 300 million Eurobonds. We took a proactive stance and explored
various alternatives for refinancing, aiming to secure the best
possible outcome for GCAP and its stakeholders. As a result of
these efforts, we identified an opportunity to effect a landmark
transaction by issuing sustainability-linked bonds in the local
capital markets in Georgia. In August, we successfully completed
that transaction by issuing US$ 150 million sustainability-linked
bonds (the "Notes"). The issuance of the Notes represents the
largest-ever corporate bond offering in the country, and the first
of its magnitude and kind in our region. The new Notes are
US$-denominated with 5-year bullet maturity (callable after two
years), carry an 8.50% fixed coupon and were issued at par. The
Notes are rated BB- by S&P, a one-notch upgrade compared to the
existing Eurobonds. A key feature of the sustainability-linked bond
is GCAP's commitment to reduce its greenhouse gas emissions by 20%
by 2027 compared to a 2022 baseline. Through this target, GCAP will
support climate change mitigation, natural resources conservation
and pollution prevention, thereby contributing to the transition
towards a more sustainable and lower carbon economy in Georgia.
The issuance attracted an unprecedented level of interest in
Georgia, with total demand reaching US$ 200 million and spreading
across a diverse range of 275+ retail, corporate, and institutional
investors. I was particularly impressed by the remarkable level of
retail investor participation, who have demonstrated strong
confidence in GCAP by subscribing to the highest retail volume of
corporate bonds in the history of Georgia's capital markets. This
retail investor universe is an exciting discovery for us and
represents a new source of funding for Georgia Capital and its
portfolio companies. The issuance of the Notes was supported by
Georgia Capital's longstanding partner international financial
institutions, who acquired US$ 67 million of the total issue, while
the remaining US$ 83 million was allocated to local investors.
Despite the challenging global credit markets, the transaction was
concluded on attractive terms for GCAP, which yet again
demonstrates our superior access to capital, whether on the
international or Georgian capital markets. The proceeds from the
Notes, together with existing liquid funds, are to be used to fully
redeem the existing US$ 300 million Eurobonds.
In conjunction with the new issuance, we have successfully
executed a tender offer. This resulted in the repurchase of US$
176.5 million existing Eurobonds, which together with the US$ 106.9
million Eurobonds already held in GCAP treasury, have been fully
cancelled. As for the remaining US$ 16.6 million Eurobonds, we have
exercised the right of the optional redemption at a "make whole"
price, with the settlement expected in early September. Following
the planned cancellation and repayment of the outstanding
Eurobonds, GCAP's gross debt balance will decrease to US$ 150
million.
Buyout of minority shareholders in retail (pharmacy) business.
In 2Q23 our retail (pharmacy) business signed an agreement with its
minority shareholders to accelerate the acquisition of a 20.6%
equity interest in the business. As a result of this transaction,
GCAP's ownership stake in Retail (Pharmacy) increased to 97.6% in
2Q23 from 77.0% in 1Q23. The transaction is in line with our
360-degree capital management framework and reconfirms our
confidence in the value creation potential of the retail (pharmacy)
business, which has consistently delivered outstanding results and
captured significant growth opportunities.
NCC ratio decreased by 2.3 ppts to 17.4% in 2Q23. The decrease
in the NCC ratio in 2Q23 was mainly driven by a) a 2.8% growth in
total portfolio value, and b) a 16.5% increase in cash and liquid
funds balances due to strong dividend inflows during the quarter.
Dividend income from BoG was substantial, totalling GEL 93.1
million, of which GEL 40.3 million is attributable to our
participation in BoG's on-market share buybacks during 2Q23, while
GEL 52.8 million represents the regular annual dividend from BoG,
which was received in July 2023. Dividend inflows from the private
portfolio companies in 2Q23 amounted to GEL 28.5 million (GEL 8.4
million dividend was received from the P&C Insurance business
and a GEL 20.1 million one-off dividend was collected from Retail
(Pharmacy), following the minority buyout transaction).
Macroeconomic update. Following two consecutive years of
double-digit growth, real GDP expanded by 7.4% in 1H23. Growth was
supported by strong external inflows with trade, remittances and
tourism revenues showing strong year-over-year performances. On the
domestic side, credit expansion, continued fiscal outlays and
strong business sentiment were key contributors to the economic
activity. Despite some stabilisation in 2Q23, the Georgian Lari
(GEL) has maintained its recent upward trend and (as of 14 August
2023) has appreciated by 3.1% against the US$ compared to the
beginning of the year. This appreciation was supported by strong
external inflows, ample FX liquidity, a strict monetary policy
stance, increased lending in foreign currency and the overall
positive economic growth. The annual inflation rate eased sharply
in 2023, with the June headline number standing at 0.6%, below the
3% target. Considering the downward trend in inflation, the
National Bank of Georgia (NBG) has reduced the policy rate by 75
bps to 10.25% since May 2023. The current account deficit remained
low at 3.2% of GDP in 1Q23, following a historic low level of 4.0%
in 2022. Fiscal and monetary authorities used favourable macro
conditions appropriately to rebuild Georgia's external buffers,
with government debt decreasing below pre-pandemic levels and
reserves reaching historic highs.
Outlook. Our robust balance sheet and capital allocation
management, coupled with the overall impressive performance of our
portfolio companies about which you can read more in the pages that
follow, led to outstanding results in 2Q23. The successful issuance
of our local sustainability-linked bonds has further bolstered our
financial flexibility, enabling us to continue our substantial
de-leveraging progress towards our targeted NCC ratio of 15%.
Moreover, this achievement has contributed significantly to the
development of the local capital market and supported the
transition towards a more sustainable economy in Georgia. Looking
ahead, I believe that Georgia Capital is extremely well-positioned
for consistent NAV per share growth in the medium to long term,
while also continuing to make significant progress on our key
strategic priorities.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset
value at 3 0 - Jun -23 and its income for the second quarter and
first half period then ended on an IFRS basis (see "Basis of
Presentation" on page 27 below).
Net Asset Value (NAV) Statement
NAV statement summarises the Group's IFRS equity value (which we
refer to as Net Asset Value or NAV in the NAV Statement below) at
the opening and closing dates for the second quarter (31- Mar -23
and 3 0 - Jun -23). The NAV Statement below breaks down NAV into
its components and provides a roll forward of the related changes
between the reporting periods. For the NAV Statement for the first
half of 2023 see page 27.
NAV STATEMENT 2Q 23
GEL '000, Mar-23 1. 2a. 2b. 2c. 3. 4. Jun Change
unless Value Investment Buyback Dividend Operating Liquidity/ -23 %
otherwise noted creation and expenses FX/Other
(Unaudited) ([8]) Divestments
Listed and
Observable
Portfolio
Companies
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Bank of Georgia
(BoG) 830,077 145,951 - - (93,182) - - 882,846 6.4%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Water Utility 155,000 4,000 - - - - - 159,000 2.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Listed
and
Observable
Portfolio
Value 985,077 149,951 - - (93,182) - - 1,041,846 5.8%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio
value change
% 15.2% 0.0% 0.0% -9.5% 0.0% 0.0% 5.8%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
Companies
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Large Companies 1,467,089 56,957 - - (28,479) - 695 1,496,262 2.0%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Retail
(Pharmacy) 750,456 (7,163) - - (20,061) - 273 723,505 -3.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Hospitals 427,105 (1,318) - - - - 273 426,060 -0.2%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Insurance (P&C
and
Medical) 289,528 65,438 - - (8,418) - 149 346,697 19.7%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
P&C
Insurance 232,276 52,953 - - (8,418) - 149 276,960 19.2%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Medical
Insurance 57,252 12,485 - - - - - 69,737 21.8%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Investment
Stage
Companies 527,668 3,530 3,423 - - - 1,741 536,362 1.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Renewable
Energy 243,016 686 2,529 - - - 1,451 247,682 1.9%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Education 175,148 7,876 894 - - - 229 184,147 5.1%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Clinics and
Diagnostics 109,504 (5,032) - - - - 61 104,533 -4.5%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Other Companies 287,628 (4,871) - - - - 3,337 286,094 -0.5%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Private
Portfolio
Value 2,282,385 55,616 3,423 - (28,479) - 5,773 2,318,718 1.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
value change % 2.4% 0.1% 0.0% -1.2% 0.0% 0.3% 1.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,267,462 205,567 3,423 - (121,661) - 5,773 3,360,564 2.8%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
value change % 6.3% 0.1% 0.0% -3.7% 0.0% 0.2% 2.8%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Debt (2) (386,228) - (3,423) (34,455) 121,661 (5,667) (16,752) (324,864) -15.9%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
Cash and
liquid funds 344,329 - (3,423) (34,455) 68,824 (5,667) 31,517 401,125 16.5%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
Loans
issued 35,548 - - - - - (18,087) 17,461 -50.9%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
Accrued
dividend
income - - - - 52,837 - - 52,837 0.0%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
Gross
Debt (766,105) - - - - - (30,182) (796,287) 3.9%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net other
assets/
(liabilities)
(3) (784) - - - - (3,572) 3,253 (1,103) 40.7%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
share-based
comp. - - - - - (3,572) 3,572 - 0.0%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,880,450 205,567 - (34,455) - (9,239) (7,726) 3,034,597 5.4%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV change % 7.1% 0.0% -1.2% 0.0% -0.3% -0.3% 5.4%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Shares
outstanding(8) 42,533,015 - - (1,372,127) - - 250,292 41,411,180 -2.6%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 67.72 4.84 0.00 1.42 0.00 (0.21) (0.49) 73.28 8.2%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 7.1% 0.0% 2.1% 0.0% -0.3% -0.7% 8.2%
---------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share (GEL) was up by 8.2% q-o-q in 2Q23, reflecting a)
GEL 205.6 million value creation across our portfolio companies
with a positive 7.1 ppts impact and b) share buybacks (+2.1 ppts
impact). The NAV per share growth was slightly offset by a)
management platform-related costs and net interest expense (-0.6
ppts impact in total) and b) GEL's depreciation against US$,
resulting in a foreign currency loss of GEL 9.4 million on GCAP net
debt (-0.3 ppts impact).
Portfolio overview
Total portfolio value increased by GEL 93.1 million (2.8%) to
GEL 3.4 billion in 2Q23:
-- The value of the listed and observable portfolio increased by
GEL 56.8 million (up 5.8%), resulting from GEL 150.0 million value
creation, partially offset by GEL 93.2 million dividend income from
BoG.
-- The value of the private portfolio increased by GEL 36.3
million (up 1.6%), mainly reflecting the net impact of a) GEL 55.6
million value creation, b) investments of GEL 3.4 million and c) a
decrease of GEL 28.5 million due to dividends paid to GCAP.
Consequently, as of 30-Jun-23, the listed and observable
portfolio value totalled GEL 1.0 billion (31.0% of the total
portfolio value), and the private portfolio value amounted to GEL
2.3 billion (69.0% of the total).
1) Value creation
Total portfolio value creation amounted to GEL 205.6 million in
2Q23.
-- A GEL 150.0 million value creation across the listed and
observable portfolio strongly supported the NAV per share growth in
2Q23. This reflects:
o A GEL 146.0 million value creation from BoG, resulting from a
6.4% increase in BoG's share price, partially subdued by GEL's
depreciation against GBP by 4.6% in 2Q23.
o GEL 4.0 million value creation in Water Utility, reflecting
the application of the put option valuation to GCAP's 20% holding
in the business (where GCAP has a clear exit path through a put and
call structure at pre-agreed EBITDA multiples).
-- The value creation in the private portfolio amounted to GEL
55.6 million in 2Q23, reflecting the net impact of:
o GEL 135.6 million operating performance-related increase in
the value of our private assets, resulting from the continued
strong performance of our non-healthcare businesses and the rebound
in earnings growth momentum of our healthcare businesses, as they
continue the gradual organic return to a pre-pandemic operating
environment.
o GEL 80.0 million negative net impact from changes in implied
valuation multiples ([9]) and foreign currency exchange rates.
The table below summarises value creation drivers in our
businesses in 2 Q23:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([10]) / and FX ([12])
buy-outs
/ exits
([11])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted
(Unaudited) (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable portfolio 149,951
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG 145,951
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility 4,000
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private portfolio 135,629 - (80,013) 55,616
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies 79,875 - (22,918) 56,957
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) (865) - (6,298) (7,163)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (8,116) - 6,798 (1,318)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) 88,856 - (23,418) 65,438
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 61,759 - (8,806) 52,953
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance 27,097 - (14,612) 12,485
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies 16,405 - (12,875) 3,530
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy 960 - (274) 686
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education 10,097 - (2,221) 7,876
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics 5,348 - (10,380) (5,032)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other 39,349 - (44,220) (4,871)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio 135,629 - (80,013) 205,567
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Valuation overview [13]
In 2Q23, valuation assessments of our large and investment stage
portfolio companies were performed by a third-party independent
valuation firm, Kroll (formerly known as Duff & Phelps), in
line with International Private Equity Valuation ("IPEV")
guidelines. The independent valuation assessments, which serve
as an input for Georgia Capital's estimate of fair value, were
performed by applying a combination of an income approach (DCF) and
a market approach (listed peer multiples and, in some
cases, precedent transactions). The independent valuations of
large and investment stage businesses are performed on a
semi-annual basis. In line with our strategy, from time to time we
may receive offers from interested buyers for our private portfolio
companies, which would be considered in the overall valuation
assessment, where appropriate.
The enterprise value and equity value development of our
businesses in 2 Q23 is summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Jun-23 31-Mar-23 Change 30-Jun-23 31-Mar-23 Change % share
otherwise noted % % in total
(Unaudited) portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 1,041,846 985,077 5.8% 31.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 882,846 830,077 6.4% 26.3%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 159,000 155,000 2.6% 4.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 3,394,482 3,286,231 3.3% 2,318,718 2,282,385 1.6% 69.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,990,517 1,909,833 4.2% 1,496,262 1,467,089 2.0% 44.5%
Retail (pharmacy) 980,682 974,706 0.6% 723,505 750,456 -3.6% 21.5%
Hospitals 680,804 662,809 2.7% 426,060 427,105 -0.2% 12.7%
Insurance (P&C and
Medical) 329,031 272,318 20.8% 346,697 289,528 19.7% 10.3%
Of which, P&C Insurance 276,960 232,276 19.2% 276,960 232,276 19.2% 8.2%
Of which, Medical
Insurance 52,071 40,042 30.0% 69,737 57,252 21.8% 2.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 848,849 835,996 1.5% 536,362 527,668 1.6% 16.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 441,335 434,150 1.7% 247,682 243,016 1.9% 7.4%
Education [14] 224,514 221,062 1.6% 184,147 175,148 5.1% 5.5%
Clinics and Diagnostics 183,000 180,784 1.2% 104,533 109,504 -4.5% 3.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 555,116 540,402 2.7% 286,094 287,628 -0.5% 8.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 3,360,564 3,267,462 2.8% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private large portfolio companies (44.5% of total portfolio
value)
Retail (Pharmacy) (21.5% of total portfolio value) - the
Enterprise Value (EV) of Retail (Pharmacy) was up by 0.6% to GEL
980.7 million in 2Q23, resulting from the strong performance of the
business, supported by the expansion of the retail chain and
resilience of Georgian economy. 2Q23 revenues and EBITDA were up by
5.3% and 11.7% y-o-y, respectively, notwithstanding a) the decrease
in product prices due to GEL's appreciation against foreign
currencies (the FX effect is directly transmitted into the pricing
as c.70% of the inventory purchases are denominated in foreign
currencies) and b) the negative impact of the External Reference
Pricing model, which introduces a maximum retail price on targeted
prescription medicines that are financed by the Government of
Georgia. See page 14 for details. Consequently, LTM EBITDA (incl.
IFRS 16) was up by 1.7% to GEL 106.9 million in 2Q23. Net debt
increased by 84.2% to GEL 249.2 million in 2Q23, reflecting a
one-off GEL 20.1 million dividend distribution to GCAP. The
increase in net debt also reflects the buyout of the minority
shareholders, which was executed at previously disclosed/agreed
valuation multiples. As a result, the fair value of GCAP's 97.6%
holding decreased by 3. 6 % to GEL 72 3 . 5 million in 2Q23. The
implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) decreased
to 9.2x as at 30-Jun-23 (down from 9.3x as of 31-Mar-23).
Hospitals (12.7% of total portfolio value) - Hospitals' EV
increased by 2.7% to GEL 680.8 million in 2Q23, reflecting the
rebound in top-line growth as the business is completing its
gradual organic return to pre-pandemic levels of activity. In 2Q23,
revenue and EBITDA (excl. IFRS 16) were up by 8.3% and 9.2% y-o-y,
respectively. Consequently, LTM EBITDA (incl. IFRS 16) increased by
2.0% q-o-q to GEL 52.9 million in 2Q23. Net debt was up by 9.1%
q-o-q to GEL 222.2 million, mainly reflecting the delay in the
collection of receivables from the State in 2Q23 due to one-off
processing delays associated with the introduction of Diagnosis
Related Group ("DRG") financing system . See page 16 for details.
As a result, the equity value of Hospitals decreased by 0.2% q-o-q
to GEL 426.1 million in 2Q23, translating into an implied LTM
EV/EBITDA multiple (incl. IFRS 16) of 12.9x at 30-Jun-23 (12.8x at
31-Mar-23).
Insurance (P&C and Medical) (10.3% of total portfolio value)
- The insurance business combines: a) P&C Insurance valued at
GEL 277.0 million and b) Medical Insurance valued at GEL 69.7
million. In addition to the robust operating performance of the
businesses as outlined below, the 2Q23 valuation assessments are
positively impacted by Georgia's adoption of the Estonian Taxation
Model, which will be implemented starting from January 2024. The
pre-tax profit of the insurance businesses is currently subject to
a 15% corporate income tax. With the introduction of the new regime
in January 2024, a 15% corporate income tax will be applied only to
earnings distributed to individuals or non-resident legal entities.
As GCAP (a domestic legal entity) owns 100% of both insurance
businesses, they will no longer be subject to paying corporate
income tax as of 2024, freeing up future cash flows for both
business development and increased dividend payments to GCAP.
P&C Insurance - Insurance revenue was up by 19.8% y-o-y to
GEL 28.5 million in 2Q23, mainly reflecting the growth in the
Motor, credit life, agricultural and border MTPL insurance lines.
The combined ratio increased by 4.5 ppts y-o-y in 2Q23, mainly
attributable to a) a well-managed expense ratio, down 0.5 ppts
y-o-y, b) a 1.6 ppts y-o-y increase in loss ratio due the increased
Agro insurance claims during the quarter and c) a 3.4 ppts y-o-y
increase in FX ratio, reflecting the impact of FX movements on the
business operations. Consequently, 2Q23 net income was up 13.2%
y-o-y to GEL 6.0 million. See page 17 for details. These strong
2Q23 results coupled with the forthcoming implementation of the
Estonian Taxation Model led to a 19.2% increase in the equity value
of the P&C insurance business in 2Q23 (up q-o-q to GEL 277.0
million), translating into an implied LTM P/E valuation multiple of
10.1x at 30-Jun-23, with the earnings calculated on a pre-tax basis
due to the business valuation incorporating the impact of
forthcoming implementation of the Estonian Taxation Model.
Medical Insurance - Insurance revenue increased by 26.3% y-o-y
to GEL 23.6 million in 2Q23, reflecting the increase in the number
of insured clients, mainly in the corporate client segment. The
combined ratio was at 96.2% in 2Q23 (down 6.6 ppts y-o-y),
resulting from a) a well-managed loss ratio, down 3.3 ppts y-o-y,
and b) a 3.3 ppts improvement in the expense ratio, the latter
reflecting the strong top-line growth of the business, while
operating expenses remained flat. Consequently, the net income of
the medical insurance business was up by 2.8x y-o-y to GEL 1.4
million in 2Q23. See page 17 for details. As a result of the
developments described above, the equity value of the business was
assessed at GEL 69.7 million at 30-Jun-23 (up 21.8% q-o-q),
translating into the implied LTM P/E valuation multiple of 10.4x in
2Q23, with the earnings calculated on a pre-tax basis due to the
business valuation incorporating the impact of forthcoming
implementation of the Estonian Taxation Model.
Private investment stage portfolio companies (16.0% of total
portfolio value)
Renewable Energy (7.4% of total portfolio value) - EV of the
business decreased by 0.6% to US$ 168.6 million in 2Q23 (up 1.7% to
GEL 441.3 million in GEL terms, reflecting the local currency
depreciation against US$ during the quarter). In US$ terms, 2Q23
revenue and EBITDA were down by 3.6% and 14.2% y-o-y, respectively,
reflecting the net impact of a) a 13.2% y-o-y decrease in
electricity generation in 2Q23, as one of the power-generating
units of Hydrolea HPPs was temporarily taken offline due to planned
rehabilitation works (the works were completed in June 2023 and the
operations resumed in their normal course), and b) an 11.0% y-o-y
increase in the average electricity selling price in 2Q23,
reflecting the electricity exports to the Republic of Türkiye.
Revenue and EBITDA in GEL terms were down by 16.5% and 25.5% y-o-y
in 2Q23, respectively. See page 20 for details. The pipeline
renewable energy projects continued to be measured at an equity
investment cost (GEL 55.4 million in aggregate as at 30-Jun-23).
Net debt remained largely flat, down by 0.9% to US$ 74.0 million in
2Q23 (in GEL terms, up by 1.3% to GEL 193.7 million). As a result,
the equity value of Renewable Energy was assessed at GEL 247.7
million in 2Q23 (up by 1.9% q-o-q), (down 0.3% q-o-q to US$ 94.6 in
US$ terms). The blended EV/EBITDA implied valuation multiple of the
operational assets stood at 12.4x in 2Q23, down from 12.6x in
1Q23.
Education (5.5% of total portfolio value) - EV of Education was
up by 1.6% to GEL 224.5 million in 2Q23, reflecting the strong
operating performance of the business. Revenue of the business
increased by 27.5% y-o-y in 2Q23, reflecting strong intakes and
ramp-up of utilization in line with both the organic growth and
expansion of the business. EBITDA was up by 1.5% y-o-y in 2Q23,
further reflecting the negative impact of the shift in academic
days in midscale school and the increased operating expenses (up by
44.4% y-o-y) in line with the expansion of the business and
inflation. In 2Q23, GCAP's investments in the business amounted to
GEL 0.9 million and were mainly deployed for the development of a
new campus in the mid-scale segment. See page 21 for details.
Consequently, LTM EBITDA was up by 0.8% to GEL 13.8 million in
2Q23. Net debt was down by 25.3% q-o-q to GEL 13.4 million in 2Q23,
reflecting the enhanced cash flow generation of the business. As a
result, GCAP's stake in the education business was valued at GEL 18
4 .2 million in 2Q23 (up 5 .1% q-o-q). This translated into the
implied valuation multiple of 16. 3 x in 2Q23. The forward-looking
implied valuation multiple is estimated at 12.2x for the 2023-2024
academic year.
Clinics and Diagnostics (3.1% of total portfolio value) - The EV
of the business increased by 1.2% to GEL 183.0 million in 2Q23,
reflecting the rebound in earnings growth momentum, as the business
is completing the gradual organic return to pre-pandemic levels of
activity. The combined 2Q23 revenue of the clinics and diagnostics
business was up by 18.0% y-o-y leading to a 38.1% y-o-y increase in
2Q23 EBITDA (excl. IFRS 16). See page 22 for details. LTM EBITDA
(incl. IFRS 16) of the business was up by 13.2% to GEL 9.7 million
in 2Q23. Net debt was up by 10.6% q-o-q to GEL 74.7 million, mainly
reflecting the investments made for the expansion of the business.
As a result, the equity value of the business was assessed at GEL
10 4.5 million, down 4.5 % q-o-q in 2 Q23, translating into an
implied LTM EV/EBITDA multiple (incl. IFRS 16) of 18.8 x at 3 0
-Jun-23, down from 21.0x at 31-Mar-23. The forward-looking implied
valuation multiple is estimated at 10.5x.
Other businesses (8.5% of total portfolio value) - The "other"
private portfolio (Auto Service, Beverages, Housing Development and
Hospitality businesses) is valued based on LTM EV/EBITDA except for
the housing development (DCF), wine business (DCF) and hospitality
businesses (NAV). See performance highlights of other businesses on
page 24. The portfolio value of other businesses remained largely
flat, down by 0.5% to GEL 286.1 in 2Q23.
Listed and observable portfolio companies (31.0% of total
portfolio value)
BOG ( 26.3% of total portfolio value) - In 1Q23, BoG delivered
an annualised ROAE of 27.9% and a 4.3% loan book growth y-o-y (on a
constant currency basis, the loan portfolio increased by 18.3%
y-o-y). In 2Q23, BoG's share price continued its positive
trajectory and was up by 6.4% q-o-q to GBP 29.25 at 30-Jun-23. This
reflects the strong growth in BoG's earnings, supported by the
accretive impact of the Bank's share buybacks. In 2Q23, GCAP
received GEL 40.3 million buyback dividends from participation in
the Bank's buyback programme, corresponding to c.435,000 shares
sold. In 2Q23, the Bank also declared a final dividend for 2022 of
GEL 5.80 per ordinary share. Consequently, the accrued dividend
income for GCAP amounted to GEL 52.8 million as of 30-Jun-23. The
final dividends were received on 14-Jul-23. As a result of the
developments described above, the market value of GCAP's 19.8%
equity stake in BoG increased by 6.4% to GEL 882.8 million. The LTM
P/E valuation multiple was at 3.3x at 31-Mar-22 (up from 2.8x at
31-Dec-22). BoG's public announcement of their 2Q23 and 1H23
results when published will be available on BoG's website .
Water Utility ( 4.7% of total portfolio value) - In 2Q23, the
fair value of GCAP's 20% holding in the water utility business
(where GCAP has a clear exit path through a put and call structure
at pre-agreed EBITDA multiples) increased by GEL 4.0 million to GEL
159.0 million. This reflects the application of the put option
valuation to GCAP's holding in the business.
2) Investments [15]
In 2Q23, GCAP invested GEL 3.4 million in private portfolio
companies.
-- GEL 2.5 million was invested in Renewable Energy for the
development of the pipeline projects.
-- GEL 0.9 million was allocated to the education business for
the development of a new campus in the mid-scale segment.
3) Share buybacks
During 2Q23, 1,372,127 shares were bought back for a total
consideration of GEL 34.5 million.
-- 372,127 shares were repurchased for the management trust for
a total consideration of GEL 9.1 million.
-- 1,000,000 shares with a total value of US$ 10.0 million (GEL
25.4 million) were bought back and cancelled under GCAP's US$ 10
million share buyback and cancellation programme announced in April
2023.
4) Dividends(15)
In 2Q23, Georgia Capital recorded GEL 121.7 million dividend
income from portfolio companies, of which:
-- GEL 52.8 million representing the final dividends from BoG, collected on 14-Jul-23;
-- GEL 40.3 million buyback dividend was received from
participation in BoG's buyback programme, of which GEL 8.1 million
one-off dividend was attributable to participation in BoG's 2022
buybacks in 2Q23.
-- GEL 20.1 million one-off dividend from Retail (pharmacy).
-- GEL 8.4 million regular dividend from P&C Insurance.
1H23 NAV STATEMENT HIGHLIGHTS
GEL '000, unless Dec-22 1. 2a. 2b. 2c. 3. 4. Jun Change
otherwise noted Value Investment Buyback Dividend Operating Liquidity/ -23 %
(Unaudited) creation and expenses FX/Other
([16]) divestments
Total Listed and
Observable
Portfolio
Value 985,463 170,791 - - (114,408) - - 1,041,846 5.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio value
change
% 17.3% 0.0% 0.0% -11.6% 0.0% 0.0% 5.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Private
Portfolio
Companies 2,213,164 111,670 20,423 - (33,666) - 7,127 2,318,718 4.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which, Large
Companies 1,437,610 85,888 - - (28,479) - 1,243 1,496,262 4.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Investment
Stage
Companies 501,407 21,982 16,223 - (5,187) - 1,937 536,362 7.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Other
Companies 274,147 3,800 4,200 - - - 3,947 286,094 4.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
value change % 5.0% 0.9% 0.0% -1.5% 0.0% 0.3% 4.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,198,627 282,461 20,423 - (148,074) - 7,127 3,360,564 5.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
value change % 8.8% 0.6% 0.0% -4.6% 0.0% 0.2% 5.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Debt (2) (380,905) - (20,423) (53,720) 148,074 (10,884) (7,006) (324,864) -14.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,817,391 282,461 - (53,720) - (19,171) 7,636 3,034,597 7.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV change % 10.0% 0.0% -1.9% 0.0% -0.7% 0.3% 7.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Shares
outstanding(16) 42,973,462 - - (2,142,418) - - 580,136 41,411,180 -3.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 65.56 6.57 0.00 2.13 0.00 (0.44) (0.54) 73.28 11.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 10.0% 0.0% 3.2% 0.0% -0.7% -0.8% 11.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share (GEL) increased by 11.8% in 1H23, reflecting a)
robust GEL 282.5 million value creation across our portfolio
companies with a positive 10.0 ppts impact, b) share buybacks (+3.2
ppts impact) and c) GEL's appreciation against US$, resulting in a
foreign currency gain of GEL 12.6 million on GCAP net debt (+0.5
ppts impact). The NAV per share growth was slightly offset by
management platform-related costs and net interest expense with a
negative 1.3 ppts impact in total.
Portfolio overview
Total portfolio value increased by GEL 161.9 million (5.1%) to
GEL 3.4 billion in 1H23:
-- The value of GCAP's holding in BoG was up by GEL 52.4
million, reflecting robust GEL 166.8 million value creation,
partially offset by GEL 114.4 million dividend income from the Bank
in 1H23.
-- The value of the water utility business increased by GEL 4.0
million, reflecting the application of the put option valuation to
GCAP's 20% holding in the business.
-- The value of the private portfolio increased by GEL 105.6 million in 1H23.
1) Value creation
Total portfolio value creation amounted to GEL 2 8 2. 5 million
in 1 H23.
-- A 12.3% increase in BoG's share price in 1H23 led to a GEL 166.8 million value creation.
-- GEL 4.0 million value was created at our water utility
business in 1H23, reflecting the developments described above.
-- The value creation in the private portfolio amounted to GEL
111.7 million in 1H23, reflecting the net impact of:
o GEL 173.6 million operating performance-related increase in
the value of our private assets, resulting from the continued
strong performance of our non-healthcare businesses and the rebound
in the earnings growth momentum of our healthcare businesses, as
they continue the gradual organic return to a pre-pandemic
operating environment.
o GEL 62.0 million negative net impact from changes in implied
valuation multiples ([17]) and foreign currency exchange rates.
The table below summarises value creation drivers in our
businesses in 1H 23:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([18]) / and FX ([20])
buy-outs
/ exits
([19])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted
(Unaudited) (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable 170,791
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG 166,791
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility 4,000
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private 173,629 - (61,959) 111,670
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies 80,386 - 5,502 85,888
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) 5,051 - 13,725 18,776
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (45,058) - 37,652 (7,406)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) 120,393 - (45,875) 74,518
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 71,666 - (15,030) 56,636
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance 48,727 - (30,845) 17,882
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies (1,208) - 23,190 21,982
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy (2,982) - 23,499 20,517
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education 22,718 - (13,547) 9,171
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics (20,944) - 13,238 (7,706)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other 94,451 - (90,651) 3,800
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio 173,629 - (61,959) 282,461
-------------------------------------- ---------------------- ------------ ---------------- ---------------
The enterprise value and equity value development of our
businesses in 1H 23 is summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Jun-23 31-Dec-22 Change 30-Jun-23 31-Dec-22 Change % share
otherwise noted % % in total
(Unaudited) portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 1,041,846 985,463 5.7% 31.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 882,846 830,463 6.3% 26.3%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 159,000 155,000 2.6% 4.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 3,394,482 3,310,981 2.5% 2,318,718 2,213,164 4.8% 69.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,990,517 1,875,688 6.1% 1,496,262 1,437,610 4.1% 44.5%
Retail (pharmacy) 980,682 957,686 2.4% 723,505 724,517 -0.1% 21.5%
Hospitals 680,804 653,335 4.2% 426,060 433,193 -1.6% 12.7%
Insurance (P&C and
Medical) 329,031 264,667 24.3% 346,697 279,900 23.9% 10.3%
Of which, P&C Insurance 276,960 228,045 21.4% 276,960 228,045 21.4% 8.2%
Of which, Medical
Insurance 52,071 36,622 42.2% 69,737 51,855 34.5% 2.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 848,849 816,023 4.0% 536,362 501,407 7.0% 16.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 441,335 417,903 5.6% 247,682 224,987 10.1% 7.4%
Education [21] 224,514 218,264 2.9% 184,147 164,242 12.1% 5.5%
Clinics and Diagnostics 183,000 179,856 1.7% 104,533 112,178 -6.8% 3.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 555,116 619,270 -10.4% 286,094 274,147 4.4% 8.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 3,360,564 3,198,627 5.1% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
2) Investments [22]
In 1H23, GCAP invested GEL 20.4 million in private portfolio
companies.
-- GEL 10.5 million was allocated to the education business,
mainly for the acquisition of the new campus in the affordable
segment and the development of a new campus in the mid-scale
segment.
-- GEL 5.7 million was invested in Renewable Energy for the
development of the pipeline projects.
-- GEL 4.2 million was invested in the auto service business.
3) Share buybacks
During 1H23, 2,142,418 shares were bought back for a total
consideration of GEL 53.7 million.
-- 1,142,418 shares were repurchased for the management trust
for a total consideration of GEL 28.4 million.
-- 1,000,000 shares with a total value of US$ 10.0 million (GEL
25.4 million) were bought back and cancelled under GCAP's US$ 10
million share buyback and cancellation programme announced in April
2023.
4) Dividends(22)
In 1H23, Georgia Capital recorded GEL 148.1 million dividend
income from portfolio companies:
-- GEL 61.6 million buyback dividend represents the
participation in BoG's buyback programme, of which GEL 29.0 million
one-off dividend was attributable to participation in BoG's 2022
buybacks in 1H23.
-- GEL 52.8 million represents the final dividends from BoG, collected on 14-Jul-23.
-- GEL 20.1 million one-off dividend from Retail (pharmacy).
-- GEL 8.4 million regular dividend from P&C Insurance.
-- GEL 5.2 million regular dividend from Renewable Energy.
Net Capital Commitment (NCC) overview
Below we describe the components of Net Capital Commitment (NCC)
as of 30 June 2023 and as of 31 March 2023. NCC represents an
aggregated view of all confirmed, agreed and expected capital
outflows at the GCAP HoldCo level.
Components of NCC 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
GEL '000, unless otherwise
noted (unaudited)
Cash at banks 163,082 140,474 16.1% 235,255 -30.7%
-------------------------------- ---------- ---------- ------- ---------- -------
Liquid funds 238,043 203,855 16.8% 176,589 34.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Of which, Internationally
listed debt securities 235,181 200,908 17.1% 173,395 35.6%
-------------------------------- ---------- ---------- ------- ---------- -------
Of which, Locally listed
debt securities 2,862 2,947 -2.9% 3,194 -10.4%
-------------------------------- ---------- ---------- ------- ---------- -------
Total cash and liquid
funds 401,125 344,329 16.5% 411,844 -2.6%
-------------------------------- ---------- ---------- ------- ---------- -------
Loans issued 17,461 35,548 -50.9% 26,830 -34.9%
-------------------------------- ---------- ---------- ------- ---------- -------
Accrued dividend income 52,837 - NMF - NMF
-------------------------------- ---------- ---------- ------- ---------- -------
Gross debt (796,287) (766,105) 3.9% (819,579) -2.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Net debt (1) (324,864) (386,228) -15.9% (380,905) -14.7%
-------------------------------- ---------- ---------- ------- ---------- -------
Guarantees issued (2) (4,289) (4,179) 2.6% (18,460) -76.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Net debt and guarantees
issued (3)=(1)+(2) (329,153) (390,407) -15.7% (399,365) -17.6%
-------------------------------- ---------- ---------- ------- ---------- -------
Planned investments (4) (123,915) (124,658) -0.6% (141,396) -12.4%
-------------------------------- ---------- ---------- ------- ---------- -------
of which, planned investments
in Renewable Energy (76,054) (76,949) -1.2% (81,205) -6.3%
-------------------------------- ---------- ---------- ------- ---------- -------
of which, planned investments
in Education (47,861) (47,709) 0.3% (60,191) -20.5%
-------------------------------- ---------- ---------- ------- ---------- -------
Announced Buybacks (5) - - - - -
-------------------------------- ---------- ---------- ------- ---------- -------
Contingency/liquidity
buffer (6) (130,885) (128,020) 2.2% (135,100) -3.1%
-------------------------------- ---------- ---------- ------- ---------- -------
Total planned investments,
announced buybacks and
contingency/liquidity buffer
(7)=(4)+(5)+(6) (254,800) (252,678) 0.8% (276,496) -7.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Net capital commitment
(3)+(7) (583,953) (643,085) -9.2% (675,861) -13.6%
Portfolio value 3,360,564 3,267,462 2.8% 3,198,627 5.1%
-2.3 -3.7
NCC ratio 17.4% 19.7% ppts 21.1% ppts
-------------------------------- ---------- ---------- ------- ---------- -------
Cash and liquid funds . Total cash and liquid funds' balance was
up by 16.5% q-o-q to GEL 401.1 million (up 13.9% q-o-q to US$ 153.2
million) in 2Q23, mainly reflecting the strong dividend inflows as
described above . The increase was slightly offset by a) GEL 34.5
million GCAP share buybacks, b) GEL 4.9 million cash operating
expenses and d) GEL 3.4 million capital allocations .
Internationally listed debt securities balance includes
dollar-denominated Eurobonds issued by Georgian corporates to
generate yield on GCAP's liquid funds. As at 30-June-23, the
balance amounted to GEL 235.2 million, of which GEL 221.3 million
(US$ 84.5 million (at amortised cost)) was allocated to GCAP's
Eurobonds. In 1H23, the total cash and liquid funds' balance
remained largely flat (down 2.6%).
Loans issued. Issued loans' balance primarily refers to loans
issued to our private portfolio companies and are lent at market
terms. The balance was down by GEL 18.1 million in 2Q23 (down by
GEL 9.4 million in 1H23), mainly reflecting loan repayments from
the hospitality and auto service businesses. Subsequent to 2Q23,
the loans issued balance decreased to GEL 8.7 million, reflecting
the full repayment of the loan by our auto service business.
Gross debt. In US$ terms, the outstanding balance of GCAP's US$
300 million Eurobonds remained unchanged in both reporting periods.
In GEL terms, the balance was up by 3.9% in 2Q23 and down by 2.8%
in 1H23, mainly reflecting the foreign exchange rate movements. Net
of US$ 84.5 million GCAP Eurobonds held in treasury, the debt
balance stood at US$ 219.6 million (at amortised cost) at
30-Jun-23.
Guarantees issued. The balance reflects GCAP's guarantee on the
borrowing of the beer business. Due to the recent developments in
the business's operating performance, in 1H23 GCAP's guarantee
decreased by EUR 4.9 million to EUR 1.5 million.
Planned investments. Planned investments' balance represents
expected investments in renewable energy and education businesses
over the next 2-3 years. The balance in US$ terms was down 2.8% and
9.5% in 2Q23 and 1H23, respectively, due to the investments in
these businesses, as described above (the balance in GEL terms was
down 0.6% and 12.4% in 2Q23 and 1H23, respectively).
Contingency/liquidity buffer. The balance reflects the cash and
liquid assets in the amount of US$ 50 million, held by GCAP at all
times, for contingency/liquidity purposes. The balance remained
unchanged in US$ terms as at 30-Jun-23.
As a result of the movements described above, NCC was down by
9.2% to GEL 584.0 million (US$ 223.1 million), translating into a
17.4% NCC ratio as at 30-Jun-23 (down by 2.3 ppts q-o-q).
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 179.4 million in 2Q2 3 (GEL 19.6
million net loss in 2Q2 2 ) and GEL 242.5 million in 1H2 3 (GEL
509.1 million net loss in 1H2 2 ). The IFRS income statement is
prepared on the Georgia Capital PLC level and the results of all
operations of the Georgian holding company JSC Georgia Capital are
presented as one line item. As we conduct almost all of our
operations through JSC Georgia Capital, through which we hold all
of our portfolio companies, the IFRS results provide little
transparency on the underlying trends.
Accordingly, to enable a more granular analysis of those trends,
the following adjusted income statement presents the Group's
results of operations for the period ending June 30 as an
aggregation of (i) the results of GCAP (the two holding companies
Georgia Capital PLC and JSC Georgia Capital, taken together) and
(ii) the fair value change in the value of portfolio companies
during the reporting period. For details on the methodology
underlying the preparation of the adjusted income statement, please
refer to page 9 6 in Georgia Capital PLC 202 2 Annual report.
INCOME STATEMENT (Adjusted IFRS/APM)
GEL '000, unless otherwise
noted
(Unaudited) 2 Q23 2 Q22 Change 1H 23 1H 22 Change
================================ ========= ========= ======= ========= ========== =======
Dividend income 121,661 32,226 NMF 148,074 34,421 NMF
================================ ========= ========= ======= ========= ========== =======
Of which, regular
dividend income 81,316 32,226 NMF 86,503 34,421 NMF
================================ ========= ========= ======= ========= ========== =======
Of which, buyback
dividend income 40,345 - NMF 61,571 - NMF
================================ ========= ========= ======= ========= ========== =======
Interest income 5,015 9,364 -46.4% 9,991 18,150 -45.0%
================================ ========= ========= ======= ========= ========== =======
Realised / unrealised
loss on liquid funds 654 (1,197) NMF 1,085 (11,435) NMF
================================ ========= ========= ======= ========= ========== =======
Interest expense (13,000) (17,826) -27.1% (26,751) (37,679) -29.0%
================================ ========= ========= ======= ========= ========== =======
Gross operating income/(loss) 114,330 22,567 NMF 132,399 3,457 NMF
================================ ========= ========= ======= ========= ========== =======
Operating expenses (9,238) (10,395) -11.1% (19,171) (19,700) -2.7%
================================ ========= ========= ======= ========= ========== =======
GCAP net operating
income/(loss) 105,092 12,172 NMF 113,228 (16,243) NMF
================================ ========= ========= ======= ========= ========== =======
Fair value changes
of portfolio companies
================================ ========= ========= ======= ========= ========== =======
Listed and Observable
Portfolio Companies 56,769 (4,152) NMF 56,383 (211,859) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Bank of
Georgia Group PLC 52,769 (17,760) NMF 52,383 (225,467) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Water Utility 4,000 13,608 -70.6% 4,000 13,608 -70.6%
================================ ========= ========= ======= ========= ========== =======
Private Portfolio
companies 27,137 (42,520) NMF 78,004 (287,828) NMF
================================ ========= ========= ======= ========= ========== =======
Large Portfolio Companies 28,478 (21,396) NMF 57,409 (163,928) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Retail (pharmacy) (27,224) 13,948 NMF (1,285) (39,358) -96.7%
================================ ========= ========= ======= ========= ========== =======
Of which, Hospitals (1,318) (46,250) -97.2% (7,406) (95,769) -92.3%
================================ ========= ========= ======= ========= ========== =======
Of which, Insurance
(P&C and Medical) 57,020 10,906 NMF 66,100 (28,801) NMF
================================ ========= ========= ======= ========= ========== =======
Investment Stage Portfolio
Companies 3,530 (3,536) NMF 16,795 (19,219) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Renewable
energy 686 8,050 -91.5% 15,330 (2,002) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Education 7,876 16,385 -51.9% 9,171 20,741 -55.8%
================================ ========= ========= ======= ========= ========== =======
Of which, Clinics
and Diagnostics (5,032) (27,971) -82.0% (7,706) (37,958) -79.7%
================================ ========= ========= ======= ========= ========== =======
Other businesses (4,871) (17,588) -72.3% 3,800 (104,681) NMF
================================ ========= ========= ======= ========= ========== =======
Total investment return 83,906 (46,672) NMF 134,387 (499,687) NMF
================================ ========= ========= ======= ========= ========== =======
Income/(loss) before
foreign exchange movements
and non-recurring expenses 188,998 (34,500) NMF 247,615 (515,930) NMF
================================ ========= ========= ======= ========= ========== =======
Net foreign currency
(loss)/gain (9,389) 18,172 NMF 12,631 14,448 -12.6%
================================ ========= ========= ======= ========= ========== =======
Non-recurring expenses (1,321) (104) NMF (1,321) (196) NMF
================================ ========= ========= ======= ========= ========== =======
Net income/(loss) 178,288 (16,432) NMF 258,925 (501,678) NMF
================================ ========= ========= ======= ========= ========== =======
Gross operating income of GEL 114.3 million in 2Q23 reflects a
significant increase in dividend income, which was further
supported by a y-o-y decrease in interest expenses due to the
buyback and cancellation of Eurobonds in 2022 and GEL's y-o-y
appreciation against US$. Gross operating income in 1H23 amounted
to GEL 132.4 million.
GCAP earned an average yield of 2.3% on the average balance of
liquid assets of GEL 195.0 million in 1H23 (3.9% on GEL 471.7
million in 1H22).
The components of GCAP's operating expenses are shown in the
table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise
noted
(Unaudited) 2Q23 2Q22 Change 1H23 1H22 Change
Administrative expenses
([23]) (2,899) (3,323) -12.8% (5,528) (6,087) -9.2%
Management expenses
- cash-based ([24]) (2,767) (2,411) 14.8% (5,356) (4,864) 10.1%
Management expenses
- share-based ([25]) (3,572) (4,661) -23.4% (8,287) (8,749) -5.3%
Total operating expenses (9,238) (10,395) -11.1% (19,171) (19,700) -2.7%
Of which, fund type
expense ([26]) (2,338) (3,091) -24.4% (4,904) (6,084) -19.4%
Of which, management
fee type expenses ([27]) (6,900) (7,304) -5.5% (14,267) (13,616) 4.8%
GCAP management fee expenses starting from 2024 will have a
self-targeted cap of 0.75% of Georgia Capital's NAV. The LTM
management fee expense ratio was 0.97% at 30-Jun-23 (1.11% as of
30-Jun-22).
Total investment return represents the increase (decrease) in
the fair value of our portfolio. Total investment return was GEL
83.9 million in 2Q23 and GEL 134.4 million in 1H23, reflecting the
growth in the value of our listed and observable and private
portfolio businesses. We discuss valuation drivers for our
businesses on pages 5-8. The performance of each of our private
large and investment stage portfolio companies is discussed on
pages 14-24.
GCAP's net foreign currency liability balance amounted to c.US$
142 million (GEL 371 million) at 30-Jun-23. Net foreign currency
loss was GEL 9.4 million in 2 Q23, and net foreign currency gain
was GEL 12.6 million in 1H23. The non-recurring expenses amounted
to GEL 1.3 million in both reporting periods , which includes the
impact of the modification of share-based payment award for one
executive. Modification removed the service condition required for
the vesting of previously awarded shares, thus resulting in
accelerated expense recognition for such awards. As a result of the
movements described above, GCAP's adjusted IFRS net income was GEL
178.3 million in 2Q23 and GEL 258.9 million in 1H23.
DISCUSSION OF PORTFOLIO COMPANIES' RESULTS (STAND-ALONE
IFRS)
The following sections present the IFRS results and business
development extracted from the individual portfolio company's IFRS
accounts for large and investment stage entities, where the 2Q23,
1H23, 2Q22 and 1H22 portfolio company's accounts and respective
IFRS numbers are unaudited. We present key IFRS financial
highlights, operating metrics and ratios along with commentary
explaining the developments behind the numbers. For the majority of
our portfolio companies, the fair value of our equity investment is
determined by the application of an income approach (DCF) and a
market approach (listed peer multiples and precedent transactions).
Under the discounted cash flow (DCF) valuation method, fair value
is estimated by deriving the present value of the business using
reasonable assumptions of expected future cash flows and the
terminal value, and the appropriate risk-adjusted discount rate
that quantifies the risk inherent to the business. Under the market
approach, listed peer group earnings multiples are applied to the
trailing twelve months (LTM) stand-alone IFRS earnings of the
relevant business. As such, the stand-alone IFRS results and
developments driving the IFRS earnings of our portfolio companies
are key drivers of their valuations within GCAP's financial
statements. See "Basis of Presentation" on page 27 for more
background.
LARGE PORTFOLIO COMPANIES
Discussion of Retail (pharmacy) Business Results
The retail (pharmacy) business, where GCAP owns a 97.6% equity
interest, is the largest pharmaceuticals retailer and wholesaler in
Georgia, with a 3 3 % market share by revenue. The business
consists of a retail pharmacy chain and a wholesale business that
sells pharmaceuticals and medical supplies to hospitals and other
pharmacies. The business operates a total of 3 83 pharmacies (of
which 371 are in Georgia and 12 are in Armenia) and 11 franchise
stores (of which, four are in Armenia and Azerbaijan).
2Q23 & 1H23 performance (GEL '000), Retail (pharmacy)
[28]
Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue, net 202,264 192,100 5.3% 400,547 390,902 2.5%
Of which, retail 160,022 149,739 6.9% 316,220 304,617 3.8%
Of which, wholesale 42,242 42,361 -0.3% 84,327 86,285 -2.3%
Gross Profit 59,865 55,745 7.4% 119,159 114,842 3.8%
29.6
Gross profit margin % 29.0% 0.6ppts 29.7% 29.4% 0.3ppts
Operating expenses (ex.
IFRS 16) (39,934) (37,896) 5.4% (78,713) (76,376) 3.1%
EBITDA (ex. IFRS 16) 19,931 17,849 11.7% 40,446 38,466 5.1%
EBITDA margin, (ex.
IFRS 16) 9.9% 9.3% 0.6ppts 10.1% 9.8% 0.3ppts
Net profit (ex. IFRS
16) 12,751 19,477 -34.5% 33,348 36,522 -8.7%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 3,145 18,406 -82.9% 17,717 35,212 -49.7%
EBITDA to cash conversion 15.8% 103.1% -87.3ppts 43.8% 91.5% -47.7ppts
Cash flow from investing
activities [29] (84,964) (25,278) NMF (78,139) (45,672) 71.1%
Free cash flow, (ex.
IFRS 16) [30] (85,637) (17,780) NMF (66,186) (19,744) NMF
Cash flow used in financing
activities (ex. IFRS
16) 23,247 24,864 -6.5% 15,181 15,167 0.1%
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 552,064 581,595 -5.1% 576,060 -4.2%
Of which, cash and bank
deposits 29,514 88,179 -66.5% 75,279 -60.8%
Of which, securities
and loans issued 20,509 22,365 -8.3% 22,857 -10.3%
Total liabilities 502,395 499,210 0.6% 515,081 -2.5%
Of which, borrowings 178,870 127,431 40.4% 131,547 36.0%
Of which, lease liabilities 115,331 110,035 4.8% 107,455 7.3%
Total equity 49,669 82,385 -39.7% 60,979 -18.5%
INCOME STATEMENT HIGHLIGHTS
Ø A y-o-y increase in 2Q23 and 1H23 total revenues was mainly
driven by the continued expansion of the pharmacy chain and
franchise stores and the overall growth in the Georgian economy.
The increase in revenues was partially subdued by a) a significant
decrease in product prices, due to GEL's appreciation against
foreign currencies (the FX effect is directly transmitted into the
pricing as c.70% of the inventory purchases are denominated in
foreign currencies), and b) the implementation of the External
Reference Pricing model, which introduces a maximum retail price on
targeted prescription medicines that are financed by the State.
Ø The improvement in the gross profit margins in 2Q23 and 1H23
reflects a) increased sales of high-margin para-pharmacy products
in the retail business line (revenue from para-pharmacy, as a
percentage of retail revenue, was 39.4% in 2Q23 compared to 35.2%
in 2Q22 (39.5% in 1H23 compared to 34.9% in 1H22)) and b) positive
developments in the wholesale business line, notwithstanding the
y-o-y revenue reduction.
Ø Operating expenses remained well managed, with positive
operating leverage of 2.0% in 2Q23 and 0.7% in 1H23.
Ø As a result, the business posted strong EBITDA margins
(excluding IFRS 16) of 9.9% (up 60 bps y-o-y) and 10.1% (up 30 bps
y-o-y) in 2Q23 and 1H23, respectively.
Ø Interest expense (excluding IFRS 16) was up 20.7% y-o-y in
2Q23 (up 5.9% y-o-y in 1H23), reflecting the increased average net
debt balance, as described below.
Ø The business posted GEL 12.8 million net profit excluding IFRS
16 in 2Q23, down 34.5% y-o-y, further reflecting higher FX gain in
2Q22 due to the GEL's appreciation against the basket of foreign
currencies last year. Net profit (excluding IFRS 16) in 1H23
amounted to GEL 33.3 million, down 8.7% y-o-y.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Net debt balance was up to GEL 128.9 million in 2Q23, from GEL
16.9 million in 1Q23, reflecting a) increased borrowings that
partially financed the minority buyout transaction, and b) a GEL
20.1 million dividend payment to GCAP in 2Q23.
Ø A temporary decrease in EBITDA to cash conversion ratio in
2Q23 and 1H23 was due to the advance payments made by the business
to some of its vendors in order to obtain supplier discounts.
EBITDA to cash conversion ratio is expected to normalize in the
second half of 2023.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In 2Q23 the business signed an agreement with its minority
shareholders to acquire a 20.6% equity interest in the business. As
a result of this transaction, GCAP's ownership stake in Retail
(Pharmacy) increased to 97.6% in 2Q23 from 77.0% in 1Q23. The
transaction was executed at previously disclosed/agreed valuation
multiples.
Ø The business added 19 pharmacies and 3 franchise stores (one
of which is Carter's) over the last 12 months.
Unaudited Jun-23 Mar-23 Change Jun-22 Change
(q-o-q) (y-o-y)
Number of pharmacies 383 378 5 366 17
Of which, Georgia 371 368 3 358 13
Of which, Armenia 12 10 2 8 4
Number of franchise
stores 11 11 - 8 3
Of which, Georgia 7 7 - 6 1
Of which, Armenia 2 2 - 2 -
Of which, Azerbaijan 2 2 - - 2
Ø Retail (Pharmacy)'s key operating performance highlights for 2
Q2 3 and 1H23 are noted below:
Key metrics
( Unaudited) 2Q23 2Q22 Change 1H23 1H22 Change
Same store
revenue growth 2.8% -1.6% 4.4ppts -0.2% 5.0% -5.2ppts
Number of bills 3.3
issued (mln) 7.9 7.4 5.8% 15.5 15.0 %
Average bill 3.
size (GEL) 19.3 18.7 3 % 19.3 18.9 2.1%
The same store revenue growth in 2Q23 reflects the continued
expansion of the business, while a 5.2ppts y-o-y decrease in 1H23
same store revenue growth was attributable to the recalibration of
product prices due to GEL's appreciation against foreign
currencies. If measured on a constant currency basis (excluding the
impact of FX movements), the same store revenue growth would stand
at c.9% and c.7%, in 2Q23 and 1H23 y-o-y, respectively.
Discussion of Hospitals Business Results
The hospitals business, where GCAP owns a 100% equity, is the
largest healthcare market participant in Georgia, comprised of 16
referral hospitals with a total of 2,524 beds, providing secondary
and tertiary level healthcare services across Georgia.
2Q23 & 1H23 performance (GEL '000), Hospitals [31]
Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue, net [32] 78,496 72,483 8.3% 152,161 149,557 1.7%
Gross Profit 28,352 26,576 6.7% 54,338 54,353 NMF
Gross profit margin 35.8% 36.1% -0.3ppts 35.4% 35.8% -0.4ppts
Operating expenses (ex.
IFRS 16) (13,651) (13,118) 4.1% (26,013) (25,805) 0.8%
EBITDA (ex. IFRS 16) 14,701 13,458 9.2% 28,325 28,548 -0.8%
EBITDA margin (ex. IFRS
16) 18.5% 18.3% 0.2ppts 18.4% 18.8% -0.4ppts
N et (loss)/profit (ex. (1,20
IFRS 16) [33] (376) 1,767 NMF 4 ) 4,784 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) (3,963) 4,027 NMF (6,944) 14,616 NMF
EBITDA to cash conversion -27.0
(ex. IFRS 16) % 29.9% -56.9ppts -24.5% 51.2% -75.7ppts
Cash flow used in investing
activities [34] (7,864) 5,192 NMF (14,043) 2,312 NMF
Free cash flow (ex. IFRS
16) [35] (11,973) 5,637 NMF (21,391) 14,248 NMF
Cash flow from financing
activities (ex. IFRS 16) (3,875) (25,570) -84.8% 4,752 (45,899) NMF
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 630,233 628,175 0.3% 614,705 2.5%
Of which, cash balance
and bank deposits 4,991 20,846 -76.1% 21,625 -76.9%
Of which, securities and
loans issued 8,575 8,374 2.4% 14,040 -38.9%
Total liabilities 288,013 286,023 0.7% 270,418 6.5%
Of which, borrowings 227,093 223,317 1.7% 213,880 6.2%
-0.6
Total equity 342,220 342,152 NMF 344,287 %
INCOME STATEMENT HIGHLIGHTS
Ø A strong y-o-y rebound in 2Q23 revenue reflects the gradual
organic return to pre-pandemic levels of activity, as following the
suspension of COVID contracts by the Government in 1Q22, the
patient traffic has been returning to normal levels.
Ø 1H23 y-o-y revenue growth reflects a strong 2Q23 performance,
as described above, partially offset by a higher base effect of the
following factors on the 1Q23 results:
o The suspension of COVID contracts by the Government in
mid-March 2022.
o Temporary closure of Iashvili Paediatric Tertiary Referral
Hospital ("Iashvili Hospital), the largest paediatric services
provider in the country, due to mandatory regulatory-related
renovation works. The works commenced in October 2022 and were
completed in March 2023.
o The absence of revenues from the Traumatology Hospital, which
was divested in April 2022.
Ø Adjusted for the temporary closure of Iashvili Hospital and
the absence of revenues from the Traumatology Hospital, the 1H23
revenue was up by 5.7% y-o-y.
Ø The cost of services in the business consists mainly of
salaries, materials and utilities. Trends in salary and materials
costs are captured in the direct salary and materials rates ([36])
.
o A y-o-y increase in direct salary rates, up 1.5 ppts to 37.6%
in 2Q23 and up 2.4 ppts to 37.6% in 1H23, is mainly attributable to
increased minimum salary rates for medical staff.
o Phasing out of COVID as well as the completion of the transfer
of the hospitals business' procurement department from pharmacy to
hospitals (which began in January 2021 and was completed in
December 2022), led to an improvement in materials rate (17.6% in
2Q23 compared to 18.4% in 2Q22 and 17.4% in 1H23 compared to 19.1%
in 1H22).
o Utilities and other costs were up y-o-y by 6.2% in 2Q23 and up
5.6% in 1H23, resulting from inflation pressures.
Ø Well-managed administrative salaries and other employee
benefits as well as a decrease in general and administrative
expenses (excl. IFRS 16) (down 6.1% in 2Q23 y-o-y) resulted in
positive operating leverage of 2.6% in 2Q23. Overall in 1H23
operating leverage was negative at 0.8% further reflecting an
increase in general and administrative expenses (excl. IFRS 16) in
1H23 (up 3.8% y-o-y), due to the launch of new products and
services and increased marketing costs to support the transition to
the post-COVID environment.
Ø The developments described above resulted in a 9.2% and 0.2
ppts y-o-y increase in EBITDA (excl. IFRS 16) and EBITDA margin in
2Q23. The 1H23 EBITDA was down 0.8% y-o-y, but adjusted for the
temporary closure of Iashvili Hospital and the absence of revenues
from the Traumatology Hospital was up by 11.1% y-o-y.
Ø Net interest expense (excluding IFRS 16) was up by 42.3% in
2Q23 and up 38.6% in 1H23, y-o-y, reflecting the increased net debt
balance as described below.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø N et debt balance was up 10.0% q-o-q and up 19.8% YTD, mainly
resulting from the delay in the collection of receivables from the
State in 2023 due to one-off processing delays associated with the
introduction of Diagnosis Related Group ("DRG") financing system
.
Ø Negative cash flow from operating activities (excl. IFRS 16)
was due to the delay in the collection of receivables from the
State in 1H23.
Ø Capex investment was GEL 8.7 million in 2Q23, mainly
reflecting maintenance capex at hospitals. In 1H23 the capex
investment of GEL 16.7 million apart from maintenance capex also
includes renovation works in Iashvili Hospital.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business key operating performance highlights for 2 Q23
and 1H23 are noted below:
Key metrics (
Unaudited) 2Q23 2Q22 Change 1H23 1H22 Change
-0.6 -4.3
Occupancy rate 57.3% 57.9% ppts 55.6% 59.9% ppts
Number of admissions 285 547
(thousands) . 5 301.7 -5.4% . 9 616.4 -11.1%
2Q23 and 1H23 revenues were up notwithstanding the y-o-y
decrease in the occupancy rate and the number of admissions in both
reporting periods. This reflects the change in service mix and
increased demand for elective care and outpatient services, which
is in line with the planned transition to the post-COVID operating
environment.
Discussion of Insurance (P&C and Medical) Business
Results
The insurance business comprises a) Property and Casualty
(P&C) insurance business and b) medical insurance business. The
P&C insurance business is a leading player in the local
insurance market with a 27.4% market share in property and casualty
insurance based on gross premiums as of 3 1 -Dec-22. P&C also
offers a variety of non-property and casualty products, such as
life insurance. The medical insurance business is one of the
country's largest private health insurers, with a 19% market share
based on 1Q23 net insurance premiums. Medical Insurance offers a
variety of health insurance products primarily to corporate and
(selectively) to state entities and also to retail clients in
Georgia. GCAP owns a 100% equity stake in both insurance
businesses.
2Q23 & 1H23 performance (GEL'000), Insurance (P&C and
Medical) [37]
Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Insurance revenue 52,174 42,549 22.6% 98,405 81,706 20.4%
Net underwriting profit 14,234 11,832 20.3% 27,498 22,777 20.7%
Net investment profit 3,877 2,318 67.3% 6,353 4,275 48.6%
Net profit 7,385 5,769 28.0% 14,000 10,359 35.1%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 12,911 13,079 -1.3% 21,277 15,131 40.6%
Free cash flow 11,359 12,243 -7.2% 19,026 13,715 38.7%
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 236,917 223,635 5.9% 217,373 9.0%
Total equity 127,730 128,872 -0.9% 121,486 5.1%
Ø The Georgian insurance sector is set to adopt the Estonian
Taxation Model which will come into force from the beginning of
2024. Prior to this change, the pre-tax profit of the insurance
businesses was levied by a 15% corporate income tax. Following the
enforcement of the Estonian Taxation Model, a 15% corporate income
tax will be applied to earnings distributed to individuals or
non-resident legal entities. Consequently, GCAP's insurance
businesses will no longer be subject to the corporate income tax
payment, freeing up the resources for both business development and
enhanced dividend payments to GCAP.
Ø In 1H23, P&C and medical insurance businesses adopted the
IFRS 17 "Insurance contracts" accounting standard. Comparative
periods were also retrospectively restated.
TOTAL INSURANCE BUSINESS HIGHLIGHTS
P&C and medical insurance have a broadly equal share in
total revenues, while the combined net profit in 2Q23 and 1H23 was
mainly attributable to P&C (80.7% and 77.1% share in total net
profit in 2Q23 and 1H23, respectively). The loss ratio was down by
0.2 ppts and the expense ratio was down by 1.9 ppts y-o-y in 2Q23
(up 0.9 ppts and down 1.6 ppts y-o-y in 1H23, respectively),
translating into 0.3 ppts y-o-y decrease in the combined ratio
(down 0.8 ppts y-o-y in 1H23). As a result, ROAE [38] was 25.0% in
2Q23 (22.1% in 2Q22) and 24.5% in 1H23 (20.4% in 1H22).
Discussion of results, P&C Insurance
( GEL '000 ) Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Insurance revenue 28,544 23,835 19.8% 52,965 45,310 16.9%
9,79 18,17
Net underwriting profit 10,719 7 9.4% 20,603 4 13.4%
Net investment profit 2,655 1,333 99.2% 4,069 2,398 69.7%
5,26 13. 2 9,22
Net profit 5,957 3 % 10,788 4 17.0%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 11,065 12,653 -12.6% 17,943 16,071 11.6%
Free cash flow 10,513 12,083 -13.0% 16,732 15,019 11.4%
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 167,336 155,635 7.5% 151,795 10.2%
Total equity 87,977 90,566 -2.9% 86,090 2.2%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 2Q23 and 1H23 insurance revenue reflect s a
combination of factors:
o Motor insurance revenues were up by GEL 2.2 million y-o-y in
2Q23 (up by 3.4 million in 1H23), mainly attributable to the growth
in the retail client portfolio.
o Credit life insurance revenues were up by GEL 1.1 million
y-o-y in 2 Q23 (up by 2.5 million in 1H23), resulting from the
growth of banks' portfolios in the mortgage, consumer loan, and
other sectors.
o Agricultural insurance revenues were up by GEL 0.8 million
y-o-y in 2Q23 (up by GEL 0.8 million y-o-y in 1H23), driven by
increased Agro insurance sales from GEL11.7 million in 1H22 to GEL
13.2 million in 1H23.
o Border MTPL revenues increased by GEL 0.3 million y-o-y in
2Q23 (up by 0.8 million in 1H23), reflecting the direct impact of
migration and the significant recovery in tourism.
Ø P&C Insurance's key performance ratios for 2Q23 and 1H23
are noted below:
Key ratios
( Unaudited) 2Q23 2Q22 Change 1H23 1H22 Change
Combined ratio 84.3% 79.8% 4.5 ppts 83.6% 81.2% 2.4 ppts
-0.5
Expense ratio 33.8% 34.3% ppts 34.6% 34.1% 0.5 ppts
Loss ratio 48.4% 46.8% 1.6 ppts 50.4% 48.1% 2.3 ppts
-0.4
FX ratio 2.1% -1.3% 3.4 ppts -1.4% -1.0% ppts
ROAE(38) 30.2% 29.5% 0.7 ppts 28.0% 26.6% 1.4 ppts
Ø The combined ratio increased by 4.5 ppts y-o-y in 2Q23 (up by
2.4 ppts y-o-y in 1H23).
-- The expense ratio remained well controlled in both reporting
periods, down 0.5 ppts y-o-y in 2Q23 and up 0.5 ppts y-o-y in
1H23.
-- An in crease in the loss ratio in 2Q23 is mainly attributable
to increased Agro insurance claims due to unfavourable weather
conditions during the quarter. The 1H23 loss ratio further reflects
a large property insurance claim incurred in 1Q23, with an
estimated net loss of GEL 1.2 million.
-- A 3.4 y-o-y ppts increase in FX ratio in 2Q23 (down 0.4 ppts
y-o-y in 1H23) reflects the impact of foreign exchange rate
movements on the business operations.
Ø P&C Insurance's net investment profit was up by 99.2%
y-o-y in 2Q23 (up by 69.7% y-o-y in 1H23), reflecting a) a higher
average liquid funds balance, b) an increase in global interest
rates, and c) lower market-driven losses on investments placed in
publicly traded debt securities.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø P&C Insurance's solvency ratio was 185% as of 30 June
2023, significantly above the required minimum of 100%.
Ø A 12.6% y-o-y decrease in the net cash flows from operating
activities in 2Q23 reflects the payment of some payable balances to
agents and brokers as well as the reimbursement of claims as
described above. Overall, the operating cash flow in 1H23 increased
by 11.6% y-o-y, mainly driven by higher underwriting cash flows of
the business, as well as increased investment returns.
Ø GEL 8.4 million dividends were paid to GCAP in 2Q23 on the
back of the strong operating performance.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø With its 27.4% market share on the local insurance market,
P&C remained the largest market player, maintaining a strong
position.
Ø In 1H23, the business expanded its operations into the
regional reinsurance markets of Armenia and Azerbaijan, generating
GEL 0.5 million (GEL 0.2 million in 2Q23) in net written premiums
from these countries, translating into GEL 0.3 million net revenue
in 1H23.
Discussion of results, Medical Insurance
(GEL '000 ) Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Insurance revenue 23,630 18,714 26.3% 45,440 36,396 24.8%
Net underwriting profit 3,515 2,035 72.7% 6,895 4,603 49.8%
2,28
Net investment profit 1,222 985 24.1% 4 1,877 21.7%
Net profit 1,428 506 NMF 3,212 1,135 NMF
CASH FLOW HIGHLIGHTS
Net cash flows from operating 3,33
activities 1,846 426 NMF 4 (940) NMF
2,29 (1,30
Free cash flow 846 16 0 NMF 4 4 ) NMF
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 69,581 68,000 2.3% 65,578 6.1%
Total equity 39,753 38,306 3.8% 35,396 12.3%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 2Q23 and 1H23 insurance revenue is due to the
8.0% y-o-y increase in the total number of insured clients
(c.173,000 as of Jun-23), mainly in the corporate client
segment.
Ø 1H23 net claims expenses stood at GEL 36.7 million (up 21.9%
y-o-y), out of which:
o GEL 16.5 million (45.0% of the total) was inpatient;
o GEL 14.0 million (38.1% of the total) was outpatient; and
o GEL 6.2 million (16.9% of the total) was related to
pharmaceuticals.
Ø The business maintained a targeted loss ratio of 81.0% in 2Q23
and 80.7% in 1H23, down 3.3 ppts and 2.0 ppts y-o-y,
respectively.
Ø A 3.3 ppts and 3.2 ppts y-o-y decrease in the expense ratio in
2Q23 and 1H23, was due to the top-line growth of the business while
operating expenses remained flat. These translated into a 6.6 ppts
and 5.2 ppts y-o-y decrease in the combined ratio,
respectively.
Ø The developments described above led to a more than 180% y-o-y
increase in the 1Q23 and 1H23 net profits.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business remains one of the largest medical insurers on
the market with a 19.4% market share based on 1Q23 net insurance
premiums. The insurance renewal rate was up 12.5 ppts y-o-y to
83.0% in 1H23.
INVESTMENT STAGE PORTFOLIO COMPANIES
Discussion of Renewable Energy Business Results
The renewable energy business operates three wholly-owned
commissioned renewable assets: 30MW Mestiachala HPP, 20MW Hydrolea
HPPs and 21MW Qartli wind farm. In addition, the business has a
pipeline of renewable energy projects in varying stages of
development. The renewable energy business is 100% owned by Georgia
Capita l. As electricity sales in Georgia is a dollar business, the
financial data below is presented in US$.
2Q23 & 1H23 performance (US$ '000), Renewable Energy
[39]
Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue 4,159 4,316 -3.6% 5,964 6,385 -6.6%
Of which, PPA 1,935 1,814 6.7% 3,740 3,736 0.1%
Of which, Non-PPA 2,224 2,502 -11.1% 2,224 2,649 -16.0%
( 1,117 ( 772 ( 2,025 ( 1,646
Operating expenses ) ) 44.7% ) ) 23.0%
EBITDA 3,042 3,544 -14.2% 3,939 4,739 -16.9%
-9.0 -8.2
EBITDA margin 73.1% 82.1% ppts 66.0% 74.2% ppts
( 1,539 ( 2,775
Net profit/(loss) 174 394 -55.8% ) ) -44.5%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities 1,912 2,607 -26.7% 2,485 3,729 -33.4%
Cash flow used in investing ( 612 ( 8 ( 2,154 ( 2,252
activities ) ) NMF ) ) -4.4%
Cash flow used in financing ( 1,845 ( 3,009 ( 2,654 ( 7,296
activities ) ) -38.7% ) ) -63.6%
Dividends paid out - (700) NMF (2,000) (1,400) 42.9%
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 121,869 121,338 0.4% 122,645 -0.6%
Of which, cash balance 7,212 7,706 -6.4% 9,468 -23.8%
Total liabilities 83,578 84,374 -0.9% 84,288 -0.8%
Of which, borrowings 81,116 81,966 -1.0% 80,570 0.7%
Total equity 38,291 36,964 3.6% 38,357 -0.2%
INCOME STATEMENT HIGHLIGHTS
(GEL) 2Q23 2Q22 Change 1H23 1H22 Change
Revenue 10,722 12,834 -16.5% 15,427 19,244 -19.8%
EBITDA 7,841 10,523 -25.5% 10,180 14,227 -28.4%
INCOME STATEMENT HIGHLIGHTS
Ø A y-o-y decrease in 2Q23 and 1H23 revenues in US$ terms
reflects the net impact of the following factors:
o A 13.2% y-o-y decrease in electricity generation in 2Q23 (down
13.6% y-o-y in 1H23), as one of the power-generating units of
Hydrolea HPPs was temporarily taken offline due to planned
rehabilitation works (the works were completed in June 2023 and the
operations resumed in their normal course).
o The increase in the average electricity selling price, up
11.0% y-o-y to 54.1 US$/MWh in 2Q23 and up 8.2% y-o-y to 56.4
US$/MWh in 1H23. This reflects the export of 16.7 GWh of
electricity to the Republic of Türkiye in 2Q23, with the average
export price reaching 68.7 US$/MWh.
Ø Approximately 40% of electricity sales during 2Q23 (c.55% in
1H23) were covered by long-term fixed-price power purchase
agreements (PPAs) formed with a Government-backed entity.
Revenue and generation breakdown by power assets:
Unaudited 2Q23 1H23
US$ '000, Revenue Change Electricity Change Revenue Change Electricity Change
unless otherwise from y-o-y generation y-o-y from y-o-y generation y-o-y
noted electricity ( MWh) electricity ( MWh)
sales sales
30MW Mestiachala
HPP 1,849 28.9% 34,094 1.0% 1,931 26.8% 35,591 0.6%
21MW Qartli
wind farm 1,427 7.1% 21,948 7.1% 2,776 7.9% 42,707 7.9%
20MW Hydrolea
HPPs 883 -43.0% 20,844 -39.2% 1,257 -45.1% 27,501 -42.1%
Total 4,159 -3.6% 76,886 -13.2% 5,964 -6.6% 105,799 -13.6%
=================== ============= ======= ============ ======= ============= ======= ============ =======
Ø Operating expenses were up by 4 4 .7% and 2 3 . 0 % y-o-y in
2Q23 and 1H23, respectively, mainly reflecting the electricity and
transmission costs incurred due to electricity export in the
Republic of Türkiye.
Ø The developments described above, led to a 14.2% and 16.9%
y-o-y decrease in EBITDA in 2Q23 and 1H23, respectively.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø A y-o-y decrease in operating cash flows reflects the decrease
in 2Q23 and 1H23 EBITDA, as described above.
Ø A y-o-y decrease in cash outflows from financing activities in
2Q23 and 1H23 is attributable to the following factors:
o Investment of US$ 1.0 million by GCAP for the development of
the pipeline projects in 2Q23 (US$ 2.2 million in 1H23),
o A y-o-y differential in coupon payments between the existing
local bonds (US$ 2.8 million paid in 2Q23) and the already redeemed
Eurobonds (US$ 3.7 million paid in 1Q22),
o Eurobond buybacks of US$ 2.2 million by the business in
2Q22.
Discussion of Education Business Results
Our education business currently combines majority stakes in
four private school brands operating across six campuses, acquired
in 2019-2023: British-Georgian Academy and British International
School of Tbilisi (70% stake), the leading schools in the premium
and international segments; Buckswood International School (80%
stake), well-positioned in the midscale segment and Green School
(80%-90% ownership), well-positioned in the affordable segment.
2Q23 & 1H23 performance (GEL '000), Education [40]
Unaudited
INCOME STATEMENT
HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue 14,468 11,351 27.5% 28,408 22,154 28.2%
Operating expenses (9,930) (6,879) 44.4% (18,508) (13,365) 38.5%
EBITDA 4,538 4,472 1.5% 9,900 8,789 12.6%
-8.0 -4.9
EBITDA Margin 31.4% 39.4% ppts 34.8% 39.7% ppts
Net profit 3,427 4,588 -25.3% 8,429 8,479 -0.6%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 8,231 8,833 -6.8% 11,327 10,517 7.7%
Net cash flows used
in investing activities (4,715) (5,766) -18.2% (19,839) (8,201) NMF
Net cash flows from
financing activities 514 1,721 -70.1% 13,053 2,627 NMF
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 180,212 171,236 5.2% 156,320 15.3%
Of which, cash 9,970 5,921 68.4% 5,709 74.6%
Total liabilities 56,329 52,120 8.1% 52,168 8.0%
Of which, borrowings 24,288 23,693 2.5% 21,740 11.7%
Total equity 123,883 119,116 4.0% 104,152 18.9%
INCOME STATEMENT HIGHLIGHTS
Ø Strong intakes and a ramp-up of the utilisation led to a 27.5%
y-o-y increase in revenue in 2Q23 (up 28.2% y-o-y in 1H23), in line
with both the organic growth and expansion of the business. Our
education business has experienced a significant increase in the
total number of learners during the 2022-2023 academic year. The
total number of learners increased by 1,286 y-o-y (up by 39.8%
y-o-y to 4,516 learners as of 30-Jun-23), of which 307 learners
were added through the recent expansion in the affordable segment
as described below.
Ø EBITDA margin was down by 8.0 ppts y-o-y to 31.4% in 2Q23
(down by 4.9 ppts y-o-y to 34.8% in 1H23) reflecting a) a shift in
academic days in midscale school and b) increased operating
expenses due to the increased salary, catering and utility
expenses, in line with the expansion of the business and inflation.
This translated into a 1.5% y-o-y increase in 2Q23 EBITDA (up 12.6%
y-o-y in 1H23).
Ø As a result, the business posted GEL 3.4 million net income in
2Q23, down by 25.3% y-o-y (GEL 8.4 million in 1H23 down by 0.6%
y-o-y).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø S trong cash collection rates (at 96.4% as of 30-Jun-23,
largely at last year's level of 96.7%), combined with enhanced
revenue streams, led to a 7.7% y-o-y increase in operating cash
flow generation of the business in 1H23.
Ø Cash outflows on investing activities in 2Q23 and 1H23 mainly
reflect two investment projects as described below and the
investment for the development of a new campus in the midscale
segment which will be launched in the 2023-2024 academic year.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
In 1H23, the education business increased its capacity in the
affordable segment by 1,200 learners through the acquisition of the
new campus. With this investment, the education business has
expanded from the built capacity of 5,670 learners to 6,870
learners, while the capacity of the affordable segment increased
from 3,500 learners to 4,700 learners.
In 1H23, the education business also acquired a land plot for
the planned expansion of the premium and international segments.
This acquisition will increase the total secured pipeline capacity
for all segments for 2025 by 350 learners, in total from 2,410
learners to 2,760 learners. Of this amount, the secured pipeline
capacity of the premium and international schools will increase
from the current 1,200 learners to 1,550 learners.
Ø The utilisation rate for the total learner capacity was up by
1.9 ppts y-o-y to 65.7% as of 30-Jun-23.
o The utilisation rate for the pre-expansion 2,810 learner
capacity (i.e., excluding the new capacity addition of 4,060
learners) was up by 3.5 ppts y-o-y to 100% as of 30 June 2023.
o The utilisation of the newly added capacity of 4,060 learners
was 42.0% as of 30 June 2023.
Discussion of Clinics and Diagnostics Business Results
The clinics and diagnostics business, where GCAP owns a 100%
equity interest, is the second largest healthcare market
participant in Georgia after our hospitals business. The business
comprises two segments: 1) Clinics: 18 community clinics with 353
beds (providing outpatient and basic inpatient services); 17
polyclinics (providing outpatient diagnostic and treatment
services) and 14 lab retail points at GPC pharmacies; 2)
Diagnostics, operating the largest laboratory in the entire
Caucasus region - "Mega Lab".
2Q23 & 1H23 performance (GEL '000), Clinics and Diagnostics
[41]
Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue, net [42] 20,993 17,795 18.0% 40,890 43,723 -6.5%
Of which, clinics 17,917 15,188 18.0% 34,986 34,795 0.5%
Of which, diagnostics 4,776 3,937 21.3% 9,192 11,765 -21.9%
Of which, inter-business
eliminations (1,700) (1,330) 27.8% (3,288) (2,837) 15.9%
Gross Profit 9,365 7,546 24.1% 17,766 17,999 -1.3%
1.6 1.8
Gross profit margin 43.8% 42.2% ppts 42.8% 41.0% ppts
Operating expenses (ex.
IFRS 16) (6,191) (5,247) 18.0% (12,017) (10,980) 9.4%
EBITDA (ex. IFRS 16) 3,174 2,299 38.1% 5,749 7,019 -18.1%
EBITDA margin (ex. IFRS 1.9 -2.2
16) 14.8% 12.9% ppts 13.8% 16.0% ppts
N et (loss)/profit (ex.
IFRS 16) (1,233) (1,230) 0.2% (1,704) 352 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 2,126 1,712 24.2% 1,088 2,788 -61.0%
EBITDA to cash conversion -7.5 -20.8
(ex. IFRS 16) 67.0% 74.5% ppts 18.9% 39.7% ppts
Cash flow used in investing
activities (3,720) (4,000) -7.0% (6,698) (6,442) 4.0%
Free cash flow (ex.
IFRS 16) [43] (1,482) (2,325) 36.3% (5,443) (3,638) -49.6%
Cash flow from financing
activities (ex. IFRS
16) 1,132 440 NMF 5,406 (903) NMF
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 200,403 195,537 2.5% 190,767 5.1%
Of which, cash balance
and bank deposits 6,766 7,224 -6.3% 6,966 -2.9%
Of which, securities
and loans issued 3,141 3,081 1.9% 3,107 1.1%
Total liabilities 105,836 99,335 6.5% 94,786 11.7%
Of which, borrowings 69,253 65,820 5.2% 60,832 13.8%
Total equity 94,567 96,202 -1.7% 95,981 -1.5%
Discussion of results, Clinics
(GEL '000 ) Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue, net(49) 17,917 15,188 18.0% 34,986 34,795 0.5%
Of which, polyclinics 12,410 10,404 19.3% 23,832 20,886 14.1%
Of which, community clinics 5,507 4,784 15.1% 11,154 13,908 -19.8%
Gross Profit 8,118 6,763 20.0% 15,501 14,940 3.8%
0.1 0.8
Gross profit margin 44.4% 44.3% ppts 43.5% 42.7% ppts
Operating expenses (ex.
IFRS 16) (5,341) (4,349) 22.8% (10,405) (8,881) 17.2%
EBITDA (ex. IFRS 16) 2,777 2,414 15.0% 5,096 6,059 -15.9%
EBITDA margin (ex. IFRS -0.6 -3.0
16) 15.2% 15.8% ppts 14.3% 17.3% ppts
N et (loss)/profit (ex.
IFRS 16) (1,087) (808) 34.5% (1,404) 24 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 2,398 2,146 11.7% 2,771 3,569 -22.4%
EBITDA to cash conversion -2.5 -4.5
(ex. IFRS 16) 86.4% 88.9% ppts 54.4% 58.9% ppts
Cash flow used in investing
activities [44] (3,571) (3,728) -4.2% (5,959) (5,831) 2.2%
Free cash flow (ex. IFRS
16)(43) (1,059) (1,602) 33.9% (3,012) (2,209) -36.4%
Cash flow from financing
activities (ex. IFRS 16) 637 778 -18.1% 3,998 (257) NMF
BALANCE SHEET HIGHLIGHTS 30-Jun-23 31-Mar-23 Change 31-Dec-22 Change
Total assets 170,277 165,035 3.2% 160,691 6.0%
Of which, cash balance
and bank deposits 6,640 7,170 -7.4% 5,825 14.0%
Of which, securities
and loans issued 3,417 3,357 1.8% 3,379 1.1%
Total liabilities 93,720 87,502 7.1% 83,531 12.2%
Of which, borrowings 63,735 60,914 4.6% 56,908 12.0%
Total equity 76,557 77,533 -1.3% 77,160 -0.8%
INCOME STATEMENT HIGHLIGHTS
Ø Similar to the hospitals business, the organic transition to
the post-COVID operating environment, has been positively reflected
in the 2Q23 net revenue of the clinics business. Net revenue from
polyclinics was up by 19.3%, while the revenue from community
clinics increased by 15.1%, y-o-y in 2Q23, both reflecting
significant growth in revenues from regular ambulatory
services.
Ø The increase in 1H23 net revenue reflects the improved 2Q23
performance, as described above, partially offset by the suspension
of COVID contracts in March 2022 and the related y-o-y decrease in
1Q23 revenue as compared to 1Q22.
Ø The cost of services in the business consists mainly of
materials, salaries and utilities. Trends in materials and salary
costs are captured in the direct materials and salary rates ([45])
(a significant portion of direct salaries are fixed). The y-o-y
increase in the gross profit, up 20.0% and up 3.8% in 2Q23 and
1H23, respectively, was due to the following factors:
o The post-COVID transition was reflected in the improved
materials rate (COVID treatments are characterised by high
materials rate). The materials rate was down 2.2 ppts in 2Q23 and
down 5.1 ppts in 1H23 , y-o-y .
o The 2Q23 direct salary rate was down by 2.6 ppts y-o-y in line
with the revenue growth, while a 0.9 ppts y-o-y increase in 1H23
reflects the suspension of the COVID contracts, as described
above.
Ø Operating expenses (excl. IFRS 16) were up 22.8% in 2Q23 and
up 17.2% in 1H23 y-o-y, mainly reflecting the increase in salaries
and other employee benefits (up 17.2% and 11.4% y-o-y) and general
and administrative expenses (excl. IFRS 16) (up 33.0% and 17.4%
y-o-y). The increase is mainly attributable to the expansion as
well as the restructuring of the business back to normal operating
levels.
Ø As a result, the EBITDA margin (excl. IFRS 16) was down 0.6
ppts to 15.2% in 2Q23 and down 3.0 ppts to 14.3% in 1H23.
Ø The net interest expense (excl. IFRS 16) was up 4.7% in 2Q23
and up 6.9% in 1H23 y-o-y, reflecting a) an increased balance of
net debt due to weaker cash generation and investment made for the
expansion of the business and b) increased interest rates on the
market.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Strong top-line performance in 2Q23 translated into an 11.7%
y-o-y increase in the operating cash flow in 2Q23. The decrease in
operating cash flow in 1H23 reflects the state prepayment of some
invoices under the universal healthcare coverage in December
2022.
Ø In 1H23, the business spent GEL 5.8 million on capex,
primarily related to the expansion of the polyclinics chain in 2023
and investment in maintenance capex at community clinics. Capex
investment in 2Q23 amounted to GEL 3.5 million.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø Our community clinics and (to a lesser extent) our polyclinics
were both affected by the reduced traffic for COVID services, such
as COVID tests and vaccinations in 2023:
Unaudited 2Q23 2Q22 Change 1H23 1H22 Change
Number of admissions
(thousands) 511.4 497.5 2.8% 1,021.6 1,136.1 -10.1%
Of which, polyclinics 410.1 394.3 4.0% 821.7 882.7 -6.9%
Of which, community
clinics 101.3 103.2 -1.8% 199.9 253.4 -21.1%
Ø The number of polyclinics and community clinics operated by
the business is provided below.
Unaudited Jun-23 Mar-23 Change Jun-22 Change
(q-o-q) (y-o-y)
Number of clinics 35 36 - 35 -
Of which, polyclinics 17 17 - 1 6 1
Of which, community
clinics 1 8 19 -1 1 9 -1
Ø The number of registered patients increased by c.19,000 y-o-y
to c.283,000 in Tbilisi and by c.22,000 y-o-y to c.623,000 across
the country as of 30-Jun-23.
Discussion of results, Diagnostics
(GEL '000 ) Unaudited
INCOME STATEMENT HIGHLIGHTS 2Q23 2Q22 Change 1H23 1H22 Change
Revenue, net [46] 4,776 3,937 21.3% 9,192 11,765 -21.9%
Of which, from regular
lab tests 4,666 3,219 45.0% 8,869 6,891 28.7%
Of which, from COVID-19
tests 110 718 -84.7% 323 4,874 -93.4%
Gross Profit 1,247 783 59.3% 2,265 3,053 -25.8%
6.2 -1.3
Gross profit margin 26.1% 19.9% ppts 24.6% 25.9% ppts
Operating expenses (ex.
IFRS 16) (850) (898) -5.3% (1,612) (2,093) -23.0%
EBITDA (ex. IFRS 16) 397 (115) NMF 653 960 -32.0%
EBITDA margin (ex. IFRS 11.2 -1.1
16) 8.3% -2.9% ppts 7.1% 8.2% ppts
N et (loss)/profit (ex.
IFRS 16) (598) (422) 41.7% (752) 328 NMF
INCOME STATEMENT HIGHLIGHTS
Ø As part of the post-COVID transition, the business has been
actively broadening its client base and diversifying its range of
non-COVID services. This translated into a 45.0% y-o-y increase in
revenues from regular lab tests in 2Q23, leading to a 21.3% y-o-y
increase in the total revenue of the business.
Ø The 21.9% y-o-y decrease in the net revenue of the diagnostics
business in 1H23 was driven by the suspension of Government
contracts for COVID testing in March 2022 as infections slowed and
became less severe. After having been the revenue driver in 2021
and the first quarter of 2022, revenues from COVID testing
decreased dramatically, and were down 93.4% y-o-y in 1H23.
Ø The strong 2Q23 performance translated into a 59.3% y-o-y
increase in gross profit with 26.1% gross profit margin (up 6.2
ppts y-o-y) and GEL 0.4 mln EBITDA with 8.3% EBITDA margin (up 11.2
ppts y-o-y).
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The key operating performance highlights for 2Q23 and 1H23 are
noted below:
Unaudited 2Q23 2Q22 Change 1H23 1H22 Change
Number of non-Covid tests
performed (thousands) 626 509 23.1% 1,234 1,111 11.0%
Average revenue per non-Covid
test (GEL) 7.5 6.3 17.8% 7.2 6.2 15.9%
Discussion of Other Portfolio Results
The four businesses in our "other" private portfolio are Auto
Service, Beverages, Housing Development, and Hospitality. They had
a combined value of GEL 286 .1 million at 3 0 - Jun -23, which
represented 8.5% of our total portfolio.
2Q23 & 1H23 aggregated performance highlights (GEL '000),
Other Portfolio
(Unaudited) 2Q23 2Q22 Change 1H23 1H22 Change
Revenue 149,512 121,607 22.9% 270,684 198,384 36.4%
EBITDA 10,897 10,093 8.0% 14,787 11,395 29.8%
Net cash flows from operating
activities (10,021) (1,018) NMF 935 (4,389) NMF
Ø Auto Service | The auto service business includes a car
services and parts business, and a periodic technical inspection
(PTI) business.
o Car services and parts business | In 2Q23, revenue was up by
24.3% y-o-y to GEL 13.1 million (up 42.5% y-o-y to GEL 24.9 million
in 1H23), reflecting an increase in retail, corporate and wholesale
segments. Similarly, the gross profit was up by 34.5% to GEL 3.6
million in 2Q23 and up by 55.6% to GEL 6.7 million in 1H23, y-o-y.
In 2Q23, operating expenses were up by 59.6% y-o-y (up by 57.6%
y-o-y in 1H23), reflecting the business growth and inflation
pressures. As a result, the business posted GEL 0.8 million EBITDA
in 2Q23, down by 10.7% y-o-y (GEL 1.5 million in 1H23, up by 48.7%
y-o-y).
o Periodic technical inspection (PTI) business | PTI business's
revenue was up by 24.5% y-o-y to GEL 4.5 million in 2Q23 (up by
18.5% y-o-y to GEL 9.2 million in 1H23). Revenue growth was driven
by an increase in primary vehicle inspections during the quarter,
further supported by the introduction of paid secondary checks in
2023 compared to the preceding periods where this service was
provided free of charge. The number of total cars serviced was up
by 10.8% and 4.9% y-o-y in 2Q23 and 1H23, respectively, translating
into a 19.2% and 16.8% y-o-y increase in EBITDA (2Q23 and 1H23
EBITDA was GEL 2.0 and GEL 4.3 million, respectively).
Ø Beverages | The beverages business combines three business
lines: a beer business, a distribution business and a wine
business.
o Beer business | The net revenue of the beer business increased
by 12.9% y-o-y to GEL 28.2 million in 2Q23 and by 22.8% y-o-y to
GEL 44.8 million in 1H23, reflecting the impact of the strong
recovery in tourism and increased product prices due to higher
demand. Beer and lemonade y-o-y sales (in hectolitres) were up 4.4%
and 37.6%, respectively, in 2Q23 (up by 11.9% and 48.4% y-o-y in
1H23). The average 2Q 2 3 GEL price per litre (average for beer and
lemonade) increased by 8.3% y-o-y (up by 8.4% in 1H23).
Consequently, the EBITDA of the business increased by 19.5% y-o-y
and stood at GEL 7.9 million in 2Q23 (up 40.9% y-o-y to GEL 10.3
million in 1H23).
o Distribution business | Revenue of the distribution business
increased by 7.6% and 18.5% y-o-y to GEL 51.6 million and GEL 85.9
million in 2Q23 and 1H23, respectively. In 2Q23, operating expenses
were up by 48.4% y-o-y (up by 52.4% y-o-y in 1H23), reflecting the
business growth and inflation. As a result, the business posted an
EBITDA of GEL 3.1 million in 2Q23, down by 5.5% y-o-y ( GEL 3.9
million in 1H23, up by 2.1% y-o-y).
o Wine business | The net revenue of the wine business was up by
44.7% to GEL 16.1 million in 2Q23 (up by 55.6% y-o-y to GEL 25.8
million in 1H23), driven by a 68.7% increase in the number of
bottles sold in 2Q23 (up by 84.4% in 1H23), attributable to
significant growth in exports (export share in total sales was up
by 9.0ppts to 89.1% in 2Q23 and up by 6.7ppts to 87.3% in 1H23)
Consequently, EBITDA increased 2.2x times to GEL 1.4 million in
2Q23 (up by GEL 1.1 million to GEL 0.6 million in 1H23).
Ø Housing development and hospitality businesses | In light of
the increased sales and construction progress, 2 Q2 3 revenue of
the housing development business was up 33.2% y-o-y to GEL 5 9.5
million (up by 56.9% y-o-y to GEL 1 10.8 million in 1 H 23).
However, 2Q23 EBITDA decreased by GEL 2.7 million y-o-y to negative
GEL 2.1 million, reflecting decreased profitability of the ongoing
residential projects due to the remeasurement of the construction
budgets as a result of significant inflation within the
construction materials (1H23 EBITDA was down by GEL 3.8 million to
negative GEL 5.1 million y-o-y). The revenue of the hospitality
business increased by 37.5% y-o-y in 2Q23 (up by 15.6% y-o-y in
1H23), while the hospitality business EBITDA was up by GEL 0.3
million to negative GEL 1.1 million in 2Q23 (1H23 EBITDA was up by
38.4% y-o-y to GEL 1.0 million). In 1H23, the hospitality business
successfully completed the sale of two operational hotels, a vacant
land plot and an under-construction hotel located in Tbilisi (the
latter completed in 2Q23). The total consideration from these
transaction amounts to US$ 36.4 million. The proceeds from these
sales were fully utilised for deleveraging the hospitality
business's balance sheet.
RECONCILIATION OF ADJUSTED INCOME STATEMENT TO IFRS INCOME
STATEMENT
The table below reconciles the adjusted income statement to the
IFRS income statement. Adjustments to reconcile adjusted income
statement with IFRS income statement mainly relate to eliminations
of income, expense and certain equity movement items recognised at
JSC Georgia Capital, which are subsumed within gross investment
(loss)/income in IFRS income statement of Georgia Capital PLC.
2Q23, unaudited 1H23, unaudited
GEL '000, unless otherwise Adjusted Adjustment IFRS Adjusted Adjustment IFRS
noted IFRS income IFRS income income
(Unaudited) income statement statement statement
statement
----------- ----------- ----------- ------------- ----------- -----------
Dividend income 121,661 (109,661) 12,000 148,074 (136,074) 12,000
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Of which, regular dividend
income 81,316 (69,316) 12,000 86,503 (74,503) 12,000
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Of which, buyback dividend
income 40,345 (40,345) - 61,571 (61,571) -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Interest income 5,015 (5,015) - 9,991 (9,991) -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Realised/unrealised
gain/(loss) on liquid
funds /
Gain on Eurobond buybacks 654 (654) - 1,085 (1,085) -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Interest expense (13,000) 13,000 - (26,751) 26,751 -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Gross operating income/(loss) 114,330 (102,330) 12,000 132,399 (120,399) 12,000
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Operating expenses (administrative,
salaries and other employee
benefits) (9,238) 9,238 - (19,171) 19,171 -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
GCAP net operating
income/(loss) 105,092 (93,092) 12,000 113,228 (101,228) 12,000
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Total investment return
/ gain on investments
at fair value 83,906 84,749 168,655 134,387 100,280 234,667
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Administrative expenses,
salaries and other employee
benefits - (1,337) (1,337) - (3,060) (3,060)
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Income/(loss) before
foreign exchange movements
and non-recurring expenses 188,998 (9,680) 179,318 247,615 (4,008) 243,607
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Net foreign currency
gain/(loss) (9,389) 9,432 43 12,631 (13,749) (1,118)
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Non-recurring expenses (1,321) 1,321 - (1,321) 1,321 -
------------------------------------- ----------- ----------- ----------- ------------- ----------- -----------
Net income/(loss) 178,288 1,073 179,361 258,925 (16,436) 242,489
===================================== =========== =========== =========== ============= =========== ===========
ADDITIONAL FINANCIAL INFORMATION
The 1H23 NAV Statement shows the development of NAV since
31-Dec-22:
GEL '000, unless Dec-22 1. 2a. 2b. 2c. 3. 4. Jun Change
otherwise noted Value Investment Buyback Dividend Operating Liquidity/ -23 %
Unaudited creation and expenses FX/Other
([47]) Divestments
Listed and
Observable
Portfolio
Companies
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Bank of Georgia
(BoG) 830,463 166,791 - - (114,408) - - 882,846 6.3%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Water Utility 155,000 4,000 - - - - - 159,000 2.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Listed and
Observable
Portfolio
Value 985,463 170,791 - - (114,408) - - 1,041,846 5.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio value
change
% 17.3% 0.0% 0.0% -11.6% 0.0% 0.0% 5.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
Companies
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Large Companies 1,437,610 85,888 - - (28,479) - 1,243 1,496,262 4.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Retail
(Pharmacy) 724,517 18,776 - - (20,061) - 273 723,505 -0.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Hospitals 433,193 (7,406) - - - - 273 426,060 -1.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Insurance (P&C
and
Medical) 279,900 74,518 - - (8,418) - 697 346,697 23.9%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which, P&C
Insurance 228,045 56,636 - - (8,418) - 697 276,960 21.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Medical
Insurance 51,855 17,882 - - - - - 69,737 34.5%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Investment Stage
Companies 501,407 21,982 16,223 - (5,187) - 1,937 536,362 7.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Renewable Energy 224,987 20,517 5,718 - (5,187) - 1,647 247,682 10.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Education 164,242 9,171 10,505 - - - 229 184,147 12.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Clinics and
Diagnostics 112,178 (7,706) - - - - 61 104,533 -6.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Other Companies 274,147 3,800 4,200 - - - 3,947 286,094 4.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Private
Portfolio
Value 2,213,164 111,670 20,423 - (33,666) - 7,127 2,318,718 4.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
value change % 5.0% 0.9% 0.0% -1.5% 0.0% 0.3% 4.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,198,627 282,461 20,423 - (148,074) - 7,127 3,360,564 5.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
value change % 8.8% 0.6% 0.0% -4.6% 0.0% 0.2% 5.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Debt (2) (380,905) - (20,423) (53,720) 148,074 (10,884) (7,006) (324,864) -14.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Cash
and
liquid funds 411,844 - (20,423) (53,720) 95,237 (10,884) (20,929) 401,125 -2.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Loans
issued 26,830 - - - - - (9,369) 17,461 -34.9%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
Accrued
dividend
income - - - - 52,837 - - 52,837 0.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Gross
Debt (819,579) - - - - - 23,292 (796,287) -2.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net other
assets/
(liabilities)
(3) (331) - - - - (8,287) 7,515 (1,103) NMF
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
share-based
comp. - - - - - (8,287) 8,287 - 0.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,817,391 282,461 - (53,720) - (19,171) 7,636 3,034,597 7.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV change % 10.0% 0.0% -1.9% 0.0% -0.7% 0.3% 7.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Shares
outstanding(47) 42,973,462 - - (2,142,418) - - 580,136 41,411,180 -3.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 65.56 6.57 0.00 2.13 0.00 (0.44) (0.54) 73.28 11.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 10.0% 0.0% 3.2% 0.0% -0.7% -0.8% 11.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Basis of presentation
This announcement contains unaudited financial results presented
in accordance with IAS 34 - Interim Financial Reporting as adopted
in the United Kingdom. The financial results are unaudited and are
derived from management accounts.
Under IFRS 10, Georgia Capital PLC meets the "investment entity"
definition. For more details about the bases of preparation please
refer to page 96 in Georgia Capital PLC 2022 Annual report.
The presentation of the Income Statement (Adjusted) and some of
the information under the NAV Statement should be considered to be
Alternative Performance Measures (APM).
GLOSSARY
1. APM - Alternative Performance Measure.
2. GCAP refers to the aggregation of stand-alone Georgia Capital
PLC and stand-alone JSC Georgia Capital accounts.
3. Georgia Capital and "the Group" refer to Georgia Capital PLC
and its portfolio companies as a whole.
4. NMF - Not meaningful.
5. NAV - Net Asset Value, represents the net value of an entity
and is calculated as the total value of the entity's assets minus
the total value of its liabilities.
6. LTM - last twelve months.
7. EBITDA - Earnings before interest, taxes, non-recurring
items, FX gain/losses and depreciation and amortisation; The Group
has presented these figures in this document because management
uses EBITDA as a tool to measure the Group's operational
performance and the profitability of its operations. The Group
considers EBITDA to be an important indicator of its representative
recurring operations.
8. ROIC - return on invested capital is calculated as EBITDA
less depreciation, divided by the aggregate amount of total equity
and borrowed funds.
9. Loss ratio equals net insurance claims expense divided by insurance revenue.
10. Expense ratio in P&C Insurance equals sum of acquisition
costs and operating expenses divided by insurance revenue.
11. Combined ratio equals sum of the loss ratio and the expense
ratio in the insurance business.
12. ROAE - Return on average total equity (ROAE) equals profit
for the period attributable to shareholders divided by monthly
average equity attributable to shareholders of the business for the
same period.
13. Net investment - gross investments less capital returns
(dividends and sell-downs).
14. EV - enterprise value.
15. Liquid assets & loans issued include cash, marketable
debt securities and issued short-term loans at GCAP level.
16. Total return / value creation - total return / value
creation of each portfolio investment is calculated as follows: we
aggregate a) change in beginning and ending fair values, b) gains
from realised sales (if any) and c) dividend income during period.
We then adjust the net result to remove capital injections (if any)
to arrive at the total value creation / investment return.
17. WPP - Wind power plant.
18. HPP - Hydro power plant.
19. PPA - Power purchase agreement.
20. Number of shares outstanding - Number of shares in issue
less total unawarded shares in JSC GCAP's management trust.
21. Market Value Leverage ("MVL"), also Loan to Value ("LTV") -
Interchangeably used across the document and is calculated by
dividing net debt to the total portfolio value.
22. NCC - Net Capital Commitment, representing an aggregated
view of all confirmed, agreed and expected capital outflows at the
GCAP HoldCo level.
23. NCC Ratio - Equals Net Capital Commitment divided by
portfolio value.
Principal risks and uncertainties
Understanding our risks
In the Group's 2022 Annual Report and Accounts we disclosed the
principal risks and uncertainties and their potential impact, as
well as the trends and outlook associated with these risks and the
actions we take to mitigate these risks. We have updated this
disclosure to reflect recent developments and this is set out in
full below. If any of the following risks were to occur, the
Group's business, financial condition, results of operations or
prospects could be materially affected. The risks and uncertainties
described below may not be the only ones the Group faces. The order
in which the principal risks and uncertainties appear does not
denote their order of priority. Additional risks and uncertainties,
including those that the Group is currently not aware of or deems
immaterial, may also result in decreased revenues, incurred
expenses or other events that could result in a decline in the
value of the Group's securities.
REGIONAL INSTABILITY RISK
PRINCIPAL RISK / UNCERTAINTY The Georgian economy and our business may be adversely
affected by regional tensions. Georgia shares
borders with Russia, Azerbaijan, Armenia and the
Republic of Türkiye, and has two breakaway
territories, Abkhazia and the Tskhinvali/South
Ossetia regions. In addition to strong political
and geographic influences, regional countries
are highly linked to the Georgian economy representing
its significant historical trading partners.
Following a significant Russian military build-up
near the Russia-Ukraine border and months of rising
tensions, Russian troops crossed the border on
24 February 2022, and the situation escalated
into a war. In response to the invasion, all G-7
countries, the EU and many other countries have
announced severe economic sanctions on Russia,
including selected high-profile Russian banks,
Russian entities and Russian individuals. At the
start of the war, there was a significant depreciation
of the Russian Ruble against foreign currencies,
although the Ruble has since recovered but remains
depreciated compared to the pre-war period. The
market value of Russian securities has also decreased
significantly. As the situation grinds on, the
already steep humanitarian costs and economic
losses for Ukraine, Russia and the rest of the
world are likely to deepen. Ukraine and Russia
are particularly important trade partners of Georgia,
and spillover risks remain. The length and outcome
of the war are clearly uncertain, but it is possible
that the negative impact of the war will become
more pronounced in the medium to longer term and
could continue to have a material impact on market
confidence, affecting all regional countries.
Various tensions have also existed between Russia
and Georgia for more than 15 years, and the two
countries also had a brief armed conflict in 2008,
which led to Russia's control of the two breakaway
territories. Finally, there has also been ongoing
geopolitical tension, political instability, economic
instability and military conflict between other
regional countries, with the latest flare-up culminating
in a six-week war (September-November 2020) between
Armenia and Azerbaijan over the disputed Nagorno-Karabakh
region. Despite the peace agreement, skirmishes
are reported to have occurred on several occasions,
most recently in September 2022. The continuation
or escalation of the war, political instability,
geopolitical conflict, the economic decline of
Georgia's trading partners and any further tension
with Russia, including border and territorial
disputes, may have a negative impact on the political
or economic stability of Georgia, which in turn
may affect our business unfavourably, including
putting adverse pressure on our business model,
our revenues, our financial position and the valuations
of our listed and private portfolio companies.
-------------------------------------------------------------------
KEY DRIVERS / TRS The Russian invasion of Ukraine has resulted in
extraordinary economic disruption, as market confidence
has plunged, unprecedented sanctions have been
imposed upon the Russian economy, food and energy
prices have surged and spillover risks have been
substantially aggravated, with further economic
consequences to follow as the situation develops.
While food and energy prices have been relatively
stabilising since the second half of 2022, markets
remain highly unpredictable in light of the ongoing
conflict.
Although a ceasefire agreement ended the six-week
Armenia-Azerbaijan war in November 2020, the conflict
has not been conclusively resolved. Russian peacekeeping
forces were deployed for an initial period of
five years. Despite peacekeeping efforts, tensions
flared up again in September 2022, resulting in
a high number of fatalities on both sides and
risking another major escalation. The EU has deployed
civilian monitors on the Armenian side of the
border, aiming to aid in keeping the peace. The
risks of a further flare-up depend on the success
of the peacekeeping mission.
Russia imposed economic sanctions on Georgia in
2006, and conflict between the countries escalated
in 2008 when Russian forces crossed Georgian borders
and recognised the independence of Abkhazia and
the Tskhinvali/South Ossetia regions. Russian
troops continue to occupy the regions, and tensions
between Russia and Georgia persist. The introduction
of a preferential trade regime between Georgia
and the EU in 2016, the European Parliament's
approval of a proposal on visa liberalisation
for Georgia in 2017, and Georgia's recently attaining
"European perspective" for EU candidacy could
potentially intensify tensions between the countries.
Russia banned direct flights in July 2019 and
recommended stopping the sale of holiday packages
to Georgia. The decision was made in response
to anti-Putin protests in Tbilisi, which started
after a member of the Russian parliament addressed
the Georgian parliament in Russian from the speaker's
chair. In May 2023, Vladimir Putin signed a decree
abolishing the visa regime for Georgian citizens
starting May 15, 2023. In addition, the ban on
direct flights to Georgia was also lifted from
May 15, 2023.
-------------------------------------------------------------------
MITIGATION The Group actively monitors significant developments
in the region and risks related to political instability
and the Georgian Government's response thereto.
It also develops responsive strategies and action
plans of its own. The Georgian export market shifted
away from the Russian market after Russia's 2006
embargo, and the Group participated in that shift.
In 2022, Russia accounted for 12% of Georgian
exports, as opposed to 17.8% in 2005.
Since the beginning of the war, the migration
effect from Russia, Ukraine and Belarus has altered
the composition of foreign currency inflows from
remittances and international visitors. The migration
effect has resulted in an 86% y-o-y increase in
remittance inflows in 2022, including a fivefold
increase of up to US$ 2.1 billion from Russia.
Remittances increased by 32.5% in 1H23. Moreover,
international travel receipts have increased substantially
from the three countries. With most of the migrants
expected to have arrived for long-term stays,
it is currently impossible to estimate the long-term
impact of the migration effect. Whilst elevated
foreign currency inflows effectively constitute
rising external demand in the short run, the medium
to long-term effects remains highly uncertain,
depending on the timing and terms of the eventual
conclusion of the war in Ukraine. Despite this
surge in foreign currency inflows predominantly
from Russia, both remittance inflows and tourism
receipts remain diversified, with the EU having
emerged as the top foreign currency provider since
2019 before the Russia-Ukraine war. As travel
resumes globally, it is hoped that the rising
trend of tourism revenues from the EU will continue.
Merchandise exports also remain diversified, relatively
insulating foreign demand from regional risks,
and new destination countries have emerged as
top trading partners in 2022, such as Peru, Kazakhstan
and Kyrgyzstan. Armenia has emerged as the top
destination country for Georgian exports in 1H23,
accounting for 14.4% of total exports (7.8% in
1H22), While Russia was the largest destination
country for domestically produced Georgian exports
with an 18.1% share in 1H23 (12% in 1H22).
While financial market turbulence and geopolitical
tensions affect regional trading partners, Georgia's
preferential trading regimes, including DCFTA
with the EU and FTA with China, support the country's
resilience against regional external shocks. Enhancing
linkages with the EU market will further be supported
by a new recovery plan for Eastern Partnership
countries, including ambitious investments in
improved connectivity and unlocked potential to
get full benefits from the DCFTA. Following Ukraine's
plea to join the EU as it battles Russia's invasion,
Georgia and Moldova on 3 March 2022 submitted
their applications to join the EU. Georgia previously
planned to apply to join the European Union in
2024. The European Council granted a conditional
European perspective to all three countries, with
Ukraine and Moldova receiving the candidate status
pre-emptively and Georgia set to receive that
status as the conditions are satisfied. The Georgian
parliament has begun working on adopting the Council
recommendations. In February 2023, the European
Commission published analytical reports assessing
the stance of Georgia, Ukraine and Moldova with
respect to their alignment with the EU acquis
and offering guidance for the steps ahead. The
report for Georgia was widely regarded as favourable,
with the EU ambassador to Georgia congratulating
the Government for "a very positive report".
-------------------------------------------------------------------
CURRENCY AND MACROECONOMIC ENVIRONMENT RISKS
PRINCIPAL RISK / UNCERTAINTY Unfavourable dynamics of major macroeconomic variables,
including depreciation of the Lari against the
US dollar, may have a material impact on the Group's
performance.
On the macro-level, the country's free-floating
exchange rate works well as a shock absorber,
but on the micro-level, currency fluctuations
have affected and may continue to adversely affect
the Group's results. There is a risk that the
Group incurs material losses or loses material
amounts of revenue and, consequently, deteriorates
its solvency in a specific currency or group of
currencies due to the fluctuation of exchange
rates. The risk is mainly caused by significant
open foreign currency positions in the balance
sheets.
-------------------------------------------------------------------
KEY DRIVERS / TRS The Group's operations are primarily located in,
and most of its revenue is sourced from Georgia.
Factors such as GDP, inflation, interest and currency
exchange rates, as well as unemployment, personal
income, tourist numbers and the financial situation
of companies, can have a material impact on customer
demand for its products and services.
The Lari floats freely against major currencies.
After depreciating in 2020 due to capital outflows
from the emerging and frontier markets, a sudden
stop in tourism revenues and shrinking merchandise
exports, as well as rapidly deteriorating expectations,
the Lari reversed course and appreciated to higher
than pre-COVID levels by the end of 2022. On the
back of elevated FX inflows and favourable macro
conditions, GEL continued strengthening in 2023,
appreciating by 3.1% YTD against the US dollar
as of August 14, 2023.
Following rate cuts in 2020 to respond to the
COVID-19 shock, NBG reversed the stance and raised
the monetary policy rate by 300 bps during March
2021 - April 2022 to 11%, responding to the high
inflation, subsequent rising inflationary expectations
and increased uncertainty. On the back of supply-side
bottlenecks, rising global food, energy and commodity
prices and resumed economic activity inflation
peaked in January 2022 in Georgia and has begun
decelerating since then. Inflation has started
to reduce sharply in 2023 fallen below the target
since April 2023 and was reported at 0.3% in July
2023. Considering the latest inflation downward
trend, NBG has begun a gradual exit from tight
monetary policy and reduced the policy rate by
50 bps in May and by 25 bps in August to 10.25%.
However, due to the high domestic inflation, wage
growth trends, more than expected economic growth
and geopolitical uncertainty, the NBG stated that
it will continue to reduce the monetary policy
rate only at a slow pace.
According to preliminary Government projections,
the fiscal deficit fell to -3.1% of GDP in 2022,
and public debt fell to under 40% of GDP, aiding
disinflation on the domestic side and reducing
vulnerabilities on the external side.
Real GDP continued rapid growth in 2022, with
the economy growing by 10.1% y-o-y in 2022 following
a 10.5% expansion in 2021, finishing among top
performers in the world with respect to economic
growth in 2022 according to IMF and the World
Bank. The above-mentioned external factors as
well as strong domestic demand, continued credit
expansion and moderated but still expansionary
fiscal policy have all been supporting economic
growth. The high economic growth pace was kept
also in 2023 with preliminary economic growth
standing at 7.6% y-o-y in 1H23. The current Account
Deficit remained low at 3.2% of GDP in 1Q23 ,
following up on a historic low level of 4.0% in
2022. Foreign direct investments also increased
substantially throughout the year, totalling US$
2.0 billion in 2022, up by 61% y-o-y. In 1Q23
FDI amounted to US$ 497 million, down by 13.7%
y-o-y.
As a result of the improved macroeconomic environment,
Fitch Ratings revised Georgia's sovereign credit
rating outlook to positive from stable in January
2023 and reaffirmed the positive outlook in July
2023, citing "extremely strong economic recovery,
sound macro-policy and record of fiscal prudence".
A new three-year executive stand-by arrangement
worth US$ 280 million was approved by the IMF
in June 2022, focusing on structural reforms and
anchoring macroeconomic policy.
-------------------------------------------------------------------
MITIGATION The Georgian economy remains vulnerable to external
shocks due to a mix of its historically high current
account deficit, low domestic savings rate and
high level of dollarisation. The external balance
deteriorated following the onset of the COVID-19
pandemic, with the current account deficit amounting
to 12.5% of GDP in 2020, as tourism revenues,
a major source of foreign currency inflows, evaporated.
However, in 2021 the deficit improved to 10.4%
of GDP and in 2022 reached a record low of -4.0%
of GDP, including a record high 5.7% surplus in
3Q22, as external inflows have accelerated significantly,
with the migration effect supplementing higher
external demand from neighbour countries. In 1Q23
the current account deficit reduced to 3.2% of
GDP. Major sources of financing the current account
deficit are remittance inflows (up 32.5% y-o-y
in 1H23), merchandise exports (up 19.3% y-o-y),
and tourism revenues (up 58% y-oy in 1H23,124%
of respective 1H19 levels). The National Bank
of Georgia (NBG) bought a net US$ 1.6 bln in January
2022 - June 2023, taking advantage of surging
FX inflows. Subsequently, official reserve assets
reached record-high levels in 2023 and amounted
to US$ 5.1 billion in June 2023, up 29% y-o-y.
The Group continually monitors market conditions,
reviews market changes and also performs stress
and scenario testing to test its position under
adverse economic conditions, including adverse
currency movements.
The currency risk management process is an integral
part of the Group's activities; currency risk
is managed through regular and frequent monitoring
of the Group's currency positions and through
the timely and efficient elaboration of responsive
actions and measures. Senior management reviews
the overall currency positions of the Group several
times during the year and elaborates on respective
overall currency strategies; the Finance department
monitors the daily currency position for stand-alone
Georgia Capital, weekly currency positions on
a portfolio company level and manages short-term
liquidity of the Group across different currencies.
Control procedures involve regular monitoring
and control of the currency gap and currency positions,
running currency sensitivity tests and elaborating
response actions/steps based on the results of
the tests.
-------------------------------------------------------------------
REGULATORY AND LEGAL RISKS
PRINCIPAL RISK / UNCERTAINTY The Group owns businesses operating across a wide
range of industries: banking, healthcare, retail
(pharmacy) and distribution, property and casualty
insurance, medical insurance, real estate, water
utility and electric power generation, hydro and
wind power, beverages, education and auto service.
Many of these industries are highly regulated.
The regulatory environment continues to evolve,
and we cannot predict what additional regulatory
changes will be introduced in the future or the
impact they may have on our operations.
Georgia Capital and its businesses may be adversely
affected by risks related to litigations arising
from time to time in the ordinary course of business.
-------------------------------------------------------------------
KEY DRIVERS / TRS Each of our businesses is subject to different
regulators and regulation. Legislation in certain
industries, such as banking, healthcare, energy,
insurance and utilities is continuously evolving.
Different changes, including but not limited to
governmental funding, licensing and accreditation
requirements and tariff structures, may adversely
affect our businesses.
Except as disclosed on page 57, there were no
governmental, legal or arbitration proceedings
(including any such proceedings which are pending
or threatened of which GCAP is aware) during the
12 months preceding the date of this document
which may have, or have had in the recent past,
significant effects on either GCAP and/or its
portfolio companies' financial position or profitability.
-------------------------------------------------------------------
MITIGATION Continued investment in our people and processes
enable us to meet our current regulatory requirements
and means that we are well-placed to respond to
any future changes in regulation. Further, our
investment portfolio is well diversified, limiting
exposure to particular industry-specific regulatory
risks.
In line with our integrated control framework,
we carefully evaluate the impact of legislative
and regulatory changes as part of our formal risk
identification and assessment processes and, to
the extent possible, proactively participate in
the drafting of relevant legislation. As part
of this process, we engage where possible in constructive
dialogue with regulatory bodies and seek external
advice on potential changes to legislation. We
then develop appropriate policies, procedures
and controls as required to fulfil our compliance
obligations. Our compliance framework, at all
levels, is subject to regular review by Internal
Audit and external assurance providers.
Our integrated control framework also ensures
the application and development of mechanisms
for identifying legal risks in the Group's activities
in a timely manner, the monitoring and investigation
of the Group's activities in order to identify
any legal risks, the planning and implementation
of all necessary actions for the elimination of
identified legal risks, participation in legal
proceedings on behalf of the Group where necessary
and the investigation of possibilities for increasing
the effectiveness of the Group's legal documentation
and its implementation in the Group's daily activities.
The framework also considers the engagement of
the external legal advisors, when appropriate.
-------------------------------------------------------------------
INVESTMENT RISK
PRINCIPAL RISK / UNCERTAINTY The Group may be adversely affected by risks in
respect of specific investment decisions.
-------------------------------------------------------------------
KEY DRIVERS / TRS An inappropriate investment decision might lead
to poor performance. Investment risks may arise
from inadequate research and due diligence of
new acquisitions and bad timing of the execution
of both acquisition and divestment decisions.
The valuation of investments can be volatile in
line with the market developments.
-------------------------------------------------------------------
MITIGATION The Group manages investment risk with established
procedures and a thorough evaluation of target
acquisitions. Investment opportunities are subject
to rigorous appraisal and a multi-stage approval
process. Target entry and exit event prices are
monitored and updated regularly in relation to
market conditions and strategic aims. The Group
performs due diligence on each target acquisition
including on financial and legal matters. Subject
to an evaluation of the due diligence results
an acceptable price and funding structure is determined,
and the pricing, funding and future integration
plan is presented to the Board for approval. The
Board reviews and approves or rejects proposals
for development, acquisition and sale of investments
and decides on all major new business initiatives,
especially those requiring a significant capital
allocation. The Board focuses on both investment
strategy and exit processes, while also actively
managing exit strategies in light of the prevailing
market conditions.
-------------------------------------------------------------------
LIQUIDITY RISK
PRINCIPAL RISK / UNCERTAINTY Risk that liabilities cannot be met, or new investments
made, due to a lack of liquidity. Such risk can
arise from not being able to sell an investment
due to lack of demand from the market, from suspension
of dividends from portfolio companies, from not
holding cash or being able to raise debt.
-------------------------------------------------------------------
KEY DRIVERS / TRS The Group predominantly invests in private portfolio
businesses, potentially making the investments
difficult to monetise at any given point in time.
There is a risk that the Group will not be able
to meet its financial obligations and liabilities
on time due to a lack of cash or liquid assets
or the inability to generate sufficient liquidity
to meet payment obligations. This may be caused
by numerous factors, such as: the inability to
refinance long-term liabilities; suspended dividend
inflows from the investment entity subsidiaries;
excessive investments in long-term assets and
a resulting mismatch in the availability of funding
to meet liabilities; or failure to comply with
the creditor covenants causing a default.
-------------------------------------------------------------------
MITIGATION The liquidity management process is a regular
process, where the framework is approved by the
Board and is monitored by senior management and
the Chief Financial Officer. The framework models
the ability of the Group to fund under both normal
conditions (Base Case) and during stressed situations.
This approach is designed to ensure that the funding
framework is sufficiently flexible to ensure liquidity
under a wide range of market conditions. The Finance
department monitors certain liquidity measures
on a daily basis and actively analyses and manages
liquidity weekly. Senior management is involved
at least once a month and the Board on a quarterly
basis. Such monitoring involves a review of the
composition of the cash buffer, potential cash
outflows and management's readiness to meet such
commitments. It also serves as a tool to revisit
the portfolio composition and take necessary measures,
if required.
Since the adaption of the capital management framework
and introduction of the NCC navigation tool in
May 2022, the Group's primary emphasis has centred
around deleveraging. This strategic approach has
resulted in a significant reduction in the Group's
liquidity risk.
As outlined on page 2, in August 2023, Georgia
Capital successfully issued US$ 150 million sustainability-linked
bonds. The proceeds from the transaction, together
with existing liquid funds of GCAP, are being
utilised to fully redeem the existing US$ 300
million Eurobonds out of which US$ 283.4 million
have already been repurchased and cancelled. As
for the remaining US$ 16.6 million Eurobonds,
GCAP exercised the right of the optional redemption
at a "make whole" price, with the redemption of
all of the outstanding Eurobonds expected on 4
September 2023. Following the planned cancellation
and repayment of the outstanding Eurobonds, GCAP's
gross debt balance will decrease to US$ 150 million.
Overall, since the introduction of the Net Capital
Commitment concept in 1Q22, the NCC ratio has
decreased significantly, from 28.2% at 31-Mar-22
to 17.4% at 30-Jun-23. Going forward, the Group
targets to bring down the NCC ratio below 15%
by December 2025. The deleveraging strategy was
also implemented across our private portfolio
companies, where individual leverage targets have
been developed.
GCAP's latest corporate credit ratings are B1/Positive
by Moody's and B+/CreditWatch positive by S&P.
-------------------------------------------------------------------
PORTFOLIO COMPANY STRATEGIC AND EXECUTION RISKS
PRINCIPAL RISK / UNCERTAINTY Market conditions may adversely impact our strategy
and all our businesses have their own risks specific
to their industry. Our businesses have growth
and expansion strategies and we face execution
risk in implementing these strategies.
The Group will normally seek to monetise its investments,
primarily through strategic sale, typically within
five to ten years from acquisition, and we face
market and execution risk in connection with exits
at reasonable prices.
-------------------------------------------------------------------
KEY DRIVERS / TRS Each of our private portfolio companies and our
listed assets (Bank of Georgia) face its own risks.
These include risks inherent to their industry,
or to their industry particularly in Georgia,
and each faces significant competition. They also
face the principal risks and uncertainties referred
to in this table.
Macroeconomic conditions, the financial and economic
environment and other market conditions in international
capital markets may limit the Group's ability
to achieve a partial or full exit from its existing
or future businesses at reasonable prices. It
may not be possible or desirable to divest, including
because suitable buyers cannot be found at the
appropriate times, or because of difficulties
in obtaining favourable terms or prices, or because
the Group has failed to act at the appropriate
time.
-------------------------------------------------------------------
MITIGATION For each business, we focus on building a strong
management team and have successfully been able
to do so thus far. Management succession planning
is regularly on the agenda for the Nomination
Committee which reports to the Board on this matter.
The Board closely monitors the implementation
of strategy, financial and operational performance,
risk management and internal control framework,
and corporate governance of our businesses. We
hold management accountable for meeting targets.
For each industry in which we operate, we closely
monitor industry trends, market conditions and
the regulatory environment. We have also sought,
and continue to seek, advice from professionals
with global experience in relevant industries.
We carry our private portfolio companies at fair
value in our NAV Statement. The valuations are
audited, increasing the credibility of fair valuation
and limiting the risk of mispricing the asset.
In addition, the valuation of private large and
investment portfolio companies (60.5% of total
portfolio value) is performed by an independent
valuation company on a semi-annual basis. The
Group has a strong track record of growth and
has accessed the capital markets on multiple occasions
as part of the BGEO Group PLC, prior to the demerger
in May 2018. Our acquisition history has also
been successful, and we have been able to integrate
businesses due to our strong management with integration
experience. In 2022, GCAP successfully completed
the water utility business disposal, which represents
our most significant monetisation event to date
and marks the completion of the full investment
cycle for one of our large portfolio businesses
as set out on page 12 of the Group's 2022 Annual
Report.
-------------------------------------------------------------------
Statement of Directors' Responsibilities
We, the Directors, confirm that to the best of our
knowledge:
-- The unaudited interim condensed financial statements have
been prepared in accordance with International Accounting Standard
(IAS) 34 "Interim Financial Reporting", as adopted by the United
Kingdom and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
-- This Results Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
-- This Results Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.8R
(disclosure of related parties' transactions and changes
therein)
After making enquiries, the Directors considered it appropriate
to adopt the going concern basis in preparing this Results
Report.
The Directors of the Group are as follows:
Irakli Gilauri
David Morrison
Massimo Gesua' sive Salvadori
Maria Chatti-Gautier
Neil Janin
By order of the Board
Irakli Gilauri
Chairman & Chief Executive Officer
14 August 2023
Georgia Capital PLC Unaudited Interim
Condensed Financial Statements
30 June 2023
CONTENTS
INTERIM CONDENSED FINANCIAL STATEMENTS
Interim Condensed Statement of Financial Position
.....................................................................................................................
38
Interim Condensed Statement of Profit or Loss and Comprehensive
Income
............................................................................
39
Interim Condensed Statement of Changes in Equity
.....................................................................................................................
40
Interim Condensed Statement of Cash Flows
................................................................................................................................
41
SELECTED EXPLANATORY NOTES TO INTERIM CONDENSED FINANCIAL
STATEMENTS
1. Principal Activities
2. Basis of Preparation
3. Significant accounting policies
4. Segment Information
5. Equity Investments at Fair Value .
6. Equity
7. Fair Value Measurements
8. Maturity Analysis
9. Related Party Disclosures
10. Events after the Reporting Period .
Note 30 June 2023 (unaudited) 31 December 2022
----- --------------------------- -----------------
Assets
Cash and cash equivalents* 5,388 23,361
Prepayments 1,020 363
Equity investments at fair value 5 3,029,727 2,795,060
--------------------------- -----------------
Total assets 3,036,135 2,818,784
=========================== =================
Liabilities
Other liabilities 1,538 1,393
--------------------------- -----------------
Total liabilities 1,538 1,393
--------------------------- -----------------
Equity
Share capital 6 1,441 1,473
Additional paid-in capital and merger reserve 238,311 238,311
Retained earnings 2,794,845 2,577,607
--------------------------- -----------------
Total equity 3,034,597 2,817,391
Total liabilities and equity 3,036,135 2,818,784
=========================== =================
*As at 30 June 2023 and 31 December 2022 cash and cash
equivalents consist of current accounts with credit
institutions.
The Company's distributable reserves as at 30 June 2023 were GEL
1,210,423 (31 December 2022: 1,227,852).
The financial statements on page 38 to 60 were approved by the
Board of Directors on 14 August and signed on its behalf by:
Irakli Gilauri Chief Executive Officer
14 August 2023
Georgia Capital PLC
Registered No. 10852406
The accompanying notes on pages 42 to 60 are an integral part of
these interim condensed financial statements.
Note 30 June 2023 (unaudited) 30 June 2022 (unaudited)
----- ------------------------- -------------------------
Gains/ ( losses ) on investments at fair value 5 234,667 (501,249)
Dividend income 5 12,000 -
Gross investment profit /(loss) 246,667 (501,249)
------------------------- -------------------------
Administrative expenses (1,938) (2,436)
Salaries and other employee benefits (1,122) (1,348)
------------------------- -------------------------
Profit/(loss) before foreign exchange and non-recurring
items 243,607 (505,033)
------------------------- -------------------------
Net foreign currency loss (1,118) (3,929)
Non-recurring expense - (129)
Profit/(loss) before income taxes 242,489 (509,091)
------------------------- -------------------------
Income tax - -
Profit/(loss) for the period 242,489 (509,091)
------------------------- -------------------------
Other comprehensive income - -
Total comprehensive income/(loss) for the period 242,489 (509,091)
========================= =========================
Earnings/(Loss) per share (GEL): 6
- basic 6.0596 (11.8388)
- diluted 5.9337 (11.8388)
The accompanying notes on pages 42 to 60 are an integral part of
these interim condensed financial statements.
Additional
paid-in capital
and merger
Share capital reserve Treasury Shares Retained earnings Total
--------------- ------------------- ----------------- ------------------- ----------
1 January 2023 1,473 238,311 - 2,577,607 2,817,391
=============== =================== ================= =================== ==========
Profit for the
period - - - 242,489 242,489
Total comprehensive
income for the
period - - - 242,489 242,489
Increase in equity
arising from
share-based
payments - - - 271 271
Cancellation of
shares (Note 6) (32) - 32 - -
Purchase of
treasury shares
(Note 6) - - (32) (25,522) (25,554)
30 June 2023
(unaudited) 1,441 238,311 - 2,794,845 3,034,597
=============== =================== ================= =================== ==========
Additional
paid-in capital
and merger Retained
Share capital reserve Treasury Shares earnings Total
--------------- ------------------ ----------------- ------------------ ------------
1 January 2022 1,547 238,311 - 2,643,764 2,883,622
=============== ================== ================= ================== ============
Loss for the
period - - - (509,091) (509,091)
Total
comprehensive
loss for the
period - - - (509,091) (509,091)
Increase in
equity arising
from share-based
payments - - - 223 223
Cancellation of
shares (Note 6) (45) - 45 - -
Purchase of
treasury shares
(Note 6) - - (55) (42,138) (42,193)
30 June 2022
(unaudited) 1,502 238,311 (10) 2,092,758 2,332,561
=============== ================== ================= ================== ============
The accompanying notes on pages 42 to 60 are an integral part of
these interim condensed financial statements.
Note 30 June 2023 (unaudited) 30 June 2022 (unaudited)
----- ------------------------- -------------------------
Cash flows from operating activities
Salaries and other employee benefits paid (851) (1,117)
General, administrative and operating expenses paid (1,859) (1,319)
Net other expense paid (667) (3,065)
-------------------------
Net cash flows used in operating activities before
income tax (3,377) (5,501)
Income tax paid - -
------------------------- -------------------------
Net Cash flows used in operating activities (3,377) (5,501)
------------------------- -------------------------
Cash flows from investing activities
Capital redemption from subsidiary 5 - 77,095
Dividends received 5 12,000 -
Cash flows from investing activities 12,000 77,095
------------------------- -------------------------
Cash flows from financing activities
Other purchases of treasury shares 6 (25,351) (41,946)
Acquisition of treasury shares under share-based
payment plan 6 (203) (247)
Net cash used in financing activities (25,554) (42,193)
------------------------- -------------------------
Effect of exchange rates changes on cash and cash
equivalents (1,042) (4,369)
------------------------- -------------------------
Net (decrease)/ increase in cash and cash equivalents (17,973) 25,032
------------------------- -------------------------
Cash and cash equivalents, beginning of the period 23,361 7,200
Cash and cash equivalents, end of the period 5,388 32,232
The accompanying notes on pages 42 to 60 are an integral part of
these interim condensed financial statements.
1. Principal Activities
Georgia Capital PLC ("Georgia Capital" or the "Company") is a
public limited liability company incorporated in England and Wales
with registered number 10852406. Georgia Capital PLC holds 100% of
the share capital of the JSC Georgia Capital ("JSC GCAP"), which
makes up a group of companies (the "Group"), focused on buying,
building and developing businesses in Georgia. The Group currently
has the following portfolio businesses (i) a retail (pharmacy)
business, (ii) a hospitals business, (iii) an insurance business
(P&C and medical insurance); (iv) a clinics and diagnostics
business, (v) a renewable energy business (hydro and wind assets)
and (vi) an education business; Georgia Capital also holds other
small private businesses across different industries in Georgia; a
20% equity stake in the water utility business and a 19.8% equity
stake in LSE premium-listed Bank of Georgia Group PLC ("BoG"), a
leading universal bank in Georgia. The shares of Georgia Capital
are admitted to trading on the London Stock Exchange PLC's Main
Market for listed securities under the ticker CGEO, effective 29
May 2018.
Georgia Capital's registered legal address is 42 Brook Street,
London W1K 5DB, England, United Kingdom.
As at 30 June 2023 and 31 December 2022, the following
shareholders owned more than 5% of the total outstanding shares* of
Georgia Capital. Other shareholders individually owned less than 5%
of the outstanding shares.
Shareholder 30 June 2023 (unaudited) 31 December 2022
------------------------- -----------------
Gemsstock Ltd 11% 11%
Allan Gray Ltd 7% 7%
Others 82% 82%
-------------------------
Total 100% 100%
------------------------- -----------------
*For the purposes of calculating percentage of shareholding, the
denominator includes total number of issued shares which includes
shares held in the trust for share-based compensation purposes of
the Group.
References to the Group are applied in these financial
statements in the context of going concern assessment, segment,
fair valuation and risk management disclosures.
2. Basis of Preparation
General
The Company's condensed half year financial statements have been
prepared in accordance with IAS 34, Interim Financial Reporting, as
adopted by the United Kingdom. They should be read in conjunction
with the annual financial statements for the year ended 31 December
2022, which have been prepared in accordance with UK-adopted
international accounting standards ("IFRS"), were approved by the
Board on 23 March 2023 and delivered to the Registrar of
Companies.
The interim condensed financial statements are unaudited and
have not been reviewed by auditors pursuant to the Auditing
Practices Board guidance on "Review of interim financial
information".
These interim condensed financial statements are presented in
thousands of Georgian Lari ("GEL"), except per share amounts, which
are presented in Georgian Lari, and unless otherwise noted.
Going concern
The Board of Directors of Georgia Capital has made an assessment
of the Company's ability to continue as a going concern and is
satisfied that it has the resources to continue in business for a
period of at least 12 months from the date of approval of the
financial statements. Furthermore, management is not aware of any
material uncertainties that may cast significant doubt upon the
Company's ability to continue as a going concern for the
foreseeable future. Therefore, the financial statements continue to
be prepared on a going concern basis.
3. Significant accounting policies
Accounting policies
The accounting policies and methods of computation applied in
the preparation of these interim condensed financial statements are
consistent with those disclosed in the annual financial statements
of the Company as at and for the year ended 31 December 2022. The
Company has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
The following amendments became effective from 1 January 2023
and had no material impact on the Company's condensed interim
financial statements:
IFRS 17 Insurance contracts
Amendments to IAS 8 Accounting Policies Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of accounting policies
Amendments to IAS 12 Income Taxes - Deferred Tax related to
Assets and Liabilities arising from a Single Transaction
Amendments to IAS 12 Income Taxes - D eferred Tax Assets and
Liabilities related to Pillar Two Income Taxes
The following standards that are issued but not yet effective
are also expected to have no material impact on the Company's
condensed interim financial statements:
Amendments to IFRS 16 Leases - Lease Liability in a Sale and
Leaseback
Amendments to IAS 1 Presentation of Financial Statements -
Classification of Liabilities as Current or Non-current
Amendments to IAS 1 Presentation of Financial Statements -
Classification of debt with covenants
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments - Disclosures: Supplier Finance Arrangements
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
4. Segment Information
For management purposes, the Group is organised into the
following operating segments as follows:
listed and observable portfolio companies, private large
portfolio companies, private investment stage portfolio companies,
private other portfolio companies, and corporate centre.
Listed and observable portfolio companies segment
BOG - the Company has a significant investment in London Stock
Exchange premium listed Bank of Georgia Group PLC. GCAP does not
hold voting rights in BOG.
Water Utility - the Company has a 20% equity stake in the Water
Utility business, following the disposal of 80% of its shares
during 2021. Water Utility is a regulated monopoly in Tbilisi and
the surrounding area, where it provides water and wastewater
services.
Private portfolio companies segment
Large portfolio companies segment:
The large portfolio companies segment includes investments in
hospitals, retail (pharmacy), and insurance businesses.
Retail (Pharmacy) consists of a retail pharmacy chain and a
wholesale business that sells pharmaceuticals and medical supplies
to hospitals and other pharmacies.
Hospitals business is the largest healthcare market participant
in Georgia. Hospitals business provides secondary and tertiary
level healthcare services.
Insurance business comprises a property and casualty insurance
and medical insurance businesses. Principally providing wide-scale
property and casualty and medical insurance services to corporate
and retail clients.
Investment stage portfolio companies segment:
The investment stage portfolio companies segment includes
investments into clinics, diagnostics, renewable energy and
education businesses.
Clinics & Diagnostics business consists of clinics,
providing outpatient and basic inpatient services, polyclinics
providing outpatient diagnostic and treatment services, and
diagnostics business, operating the largest laboratory in the
entire Caucasus region.
Renewable energy business principally operates three wholly
owned commissioned renewable energy assets. In addition, a pipeline
of renewable energy projects is in an advanced stage of
development.
Education business combines majority stakes in four leading
private schools in Tbilisi. It provides education for preschool to
12th grade (K-12);
Other portfolio companies segment:
The other portfolio companies segment includes Housing
Development, Hospitality, Beverages and Auto Service
businesses.
Corporate Centre comprising of Georgia Capital PLC and JSC
Georgia Capital.
Management monitors the fair values of its segments separately
for the purposes of making decisions about resource allocation and
performance assessment. Transactions between segments are accounted
for at actual transaction prices.
4 . Segment Information (continued)
The following table presents the net asset value (NAV) of the
Group's operating segments at 30 June 2023 and the roll-forward
from 31 December 2022:
NAV Statement 31 1.Value 2a. 2b. 2c. 3.Operating 4. 30 June
December Investments Buybacks Dividends Liquidity 2023
2022 & (unaudited)
Divestments
---------- ------------ --------- ------------ ------------
Creation Expenses Management/
FX / Other
---------- ---------- ------------ --------- ------------ ------------ ------------ ------------
Listed and
Observable
Portfolio
Companies 985,463 170 , 791 - - (114,408) - - 1,041,846
BoG 830,463 166,791 - - (114,408) * - - 882,846
Water Utility 155,000 4,000 - - - - - 159,000
Private Portfolio
Companies 2,213,164 111,670 20,423 - (33,666) - 7,127 2,318,718
Large Portfolio
Companies 1,437,610 85,888 - - (28,479) - 1,243 1,496,262
Retail (Pharmacy) 724,517 18,776 - - (20,061) - 273 723,505
Hospitals 433,193 (7,406) - - - - 273 426,060
Insurance (P&C and
Medical) 279,900 74,518 - - (8,418) - 697 346,697
Of which, P&C
Insurance 228,045 56,636 - - (8,418) - 697 276,960
Of which, Health
Insurance 51,855 17,882 - - - - - 69,737
Investment Stage
Portfolio
Companies 501,407 21,982 16,223 - (5,187) - 1,937 536,362
Clinics and
diagnostics 112,178 (7,706) - - - - 61 104,533
Renewable energy 224,987 20,517 5,718 - (5,187) - 1,647 247,682
Education 164,242 9,171 10,505 - - - 229 184,147
Other Portfolio
Companies 274,147 3,800 4,200 - - - 3,947 286,094
Total Portfolio
Value 3,198,627 282,461 20,423 - (148,074) - 7,127 3,360,564
---------- ---------- ------------ --------- ------------ ------------ ------------ ------------
Net Debt (380,905) - (20,423) (53,720) 148,074 (10,884) (7,006) (324,864)
of which, Cash
and liquid
funds 411,844 - (20,423) (53,720) 95,237 (10,884) (20,929) 401,125
of which, Loans
issued 26,830 - - - - - (9,369) 17,461
of which,
Dividend
receivable - - - - 52,837 - - 52,837
of which, Gross
Debt (819,579) - - - - - 23,292 (796,287)
Net other assets/
(liabilities) (331) - - - - (8,287) 7,515 (1,103)
Net Asset Value 2,817,391 282,461 - 53,720 - (19,171) 7,636 3,034,597
========== ========== ============ ========= ============ ============ ============ ============
* In segment information, dividend income includes consideration
received as a result of participation in BoG buyback programme.
4 . Segment Information (continued)
The following table presents the NAV statement of the Group's
operating segments at 30 June 2022 and the roll forward from 31
December 2021:
NAV Statement 31 December 1.Value 2a. 2b. 2c. 3.Operating 4. 30 June
2021 Investments Buybacks Dividends Liquidity 2022
& (unaudited)
Divestments
------------ ------------ --------- ---------- ------------
Creation Expenses Management/
FX / Other
------------ ---------- ------------ --------- ---------- ------------ ------------ ------------
Listed and
Observable
Portfolio
Companies 681,186 (189,061) 139,392 - (22,798) - - 608,719
BoG 681,186 (202,669) - - (22,798) - - 455,719
Water Utility - 13,608 139,392 - - - - 153,000
Private Portfolio
Companies 2,935,045 (276,205) (552,804) - (11,623) - 2,281 2,096,694
Large Portfolio
Companies 2,249,260 (156,554) (696,960) - (7,374) - 821 1,389,193
Retail (Pharmacy) 710,385 (39,358) - - - - - 671,027
Hospitals 573,815 (95,769) - - - - - 478,046
Water Utility 696,960 - (696,960) - - - - -
Insurance (P&C and
Medical) 268,100 (21,427) - - (7,374) - 821 240,120
Of which, P&C
Insurance 211,505 (5,142) - - (7,374) - 821 199,810
Of which, Health
Insurance 56,595 (16,285) - - - - - 40,310
Investment Stage
Portfolio
Companies 461,140 (14,970) 1,559 - (4,249) - 487 443,967
Clinics and
diagnostics 158,004 (37,958) - - - - - 120,046
Renewable energy 173,288 2,247 395 - (4,249) - 487 172,168
Education 129,848 20,741 1,164 - - - - 151,753
Other Portfolio
Companies 224,645 (104,681) 142,597 - - - 973 263,534
Total Portfolio
Value 3,616,231 (465,266) (413,412) - (34,421) - 2,281 2,705,413
------------ ---------- ------------ --------- ---------- ------------ ------------ ------------
Net Debt (711,074) - 419,419 (53,540) 34,421 (10,951) (44,189) (365,914)
of which, Cash
and liquid
funds 272,317 - 555,996 (53,540) 11,623 (10,951) (112,078) 663,367
of which, Loans
issued 154,214 - (136,577) - - - 7,737 25,374
of which,
Dividend
receivable - - - - 22,798 - - 22,798
of which, Gross
Debt (1,137,605) - - - - - 60,152 (1,077,453)
Net other assets/
(liabilities) (21,535) - (6,007) - - (8,749) 29,353 (6,938)
Net Asset Value 2,883,622 (465,266) - (53,540) - (19,700) (12,555) 2,332,561
============ ========== ============ ========= ========== ============ ============ ============
1.Value Creation - measures the annual shareholder return on
each portfolio company for Georgia Capital. It is the aggregation
of a) the change in beginning and ending fair values, b) dividend
income during period. The net result is then adjusted to remove
capital injections (if any) to arrive at the total value creation /
investment return.; 2a.Investments and Divestments - represents
capital injections and divestments in portfolio companies made by
JSC GCAP; 2b. Buybacks - represent buybacks made by GCAP PLC and
JSC GCAP in order to satisfy share compensation of executives and
purchases under buyback program announced by GCAP PLC; 2c.Dividends
- represent dividends received from portfolio companies by JSC
GCAP; 3.Operating Expenses - holding company aggregated operating
expenses of GCAP PLC and JSC GCAP; 4.Liquidity Management/FX/Other
- holding company aggregated movements of GCAP PLC and JSC GCAP
related to liquidity management, foreign exchange movement,
non-recurring and other.
2. Net debt and Net other assets/(liabilities) represent
corporate centre .
4 . Segment Information (continued)
Reconciliation to IFRS financial statements:
30 June 2023 (unaudited)
-----------------------------------------------------------------------------------------------------
Georgia Aggregation Elimination Aggregated Reclassifications** NAV Statement
Capital PLC with JSC of double Holding
Georgia effect on Company
Capital* investments
--------------- -------------- -------------- -------------- -------------------- --------------
Cash and cash
equivalents 5 , 388 157,694 - 163,082 (163,082) -
Marketable
securities - 3,940 - 3,940 (3,940) -
Investment in
redeemable
securities - 12,789 - 12,789 (12,789) -
Prepayments 1 , 020 - - 1 , 020 (1 , 020) -
Loans issued - 17,461 - 17,461 (17,461) -
Other assets,
net - 55,958 - 55,958 (55,958) -
Equity
investments
at fair value 3 , 029 , 727 3,360,564 (3,029,727) 3,360,564 - 3,360,564
Total assets 3 , 036 , 135 3,608,406 (3,029,727) 3,614,814 (254,250) 3,360,564
=============== ============== ============== ============== ==================== ==============
Debt
securities
issued - 574,974 - 574,974 (574,974) -
Other
liabilities 1 , 538 3,705 - 5,243 (5,243) -
Total
liabilities 1 , 538 578,679 - 580,217 (580,217) -
=============== ============== ============== ============== ==================== ==============
Net Debt - - - - (324,864) (324,864)
of which, Cash
and liquid
funds - - - - 401,125 401,125
of which,
Loans issued - - - - 17,461 17,461
of which,
Dividend
receivable 52,837 52,837
of which,
Gross Debt - - - - (796,287) (796,287)
Net other
assets/
(liabilities) - - - - (1,103) (1,103)
Total
equity/NAV 3 , 034 , 597 3,029,727 (3,029,727) 3,034,597 - 3,034,597
=============== ============== ============== ============== ==================== ==============
30 June 2022 (unaudited)
---------------------------------------------------------------------------------------------------
Georgia Aggregation Elimination Aggregated Reclassifications** NAV Statement
Capital PLC with JSC of double Holding
Georgia effect on Company
Capital* investments
-------------- -------------- ------------- -------------- -------------------- --------------
Cash and cash
equivalents 32,232 150,688 - 182,920 (182,920) -
Amounts due
from credit
institutions - 182,881 - 182,881 (182,881) -
Marketable
securities - 137,186 - 137,186 (137,186) -
Investment in
redeemable
securities - 13,523 - 13,523 (13,523) -
Accounts
receivable 448 22,909 - 23,357 (23,357) -
Loans issued - 25,374 - 25,374 (25,374) -
Other assets,
net - 2,718 - 2,718 (2,718) -
Equity
investments
at fair value 2,303,029 2,705,413 (2,303,029) 2,705,413 - 2,705,413
Total assets 2,335,709 3,240,692 (2,303,029) 3,273,372 (567,959) 2,705,413
============== ============== ============= ============== ==================== ==============
Debt
securities
issued - 924,057 - 924,057 (924,057) -
Other
liabilities 3,148 13,606 - 16,754 (16,754) -
Total
liabilities 3,148 937,663 - 940,811 (940,811) -
============== ============== ============= ============== ==================== ==============
Net Debt - - - - (365,914) (365,914)
of which, Cash
and liquid
funds - - - - 663,367 663,367
of which,
Loans issued - - - - 25,374 25,374
of which,
Dividend
receivable 22,798 22,798
of which,
Gross Debt - - - - (1,077,453) (1,077,453)
Net other
assets/
(liabilities) - - - - (6,938) (6,938)
Total
equity/NAV 2,332,561 2,303,029 (2,303,029) 2,332,561 - 2,332,561
============== ============== ============= ============== ==================== ==============
* For a detailed breakdown of JSC Georgia Capital refer to note
7.
** Reclassification and adjustments to aggregated balances to
arrive at the NAV specific presentation, such as: aggregating cash,
marketable securities, repurchased GCAP bonds as cash and liquid
funds, debt securities issued as gross debt and netting of other
assets and liabilities; capitalization of project development
related expenses.
4 . Segment Information (continued)
The following table presents income statement information of the
Group's operating segments for the six months ended 30 June 2023
(unaudited) :
Private Portfolio Companies
----------------------------
Listed & Large Investment Other Corporate Total Intragroup Equity Investment
observable Stage Center Investment Changes Entity
Portfolio Reversal in JSC Total
Companies and GCAP
Adjustments
------- ----------- ------ ---------- --------- ------------ ----------
Gains on
investments at
fair value 56,383 57,409 16,795 3,800 - 134,387 128,714 (28,434) 234,667
Listed and
observable
Investments 56,383 - - - - 56,383 (56,383) - -
Private
Investments - 57,409 16,795 3,800 - 78,004 185,097 (28,434) 234,667
Dividend income 114,408 28,479 5,187 - - 148,074 (148,074) 12,000 12,000
Interest income - - - - 9,991 9,991 (9,991) - -
Gain on liquid
funds - - - - 1,085 1,085 (1,085) - -
Gross investment
profit 170,791 85,888 21,982 3,800 11,076 293,537 (30,436) (16,434) 246,667
----------- ------- ----------- ------ ---------- --------- ------------ ---------- -----------
Administrative
expenses - - - - (5,528) (5,528) 3,590 - (1,938)
Salaries and
other employee
benefits - - - - (13,643) (13,643) 12,521 - (1,122)
Interest expense - - - - (26,751) (26,751) 26,751 - -
Profit/(loss)
before
provisions,
foreign
exchange and
non-recurring
items 170,791 85,888 21,982 3,800 (34,846) 247,615 12,426 (16,434) 243,607
----------- ------- ----------- ------ ---------- --------- ------------ ---------- -----------
Expected credit
loss - - - - (41) (41) 41 - -
Net foreign
currency gain - - - - 12,670 12,670 (13,788) - (1,118)
Non-recurring
expense - - - - (1,321) (1,321) 1,321 - -
Profit/(loss)
before income
taxes 170,791 85,888 21,982 3,800 (23,538) 258,923 - (16,434)) 242,489
----------- ------- ----------- ------ ---------- --------- ------------ ---------- -----------
Income tax - - - - - - - - -
Profit/(loss)
for the period 170,791 85,888 21,982 3,800 (23,538) 258,923 - (16,434) 242,489
=========== ======= =========== ====== ========== ========= ============ ========== ===========
4 . Segment Information (continued)
The following table presents income statement information of the
Group's operating segments for the six months ended 30 June 2022
(unaudited) :
Private Portfolio Companies
-----------------------------------
Listed & Large Investment Other Corporate Total Intragroup Equity Investment
observable Stage Center Investment Changes Entity
Portfolio Reversal in JSC Total
Companies and GCAP
Adjustments
---------- ----------- ---------- ---------- ---------- ------------ --------
(Losses)/gains
on investments
at fair value (211,859) (163,928) (19,219) (104,681) - (499,687) 5,851 (7,413) (501,249)
Listed and
observable
Investments (211,859) - - - - (211,859) 211,859 - -
Private
Investments - (163,928) (19,219) (104,681) - (287,828) (206,008) (7,413) (501,249)
Dividend income 22,798 7,374 4,249 - - 34,421 (34,421) - -
Interest income - - - - 18,150 18,150 (18,150) - -
Loss on liquid
funds - - - - (11,435) (11,435) 11,435 - -
Gross
investment
(loss)/profit (189,061) (156,554) (14,970) (104,681) 6,715 (458,551) (35,285) (7,413) (501,249)
----------- ---------- ----------- ---------- ---------- ---------- ------------ -------- -----------
Administrative
expenses - - - - (6,087) (6,087) 3,651 - (2,436)
Salaries and
other employee
benefits - - - - (13,613) (13,613) 12,265 - (1,348)
Interest
expense - - - - (37,679) (37,679) 37,679 - -
(Loss)/Profit
before
provisions,
foreign
exchange and
non-recurring
items (189,061) (156,554) (14,970) (104,681) (50,664) (515,930) 18,310 (7,413) (505,033)
----------- ---------- ----------- ---------- ---------- ---------- ------------ -------- -----------
Expected credit
loss - - - - (712) (712) 712 - -
Net foreign
currency
gain/(loss) - - - - 15,160 15,160 (19,089) - (3,929)
Non-recurring
expense - - - - (196) (196) 67 - (129)
Loss before
income taxes (189,061) (156,554) (14,970) (104,681) (36,412) (501,678) - (7,413) (509,091)
----------- ---------- ----------- ---------- ---------- ---------- ------------ -------- -----------
Income tax - - - - - - - - -
Loss for the
period (189,061) (156,554) (14,970) (104,681) (36,412) (501,678) - (7,413) (509,091)
=========== ========== =========== ========== ========== ========== ============ ======== ===========
5. Equity Investments at Fair Value
30 June 2023 (unaudited) 31 December 2022
------------------------- --------------------
Subsidiaries (Note 7) 3,029,727 2,795,060
Equity Investments at Fair Value 3,029,727 2,795,060
========================= ====================
2023 2022
------------------- ------------------------
At 1 January 2,795,060 2,881,373
Fair Value gain and dividend income 246,667 (501,249)
Capital redemption* - (77,095)
Dividend income** (12,000) -
At 30 June (unaudited) 3,029,727 2,303,029
=================== ========================
* During six months ended 30 June 2022 JSC Georgia Capital made
a capital reduction to its 100% shareholder with total
consideration of GEL 77,095 of which cash consideration GEL
77,095.
** During six months ended 30 June 2023 JSC Georgia Capital paid
dividend to its 100% shareholder in the amount of GEL 12,000 (30
June 2022: GEL nil).
Georgia Capital PLC holds a single investment in JSC Georgia
Capital (an investment entity on its own), which holds a portfolio
of investments, both meet the definition of investment entity and
Georgia Capital PLC measures its investment in JSC Georgia Capital
at fair value through profit or loss. For the breakdown and
detailed information regarding the equity investments at fair
value, refer to note 7.
6. Equity
Share capital
As at 30 June 2023 issued share capital comprised 43,827,862
authorised common shares (30 June 2022: 45,693,708) , of which
43,827,862 (30 June 2022: 45,693,708) were fully paid . Each share
has a nominal value of one British penny. Shares issued and
outstanding as at 30 June 202 3 and 30 June 2022 are described
below:
Number
of shares
Ordinary Amount
------------ -------
1 January 2023 44,827,862 1,473
============ =======
Cancellation of shares (1,000,000) (32)
30 June 2023 (unaudited) 43,827,862 1,441
============ =======
Number
of shares
Ordinary Amount
------------ -------
1 January 2022 47,080,203 1,547
============ =======
Cancellation of shares (1,386,495) (45)
30 June 2022 (unaudited) 45,693,708 1,502
============ =======
6 . Equity (continued)
Treasury Shares
During six months ended 30 June 2023, the Company paid cash
consideration of GEL 25,554 (30 June 2022: GEL 42,193) for
acquisition of treasury shares, of which GEL 203 (30 June 2022: GEL
247) was related to shares acquired for settlement of employee
share-based payments and GEL 25,351 (30 June 2022: GEL 41,946) were
other acquisitions made by the Company, including those under the
share buyback programme.
During the six months ended 30 June 2023 1,000,000 treasury
shares bought back under the Buyback Program were cancelled (30
June 2022: 1,386,495).
Earnings/(loss) per share
30 June 2023 (unaudited) 30 June 2022 (unaudited)
------------------------- -------------------------
Basic earnings per share
Profit/(loss) for the period attributable to ordinary
shareholders of the parent 242,489 (509,091)
Weighted average number of ordinary shares outstanding
during the year 40,017,308 43,001,913
Earnings/(loss) per share 6.0596 (11.8388)
Diluted earnings per share
Profit/(loss) for the period attributable to ordinary
shareholders of the Group 242,489 (509,091)
Weighted average number of diluted ordinary shares
outstanding during the year 40,866,075 43,001,913
Diluted earnings/(loss) per share 5.9337 (11.8388)
7. Fair Value Measurements
Fair value hierarchy
For the purpose of fair value disclosures, the Company has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability. The
following tables show analysis of assets and liabilities measured
at fair value or for which fair values are disclosed by level of
the fair value hierarchy:
30 June 2023 (unaudited) Level 1 Level 2 Level 3 Total
--------- --------- ---------- ----------
Assets measured at fair value
Equity investments at fair value - - 3,029,727 3,029,727
31 December 2022 Level 1 Level 2 Level 3 Total
--------- --------- ---------- ----------
Assets measured at fair value
Equity investments at fair value - - 2,795,060 2,795,060
Valuation techniques
The following is a description of the determination of fair
value for financial instruments which are recorded at fair value
using valuation techniques. These incorporate the Company 's
estimate of assumptions that a market participant would make when
valuing the instruments.
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid
or have a short-term maturity (less than three months), it is
assumed that the carrying amounts approximate to their fair value.
This assumption is also applied to demand deposits, savings
accounts without a specific maturity and variable rate financial
instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities
carried at amortised cost are estimated by comparing market
interest rates when they were first recognised with current market
rates offered for similar financial instruments. The estimated
fair
7. Fair Value Measurement (continued)
Valuation techniques (continued)
value of fixed interest-bearing deposits is based on discounted
cash flows using prevailing money-market interest rates for debts
with similar credit risk and maturity.
Investment in subsidiaries
Equity investments at fair value include investment in
subsidiary at fair value through profit or loss representing 100%
interest of JSC Georgia Capital. Georgia Capital PLC holds a single
investment in JSC Georgia Capital (an investment entity on its
own), which holds a portfolio of investments, both meet the
definition of investment entity and Georgia Capital PLC measures
its investment in JSC Georgia Capital at fair value through profit
or loss. Investments in investment entity subsidiaries and loans
issued are accounted for as financial instruments at fair value
through profit and loss in accordance with IFRS 9. Debt securities
owned are measured at fair value. In the ordinary course of
business, the net asset value of investment entity subsidiaries is
considered to be the most appropriate to determine fair value. JSC
Georgia Capital's net asset value as of 30 June 2023 and 31
December 2022 is as follows:
30 June 2023 (unaudited) 31 December 2022
------------------------- ---------------------
Assets
Cash and cash equivalents 157 , 694 199 , 771
Amounts due from credit institutions - 16,278
Marketable securities 3,940 25,445
Investment in redeemable securities 12,789 12,631
Accounts receivable 52,594 -
Equity investments at fair value 3,360,564 3,198,627
Of which listed and observable investments 1,041,846 985,463
------------------------- ---------------------
BOG 882,846 830,463
Water utility 159,000 155,000
Of which private investments: 2,318,718 2,213,164
------------------------- ---------------------
Large portfolio companies 1,496,262 1,437,610
Retail (Pharmacy) 723,505 724,517
Hospitals 426,060 433,193
P&C insurance 276,960 228,045
Medical insurance 69,737 51,855
Investment stage portfolio companies 536,362 501,407
Clinics and diagnostics 104,533 112,178
Renewable energy 247,682 224,987
Education 184,147 164,242
Other portfolio companies 286,094 274,147
Loans issued 17,461 26,830
Other assets 3,364 2,351
Total assets 3,608,406 3,481,933
========================= =====================
Liabilities
Debt securities issued 574,974 681,067
Other liabilities 3,705 5,806
Total liabilities 578,679 686,873
------------------------- ---------------------
Net Asset Value 3,029,727 2,795,060
========================= =====================
7. Fair Value Measurement (continued)
Valuation techniques (continued)
In measuring fair values of JSC Georgia Capital's investments,
following valuation methodology is applied:
Equity Investments in Listed and Observable Portfolio
Companies
Equity instruments listed on an active market are valued at the
price within the bid/ask spread, that is most representative of
fair value at the reporting date, which usually represents the
closing bid price. The instruments are included within Level 1 of
the hierarchy in JSC GCAP financial statements. Listed and
observable portfolio also includes instruments for which there is a
clear exit path from the business, e.g. through a put and/or call
options at pre-agreed multiples. In such cases, pre-agreed terms
are used for valuing the company.
Equity Investments in Private Portfolio Companies
Large portfolio companies - An independent third-party valuation
firm is engaged to assess fair value ranges of large private
portfolio companies at the reporting date starting from 31 December
2020 . The independent valuation company has extensive relevant
industry and emerging markets experience. Valuation is performed by
applying several valuation methods including an income approach
based mainly on discounted cash flow and a market approach based
mainly on listed peer multiples (the DCF and listed peer multiples
approaches applied are described below for the other portfolio
companies). The different valuation approaches are weighted to
derive a fair value range, with the income approach being more
heavily weighted than the market approach. Management selects what
is considered to be the most appropriate point in the provided fair
value range at the reporting date.
Investment stage portfolio companies - An independent
third-party valuation firm is engaged to assess fair value ranges
of investment stage private portfolio companies at the reporting
date starting from 30 June 2022. (31 December 2021 - was valued
internally in line with the methodology described below for other
portfolio companies). The independent valuation company has
extensive relevant industry and emerging markets experience.
Valuation is performed by applying several valuation methods
including an income approach based mainly on discounted cash flow
and a market approach based mainly on listed peer multiples (the
DCF and listed peer multiples approaches applied are substantially
identical to those described below for the other portfolio
companies). The different valuation approaches are weighted to
derive a fair value range, with the income approach being more
heavily weighted than the market approach. Management selects what
is considered to be the most appropriate point in the provided fair
value range at the reporting date.
Other portfolio companies - fair value assessment is performed
internally as described below.
Equity investments in private portfolio companies are valued by
applying an appropriate valuation method, which makes maximum use
of market-based public information, is consistent with valuation
methods generally used by market participants and is applied
consistently from period to period, unless a change in valuation
technique would result in a more reliable estimation of fair
value.
The value of an unquoted equity investment is generally
crystallised through the sale or flotation of the entire business.
Therefore, the estimation of fair value is based on the assumed
realisation of the entire enterprise at the reporting date.
Recognition is given to the uncertainties inherent in estimating
the fair value of unquoted companies and appropriate caution is
applied in exercising judgments and in making the necessary
estimates.
The fair value of equity investments is determined using one of
the valuation methods described below:
Listed Peer Group Multiples
This methodology involves the application of a listed peer group
earnings multiple to the earnings of the business and is
appropriate for investments in established businesses and for which
the Company can determine a group of listed companies with similar
characteristics.
The earnings multiple used in valuation is determined by
reference to listed peer group multiples appropriate for the period
of earnings calculation for the investment being valued. The
Company identifies a peer group for each equity investment taking
into consideration points of similarity with the investment such as
industry, business model, size of the company, economic
7. Fair Value Measurement (continued)
Valuation techniques (continued)
and regulatory factors, growth prospects (higher growth rate)
and risk profiles. Some peer-group companies' multiples may be more
heavily weighted during valuation if their characteristics are
closer to those of the company being valued than others.
As a rule of thumb, last 12-month earnings will be used for the
purposes of valuation as a generally accepted method. Earnings are
adjusted where appropriate for exceptional, one-off or
non-recurring items.
a. Valuation based on enterprise value
Fair value of equity investments in private companies can be
determined as their enterprise value less net financial debt (gross
face value of debt less cash) appearing in the most recent
Financial Statements.
Enterprise value is obtained by multiplying measures of a
company's earnings by listed peer group multiple (EV/EBITDA) for
the appropriate period. The measures of earnings generally used in
the calculation is recurring EBITDA for the last 12 months (LTM
EBITDA). In exceptional cases, where EBITDA is negative, peer
EV/Sales (enterprise value to sales) multiple can be applied to
last 12-month recurring/adjusted sales revenue of the business (LTM
sales) to estimate enterprise value.
Once the enterprise value is estimated, the following steps are
taken:
Net financial debt appearing in the most recent financial
statements is subtracted from the enterprise value. If net debt
exceeds enterprise value, the value of shareholders' equity remains
at zero (assuming the debt is without recourse to Georgia
Capital).
The resulting fair value of equity is apportioned between
Georgia Capital and other shareholders of the company being valued,
if applicable.
Valuation based on enterprise value using peer multiples is used
for businesses within non-financial industries.
b. Equity fair value valuation
Fair value of equity investment in companies can also be
determined as using price to earnings (P/E) multiple of similar
listed companies.
The measure of earnings used in the calculation is recurring
adjusted net income (net income adjusted for non-recurring items
and forex gains/ losses) for the last 12 months (LTM net income).
The resulting fair value of equity is allocated between Georgia
Capital and other shareholders of the portfolio company, if any.
Fair valuation of equity using peer multiples can be used for
businesses within financial sector (e.g. insurance companies).
Discounted cash flow
Under the discounted cash flow (DCF) valuation method, fair
value is estimated by deriving the present value of the business
using reasonable assumptions of expected future cash flows and the
terminal value, and the appropriate risk-adjusted discount rate
that quantifies the risk inherent to the business. The discount
rate is estimated with reference to the market risk-free rate, a
risk adjusted premium and information specific to the business or
market sector. Under the discounted cash flow analysis unobservable
inputs are used, such as estimates of probable future cash flows
and an internally-developed discounting rate of return.
Net Asset Value
The net assets methodology involves estimating fair value of an
equity investment in a private portfolio company based on its book
value at reporting date. This method is appropriate for businesses
(such as real estate) whose value derives mainly from the
underlying value of its assets and where such assets are already
carried at their fair values (fair values determined by
professional third-party valuation companies) on the balance
sheet.
Price of recent investment
The price of a recent investment resulting from an orderly
transaction, generally represents fair value as of the transaction
date. At subsequent measurement dates, the price of a recent
investment may be an appropriate starting point for estimating fair
value. However, adequate consideration is given to the current
facts and circumstances to assess at each measurement date whether
changes or events subsequent to the relevant transaction imply a
change in the investment's fair value.
7. Fair Value Measurement (continued)
Valuation techniques (continued)
Exit price
Fair value of a private portfolio company in a sales process,
where the price has been agreed but the transaction has not yet
settled, is measured at the best estimate of expected proceeds from
the transaction, adjusted pro-rata to the proportion of
shareholding sold.
Validation
Fair value of investments estimated using one of the valuation
methods described above is cross-checked using several other
valuation methods as follows:
Listed peer group multiples - peer multiples such as P/E, P/B
(price to book) and dividend yield are applied to the respective
metrics of the investment being valued depending on the industry of
the company. The Company develops fair value range based on these
techniques and analyses whether fair value estimated above falls
within this range.
Discounted cash flow (DCF) - The discounted cash flow valuation
method is used to determine fair value of equity investment. Based
on DCF, the Company might make upward or downward adjustment to the
value of valuation target as derived from primary valuation method.
If fair value estimated using discounted cash flow analysis
significantly differs from the fair value estimate derived using
primary valuation method, the difference is examined thoroughly,
and judgement is applied in estimating fair value at the
measurement date.
In line with our strategy, from time to time, we may receive
offers from interested buyers for our private portfolio companies,
which would be considered in the overall valuation assessment,
where appropriate.
Valuation process for Level 3 valuations
Georgia Capital hired third-party valuation professionals to
assess fair value of the large private portfolio companies as at 30
June 2023 and 31 December 2022. Starting from 2022 third-party
valuation professionals are hired to assess fair value of the
investment stage private portfolio companies as well. As of 30 June
2023 such businesses include Hospitals, P&C insurance, Retail
(Pharmacy), Medical Insurance, Clinics & Diagnostics, Renewable
energy, Education. The valuation is performed by applying several
valuation methods that are weighted to derive fair value range,
with the income approach being more heavily weighted than market
approach. Management selects most appropriate point in the provided
fair value range at the reporting date. Fair values of investments
in other private portfolio companies are assessed internally in
accordance with Georgia Capital's valuation methodology by the
Valuation Workgroup.
Georgia Capital's Management Board proposes fair value to be
placed at each reporting date to the Audit and Valuation Committee.
Audit and Valuation Committee is responsible for the review and
approval of fair value s of investments at the end of each
reporting period.
Description of significant unobservable inputs to level 3
valuations
The approach to valuations as of 30 June 2023 was consistent
with the Company 's valuation process and policy.
Management analyses the impact of climate change on the
valuations, such as by incorporation of known effects of climate
risks to the future cash flow forecasts or through adjusting peer
multiples the known differences in the climate risk exposure as
compared to the investment being fair valued. As at 30 June 2023,
the management concluded that the effects of the climate risks are
reflected in the peer multiples and discount rates used in the
valuations and that no specific adjustments are required in
relation of the Group's investment portfolio measurement and
respective fair value sensitivity disclosures.
7. Fair Value Measurement (continued)
Description of significant unobservable inputs to level 3
valuations (continued)
The following tables show descriptions of significant
unobservable inputs to level 3 valuations of equity
investments:
30 June 2023 (unaudited)
Description Valuation technique Unobservable input Range [selected input] Fair value
------------------------------ --------------------- ---------------------- ------------------------ -------------
Loans Issued DCF Discount rate 5.5%-16.5% 17,461
------------------------------ --------------------- ---------------------- ------------------------ -------------
Equity investments at fair
value
Large portfolio 1,496,262
Retail (Pharmacy) DCF, EV/EBITDA EV/EBITDA multiple 5.6x-24.0x 723,505
[9.2x]
Hospitals DCF, EV/EBITDA EV/EBITDA multiple 7.1x-15.9x 426,060
[12.9x]
P&C insurance DCF, P/E P/E multiple 4.7x-26.1x 276,960
[10.1x]
Medical insurance DCF, P/E P/E multiple 5.9x-10.3x 69,737
------------------------------ --------------------- ---------------------- -------------
[10.4x]
---------------------------------------------------------------------------------------------------- -------------
Investment stage 536,362
Clinics and diagnostics DCF, EV/EBITDA EV/EBITDA multiple 9.5x-15.9x 104,533
[18.8x]
Renewable energy DCF, EV/EBITDA EV/EBITDA multiple 2.3x-17.7x 247,682
[9.5x]
Education DCF, EV/EBITDA EV/EBITDA multiple 7.0x-54.0x 184,147
------------------------------ --------------------- ---------------------- -------------
[16.3x]
---------------------------------------------------------------------------------------------------- -------------
Other Sum of the parts EV/EBITDA multiples 1.9x-14.5x 286,094
------------------------------ --------------------- -------------
[6.5x-8.0x]
-------------
Cashflow probability [90%-100%]
NAV multiple [1.0 x]
---------------------- ----------------------------------------------------------------------------- -------------
7. Fair Value Measurement (continued)
Description of significant unobservable inputs to level 3
valuations (continued)
31 December 2022
Description Valuation technique Unobservable Range Fair
input [selected value
input]
------------------------- --------------------- ---------------------- -------------- -------------
Loans Issued DCF Discount rate 5.5%-16.5% 26,830
------------------------- --------------------- ---------------------- -------------- -------------
Equity investments
at fair value
Large portfolio 1,437,610
Retail (Pharmacy) DCF, EV/EBITDA EV/EBITDA multiple 6.1x-20.9x 724,517
[9.1x]
Hospitals DCF, EV/EBITDA EV/EBITDA multiple 7.5x-14.2x 433,193
[12.2x]
P&C insurance DCF, P/E P/E multiple 7.0x-37.0x 228,045
[10.7x]
Medical insurance DCF, P/E P/E multiple 10.3x-11.8x 51,855
------------------------- --------------------- ---------------------- -------------
[10.6x]
------------------------------------------------------------------------------------- -------------
Investment stage 501,407
Clinics and diagnostics DCF, EV/EBITDA EV/EBITDA multiple 7.9x-14.2x 112,178
[16.5x]
Renewable energy DCF, EV/EBITDA EV/EBITDA multiple 8.1x-20.9x 224,987
[11.4x]
Education DCF, EV/EBITDA EV/EBITDA multiple 7.6x-39.3x 164,242
------------------------- --------------------- ---------------------- -------------
[16.9x]
------------------------------------------------------------------------------------- -------------
Other Sum of the parts EV/EBITDA multiples 2.0x-16.8x 274,147
------------------------- --------------------- -------------
[6.3x-10.0x]
-------------
Cashflow probability [90%-100%]
NAV multiple [0.9x]
---------------------- -------------------------------------------------------------- -------------
Georgia Capital hired third-party valuation professionals to
assess fair value of the large and investment stage private
portfolio companies as at 30 June 2023 and 31 December 2022
including Retail (Pharmacy), Hospitals, P&C insurance, Medical
Insurance, Clinics and Diagnostics. Starting from 30 June 2022,
fair value assessment for Renewable Energy and Education businesses
are performed by third-party valuation professionals as well. The
valuation is performed by applying several valuation methods that
are weighted to derive fair value range, with the income approach
being more heavily weighted than market approach. Management
selects most appropriate point in the provided fair value range at
the reporting date.
On 31 December 2021, Georgia Capital signed a SPA to dispose 80%
interest in Water Utility business , which was previously included
within the large private portfolio companies As at 30 June 2023 the
remaining 20% interest in Water Utility business was valued using
the pre-agreed put option multiple in reference to the signed
contract with the buyer as GCAP has a clear exit path from the
business through a put and call structure at pre-agreed EBITDA
multiples.
During 2022, comprehensive analysis was performed to determine
the impact of the Russia-Ukraine war on the private portfolio
valuations. During the analysis, the impact of the war on discount
rates was estimated and changes in listed peer multiples and
overall movement in emerging and regional markets were reviewed.
Uncertainties surrounding the geopolitical tensions translated into
an increase in discount rates during 2022 and reduced listed peer
multiples and were reflected accordingly in the private portfolio
companies' valuations, where applicable. As for 2023, no further
major movements were observed on the markets in terms of peer
multiples or discount rates. Management continues the impact
assessment and will update the valuation inputs accordingly going
forward.
As at 30 June 2023, several portfolio companies (Hospitals,
Clinics, P&C Insurance, together "Defendants") were engaged in
litigation that has been ongoing since 2015 with some of the former
shareholders of Insurance Company Imedi L ("Claimants") in relation
to the acquisition price of the business. Former shareholders claim
that their 66% shares in Insurance Company Imedi L were sold under
duress at a price below market value in 2012. Since the outset, GHG
and Aldagi have vigorously defended their position that the claims
are wholly without merit. Defendants won the case in Tbilisi City
Court in 2018. The Claimants appealed against the court decision
and in January 2020, Tbilisi Court of Appeals decided to return the
case back to Tbilisi City Court for further analysis of the
circumstances of the case, this decision was sustained by Supreme
Court in February 2022 as well. In July 2022, Tbilisi City Court
partially satisfied the Claimants and ruled that claims in the
amount of USD 12.7 million principal amount plus an annual 5%
interest charge as lost income (c. USD 21 million in total) should
be paid. The new decision of the First Instance Court was appealed
and the case is at the stage of consideration at the Appellate
Court.
7. Fair Value Measurement (continued)
Description of significant unobservable inputs to level 3
valuations (continued)
Defendants are confident that they will prevail and there have
not been made a provision for a potential liability in their
financial statements. Management shares Defendants' assessment of
the merits of the case and considers that the probability of
incurring losses on this claim is low, accordingly, fair values of
portfolio companies do not take into account a potential liability
in relation to this litigation.
Sensitivity analysis to significant changes in unobservable
inputs within Level 3 hierarchy
In order to determine reasonably possible alternative
assumptions the Company adjusted key unobservable model inputs. The
Company adjusted the inputs used in valuation by increasing and
decreasing them within a range which is considered by the Company
to be reasonable.
If the interest rate for each individual loan issued to equity
investments as at 30 June 2023 decreased by 1.1-3.3 percentage
points (31 December 2022 decreased by 1.1-3.3 percentage points),
the amount of loans issued would have decreased by GEL 156 or 0.9%
(31 December 2022: decreased by GEL 150 or 0.6%). If the interest
rates increased by 1.1-3.3 percentage points (31 December 2022
increased by 1.1-3.3 percentage points) then loans issued would
have increased by GEL 155 or 0.9% (31 December 2022: increased by
GEL 148 or 0.6%).
If the listed peer multiples used in the market approach to
value unquoted investments as at 30 June 2023 decreased by 10% (31
December 2022: 10%), value of equity investments at fair value
would decrease by GEL 75 million or 2% (31 December 2022: GEL 71
million or 2%). If the multiple increased by 10% (31 December 2022:
10%) then the equity investments at fair value would increase by
GEL 75 million or 2% (31 December 2020: GEL 71 million or 2%).
If the discount rates used in the income approach to value
unquoted investments decreased by 50 basis points (31 December
2022: 50 basis points), the value of equity investments at fair
value would increase by GEL 81 million or 2% (31 December 2022: GEL
75 million or 2%). If the discount rates increased by 50 basis
points (31 December 2022: 50 basis points) then the equity
investments at fair value would decrease by GEL 84 million or 3%
(GEL 71 million or 2%). If the discount rate decreased by 100 basis
points, the value of equity investments at fair value would
increase by GEL 171 million or 5% (31 December 2022: GEL 155
million or 5%). If the discount rate increased by 100 basis points
then the equity investments at fair value would decrease by GEL 158
million or 5% (31 December 2022: GEL 138 million or 4%).
If the multiple used to value unquoted investments valued on NAV
and recent transaction price basis as at 30 June 2023 decreased by
10% (31 December 2022: 10%), value of equity investments at fair
value would decrease by GEL 10 million or 0.3% (31 December 2022:
GEL 11 million or 0.3%). If the multiple increased by 10% then the
equity investments at fair value would increase by GEL 10 million
or 0.3% (31 December 2022: GEL 11 million or 0.3%).
As set out in the description of significant unobservable inputs
to level 3 valuations the valuations have been prepared on the
basis that climate change risks are reflected in the peer multiples
and discount rates. Therefore, the sensitivities noted above in
respect of peer multiples and discount rates include the risk
arising from climate change.
Movements in level 3 financial instruments measured at fair
value
The following tables show a reconciliation of the opening and
closing amounts of level 3 financial assets which are recorded at
fair value:
At Fair Capital Capital At 31 Fair Capital Dividend At 30
1 January Value redemption increase December Value redemption Income June
gain gain
------ ----------- --------- -------- ----------- ---------
2023
2022 2022 (unaudited)
---------- ------ ----------- --------- ---------- -------- ----------- --------- ------------
Level 3
financial
assets
Equity
investments
at fair
value (Note
5) 2,881,373 925 (87,238) - 2,795,060 246,667 - (12,000) 3,029,727
8. Maturity Analysis
The table below shows an analysis of assets and liabilities
analysed according to when they are expected to be recovered or
settled:
30 June 2023 (unaudited)
------------------------------------------------------------
Less than More than Total
1 Year 1 Year
------------------- ----------------- --------------------
Cash and cash equivalents 5,388 - 5,388
Equity investments at fair value - 3,029,727 3,029,727
Prepayments 1,020 - 1,020
Total assets 6,408 3,029,727 3,036,135
------------------- ----------------- --------------------
Other liabilities 1,538 - 1,538
Total liabilities 1,538 - 1,538
------------------- ----------------- --------------------
Net 4,870 3,029,727 3,034,597
=================== ================= ====================
31 December 2022
-------------------------------------------------------
Less than More than Total
1 Year 1 Year
------------------ ----------------- ----------------
Cash and cash equivalents 23,361 - 23,361
Equity investments at fair value - 2,795,060 2,795,060
Prepayments 363 - 363
------------------ ----------------- ----------------
Total assets 23,724 2,795,060 2,818,784
------------------ ----------------- ----------------
Other liabilities 1,393 - 1,393
------------------ ----------------- ----------------
Total liabilities 1,393 - 1,393
------------------ ----------------- ----------------
Net 22,331 2,795,060 2,817,391
================== ================= ================
9. Related Party Disclosures
In accordance with IAS 24 "Related Party Disclosures", parties
are considered to be related if one party has the ability to
control the other party or exercise significant influence over the
other party in making financial or operational decisions. In
considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal
form.
Related parties may enter into transactions which unrelated
parties might not, and transactions between related parties may not
be effected on the same terms, conditions and amounts as
transactions between unrelated parties. All transactions with
related parties are conducted on an arm's length basis. There were
no related party transactions as of and for the periods ended 30
June 2023 and 30 June 2022, other than capital redemption from JSC
GCAP (note 5) and compensation of key management personnel
disclosed below:
Compensation of key management personnel comprised the
following:
30 June 2023 (unaudited) 30 June 2022 (unaudited)
--------------------------------------- -------------------------------------
Salaries and other benefits (485) (603)
Share-based payments compensation (271) (223)
Total key management compensation (756) (826)
======================================= =====================================
9. Related Party Disclosures (continued)
Key management personnel do not receive cash settled
compensation, except for fixed salaries. The number of key
management personnel for the six months ended 30 June 2023 was 7
(30 June 2022: 8).
10. Events after the Reporting Period
Issuance of Eurobonds
On 3 August 2023 JSC Georgia Capital ("JSC GCAP"), a 100%
subsidiary of Georgia Capital PLC, has successfully issued a USD
150 million sustainability-linked bond (the "Notes") on the
Georgian market. The Notes are USD-denominated with 5-year bullet
maturity (callable after two years), carry an 8.50% fixed coupon
and were issued at par. The proceeds from the Notes, together with
the existing liquid funds of GCAP, will be used to fully redeem the
existing USD 300 million Eurobond. As a result, GCAP's gross debt
balance will decrease from the current USD 300 million to USD 150
million.
Tender Offer to purchase USD 300 million Notes
On 12 July 2023 JSC Georgia Capital, (" JSC GCAP "), a 100%
subsidiary of Georgia Capital PLC, launched an invitation to
holders (the "Noteholders") of its outstanding USD 300 million
6.125% notes due 2024 (the "Notes"), to tender their Notes for
purchase by the Issuer for cash (the "Tender Offer"). As a result
of the Tender Offer, in aggregate USD 176.5 million principal
amount of Notes were accepted.
On 10 August JSC Georgia Capital canceled USD 176.5 million
principal amount of the Notes purchased as a result of Tender offer
and USD 106.9 million principal amount of Notes owned by the JSC
GCAP in treasury (of which USD 23.5 million principal amount of
Notes were purchased subsequent to reporting date). Following
settlement of the Tender Offer and the cancellation of USD 283.4
million in aggregate principal amount of the Notes, USD 16.6
million Notes will remain outstanding which is expected to be
redeemed according to the optional redemption at make whole.
Dividend receipt
On 20 July 2023 JSC Georgia Capital ("JSC GCAP"), a 100%
subsidiary of Georgia Capital PLC, received a dividend in the
amount of GEL 20.2 million from Retail Pharmacy business.
ABOUT GEORGIA CAPITAL PLC
Georgia Capital PLC (LSE: CGEO LN) is a platform for buying,
building and developing businesses in Georgia (together with its
subsidiaries, "Georgia Capital" or "the Group"). The Group's
primary business is to develop or buy businesses, help them
institutionalise their management and grow them into mature
businesses that can further develop largely on their own, either
with continued oversight or independently. Once Georgia Capital has
successfully developed a business, the Group actively manages its
portfolio to determine each company's optimal owner. Georgia
Capital will normally seek to monetise its investment over a 5-10
year period from the initial investment.
Georgia Capital currently has the following portfolio
businesses: (1) a retail (pharmacy) business, (2) a hospitals
business, (3) an insurance business (P&C and medical
insurance); (4) a renewable energy business (hydro and wind
assets), (5) an education business; and (6) a clinics and
diagnostics business. Georgia Capital also holds other small
private businesses across different industries in Georgia; a 20.0%
equity stake in the water utility business and a 19.8% equity stake
(at 30-Jun-23) in LSE premium-listed Bank of Georgia Group PLC
("BoG"), a leading universal bank in Georgia.
Forward looking statements
This announcement contains forward-looking statements,
including, but not limited to, statements concerning expectations,
projections, objectives, targets, goals, strategies, future events,
future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive
strengths and weaknesses, plans or goals relating to financial
position and future operations and development. Although Georgia
Capital PLC believes that the expectations and opinions reflected
in such forward-looking statements are reasonable, no assurance can
be given that such expectations and opinions will prove to have
been correct. By their nature, these forward-looking statements are
subject to a number of known and unknown risks, uncertainties and
contingencies, and actual results and events could differ
materially from those currently being anticipated as reflected in
such statements. Important factors that could cause actual results
to differ materially from those expressed or implied in
forward-looking statements, certain of which are beyond our
control, include, among other things: regional instability; impact
of COVID-19; currency fluctuations, including depreciation of the
Georgian Lari, and macroeconomic risk; regulatory risk across a
wide range of industries; investment risk; liquidity risk;
portfolio company strategic and execution risks; and other key
factors that could adversely affect our business and financial
performance, including those which are contained elsewhere in this
document and in our past and future filings and reports and also
the 'Principal Risks and Uncertainties' included in this
announcement and in Georgia Capital PLC's Annual Report and
Accounts 2022. No part of this
document constitutes, or shall be taken to constitute, an
invitation or inducement to invest in Georgia Capital PLC or any
other entity and must not be relied upon in any way in connection
with any investment decision. Georgia Capital PLC and other
entities undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events
or otherwise, except to the extent legally required. Nothing in
this document should be construed as a profit forecast.
Disclaimer
Georgia Capital engaged Kroll (formerly known as Duff &
Phelps), a third-party independent valuation firm to provide a
range of fair values of certain subject investments. For the period
ended 30 June 2023, Georgia Capital asked the independent valuation
firm to independently estimate a range of fair value for 100
percent of Georgia Healthcare Group ("GHG"), JSC Insurance Company
Aldagi Group ("Aldagi"), Georgian Renewable Power Holding ("GRPH")
and Georgia Education Group ("GEG"). Kroll performed limited
procedures and applied their judgement to estimate fair value range
based on the facts and circumstances known to them as at the
valuation date, 30 June 2023. The analysis performed by Kroll was
based upon data and assumptions provided by Georgia Capital and
received from third party sources, which the independent valuation
firm relied upon as being accurate without independent
verification. The advice of the third party independent valuation
firm is one input that the Georgia Capital considered for
determining the fair value of GHG, Aldagi, GGU and GEG for which
the Company is ultimately and solely responsible. In this context,
Kroll's role as independent valuation service provider did not
constitute an endorsement of Georgia Capital either from a
financial or operational point of view, nor did they provide a
transaction, fairness or solvency opinion. The results of the
independent valuation report should not be relied upon by anyone
for any investment or transaction purpose related to the Company or
any underlying investments.
COMPANY INFORMATION
Georgia Capital PLC
Registered Address
42 Brook Street
London W1K 5DB
United Kingdom
www.georgiacapital.ge
Registered under number 10852406 in England and Wales
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "CGEO.LN"
Contact Information
Georgia Capital PLC Investor Relations
Telephone: +44 (0) 203 178 4052; +995 322 000000
E-mail: ir@gcap.ge
Auditors
PricewaterhouseCoopers LLP ("PwC")
Atria One, 144 Morrison Street,
Edinburgh EH3 8EX
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online
service run by our Registrar, Computershare,
giving you convenient access to information on your
shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk .
Investor Centre Shareholder Helpline - +44 (0) 370 873 5866
Share price information
Shareholders can access both the latest and historical prices
via the website
www.georgiacapital.ge
[1] See "Basis of Presentation" for more background on page 27.
Private portfolio companies' performance includes aggregated
stand-alone IFRS results for our portfolio companies, which can be
viewed as APMs for Georgia Capital, since Georgia Capital does not
consolidate its subsidiaries and instead measures them at fair
value under IFRS.
[2] Please see definition in glossary on page 28.
([3]) 2Q22 and 1H22 numbers include the conversion of GEL 142.6
million loans issued to our beverages and real estate businesses
into equity.
[4] Includes both the buybacks under the share buyback and
cancellation programme and for the management trust.
([5]) One-off dividend income in 2Q23 includes the non-recurring
GEL 20.1 million dividend collected from the retail (pharmacy)
business and a GEL 8.1 million buyback dividend attributable to
participation in BoG's 2022 buybacks in 2Q23. The 1H23 number
further reflects a GEL 21. 3 million buyback dividend attributable
to participation in BoG's 2022 buybacks in 1Q23.
[6] Private portfolio companies' performance highlights are
presented excluding the water utility business. Aggregated numbers
are presented like-for-like basis.
[7] The results of our four smaller businesses included in other
portfolio companies (described on page 24) are not broken out
separately. Performance totals, however, include the other
portfolio companies' results (and are therefore not the sum of
large and investment stage portfolio results).
[8] Please see definition in glossary on page 28.
([9]) Valuation multiples implied by dividing the final
valuations of the business assigned as described under "Valuation
Overview" by the respective trailing twelve-month EBITDA or net
income, as applicable.
[10] Change in the fair value attributable to the change in
actual or expected earnings of the business, as well as the change
in net debt.
[11] Greenfields / buy-outs represent the difference between
fair value and acquisition price in the first reporting period in
which the business/greenfield project is no longer valued at
acquisition price/cost. Exits represent the difference between the
latest reported fair value and the value of the disposed asset (or
assets in the process of disposal) assessed at a transaction
price.
[12] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[13] Please read more about valuation methodology on page 27 in
"Basis of presentation".
[14] Enterprise value is presented excluding the recently
launched schools and non-operational assets, added to the equity
value of the education business at cost.
[15] Investments are made and dividends are received at JSC
Georgia Capital level, the Georgian holding company.
[16] Please see definition in glossary on page 28.
([17]) Valuation multiples implied by dividing the final
valuations of the business assigned as described under "Valuation
Overview" by the respective trailing twelve-month EBITDA or net
income, as applicable.
[18] Change in the fair value attributable to the change in
actual or expected earnings of the business, as well as the change
in net debt.
[19] Greenfields / buy-outs represent the difference between
fair value and acquisition price in the first reporting period in
which the business/greenfield project is no longer valued at
acquisition price/cost. Exits represent the difference between the
latest reported fair value and the value of the disposed asset (or
assets in the process of disposal) assessed at a transaction
price.
[20] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[21] Excluding the recently launched schools and non-operational
assets, added to the equity value of the education business at
cost.
[22] Investments are made and dividends are received at JSC
Georgia Capital level, the Georgian holding company.
[23] Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative
costs.
[24] Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
[25] Share-based management expenses are share salary and share
bonus expenses of management and staff.
[26] Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and
corporate secretary costs.
[27] Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
[28] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[29] Of which - cash outflow on capex of GEL 5.1 million in 2Q23
and GEL 9.4 million in 1H23 (GEL 5.0 million in 2Q22 and GEL 13.8
million in 1H22); cash outflow on minority acquisition; proceeds
from sale of PPE of GEL 5.4 million in 2Q23 and GEL 14.6 million in
1H23 (none in 1H23); and proceeds from sale of bonds, securities
and respective interest income received of GEL 3.8 million in 2Q23
and GEL 5.8 million in 1H23 (GEL 10.9 million in 2Q22 and GEL 9.3
million in 1H22)
[30] Calculated by deducting capex and minority acquisition from
operating cash flows and adding proceeds from sale of PPE.
[31] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[32] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
[33] 2Q22 and 1H22 numbers are adjusted for a GEL 2.7 million
loss from the sale of the Traumatology Hospital.
[34] Of which - capex of GEL 8.7 million in 2Q23 (GEL 5.3
million in 2Q22) and GEL 16.7 million in 1H23 (GEL 9.1 million in
1H22).
[35] Operating cash flows less capex, plus net proceeds on sale
of PPE.
[36] The respective costs divided by gross revenues.
[37] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[38] Calculated based on net income, adjusted for non-recurring
items and average equity, adjusted for preferred shares.
[39] The detailed IFRS financial statements (in both US$ and
GEL) are included in supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[40] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[41] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[42] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from Gross revenue.
[43] Operating cash flows less capex.
[44] Of which capex of GEL 3.5 million in 2Q23 and GEL 5.8
million in 1H23 (GEL 3.7 million in 2Q22 and GEL 5.8 million in
1H22).
[45] The respective costs divided by gross revenues.
[46] Net revenue - Gross revenue less corrections and
rebates.
[47] Please see definition in glossary on page 28.
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IR QZLFFXVLBBBF
(END) Dow Jones Newswires
August 15, 2023 02:00 ET (06:00 GMT)
Georgia Capital (LSE:CGEO)
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Georgia Capital (LSE:CGEO)
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