TIDMCGEO
RNS Number : 7506R
Georgia Capital PLC
31 October 2023
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS)[1]
GEL '000, unless otherwise Sep-23 Jun-23 Change Dec-22 Change
noted
Georgia Capital NAV overview
NAV per share, GEL 76.99 73.28 5.1% 65.56 17.4%
NAV per share, GBP 23.44 22.12 6.0% 20.12 16.5%
Net Asset Value (NAV) 3,187,680 3,034,597 5.0% 2,817,391 13.1%
Liquid assets and loans issued 109,261 418,586 -73.9% 438,674 -75.1%
-1.5 -5.2
NCC ratio[2] 15.9% 17.4% ppts 21.1% ppts
Georgia Capital Performance 3Q23 3Q22 Change 9M23 9M22 Change
Total portfolio value creation 174,922 169,906 3.0% 457,386 (295,360) NMF
of which, listed and observable
businesses 221,148 142,450 55.2% 391,939 (46,611) NMF
of which, private businesses (46,226) 27,456 NMF 65,447 (248,749) NMF
Investments[3] 30 12,792 -99.8% 20,453 156,948 -87.0%
Buybacks[4] 273 15,256 -98.2% 53,994 68,796 -21.5%
Dividend income 53,661 32,019 67.6% 201,735 66,440 NMF
of which, recurring dividend
income[5] 47,061 32,019 47.0% 145,674 66,440 NMF
of which, one-off dividend
income [6] 6,600 - NMF 56,061 - NMF
Net income / (loss) 148,354 162,013 -8.4% 407,280 (339,666) NMF
Private portfolio companies'
performance(1,[7]) 3Q23 3Q22 Change 9M23 9M22 Change
Large portfolio companies
Revenue 321,735 300,515 7.1% 972,848 922,680 5.4%
EBITDA 33,694 34,623 -2.7% 115,948 110,986 4.5%
Net operating cash flow 31,534 34,947 -9.8% 61,011 98,223 -37.9%
Investment stage portfolio
companies
Revenue 41,462 39,586 4.7% 126,187 124,707 1.2%
EBITDA 14,981 13,951 7.4% 40,938 44,001 -7.0%
Net operating cash flow 20,814 18,984 9.6% 39,733 43,583 -8.8%
Total portfolio[8]
Revenue 525,322 492,120 6.7% 1,531,844 1,397,790 9.6%
EBITDA 70,061 67,489 3.8% 193,059 185,298 4.2%
Net operating cash flow 50,985 69,888 -27.0% 100,316 153,373 -34.6%
KEY POINTS
Ø NAV per share (GEL) up 5.1% q-o-q to GEL 76.99, supported by
BoG's outstanding performance and share price growth
Ø NCC ratio improved by 1.5 ppts q-o-q to 15.9% as at 30-Sep-23
( 8 .5 ppts improvement y -o-y), resulting from a significant
decrease in net debt, strong cash generation and continued growth
in portfolio value
Ø Upgrade in GCAP's corporate credit rating from "B+" to "BB-"
by S&P, reflecting strong progress on deleveraging
Ø GEL 53.7 million dividend income (of which, recurring GEL 47.1
million) from the portfolio companies in 3Q23, driving 9M23 total
dividend income to GEL 201.7 million (of which, recurring GEL 145.7
million)
Ø Commencement of a new US$ 15 million share buyback and
cancellation program, in line with our capital allocation
framework
Conference call: An investor/analyst conference call will be
held on 31 October 2023, at 13:00 UK / 14:00 CET / 8:00 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
Georgia Capital's 3Q23 results demonstrate strong operational
and financial performances and also reflect significant
achievements in delivering on our strategic priorities.
NAV per share (GEL) was up 5.1% to GEL 76.99 in 3Q23. The NAV
per share growth in 3Q23 mainly resulted from the continued growth
of BoG's share price, up 26.2% q-o-q in 3Q23. This created GEL
221.1 million value in 3Q23 (7.3 ppts positive impact on the NAV
per share). Value creation across our private portfolio companies
amounted to negative GEL 46.2 million (-1.5 ppts impact), as
resilient and mainly robust operating performances of our
high-quality assets were offset by movements in implied valuation
multiples and foreign currency exchange rates. Management
platform-related costs and net interest expense reduced NAV per
share by 0.5 ppts. In GBP terms, the NAV per share growth in 3Q23
was 6.0%, reflecting GEL's slight appreciation against GBP during
the quarter.
Underlying operating performances across our private portfolio
remain solid. In 3Q23, the aggregated revenues and EBITDA of our
private portfolio companies increased by 6.7% and 3.8% y-o-y,
respectively, notwithstanding the influence of various external
factors on business operations.
Ø The operating performance of our retail (pharmacy) business
was strong in 3Q23, and more than offset the impact of several
recent healthcare-related regulatory changes. In the first half of
the year, the Government introduced an External Reference Pricing
("ERP") model, imposing a maximum retail price ceiling on specified
prescription medicines funded by the Government of Georgia. In
addition, there have been additional regulations implemented to
enhance the standards for medicine transportation and storage.
These changes resulted in the closure of certain partner pharmacies
in 2023, which our pharmacy business held wholesale distribution
agreements with. Despite these challenges, the business recorded
5.2% and 15.6% y-o-y growth in revenue and EBITDA respectively in
3Q23. These results demonstrate the remarkable resilience of the
business, underpinned by the ongoing expansion of the retail chain
and franchise stores, along with an increased focus on product mix
diversification.
Ø 2023 has also witnessed a number of regulatory changes in the
healthcare sector. The performance of our hospitals and clinics
& diagnostics businesses has been temporarily impacted by
recently introduced facility regulation rules, implemented to
address the oversupply of beds and enhance the quality of the
healthcare industry in the country. The regulation introduced
upgraded standards for healthcare facilities and imposed minimum
requirements on space allotted per hospital bed. In order to adapt
to the new standards, our healthcare businesses initiated a number
of renovation projects in 3Q23, which resulted in certain sections
of our healthcare facilities being temporarily closed and unable to
accept patients. The renovation works have been completed and all
affected facilities have already reopened. Despite these
challenges, the combined revenue and EBITDA of our healthcare
businesses (hospitals and clinics & diagnostics) were up by
3.8% and 25.4% y-o-y in 3Q23. These new regulations are expected to
enhance the quality of healthcare services in Georgia which we
believe will offer an opportunity to build on the competitive
advantage of our high quality healthcare businesses in the medium
to long term. However, in the short-term they slowed the previously
projected pace of post-COVID recovery.
Ø Following a strategic review, we are planning to restructure
the hospitals business to capture this emerging opportunity and
enhance operational efficiencies. Starting from 4Q23, the hospitals
business will be split into two distinct segments: "Large and
Specialty Hospitals" and "Regional and Community Hospitals". The
Regional and Community Hospitals will also incorporate the
community clinics that are currently managed and presented as part
of the clinics and diagnostics business. For our patients, the
transition will be seamless and business operations will continue
uninterrupted. The existing hospitals' management team will
continue to manage the Large and Specialty Hospitals business and
focus on their continued growth, while enhancing profitability
margins. The Large and Specialty Hospitals and Regional and
Community Hospitals will represent approximately 75 % and 2 5 %,
respectively, of the consolidated hospitals business EBITDA. A new
CEO from a local competitor is set to join the Regional and
Community Hospitals business to lead the team to focus on the
service and efficiency from this group of hospitals.
Ø Our P&C insurance business had a robust quarter in terms
of revenue growth, up 22.5% y-o-y in 3Q23. However, increased
property insurance claims, resulting from an unprecedented
landslide in one of the regions of Georgia and increased Agro
insurance claims due to an abnormal number of hailstorms during the
quarter, led to a 17.4 ppts y-o-y increase in the loss ratio in
3Q23. This translated into a 61.4% y-o-y decrease in the net income
of the business in 3Q23.
3Q23 was also strong for our education and medical insurance
businesses. The expansion of the education business and ramp-up of
utilisation levels led to a 14.7% y-o-y increase in the revenue of
the business. Within our medical insurance business, revenues
increased by 21.2% y-o-y, reflecting an increase in the prices of
insurance policies, and in the number of insured clients. Our other
portfolio companies posted a strong combined y-o-y revenue growth
of 6.6% in 3Q23, mainly driven by an outstanding performance in the
beverages business.
Details on how the operating performance of the different
private portfolio businesses translated into their NAVs can be
found in the pages that follow.
Strong progress on our key strategic priority of deleveraging
GCAP. In 3Q23, we completed the issuance of a US$ 150 million
sustainability-linked bond, representing the largest-ever corporate
bond offering in Georgia, and the first of its magnitude and kind
in our region. The proceeds from the transaction, together with the
existing liquid funds of GCAP were fully used to redeem GCAP's
Eurobonds. Following these transactions, GCAP's gross debt balance
decreased from US$ 300 million to US$ 150 million. In 3Q23, the NCC
ratio improved by 1.5 ppts q-o-q to 15.9% driven by a) GEL 53.7
million dividend income from the portfolio companies (up 67.6%
y-o-y), b) a 3.5% growth in total portfolio value, c) a GEL 8.6
million decrease in loans issued due to the full repayment of a
loan to our auto services business, and d) GEL 4.3 million decrease
in GCAP's bank guarantee on the borrowings of the beer business,
following which the guarantees issued balance was reduced to zero.
This strong progress on deleveraging also resulted in an upgrade in
our corporate credit rating from "B+" to "BB-" by S&P on 26
October 2023.
Launch of a new US$ 15 million share buyback and cancellation
programme. While our share price has continued to recover, the
strong growth in our NAV has meant that the discount to our NAV per
share has remained elevated, at approximately 60%. This provides an
attractive opportunity to create significant value for our
shareholders through accretive tactical share buybacks. As a
result, and in line with our capital allocation philosophy, we are
today launching a US$ 15 million share buyback and cancellation
programme, which will be in effect over a six-month period (see
page 25 for details).
Macroeconomic update. Following two consecutive years of
double-digit growth, real GDP expanded by 7. 0 % in 8 M 23. Growth
was supported by strong external inflows with trade, remittances
and tourism revenues showing strong y-o-y performances. On the
domestic side, credit expansion, continued fiscal outlays and
strong business sentiment were key contributors to economic
activity. Georgian GEL remains above pre-pandemic levels on the
back of strong external inflows, ample FX liquidity, a strict
monetary policy stance, increased lending in foreign currency and
overall positive economic growth. The annual inflation rate eased
sharply in 2023, with the September headline number standing at
0.7%, below the 3% target. Considering the downward trend in
inflation, the National Bank of Georgia (NBG) has started to exit
from its previously tightened monetary policy and reduced the GEL
prime rate by 100 bps to 10.0% since May 2023. The external balance
sheet is strengthening, marked by a reduction in the current
account deficit, a decline in government debt to levels lower than
those seen prior to the pandemic, and the attainment of
historically high reserves.
Outlook. Our robust balance sheet and capital allocation
management, coupled with the overall performance of our portfolio
companies about which you can read more in the pages that follow,
led to strong results in 3Q23. The substantial deleveraging
progress has enhanced our financial flexibility, allowing us to
continue to create value for our shareholders and distribute US$ 15
million through a new share buyback programme, while getting much
closer to our goal of achieving our targeted through-the-cycle NCC
ratio of less than 15%. Looking ahead, I believe that Georgia
Capital is extremely well-positioned to deliver consistent NAV per
share growth in the medium to long term, all while making further
progress on our key strategic and capital management
priorities.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset
value at 3 0 - Sep -23 and its income for the third quarter and
nine-month period then ended on an IFRS basis (see "Basis of
Presentation" on page 26 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 third quarter (30- Jun -23
and 3 0 - Sep -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 nine
months of 2023 see page 25.
NAV STATEMENT 3Q 23
GEL '000, Jun-23 1. 2a. 2b. 2c. 3. 4. Sep Change
unless Value Investment Buyback Dividend Operating Liquidity/ -23 %
otherwise noted creation and expenses FX/Other
([9]) Divestments
Listed and
Observable
Portfolio
Companies
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Bank of Georgia
(BoG) 882,846 221,148 - - (11,785) - - 1,092,209 23.7%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Water Utility 159,000 - - - - - - 159,000 0.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Total Listed
and
Observable
Portfolio
Value 1,041,846 221,148 - - (11,785) - - 1,251,209 20.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio
value change
% 21.2% 0.0% 0.0% -1.1% 0.0% 0.0% 20.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Private
Portfolio
Companies
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Large Companies 1,496,262 (52,279) - - (41,876) - 817 1,402,924 -6.2%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Retail
(Pharmacy) 723,505 (13,776) - - (30,843) - 359 679,245 -6.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Hospitals 426,060 (38,531) - - (6,018) - 359 381,870 -10.4%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Insurance (P&C
and
Medical) 346,697 28 - - (5,015) - 99 341,809 -1.4%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Of which,
P&C
Insurance 276,960 (9,248) - - - - 99 267,811 -3.3%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Of which,
Medical
Insurance 69,737 9,276 - - (5,015) - - 73,998 6.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Investment
Stage
Companies 536,362 (8,955) 30 - - - 371 527,808 -1.6%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Renewable
Energy 247,682 12,989 - - - - 139 260,810 5.3%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Education 184,147 (13,473) 30 - - - 152 170,856 -7.2%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Clinics and
Diagnostics 104,533 (8,471) - - - - 80 96,142 -8.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Other Companies 286,094 15,008 (4,168) - - - 331 297,265 3.9%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Total Private
Portfolio
Value 2,318,718 (46,226) (4,138) - (41,876) - 1,519 2,227,997 -3.9%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Private
Portfolio
value change % -2.0% -0.2% 0.0% -1.8% 0.0% 0.1% -3.9%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,360,564 174,922 (4,138) - (53,661) - 1,519 3,479,206 3.5%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Total Portfolio
value change % 5.2% -0.1% 0.0% -1.6% 0.0% 0.0% 3.5%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Net Debt (2) (324,864) - 1,001 (273) 53,661 (5,442) (18,268) (294,185) -9.4%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
of which,
Cash and
liquid funds 401,125 - 1,001 (273) 106,498 (5,442) (402,553) 100,356 -75.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
of which,
Loans
issued 17,461 - - - - - (8,556) 8,905 -49.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
of which,
Accrued
dividend
income 52,837 - - - (52,837) - - - NMF
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
of which,
Gross
Debt (796,287) - - - - - 392,841 (403,446) -49.3%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Net other
assets/
(liabilities)
(3) (1,103) - 3,137 - - (3,360) 3,985 2,659 NMF
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
of which,
share-based
comp. - - - - - (3,360) 3,360 - 0.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 3,034,597 174,922 - (273) - (8,802) (12,764) 3,187,680 5.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
NAV change % 5.8% 0.0% 0.0% 0.0% -0.3% -0.4% 5.0%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Shares
outstanding(9) 41,411,180 - - (9,430) - - - 41,401,750
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 73.28 4.22 - 0.01 - (0.21) (0.31) 76.99 5.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 5.8% 0.0% 0.0% 0.0% -0.3% -0.4% 5.1%
---------------- ----------- --------- ------------ -------- --------- ---------- ----------- ----------- -------
NAV per share (GEL) was up by 5.1% q-o-q in 3Q23, mainly
reflecting GEL 174.9 million value creation across our portfolio
companies with a positive 5.8 ppts impact. The NAV per share growth
was slightly offset by a) management platform-related costs and net
interest expense (-0.5 ppts impact in total) and b) GEL's
depreciation against US$, resulting in a foreign currency loss of
GEL 6.2 million on GCAP net debt (-0.2 ppts impact).
Portfolio overview
Total portfolio value increased by GEL 118.6 million (3.5%) to
GEL 3.5 billion in 3Q23:
-- The value of the listed and observable portfolio increased by
GEL 209.4 million (up 20.1%), resulting from the continued growth
in BoG's share price.
-- The value of the private portfolio decreased by GEL 90.7
million (down 3.9%), mainly reflecting a) a decrease of GEL 41.9
million due to dividends paid to GCAP and b) negative GEL 46.2
million value creation.
Consequently, as of 30-Sep-23, the listed and observable
portfolio value totalled GEL 1.3 billion (36.0% of the total
portfolio value), and the private portfolio value amounted to GEL
2.2 billion (64.0% of the total).
1) Value creation
Total portfolio value creation amounted to GEL 174.9 million in
3Q23. This reflects GEL 221.1 million value creation resulting from
the 26.2% increase in BoG's share price during the quarter,
partially offset by GEL 46.2 million negative impact from changes
in implied valuation multiples[10] and foreign currency exchange
rates on private portfolio valuations.
The table below summarises value creation drivers in our
businesses in 3 Q23:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([11]) / and FX ([13])
buy-outs
/ exits
([12])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable portfolio 221,148
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG 221,148
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility -
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private portfolio 1 - (46,227) (46,226)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies (49,632) - (2,647) (52,279)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) (225) - (13,551) (13,776)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (18,769) - (19,762) (38,531)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) (30,638) - 30,666 28
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance (48,688) - 39,440 (9,248)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance 18,050 - (8,774) 9,276
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies 2,045 - (11,000) (8,955)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy 5,538 - 7,451 12,989
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education (16,675) - 3,202 (13,473)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics 13,182 - (21,653) (8,471)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other 47,588 - (32,580) 15,008
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio 1 - (46,227) 174,922
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Valuation overview [14]
In 3Q23, our private large and investment stage portfolio
companies were valued internally by incorporating the portfolio
companies' 3Q23 results, in line with International Private Equity
Valuation ("IPEV") guidelines and methodology deployed in 1H23 by
an independent valuation company. 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 3 Q23 is summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-23 30-Jun-23 Change 30-Sep-23 30-Jun-23 Change % share
otherwise noted % % in total
portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 1,251,209 1,041,846 20.1% 36.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 1,092,209 882,846 23.7% 31.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 159,000 159,000 NMF 4.6%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
3,41 2,227,
Private portfolio 1 , 385 3,394,482 0.5% 997 2,318,718 -3.9% 64.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,978,870 1,990,517 -0.6% 1,402,924 1,496,262 -6.2% 40.3%
Retail (pharmacy) 1,006,309 980,682 2.6% 679,245 723,505 -6.1% 19.5%
Hospitals 645,372 680,804 -5.2% 381,870 426,060 -10.4% 11.0%
Insurance (P&C and
Medical) 327,189 329,031 -0.6% 341,809 346,697 -1.4% 9.8%
Of which, P&C Insurance 267,811 276,960 -3.3% 267,811 276,960 -3.3% 7.7%
Of which, Medical
Insurance 59,378 52,071 14.0% 73,998 69,737 6.1% 2.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 835,040 848,849 -1.6% 527,808 536,362 -1.6% 15.2%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 452,797 441,335 2.6% 260,810 247,682 5.3% 7.5%
Education[15] 205,343 224,514 -8.5% 170,856 184,147 -7.2% 4.9%
Clinics and Diagnostics 176,900 183,000 -3.3% 96,142 104,533 -8.0% 2.8%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
7. 3.
Other 59 7,475 555,116 6 % 29 7,265 286,094 9 % 8.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
3,47
Total portfolio 9,206 3,360,564 3.5% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private large portfolio companies (40.3% of total portfolio
value)
Retail (Pharmacy) (19.5% of total portfolio value) - the
Enterprise Value (EV) of Retail (Pharmacy) was up by 2.6% to GEL
1.0 billion in 3Q23, driven by the strong performance of the
business, supported by the expansion of the retail chain and
continued growth of Georgian economy. 3Q23 revenues and EBITDA were
up by 5.2% and 15.6% y-o-y, respectively, notwithstanding several
countervailing factors including a) GEL's appreciation against
foreign currencies which negatively affect product pricing as c.70%
of the inventory purchases are denominated in foreign currencies,
b) the negative impact of the External Reference Pricing model, and
c) the decrease in wholesale revenues due to the impact of new
government regulations. See page 13 for details. Consequently, LTM
EBITDA (incl. IFRS 16) was up by 3.6% to GEL 110.8 million in 3Q23.
Net debt increased by 28.0% to GEL 319.1 million in 3Q23,
reflecting the short-term borrowings obtained to support working
capital requirements. As a result, the fair value of GCAP's 97.6%
holding decreased by 6.1% to GEL 679.2 million in 3Q23. The implied
LTM EV/EBITDA valuation multiple (incl. IFRS 16) decreased to 9.1x
as at 30-Sep-23 (down from 9.2x as of 30-Jun-23).
Hospitals (11.0% of total portfolio value) - Hospitals' EV
decreased by 5.2% to GEL 645.4 million in 3Q23. This valuation
assessment reflects the anticipated impact of the recently
introduced regulations. To address the oversupply of beds and
enhance the quality of the healthcare industry in the country, the
Government of Georgia introduced new facility regulation rules,
effective from September 2023 which establishes upgraded standards
for healthcare facilities and imposes minimum requirements for
space allotted per hospital bed. During the phased renovation
process of 12 of the business' 16 hospitals, certain sections of
the business facilities were temporarily closed for services and
unable to accept patients, thereby affecting the revenue and EBITDA
(excl. IFRS 16) numbers, up 2.6% and down 12.3% y-o-y in 3Q23,
respectively. See page 15 for details. LTM EBITDA (incl. IFRS 16)
decreased by 2.4% q-o-q to GEL 51.7 million in 3Q23. Net debt was
up by 3.9% q-o-q to GEL 231.0 million, mainly reflecting higher
capex investments related to new facility regulations and payment
of GEL 6.0 million dividends to GCAP in 3Q23. As a result, the
equity value of Hospitals decreased by 10.4% q-o-q to GEL 381.9
million in 3Q23, translating into an implied LTM EV/EBITDA multiple
(incl. IFRS 16) of 12.5x at 30-Sep-23 (12.9x at 30-Jun-23).
Insurance (P&C and Medical) (9.8% of total portfolio value)
- The insurance business combines: a) P&C Insurance valued at
GEL 267.8 million and b) Medical Insurance valued at GEL 74.0
million.
P&C Insurance - Insurance revenue was up by 22.5 % y-o-y to
GEL 32.7 million in 3 Q23, mainly reflecting the growth in the
Motor, credit life and agricultural insurance lines. The combined
ratio increased by 22.8 ppts y-o-y in 3Q23, attributable to the
following factors: a) a significant 17.4 ppts y-o-y increase in the
loss ratio mainly due to the combined effect of an unprecedented
landslide in one of the regions of Georgia and increased Agro
insurance claims due to abnormal number of hailstorms during the
quarter and b) a 3.9 ppts y-o-y increase in FX ratio, reflecting
the impact of FX movements on the business operations.
Consequently, 3Q23 net income was down 61.4% y-o-y to GEL 2.5
million. See page 16 for details. Pre-tax LTM net income was down
by 17.5% to GEL 22.7 million in 3Q23. The equity value of the
P&C insurance business was assessed at GEL 267.8 million at
30-Sep-23 (down 3.3% q-o-q), translating into an implied LTM P/E
valuation multiple of 11.8x at 30-Sep-23 (up from 10.1x at
30-Jun-23).
Medical Insurance - Insurance revenue increased by 21.2% y-o-y
to GEL 21.1 million in 3Q23, reflecting the increase in the prices
of insurance policies and the number of insured clients mainly in
the corporate client segment. The combined ratio was at 94.6% in
3Q23 (down 6.4 ppts y-o-y), resulting from a) a well-managed loss
ratio, down 3.7 ppts y-o-y, and b) a 2.7 ppts improvement in the
expense ratio, reflecting the strong top-line growth of the
business. Consequently, the net income of the medical insurance
business was up by 3.5x y-o-y to GEL 1.1 million in 3Q23. See page
16 for details. Pre-tax LTM net income was up by 18.7% to GEL 8.0
million in 3Q23. As a result of the developments described above,
the equity value of the business was assessed at GEL 74.0 million
at 30-Sep-23 (up 6.1 % q-o-q), translating into the implied LTM P/E
valuation multiple of 9.3x at 30-Sep-23 (down from 10.4x at
30-Jun-23).
Private investment stage portfolio companies (15.2% of total
portfolio value)
Renewable Energy (7.5% of total portfolio value) - EV of the
business was up by 0.3% to US$ 169.1 million in 3Q23 (up 2.6% to
GEL 452.8 million in GEL terms, reflecting stable prospects and the
local currency depreciation against US$ during the quarter). In US$
terms, 3Q23 revenue and EBITDA were up by 2.8% and down by 2.7%
y-o-y, respectively, reflecting the net impact of a) a 1.3% y-o-y
decrease in electricity generation in 3Q23 influenced by varying
weather conditions and b) 3.9% y-o-y increase in the average
electricity selling price in 3Q23 driven by exports to Türkiye the
effect of which is partially offset by export related electricity
and transmission costs reflected in operating expenses. Revenue and
EBITDA in GEL terms were down by 3.9% and 9.0% y-o-y in 3Q23,
respectively. See page 19 for details. The pipeline renewable
energy projects continued to be measured at an equity investment
cost (GEL 55.6 million in aggregate as at 30-Sep-23). Net debt
decreased by 3.1% to US$ 71.7 million in 3Q23 (down 0.9% to GEL
192.0 million in GEL terms) due to strong cash flow generation
during the quarter. As a result, the equity value of Renewable
Energy was assessed at GEL 260.8 million in 3Q23 (up by 5.3%
q-o-q), (up 2.9% q-o-q to US$ 97.4 in US$ terms). The blended
EV/EBITDA implied valuation multiple of the operational assets
stood at 12.5x as at 30-Sep-23, up from 12.4x at 30-Jun-23.
Education (4.9% of total portfolio value) - EV of Education was
down by 8.5% to GEL 205.3 million in 3Q23, reflecting near-term
developments in the operating performance of the business. The
third quarter is usually a slow season for the education business,
as the schools are not operational during the July-August holidays.
The revenue in 3Q23 increased by 14.7% y-o-y driven by a) organic
growth through strong intakes and a ramp-up of the utilisation and
b) expansion of the business through the launch of a new campus in
the mid-scale segment category in 3Q23. The revenue growth was
partially subdued by GEL's y-o-y appreciation against US$, as the
tuition fees for our premium and international schools are
denominated in US$. Operating expenses were up by 38 .0 % in 3Q23,
mainly reflecting inflation and increased salary expenses in line
with the expansion. This led to a GEL 1. 7 million decrease in
EBITDA in 3Q23. See page 20 for details. Consequently, LTM EBITDA
was down by 9.6% to GEL 12.4 million in 3Q23. Net debt was down by
3.3% q-o-q to GEL 12.9 million in 3Q23. As a result, GCAP's stake
in the education business was valued at GEL 170.9 million at
30-Sep-23 (down 7.2% q-o-q). This translated into the implied
valuation multiple of 16.5x 30-Sep-23. The forward-looking implied
valuation multiple is estimated at 11.2x for the 2023-2024 academic
year.
Clinics and Diagnostics (2.8% of total portfolio value) - The EV
of the business decreased by 3.3% to GEL 176.9 million in 3Q23.
Similar to Hospitals, the new facility regulation has also impacted
the outlook of the clinics and diagnostics business, which has been
reflected in our 3Q23 valuation assessment. The combined 3Q23
revenue of the clinics and diagnostics business was up by 8.4%
y-o-y. 3Q23 EBITDA (excl. IFRS 16), which also reflects a GEL 2.9
one-off gain from the sale of one of the polyclinic buildings, was
up 4.2x y-o-y. See page 21 for details. Consequently, LTM EBITDA
(incl. IFRS 16) of the business was up by 41.7% to GEL 13.8 million
in 3Q23. Net debt was up by 3.4% q-o-q to GEL 77.3 million. As a
result, the equity value of the business was assessed at GEL 96.1
million, down 8.0% q-o-q in 3Q23, translating into an implied LTM
EV/EBITDA multiple (incl. IFRS 16) of 1 2 .8 x at 3 0 -Sep-23, down
from 18.8x at 30-Jun-23. The forward-looking implied valuation
multiple is estimated at 10. 1 x.
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 23. The portfolio value of other businesses increased by 3. 9
% to GEL 29 7 . 3 in 3Q23, mainly driven by the strong operating
performance and improved prospects of our beverages business.
Listed and observable portfolio companies (36.0% of total
portfolio value)
BOG ( 31.4% of total portfolio value) - In 2 Q23, BoG delivered
an annualised ROAE of 34.6% and a 17.6% loan book growth y-o-y (on
a constant currency basis, the loan portfolio increased by 12.2%
y-o-y). In 3Q23, BoG's share price was up by 26.2% q-o-q to GBP
36.9 at 30-Sep-23. This reflects the strong growth in BoG's
earnings, supported by the accretive impact of the Bank's share
buybacks. In 3Q23, GCAP received GEL 52.8 million final dividends
(declared and accrued in 1H23) and GEL 11.8 million buyback
dividends from participation in the Bank's buyback programme,
corresponding to c.100,000 shares sold. Subsequent to 3Q23, GCAP
received additional GEL 27.6 million interim dividends from BoG, up
52.3% compared to interim dividends received in 2022,
notwithstanding the sale of c.775,000 BoG shares through the
participation in the Bank's buyback programme since its resumption.
As a result of the developments described above, the market value
of GCAP's equity stake in BoG increased by 23.7% to GEL 1,092.
million. The LTM P/E valuation multiple was at 3.4x at 30-Jun-23
(3.4x at 31-Mar-23). BoG's public announcement of their 3Q23 and
9M23 results when published will be available on BoG's website
.
Water Utility ( 4.6% of total portfolio value ) - In 3Q23, 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, remained unchanged at
GEL 159.0 million. This reflects the application of the put
option valuation to GCAP's holding in the business. We expect that
the year-end valuation assessment will reflect the revised tariffs
for the upcoming 2024-2026 regulatory period, which are anticipated
to receive approval in December 2023.
2) Dividends
In 3Q23, Georgia Capital recorded GEL 53.7 million dividend
income from portfolio companies, of which:
-- A total of GEL 30.8 million dividends were collected from the
Retail (pharmacy) business, with GEL 6.6 million constituting a
one-off dividend.
-- GEL 11.8 million buyback dividend was received from
participation in BoG's buyback programme.
-- GEL 6.0 million dividend from Hospitals business.
-- GEL 5.0 million dividend from Medical Insurance.
9M23 NAV STATEMENT HIGHLIGHTS
GEL '000, unless Dec-22 1. 2a. 2b. 2c. 3. 4. Sep Change
otherwise noted Value Investment Buyback Dividend Operating Liquidity/ -23 %
creation and expenses FX/Other
([16]) divestments
Total Listed and
Observable
Portfolio
Value 985,463 391,939 - - (126,193) - - 1,251,209 27.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio value
change
% 39.8% 0.0% 0.0% -12.8% 0.0% 0.0% 27.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Private
Portfolio
Companies 2,213,164 65,447 16,285 - (75,542) - 8,643 2,227,997 0.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which, Large
Companies 1,437,610 33,610 - - (70,355) - 2,059 1,402,924 -2.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Investment
Stage
Companies 501,407 13,029 16,253 - (5,187) - 2,306 527,808 5.3%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Other
Companies 274,147 18,808 32 - - - 4,278 297,265 8.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
value change % 3.0% 0.7% 0.0% -3.4% 0.0% 0.4% 0.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
Value 3,198,627 457,386 16,285 - (201,735) - 8,643 3,479,206 8.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
value change % 14.3% 0.5% 0.0% -6.3% 0.0% 0.3% 8.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Debt (380,905) - (19,422) (53,994) 201,735 (16,327) (25,272) (294,185) -22.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value 2,817,391 457,386 - (53,994) - (27,974) (5,129) 3,187,680 13.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV change % 16.2% 0.0% -1.9% 0.0% -1.0% -0.2% 13.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Shares
outstanding(16) 42,973,462 - - (2,151,848) - - 580,136 41,401,750 -3.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 65.56 10.64 - 2.13 - (0.65) (0.70) 76.99 17.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 16.2% 0.0% 3.3% 0.0% -1.0% -1.1% 17.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share (GEL) increased by 17.4% in 9M23, reflecting a)
GEL 457.4 million value creation across our portfolio companies
with a positive 16.2 ppts impact, b) share buybacks (+3.3 ppts
impact) and c) GEL's appreciation against US$, resulting in a
foreign currency gain of GEL 6.5 million on GCAP net debt (+0.2
ppts impact). The NAV per share growth was slightly offset by
management platform-related costs and net interest expense with a
negative 1.9 ppts impact in total.
Portfolio overview
Total portfolio value increased by GEL 280.6 million (8.8%) to
GEL 3.5 billion in 9M23:
-- The value of GCAP's holding in BoG was up by GEL 261.7
million, reflecting robust GEL 387.9 million value creation,
partially offset by GEL 126.2 million dividend income from the Bank
in 9M23.
-- 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 14.8
million in 9M23, mainly reflecting the net impact of a) GEL 65.4
million value creation, b) investments of GEL 20.5 million
predominantly in investment stage businesses and c) a decrease of
GEL 75.5 million due to dividends paid to GCAP.
1) Value creation
Total portfolio value creation amounted to GEL 457.4 million in
9M23.
-- A 41.7% increase in BoG's share price in 9M23 led to a GEL 387.9 million value creation.
-- GEL 4.0 million value was created at our water utility
business in 9M23, as described above.
-- The value creation in the private portfolio amounted to GEL
65.4 million in 9M23, reflecting the net impact of:
o GEL 244.0 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 undergo the post-COVID transformation and adapt to new
regulatory changes.
o GEL 178.5 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 9M 23:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([18]) / and FX ([20])
buy-outs
/ exits
([19])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable 391,939
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG 387,939
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility 4,000
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private 243,986 - (178,539) 65,447
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies 34,248 - (638) 33,610
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) 4,447 - 553 5,000
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (63,086) - 17,149 (45,937)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) 92,887 - (18,340) 74,547
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 20,345 - 27,044 47,389
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance 72,542 - (45,384) 27,158
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies (1,102) - 14,131 13,029
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy 2,566 - 30,941 33,507
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education 5,550 - (9,852) (4,302)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics (9,218) - (6,958) (16,176)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other 210,840 - (192,032) 18,808
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio 243,986 - (178,539) 457,386
-------------------------------------- ---------------------- ------------ ---------------- ---------------
The enterprise value and equity value development of our
businesses in 9M 23 is summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-23 31-Dec-22 Change 30-Sep-23 31-Dec-22 Change % share
otherwise noted % % in total
portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 1,251,209 985,463 27.0% 36.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 1,092,209 830,463 31.5% 31.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 159,000 155,000 2.6% 4.6%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 3,411,385 3,310,981 3.0% 2,227,997 2,213,164 0.7% 64.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,978,870 1,875,688 5.5% 1,402,924 1,437,610 -2.4% 40.3%
Retail (pharmacy) 1,006,309 957,686 5.1% 679,245 724,517 -6.2% 19.5%
Hospitals 645,372 653,335 -1.2% 381,870 433,193 -11.8% 11.0%
Insurance (P&C and
Medical) 327,189 264,667 23.6% 341,809 279,900 22.1% 9.8%
Of which, P&C Insurance 267,811 228,045 17.4% 267,811 228,045 17.4% 7.7%
Of which, Medical
Insurance 59,378 36,622 62.1% 73,998 51,855 42.7% 2.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 835,040 816,023 2.3% 527,808 501,407 5.3% 15.2%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 452,797 417,903 8.3% 260,810 224,987 15.9% 7.5%
Education[21] 205,343 218,264 -5.9% 170,856 164,242 4.0% 4.9%
Clinics and Diagnostics 176,900 179,856 -1.6% 96,142 112,178 -14.3% 2.8%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 597,475 619,270 -3.5% 297,265 274,147 8.4% 8.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 3,479,206 3,198,627 8.8% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
2) Investments[22]
In 9M23, 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 the renewable energy business
for the development of the pipeline projects.
-- GEL 4.2 million was invested in the auto service business.
3) Share buybacks
During 9M23, 2,151,848 shares were bought back for a total
consideration of GEL 54.0 million.
-- 1,151,848 shares were repurchased for the management trust
for a total consideration of GEL 28.6 million, fully securing the
management trust in the form of unawarded shares for the
forthcoming four years.
-- 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 9 M23, Georgia Capital recorded GEL 201.7 million dividend
income from portfolio companies:
-- GEL 73.4 million buyback dividend represents the
participation in BoG's buyback programme, of which GEL 29.4 million
one-off dividend was attributable to participation in BoG's 2022
buybacks in 9M23.
-- GEL 52.8 million represents the final dividends from BoG, collected on 14-Jul-23.
-- A total of GEL 50.9 million dividends were collected from the
retail (pharmacy) business, with GEL 26.7 million constituting a
one-off dividend.
-- GEL 8.4 million dividend from P&C Insurance.
-- GEL 6.0 million dividend from Hospitals.
-- GEL 5.2 million dividend from Renewable Energy.
-- GEL 5.0 million dividend from Medical Insurance.
Net Capital Commitment (NCC) overview
Below we describe the components of Net Capital Commitment (NCC)
as of 30 September 2023 and as of 30 June 2023. NCC represents an
aggregated view of all confirmed, agreed and expected capital
outflows at the GCAP HoldCo level.
Components of NCC 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
GEL '000, unless otherwise
noted
Cash at banks 68,851 163,082 -57.8% 235,255 -70.7%
-------------------------------- ---------- ---------- ------- ---------- -------
Liquid funds 31,505 238,043 -86.8% 176,589 -82.2%
-------------------------------- ---------- ---------- ------- ---------- -------
Of which, Internationally
listed debt securities 13,975 235,181 -94.1% 173,395 -91.9%
-------------------------------- ---------- ---------- ------- ---------- -------
Of which, Locally listed
debt securities 17,530 2,862 NMF 3,194 NMF
-------------------------------- ---------- ---------- ------- ---------- -------
Total cash and liquid
funds 100,356 401,125 -75.0% 411,844 -75.6%
-------------------------------- ---------- ---------- ------- ---------- -------
Loans issued 8,905 17,461 -49.0% 26,830 -66.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Accrued dividend income - 52,837 NMF - NMF
-------------------------------- ---------- ---------- ------- ---------- -------
Gross debt (403,446) (796,287) -49.3% (819,579) -50.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Net debt (1) (294,185) (324,864) -9.4% (380,905) -22.8%
-------------------------------- ---------- ---------- ------- ---------- -------
Guarantees issued (2) - (4,289) NMF (18,460) NMF
-------------------------------- ---------- ---------- ------- ---------- -------
Net debt and guarantees
issued (3)=(1)+(2) (294,185) (329,153) -10.6% (399,365) -26.3%
-------------------------------- ---------- ---------- ------- ---------- -------
Planned investments (4) (126,752) (123,915) 2.3% (141,396) -10.4%
-------------------------------- ---------- ---------- ------- ---------- -------
of which, planned investments
in Renewable Energy (77,814) (76,054) 2.3% (81,205) -4.2%
-------------------------------- ---------- ---------- ------- ---------- -------
of which, planned investments
in Education (48,938) (47,861) 2.3% (60,191) -18.7%
-------------------------------- ---------- ---------- ------- ---------- -------
Announced Buybacks (5) - - - - -
-------------------------------- ---------- ---------- ------- ---------- -------
Contingency/liquidity
buffer (6) (133,915) (130,885) 2.3% (135,100) -0.9%
-------------------------------- ---------- ---------- ------- ---------- -------
Total planned investments,
announced buybacks and
contingency/liquidity buffer
(7)=(4)+(5)+(6) (260,667) (254,800) 2.3% (276,496) -5.7%
-------------------------------- ---------- ---------- ------- ---------- -------
Net capital commitment
(3)+(7) (554,852) (583,953) -5.0% (675,861) -17.9%
Portfolio value 3,479,206 3,360,564 3.5% 3,198,627 8.8%
-1.5 -5.2
NCC ratio 15.9% 17.4% ppts 21.1% ppts
-------------------------------- ---------- ---------- ------- ---------- -------
Cash and liquid funds . Total cash and liquid funds' balance was
down 75.0% q-o-q to GEL 100.4 million (down 75.5% q-o-q to US$ 37.5
million) in 3Q23, mainly reflecting the use of funds for redemption
of GCAP's Eurobonds in 3Q23. The decrease was slightly offset by
the strong dividend inflows as described above . In 3Q23, the
balance of internationally listed debt securities decreased by
94.1% to GEL 14.0 million, reflecting the redemption of GCAP's
Eurobonds. Consequently, in 9M23, the total cash and liquid funds'
balance decreased by 75.6%.
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 8.6 million in 3Q23 (down by GEL
17.9 million in 9M23), reflecting the full repayment of the
previously issued loan by our auto services business.
Gross debt. In US$ terms the balance decreased by 50.5% q-o-q in
3Q23, reflecting the net impact of the issuance of US$ 150 million
local sustainability-linked bonds and full redemption of GCAP
Eurobonds in 3Q23 (down 50.3% in 9M23). In GEL terms, the balance
was down by 49.3% in 3Q23 and down by 50.8% in 9M23, reflecting
foreign exchange rate movements.
Guarantees issued. The balance reflected GCAP's guarantee on the
borrowing of the beer business. In 3Q23, the guarantee was reduced
to zero, leaving GCAP with no outstanding guarantees.
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 remained
unchanged in 3Q23, while in 9M23 it decreased by 9.6%, due to the
investments in these businesses, as described above (the balance in
GEL terms was up 2.3% and down 10.4% in 3Q23 and 9M23,
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-Sep-23.
As a result of the movements described above, NCC was down by
5.0% to GEL 554.9 million (US$ 207.2 million), translating into a
15.9% NCC ratio as at 30-Sep-23 (down by 1.5 ppts q-o-q).
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 152.9 million in 3Q2 3 (GEL 1 64.5
million net income in 3Q2 2 ) and GEL 395.4 million in 9M2 3 (GEL
344.6 million net loss in 9M2 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 September 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 3 Q23 3 Q22 Change 9M 23 9M 22 Change
================================ ========= ========= ======= ========= ========== =======
Dividend income 53,661 32,019 67.6% 201,735 66,440 NMF
================================ ========= ========= ======= ========= ========== =======
Of which, regular
dividend income 41,876 32,019 30.8% 128,379 66,440 93.2%
================================ ========= ========= ======= ========= ========== =======
Of which, buyback
dividend income 11,785 - NMF 73,356 - NMF
================================ ========= ========= ======= ========= ========== =======
Interest income 4,304 8,165 -47.3% 14,296 26,315 -45.7%
================================ ========= ========= ======= ========= ========== =======
Realised / unrealised
loss/gain on liquid
funds / Loss on GCAP
Eurobond buybacks (3,430) (1,719) 99.5% (2,348) (13,154) NMF
================================ ========= ========= ======= ========= ========== =======
Interest expense (12,031) (16,573) -27.4% (38,782) (54,253) -28.5%
================================ ========= ========= ======= ========= ========== =======
Gross operating income 42,504 21,892 94.2% 174,901 25,348 NMF
================================ ========= ========= ======= ========= ========== =======
Operating expenses (8,802) (9,821) -10.4% (27,973) (29,521) -5.2%
================================ ========= ========= ======= ========= ========== =======
GCAP net operating
income/(loss) 33,702 12,071 NMF 146,928 (4,173) NMF
================================ ========= ========= ======= ========= ========== =======
Fair value changes
of portfolio companies
================================ ========= ========= ======= ========= ========== =======
Listed and Observable
Portfolio Companies 209,363 142,450 47.0% 265,746 (69,409) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Bank of
Georgia Group PLC 209,363 142,450 47.0% 261,746 (83,017) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Water Utility - - NMF 4,000 13,608 -70.6%
================================ ========= ========= ======= ========= ========== =======
Private Portfolio
companies (88,102) (4,563) NMF (10,095) (292,391) -96.5%
================================ ========= ========= ======= ========= ========== =======
Large Portfolio Companies (94,155) (25,140) NMF (36,745) (189,065) -80.6%
================================ ========= ========= ======= ========= ========== =======
Of which, Retail (pharmacy) (44,619) 6,209 NMF (45,904) (33,147) 38.5%
================================ ========= ========= ======= ========= ========== =======
Of which, Hospitals (44,549) (45,819) -2.8% (51,955) (141,588) -63.3%
================================ ========= ========= ======= ========= ========== =======
Of which, Insurance
(P&C and Medical) (4,987) 14,470 NMF 61,114 (14,330) NMF
================================ ========= ========= ======= ========= ========== =======
Investment Stage Portfolio
Companies (8,955) 5,965 NMF 7,842 (13,254) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Renewable
energy 12,989 1,768 NMF 28,320 (234) NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Education (13,473) 7,286 NMF (4,302) 28,028 NMF
================================ ========= ========= ======= ========= ========== =======
Of which, Clinics
and Diagnostics (8,471) (3,089) NMF (16,176) (41,048) -60.6%
================================ ========= ========= ======= ========= ========== =======
Other businesses 15,008 14,612 2.7% 18,808 (90,072) NMF
================================ ========= ========= ======= ========= ========== =======
Total investment return 121,261 137,887 -12.1% 255,651 (361,800) NMF
================================ ========= ========= ======= ========= ========== =======
Income/(loss) before
foreign exchange movements
and non-recurring expenses 154,963 149,958 3.3% 402,579 (365,973) NMF
================================ ========= ========= ======= ========= ========== =======
Net foreign currency
(loss)/gain (6,170) 12,137 NMF 6,460 26,585 -75.7%
================================ ========= ========= ======= ========= ========== =======
Non-recurring expenses (439) (82) NMF (1,759) (278) NMF
================================ ========= ========= ======= ========= ========== =======
Net income/(loss) 148,354 162,013 -8.4% 407,280 (339,666) NMF
================================ ========= ========= ======= ========= ========== =======
Gross operating income of GEL 42.5 million in 3Q23 reflects a
significant increase in dividend income, which was further
supported by a y-o-y decrease in interest expenses due to GEL's
y-o-y appreciation against US$ and significant deleveraging
progress as described above. Gross operating income in 9M23
amounted to GEL 174.9 million.
The components of GCAP's operating expenses are shown in the
table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise
noted 3Q23 3Q22 Change 9M23 9M22 Change
Administrative expenses
([23]) (2,523) (2,693) -6.3% (8,051) (8,780) -8.3%
Management expenses
- cash-based ([24]) (2,919) (2,402) 21.5% (8,275) (7,266) 13.9%
Management expenses
- share-based ([25]) (3,360) (4,726) -28.9% (11,647) (13,475) -13.6%
Total operating expenses (8,802) (9,821) -10.4% (27,973) (29,521) -5.2%
Of which, fund type
expense ([26]) (2,103) (2,597) -19.0% (7,007) (8,681) -19.3%
Of which, management
fee type expenses ([27]) (6,699) (7,224) -7.3% (20,966) (20,840) 0.6%
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 0.9 0 % at 30-Sep-23 (1.09% as of
30-Sep-22).
Total investment return represents the increase (decrease) in
the fair value of our portfolio. Total investment return was GEL
121.3 million in 3Q23 and GEL 255.7 million in 9M23, mostly
reflecting the growth in the value of our listed and observable
portfolio businesses. We discuss valuation drivers for our
businesses on pages 5-7. The performance of each of our private
large and investment stage portfolio companies is discussed on
pages 13-23.
GCAP's net foreign currency liability balance amounted to US$
129 million (GEL 346 million) at 30-Sep-23 , down from c.US$ 142
million (GEL 371 million) at 30-Jun-23. Net foreign currency loss
was GEL 6.2 million in 3 Q23, and net foreign currency gain was GEL
6.5 million in 9M23. As a result of the movements described above,
GCAP's adjusted IFRS net income was GEL 148.4 million in 3Q23 and
GEL 407.3 million in 9M23.
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 3Q23,
9M23, 3Q22 and 9M22 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 26
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 2 % 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 94 pharmacies (of
which 381 are in Georgia and 13 are in Armenia) and 13 franchise
stores (of which, two are in Armenia and four in Azerbaijan).
3Q23 & 9M23 performance (GEL '000), Retail (pharmacy)
[28]
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue, net 199,597 189,809 5.2% 600,144 580,711 3.3%
Of which, retail 159,972 148,398 7.8% 476,192 453,015 5.1%
Of which, wholesale 39,625 41,411 -4.3% 123,952 127,696 -2.9%
Gross Profit 61,918 56,461 9.7% 181,077 171,303 5.7%
1.3 0.7
Gross profit margin 31.0% 29.7% ppts 30.2% 29.5% ppts
Operating expenses (ex.
IFRS 16) (41,038) (38,403) 6.9% (119,751) (114,779) 4.3%
EBITDA (ex. IFRS 16) 20,880 18,058 15.6% 61,326 56,524 8.5%
EBITDA margin, (ex. 1.0 0.5
IFRS 16) 10.5% 9.5% ppts 10.2% 9.7% ppts
Net profit (ex. IFRS
16) 12,369 14,683 -15.8% 45,717 51,205 -10.7%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 435 19,268 -97.7% 18,152 54,480 -66.7%
-104.6 -66.8
EBITDA to cash conversion 2.1% 106.7% ppts 29.6% 96.4% ppts
Cash flow from investing
activities[29] 5,343 (8,887) NMF (72,795) (54,558) 33.4%
Free cash flow, (ex.
IFRS 16)[30] (10,590) 15,822 NMF (76,776) (3,921) NMF
Cash flow used in financing
activities (ex. IFRS
16) (620) (5,059) -87.7% 14,560 10,107 44.1%
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 580,104 552,064 5.1% 576,060 0.7%
Of which, cash and bank
deposits 34,426 29,514 16.6% 75,279 -54.3%
Of which, securities
and loans issued 4,578 20,509 -77.7% 22,857 -80.0%
Total liabilities 544,160 502,395 8.3% 515,081 5.6%
Of which, borrowings 216,232 178,870 20.9% 131,547 64.4%
Of which, lease liabilities 136,836 115,331 18.6% 107,455 27.3%
Total equity 35,944 49,669 -27.6% 60,979 -41.1%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in retail revenues in 3Q23 and 9M23
reflects the expansion of the pharmacy chain and franchise stores,
along with overall economic growth in Georgia. This revenue growth
was partially subdued by a significant decrease in product prices
due to the appreciation of GEL against foreign currencies (as
approximately 70% of inventory purchases are denominated in foreign
currencies) and the implementation of the External Reference
Pricing model, which sets a maximum retail price for state-financed
prescription medicines.
Ø A y-o-y decline in wholesale revenue is attributable to the
impact of new government regulations, as detailed in the valuation
drivers and operating highlights section below. These regulations
led to the closure of certain partner pharmacies in 2023, with whom
our pharmacy business had wholesale agreements.
Ø The improvement in gross profit margins in 3Q23 and 9M23 is
mainly attributable to increased sales of high-margin para-pharmacy
products in the retail business line (para-pharmacy revenue as a
percentage of retail revenue increased from 37.4% in 3Q22 to 39.6%
in 3Q23, and from 35.7% in 9M22 to 39.6% in 9M23).
Ø The increase in operating expenses in 3Q23 and 9M23 reflects
the expansion of the pharmacy chain and franchise stores.
Ø As a result, the business posted strong EBITDA margins
(excluding IFRS 16) of 10.5% (up 1.0 ppts y-o-y) and 10.2% (up 0.5
ppts y-o-y) in 3Q23 and 9M23, respectively.
Ø The significant y-o-y increase in interest expense (excluding
IFRS 16) in 3Q23 and 9M23 is due to the higher average net debt
balance, as explained below.
Ø The business posted GEL 12.4 million net profit (excluding
IFRS 16) in 3Q23, down 15. 8 % y-o-y, further reflecting higher FX
gain in 3Q22 due to GEL's appreciation against the basket of
foreign currencies last year. Net profit (excluding IFRS 16) in
9M23 amounted to GEL 45.7 million, down 10.7% y-o-y.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The net debt balance was up to GEL 177.2 million as at
30-Sep-23, from GEL 128.9 million at 30-Jun-23, mainly reflecting
the short-term borrowings obtained to support working capital
requirements. The net debt balance was up by GEL 143.8 million from
31-Dec-22, further reflecting increased borrowings that partially
financed the minority buyout transaction in June 2023.
Ø Throughout the year, the business maintained its strategy of
making advance payments to key vendors to secure substantial
supplier discounts. This temporarily impacted the EBITDA to cash
conversion ratio in 2023, but is expected to normalise in 2024.
Ø GEL 30.8 million dividends were paid to GCAP in 3Q23 (GEL 50.9
million in 9M23).
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In June 2023 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%. The transaction was
executed at previously disclosed/agreed valuation multiples.
Ø Effective from 2023, the Government introduced two new
regulations: i) Good Manufacturing Practice ("GMP") and ii) Good
Distribution Practice ("GDP"). These regulations establish the
minimum standards that medicine distributors must meet to ensure
the quality and integrity of medicines throughout the supply chain.
Compliance with GMP and GDP ensures that medicines are consistently
stored under the appropriate conditions, including during
transportation, to prevent contamination. The implementation of the
new standards resulted in the closure of several of our partner
small pharmacies, leading to a reduction in annualised wholesale
business revenue by approximately GEL 22.0 million and a
corresponding decrease in gross profit by around GEL 4.6 million.
In 3Q23 and 9M23, the wholesale business revenue was affected by
GEL 6.2 million and GEL 18.0 million, respectively, while the
effect on gross profit was GEL 1.1 million in 3Q23 and GEL 3.1
million in 9M23. To meet the requirements the business incurred
additional CAPEX of GEL c.4.0 million in 9M23.
Ø The business added 19 pharmacies and 3 franchise stores (one
of which sells the Carter's baby clothing line) over the last 12
months.
Change Change
Sep-23 Jun-23 (q-o-q) Sep-22 (y-o-y)
Number of pharmacies 394 383 11 368 26
Of which, Georgia 381 371 10 359 22
Of which, Armenia 13 12 1 9 4
Number of franchise
stores 13 11 2 10 3
Of which, Georgia 7 7 - 7 -
Of which, Armenia 2 2 - 2 -
Of which, Azerbaijan 4 2 2 1 3
Ø Retail (Pharmacy)'s key operating performance highlights for 3
Q2 3 and 9 M23 are noted below:
Key metrics 3Q23 3Q22 Change 9M23 9M22 Change
Same store 6.6 -1.2
revenue growth 3.5% -3.1% ppts 1.0% 2.2% ppts
Number of bills 1. 2.
issued (mln) 7.6 7.5 1% 23.1 22.5 5 %
Average bill 6. 2.
size (GEL) 20.0 18.8 7 % 19.5 19.1 5 %
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, providing secondary and tertiary level
healthcare services across Georgia.
3Q23 & 9M23 performance (GEL '000), Hospitals [31]
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue, net[32] 68,307 66,580 2.6% 220,468 216,137 2.0%
Gross Profit 22,067 22,834 -3.4% 76,405 77,187 -1.0%
-1.9 -0.9
Gross profit margin 32.0% 33.9% ppts 34.3% 35.2% ppts
Operating expenses (ex.
IFRS 16) (13,351) (12,893) 3.6% (39,364) (38,698) 1.7%
EBITDA (ex. IFRS 16) 8,716 9,941 -12.3% 37,041 38,489 -3.8%
EBITDA margin (ex. IFRS -2.2 -0.9
16) 12.6% 14.8% ppts 16.6% 17.5% ppts
N et (loss)/profit (ex.
IFRS 16)[33] (6,376) (3,497) -82.3% (7,580) 1,287 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 21,735 3,768 NMF 14,792 18,384 -19.5%
EBITDA to cash conversion -7.9
(ex. IFRS 16) 249.4% 37.9% NMF 39.9% 47.8% ppts
Cash flow used in investing
activities[34] (16,513) (6,922) NMF (30,556) (4,610) NMF
Free cash flow (ex. IFRS
16)[35] 5,188 (1,650) NMF (16,202) 12,598 NMF
Cash flow from financing
activities (ex. IFRS 16) (8,818) 6,737 NMF (4,067) (39,163) -89.6%
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 614,090 630,233 -2.6% 614,705 -0.1%
Of which, cash balance
and bank deposits 1,192 4,991 -76.1% 21,625 -94.5%
Of which, securities and
loans issued 8,990 8,575 4.8% 14,040 -36.0%
Total liabilities 283,957 288,013 -1.4% 270,418 5.0%
Of which, borrowings 232,387 227,093 2.3% 213,880 8.7%
Total equity 330,133 342,220 -3.5% 344,287 -4.1%
To address the oversupply of beds and enhance the quality of the
healthcare industry in Georgia, the government introduced a new
facility regulation, effective from September 2023. This regulation
establishes upgraded standards for healthcare facilities and
imposes minimum requirements for space allotted per hospital bed .
In order to meet the new standards, the business initiated
renovation projects in 12 of its hospitals. During the phased
renovation, certain departments of our facilities were temporarily
closed and unable to accept patients. These renovation works took
place throughout July and August, with most of the work being
completed by the end of September. The CAPEX investment for the
renovation projects amounted to GEL 10.0 million in 3Q23. The
negative annualised impact of increased expenses that will result
from additional requirements is estimated at GEL c.4.0 million.
INCOME STATEMENT HIGHLIGHTS
Ø Notwithstanding the developments related to the new facility
regulation as described above, the 3Q23 revenue was up by 2.6%
y-o-y. The relatively modest 2.0% y-o-y increase in 9M23 revenue
further reflects mainly the following factors:
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 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 2.0 ppts to 40.5%
in 3Q23 and up 2.3 ppts to 38.5% in 9M23, is mainly attributable to
increased minimum salary rates for medical staff.
o An improvement in materials rate (17.5% in 3Q23 compared to
17.7% in 3Q22 and 17.4% in 9M23 compared to 18.7% in 9M22) resulted
from the phasing out of COVID as well as the completion of the
transfer of the hospitals business' procurement department from
pharmacy to hospitals.
o Utilities and other costs were up y-o-y by 3.7% in 3Q23 and up
5.0% in 9M23, resulting from overall inflation.
Ø Administrative salaries and other employee benefits were
well-managed y-o-y, down by 1.2% in 3Q23 and by 0.4% in 9M23. T he
launch of new products and services and increased marketing costs
to support the transition to the post-COVID environment translated
into increased general and administrative expenses (excl. IFRS 16),
up 5.0% in 3Q23 and up 4.2% in 9M23, y-o-y. As a result, the
business operating leverage was negative at 7.0% in 3Q23 and 2.7%
in 9M23.
Ø The developments described above resulted in a 12.3% and 2.2
ppts y-o-y decrease in EBITDA (excl. IFRS 16) and EBITDA margin in
3Q23, respectively (down 3.8% and 0.9 ppts y-o-y in 9M23,
respectively).
Ø Net interest expense (excluding IFRS 16) was up by 46.2% in
3Q23 and up 41.3% in 9M23, y-o-y, reflecting the increased net debt
balance (as described below) and increased interest rates on the
market.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø N et debt balance was up 4.1% q-o-q, mainly resulting from
higher capex investments associated with new facility regulation
and payment of GEL 6.0 million dividends to GCAP in 3Q23. Net debt
balance was up 24.7% in 9M23, further reflecting the delay in the
collection of receivables from the State in 2023 due to one-off
processing delays due to the introduction of the Diagnosis Related
Group ("DRG") financing system .
Ø As expected, starting in 3Q23, the State began to settle
overdue payments, which resulted in a significant improvement in
the EBITDA to cash conversion ratio (249.4% in 3Q23).
Ø Capex investment was GEL 16.5 million in 3Q23, reflecting
maintenance and capex related to the new facility regulation at
hospitals. In 9M23, the capex investment amounted to GEL 33.3
million, which apart from the 3Q23 capex described above includes
renovation works in Iashvili Hospital.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business key operating performance highlights for 3 Q23
and 9M23 are noted below:
Key metrics 3Q23 3Q22 Change 9M23 9M22 Change
4.8 1.1
Occupancy rate 48.4% 43.6% ppts 53.2% 52.1% ppts
Number of admissions
(thousands) 253.9 287.5 -11.7% 801.8 903.9 -11.3%
The decrease in the number of admissions reflects the renovation
works in our hospitals as described above.
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 29.2% market share in property and casualty
insurance based on gross premiums as of 3 0 -Jun-23. 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 1H23 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.
3Q23 & 9M23 performance (GEL'000), Insurance (P&C and
Medical) [37]
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Insurance revenue 53,831 44,126 22.0% 152,236 125,831 21.0%
Net underwriting profit 10,019 13,926 -28.1% 37,518 36,700 2.2%
Net investment profit 4,043 2,512 60.9% 10,393 6,786 53.2%
Net profit 3,602 6,772 -46.8% 17,601 17,126 2.8%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 10,242 12,452 -17.7% 31,521 27,585 14.3%
Free cash flow 8,670 11,687 -25.8% 27,697 25,403 9.0%
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 254,101 236,917 7.3% 217,373 16.9%
Total equity 127,808 127,730 0.1% 121,486 5.2%
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
coming into force 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 2023, 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 3Q23 and 9M23 was
mainly attributable to P&C (69.1% and 75.4% share in total net
profit in 3Q23 and 9M23, respectively). The loss ratio was up by
9.0 ppts and the expense ratio was down by 0.1 ppts y-o-y in 3Q23
(up 3.8 ppts and down 1.0 ppts y-o-y in 9M23, respectively),
translating into 11.2 ppts y-o-y increase in the combined ratio in
3Q23 (up 3.6 ppts y-o-y in 9M23). As a result, ROAE[38] was 12.3%
in 3Q23 (24.6% in 3Q22) and 20.3% in 9M23 (22.0% in 9M22).
Discussion of results, P&C Insurance
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Insurance revenue 32,707 26,702 22.5% 85,672 72,011 19.0%
Net underwriting profit 6,275 11,615 -46.0% 26,879 29,786 -9.8%
Net investment profit 2,855 1,542 85.1% 6,923 3,940 75.7%
Net profit 2,490 6,457 -61.4% 13,277 15,676 -15.3%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 7,136 9,976 -28.5% 25,081 26,048 -3.7%
Free cash flow 6,666 9,462 -29.5% 23,400 24,482 -4.4%
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 186,426 167,336 11.4% 151,795 22.8%
Total equity 91,939 87,977 4.5% 86,090 6.8%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 3Q23 and 9M23 insurance revenue reflect s a
combination of factors:
o Motor insurance revenues were up by GEL 3.5 million y-o-y in
3Q23 (up by 6.4 million in 9M23), 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 3 Q23 (up by 3.6 million in 9M23), resulting from the
growth of banks' portfolios in the mortgage, consumer loan, and
other sectors.
o Agricultural insurance revenues were up by GEL 0.5 million
y-o-y in 3Q23 (up by GEL 1.1 million y-o-y in 9M23), driven by
increased Agro insurance sales from GEL 12.0 million in 9M22 to GEL
13.5 million in 9M23.
Ø P&C Insurance's key performance ratios for 3Q23 and 9M23
are noted below:
Key ratios 3Q23 3Q22 Change 9M23 9M22 Change
Combined 22.8 10.1
ratio 99.5% 76.7% ppts 89.7% 79.6% ppts
Expense 1.5 0.8
ratio 35.2% 33.7% ppts 34.8% 34.0% ppts
17.4
ppts
ppts 8.0
Loss ratio 63.3% 45.9% pptppts 55.3% 47.3% ppts
3.9 1.3
FX ratio 1.0% -2.9% ppts -0.4% -1.7% ppts
-22.8 -6.8
ROAE(38) 12.8% 35.6% ppts 22.8% 29.6% ppts
Ø The combined ratio increased by 22.8 ppts y-o-y in 3Q23 (up by
10.1 ppts y-o-y in 9M23).
-- The expense ratio remained well controlled in both reporting
periods, up by 1.5 ppts y-o-y in 3Q23 and up by 0.8 ppts y-o-y in
9M23.
-- An in crease in the 3Q23 loss ratio was mainly driven by:
o Increased property insurance claims, resulting from an
unprecedented landslide in one of the regions of Georgia with the
estimated net loss of GEL 2.6 million (8.0 ppts impact on the 3Q23
loss ratio).
o Increased Agro insurance claims due abnormal number of
hailstorms during the quarter, resulting in a 7.2 ppts y-o-y
increase in the 3Q23 loss ratio. The increase further reflects the
low base effect of exceptionally low Agro insurance claims in
3Q22.
o The 9M23 loss ratio was further affected by a large property
insurance claim incurred in 1Q23, with an estimated net loss of GEL
1.2 million.
-- A 3.9 ppts y-o-y increase in FX ratio in 3Q23 (up by 1.3 ppts
y-o-y in 9M23), reflecting the impact of foreign exchange rate
movements on the business's insurance operations.
Ø P&C Insurance's net investment profit was up by 85.1%
y-o-y in 3Q23 (up by 75.7% y-o-y in 9M23), 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 195% as of 30 September
2023, significantly above the required minimum of 100%.
Ø A 28.5% y-o-y decrease in the net cash flows from operating
activities in 3Q23 (down by 3.7% in 9M23) reflects the payment of
some payable balances to reinsurers, agents and brokers as well as
the reimbursement of the abnormal amount of claims mentioned
above.
Ø GEL 8.4 million dividends were paid to GCAP in 9M23.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø With its 29.2% market share on the local insurance market,
P&C remained the largest market player, maintaining a strong
position.
Ø In 9M23, the business expanded its operations into the
regional reinsurance markets of Armenia and Azerbaijan. The
expansion has positively contributed to the operating performance
of the business.
Ø In 3Q23, Aldagi became the first insurance company on the
local market to obtain an international credit rating of bb+ from
AM Best. The credit rating is expected to further support the
regional expansion of the business' reinsurance operations.
Discussion of results, Medical Insurance
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Insurance revenue 21,124 17,424 21.2% 66,564 53,820 23.7%
Net underwriting profit 3,744 2,311 62.0% 10,639 6,914 53.9%
Net investment profit 1,188 970 22.5% 3,470 2,846 21.9%
Net profit 1,112 315 NMF 4,324 1,450 NMF
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 3,106 2,476 25.4% 6,440 1,537 NMF
Free cash flow 2,004 2,225 -9.9% 4,297 921 NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 67,675 69,581 -2.7% 65,578 3.2%
Total equity 35,869 39,753 -9.8% 35,396 1.3%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 3Q23 and 9M23 insurance revenue is due to the
increase in the price of insurance policies and a 6.6% y-o-y
increase in the total number of insured clients (c.170,500 as of
Sep-23) mainly in the corporate client segment.
Ø 9M23 net claims expenses stood at GEL 53.1 million (up 19.9%
y-o-y), out of which:
o GEL 22.3 million (42.0% of the total) was inpatient;
o GEL 21.8 million (41.1% of the total) was outpatient; and
o GEL 9.0 million (16.9% of the total) was related to
pharmaceuticals.
Ø 3Q23 combined ratio decreased by 6.4 ppts y-o-y (down by 5.6
ppts y-o-y in 9M23), reflecting:
o Improved loss ratio, down 3.7 ppts y-o-y to 77.6% in 3Q23,
reflecting the robust revenue growth (down 2.5 ppts y-o-y to 79.7%
in 9M23).
o 2.7 ppts y-o-y decrease in the 3Q23 expense ratio, reflecting
the top-line growth of the business while operating expenses
remained flat (down 3.1 ppts y-o-y in 9M23).
Ø The solid operating performance during the quarter led to a
253.0% y-o-y increase in the 3Q23 net profit. In 9M23 the business
posted GEL 4.3 million net profit, up 198.2% y-o-y.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø GEL 5.0 million dividends were paid to GCAP in 3Q23.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business remains one of the largest medical insurers on
the market with a 19.2% market share based on 1H23 net insurance
premiums. The insurance renewal rate was up 7.6 ppts y-o-y to 83.2%
in 9M23.
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$.
3Q23 & 9M23 performance (US$ '000 ), Renewable Energy
[39]
INCOME
STATEMENT
HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue 5,507 5,356 2.8% 11,472 11,740 -2.3%
Of which,
PPA 2,357 2,638 -10.7% 6,098 6,374 -4.3%
Of which,
Non-PPA 3,150 2,718 15.9% 5,374 5,366 0.1%
Operating
expenses (1,096) (824) 33.0% (3,121) (2,471) 26.3%
EBITDA 4,411 4,532 -2.7% 8,351 9,269 -9.9%
-4.5 -6.2
EBITDA margin 80.1% 84.6% ppts 72.8% 79.0% ppts
Net
profit/(loss) 1,971 1,345 46.5% 432 (1,430) NMF
CASH FLOW
HIGHLIGHTS
Cash flow from
operating
activities 4,358 4,313 1.0% 6,843 8,042 -14.9%
Cash flow used
in investing
activities (1,009) 2,515 NMF (3,163) 263 NMF
Cash flow from
financing
activities 65 (8,331) NMF (2,589) (15,628) -83.4%
Dividends
paid out - (700) NMF (2,000) (2,100) -4.8%
BALANCE SHEET 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
HIGHLIGHTS
Total assets 124,757 121,869 2.4% 122,645 1.7%
Of which,
cash balance 10,585 7,212 46.8% 9,468 11.8%
Total
liabilities 85,176 83,578 1.9% 84,288 1.1%
Of which,
borrowings 82,195 81,116 1.3% 80,570 2.0%
Total equity 39,581 38,291 3.4% 38,357 3.2%
INCOME
STATEMENT
HIGHLIGHTS
(GEL) 3Q23 3Q22 Change 9M23 9M22 Change
Revenue 14,590 15,176 -3.9% 30,017 34,420 -12.8%
EBITDA 11,689 12,840 -9.0% 21,869 27,067 -19.2%
INCOME STATEMENT HIGHLIGHTS
Ø A y-o-y increase in 3Q23 revenue in US$ terms reflects the net
impact of the following factors:
o The average electricity selling price increased by 3.9 % y-o-y
to 56. 4 US$/MWh in 3Q23, resulting from an 8.8 % y-o-y increase in
the average market selling price (excluding PPAs), reaching 53. 5
US$/MWh in 3Q23. This reflects the export of 16.2 GWh of
electricity to the Republic of Türkiye in 3Q23, with an average
export price of 68.2 US$/MWh.
o Electricity generation decreased by 1.3% in 3Q23, reflecting
the decrease in electricity generation at Mestiachala HPP and
Qartli Wind and the increased electricity generation at Hydrolea
HPPs, influenced by varying weather conditions.
Ø A y-o-y decrease in 9M23 revenue was mainly driven by an 8.1%
y-o-y decrease in electricity generation, as one of the
power-generating units of Hydrolea HPPs was temporarily taken
offline in December 2022 due to planned rehabilitation works (the
works were completed in June 2023 and the operations resumed in
their normal course).
Ø Approximately 4 0 % of electricity sales during 3Q23 (c.5 0 %
in 9M23) were covered by long-term fixed-price power purchase
agreements (PPAs) formed with a government-backed entity.
Revenue and generation breakdown by power assets:
3Q23 9M23
US$ '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 3,079 3.1% 55,372 -5.5% 5,010 11.1% 90,964 -3.2%
20MW Hydrolea
HPPs 896 19.3% 18,498 21.7% 2,154 -29.1% 45,998 -26.7%
21MW Qartli
wind farm 1,532 -5.4% 23,568 -5.4% 4,308 2.7% 66,275 2.7%
Total 5,507 2.8% 97,438 -1.3% 11,472 -2.3% 203,237 -8.1%
=================== ============= ======= ============ ======= ============= ======= ============ =======
Ø Operating expenses were up by 33.0% and 2 6 . 3 % y-o-y in
3Q23 and 9M23, 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 2.7% and 9.9% y-o-y
decrease in EBITDA in 3Q23 and 9M23, respectively.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Operating cash flow in 3Q23 remained flat and was down by
14.9% y-o-y in 9M23, aligning with the EBITDA developments, as
described above.
Ø A y-o-y change in investing cash flows mainly reflects (a) the
investments made for the development of pipeline projects in 3Q23
and 9M23 and (b) investing cash inflows in the comparable periods
of 2022 as a result of the sale of investment securities, which
were previously held for liquidity management purposes.
Ø A y-o-y decrease in cash outflows from financing activities in
3Q23 and 9M23 is attributable to the following factors:
o A y-o-y differential in the timing of coupon payments between
the existing local bonds (no coupon payment in 3Q23, US$ 2.8
million in 9M23) and the already redeemed Eurobonds (US$ 4.4
million coupon payment in 3Q22, US$ 8.2 million in 9M22).
o Low base effect of cash outflows for Eurobond buybacks of US$
3. 2 million in 3Q22 (US$ 5.5 in 9M22).
o Investment of US$ 2.2 million by GCAP for the development of
the pipeline projects in 9M23 .
Discussion of Education Business Results
Our education business currently combines majority stakes in
four private school brands operating across seven 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.
3Q23 & 9M23 performance (GEL '000), Education [40]
INCOME STATEMENT
HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue 7,737 6,747 14.7% 36,145 28,901 25.1%
Operating expenses (9,609) (6,963) 38.0% (28,117) (20,328) 38.3%
EBITDA (1,872) (216) NMF 8,028 8,573 -6.4%
-21.0 -7.5
EBITDA Margin -24.2% -3.2% ppts 22.2% 29.7% ppts
Net (loss)/profit (3,389) (1,042) NMF 5,040 7,437 -32.2%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 6,151 4,889 25.8% 17,478 15,406 13.4%
Net cash flows used
in investing activities (7,911) (8,171) -3.2% (27,750) (16,372) 69.5%
Net cash flows from
financing activities 1,210 3,398 -64.4% 14,263 6,025 NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 186,718 180,212 3.6% 156,320 19.4%
Of which, cash 9,491 9,970 -4.8% 5,709 66.2%
Total liabilities 66,340 56,329 17.8% 52,168 27.2%
Of which, borrowings 26,443 24,288 8.9% 21,740 21.6%
Total equity 120,378 123,883 -2.8% 104,152 15.6%
In 3Q23, the total learner capacity of the education business
increased by 400 learners to 7,270 learners, reflecting the launch
of a new campus in the mid-scale segment category.
The 2023-2024 academic year has started with a significant
increase in the total number of learners, in line with both the
organic growth and the expansion of the business. In total, as of
30-Sep-23, the business grew by 1,784 learners to 5,900 learners
compared to the beginning of the 2022-2023 academic year (up by
1,384 learners q-o-q). The growth of intakes in 1st graders was 325
learners (up by 59.3% y-o-y to 873 learners), and in the
kindergartens and pre-schools was 262 learners (up by 61.1% y-o-y
to 691 learners).
INCOME STATEMENT HIGHLIGHTS
Ø The third quarter is usually a slow season for the education
business, as the schools are not operational during the July-August
holidays. The revenue in 3Q23 increased by 14.7% y-o-y and was up
25.1% y-o-y in 9M23, driven by a) organic growth through strong
intakes and a ramp-up of the utilisation and b) expansion of the
business. The revenue growth was partially subdued by GEL's y-o-y
appreciation against US$, as the tuition fees for our premium and
international schools are denominated in US$.
Ø Operating expenses were up by 38.0% and 38.3% y-o-y in 3Q23
and 9M23, respectively, mainly reflecting inflation and increased
salary expenses in line with the expansion of the business.
Ø Consequently, 3Q23 EBITDA was down by GEL 1.7 million y-o-y
(down by 6.4% y-o-y in 9M23).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Strong cash collection rates (at 54.8% as of 30-Sep-23,
slightly below last year's level of 60.8%), combined with enhanced
revenue streams, led to a 25.8% and 13.4% y-o-y increase in
operating cash flow generation of the business in 3Q23 and 9M23,
respectively.
Ø Investing cash flows mainly reflect the cash outflows for the
investment projects, in line with the business expansion
strategy.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The utilisation rate for the total 7,270 learner capacity was
up by 8.3 ppts y-o-y to 81.2% as of 30-Sep-23.
o 100% utilization rate for the pre-expansion 2,810 learner
capacity.
o The utilisation of the newly added capacity of 4,460 learners
was 69.3%.
Ø The number of campuses across the different segments is noted
below:
Change Change
Sep-23 Jun-23 (q-o-q) Sep-22 (y-o-y)
Total number of
campuses 7 6 1 5 2
Premium and International
segment 1 1 - 1 -
Mid-scale segment 2 1 1 1 1
Affordable segment 4 4 - 3 1
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 (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".
3Q23 & 9M23 performance (GEL '000), Clinics and Diagnostics
[41]
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue, net[42] 19,142 17,663 8.4% 60,032 61,386 -2.2%
Of which, clinics 16,109 14,443 11.5% 51,095 49,238 3.8%
Of which, diagnostics 4,293 4,459 -3.7% 13,485 16,224 -16.9%
Of which, inter-business
eliminations (1,260) (1,239) 1.7% (4,548) (4,076) 11.6%
Gross Profit 8,290 6,946 19.3% 26,056 24,945 4.5%
3.1 2.1
Gross profit margin 42.2% 39.1% ppts 42.6% 40.5% ppts
Operating expenses (ex.
IFRS 16) (2,929) (5,663) -48.3% (14,946) (16,643) -10.2%
EBITDA (ex. IFRS 16) 5,361 1,283 NMF 11,110 8,302 33.8%
EBITDA margin (ex. IFRS 20.1 4.7
16) 27.3% 7.2% ppts 18.2% 13.5% ppts
N et profit/(loss) (ex.
IFRS 16) 1,243 (1,333) NMF (461) (981) 53.0%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 3,06
16) 8 1,731 77.2% 4,155 4,518 -8.0%
EBITDA to cash conversion -77.7 -17.0
(ex. IFRS 16) 57.2% 134.9% ppts 37.4% 54.4% ppts
Cash flow used in investing
activities (3,563) (1,675) NMF (10,261) (8,116) 26.4%
Free cash flow (ex. (46
IFRS 16)[43] 7 ) 73 NMF (5,911) (3,565) -65.8%
Cash flow used in financing
activities (ex. IFRS ( 50
16) (2,366) ) NMF 3,039 (954) NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 204,573 200,403 2.1% 190,767 7.2%
Of which, cash balance
and bank deposits 3,894 6,766 -42.4% 6,966 -44.1%
Of which, securities
and loans issued 3,069 3,141 -2.3% 3,107 -1.2%
Total liabilities 109,208 105,836 3.2% 94,786 15.2%
Of which, borrowings 68,748 69,253 -0.7% 60,832 13.0%
Total equity 95,365 94,567 0.8% 95,981 -0.6%
Discussion of results, Clinics
(GEL '000 )
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue, net 16,109 14,443 11.5% 51,095 49,238 3.8%
Of which, polyclinics 11,502 9,462 21.6% 35,334 30,349 16.4%
Of which, community clinics 4,607 4,981 -7.5% 15,761 18,889 -16.6%
Gross Profit 7,230 6,068 19.1% 22,731 21,008 8.2%
1.9 1.1
Gross profit margin 43.6% 41.7% ppts 43.5% 42.4% ppts
Operating expenses (ex.
IFRS 16) (2,050) (4,777) -57.1% (12,455) (13,658) -8.8%
EBITDA (ex. IFRS 16) 5,180 1,291 NMF 10,276 7,350 39.8%
EBITDA margin (ex. IFRS 22.3 4.9
16) 31.2% 8.9% ppts 19.7% 14.8% ppts
N et profit/(loss) (ex.
IFRS 16) 1,558 (985) NMF 154 (961) NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 2,928 1,802 62.5% 5,699 5,371 6.1%
EBITDA to cash conversion
(ex. IFRS 16) 56.5% 139.6% -83.1% 55.5% 73.1% -17.6%
Cash flow used in investing
activities[44] (3,349) (1,597) NMF (9,308) (7,428) 25.3%
Free cash flow (ex. IFRS
16) (389) 236 NMF (3,401) (1,973) -72.4%
Cash flow used in financing
activities (ex. IFRS 16) (2,326) 287 NMF 1,672 30 NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-23 30-Jun-23 Change 31-Dec-22 Change
Total assets 174,076 170,277 2.2% 160,691 8.3%
Of which, cash balance
and bank deposits 3,883 6,640 -41.5% 5,825 -33.3%
Of which, securities
and loans issued 3,069 3,417 -10.2% 3,379 -9.2%
Total liabilities 96,406 93,720 2.9% 83,531 15.4%
Of which, borrowings 63,116 63,735 -1.0% 56,908 10.9%
Total equity 77,670 76,557 1.5% 77,160 0.7%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in total revenue during both reporting periods is
attributable to the growth in the polyclinics business line. This
increase in polyclinic revenue is the result of higher demand for
non-COVID regular ambulatory services and the expansion of the
business.
Ø Similar to the hospitals business, the new facility regulation
also affected community clinics. In certain departments, admissions
were temporarily suspended due to renovation works, resulting in a
13.9% y-o-y reduction in the total number of admissions at
community clinics in 3Q23. This decline translated into a 7.5%
y-o-y decrease in revenue for community clinics in 3Q23. The y-o-y
decrease in 9M23 revenues from community clinics further reflects
the suspension of the COVID programme in 1Q22.
Ø In 3Q23, the business sold one of its polyclinic buildings for
US$ 6.2 million. 80% of the sales proceeds were collected in
October, while the remaining 20% will be received before year-end.
The proceeds from the transaction will be mainly used for
deleveraging the business. The gain from this transaction amounted
to GEL 2.9 million, which reduced the operating expenses in
3Q23.
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 19.1% and 8.2% in 3Q23 and 9M23,
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 1.9 ppts in 3Q23 and
down 4.2 ppts in 9M23 , y-o-y .
o The direct salary rate remained well managed, down by 1.9 ppts
y-o-y in 3Q23 and was flat y-o-y in 9M23.
Ø Operating expenses (excl. IFRS 16) mainly reflect the
following factors:
o The salaries and administrative expenses (excl. IFRS 16)
remained well controlled in 3Q23 but were up by 6 .4% and 11.0%
y-o-y in 9M23, respectively, reflecting the expansion as well as
the restructuring of the business back to normal operating
levels.
o The gain from the disposal, as mentioned above.
Ø Excluding the gain from the divested building, the business
posted a 13.7% EBITDA margin in 3Q23 (up 4.8 ppts y-o-y) and 14.1%
in 9M23 (down 0.7 ppts y-o-y).
Ø The net interest expense (excl. IFRS 16) was up 32.6% in 3Q23
and up 14.6% in 9M23 y-o-y, reflecting a) an increased balance of
net debt due to investment made for the expansion of the business
and b) increased interest rates on the market.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The EBITDA to cash conversion ratio reflects the gain recorded
from the disposal, as mentioned above. Excluding this impact, the
EBITDA to cash conversion ratio stood at 128.5% in 3Q23 and 77.3%
in 9M23.
Ø In 9M23, the business spent GEL 9.1 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 3Q23 amounted to GEL 3.3 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:
3Q23 3Q22 Change 9M23 9M22 Change
Number of admissions
(thousands) 460.3 483.7 -4.9% 1,481.9 1,619.8 -8.5%
Of which, polyclinics 369.0 377.7 -2.3% 1,190.7 1,260.4 -5.5%
Of which, community
clinics 91.3 106.0 -13.9% 291.2 359.4 -19.0%
Ø The number of polyclinics and community clinics operated by
the business is provided below.
Sep-23 Jun-23 Change Sep-22 Change
(q-o-q) (y-o-y)
Number of clinics 35 35 - 36 -1
Of which, polyclinics 17 17 - 1 7 -
Of which, community
clinics 1 8 1 8 - 1 9 -1
As of 30-Sep-23, the total number of registered patients in our
polyclinics reached c.291,000 (c.270,000 as of 30-Sep-22) in
Tbilisi and c.632,000 (c.608,000 as of 30-Sep-22) in Georgia.
Discussion of results, Diagnostics
(GEL '000 )
INCOME STATEMENT HIGHLIGHTS 3Q23 3Q22 Change 9M23 9M22 Change
Revenue, net 4,293 4,459 -3.7% 13,485 16,224 -16.9%
Of which, from regular
lab tests 4,164 3,583 16.2% 13,033 10,474 24.4%
Of which, from COVID-19
tests 129 876 -85.3% 452 5,750 -92.1%
Gross Profit 1,060 878 20.7% 3,325 3,931 -15.4%
5.0 0.5
Gross profit margin 24.7% 19.7% ppts 24.7% 24.2% ppts
Operating expenses (ex.
IFRS 16) (879) (886) -0.8% (2,491) (2,979) -16.4%
EBITDA (ex. IFRS 16) 181 (8) NMF 834 952 -12.4%
EBITDA margin (ex. IFRS 4.4 0.3
16) 4.2% -0.2% ppts 6.2% 5.9% ppts
N et loss (ex. IFRS 16) (315) (348) 9.5% (1,067) (20) 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 16.2% y-o-y increase in
revenues from regular lab tests in 3Q23 and 24.4% in 9M23.
Ø Overall, the 16.9% y-o-y decrease in the net revenue of the
diagnostics business in 9M23 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 92.1% y-o-y in 9M23.
Ø In 3Q23, the business posted a 20.7% y-o-y increase in gross
profit with 24.7% gross profit margin (up 5.0 ppts y-o-y) and GEL
0.2 million EBITDA with 4.2% EBITDA margin (up 4.4 ppts y-o-y).
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The key operating performance highlights for 3Q23 and 9M23 are
noted below:
3Q23 3Q22 Change 9M23 9M22 Change
Number of non-Covid tests
performed (thousands) 557 455 22.4% 1,791 1,566 14.3%
Average revenue per non-Covid
test (GEL) 7.5 7.9 -5.0% 7.3 6.7 8.8%
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 297.3 million at 3 0 - Sep -23, which
represented 8.5% of our total portfolio.
3Q23 & 9M23 aggregated performance highlights (GEL '000),
Other Portfolio
3Q23 3Q22 Change 9M23 9M22 Change
Revenue 162,125 152,019 6.6% 432,809 350,403 23.5%
EBITDA 21,386 18,916 13.1% 36,173 30,311 19.3%
Net cash flows used in
operating activities (1,363) 15,957 NMF (428) 11,568 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 3Q23, revenue was up by
17.0% y-o-y to GEL 15.6 million (up 31.5% y-o-y to GEL 40.4 million
in 9M23), reflecting an increase in retail, corporate and wholesale
segments. Similarly, the gross profit was up by 28.0% to GEL 4.0
million in 3Q23 and up by 44.1% to GEL 10.7 million in 9M23, y-o-y.
In 3Q23, operating expenses were up by 37.1% y-o-y (up by 49.4%
y-o-y in 9M23), reflecting the business growth and inflation
pressures. As a result, the business posted GEL 0.9 million EBITDA
in 3Q23, up by 4.6% y-o-y (GEL 2.4 million in 9M23, up by 28.4%
y-o-y).
o Periodic technical inspection (PTI) business | PTI business's
revenue was up by 24.5% y-o-y to GEL 6.0 million in 3Q23 (up by
20.8% y-o-y to GEL 15.1 million in 9M23). Revenue growth was driven
by an increase in primary vehicle inspections during the quarter,
further supported by the introduction of fees for secondary checks
in 2023 as compared to the preceding periods, when this service was
provided free of charge. The number of total cars serviced was up
by 12.2% and 7.6% y-o-y in 3Q23 and 9M23, respectively, translating
into a 27.3% and 21.3% y-o-y increase in EBITDA (3Q23 and 9M23
EBITDA was GEL 3.5 and GEL 7.8 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 gross revenue of the beer business
increased by 9.0% y-o-y to GEL 41.0 million in 3Q23 and was up by
21.9% y-o-y to GEL 108.6 million in 9M23, resulting from the strong
recovery in tourism and increased product prices due to higher
demand. Beer y-o-y sales (in hectolitres) were up 0.6% in 3Q23 (up
by 7.1% y-o-y in 9M23). The average 3Q 2 3 GEL price per litre
(average for beer and lemonade) increased by 11.4% y-o-y (up by
9.7% in 9M23). The operating expenses were down by 29.8% and 29.4%
y-o-y in 3Q23 and 9M23, deriving from the structural changes across
beer and distribution business lines. Consequently, the EBITDA of
the business increased by 12.7% y-o-y and stood at GEL 7.9 million
in 3Q23 (up 27.1% y-o-y to GEL 18.2 million in 9M23).
o Distribution business | Revenue of the distribution business
decreased by 3.8% and increased by 7.9% y-o-y to GEL 63.3 million
and GEL 149.2 million in 3Q23 and 9M23, respectively. The gross
profit margin was up by 4.9 ppts and 3.8 ppts y-o-y in 3Q23 and
9M23, respectively, reflecting the improved trade terms from the
suppliers. In 3Q23, operating expenses were up by 45.5% y-o-y (up
by 49.8% y-o-y in 9M23), reflecting the business growth and
inflation. As a result, the business posted an EBITDA of GEL 4.2
million in 3Q23, up by 5.0% y-o-y ( GEL 8.2 million in 9M23, up by
3.6% y-o-y).
o Wine business | The net revenue of the wine business was up by
40.4% to GEL 17.4 million in 3Q23 (up by 49.1% y-o-y to GEL 43.2
million in 9M23), driven by a 61.7 % increase in the number of
bottles sold in 3Q23 (up by 75.1 % in 9M23), attributable to
significant growth in exports (export share in total sales was up
by 5.3 ppts to 86.5 % in 3Q23 and up by 6.1ppts to 87.0% in 9M23).
Consequently, EBITDA increased 6.2 times to GEL 2.3 million in 3Q23
(up by GEL 3.0 million to GEL 2.9 million in 9M23).
Ø Housing development and hospitality businesses | In light of
the increased sales and construction progress, 3 Q2 3 revenue of
the housing development business was up 11.7 % y-o-y to GEL 60.9
million (up by 37.2 % y-o-y to GEL 171.7 million in 9M 23).
However, 3Q23 EBITDA decreased by GEL 3.5 million y-o-y to GEL 0.8
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 (9M23 EBITDA was down by GEL 7.2 million to
negative GEL 4.3 million y-o-y). The revenue of the hospitality
business decreased by 15.1 % y-o-y in 3Q23 (up by 10.6 % y-o-y in
9M23), while the hospitality business EBITDA was up by GEL 0.9
million to negative GEL 0.2 million in 3Q23 (9M23 EBITDA was up by
GEL 1.2 million y-o-y to GEL 0.8 million). In 9M23, the hospitality
business successfully completed the sale of two operational hotels,
a vacant land plot and two under-construction hotels located in
Tbilisi and Kutaisi (the latter completed in 3Q23). The total
consideration from these transactions amounts to US$ 38.6 million.
The proceeds from these sales were utilised for deleveraging the
hospitality business's balance sheet.
ADDITIONAL FINANCIAL INFORMATION
The 9M23 NAV Statement shows the development of NAV since
31-Dec-22:
GEL '000, unless Dec-22 1. 2a. 2b. 2c. 3. 4. Sep Change
otherwise noted Value Investment Buyback Dividend Operating Liquidity/ -23 %
creation and expenses FX/Other
([46]) Divestments
Listed and
Observable
Portfolio
Companies
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Bank of Georgia
(BoG) 830,463 387,939 - - (126,193) - - 1,092,209 31.5%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Water Utility 155,000 4,000 - - - - - 159,000 2.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Listed and
Observable
Portfolio
Value 985,463 391,939 - - (126,193) - - 1,251,209 27.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio value
change
% 39.8% 0.0% 0.0% -12.8% 0.0% 0.0% 27.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
Companies
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Large Companies 1,437,610 33,610 - - (70,355) - 2,059 1,402,924 -2.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Retail
(Pharmacy) 724,517 5,000 - - (50,904) - 632 679,245 -6.2%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Hospitals 433,193 (45,937) - - (6,018) - 632 381,870 -11.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Insurance (P&C
and
Medical) 279,900 74,547 - - (13,433) - 795 341,809 22.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which, P&C
Insurance 228,045 47,389 - - (8,418) - 795 267,811 17.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Of which,
Medical
Insurance 51,855 27,158 - - (5,015) - - 73,998 42.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Investment Stage
Companies 501,407 13,029 16,253 - (5,187) - 2,306 527,808 5.3%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Renewable Energy 224,987 33,507 5,718 - (5,187) - 1,785 260,810 15.9%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Education 164,242 (4,302) 10,535 - - - 381 170,856 4.0%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Clinics and
Diagnostics 112,178 (16,176) - - - - 140 96,142 -14.3%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Other Companies 274,147 18,808 32 - - - 4,278 297,265 8.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Private
Portfolio
Value 2,213,164 65,447 16,285 - (75,542) - 8,643 2,227,997 0.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Private
Portfolio
value change % 3.0% 0.7% 0.0% -3.4% 0.0% 0.4% 0.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,198,627 457,386 16,285 - (201,735) - 8,643 3,479,206 8.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Total Portfolio
value change % 14.3% 0.5% 0.0% -6.3% 0.0% 0.3% 8.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Debt (2) (380,905) - (19,422) (53,994) 201,735 (16,327) (25,272) (294,185) -22.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Cash
and
liquid funds 411,844 - (19,422) (53,994) 201,735 (16,327) (423,480) 100,356 -75.6%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Loans
issued 26,830 - - - - - (17,925) 8,905 -66.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which, Gross
Debt (819,579) - - - - - 416,133 (403,446) -50.8%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net other
assets/
(liabilities)
(3) (331) - 3,137 - - (11,647) 11,500 2,659 NMF
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
of which,
share-based
comp. - - - - - (11,647) 11,647 - -
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,817,391 457,386 - (53,994) - (27,974) (5,129) 3,187,680 13.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV change % 16.2% 0.0% -1.9% 0.0% -1.0% -0.2% 13.1%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Shares
outstanding(46) 42,973,462 - - (2,151,848) - - 580,136 41,401,750 -3.7%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 65.56 10.64 - 2.13 - (0.65) (0.70) 76.99 17.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % 16.2% 0.0% 3.3% 0.0% -1.0% -1.1% 17.4%
----------------- ----------- --------- ------------ ------------ ---------- ---------- ----------- ----------- -------
Commencement of US$ 15 million share buyback and cancellation
programme
As outlined on page 3 above, the Board has approved the
commencement of the US$ 15 million share buyback and cancellation
over a six-month period, which will be put in place immediately.
The shares will be purchased in the open market and the
cancellation of the treasury shares will be executed on a monthly
basis. The purpose of the buyback is to reduce the share capital.
Under the buyback programme, the maximum price paid per share will
not exceed the latest reported NAV per share amount.
In accordance with the authority granted by the shareholders at
the 2023 annual general meeting ("AGM"), the maximum number of
shares that may be repurchased is 6,719,696. The programme is
conducted within certain pre-set parameters, and in accordance with
the general authority to repurchase shares granted at the 2023 AGM,
Chapter 12 of the FCA Listing Rules, and the provisions of the
Market Abuse Regulation 596/2014/EU and of the Commission Delegated
Regulation (EU) 2016/1052 (as they form part of UK domestic
law).
The Company has appointed Numis Securities Limited ("Numis") to
manage an irrevocable, non--discretionary share buyback programme
until the end of the programme. During closed periods the Company
and its directors have no power to invoke any changes to the
programme and it is being executed at the sole discretion of
Numis.
The Company will make further announcements in due course
following the completion of any share repurchases.
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.
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 19.62% equity
stake (at 30-Sep-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 1H23 Results
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.
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 26.
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 26.
([3]) 9M22 number includes 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] Includes regular cash and buyback dividends.
([6]) One-off dividend income in 3Q23 includes the non-recurring
GEL 6.6 million dividend collected from the retail (pharmacy)
business. The 9M23 number includes a non-recurring GEL 26.7 million
dividend collected from the retail (pharmacy) business and GEL 29.4
million buyback dividend attributable to participation in BoG's
buybacks.
[7] Private portfolio companies' performance highlights are
presented excluding the water utility business. Aggregated numbers
are presented like-for-like basis.
[8] The results of our four smaller businesses included in other
portfolio companies (described on page 23) 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).
[9] Please see definition in glossary on page 26.
[10] 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.
[11] 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.
[12] 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.
[13] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[14] Please read more about valuation methodology on page 26 in
"Basis of presentation".
[15] Enterprise value is presented excluding the recently
acquired schools and non-operational assets, added to the equity
value of the education business at cost.
[16] Please see definition in glossary on page 26.
([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 11.0 million in
3Q23 and GEL 20.4 million in 9M23 (GEL 3.4 million in 3Q22 and GEL
17.2 million in 9M22); cash outflow on minority acquisition;
proceeds from sale of PPE of GEL 14.6 million in 9M23 (none in 3Q22
and none in 9M22).
[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] 9M22 number is adjusted for a GEL 2.7 million loss from the
sale of the Traumatology Hospital.
[34] Of which - capex of GEL 16.5 million in 3Q23 (GEL 5.4
million in 3Q22) and GEL 33.3 million in 9M23 (GEL 14.5 million in
9M22).
[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 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 3.3 million in 3Q23 and GEL 9.1
million in 9M23 (GEL 1.6 million in 3Q22 and GEL 7.3 million in
9M22).
[45] The respective costs divided by gross revenues.
[46] Please see definition in glossary on page 26.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
QRTWPGAUUUPWGAU
(END) Dow Jones Newswires
October 31, 2023 03:00 ET (07:00 GMT)
Georgia Capital (LSE:CGEO)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024
Georgia Capital (LSE:CGEO)
Graphique Historique de l'Action
De Juin 2023 à Juin 2024
