REG - Georgia Capital PLC - 1st Quarter Results
01/05/2024 07:00
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RNS Number : 6604M Georgia Capital PLC 01 May 2024
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS) 1 (#_ftn1)
GEL '000, unless otherwise noted Mar-24 Dec-23 Change
Georgia Capital NAV overview
NAV per share, GEL 90.04 82.94 8.6%
NAV per share, GBP 26.48 24.23 9.3%
Net Asset Value (NAV) 3,645,530 3,378,512 7.9%
Shares outstanding(2) 40,487,423 40,736,528 -0.6%
Liquid assets and loans issued 78,891 117,122 -32.6%
NCC ratio 2 (#_ftn2) 14.8% 15.6% -0.8 ppts
Georgia Capital Performance 1Q24 1Q23 Change
Total portfolio value creation 306,944 76,896 NMF
of which, listed and observable businesses 324,544 20,839 NMF
of which, private businesses (17,600) 56,057 NMF
Investments 3,000 16,998 -82.4%
Buybacks 3 (#_ftn3) 22,669 19,266 17.7%
Dividend income 4 (#_ftn4) 13,799 26,412 -47.8%
Net income 287,601 80,638 NMF
Private portfolio companies' performance(1, 5 (#_ftn5) ) 1Q24 1Q23 Change
Large portfolio companies
Revenue 339,451 322,437 5.3%
EBITDA 35,647 42,501 -16.1%
Net operating cash flow 29,682 19,171 54.8%
Investment stage portfolio companies
Revenue 43,321 32,933 31.5%
EBITDA 14,491 9,737 48.8%
Net operating cash flow 14,000 4,606 NMF
Total portfolio 6 (#_ftn6)
Revenue 515,169 473,565 8.8%
EBITDA 65,465 55,822 17.3%
Net operating cash flow 45,035 34,353 31.1%
KEY POINTS
Ø Record NAV per share of GEL 90.04, up 8.6% q-o-q, supported by BoG's
outstanding performance and share price growth
Ø Strong performance of our private portfolio companies, aggregated quarterly
revenue and EBITDA up 8.8% and 17.3% y-o-y, respectively
Ø NCC ratio improved by 0.8 ppts q-o-q to 14.8% as at 31-Mar-24 (4.9 ppts
improvement y-o-y), reflecting strong liquidity and continued growth in
portfolio value
Ø c.490,000 shares repurchased in 1Q24 (total bought back and cancelled since
demerger now stands at 7.9 million shares (US$ 87 million in value),
representing c.16.5% 7 (#_ftn7) of the issued share capital at its peak)
Ø GEL 13.8 million dividend income from the portfolio companies in 1Q24
Conference call: An investor/analyst conference call will be held on 1 May
2024, at 14:00 UK / 15:00 CET / 9:00 US Eastern Time. Please register at the
Registration Link
(https://gcap-ge.zoom.us/webinar/register/WN_izhPA1B8TOS2CzjyBt0aIA) to attend
the event. Further details are available on the Group's webpage
(https://georgiacapital.ge/) .
CHAIRMAN AND CEO'S STATEMENT
I am pleased to present another strong performance in the first quarter of
2024, which demonstrates significant strategic, financial, and operational
progress of Georgia Capital.
Record-high NAV per share. NAV per share (GEL) increased by 8.6% in 1Q24,
mainly resulting from robust value creation across our portfolio companies.
Value creation in our listed and observable portfolio amounted to GEL 324.5
million (9.6 ppts positive impact on the NAV per share). This growth was
fueled by the continued rally of BoG's share price, which saw a 27.0% increase
in 1Q24 and reflects the strong growth in BoG's earnings, as well as the
impact of its expansion into the Armenian market (through the acquisition of
Ameriabank CJSC). Value creation across our private portfolio companies was
negative GEL 17.6 million (-0.5 ppts impact), as the resilient operating
performances of our high-quality assets (aggregated revenue and EBITDA up 8.8%
and 17.3% y-o-y in 1Q24, respectively), were offset by movements in implied
valuation multiples and foreign currency exchange rates. The NAV per share
growth was further supported by our share buyback and cancellation programme
(+0.8 ppts impact), partially offset by management platform related costs and
net interest expense (-0.5 ppts impact). In GBP terms, the NAV per share
growth in 1Q24 was 9.3%, supported by GEL's appreciation against GBP during
the quarter.
Private portfolio progress. The negative value creation in the private
portfolio saw positive developments in our education, clinics and diagnostics
and insurance businesses offset by the negative impact of continued weak
operating performance in our retail pharmacy and hospitals businesses, which
have both been negatively affected by recent changes in government regulations
and other factors which we believe are now largely digested. Both businesses
continue to operate below their long-term potential; nevertheless, there was a
notable increase in revenues in 1Q24, driven by improvements in key business
operating indicators. We expect this recent momentum to continue, and to
deliver further progress throughout the rest of the year.
NCC ratio decreased to 14.8% in 1Q24. A 0.8 ppts q-o-q improvement in the NCC
ratio in 1Q24 was mainly driven by the 8.1% growth in total portfolio value.
On a y-o-y basis, the progress on the NCC ratio was substantial, down 4.9
ppts, reflecting a significant decrease in the gross debt balance.
Update on ESG. Environmental, social and governance ("ESG") matters continue
to be at the forefront of our strategy and our commitment to the increasing
importance of ESG issues remains undimmed. As announced in our Sustainability
Report in March 2024, we have made significant progress on our overarching
commitment to supporting our community and contributing to Georgia's
transition to a more sustainable and carbon-neutral economy. For the first
time in Georgia, we have successfully obtained third-party assurance on our
greenhouse gas emissions, which underscores our commitment to transparency
and, together with our proven governance, positions Georgia Capital as a key
player in the country's sustainable development. Furthermore, our longstanding
dedication to responsible investment was recognised by Asian Development Bank,
which awarded Georgia Capital with an Impact Award in April 2024.
Macroeconomic update. Georgia's economy continues its expansion, with economic
growth accelerating to 7.8% in 1Q24. Growth was supported by strong credit
expansion, ongoing fiscal spending, and foreign exchange inflows. The
inflation rate decelerated sharply and stood at 0.5% in March 2024. The
National Bank of Georgia (NBG) continued exiting from its tightened monetary
policy with cumulative 125 bps cuts, reducing the refinancing rate to 8.25% in
1Q24. The current account deficit reached historic low levels of 4.3% of GDP
in 2023, supported by robust growth in the services balance, particularly in
tourism and information and communication technology ("ICT") services. These
positive macroeconomic developments have also led to improvements in the
country's sovereign rating and macro-outlook. Moody's revised its outlook from
Ba2 negative to Ba2 stable in March 2024, while the IMF increased its growth
forecast for 2024 from 4.8% to 5.7% in its latest World Economic Outlook (WEO,
Apr-24), positioning Georgia among the highest growth performers in its peer
group.
Outlook. Our robust balance sheet and capital allocation management, coupled
with the strong performance of our portfolio companies, led to outstanding
results in 1Q24. We have achieved our goal of deleveraging the business
towards our medium-term targeted NCC ratio of 15%, and we continue to grow NAV
per share on the back of capital light and sustainable investments. Looking
ahead, with the expected rebound in the operating performance of our hospitals
and retail (pharmacy) businesses in 2H24, we anticipate an even more
significant opportunity for value creation across our portfolio companies. I
believe that Georgia Capital is extremely well positioned to continue
delivering consistent NAV per share growth over the medium to long term - and
to progress further towards achieving our key strategic priorities. This
outlook is underpinned by the resilience of the Georgian economy, which has
demonstrated consistent and substantial growth over the past few years.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset value at
31-Mar-24 and its income for the first quarter then ended on an IFRS basis
(see "Basis of Presentation" on page 19 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 first quarter (31-Dec-23 and 31-Mar-24). The NAV Statement below
breaks down NAV into its components and provides a roll forward of the related
changes between the reporting periods.
NAV STATEMENT 1Q24
GEL '000, unless otherwise noted Dec-23 1. Value creation(( 8 (#_ftn8) )) 2a. 2b. 2c. Dividend 3. Operating expenses 4. Liquidity/ FX/Other Mar-24 Change
Investment and Divestments Buyback %
Listed and Observable Portfolio Companies
Bank of Georgia (BoG) 1,225,847 321,544 - - (4,339) - - 1,543,052 25.9%
Water Utility 159,000 3,000 - - - - - 162,000 1.9%
Total Listed and Observable Portfolio Value 1,384,847 324,544 - - (4,339) - - 1,705,052 23.1%
Listed and Observable Portfolio value change % 23.4% 0.0% 0.0% -0.3% 0.0% 0.0% 23.1%
Private Portfolio Companies
Large Companies 1,436,231 (46,104) - - (4,842) - 1,080 1,386,365 -3.5%
Retail (Pharmacy) 714,001 (19,999) - - - - 360 694,362 -2.8%
Hospitals 344,356 (30,425) - - - - 359 314,290 -8.7%
Insurance (P&C and Medical) 377,874 4,320 - - (4,842) - 361 377,713 0.0%
Of which, P&C Insurance 285,566 8,305 - - (4,842) - 361 289,390 1.3%
Of which, Medical Insurance 92,308 (3,985) - - - - - 88,323 -4.3%
Investment Stage Companies 566,614 22,307 - - - - 637 589,558 4.0%
Renewable Energy 266,627 (665) - - - - 405 266,367 -0.1%
Education 189,226 13,254 - - - - 152 202,632 7.1%
Clinics and Diagnostics 110,761 9,718 - - - - 80 120,559 8.8%
Other Companies 284,253 6,197 3,000 - (4,618) - 1,005 289,837 2.0%
Total Private Portfolio Value 2,287,098 (17,600) 3,000 - (9,460) - 2,722 2,265,760 -0.9%
Private Portfolio value change % -0.8% 0.1% 0.0% -0.4% 0.0% 0.1% -0.9%
Total Portfolio Value (1) 3,671,945 306,944 3,000 - (13,799) - 2,722 3,970,812 8.1%
Total Portfolio value change % 8.4% 0.1% 0.0% -0.4% 0.0% 0.1% 8.1%
Net Debt (2) (296,808) - (3,000) (22,669) 13,799 (5,660) (12,994) (327,332) 10.3%
of which, Cash and liquid funds 107,910 - (3,000) (22,669) 13,799 (5,660) (21,014) 69,366 -35.7%
of which, Loans issued 9,212 - - - - - 313 9,525 3.4%
of which, Gross Debt (413,930) - - - - - 7,707 (406,223) -1.9%
Net other assets/ (liabilities) (3) 3,375 - - - - (3,680) 2,355 2,050 -39.3%
of which, share-based comp. - - - - - (3,680) 3,680 - NMF
Net Asset Value (1)+(2)+(3) 3,378,512 306,944 - (22,669) - (9,340) (7,917) 3,645,530 7.9%
NAV change % 9.1% 0.0% -0.7% 0.0% -0.3% -0.2% 7.9%
Shares outstanding(8) 40,736,528 - - (609,170) - - 360,065 40,487,423 -0.6%
Net Asset Value per share, GEL 82.94 7.53 (0.00) 0.69 (0.00) (0.23) (0.87) 90.04 8.6%
NAV per share, GEL change % 9.1% 0.0% 0.8% 0.0% -0.3% -1.1% 8.6%
NAV per share (GEL) was up 8.6% q-o-q in 1Q24, driven by a GEL 306.9 million
value creation across our portfolio companies (+9.1 ppts impact) and share
buybacks (+0.8 ppts impact). The NAV per share (GEL) growth was slightly
offset by management platform-related costs and net interest expense (-0.5
ppts impact in total).
Portfolio overview
Total portfolio value increased by GEL 298.9 million (8.1%) to GEL 4.0 billion
in 1Q24:
· The value of the listed and observable portfolio increased by GEL
320.2 million (up 23.1%), resulting from GEL 324.5 million value creation,
slightly offset by GEL 4.3 million buyback dividend income from BoG.
· The value of the private portfolio decreased by GEL 21.3 million
(down 0.9%), mainly reflecting negative GEL 17.6 million value creation and a
decrease of GEL 9.5 million due to dividends paid to GCAP.
Consequently, as of 31-Mar-24, the listed and observable portfolio value
totalled GEL 1.7 billion (42.9% of the total portfolio value), and the private
portfolio value amounted to GEL 2.3 billion (57.1% of the total).
1) Value creation
Total portfolio value creation amounted to GEL 306.9 million in 1Q24:
· GEL 324.5 million value creation from the listed and observable
portfolio derived from a) a 27.0% increase in BoG's share price in 1Q24 and b)
GEL 3.0 million value creation in Water Utility, reflecting the application of
the put option valuation to GCAP's 20% holding in the business (where GCAP has
a clear exit path through a put and call structure at pre-agreed EBITDA
multiples).
· GEL 17.6 million negative value creation in the private portfolio
companies reflects a) GEL 26.4 million operating performance-related increase
in the value of our private assets and b) GEL 44.0 negative net impact from
the changes in implied valuation multiples(11) and foreign currency exchange
rates on private portfolio valuations.
The table below summarises value creation drivers in our businesses in 1Q24:
Portfolio Businesses Operating Performance(( 9 (#_ftn9) )) Greenfields / Multiple Change Value Creation
buy-outs / exits(( 10 (#_ftn10) )) and FX(( 11 (#_ftn11) ))
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
Listed and Observable portfolio 324,544
BoG 321,544
Water Utility 3,000
Private portfolio 26,371 - (43,971) (17,600)
Large Portfolio Companies (45,122) - (982) (46,104)
Retail (pharmacy) (20,394) - 395 (19,999)
Hospitals (30,801) - 376 (30,425)
Insurance (P&C and Medical) 6,073 - (1,753) 4,320
Of which, P&C Insurance 12,600 - (4,295) 8,305
Of which, Medical Insurance (6,527) - 2,542 (3,985)
Investment Stage Portfolio Companies 44,572 - (22,265) 22,307
Renewable Energy 3,708 - (4,373) (665)
Education 10,680 - 2,574 13,254
Clinics and Diagnostics 30,184 - (20,466) 9,718
Other 26,921 - (20,724) 6,197
Total portfolio 26,371 - (43,971) 306,944
Valuation overview 12 (#_ftn12)
In 1Q24, our private large and investment stage portfolio companies were
valued internally by incorporating the portfolio companies' 1Q24 results, in
line with International Private Equity Valuation ("IPEV") guidelines and
methodology deployed at the end of 2023 by an independent valuation company.
The independent valuation assessments, which serve as the basis 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 1Q24 is
summarised in the following table:
Enterprise Value (EV) Equity Value
GEL '000, unless otherwise noted 31-Mar-24 31-Dec-23 Change % 31-Mar-24 31-Dec-23 Change % % share in total portfolio
Listed and Observable portfolio 1,705,052 1,384,847 23.1% 42.9%
BoG 1,543,052 1,225,847 25.9% 38.9%
Water Utility 162,000 159,000 1.9% 4.0%
Private portfolio 3,489,396 3,463,259 0.8% 2,265,760 2,287,098 -0.9% 57.1%
Large portfolio companies 2,012,188 2,021,278 -0.4% 1,386,365 1,436,231 -3.5% 34.9%
Retail (pharmacy) 1,021,558 1,043,800 -2.1% 694,362 714,001 -2.8% 17.5%
Hospitals 606,889 618,912 -1.9% 314,290 344,356 -8.7% 7.9%
Insurance (P&C and Medical) 383,741 358,566 7.0% 377,713 377,874 0.0% 9.5%
Of which, P&C Insurance 289,390 285,566 1.3% 289,390 285,566 1.3% 7.3%
Of which, Medical Insurance 94,351 73,000 29.2% 88,323 92,308 -4.3% 2.2%
Investment stage portfolio companies 877,672 856,787 2.4% 589,558 566,614 4.0% 14.8%
Renewable Energy 459,298 456,236 0.7% 266,367 266,627 -0.1% 6.7%
Education 13 (#_ftn13) 240,500 228,799 5.1% 202,632 189,226 7.1% 5.1%
Clinics and Diagnostics 177,874 171,752 3.6% 120,559 110,761 8.8% 3.0%
Other 599,536 585,194 2.5% 289,837 284,253 2.0% 7.4%
Total portfolio 3,970,812 3,671,945 8.1% 100.0%
Private large portfolio companies (34.9% of total portfolio value)
Retail (Pharmacy) (17.5% of total portfolio value) - The EV of Retail
(Pharmacy) was down by 2.1% to GEL 1.0 billion in 1Q24, reflecting near-term
developments in the operating performance of the business. The significant
recent expansion of the retail chain coupled with increased demand for
seasonal medicines due to the increased flu activity in 1Q24, led to a robust
8.7% y-o-y retail revenue growth in 1Q24. Wholesale revenue was down by 15.0%
y-o-y in 1Q24. This reflects a y-o-y decrease in State revenues, influenced by
timing discrepancies in tender occurrences, as well as the State's direct
procurement of certain medicines from manufacturers during 1Q24. Overall, the
revenue of the retail (pharmacy) business was up 3.6% y-o-y, while gross
profit increased by 5.0% y-o-y in 1Q24, notwithstanding the challenges posed
by recently introduced price regulations. Operating expenses were up 21.4%
y-o-y in 1Q24, due to increased rent and salary costs related to the chain
expansion and the launch of a new warehouse at the end of 2023 which, together
with the developments described above, translated into a 24.3% y-o-y decrease
in EBITDA in 1Q24. See page 9 for details. Consequently, LTM EBITDA (incl.
IFRS 16) was down by 2.1% to GEL 105.3 million in 1Q24. Net debt (incl. IFRS
16) remained largely flat at GEL 319.6 million as at 31-Mar-24. As a result,
the fair value of GCAP's 97.6% holding decreased by 2.8% to GEL 694.4 million
in 1Q24. The implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) remained
unchanged at 9.7x as at 31-Mar-24.
Hospitals (7.9% of total portfolio value) - The EV of the hospitals business
reduced by 1.9% to GEL 606.9 million in 1Q24. The revenue of Large and
Specialty Hospitals was up by 7.7% y-o-y in 1Q24, reflecting a) a y-o-y
increase in revenues from Iashvili Paediatric Tertiary Referral Hospital in
1Q24, which was closed during most of 1Q23 due to mandatory regulatory-related
renovation works and b) a decrease in the share of revenues from the State
(down from 58.1% in 1Q23 to 54.8% in 1Q24), as the business continued to
introduce a diversified range of new services, partially offsetting the impact
of the facility regulation rules enforced in September 2023. The 1Q24 revenue
of our Regional and Community Hospitals was down by 9.0% y-o-y, mainly
reflecting the sale of one of the hospitals in 4Q23. Operating expenses (excl.
IFRS 16) were up by 10.6% y-o-y in 1Q24, resulting from an increase in the
impairment of receivables, in line with the increased share of out-of-pocket
revenues. These developments translated into a 13.4% decrease in EBITDA
(excluding IFRS 16) in 1Q24. See page 11 for details. Consequently, LTM EBITDA
(incl. IFRS 16) was down by 2.0% to GEL 43.9 million in 1Q24 and net debt
amounted to GEL 259.2 million as at 31-Mar-24. As a result, the equity value
of Hospitals was assessed at GEL 314.3 million in 1Q24 (down 8.7% q-o-q),
translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 13.8x at
31-Mar-24 (13.8x at 31-Dec-23).
Insurance (P&C and Medical) (9.5% of total portfolio value) - The
insurance business combines: a) P&C Insurance valued at GEL 289.4 million
and b) Medical Insurance valued at GEL 88.3 million.
Insurance revenues were up by 18.9% y-o-y to GEL 55.0 million in 1Q24,
reflecting the growth in the motor, credit life and medical insurance lines.
The combined ratio of the P&C insurance increased by 4.3 ppts y-o-y in
1Q24, mainly resulting from the 4.8 ppts y-o-y increase in the FX ratio due to
the impact of the exchange rate movements on business operations. The combined
ratio of the medical insurance increased by 1.4 ppts y-o-y in 1Q24, mainly
driven by the 0.9 ppts y-o-y increase in the expense ratio resulting from the
increased salaries and other employee benefits in line with the business
growth. As a result, the pre-tax profit of the combined insurance business
remained largely flat, up 0.4% y-o-y to GEL 7.8 million in 1Q24. See page 12
for details. Pre-tax LTM net income amounted to GEL 30.4 million in 1Q24 (up
0.1%). Consequently, the equity value of the insurance business remained
unchanged at GEL 377.7 million, translating into an implied LTM P/E valuation
multiple of 12.4x at 31-Mar-24 (12.4x at 31-Dec-23).
Private investment stage portfolio companies (14.8% of total portfolio value)
Renewable Energy (6.7% of total portfolio value) - Enterprise Value of the
business was up 0.5% to US$ 170.4 million in 1Q24 (up 0.7% to GEL 459.3
million in GEL terms). This reflects the incremental impact on EV of the
resumption of operations of two power-generating units of Hydrolea HPPs, which
were taken offline during the November 2022 - June 2023 period to enable
scheduled rehabilitation works. In US$ terms, the 1Q24 revenue was up by
46.5%, reflecting a 46.0% y-o-y increase in electricity generation in 1Q24.
Operating expenses were down by 4.0% y-o-y, which together with the strong
topline growth translated into a 97.7% y-o-y increase in EBITDA in 1Q24. See
page 14 for details. The pipeline renewable energy projects continued to be
measured at an equity investment cost (GEL 56.6 million (US$ 21.0 million) in
aggregate as at 31-Mar-24). Net debt increased by 1.5% to US$ 71.6 million in
1Q24. As a result, the equity value of Renewable Energy was assessed at GEL
266.4 million in 1Q24 (down 0.1% q-o-q), (down 0.3% q-o-q to US$ 98.8 million
in US$ terms). The blended EV/EBITDA implied valuation multiple of the
operational assets stood at 12.4x as at 31-Mar-24, down from 12.6x at
31-Dec-23.
Education (5.1% of total portfolio value) - EV of Education was up by 5.1% to
GEL 240.5 million in 1Q24, reflecting the strong operating performance of the
business. Revenue in 1Q24 increased by 32.8% y-o-y resulting from a) organic
growth through strong learner intakes and a ramp-up of utilisation and b)
expansion of the business through the launch and acquisition of two new
campuses in 2023. The revenue growth was partially subdued by GEL's y-o-y
appreciation against US$, as the tuition fees for our premium and
international schools are denominated in US$. On a constant currency basis,
the y-o-y revenue growth in 1Q24 amounted to 39.9%. The expansion of the
business also led to a 47.1% y-o-y increase in operating expenses.
Consequently, EBITDA was up by 10.0% y-o-y in 1Q24 (up 27.6% on a constant
currency basis). See page 15 for details. LTM EBITDA was up by 8.2% to GEL
14.9 million in 1Q24. Net debt was down by 25.0% q-o-q to GEL 12.4 million in
1Q24, reflecting the strong cash flow generation of the business. As a result,
GCAP's stake in the education business was valued at GEL 202.6 million at
31-Mar-24 (up 7.1% q-o-q). This translated into the implied valuation multiple
of 16.2x as at 31-Mar-24, down from 16.7x at 31-Dec-23. The forward-looking
implied multiple is estimated at 11.0x for the 2024-2025 academic year.
Clinics and Diagnostics (3.0% of total portfolio value) - The EV of the
business increased by 3.6% to GEL 177.9 million in 1Q24, reflecting a robust
operating performance. 1Q24 revenue and EBITDA (ex. IFRS 16) of the combined
clinics and diagnostics business were up 24.0% and 83.0% y-o-y, respectively.
This growth reflects a) the increased demand for high revenue-generating
services driven by the business's proactive approach to customer acquisition
and service enhancements, and b) the expansion of the business through the
launch of two new ambulatory centres in 2H23, which also led to a 17.9% y-o-y
increase in the operating expenses in 1Q24. See page 16 for details.
Consequently, the LTM EBITDA (incl. IFRS 16) of the business was up by 13.7%
to GEL 16.8 million in 1Q24. The net debt (incl. IFRS 16) stood at GEL 54.6
million as at 31-Mar-24 (down 6.7% q-o-q). As a result, the equity value of
the business was assessed at GEL 120.6 million (up 8.8% q-o-q), translating
into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 10.6x at 31-Mar-24
(down from 11.7x at 31-Dec-23).
Other businesses (7.4% of total portfolio value) - Of the "other" private
portfolio businesses, Auto Service and Beverages (other than wine) are valued
based on LTM EV/EBITDA. Wine and Housing Development are valued based on DCF,
Hospitality is valued based on NAV. See performance highlights of other
businesses on page 18. The portfolio value of other businesses increased by
2.0% to GEL 289.8 million in 1Q24, primarily attributable to the net impact of
GEL 8.2 million value creation and GEL 4.6 million dividend collection from
the beverages business in 1Q24.
Listed and observable portfolio companies (42.9% of total portfolio value)
BOG (38.9% of total portfolio value) - In 4Q23, BoG delivered an annualised
ROAE of 26.7% and a 20.0% loan book growth y-o-y (on a constant currency
basis, the loan portfolio increased by 19.6% y-o-y). In 1Q24, BoG's share
price was up by 27.0% q-o-q to GBP 50.5 at 31-Mar-24, reflecting the strong
growth in BoG's earnings as well as the impact of the announced acquisition of
Ameriabank CJSC, which was completed at the end of March 2024. In 1Q24, GCAP
received GEL 4.3 million dividends (corresponding to c.25,000 shares sold)
from participation in the Bank's buyback programme, which was extended by an
additional GEL 100 million in 1Q24. On 15 March 2024, the Bank announced its
board's intention to recommend a final dividend for 2023 of GEL 4.94 per
ordinary share at the Bank's 2024 Annual General Meeting. This will make a
total dividend paid in respect of the Bank's 2023 earnings of GEL 8.00 per
share (a 4.6% increase compared to 2022). As a result of the developments
described above, the market value of GCAP's equity stake in BoG increased by
25.9% to GEL 1.5 billion in 1Q24. The LTM P/E valuation multiple was at 5.5x
as of 31-Mar-24. BoG's public announcement of their 1Q24 results, when
published, will be available on BoG's website
(https://bankofgeorgiagroup.com/results/earnings) .
Water Utility (4.0% of total portfolio value) - The equity value of the
business increased by GEL 3.0 million to GEL 162 million in 1Q24. This
valuation assessment was performed by applying the put option valuation to
GCAP's 20% holding and reflects the impact of the new tariffs on the
business's factual performance in 1Q24. New tariffs for water supply and
sanitation ("WSS") for the 2024-2026 regulatory period were approved in
December 2023. The WSS tariffs for legal entities in Tbilisi increased from
GEL 6.5 to GEL 8.8 per cubic meter compared to the previous regulatory period
of 2021-2023. WSS tariffs for residential customers remained unchanged.
2) Investments 14 (#_ftn14)
In 1Q24, GCAP invested GEL 3.0 million in the auto service business.
3) Share buybacks
During 1Q24, 609,170 shares were bought back for a total consideration of GEL
22.7 million.
· 488,642 shares with a value of GEL 18.0 million (US$ 6.7 million)
were repurchased under GCAP's US$ 15 million share buyback and cancellation
programme.
· 120,528 shares (GEL 4.7 million in value) represent the
tax-related statutory buyback for the management trust, where the average cost
of unawarded shares is GBP 7.8 as of 31 March 2024.
4) Dividends 15 (#_ftn15)
In 1Q24, Georgia Capital collected GEL 13.8 million regular dividends from the
portfolio companies, of which:
· GEL 4.3 million was received from participation in BoG's buyback
programme.
· GEL 4.8 million dividends were collected from the P&C
insurance business.
· GEL 4.6 million dividends were received from the beverages
business.
Net Capital Commitment (NCC) overview
Below we describe the components of Net Capital Commitment (NCC) as of 31
March 2024 and as of 31 December 2023. NCC represents an aggregated view of
all confirmed, agreed and expected capital outflows (including a buffer for
contingencies) at both Georgia Capital PLC and JSC Georgia Capital levels.
Components of NCC 31-Mar-24 31-Dec-23 Change
GEL '000, unless otherwise noted
Cash and liquid funds 69,366 107,910 -35.7%
Loans issued 9,525 9,212 3.4%
Gross debt (406,223) (413,930) -1.9%
Net debt (1) (327,332) (296,808) 10.3%
Guarantees issued (2) - - NMF
Net debt and guarantees issued (3)=(1)+(2) (327,332) (296,808) 10.3%
Planned investments (4) (125,417) (125,143) 0.2%
of which, planned investments in Renewable Energy (77,807) (77,637) 0.2%
of which, planned investments in Education (47,610) (47,506) 0.2%
Announced Buybacks (5) - (18,087) NMF
Contingency/liquidity buffer (6) (134,765) (134,470) 0.2%
Total planned investments, announced buybacks and contingency/liquidity buffer (260,182) (277,700) -6.3%
(7)=(4)+(5)+(6)
Net capital commitment (3)+(7) (587,514) (574,508) 2.3%
Portfolio value 3,970,812 3,671,945 8.1%
NCC ratio 14.8% 15.6% -0.8 ppts
Cash and liquid funds. Total cash and liquid funds' balance was down by 35.7%
q-o-q to GEL 69.4 million (down 35.9% q-o-q to US$ 25.7 million) in 1Q24,
mainly reflecting share buybacks during the quarter, as described above and
coupon payment on US$ 150 million sustainability-linked bonds.
Loans issued. Issued loans' balance primarily refers to loans issued to our
private portfolio companies and are lent at market terms. The balance was up
by GEL 0.3 million in 1Q24, reflecting the interest accrual on the loans
issued.
Gross debt. In US$ terms the balance decreased by 2.1% q-o-q in 1Q24,
reflecting the net impact of interest accrual and coupon payment on GCAP's
bonds. In GEL terms, the balance was down by 1.9% in 1Q24, further reflecting
the foreign exchange rate movements.
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 1Q24 (the balance in GEL
terms was up 0.2% in 1Q24, reflecting the foreign exchange rate movement).
Announced buybacks. The balance of the announced buybacks reflects the
completion of GCAP's share buybacks and cancellation programme in 1Q24.
Contingency/liquidity buffer. The balance reflects the provision for cash and
liquid assets in the amount of US$ 50 million, for contingency/liquidity
purposes. The balance remained unchanged in US$ terms as at 31-Mar-24.
As a result of the movements described above, the NCC ratio as at 31-Mar-24
declined by 0.8 ppts q-o-q to 14.8% as the 8.1% increase in the portfolio more
than offset the 2.3% q-o-q increase in NCC.
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 285.3 million in 1Q24 (GEL 63.1 million net
income in 1Q23). 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 March 31 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 94 in Georgia Capital PLC
2023 Annual report.
INCOME STATEMENT (Adjusted IFRS/APM)
GEL '000, unless otherwise noted 1Q24 1Q23 Change
Dividend income 13,799 26,412 -47.8%
Of which, regular dividend income 9,460 5,187 82.4%
Of which, buyback dividend income 4,339 21,225 -79.6%
Interest income 1,637 4,977 -67.1%
Realised/unrealised (loss)/gain on liquid funds (551) 428 NMF
Interest expense (8,610) (13,751) -37.4%
Gross operating income 6,275 18,066 -65.3%
Operating expenses (9,340) (9,932) -6.0%
GCAP net operating (loss)/income (3,065) 8,134 NMF
Fair value changes of portfolio companies
Listed and Observable Portfolio Companies 320,205 (386) NMF
Of which, Bank of Georgia Group PLC 317,205 (386) NMF
Of which, Water Utility 3,000 - NMF
Private Portfolio companies (27,060) 50,870 NMF
Large Portfolio Companies (50,946) 28,931 NMF
Of which, Retail (pharmacy) (19,999) 25,939 NMF
Of which, Hospitals (30,425) (6,088) NMF
Of which, Insurance (P&C and Medical) (522) 9,080 NMF
Investment Stage Portfolio Companies 22,307 13,268 68.1%
Of which, Renewable energy (665) 14,646 NMF
Of which, Education 13,254 1,296 NMF
Of which, Clinics and Diagnostics 9,718 (2,674) NMF
Other businesses 1,579 8,671 -81.8%
Total investment return 293,145 50,484 NMF
Income before foreign exchange rate movements and non-recurring expenses 290,080 58,618 NMF
Net foreign currency (loss)/gain (1,157) 22,020 NMF
Non-recurring expenses (1,322) - NMF
Net income 287,601 80,638 NMF
The gross operating income stood at GEL 6.3 million in 1Q24, down 65.3% y-o-y.
This decline mainly reflects the decrease in dividend income attributable to
the non-recurring buyback dividend of GEL 21.2 million recorded in 1Q23 from
participation in BoG's 2022 buybacks.
Interest income was also down on lower liquid funds due to significant
deleveraging progress in 2023, which resulted in significantly reduced
interest expense during the quarter.
The components of GCAP's operating expenses are shown in the table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise noted 1Q24 1Q23 Change
Administrative expenses(( 16 (#_ftn16) )) (2,860) (2,629) 8.8%
Management expenses - cash-based(( 17 (#_ftn17) )) (2,800) (2,589) 8.1%
Management expenses - share-based(( 18 (#_ftn18) )) (3,680) (4,714) -21.9%
Total operating expenses (9,340) (9,932) -6.0%
Of which, fund type expense(( 19 (#_ftn19) )) (2,501) (2,566) -2.5%
Of which, management fee type expenses(( 20 (#_ftn20) )) (6,839) (7,366) -7.2%
GCAP management fee expenses starting from 2024 have a self-targeted cap of
0.75% of Georgia Capital's NAV. The LTM management fee expense ratio was 0.73%
at 31-Mar-24 (1.03% as of 31-Mar-23).
Total investment return represents the increase (decrease) in the fair value
of our portfolio. Total investment return was GEL 293.1 million in 1Q24,
reflecting the changes in the value of our portfolio companies. We discuss
valuation drivers for our businesses on pages 4-6. The performance of each of
our private large and investment stage portfolio companies is discussed on
pages 9-18.
GCAP's net foreign currency liability balance amounted to US$ 136 million (GEL
366 million) at 31-Mar-24. As a result of the movements described above,
GCAP's adjusted IFRS net income was GEL 287.6 million in 1Q24.
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 1Q24 and 1Q23 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 19 for more
background.
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 32%
market share based on the 2022 revenues. 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
418 pharmacies (of which 402 are in Georgia and 16 in Armenia) and 24
franchise stores (of which, two are in Armenia and four in Azerbaijan).
1Q24 performance (GEL '000), Retail (pharmacy) 21 (#_ftn21)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue, net 203,711 196,549 3.6%
Of which, retail 167,945 154,464 8.7%
Of which, wholesale 35,766 42,085 -15.0%
Gross Profit 59,815 56,983 5.0%
Gross profit margin 29.4% 29.0% 0.4 ppts
Operating expenses (ex. IFRS 16) (44,275) (36,467) 21.4%
EBITDA (ex. IFRS 16) 15,540 20,516 -24.3%
EBITDA margin, (ex. IFRS 16) 7.6% 10.4% -2.8 ppts
Net profit (ex. IFRS 16) 6,748 20,598 -67.2%
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 19,566 14,571 34.3%
EBITDA to cash conversion 125.9% 71.0% 54.9 ppts
Cash flow used in investing activities 22 (#_ftn22) (5,226) 6,826 NMF
Free cash flow, (ex. IFRS 16) 23 (#_ftn23) 13,326 19,450 -31.5%
Cash flow used in financing activities (ex. IFRS 16) (25,511) (8,066) NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 611,444 631,218 -3.1%
Of which, cash and bank deposits 48,928 60,383 -19.0%
Of which, securities and loans issued 2,278 2,623 -13.2%
Total liabilities 566,686 597,611 -5.2%
Of which, borrowings 207,324 228,261 -9.2%
Of which, lease liabilities 158,451 151,916 4.3%
Total equity 44,759 33,607 33.2%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in 1Q24 retail revenue is attributable to the
combination of the following factors:
o Expansion of the retail chain - the business added 40 pharmacies and 13
franchise stores over the last 12 months.
o Increased demand for seasonal medicines due to the increased flu activity
in 1Q24 compared to 1Q23.
o The revenue growth was partially affected by price regulations, which set
a maximum selling retail price for both prescription and non-prescription
medicines. The list of regulated products, initially identified in 2023, was
expanded further in 1Q24. This resulted in a negative impact of GEL 2.3
million on the retail revenue growth in 1Q24. In response to these regulatory
challenges, the business has launched various initiatives aimed at optimising
the retail chain and enhancing the sales and profitability of para-pharmacy
products.
Ø The developments in 1Q24 wholesale revenue reflect:
o A y-o-y decrease in State revenues, influenced by timing discrepancies in
tender occurrences, as well as the State's direct procurement of certain
medicines from manufacturers during 1Q24.
o The negative impact of GEL 1.1 million related to the price regulations as
described above.
Ø Gross profit was up by 5.0% y-o-y in 1Q24, mainly driven by a 4.3 ppts
improvement in the gross profit margin of para-pharmacy retail revenue
(revenue from para-pharmacy, as a percentage of retail revenue, was 36.1% in
1Q24, compared to 38.6% in 1Q23). The y-o-y growth in gross profit in 1Q24 was
partially affected by the negative impact of GEL 1.8 million due to the
introduction of the price regulations.
Ø The y-o-y increase in operating expenses (excl. IFRS 16) in 1Q24 was mainly
driven by increased rent and salary expenses in line with the substantial
expansion of the retail chain and the launch of the new warehouse at the end
of 2023. The y-o-y increase in operating expenses (excl. IFRS 16) in 1Q24
further reflects a GEL 1.0 million one-off gain recorded from the sale of an
unutilised property in 1Q23.
Ø As a result of the developments described above the business posted EBITDA
(excl. IFRS 16) of GEL 15.5 million in 1Q24 (down 24.3% y-o-y) with EBITDA
margin (excl. IFRS 16) of 7.6% (down 2.8 ppts y-o-y).
Ø Interest expense (excl. IFRS 16) was up by GEL 3.9 million y-o-y to GEL 5.2
million in 1Q24, attributable to the higher average net debt balance, utilised
to finance the minority buyout transaction in June 2023.
Ø The business posted a net profit (excl. IFRS 16) of GEL 6.7 million in 1Q24
(down 67.2% y-o-y), which also reflects one-off costs associated with the
termination of contracts due to changes in management.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The net debt balance was down to GEL 156.1 million at 31-Mar-24, from GEL
165.3 million at 31-Dec-23, reflecting robust cash flow generation in 1Q24.
Ø Strong cash flow from operating activities with a 125.9% EBITDA to cash
conversion ratio in 1Q24, reflecting the sale of a significant portion of the
inventory stock, partially due to the increased flu activity during the
quarter.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The number of pharmacies and franchise stores is provided below:
Mar-24 Dec-23 Change (q-o-q) Mar-23 Change (y-o-y)
Number of pharmacies 418 412 6 378 40
Of which, Georgia 402 397 5 368 34
Of which, Armenia 16 15 1 10 6
Number of franchise stores 24 23 1 11 13
Of which, Georgia 18 17 1 7 11
Of which, Armenia 2 2 - 2 -
Of which, Azerbaijan 4 4 - 2 2
Ø Retail (Pharmacy)'s key operating performance highlights for 1Q24 are noted
below:
Key metrics 1Q24 1Q23 Change
Same store revenue growth 0.6% -3.4% 4.0 ppts
Number of bills issued (mln) 8.1 7.6 5.8%
Average bill size (GEL) 19.6 19.1 2.7%
Discussion of Hospitals Business Results 24 (#_ftn24)
The hospitals business, where GCAP owns a 100% equity, is the largest
healthcare market participant in Georgia, comprised of 7 Large and Specialty
Hospitals, providing secondary and tertiary level healthcare services across
Georgia and 27 Regional and Community Hospitals, providing outpatient and
basic inpatient services.
1Q24 performance (GEL '000), Hospitals 25 (#_ftn25)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue, net 26 (#_ftn26) 80,749 79,657 1.4%
Gross Profit 27,804 28,233 -1.5%
Gross profit margin 34.0% 35.1% -1.1 ppts
Operating expenses (ex. IFRS 16) (15,466) (13,986) 10.6%
EBITDA (ex. IFRS 16) 12,338 14,247 -13.4%
EBITDA margin (ex. IFRS 16) 15.1% 17.7% -2.6 ppts
Net loss (ex. IFRS 16) (3,585) (1,329) NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 2,502 (3,767) NMF
EBITDA to cash conversion (ex. IFRS 16) 20.3% -26.4% 46.7 ppts
Cash flow from investing activities 27 (#_ftn27) 17,593 (9,401) NMF
Free cash flow (ex. IFRS 16) 28 (#_ftn28) 20,627 (10,633) NMF
Cash flow used in financing activities (ex. IFRS 16) (27,428) 10,849 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 675,170 707,614 -4.6%
Of which, cash balance and bank deposits 2,292 9,753 -76.5%
Of which, securities and loans issued 11,909 9,557 24.6%
Total liabilities 334,094 357,658 -6.6%
Of which, borrowings 264,873 281,352 -5.9%
Total equity 341,076 349,956 -2.5%
INCOME STATEMENT HIGHLIGHTS
Ø The Large and Specialty Hospitals and Regional and Community Hospitals
represent approximately 65% and 35%, respectively, of the consolidated
hospitals business revenue.
Total revenue breakdown 1Q24 1Q23 Change
Total revenue, net 80,749 79,657 1.4%
Of which, Large and Specialty Hospitals 53,872 50,008 7.7%
Of which, Regional and Community Hospitals 27,244 29,942 -9.0%
Of which, Inter-business eliminations (367) (293) 25.3%
Ø The 1Q24 revenue of Large and Specialty Hospitals increased by 7.7% y-o-y.
The growth mainly reflects:
o The resilient underlying performance of this group of hospitals as they
continue to introduce a diversified range of new services which partially
offset the impact of the new facility regulations introduced in September
2023. This translated into a decrease in the share of revenues from the State
from 58.1% in 1Q23 to 54.8% in 1Q24.
o A y-o-y increase in revenues from Iashvili Paediatric Tertiary Referral
Hospital ("Iashvili Hospital) in 1Q24, which was closed during most of 1Q23
due to mandatory regulatory-related renovation works.
Ø The 1Q24 revenue of our Regional and Community Hospitals was down by 9.0%
y-o-y, mainly reflecting the sale of one of the hospitals in 4Q23. Adjusted
for this sale, the 1Q24 revenue of Regional and Community Hospitals was up by
7.2% y-o-y, reflecting the positive impact of the previously announced
strategic restructuring, enabling the business to enhance services and extract
operational efficiencies.
Ø Consequently, the combined revenue of the hospitals business was up by 1.4%
y-o-y in 1Q24.
Ø The gross profit margin was down by 1.1 ppts y-o-y to 34.0% in 1Q24. This
apart from the revenue developments described above, reflects the following
trends in direct salary and materials rates(( 29 (#_ftn29) )) and utility
costs:
o The direct salary rate was up 1.7 ppts to 39.6% y-o-y in 1Q24, mainly
attributable to increased minimum salary rates for medical staff.
o The materials rate was up 0.6 ppts y-o-y to 16.8% in 1Q24.
o Utilities and other costs were managed effectively, down 19.2% y-o-y.
Ø Operating expenses (excl. IFRS 16) were up by 10.6% y-o-y in 1Q24,
resulting from a) an organic increase in the impairment of receivables, in
line with the increased share of out-of-pocket revenues, which are typically
characterised by higher impairment costs and b) high base effect of the gain
recorded on the sale of an unutilised property in 1Q23 (adjusted for this
sale, the operating expenses (excl. IFRS 16) were up by 5.3% y-o-y in 1Q24).
Ø The developments described above translated into a 13.4% decrease in EBITDA
(excluding IFRS 16) in 1Q24.
Total EBITDA (excl. IFRS 16), breakdown 1Q24 1Q23 Change
Total EBITDA (excl. IFRS 16) 12,338 14,247 -13.4%
Of which, Large and Specialty Hospitals 9,090 9,889 -8.1%
Of which, Regional and Community Hospitals 3,248 4,359 -25.5%
Ø Net interest expense (excluding IFRS 16) was up by 5.2% in 1Q24, reflecting
an increased average net debt balance utilised to finance significant capex
investments related to new facility regulations in 2H23.
Ø As a result, the business posted a net loss (excluding IFRS 16) of GEL 3.6
million in 1Q24.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Capex investment was GEL 11.4 million in 1Q24, which reflects a) the
maintenance capex of GEL 4.0 million and b) GEL 2.7 million capex related to
the new regulations, which also takes into account capex investments for
obtaining required accreditations.
Ø In 1Q24, the business collected GEL 29.5 million cash proceeds from the
sale of one of its regional and community hospitals, which were primarily
utilised for deleveraging the hospitals business's balance sheet. This
translated into a 4.3% q-o-q decrease in the net debt balance in 1Q24.
Ø EBITDA to cash conversion ratio stood at 20.3% in 1Q24, reflecting the
one-off administrative delays in the collection of receivables from the State
in 1Q24. This was attributed to the integration of the community hospitals,
formerly managed under Clinics and Diagnostics, into the hospitals business in
4Q23. On the contrary, the mentioned restructuring had a positive impact on
the EBITDA to cash conversion ratio of the clinics and diagnostics business,
as detailed on page 16 below. The trend is expected to normalise in the coming
months.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business key operating performance highlights for 1Q24 are noted below:
Key metrics 1Q24 1Q23 Change
Number of admissions (thousands) 414.3 361.0 14.8%
Of which, Large and Specialty Hospitals 176.9 139.7 26.6%
Of which, Regional and Community Hospitals 237.4 221.3 7.3%
Occupancy rates:
Large and Specialty Hospitals 69.8% 54.2% 15.6 ppts
Regional Hospitals 75.0% 53.4% 21.6 ppts
Discussion of Insurance (P&C and Medical) Business Results
As at 31-Mar-24, 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 with a 30% market share in property and
casualty insurance based on gross premiums as of 31-Dec-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 an 18% market share based on net insurance
premiums as of 31-Dec-23, offering 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.
In April 2024, our medical insurance business completed the previously
announced acquisition of a GEL 87 million portfolio of insurance contracts and
brand name from "Ardi," the third-largest player in the Georgian health
insurance market with a 17% market share based on FY23 net insurance premiums.
This acquisition positions GCAP's medical insurance business as the largest
health insurer in the country and offers an opportunity to diversify our
portfolio and achieve significant financial and strategic synergies. The total
cash outflow for this transaction amounts to GEL 26.4 million, which will be
fully financed by funds already available in the medical insurance business,
with no cash investment required from GCAP. The financial impact of the
acquisition will be reflected in the 2Q24 results. Following this acquisition,
GCAP's insurance business operates under three distinct brand names: Aldagi,
specialising in P&C insurance, and Imedi L and Ardi, both specialising in
medical insurance.
1Q24 performance (GEL'000), Insurance (P&C and Medical)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Insurance revenue 54,991 46,231 18.9%
Of which, P&C Insurance 31,496 24,421 29.0%
Of which, Medical Insurance 23,495 21,810 7.7%
Net underwriting profit 14,218 13,264 7.2%
Net investment profit 3,322 2,474 34.3%
Pre-tax profit 7,768 7,740 0.4%
Of which, P&C Insurance 6,301 5,677 11.0%
Of which, Medical Insurance 1,467 2,063 -28.9%
CASH FLOW HIGHLIGHTS 1Q24 1Q23 Change
Net cash flows from operating activities 7,616 8,369 -9.0%
Free cash flow 6,299 7,671 -17.9%
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 248,274 248,902 -0.3%
Total equity 132,531 130,684 1.4%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 1Q24 insurance revenue reflects a combination of factors:
§ The revenue of the P&C insurance business was up by 29.0% y-o-y in
1Q24, resulting from:
o A GEL 5.0 million y-o-y increase in Motor insurance revenues in 1Q24,
mainly attributable to the growth in the retail client portfolio.
o A GEL 1.2 million y-o-y increase in Credit Life insurance revenues in
1Q24, driven by the growth of banks' portfolios in the mortgage, consumer
loan, and other sectors.
o A GEL 0.9 million y-o-y increase in the revenues from other insurance
lines.
§ The revenue of the medical insurance business was up by 7.7% y-o-y in
1Q24, resulting from c.10% increase in the prices of insurance policies.
Ø The insurance business's key performance ratios for 1Q24 are noted
below:
Key ratios P&C Insurance Medical Insurance
1Q24 1Q23 Change (y-o-y) 1Q24 1Q23 Change (y-o-y)
Combined ratio 87.1% 82.8% 4.3 ppts 97.2% 95.8% 1.4 ppts
Expense ratio 33.7% 35.5% -1.8 ppts 16.2% 15.3% 0.9 ppts
Loss ratio 54.0% 52.7% 1.3 ppts 81.0% 80.5% 0.5 ppts
FX ratio -0.6% -5.4% 4.8 ppts - - -
ROAE 30 (#_ftn30) 31.6% 25.7% 5.9 ppts 16.1% 19.8% -3.7 ppts
Ø The combined ratio of P&C Insurance increased by 4.3 ppts y-o-y to
87.1% in 1Q24, mainly resulting from foreign exchange rate movements on the
business's insurance operations.
Ø The combined ratio of Medical Insurance increased by 1.4 ppts y-o-y to
97.2% in 1Q24, reflecting a) a slight increase in the expense ratio (up 0.9
ppts y-o-y) due to the increased salaries and other employee benefits in line
with the business growth, and b) a 0.5 ppt increase in the loss ratio, driven
by increased insurance claims on the back of the increased flu activity in
1Q24 compared to 1Q23.
Ø The net investment profit was up by 34.3% y-o-y in 1Q24, attributable to
the FX movements and higher average liquid funds balance.
Ø As a result of the developments described above, the pre-tax profit of the
combined insurance business remained largely flat, up 0.4% y-o-y in 1Q24.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The solvency ratio of P&C and medical insurance businesses stood at
165% and 140%, respectively, as of 31 March 2024, significantly above the
required minimum of 100%.
Ø A y-o-y decrease in the net cash flows from operating activities reflects
the cash outflows of GEL 1.9 million related to the reimbursement of a
significant property insurance claim that was incurred in 1Q23 and reimbursed
in 1Q24.
Ø GEL 4.9 million dividends were paid to GCAP in 1Q24.
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 Capital. As electricity sales in Georgia is a dollar
business, the financial data below is presented in US$.
1Q24 performance (US$ '000), Renewable Energy 31 (#_ftn31)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue 2,645 1,805 46.5%
Of which, PPA 1,573 1,805 -12.9%
Of which, Non-PPA 1,072 - NMF
Operating expenses (872) (908) -4.0%
EBITDA 1,773 897 97.7%
EBITDA margin 67.0% 49.7% 17.3 ppts
Net loss (575) (1,713) -66.4%
CASH FLOW HIGHLIGHTS
Cash flow from operating activities 1,141 572 99.5%
Cash flow used in investing activities (856) (1,542) -44.5%
Cash flow used in financing activities (5,162) (809) NMF
Repayment of borrowings (5,186) - NMF
Dividends paid out - (2,000) NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 117,586 122,579 -4.1%
Of which, cash balance 5,560 10,525 -47.2%
Total liabilities 79,543 83,911 -5.2%
Of which, borrowings 77,237 80,935 -4.6%
Total equity 38,043 38,667 -1.6%
INCOME STATEMENT HIGHLIGHTS (GEL) 1Q24 1Q23 Change
Revenue 7,091 4,705 50.7%
EBITDA 4,755 2,339 103.3%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in 1Q24 revenue in US$ terms was driven by a 46.5% y-o-y
improvement in electricity generation in 1Q24. This reflects:
o The resumption of operations of two power-generating units of Hydrolea
HPPs, which were taken offline during the November 2022-June 2023 periods due
to previously planned phased rehabilitation works.
o A 5.4% and 6.5% y-o-y decrease in electricity generation at 30MW
Mestiachala HPP and 21MW Qartli wind farm, respectively, in 1Q24, resulting
from the unfavourable weather conditions during the quarter.
Ø The average electricity selling price remained flat at 62.6 US$/MWh in 1Q24
(62.4 US$/MWh in 1Q23).
Ø Approximately 60% of electricity sales during 1Q24 were covered by
long-term fixed-price power purchase agreements (PPAs) formed with a
Government-backed entity, compared to 100% during 1Q23, reflecting the
expiration of PPAs at two power-generating units.
1Q24 revenue and generation breakdown by power assets:
US$ '000, Revenue from Change Electricity Change
electricity sales
y-o-y
generation (MWh)
y-o-y
unless otherwise noted
30MW Mestiachala HPP 78 -6.0% 1,416 -5.4%
20MW Hydrolea HPPs 1,305 249.9% 21,384 221.2%
21MW Qartli wind farm 1,262 -6.4% 19,412 -6.5%
Total 2,645 46.5% 42,212 46.0%
Ø The operating expenses remained well controlled, down 4.0% y-o-y in 1Q24,
which combined with the developments described above, led to a 97.7% y-o-y
increase in EBITDA.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø A y-o-y increase in the cash flow from operating activities reflects the
increase in 1Q24 EBITDA, as described above.
Ø A y-o-y increase in the cash outflows from financing activities in 1Q24
reflects the buyback and cancellation of US$ 5.1 million green bonds in 1Q24,
resulting in a decrease in the gross debt balance to US$74.9 million.
Discussion of Education Business Results
Our education business currently combines majority stakes in four private
school brands operating across seven campuses acquired over the period
2019-2023: British-Georgian Academy and British International School of
Tbilisi (70% stake), the leading schools in the premium and international
segments; Buckswood International School (80% stake), well-positioned in the
midscale segment and Green School (80%-90% ownership), well-positioned in the
affordable segment.
1Q24 performance (GEL '000), Education 32 (#_ftn32)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue 18,516 13,940 32.8%
Operating expenses (12,619) (8,578) 47.1%
EBITDA 5,897 5,362 10.0%
EBITDA Margin 31.8% 38.5% -6.7 ppts
Net profit 5,039 5,002 0.7%
CASH FLOW HIGHLIGHTS
Net cash flows from operating activities 6,084 3,096 96.5%
Net cash flows used in investing activities (4,154) (15,124) -72.5%
Net cash flows from financing activities 987 12,539 -92.1%
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 198,997 191,723 3.8%
Of which, cash 10,428 7,535 38.4%
Total liabilities 64,231 62,149 3.4%
Of which, borrowings 29,301 27,750 5.6%
Total equity 134,766 129,574 4.0%
INCOME STATEMENT HIGHLIGHTS
Ø The 32.8% y-o-y increase in 1Q24 revenues was driven by a) organic growth
through strong intakes and a ramp-up of the utilisation and b) expansion of
the business through the launch of a new campus in the mid-scale segment and
the acquisition of the new campus in the affordable segment during 2023. The
revenue growth was partially subdued by GEL's y-o-y appreciation against US$,
as the tuition fees for our premium and international schools are denominated
in US$. On a constant currency basis, the y-o-y revenue growth in 1Q24
amounted to 39.9%.
Ø Operating expenses were up by 47.1% y-o-y in 1Q24, mainly reflecting
increased salary, catering and utility expenses, in line with the expansion of
the business.
Ø Consequently, EBITDA was up by 10.0% y-o-y (up 27.6% on a constant currency
basis), while EBITDA margin was down by 6.7 ppts y-o-y in 1Q24, reflecting the
early ramp-up stage of the newly launched campuses. The margin is expected to
rebound as the utilisation rate of the newly added learner capacity picks up
gradually.
Ø The business posted a net income of GEL 5.0 million in 1Q24, up 0.7% y-o-y,
notwithstanding a) lower FX gains recorded in 1Q24 compared to 1Q23, as GEL
experienced a more modest appreciation against foreign currencies in 1Q24, and
b) an increase in net interest expense due to the higher average net debt
balance utilised to partially finance the expansion projects.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Strong cash collection rates (at 89.3% as of 31-Mar-24, slightly below last
year's level of 91.3%), combined with enhanced revenue streams, led to a 96.5%
y-o-y increase in operating cash flow generation of the business in 1Q24.
Ø Investing cash outflows of GEL 4.2 million in 1Q24 reflect the investment
projects, mainly related to the ongoing construction of a new campus in the
midscale segment.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The total number of learners increased by 1,373 learners y-o-y to 5,885
learners at 31-Mar-2024.
Ø The utilisation rate for the total 7,270 learner capacity was up by 15.2
ppts y-o-y to 80.9% as of 31-Mar-2024.
o The utilisation rate for the pre-expansion 2,810 learner capacity was
100%.
o The utilisation of the newly added capacity of 4,460 learners was 68.9%.
Ø The number of campuses across the different segments is noted below:
Mar-24 Dec-23 Change (q-o-q)
Total number of campuses 7 7 -
Premium and International segment 1 1 -
Mid-scale segment 2 2 -
Affordable segment 4 4 -
Discussion of Clinics and Diagnostics Business Results 33 (#_ftn33)
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. Following the strategic restructuring, as outlined in the
hospitals business discussion section on page 11, the business comprises two
segments: 1) 18 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".
1Q24 performance (GEL '000), Clinics and Diagnostics 34 (#_ftn34)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue, net 35 (#_ftn35) 17,714 14,288 24.0%
Of which, clinics 14,086 11,142 26.4%
Of which, diagnostics 5,378 4,416 21.8%
Of which, inter-business eliminations (1,750) (1,270) 37.8%
Gross Profit 8,726 6,323 38.0%
Gross profit margin 49.2% 43.8% 5.4 ppts
Operating expenses (ex. IFRS 16) (5,157) (4,372) 17.9%
EBITDA (ex. IFRS 16) 3,569 1,951 83.0%
EBITDA margin (ex. IFRS 16) 20.1% 13.5% 6.6 ppts
Net profit (ex. IFRS 16) 1,343 31 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 4,728 (58) NMF
EBITDA to cash conversion (ex. IFRS 16) 132.5% -3.0% 135.5 ppts
Cash flow used in investing activities (1,103) (2,789) -60.5%
Free cash flow (ex. IFRS 16) 36 (#_ftn36) 3,936 (2,763) NMF
Cash flow used in financing activities (ex. IFRS 16) (2,455) 4,879 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 129,633 135,848 -4.6%
Of which, cash balance and bank deposits 5,671 4,500 26.0%
Of which, securities and loans issued 3,051 8,357 -63.5%
Total liabilities 75,826 83,901 -9.6%
Of which, borrowings 41,143 48,630 -15.4%
Total equity 53,807 51,947 3.6%
Discussion of results, Clinics (GEL '000)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue, net 14,086 11,142 26.4%
Gross Profit 7,102 5,305 33.9%
Gross profit margin 50.3% 47.1% 3.2 ppts
Operating expenses (ex. IFRS 16) (4,195) (3,610) 16.2%
EBITDA (ex. IFRS 16) 2,907 1,695 71.5%
EBITDA margin (ex. IFRS 16) 20.6% 15.0% 5.6 ppts
Net profit (ex. IFRS 16) 1,115 185 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 4,708 1,352 NMF
EBITDA to cash conversion (ex. IFRS 16) 162.0% 79.8% 82.2 ppts
Cash flow used in investing activities 37 (#_ftn37) (974) (2,199) -55.7%
Free cash flow (ex. IFRS 16) 4,045 (756) NMF
Cash flow used in financing activities (ex. IFRS 16) (2,390) 3,965 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-24 31-Dec-23 Change
Total assets 99,557 105,789 -5.9%
Of which, cash balance and bank deposits 5,605 4,261 31.5%
Of which, securities and loans issued 3,051 8,357 -63.5%
Total liabilities 63,965 71,840 -11.0%
Of which, borrowings 34,743 42,340 -17.9%
Total equity 35,592 33,949 4.8%
INCOME STATEMENT HIGHLIGHTS
Ø The 26.4% y-o-y increase in 1Q24 revenue reflects the increased demand for
high revenue-generating services as well as the growth in the number of
registered patients, driven by the business's proactive approach to customer
acquisition and service enhancements. The expansion of the business through
the launch of two new ambulatory centres in 2H23 also contributed to revenue
growth.
Ø The cost of services in the clinics consists mainly of salaries, cost of
providers, materials and utilities:
o The trend in salary cost is captured in the direct salary rate(( 38
(#_ftn38) )). A significant portion of direct salaries is fixed, which on the
back of increased revenue improved by 2.1 ppts y-o-y to 29.9% in 1Q24.
o Materials rate and utility expenses were well-managed, improving by 0.9
ppts and 6.5% y-o-y in 1Q24, respectively.
o The cost of providers mainly consists of outsourced laboratory services,
which accounted for c.14% of revenue in 1Q24, up from c.12% in 1Q23. While
increased demand for such services led to a 2.0 ppts y-o-y increase in the
ratio in 1Q24, their impact on the business's overall profitability is
considerably more significant.
Ø Consequently, the gross profit margin improved by 3.2 ppts y-o-y in 1Q24.
Ø Operating expenses (excl. IFRS 16) were up by 16.2% y-o-y in 1Q24,
reflecting increased salaries and administrative expenses (excl. IFRS 16) in
line with the expansion of the business.
Ø The robust performance of the business translated into a 5.6 ppts y-o-y
increase in the EBITDA margin to 20.6% in 1Q24.
Ø The depreciation expense (excl. IFRS 16) was up 20.7% in 1Q24 y-o-y, in
line with the business expansion. When combined with the developments
described above, the result was a significant increase in the 1Q24 net profit.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The strong performance of the business translated into a 162.0% EBITDA to
cash conversion ratio in 1Q24. This further reflects the positive impact of
the strategic reorganisation as outlined in the hospitals business performance
overview section on page 11 above.
Ø The net debt balance was down by 12.2% in 1Q24, reflecting robust cash flow
generation during the quarter.
Ø In 1Q24, the business spent GEL 0.7 million on capex, primarily related to
maintenance.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The number of admissions at our clinics is highlighted below:
1Q24 1Q23 Change
Number of admissions (thousands) 461.4 396.4 16.4%
Ø The number of polyclinics operated by the business is provided below.
Mar-24 Mar-23 Change (y-o-y)
Number of polyclinics 18 17 1
As of 31-Mar-24, the total number of registered patients in our polyclinics in
Tbilisi reached c.305,000 (c.280,000 as of 31-Mar-23).
Discussion of results, Diagnostics (GEL '000)
INCOME STATEMENT HIGHLIGHTS 1Q24 1Q23 Change
Revenue, net 5,378 4,416 21.8%
Gross Profit 1,624 1,018 59.5%
Gross profit margin 30.2% 23.1% 7.1 ppts
Operating expenses (ex. IFRS 16) (962) (762) 26.2%
EBITDA (ex. IFRS 16) 662 256 158.6%
EBITDA margin (ex. IFRS 16) 12.3% 5.8% 6.5 ppts
Net profit / (loss) (ex. IFRS 16) 228 (154) 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 services. This
resulted in a 21.8% y-o-y increase in revenues in 1Q24.
Ø Materials and direct salary rates improved by 1.6 ppts to 38.3% and by 2.7
ppts to 22.9%, y-o-y in 1Q24, respectively.
Ø As a result, the business recorded a 59.5% and 7.1 ppts y-o-y increase in
gross profit and gross profit margin in 1Q24, respectively. The 1Q24 EBITDA
was up 158.6% y-o-y, while the EBITDA margin improved by 6.5 ppts y-o-y in
1Q24.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The key operating performance highlights for 1Q24 are noted below:
1Q24 1Q23 Change
Number of patients served (thousands) 221 207 6.6%
Number of tests performed (thousands) 738 619 19.2%
Average revenue per test GEL 7.3 7.1 2.2%
Average number of tests per patient 3.3 3.0 11.9%
Discussion of Other Portfolio Results
The four businesses in our "other" private portfolio are Auto Service,
Beverages, Housing Development, and Hospitality. They had a combined value of
GEL 289.8 million at 31-Mar-24, which represented 7.4% of our total portfolio.
1Q24 aggregated performance highlights (GEL '000), Other Portfolio
1Q24 1Q23 Change
Revenue 132,397 118,195 12.0%
EBITDA 15,327 3,583 NMF
Net cash flows from operating activities 1,352 10,576 -87.2%
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 1Q24, revenue was up by 4.0% y-o-y to
GEL 12.3 million reflecting an increase in the retail segment. Similarly, the
gross profit was up by 3.4% to GEL 3.2 million in 1Q24 y-o-y. In 1Q24,
operating expenses were up by 24.0% y-o-y, reflecting the business growth. As
a result, the business posted GEL 0.2 million EBITDA in 1Q24, down by 74.6%
y-o-y.
o Periodic technical inspection (PTI) business | PTI business's revenue was
up by 20.8% y-o-y to GEL 5.6 million in 1Q24. Revenue growth was driven by an
increase in primary vehicle inspections during the quarter. The number of
total cars serviced was up by 16.9% y-o-y in 1Q24, respectively, translating
into a 29.8% y-o-y increase in EBITDA (1Q24 EBITDA was GEL 2.9 million).
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 1.4%
y-o-y to GEL 25.2 million in 1Q24, resulting from increased product prices due
to higher demand. Sales in hectolitres in 1Q24 were down by 7.5% y-o-y. The
average 1Q24 GEL price per litre (average for beer and lemonade) increased by
9.7% y-o-y. The operating expenses were up by 7.3% in 1Q24. Consequently, the
EBITDA of the business decreased by 0.9% to GEL 2.3 million in 1Q24.
o Distribution business | Revenue of the distribution business increased by
6.5% y-o-y to GEL 36.4 million in 1Q24. The gross profit margin was down by
1.9 ppts in 1Q24, reflecting the change in product mix. In 1Q24, operating
expenses were up by 6.3% y-o-y. As a result, the business posted GEL 0.2
million EBITDA in 1Q24, down by 73.8% y-o-y.
o Wine business | The net revenue of the wine business was up by 83.7% to
GEL 17.7 million in 1Q24. The increase was driven by a 98.8% increase in the
number of bottles sold in 1Q24, primarily due to a more than 2x increase in
exports. The share of exports in total sales was up by 8.2 ppts y-o-y to 92.3%
in 1Q24. Operating expenses decreased by 4.8% y-o-y in 1Q24 due to cost
savings. Consequently, EBITDA increased to GEL 2.9 million in 1Q24 (from
negative 0.8 million in 1Q23).
Ø Real estate businesses | The combined revenue of the real estate businesses
increased by 7.4% in 1Q24 at GEL 62.6 million. The 1Q24 EBITDA increased by
GEL 7.9 million y-o-y to GEL 7.0 million, mainly resulting from the strong
operating performance of the hospitality business (EBITDA up by 84.2% in 1Q24)
and remeasurement of the construction budgets for ongoing residential projects
at our housing development business.
Basis of presentation
This announcement contains unaudited financial results presented in accordance
with UK-adopted international accounting standards ("IFRS"). The financial
results are unaudited and derived from management accounts.
Under IFRS 10, Georgia Capital PLC meets the "investment entity" definition.
For more details about the basis of preparation
please refer to page 94 in Georgia Capital PLC 2023 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 net
earned premiums.
10. Expense ratio in P&C Insurance equals sum of acquisition costs and
operating expenses divided by net earned premiums.
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, represents an aggregated view of all
confirmed, agreed and expected capital outflows at both Georgia Capital PLC
and JSC Georgia Capital levels.
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 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) and (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 19.7% equity stake (at 31-Mar-24) 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; currency fluctuations and risk, 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, 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 Georgia Capital PLC's Annual Report and Accounts
2023. 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
Central Square
29 Wellington Street
Leeds, LS1 4DL
United Kingdom
www.georgiacapital.ge (http://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 (mailto: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
(http://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 (http://www.georgiacapital.ge)
1 (#_ftnref1) See "Basis of Presentation" for more background on page 19.
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 (#_ftnref2) Please see definition in glossary on page 19.
3 (#_ftnref3) Includes both the buybacks under the share buyback and
cancellation programme and for the management trust.
(( 4 (#_ftnref4) )) Includes GEL 4.3 million and GEL 21.2 million buyback
dividends related to participation in BOG's on-market share buybacks in 1Q24
and 1Q23, respectively.
5 (#_ftnref5) Private portfolio companies' performance highlights are
presented excluding the water utility business. Aggregated numbers are
presented like-for-like basis.
6 (#_ftnref6) The results of our four smaller businesses included in other
portfolio companies (described on page 18) 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).
7 (#_ftnref7) Determined by taking into account the peak number of 47.9
million shares issued as of 31-Dec-20.
8 (#_ftnref8) Please see definition in glossary on page 19.
9 (#_ftnref9) 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.
10 (#_ftnref10) 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.
11 (#_ftnref11) Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net debt.
12 (#_ftnref12) Please read more about valuation methodology on page 19 in
"Basis of presentation".
13 (#_ftnref13) Enterprise value is presented excluding the recently
acquired schools and non-operational assets, added to the equity value of the
education business at cost.
14 (#_ftnref14) Investments are made at JSC Georgia Capital level, the
Georgian holding company.
15 (#_ftnref15) Dividends are received at JSC Georgia Capital level, the
Georgian holding company.
16 (#_ftnref16) Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative costs.
17 (#_ftnref17) Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
18 (#_ftnref18) Share-based management expenses are share salary and share
bonus expenses of management and staff.
19 (#_ftnref19) Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and corporate
secretary costs.
20 (#_ftnref20) Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
21 (#_ftnref21) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) . In 1Q24, certain
transaction-related expenses, such as POS-terminal charges, courier services,
and other related expenses, have been reclassified from operating expenses to
components of gross profit. The comparative 1Q23 period has been adjusted
retrospectively.
22 (#_ftnref22) Of which - cash outflow on capex of GEL 6.2 million in 1Q24
(GEL 4.3 million in 1Q23); proceeds from sale of investment property of GEL
9.2 million in 1Q23.
23 (#_ftnref23) Calculated by deducting capex and minority acquisition from
operating cash flows and adding proceeds from sale of PPE/IP.
24 (#_ftnref24) The numbers were adjusted retrospectively to account for the
recent strategic reorganisation in the healthcare businesses that occurred in
December 2023.
25 (#_ftnref25) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
26 (#_ftnref26) Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
27 (#_ftnref27) Of which - capex of GEL 11.4 million in 1Q24 (GEL 8.5
million in 1Q23); proceeds from the sale of property of GEL 29.6 million in
1Q24 (GEL 1.6 million in 1Q23).
28 (#_ftnref28) Operating cash flows less capex, plus net proceeds from the
sale of Batumi Hospital.
29 (#_ftnref29) The respective costs divided by gross revenues.
30 (#_ftnref30) Calculated based on average equity, adjusted for preferred
shares.
31 (#_ftnref31) The detailed IFRS financial statements (in both US$ and GEL)
are included in supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
32 (#_ftnref32) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
33 (#_ftnref33) The numbers were adjusted retrospectively to account for the
recent strategic reorganisation in the healthcare businesses.
34 (#_ftnref34) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
35 (#_ftnref35) Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from Gross revenue.
36 (#_ftnref36) Operating cash flows less capex.
37 (#_ftnref37) Of which capex of GEL 0.7 million in 1Q24 (GEL 2.1 million
in 1Q23).
38 (#_ftnref38) The respective costs divided by gross revenues.
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