TIDMCGEO
RNS Number : 4470S
Georgia Capital PLC
16 November 2021
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS)[1]
GEL '000, unless otherwise Sep-21 Jun-21 Change Dec-20 Change
noted
Georgia Capital NAV overview
NAV per share, GEL 59.77 54.48 9.7% 48.12 24.2%
Net Asset Value (NAV) 2,762,844 2,537,536 8.9% 2,212,292 24.9%
Total portfolio value 3,469,495 3,247,326 6.8% 2,907,688 19.3%
Liquid assets and loans
issued 414,930 442,088 -6.1% 284,272 46.0%
Net debt (712,121) (714,065) -0.3% (697,999) 2.0%
Georgia Capital Performance 3Q21 3Q20 Change 9M21 9M20 Change
Total portfolio value creation 244,631 452,097 -46% 585,080 (30,641) NMF
of which, listed businesses 66,246 (135,237) NMF 110,082 (432,982) NMF
of which, private businesses 178,385 587,334 -70% 474,998 402,341 18%
Investments 6,542 138,296 -95% 17,130 194,287 -91%
Dividend income 30,000 9,972 NMF 44,430 14,899 NMF
Net income 229,849 398,032 -42% 553,148 (166,810) NMF
Private portfolio companies'
performance(1) 3Q21 3Q20 Change 9M21 9M20 Change
Large portfolio companies
Revenue 399,853 303,652 31.7% 1,130,041 880,561 28.3%
EBITDA 91,494 61,872 47.9% 239,352 158,642 50.9%
Net operating cash flow 114,015 68,573 66.3% 196,013 195,264 0.4%
Investment stage portfolio
companies
Revenue 16,765 19,164 -12.5% 53,437 52,005 2.8%
EBITDA 9,489 12,455 -23.8% 30,839 31,722 -2.8%
Net operating cash flow 13,965 14,573 -4.2% 31,558 37,184 -15.1%
Total portfolio[2]
Revenue 505,726 405,990 24.6% 1,422,504 1,130,478 25.8%
EBITDA 108,837 85,452 27.4% 297,718 204,709 45.4%
Net operating cash flow 137,378 110,892 23.9% 248,976 288,933 -13.8%
KEY POINTS
Ø NAV per share (GEL) up 9.7% in 3Q21, mainly resulting
from:
o GEL 178.4 million value creation across our private portfolio
(+7.0 ppts impact)
o A 15.6% increase in BoG share price in 3Q21, adding GEL 66.2
million (+2.6 ppts impact) to the value of our holding
Ø Outstanding quarterly revenue and EBITDA growth across our
private portfolio, up 24.6% and 27.4% y-o-y, respectively, in 3Q21
(up 25.8% and 45.4%, y-o-y in 9M21)
Ø Record aggregate quarterly net operating cash flows of GEL
137.4 million, up 23.9% y-o-y in 3Q21
Ø GEL 30 million dividends collected from the private portfolio
companies in 3Q21 (GEL 44.4 million in 9M21), including GEL 25
million dividends from GHG businesses
Ø Buyout of the minority shareholders in Retail (Pharmacy)
agreed at renegotiated terms, providing the path to 100% ownership
and stretching over six year/tranches at 5.25x EV/EBITDA
multiple
Ø Additional sales of US$ 10.3 million commercial real estate
properties in September-November 2021 leading to a total of US$
45.0 million divestment with an 11.3% premium (US$ 4.6 million)
since June 2021
Conference call : An investor/analyst conference call will be
held on 16 November 2021, at 13:00 UK / 14:00 CET / 08:00 US
Eastern Time. Please click the link to join the webinar: WEBINAR
LINK , webinar ID: 858 6566 0780, passcode: 067923. Further details
about the webinar are available on the Group's webpage:
https://georgiacapital.ge/ir/news .
CHAIRMAN AND CEO'S STATEMENT
The Georgian economy has continued to demonstrate remarkable
progress, notwithstanding the ongoing impact of COVID-19 related
infection waves. Real GDP grew by 11.3% y-o-y in the nine-month
period from January to September 2021, surpassing even the most
optimistic expectations set at the beginning of 2021. Positive
developments in the epidemiological environment were sustained in
the third quarter of 2021, as 33. 9 % of the adult population have
now been fully vaccinated, up from 3.5% at 30 June 2021. To further
increase the vaccination rate across the country and meet its
target of vaccinating 60% of the adult population before the end of
2021, the Georgian Government has recently introduced the
internationally accepted "Green Pass" programme. The strong
momentum in the economic recovery has supported the excellent
operating performance across our high-quality and defensive
portfolio companies, which has enabled Georgia Capital to deliver
substantial progress and value creation.
3Q21 NAV per share growth of 9.7% (up 24.2% in 9M21). NAV per
share growth in 3Q21 was outstanding and resulted mainly from GEL
245 million in value creation across our portfolio, with a 9.6 ppts
impact on the NAV per share. The value creation across our private
portfolio amounted to GEL 178 with a 7.0 ppts impact on the NAV per
share. BoG share price during 3Q21 increased by 15.6%, strongly
supporting NAV per share growth with GEL 66 million value creation
(+2.6 ppts impact). Similarly, the 24.2% NAV per share growth in
9M21 reflects GEL 585 million value creation across our portfolio,
where GEL 475 million (+21.5 ppts impact) and GEL 110 million (+5.0
ppts impact) value was created in our private and listed portfolio
companies, respectively. NAV per share growth was even stronger in
GBP terms, up by 13.7% in 3Q21 (up 31.0% in 9M21).
Outstanding operating performance across our private portfolio.
The aggregated revenues of our private portfolio companies during
3Q21 totalled GEL 506 million, a 25% year-over-year growth and a
34% growth over the equivalent, pre-pandemic, 2019 period, while
aggregated EBITDA in 3Q21 was up 27% y-o-y and up 32% compared to
the pre-pandemic 2019 period. The growth mainly reflects the robust
performance across our large portfolio companies (revenues up 32%
and EBITDA up 48% y-o-y in 3Q21). The revised tariffs, increased
water consumption levels, and higher electricity sales volumes (the
latter supported by strong water inflows into the Zhinvali
reservoir) translated into 58% and 95% y-o-y growth in revenues and
EBITDA of the water utility business, respectively, in 3Q21.
Quarterly revenue of our healthcare services business was up 48%
(EBITDA up 28%) y-o-y in 3Q21, reflecting the remarkable growth in
the admission rates at our hospitals and clinics on the back of
increased demand for elective healthcare services. The rebound in
elective healthcare, together with the continuing expansion of the
pharmacy chain, also positively impacted the performance of our
retail (pharmacy) business which delivered 3Q21 revenues that were
up 21% y-o-y and a 25% y-o-y increase in EBITDA. The combined
revenue of our insurance business (P&C and Medical) was up 18%
y-o-y in 3Q21 (net profit up 21% y-o-y in 3Q21), benefiting from
the rebounding demand and increased prices of the insurance
policies. The strong business growth across our portfolio companies
also led to record aggregate quarterly net operating cash flows of
GEL 137 million, up 24% y-o-y in 3Q21.
For 9M21, the aggregated revenues of our private portfolio
companies increased by 26% y-o-y (and were up 36% over the
equivalent, pre-pandemic, 2019 period), while the aggregated 9M21
y-o-y EBITDA growth was 45% (up 51% compared to 9M19).
Buyout of the minority shareholders in Retail (Pharmacy). In
October 2021, Georgia Healthcare Group, the holding company of the
GCAP's healthcare services, retail (pharmacy) and medical insurance
businesses, signed a share purchase agreement to acquire the
remaining 33% minority interest in its retail (pharmacy) business
over the next six years. The buyout will be executed in six annual
tranches at a 5.25x EV/EBITDA multiple. The newly agreed payment
terms will provide better visibility for GHG to manage its
liquidity position and allow GHG to increase the dividend inflows
from the retail (pharmacy) business. The transaction is in line
with our 360-degree capital allocation philosophy and reconfirms
our confidence in the value creation potential of the retail
business, where our management team has consistently delivered
outstanding results and captured business growth opportunities.
From a macroeconomic perspective, the economic recovery
continued to deliver a strong performance into the second half of
2021. On the domestic side, the recovery has been supported by
expansionary fiscal policy (current and capital expenditures grew
by 13.9% y-o-y in 9M21) and robust lending in both national and
foreign currencies (total loans up 15.8% y-o-y in September without
the exchange rate effect). On the external side, strong remittance
inflows (up 27.8% y-o-y in 9M21) have been supported by merchandise
exports (up 24.1% y-o-y in 9M21) and tourism revenues rebounding to
50% of 2019 levels for the three consecutive months of
July-September 2021. The Georgian Lari (GEL) began strengthening in
mid-May 2021, appreciating by 3.6% compared to the beginning of the
year and by 8.6% compared to the year-to-date low as of 10 November
2021. The real effective exchange rate (REER) has also been
appreciating for four consecutive months since May, although it
still remains below the long-run trend. The currency appreciation
has been driven by strong foreign demand for Georgian exports,
robust remittance inflows, tight monetary policy and accelerated
foreign currency lending, as well as improving market sentiment.
Aided by higher-than-expected growth and GEL strengthening, the
government has lowered the public debt-to-GDP ratio projection to
52% by the end of 2021, down from 60% at the end of 2020, and
the
overall budget deficit projection has also been narrowed to 6.8%
of GDP. While fiscal support remains substantial, the deficit is
planned to be cut to 2.8% of GDP by 2023. The National Bank of
Georgia appropriately tightened the refinancing rate to 10.0% in
August 2021, responding to higher-than-expected inflation and the
potential risk of entrenched inflationary expectations. Rising
prices have mostly been caused by the global food and commodity
price surges, although supply side pressures are no longer abated
by weak domestic demand. Inflation reached 12.3% in September and
is expected to average over 9% in 2021, declining gradually next
year after the transitory effects subside and global supply side
pressures ease.
Outlook. The strong management teams at our portfolio companies
have continued to successfully navigate the challenges created by
the pandemic, while seeking opportunities to develop and improve
their operating performance. In addition, to this strong
performance from the portfolio companies, we have also made further
strategic progress with the additional sale s of US$ 10.3 million
commercial real estate properties in September-November 2021 and
remain on track with our other key strategic priorities. As a
result, and based on our proven governance, capital discipline, and
sound management capabilities, I believe Georgia Capital is
well-positioned to continue delivering robust and consistent NAV
per share growth and a substantial return for our shareholders.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's net asset value at
30-Sep-21 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 (30-Jun-21 and 30-Sep-21). 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 3Q21
GEL '000, Jun-21 1. Value 2a. 2b. 2c. 3.Operating 4. Sep-21 Change
unless creation Investment Buyback Dividend expenses Liquidity/ %
otherwise noted ([3]) FX/Other
Listed
Portfolio
Companies
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Bank of Georgia
(BoG) 575,394 66,246 - - - - - 641,640 11.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Listed
Portfolio
Value 575,394 66,246 - - - - - 641,640 11.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Listed
Portfolio
value change % 11.5% 0.0% 0.0% 0.0% 0.0% 0.0% 11.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Private
Portfolio
Companies
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Large
Companies 2,084,776 185,259 - - (25,000) - 249 2,245,284 7.7%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Healthcare
Services 685,821 49,693 - - (11,545) - - 723,969 5.6%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Retail
(Pharmacy) 580,402 48,684 - - (11,460) - - 617,626 6.4%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Water Utility 548,230 71,260 - - - - 249 619,739 13.0%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Insurance (P&C
and
Medical) 270,323 15,622 - - (1,995) - - 283,950 5.0%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Of which,
P&C
Insurance 206,351 10,084 - - - - - 216,435 4.9%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Of which,
Medical
Insurance 63,972 5,538 - - (1,995) - - 67,515 5.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Investment
Stage
Companies 344,768 (9,595) 6,177 - (5,000) - 249 336,599 -2.4%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Renewable
Energy 221,109 (8,000) 776 - (5,000) - 249 209,134 -5.4%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Education 123,659 (1,595) 5,401 - - - - 127,465 3.1%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Other
Companies 242,388 2,721 365 - - - 498 245,972 1.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Private
Portfolio
Value 2,671,932 178,385 6,542 - (30,000) - 996 2,827,855 5.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Private
Portfolio
value change % 6.7% 0.2% 0.0% -1.1% 0.0% 0.0% 5.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Portfolio
Value (1) 3,247,326 244,631 6,542 - (30,000) - 996 3,469,495 6.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Portfolio
value change % 7.5% 0.2% 0.0% -0.9% 0.0% 0.0% 6.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Debt (2) (714,065) - (6,542) (9,335) 30,000 (5,097) (7,082) (712,121) -0.3%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which,
Cash
and liquid
funds 283,897 - (6,542) (9,335) 30,000 (5,097) (36,735) 256,188 -9.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which,
Loans
issued 158,191 - - - - - 551 158,742 0.3%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which,
Gross
Debt (1,156,153) - - - - - 29,102 (1,127,051) -2.5%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net other
assets/
(liabilities)
(3) 4,275 - - - - (3,791) 4,986 5,470 28.0%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which,
share-based
comp. - - - - (3,791) 3,791 -
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Asset Value
(1)+(2)+(3) 2,537,536 244,631 - (9,335) - (8,888) (1,100) 2,762,844 8.9%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
NAV change % 9.6% 0.0% -0.4% 0.0% -0.4% 0.0% 8.9%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Shares
outstanding(3) 46,575,944 - - (354,000) - - - 46,221,944 -0.8%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Asset Value
per share, GEL 54.48 5.25 0.00 0.22 0.00 (0.19) 0.00 59.77 9.7%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
NAV per share,
GEL
change % 9.6% 0.0% 0.4% 0.0% -0.3% 0.0% 9.7%
---------------- ------------ --------- ----------- ---------- --------- ------------ ----------- ------------ -------
NAV per share (GEL) increased by 9.7% in 3Q21, mainly reflecting
a strong value creation across our private large portfolio
companies with a positive 7.3 ppts impact on the NAV per share. NAV
per share growth was further supported by an increased valuation of
BoG (+2.6 ppts impact), share buybacks - in line with the ongoing
US$ 10 million share buyback and cancellation programme (+0.4 ppts
impact), and GEL's appreciation against US$ by 1.2%, resulting in a
foreign currency gain of GEL 7.9 million on GCAP net debt (+0.3
ppts impact). The NAV per share growth was slightly offset by a)
negative value creation across investment stage portfolio companies
(-0.4 ppts impact), and b) management platform related costs and
net interest expense with negative 0.3 ppts and 0.5 ppts impact,
respectively.
Portfolio overview
Our portfolio value increased by 6.8% to GEL 3.47 billion in
3Q21, reflecting a 5.8% and 11.5% growth in the value of private
and listed businesses, respectively. At 30-Sep-21, the private
portfolio value was GEL 2.83 billion (81.5% of total portfolio
value), and the listed portfolio value was GEL 641.6 million (18.5%
of total). The private portfolio value growth of GEL 155.9 million
mainly reflects the net impact of a) GEL 178.4 million value
creation, b) investments of GEL 6.5 million predominantly in
Education and Renewable Energy, and c) a decrease of GEL 30.0
million due to dividends paid to GCAP.
Value creation
BoG share price during 3Q21 increased by 15.6%, strongly
supporting NAV per share growth with GEL 66.2 million value
creation. The value creation of GEL 178.4 million on the private
portfolio mainly reflects a) a GEL 236.4 million operating
performance-related increase in the value of our private assets,
which delivered substantially higher aggregated revenues (up 24.6%
in 3Q21 and 25.8% in 9M21, y-o-y) and EBITDA (up 27.4% in 3Q21 and
45.4% in 9M21, y-o-y), slightly offset by c) a GEL 59.2 million
negative net impact from changes in valuation multiples and foreign
currency exchange rates.
The table below summarises value creation drivers in our
businesses in 3Q21:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([4]) / and FX ([6])
buy-outs
([5])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed 66,246
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG 66,246
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private 236,357 1,213 (59,185) 178,385
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies 236,931 - (51,672) 185,259
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Healthcare Services 60,576 - (10,883) 49,693
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) 57,187 - (8,503) 48,684
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility 103,546 - (32,286) 71,260
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) 15,622 - - 15,622
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 10,084 - - 10,084
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance 5,538 - - 5,538
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies (7,686) 1,578 (3,487) (9,595)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy (6,708) 1,578 (2,870) (8,000)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education (978) - (617) (1,595)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other 7,112 (365) (4,026) 2,721
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio 236,357 1,213 (59,185) 244,631
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Enterprise value and equity value development of our businesses
in 3Q21 are summarised in the following table:
Enterprise Value (EV) Equity Value
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-21 30-Jun-21 Change 30-Sep-21 30-Jun-21 Change % share
otherwise noted % % in total
portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed portfolio 641,640 575,394 11.5% 18.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 641,640 575,394 11.5% 18.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 4,686,515 4,632,745 1.2% 2,827,855 2,671,932 5.8% 81.5%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 3,243,902 3,104,119 4.5% 2,245,284 2,084,776 7.7% 64.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Healthcare Services 1,007,139 964,045 4.5% 723,969 685,821 5.6% 20.9%
Retail (pharmacy) 916,449 878,013 4.4% 617,626 580,402 6.4% 17.8%
Water Utility 1,057,001 1,011,491 4.5% 619,739 548,230 13.0% 17.9%
Insurance (P&C and
Medical) 263,313 250,570 5.1% 283,950 270,323 5.0% 8.2%
Of which, P&C Insurance 216,435 206,351 4.9% 216,435 206,351 4.9% 6.2%
Of which, Medical
Insurance 46,878 44,219 6.0% 67,515 63,972 5.5% 1.9%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 627,439 650,684 -3.6% 336,599 344,768 -2.4% 9.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 488,323 506,860 -3.7% 209,134 221,109 -5.4% 6.0%
Education[7] 139,116 143,824 -3.3% 127,465 123,659 3.1% 3.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 815,174 877,942 -7.1% 245,972 242,388 1.5% 7.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 3,469,495 3,247,326 6.8% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed businesses (18.5% of total portfolio value)
BOG ( 18.5% of total portfolio value) - In 3Q21, BoG managed to
deliver an annualised ROAE of 25.7% and 14.3% loan book growth
y-o-y. A robust loan book growth was largely driven by continued
strong loan origination levels in all segments, but predominantly
in the consumer, micro and SME portfolios. Reflecting the
accelerated trend of economic recovery in 3Q21, BOG's share price
increased by 15.6% to GBP 15.54 at 30-Sep-21 and, as a result, the
market value of our equity stake in BOG increased by GEL 66.2
million to GEL 641.6 million. Supported by strong operating
performance, robust asset quality and capital adequacy position,
the Bank's Board has decided to restore the payment of dividends to
shareholders and has declared an interim dividend of GEL 1.48 per
ordinary share in respect of the period ended 30 June 2021.
Consequently, GCAP received GEL 14.5 million dividends from BOG in
4Q21. BoG's public announcement of their 3Q21 results is available
at: https://www.bankofgeorgiagroup.com/results/earnings .
Private large portfolio companies (64.7% of total portfolio
value)[8]
In 3Q21, our private large portfolio companies were valued
internally by incorporating 3Q21 results, in line with
International Private Equity Valuation ("IPEV") guidelines and
methodology deployed in 1H21 by an independent valuation company,
hired to provide additional transparency to our private portfolio
valuation [9] . The independent valuation assessments, which served
as the basis for Georgia Capital's estimate of the 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 the large
portfolio companies 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.
Healthcare Services (20.9 % of total portfolio value) -
Healthcare Services Enterprise Value (EV) increased by GEL 43.1
million to GEL 1,007.1 million in 3Q21, reflecting a continuing
rebound in regular elective care and outpatient services.
Consequently, admissions at hospitals and clinics increased by
105.1% and 81.1% y-o-y, respectively, in 3Q21, which, along with
the solid performance of the diagnostics business, led to a 48.0%
y-o-y growth in 3Q21 revenues. EBITDA (excl. IFRS 16) increased by
27.7% y-o-y in 3Q21. See page 1 3 for details. LTM EBITDA (incl.
IFRS 16)[10] increased by 5.8% to GEL 95.9 million in 3Q21. Net
debt (incl. financial lease liabilities) has remained largely flat
in 3Q21 (up 2.1% q-o-q to GEL 245.6 million). The business paid GEL
11.5 million dividends in 3Q21. As a result, the equity value of
the business was assessed at GEL 724.0 million, up 5.6% in 3Q21,
translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16)
of 10.5x at 30-Sep-21 (10.6x at 30-Jun-21).
Retail (pharmacy) (17.8% of total portfolio value) - Retail
(pharmacy) EV increased by GEL 38.4 million to GEL 916.4 million in
3Q21. Revenues were up by 21.1% y-o-y in 3Q21, reflecting a launch
of new pharmacies, organic sales growth and increased revenue from
wholesale as a result of winning several state tenders. EBITDA
(excl. IFRS 16) was up 24.7% y-o-y in 3Q21. See page 1 5 for
details. Consequently, LTM EBITDA (incl. IFRS 16) was up 5.5% to
GEL 99.6 million in 3Q21. Net debt (incl. financial lease
liabilities) was down by 2.9% q-o-q to GEL 134.9 million. The
business paid GEL 11.5 million dividends in 3Q21. The result was
GEL 48.7 million value creation, and the equity value of GCAP's 67%
holding as of 30 September 2021 increased by 6.4% to GEL 617.6
million in 3Q21. The implied LTM EV/EBITDA valuation multiple was
9.2x, including the impact of IFRS 16 (down from 9.3x as of
30-Jun-21).
Water Utility (17.9% of total portfolio value) - Water Utility
EV increased by GEL 45.5 million to GEL 1,057.0 million in 3Q21.
Revised water utility tariffs effective from January 2021 and
increased water consumption levels by corporate clients led to a
54.9% y-o-y increase in water supply revenue. Similarly, revenue
from electricity sales increased in 3Q21, up 108.9% y-o-y,
reflecting high water volume in Zhinvali reservoir due to
favourable hydrological conditions throughout the year. As a
result, the total revenue of the water utility business increased
by 58.2% y-o-y in 3Q21, leading to a 94.6% increase in EBITDA. See
page 17 for details. LTM Adjusted EBITDA, used in Water Utility's
multiple-based and DCF valuation, amounted to GEL 117.4 million as
at 30-Sep-21 (up 8.5% q-o-q). LTM Adjusted EBITDA combines Water
Utility's actual performance in 9M21 and the retrospective
application of new tariffs on the 4Q20 numbers. Net debt decreased
by 5.6% to GEL 437.3 million in 3Q21, mainly reflecting an
increased cash balance on the back of the strong revenue generation
of the business. As a result, the equity value of Water Utility was
assessed at GEL 619.7 million at 30-Sep-21, up by 13.0% in 3Q21,
translating into the implied LTM EV/EBITDA multiple of 9.0x at
30-Sep-21 (down from 9.3x at 30-Jun-21).
Insurance (P&C and Medical) (8.2% of total portfolio value)
- The insurance business combines: a) P&C Insurance valued at
GEL 216.4 million and b) Medical Insurance valued at GEL 67.5
million.
P&C Insurance - Net premiums earned increased by 23.7% y-o-y
to GEL 22.6 million in 3Q21, mainly reflecting the growth in the
motor insurance line on the back of a boost in the retail client
portfolio. The combined ratio was down 5.4%, mainly reflecting a
7.0% decrease in the expense ratio. Consequently, net income in
3Q21 was up by 22.2% y-o-y to GEL 4.7 million. See page 1 8 for
details. LTM net income[11] increased by 4.9% to GEL 18.0 million
in 3Q21, and the equity value of P&C insurance business was
assessed at GEL 216.4 million at 30-Sep-21 (up 4.9% q-o-q). The
implied LTM P/E valuation multiple remained unchanged at 12.0x in
3Q21.
Medical Insurance - Net premiums earned increased by 11.7% y-o-y
to GEL 18.9 million in 3Q21, predominantly driven by an increase in
the prices of insurance policies. The net claims expenses were also
up by 11.1% in 3Q21, in line with the rebounding trend of elective
healthcare services. As a result, the net income of the medical
insurance business was up 19.3% y-o-y in 3Q21. See page 1 8 for
details. LTM net income increased by 5.5% to GEL 5.5 million in
3Q21, and the equity value of the business was assessed at GEL 67.5
million at 30-Sep-21 (up 5.5% q-o-q) . The implied LTM P/E
valuation multiple remained unchanged at 12.3x in 3Q21.
Private investment stage businesses (9.7% of total portfolio
value)
Renewable Energy (6.0% of total portfolio value) - The business
is valued internally, based on a sum of the parts (EV/EBITDA and
acquisition price). Enterprise value was down 3.7% to GEL 488.3
million in 3Q21. Revenues were down 15.7% y-o-y in 3Q21, reflecting
lower electricity generation levels at the power assets, which
translated into decreased LTM EBITDA earnings. Decrease in
generation levels is mainly attributable to a) lower generation
levels at Qartli Wind Farm in 3Q21, compared to the extraordinarily
high generation levels in the corresponding 2020 period, and b)
lower generation levels at Mestiachala and Hydrolea HPPs due to the
unfavourable hydrological conditions during the quarter. See page
20 for details. The business paid GEL 5.0 million dividends in
3Q21. In addition, GCAP invested GEL 0.8 million in pipeline
renewable energy projects, which along with Mestiachala HPPs,
continued to be measured at an equity investment cost of GEL 108.0
million in aggregate. Net debt decreased by GEL 6.6 million to GEL
279.2 million in 3Q21. As a result, the equity value of the
business was assessed at GEL 209.1 million in 3Q21 (down by
5.4%).
Education (3.7% of total portfolio value) - The business is
valued internally, based on LTM EV/EBITDA. Education EV decreased
by GEL 4.7 million to GEL 139.1[12] million in 3Q21. Revenues were
up by 6.5% y-o-y while the EBITDA was down 28.2% y-o-y in 3Q21,
reflecting the decreased number of academic days as the schools
modified the academic calendar. In 3Q21, GCAP invested GEL 5.4
million for the development of affordable and mid-scale education
segments. See page 22 for details. The slow 3Q21 led to a decrease
in LTM EBITDA of 3.3% to GEL 11.1 million . Net debt was down by
GEL 2.7 million to GEL 8.8 million in 3Q21. As a result, the
education business was valued at GEL 127.5 million in 3Q21 (up 3.1%
q-o-q). The valuation multiple remained unchanged at 12.5x in
3Q21.
Other businesses (7.1% of total portfolio value) - The "other"
private portfolio (Housing Development, Hospitality and Commercial
Real Estate, Beverages, Auto Service and Digital Services) is
valued internally, based on LTM EV/EBITDA in most cases other than
our real estate development (DCF) and hospitality and commercial
real estate businesses (NAV). See performance highlights of other
businesses on page 23 . The portfolio had a combined value of GEL
246.0 million at 30-Sep-21, up by 1.5% in 3Q21. The value creation
was GEL 2.7 million in 3Q21, where the growth of GEL 7.1 million
was led by operating performance-related net increase in the value
of other portfolio companies and is mainly attributable to a) GEL
13.8 million value creation in our beverages and auto services
businesses, and b) a GEL 5.9 million value reduction in the
hospitality and commercial real estate business, reflecting
decreased revenue streams and GEL 2.3 million one-off transaction
fees associated with the divestment of a significant portion of
commercial real estate assets. The increase was offset by negative
GEL 4.0 million net impact from movements in valuation multiples
and foreign currency exchange rates, reflecting a) GEL 1.7 million
positive impact of GEL
appreciation on the net debt of our auto services business, b)
GEL 5.0 million value reduction from the net impact of negative
movements in valuation multiples and foreign currency exchange
rates in beer and distribution business, and c) GEL 1.5 million
value reduction led by the impact of GEL's appreciation on our
housing development and hospitality and commercial real estate
businesses, as their fair values are assessed in US Dollar
terms.
2) Investments[13]
In 3Q21, GCAP invested GEL 6.5 million predominantly in the
investment stage businesses, in line with our announced capital
allocation programme.
Ø GEL 0.8 million was allocated to Renewable Energy for the
development of the pipeline HPPs and wind farm projects.
Ø GEL 5.4 million was allocated to the education business for
the acquisition of an 81%[14] equity interest in Georgian-Austrian
School Pesvebi (GEL 3.9 million), development of land and building
of new campus location and capacity expansion of the existing
campus of Green School (affordable segment, GEL 0.7 million), and
capacity expansion of the existing campus of Buckswood (mid-scale
segment, GEL 0.8 million).
3) Buybacks
Since the announcement of the US$ 10 million share buyback and
cancellation programme in August 2021, we repurchased 643,582
shares with a total value of US$ 5.4 million (354,000 shares were
repurchased in 3Q21 and 289,582 shares in 4Q21 as of 12 November
2021).
4) Dividends(13)
In 3Q21, Georgia Capital received GEL 30.0 million dividends in
aggregate from the private portfolio companies, of which:
Ø GEL 11.5 million was collected from Healthcare Services,
Ø GEL 11.5 million was collected from Retail (Pharmacy),
Ø GEL 2.0 million was collected from Medical Insurance,
Ø GEL 5.0 million was collected from Renewable Energy.
Net debt overview
Below we describe the components of net debt as of 30 September
2021 and as of 30 June 2021:
GEL '000, unless otherwise 30-Sep-21 30-Jun-21 Change
noted
Cash at banks 135,928 190,039 -28.5%
Internationally listed
debt securities 113,090 89,595 26.2%
Locally listed debt
securities 7,170 4,263 68.2%
Loans issued 158,742 158,191 0.3%
Total cash and liquid
funds (a) 414,930 442,088 -6.1%
Gross debt (b) (1,127,051) (1,156,153) -2.5%
Net debt (a)+(b) (712,121) (714,065) -0.3%
Cash and liquid funds . Total cash and liquid funds were down
6.1% q-o-q to GEL 414.9 million in 3Q21. A 28.5% decrease in cash
balance mainly reflects the positive impact of dividend and
interest receipt of GEL 30 million and GEL 3.1 million,
respectively, during 3Q21, which was offset by a) increased
investments in international and local debt securities (up by GEL
26.4 million in aggregate), where internationally listed debt
securities mostly include dollar-denominated Eurobonds issued by
Georgian corporates, b) GEL 34.8 million coupon payment in 3Q21,
and c) GEL 9.4 million deployed for buybacks in line with the
ongoing US$ 10 million share buyback and cancellation programme.
The balance of loans issued to our private portfolio companies
remained flat and amounted to GEL 158.7 million as at 30-Sep-21 (up
0.3% q-o-q).
Gross debt. At 30-Sep-21, the outstanding balance of US$ 365
million six-year Eurobonds due in March 2024 was GEL 1,127.1
million (down 2.5% q-o-q). Gross debt reduction was driven by
foreign exchange gain of GEL 13.7 [15] million from GEL
appreciation against US$ and GEL 34.8 million coupon payment during
the third quarter, which was partially offset by a GEL 19.5(15)
million coupon accrual.
Net debt. Net debt remained largely flat at GEL 712.1 million in
3Q21 (down 0.3% q-o-q), reflecting a) investments of GEL 6.5
million, b) share buybacks of GEL 9.4 million, c) GCAP cash
operating expenses of GEL 5.1 million, and d) net interest expense
and fair value gains on liquid funds, in aggregate, of GEL 13.8
million. The impact was almost fully offset by GEL 30.0 million
dividends received from private portfolio companies and foreign
exchange gain of GEL 7.9 million in 3Q21.
9M21 NAV STATEMENT HIGHLIGHTS[16]
GEL '000, unless Dec-20 1. Value 2a. 2b. 2c. 3.Operating 4. Sep-21 Change
otherwise noted creation Investment Buyback Dividend expenses Liquidity/ %
([17]) FX/Other
Total Listed
Portfolio
Value 531,558 110,082 - - - - - 641,640 20.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Listed Portfolio
value change % 20.7% 0.0% 0.0% 0.0% 0.0% 0.0% 20.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Total Private
Portfolio
Value 2,376,130 474,998 17,130 - (44,430) - 4,027 2,827,855 19.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Of which, Large
Companies 1,858,237 415,349 - - (29,959) - 1,657 2,245,284 20.8%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Of which,
Investment
Stage
Companies 302,964 30,715 16,515 - (14,471) - 876 336,599 11.1%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Of which, Other
Companies 214,929 28,934 615 - - - 1,494 245,972 14.4%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Private
Portfolio
value change % 20.0% 0.7% 0.0% -1.9% 0.0% 0.2% 19.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Total Portfolio
Value (1) 2,907,688 585,080 17,130 - (44,430) - 4,027 3,469,495 19.3%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Total Portfolio
value change % 20.1% 0.6% 0.0% -1.5% 0.0% 0.1% 19.3%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Net Debt (2) (697,999) - (17,130) (12,534) 44,430 (15,934) (12,954) (712,121) 2.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,212,292 585,080 - (12,534) - (26,984) 4,990 2,762,844 24.9%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
NAV change % 26.4% 0.0% -0.6% 0.0% -1.2% 0.2% 24.9%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Shares
outstanding(17) 45,977,247 - - (473,162) - - 717,859 46,221,944 0.5%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
Net Asset Value
per share, GEL 48.12 12.72 (0.00) 0.22 (0.00) (0.59) (0.70) 59.77 24.2%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
NAV per share,
GEL
change % 26.4% 0.0% 0.5% 0.0% -1.2% -1.4% 24.2%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ----------- -------
In 9M21, NAV per share (GEL) increased by 24.2%, reflecting a)
GEL 475.0 million value creation across our private portfolio
companies with a positive 21.5 ppts impact, b) GEL 110.1 million
value creation in our listed asset, BoG, with a positive 4.9 ppts
impact, c) GEL's appreciation against US$ by 4.9%, resulting in a
foreign currency gain of GEL 34.5 million on GCAP net debt (+1.6
ppts impact) and d) share buybacks - in line with the ongoing US$
10 million share buyback and cancellation programme (+0.5 ppts
impact). The NAV per share growth was slightly offset by management
platform related costs (-1.2 ppts impact), and net interest expense
(-1.8 ppts impact).
The value creation in our private portfolio was the largest
contributor to the NAV per share growth in 9M21:
-- The outstanding performance of our large portfolio companies
translated into a GEL 415.3 million value creation and an 18.8 ppts
NAV per share growth, where water utility, healthcare services, and
retail (pharmacy) businesses contributed to the growth by 6.7 ppts,
7.4 ppts and 3.4 ppts, respectively, during 9M21 (+17.5 ppts impact
in aggregate).
-- Value creation of GEL 30.7 million in the investment stage
portfolio companies contributed 1.4 ppts to the NAV per share
growth.
-- GEL 28.9 million value was created in our other portfolio
companies, leading to a 1.3 ppts positive impact on the NAV per
share.
Portfolio overview
Our portfolio value increased by 19.3% to GEL 3.47 billion in
9M21, reflecting a 19.0% and 20.7% growth in the value of private
and listed businesses, respectively. The private portfolio value
growth of GEL 451.7 million mainly reflects the net impact of a)
GEL 475.0 million value creation, b) investments of GEL 17.1
million predominantly in Education and Renewable Energy, and c) a
decrease of GEL 44.4 million due to dividends received from the
private portfolio companies at the GCAP level.
1) Value creation
BoG share price during 9M21 increased 27.4%, strongly supporting
NAV growth with GEL 110.1 million value creation. The value
creation of GEL 475.0 million on the private portfolio mainly
reflects a) a GEL 628.5 million operating performance-related
increase in the value of our private assets, partly supported by
the strength of the Georgian economy throughout the year, and b) a
GEL 155.5 million negative impact from changes in valuation
multiples and foreign currency exchange rates.
The table below summarises value creation drivers in our
businesses in 9M21:
Portfolio Businesses Operating Greenfields Multiple Change Value Creation
Performance / and FX ([20])
([18]) buy-outs ([19])
-------------------------------------- ------------- ----------------- ---------------- ---------------
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ------------- ----------------- ---------------- ---------------
Listed 110,082
-------------------------------------- ------------- ----------------- ---------------- ---------------
BoG 110,082
-------------------------------------- ------------- ----------------- ---------------- ---------------
Private 628,477 1,978 (155,457) 474,998
-------------------------------------- ------------- ----------------- ---------------- ---------------
Large Portfolio Companies 562,739 - (147,390) 415,349
-------------------------------------- ------------- ----------------- ---------------- ---------------
Healthcare Services 329,222 - (165,364) 163,858
-------------------------------------- ------------- ----------------- ---------------- ---------------
Retail (pharmacy) 58,719 - 17,622 76,341
-------------------------------------- ------------- ----------------- ---------------- ---------------
Water Utility 167,957 - (20,600) 147,357
-------------------------------------- ------------- ----------------- ---------------- ---------------
Insurance (P&C and Medical) 6,841 - 20,952 27,793
-------------------------------------- ------------- ----------------- ---------------- ---------------
Of which, P&C Insurance 16,346 - 6,821 23,167
-------------------------------------- ------------- ----------------- ---------------- ---------------
Of which, Medical Insurance (9,505) - 14,131 4,626
-------------------------------------- ------------- ----------------- ---------------- ---------------
Investment Stage Portfolio Companies 22,477 2,593 5,645 30,715
-------------------------------------- ------------- ----------------- ---------------- ---------------
Renewable Energy 6,893 1,578 632 9,103
-------------------------------------- ------------- ----------------- ---------------- ---------------
Education 15,584 1,015 5,013 21,612
-------------------------------------- ------------- ----------------- ---------------- ---------------
Other 43,261 (615) (13,712) 28,934
-------------------------------------- ------------- ----------------- ---------------- ---------------
Total portfolio 628,477 1,978 (155,457) 585,080
-------------------------------------- ------------- ----------------- ---------------- ---------------
Enterprise value and equity value development of our businesses
in 9M21 are summarised in the following table:
Enterprise Value (EV) Equity Value
---------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-21 31-Dec-20 Change 30-Sep-21 31-Dec-20 Change % Share
otherwise noted % % in total
portfolio
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed portfolio 641,640 531,558 20.7% 18.5%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 641,640 531,558 20.7% 18.5%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 4,686,515 4,333,143 8.2% 2,827,855 2,376,130 19.0% 81.5%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 3,243,902 2,846,664 14.0% 2,245,284 1,858,237 20.8% 64.7%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Healthcare Services 1,007,139 836,918 20.3% 723,969 571,656 26.6% 20.9%
Retail (pharmacy) 916,449 835,876 9.6% 617,626 552,745 11.7% 17.8%
Water Utility 1,057,001 930,892 13.5% 619,739 471,148 31.5% 17.9%
Insurance (P&C
and Medical) 263,313 242,978 8.4% 283,950 262,688 8.1% 8.2%
Of which, P&C
Insurance 216,435 197,806 9.4% 216,435 197,806 9.4% 6.2%
Of which, Medical
Insurance 46,878 45,172 3.8% 67,515 64,882 4.1% 1.9%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 627,439 608,298 3.1% 336,599 302,964 11.1% 9.7%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 488,323 489,269 -0.2% 209,134 209,902 -0.4% 6.0%
Education[21] 139,116 119,029 16.9% 127,465 93,062 37.0% 3.7%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 815,174 878,181 -7.2% 245,972 214,929 14.4% 7.1%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 3,469,495 2,907,688 19.3% 100.0%
---------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
2) Investments[22]
In 9M21, GCAP invested GEL 17.1 million predominantly in the
investment stage businesses, in line with our announced capital
allocation programme.
Ø GEL 3.7 million was allocated to Renewable Energy for the
development of pipeline HPPs (Darchi and Zoti) and wind farm
projects.
Ø GEL 12.8 million was allocated to the education business for
the capacity expansion of the existing campus of Buckswood
(mid-scale segment, GEL 3.2 million), acquisition of land and
building of new campus location and capacity expansion of the
existing campus of Green School (affordable segment, GEL 5.7
million), and the acquisition of an 81%[23] equity interest in
Georgian-Austrian School Pesvebi (GEL 3.9 million).
3) Dividends(22)
In 9M21, Georgia Capital collected GEL 44.4 million dividends,
of which GEL 11.5 million was received from healthcare services,
GEL 11.5 million from retail (pharmacy), GEL 5 million from P&C
insurance, GEL 2 million from medical insurance, and GEL 14.5
million from the renewable energy businesses. Additionally, the
Group received GEL 14.5 million interim dividends from BOG in
November 2021.
Net debt overview
In March 2021, JSC Georgia Capital priced a US$ 65 million tap
issue that was consolidated to form a single series with the
existing US$300 million 6.125% Eurobonds. Approximately US$ 35
million from the proceeds is earmarked to fund capital allocations
to the portfolio companies and the balance for general corporate
purposes. Gross debt was up 14.7% to GEL 1,127.1 million in 9M21.
The tap issuance also translated into improved liquidity, leading
to the total cash and liquid funds being up by 46.0% to GEL 414.9
million at 30 September 2021. Overall, the net debt remained
largely flat in 9M21 (up 2.0% from 31 December 2021) and was
impacted by a) investments of GEL 17.1 million, b) share buybacks
of GEL 12.5 million, c) GCAP cash operating expenses of GEL 15.9
million, and d) net interest expense and fair value gains on liquid
funds, in aggregate, of GEL 39.2 million. The impact was offset by
GEL 44.4 million dividends received from private portfolio
companies and foreign exchange gain of GEL 34.5 million in
9M21.
The table below summarises components of net debt as of 30
September 2021 and as of 31 December 2020:
GEL '000, unless 30-Sep-21 31-Dec-20 Change
otherwise noted
Cash at banks 135,928 160,536 -15.3%
Internationally
listed debt securities 113,090 14,098 NMF
Locally listed debt
securities 7,170 655 NMF
Loans issued 158,742 108,983 45.7%
Total Cash and
liquid funds (a) 414,930 284,272 46.0%
Gross Debt (b) (1,127,051) (982,271) 14.7%
Net debt (a)+(b) (712,121) (697,999) 2.0%
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 234.5 million in 3Q21 (GEL 559.7
million in 9M21). 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 most of our operations through JSC Georgia
Capital, through which we hold 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 97 in Georgia Capital PLC 2020 Annual report .
INCOME STATEMENT (Adjusted IFRS)
GEL '000, unless otherwise
noted 3Q21 3Q20 Change 9M21 9M20 Change
--------- ---------- ------- --------- ---------- -------
Dividend income 30,000 9,972 NMF 44,430 14,899 NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Interest income 6,267 4,834 29.6% 16,884 16,650 1.4%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Realised / unrealised
(loss) / gain on liquid
funds (547) 475 NMF 967 (4,103) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Interest expense (19,519) (15,762) 23.8% (57,039) (45,941) 24.2%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Gross operating income/(loss) 16,201 (481) NMF 5,242 (18,495) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Operating expenses (8,888) (8,448) 5.2% (26,984) (23,027) 17.2%
---------------------------------- --------- ---------- ------- --------- ---------- -------
GCAP net operating income/(loss) 7,313 (8,929) NMF (21,742) (41,522) -47.6%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Fair value changes of
portfolio companies
---------------------------------- --------- ---------- ------- --------- ---------- -------
Listed portfolio companies 66,246 (135,237) NMF 110,082 (432,982) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Georgia Healthcare
Group PLC - (100,935) NMF - (195,347) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Bank of Georgia
Group PLC 66,246 (34,302) NMF 110,082 (237,635) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Private portfolio companies 148,385 577,362 -74.3% 430,568 387,442 11.1%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Large Portfolio Companies 160,259 588,020 -72.7% 385,390 522,404 -26.2%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Healthcare
Services 38,148 295,641 -87.1% 152,313 295,641 -48.5%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Retail (pharmacy) 37,224 296,577 -87.4% 64,881 296,577 -78.1%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Water Utility 71,260 (27,117) NMF 147,357 (73,181) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Insurance
(P&C and Medical) 13,627 22,919 -40.5% 20,839 3,367 NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Investment Stage Portfolio
Companies (14,595) 16,256 NMF 16,244 73,323 -77.8%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Renewable
energy (13,000) 16,338 NMF (5,368) 49,058 NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Of which, Education (1,595) (82) NMF 21,612 24,265 -10.9%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Other businesses 2,721 (26,914) NMF 28,934 (208,285) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Total investment return 214,631 442,125 -51.5% 540,650 (45,540) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Income/(Loss) before
foreign exchange movements
and non-recurring expenses 221,944 433,196 -48.8% 518,908 (87,062) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Net foreign currency
gain/(loss) 7,935 (35,164) NMF 34,484 (76,526) NMF
---------------------------------- --------- ---------- ------- --------- ---------- -------
Non-recurring expenses (27) - NMF (245) (3,222) -92.4%
---------------------------------- --------- ---------- ------- --------- ---------- -------
Net Income/(loss) 229,852 398,032 -42.3% 553,147 (166,810) NMF
================================== ========= ========== ======= ========= ========== =======
The gross operating income was GEL 16.2 million in 3Q21 (up from
negative GEL 0.5 million in 3Q20) and up by GEL 23.7 million y-o-y
to GEL 5.2 million in 9M21 (from negative 18.5 million in 9M20).
The improvement was mainly driven by increased dividend inflows
from the portfolio companies. The dividend income by businesses is
presented in the table below:
GEL '000, unless
otherwise noted 3Q21 3Q20 Change 9M21 9M20 Change
Healthcare Services 11,545 - NMF 11,545 - NMF
Retail (Pharmacy) 11,460 - NMF 11,460 - NMF
Water Utility - 5,000 NMF - 5,000 NMF
P&C Insurance - 4,972 NMF 4,959 4,972 -0.3%
Medical Insurance 1,995 - NMF 1,995 - NMF
Renewable Energy 5,000 - NMF 14,471 4,927 193.7%
Total dividend income 30,000 9,972 200.8% 44,430 14,899 198.2%
Interest income was up 29.6% y-o-y to GEL 6.3 million in 3Q21
and up 1.4% y-o-y in 9M21 to GEL 16.9 million. GCAP earned an
average yield of 5.4% on the average balance of liquid assets and
issued loans of GEL 355.5 million in 9M21 (7.1% on GEL 301.5
million in 9M20). The Eurobond tap issuance of $65 million on
16-Mar-21 led to an increase in interest expense, up 23.8% and
24.2% y-o-y in 3Q21 and 9M21, respectively. As a result, net
interest expense was GEL 13.3 million and GEL 40.2 million in 3Q21
and 9M21 at the GCAP level, respectively (GEL 10.9 million in 3Q20
and GEL 29.3 million in 9M20).
GEL '000, unless otherwise
noted 3Q21 3Q20 Change 9M21 9M20 Change
Administrative expenses
([24]) (2,613) (2,634) -0.7% (8,453) (7,543) 12.1%
Management expenses
- cash-based ([25]) (2,484) (2,607) -4.7% (7,481) (6,009) 24.5%
Management expenses
- share-based ([26]) (3,791) (3,207) 18.2% (11,050) (9,475) 16.6%
Total operating expenses (8,888) (8,448) 5.2% (26,984) (23,027) 17.2%
Of which, fund type
expense ([27]) (2,947) (2,594) 13.6% (9,340) (7,117) 31.2%
Of which, management
fee ([28]) (5,941) (5,854) 1.5% (17,644) (15,910) 10.9%
GCAP management fee expenses have a self-targeted cap of 2% of
Georgia Capital's market capitalisation. The LTM management fee
expense ratio was 1.96% at 30-Sep-21 (2.3%[29] as of 30-Sep-20).
The total LTM operating expense ratio (which includes fund type
expenses) was 3.0% at 30-Sep-21 (3.2%(29) at 30-Sep-20). The
components of GCAP's operating expenses are presented in the table
above.
Total investment return represents the increase (decrease) in
the fair value of our portfolio. Total investment return was GEL
214.6 million in 3Q21 and GEL 540.7 million in 9M21, reflecting the
growth in the value of listed and private businesses, as described
earlier in this report. We discuss valuation drivers for our
businesses on pages 5-7. The performance of each of our private,
large and investment stage portfolio companies is discussed on
pages 1 3 -2 3 .
The Group's net income (adjusted IFRS) also reflects the impact
of GEL's appreciation against the US dollar on GCAP's net foreign
currency liability balance amounting to c. US$ 240 million (GEL 750
million) at 30-Sep-21. Net foreign currency gain was GEL 7.9
million and GEL 34.5 million, respectively, in 3Q21 and 9M21. As a
result of the movements described above, GCAP's adjusted IFRS net
income was GEL 229.8 million in 3Q21 and GEL 553.1 million in
9M21.
DISCUSSION OF PORTFOLIO COMPANIES' RESULTS (STAND-ALONE
IFRS)
The following sections present the IFRS results and business
development derived from the individual portfolio company's IFRS
accounts for large and investment stage entities, where 3Q21, 3Q20,
9M21 and 9M20 portfolio company's accounts and respective IFRS
numbers are unaudited. We present key IFRS financial highlights,
operating metrics and ratios along with the 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 Healthcare Services Business Results
Healthcare Services business, where GCAP owns 100% equity
interests through GHG, is the largest healthcare market participant
in Georgia, accounting for 20% of the country's total hospital bed
capacity as of 30-Sep-21. Healthcare services business comprises
three segments: 1) Hospitals (17 referral hospitals with a total of
2,596 beds) providing secondary and tertiary level healthcare
services; 2) Clinics: 19 community clinics with 353 beds (providing
outpatient and basic inpatient services) and 15 polyclinics
(providing outpatient diagnostic and treatment services); 3)
Diagnostics, operating the largest laboratory in the entire
Caucasus region - "Mega Lab".
3Q21 & 9M21 performance (GEL '000), Healthcare Services [30]
(,) [31]
INCOME STATEMENT
HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Revenue, net[32] 104,932 70,876 48.0% 295,669 198,950 48.6%
Gross Profit 42,082 31,583 33.2% 124,564 80,674 54.4%
-4.7 1.5
Gross profit margin 39.6% 44.3% ppts 41.7% 40.2% ppts
Operating expenses
(ex.
IFRS 16) (18,086) (12,794) 41.4% (51,272) (39,528) 29.7%
EBITDA (ex. IFRS 16) 23,996 18,789 27.7% 73,292 41,146 78.1%
EBITDA margin (ex.
IFRS -3.7 4.0
16) 22.6% 26.3% ppts 24.5% 20.5% ppts
N et profit/(loss)
(ex.
IFRS 16) 7,913 (3,320) NMF 29,380 (14,875) NMF
CASH FLOW HIGHLIGHTS
Cash flow from
operating
activities (ex. IFRS
16) 30,773 21,287 44.6% 53,653 73,022 -26.5%
EBITDA to cash
conversion 14.9 -104.3
(ex. IFRS 16) 128.2% 113.3% ppts 73.2% 177.5% ppts
Cash flow from/used in
investing
activities[33] (13,275) 29,048 NMF (33,139) 11,144 NMF
Dividends and
intersegment
loans issued/received 12,570 7,869 59.7% 24,540 6,583 NMF
Free cash flow (ex.
IFRS
16)[34] 16,469 49,848 -67.0% 18,387 83,557 -78.0%
Cash flow from
financing
activities (ex. IFRS
16) (46,163) (2,376) NMF (85,550) (3,026) NMF
BALANCE SHEET 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
HIGHLIGHTS
Total assets 907,286 911,647 -0.5% 899,391 0.9%
Of which, cash balance
and bank deposits 51,471 67,927 -24.2% 93,721 -45.1%
Of which, securities
and
loans issued 4,128 6,629 -37.7% 7,133 -42.1%
Total liabilities 503,077 497,289 1.2% 510,079 -1.4%
Of which, borrowings 280,052 289,646 -3.3% 312,036 -10.3%
Total equity 404,209 414,358 -2.4% 389,312 3.8%
KEY POINTS / VALUATION DRIVERS
Ø The number of admissions up 105.1% and 81.1% y-o-y in 3Q21 (up
80.4% and 71.4% y-o-y in 9M21) at hospitals and clinics,
respectively, reflecting the increased demand for regular elective
care and outpatient services
Ø Revenues up 48.0% in 3Q21 y-o-y (up 53.0% over 3Q19); up 48.6%
in 9M21, y-o-y (up 36.8% over 9M19)
Ø Strong revenue trend combined with a well-controlled operating
cost base translated into EBITDA (excl. IFRS 16) growth, up 27.7%
in 3Q21 and up 78.1% in 9M21 y-o-y, with an EBITDA margin of 22.6%
and 24.5%, respectively
Ø Gross profit and EBITDA margins (excl. IFRS 16) were down by
4.7 ppts and 3.7 ppts y-o-y, respectively, in 3Q21, reflecting the
expiration of a 6-months state income tax subsidy for low salary
range employees, effective during May 2020 - June 2021. Adjusted to
exclude the impact of the subsidy, the gross profit and EBITDA
margins (excl. IFRS 16) were down by 1.3 ppts and 0.4 ppts y-o-y,
respectively, in 3Q21.
Ø Increased working capital investments in 1H21 due to the
robust revenue growth of the business led to a rebound in operating
cash (excl. IFRS 16) in 3Q21, up 44.6% y-o-y translating into
128.2% EBITDA to cash conversion rate (excl. IFRS 16)
Ø GEL 11.5 million dividends[35] paid in 3Q21, leading to a
slight increase in the net debt position (up 4.4% q-o-q to GEL
224.5 million as of 30-Sep-21)
INCOME STATEMENT HIGHLIGHTS
The healthcare services business continues to be actively
engaged in supporting the COVID-19 pandemic response in the
country. Currently, 9 of our hospitals and 12 of our clinics
continue receiving COVID patients, with a total aggregate number of
c.1,100 beds across the country. The Government of Georgia fully
reimburses costs associated with COVID-19 treatments and pays a
fixed fee amount per bed designated for COVID patients. A growing
number of admissions for regular elective care and outpatient
services, along with COVID-19 treatments, contributed to robust
revenue growth in 3Q21 and 9M21, outpacing even 2019 numbers.
At our hospitals, the occupancy rate was up by 17.6 ppts to
67.7% in 3Q21 and up by 12.5 ppts to 63.8% in 9M21 y-o-y. Increased
demand for elective and outpatient services also increased the
number of admissions to hospitals by 105.1% in 3Q21 and by 80.4% in
9M21 y-o-y. These trends translated into hospitals y-o-y net
revenue growth of 40.4% for the quarter and 41.7% for the nine
months. Revenue was up 40.0% in 3Q21 compared to 3Q19 and up 26.9%
in 9M21 compared to 9M19.
At our clinics, similarly, the number of admissions was up by
81.1% in 3Q21 and up by 71.4% in 9M21 y-o-y. The number of
registered patients in Tbilisi increased by c.39,000 y-o-y to
c.251,000 in 3Q21 and by c.82,000 y-o-y to c.579,000 in 3Q21 across
the country. This translated into clinics' y-o-y net revenue growth
of 56.0% in 3Q21 and 52.3% in 9M21. Clinics also significantly
outperformed against 2019 performance, with revenues being up 73.1%
in 3Q21 compared to 3Q19 and up 55.0% in 9M21 compared to 9M19.
The diagnostics segment, which, apart from regular diagnostics
services, is also engaged in COVID-19 testing, increased its
revenue by 167.4% y-o-y in 3Q21 to GEL 8.8 million and by 226.4%
y-o-y in 9M21, reaching GEL 22.0 million. Approximately half of
diagnostics revenue relates to COVID-19 testing and another half to
regular lab tests.
The developments described above translated into strong y-o-y
net revenue growth of 48.0% in 3Q21 and 48.6% in 9M21 from
healthcare services (up 53.0% in 3Q21 compared to 3Q19; up 36.8% in
9M21 compared to 9M19).
The cost of services in the business consists mainly of
materials, salaries and utilities. Trends in materials and salary
costs are captured in the materials and direct salary rates ([36])
. The materials rate increased in 2021 (up 5.7 ppts and 3.3 ppts at
hospitals and up 4.1 ppts and 3.4 ppts at clinics, y-o-y in 3Q21
and 9M21, respectively), reflecting local currency exchange rate
depreciation in previous consecutive quarters, when inventory was
purchased, as well as increased prices and consumption of medical
disposables and personal protective equipment at healthcare
facilities due to the COVID-19 driven supply shortage. In 3Q21, the
direct salary rate remained well-controlled at hospitals (down 1.8
ppts y-o-y) and clinics (stable y-o-y). Overall, for the 9M21, the
direct salary rate showed a positive trend, being down by 4.7 ppts
at hospitals and 3.7 ppts at clinics, y-o-y. The cost of utilities
was up 62.8% in 3Q21 and 48.1% in 9M21, y-o-y as a result of
increased tariffs on water, gas and electricity, effective since
January 2021. As a result, the healthcare services business posted
a 39.6% gross margin in 3Q21 and 41.7% 9M21, down 4.7 ppts and up
1.5 ppts y-o-y, respectively. The decrease in margins was partially
driven by the expiration of a 6-months state income tax subsidy for
low salary range employees, which was effective from May 2020 till
June 2021. Adjusted for the impact of state income tax subsidy, the
gross profit margin was down only by 1.3 ppts in 3Q21 and up by 3.5
ppts in 9M21, y-o-y.
The expiration of a state income tax subsidy, increased cost of
materials and utilities affected the third-quarter results, and the
business posted negative operating leverage of 8.2 ppts. However,
the strong revenue trend combined with a well-controlled operating
cost base for the year translated into positive operating leverage
of 24.7 ppts in 9M21. These led to 27.7% and 78.1% y-o-y growth in
3Q21 and 9M21 EBITDA excluding IFRS 16, respectively. EBITDA margin
(excl. IFRS 16) was down 3.7 ppts and up 4.0 ppts y-o-y, in 3Q21
and 9M21, respectively. Adjusted for the state subsidy impact,
EBITDA margin (excl. IFRS 16) is down by 0.4 ppts y-o-y in 3Q21 and
up 6.0 ppts y-o-y in 9M21. In 9M21 the EBITDA margin (excl. IFRS
16) at hospitals was 24.2% (up 3.6 ppts y-o-y), at clinics 20.9%
(up 1.8 ppts y-o-y) and at diagnostics 26.2% (up 17.4 ppts
y-o-y).
To curb the inflation pressure, the National Bank of Georgia
continues tightening the monetary policy, with the refinancing rate
being up 2.0 ppts in the last twelve months. Despite the increase
in the refinancing rate, in 3Q21 net interest expense (excl. IFRS
16) was down 6.5% y-o-y to GEL 5.8 million (down 26.0% y-o-y to GEL
16.5 million in 9M21), reflecting the low level of net debt
position of the business throughout the year. In September 2021,
the hospitals business prepaid one of its IFI borrowings, which
translated into an associated one-off expense of GEL 1.8 million
for the quarter, affecting the non-recurring items (GEL 2.2 million
in 3Q21 and GEL 5.1 million in 9M21).
Overall, in 3Q21, the business posted GEL 7.9 million net profit
excluding IFRS 16, compared to GEL 3.3 million net loss posted in
3Q20. 9M21 net profit (excl. IFRS 16) reached GEL 29.4 million,
compared to GEL 14.9 million net loss reported in 9M20.
CASH FLOW HIGHLIGHTS
After a relatively slow first half in terms of operating cash
flow, in 3Q21, the business demonstrated a full turnaround in terms
of cash flow generation. The first two quarters were affected by
increased working capital needs due to the significant revenue
growth posted by the business, as well as by the collection of
receivables from the state due to the delay in the processing of
bills during the preceding quarters, led by the high number of
COVID cases in the country in 4Q20. As a result, increased cash
flow from operating activities (excl. IFRS 16) in 3Q21 (up 44.6%
y-o-y) translated into a 128.2% EBITDA to cash conversion rate for
the quarter and 73.2% for the nine months of 2021. Capex
investments of GEL 8.5 million in 3Q21 mainly reflects maintenance
capex. Total capex amounted to GEL 23.2 million in 9M21. The
business paid GEL 11.5 million dividends[37] in 3Q21.
Discussion of Retail (pharmacy) Business Results
The retail (pharmacy) business, where GCAP owns 67% equity
interests through GHG, is the largest pharmaceuticals retailer and
wholesaler in Georgia, with a 35 % 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 pharmacy chain has a total of
341 pharmacies, of which 337 are in Georgia, and 4 are in
Armenia.
3Q21 & 9M21 performance (GEL '000), Retail (pharmacy)
[38]
INCOME STATEMENT HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Revenue, net 193,317 159,593 21.1% 566,134 478,433 18.3%
Gross Profit 53,035 39,853 33.1% 143,207 123,571 15.9%
-0.5
Gross profit margin 27.4% 25.0% 2.4 ppts 25.3% 25.8% ppts
Operating expenses (ex.
IFRS 16) (32,541) (23,421) 38.9% (89,476) (73,511) 21.7%
EBITDA (ex. IFRS 16) 20,494 16,432 24.7% 53,731 50,060 7.3%
EBITDA margin, (ex. IFRS -1.0
16) 10.6% 10.3% 0.3 ppts 9.5% 10.5% ppts
Net profit/(loss)(ex.
IFRS 16) 17,728 (70) NMF 47,278 20,449 131.2%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 26,182 15,063 73.8% 39,733 48,439 -18.0%
36.1 -22.9
EBITDA to cash conversion 127.8% 91.7% ppts 73.9% 96.8% ppts
Cash flow used in investing
activities[39] (7,736) (608) NMF (13,363) (1,026) NMF
Free cash flow, (ex.
IFRS 16)[40] 22,398 13,618 64.5% 29,067 44,610 -34.8%
Cash flow from financing
activities (ex. IFRS
16) (9,349) (36,295) -74.2% (25,670) (21,522) 19.3%
BALANCE SHEET HIGHLIGHTS 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
Total assets 489,718 482,551 1.5% 464,644 5.4%
Of which, cash and bank
deposits 36,530 27,632 32.2% 36,856 -0.9%
Of which, securities
and loans issued 17,304 12,651 36.8% 12,471 38.8%
Total liabilities 363,148 355,306 2.2% 361,048 0.6%
Of which, borrowings 90,816 87,842 3.4% 88,608 2.5%
Of which, lease liabilities 98,374 95,970 2.5% 85,919 14.5%
Total equity 126,570 127,245 -0.5% 103,596 22.2%
KEY POINTS / VALUATION DRIVERS
Ø Strong y-o-y growth in 3 Q21 revenues (up 21.1%) and EBITDA
(excl. IFRS 16) (up 24.7%). Revenue and EBITDA were also up 18.3%
and 7.3% y-o-y in 9M21, respectively, reflecting overall
improvement in economic activity and continuing expansion of the
pharmacy chain
Ø Robust gross margin of 27.4% in 3Q21, reaching 25.3% for the
9M21, resulting from new high-margin contracts in the wholesale
business
Ø EBITDA margin continued its rebounding trend during the
quarter, at 10.6% in 3Q21 and 9.5% in 9M21, exceeding the targeted
9%+
Ø Rebounding trend in cash flow from operating activities, in
line with the enhanced revenue streams - up 73.8% in 3Q21 y-o-y,
with 127.8% EBITDA to cash conversion ratio
Ø Strong operating cash translated into net debt[41] reduction,
down 22.2% q-o-q to GEL 37.0 million as of 30-Sep-21
Ø The business paid GEL 11.5 million dividends[42] 3Q21
Ø Added 32 pharmacies over the last 12 months, expanding from
309 to 341 stores
Ø New projects:
In July 2021, the business opened its first new format (300
sq.m) retail pharma drugstore in Georgia. The store offers an
extensive range of health, perfume and other beauty products as
well as services through an integrated health hub incorporating lab
retail point , ophthalmology and dermatology cabinets. Targeting to
open four more such flagship pharma stores in 2021 (3 in Tbilisi
and 1 in the regions)
The business has signed a franchise agreement with Alain
Afflelou SA, one of the leading optical retailers in France, with a
network of more than 500 largely franchised stores owned by more
than 220 franchisees. The business opened its first Afflelou Paris
opticians in August in Tbilisi and is planning to develop and
operate a shop in shop model in its GPC pharmacies
In July, under a franchise agreement with Body Shop, the
business opened its first Body Shop store in Armenia
INCOME STATEMENT HIGHLIGHTS
The retail (pharmacy) business delivered 21.1% y-o-y revenue
growth in 3Q21 and 18.3% in 9M21, reflecting expansion (adding 32
pharmacies over 12 months), organic sales growth (same-store
revenue up 14.8% in 3Q21 and up 10.6% in 9M21) as well as increased
revenue from wholesale as a result of winning several state
tenders. The retail revenue share in total revenue was 75.1% in
3Q21 (73.0% in 3Q20) and 73.4% in 9M21 (73.7% in 9M20). The revenue
from para-pharmacy as a percentage of retail revenue from the
pharma was 35.8% in 3Q21 (36.1% in 3Q20) and 34.7% in 9M21 (34.7%
in 9M20). The business issued 7.4 million bills in 3Q21 (7.0
million in 3Q20) and 21.1 million bills in 9M21 (20.4 million in
9M20), with average customer interactions of 2.3 million per month.
The average bill size increased to GEL 18.5 in 3Q21 from GEL 15.6
in 3Q20 and to GEL 18.5 in 9M21 from GEL 16.2 in 9M20.
Benefitting from the strong economic recovery since 2Q21, the
margins also started to rebound, and the business posted 27.4% and
25.3% gross profit margins in 3Q21 and 9M21, respectively, mainly
stemming from increased sales of para-pharmacy products and
associated margins (up 2.4 ppts in 3Q21 and up 1.9 ppts in 9M21).
The trend is expected to continue in line with the country's
general macro trajectory.
The business posted negative operating leverage (excl. IFRS 16)
of 5.8 ppts in 3Q21 and 9M21, mainly reflecting 1) increased rent
expense of pharmacies due to GEL devaluation (about 85% of rental
contracts are denominated in US$) as well as the expiration of six
to twelve months discounts obtained from lessors for pharmacy
leases at the initial stage of the pandemic; and 2) high marketing
costs in 2021 associated to new projects and store openings. Along
with increased salary expense mainly associated with the
cancellation of the state tax subsidy from May 2021, this
translated into a y-o-y increase in the operating expenses
(excluding IFRS 16) of 38.9% in 3Q21 and 21.7% in 9M21. The result
was a 24.7% and 7.3% y-o-y increase in EBITDA excluding IFRS 16
with an EBITDA margin of 10.6% for the quarter and 9.5% for the
nine months.
Interest expense, excluding IFRS 16, was down 15.1% y-o-y in
3Q21 and down 18.6% in 9M21, due to the 20.1% decrease in net debt
position y-o-y as of Sep-21 (down 22.2% q-o-q). GEL 1.8 million
foreign currency gain, excluding IFRS 16, reflects the decrease in
the GEL value of US$ and EUR denominated payables to suppliers due
to the appreciation of GEL in 3Q2 1 . Overall, the business posted
GEL 6.2 million foreign currency gain in 9M21 compared to GEL 9.7
million loss posted in the same period last year.
As a result, the business posted a GEL 17.7 million profit in
3Q21 (net loss 0.1 million in 3Q20) and GEL 47.3 million in 9M21
(up 131.2% y-o-y) excluding IFRS 16.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
After the 1Q21 weak performance in operating cash, which was
affected by the payment of some payable balances to suppliers, the
terms of which were temporarily prolonged during the pandemic
period, the EBITDA to cash conversion ratio started to improve from
2Q21, and the trend continued in 3Q21. The business increased its
cash flow from operating activities by 73.8% in 3Q21, translating
into a 127.8% EBITDA to cash conversion ratio for the same period.
Overall, in 9M21, the ratio stood at 73.9%. Increased cash outflows
from investing activities reflect increased capex investments
attributable to new projects such as opticians and new format
pharmacies, as well as regular expansion of the chain. The business
paid GEL 11.5 million dividends(42) in 3Q21.
Discussion of Water Utility Business Results
Our Water Utility is a regulated monopoly in Tbilisi and the
surrounding area, where it provides water and wastewater services
to c. 1.4 million residents, representing more than one-third of
Georgia's population and c. 38,000 legal entities. Water Utility
also operates hydro power plants with a total installed capacity of
149 MW. GCAP owns 100% in Water Utility through JSC Georgia Global
Utilities, the holding company of GCAP's water utility business and
operational renewable energy assets.
3 Q21 & 9M21 performance (GEL '000), Water Utility[43]
INCOME STATEMENT HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Revenue 60,085 37,985 58.2% 152,041 98,754 54.0%
Water supply 55,210 35,651 54.9% 138,213 94,066 46.9%
Energy 4,875 2,334 108.9% 13,828 4,688 NMF
Operating expenses (17,856) (15,331) 16.5% (50,357) (43,644) 15.4%
EBITDA 40,487 20,802 94.6% 96,733 50,409 91.9%
12.6 12.6
EBITDA margin 67.4% 54.8% ppts 63.6% 51.0% ppts
Net profit/(loss) 28,120 (31,197) NMF 62,978 (45,298) NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities 41,972 16,780 NMF 68,938 34,038 NMF
Cash flow used in
investing activities (11,783) (9,395) 25.4% (40,157) (35,065) 14.5%
Free cash flow 30,189 7,385 NMF 28,781 (1,007) NMF
Cash flow from financing
activities (18,463) 9,052 NMF (33,301) 33,848 NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
Total assets 700,440 675,493 3.7% 653,201 7.2%
Of which, cash balance 49,777 38,744 28.5% 55,577 -10.4%
Total liabilities 555,279 558,901 -0.6% 574,179 -3.3%
Of which, long-term
borrowings 480,451 485,862 -1.1% 498,555 -3.6%
Total equity 145,161 116,592 24.5% 79,022 83.7%
KEY POINTS / VALUATION DRIVERS
Ø 3Q21 EBITDA almost doubled y-o-y (up 91.9% y-o-y in 9M21),
driven by a 54.9% y-o-y increase in revenue from water sales (up
46.9% y-o-y in 9M21), and 2.1x growth in revenues from electricity
sales (up 2.9x y-o-y in 9M21)
Ø 3Q21 water sales volume to commercial customers continued to
demonstrate fast recovery, following the rebound of economic
activities and were up 5.5% y-o-y and 17.4% q-o-q
Ø Improved water inflows in Zhinvali HPP reservoir led to 29.0%
y-o-y growth in 3Q21 electricity generation (36.8% growth in 9M21),
driving electricity sales up
Ø 3Q21 cash flow from operating activities up to GEL 42.0
million from GEL 16.8 million in 3Q20, in line with enhanced
revenue streams from both water and electricity sales
INCOME STATEMENT HIGHLIGHTS
Revenues of water utility business increased by 58.2% y-o-y in
3Q21 (up 54.0% y-o-y in 9M21), reflecting a) increased water sales
on the back of the tariff revision by the regulator for the
2021-2023 regulatory period, as well as the faster than expected
recovery in business activities, b) increased electricity sales,
supported by improved water inflows at Zhinvali HPP reservoir due
to better hydrological conditions compared to last year and c) GEL
1.7 million gain from the sale of unexploited properties (GEL 4.3
million gain in 9M21).
3Q21 and 9M21 revenue from water sales were up y-o-y by 54.9%
and 46.9%, respectively. According to the revised water tariff
levels set by the regulatory body for 2021-2023 years, per cubic
meter, tariffs in Tbilisi increased from GEL 0.3 to GEL 0.5 for the
residential customers and from GEL 4.4 to GEL 6.5 for legal
entities compared to the previous 3-year regulatory period
(2018-2020). The tariff increase translates into an annual growth
of 36.3 %[44] in allowed water revenue for the entire water utility
business over the 2021-2023 period. Higher water sales revenue in
3Q21 was further fuelled by increased demand from legal entities on
the back of a quick restart of the economy. 3Q21 water sales
volumes to commercial customers reached 8.5 million cubic meters,
up by 5.5% y-o-y and 17.4% q-o-q.
3Q21 and 9M21 revenue from electricity sales increased y-o-y by
2.1x and 2.9x, respectively. The increase was driven by improved
water inflows and generation levels at Zhinvali HPP reservoir.
Water utility business produced 81.1 GWh of electricity in 3Q21, up
by 29.0% y-o-y, which coupled with almost stable levels of
self-produced electricity consumption of 48.9 GWh (up by 1.1%
y-o-y), led to more than 2x growth in electricity sales volumes of
32.2 GWh. The water level in the reservoir continued to remain
close to the maximum possible level of 810 m.a.s.l. (meters above
sea level), allowing for more efficient and stable electricity
generation for the rest of the year.
Operating expenses in 3 Q21 and 9M 21 were up y-o-y by 16.5% and
15.4 %, respectively, mainly reflecting higher electricity and
transmission costs , which were factored into the new water tariff
set by the regulator. As a result of the developments described
above, EBITDA for 3Q21 almost doubled y-o-y and was up by 91.9%
y-o-y in 9M21.
Net interest expense was up by 0.9 % y-o-y to GEL 8.7 million in
3Q21 (up by 12.1% y-o-y to GEL 27.4 million in 9M21), mainly
reflecting an increased balance of debt on the back of US$ 250
million green bond issuance in July 2020 . 3Q21 foreign exchange
gain amounted to GEL 5.3 million (GEL 21.9 million in 9M21),
reflecting GEL appreciation against foreign currencies, and as a
result, the 3Q21 net profit amounted to GEL 28.1 million (GEL 63.0
million in 9M21).
CASH FLOW HIGHLIGHTS
The improvement in operating cash flow was in line with the
enhanced revenue streams from water and electricity sales. 3Q21
development capex was up by 17.3% y-o-y to GEL 13.0 million (up by
12.1% y-o-y to GEL 43.8 million in 9M21). 3Q21 cash outflow from
financing activities amounted to GEL 18.5 million, reflecting
scheduled coupon payment made on US$ 250 million green bond issued
in July 2020. As a result, Water Utility's cash balance stood at
GEL 49.8 million as of 30-Sep-21.
Discussion of Insurance (P&C and Medical) Business
Results
The insurance business comprises a) Property and Casualty
(P&C) insurance business, owned through Aldagi and b) medical
insurance business, owned through GHG. P&C insurance business
is a leading player in the local insurance market with a 30.1%
market share (up by 1.3ppts y-o-y) in property and casualty
insurance based on gross premiums as of 3 0 -Jun-21. P&C also
offers a variety of non-property and casualty products, such as
life insurance. GHG is the country's largest private medical
insurer, with a 23.1% market share based on 2 Q2 1 net insurance
premiums. GHG offers a variety of medical insurance products
primarily to Georgian corporate and state entities and also to
retail clients. The medical insurance business plays a significant
feeder role for GHG's polyclinics, pharmacies and hospitals. GCAP
owns a 100% equity stake in both insurance businesses.
3Q21 & 9M21 performance (GEL '000), Insurance (P&C and
Medical)[45]
INCOME STATEMENT HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Earned premiums, net 41,519 35,198 18.0% 116,196 104,425 11.3%
Of which, P&C Insurance 22,631 18,292 23.7% 62,112 52,960 17.3%
Of which, Medical Insurance 18,888 16,906 11.7% 54,084 51,465 5.1%
Net underwriting profit 13,111 10,857 20.8% 33,563 33,852 -0.9%
Of which, P&C Insurance 9,146 7,255 26.1% 24,478 22,262 10.0%
Of which, Medical Insurance 3,965 3,602 10.1% 9,085 11,590 -21.6%
Net profit 6,522 5,373 21.4% 16,268 16,149 0.7%
Of which, P&C Insurance 4,741 3,880 22.2% 13,088 12,034 8.8%
Of which, Medical Insurance 1,781 1,493 19.3% 3,180 4,115 -22.7%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 9,100 10,649 -14.5% 19,190 25,056 -23.4%
Of which, P&C Insurance 7,573 7,040 7.6% 16,637 16,945 -1.8%
Of which, Medical Insurance 1,527 3,609 -57.7% 2,553 8,111 -68.5%
Free cash flow 8,312 13,146 -36.8% 17,384 26,306 -33.9%
Of which, P&C Insurance 6,827 6,560 4.1% 15,040 15,390 -2.3%
Of which, Medical Insurance 1,485 6,586 -77.5% 2,344 10,916 -78.5%
BALANCE SHEET HIGHLIGHTS 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
Total assets 296,534 286,746 3.4% 257,887 15.0%
Of which, P&C Insurance 211,020 195,035 8.2% 176,479 19.6%
Of which, Medical Insurance 85,514 91,711 -6.8% 81,408 5.0%
Total equity 122,706 99,022 23.9% 101,507 20.9%
Of which, P&C Insurance 90,928 67,485 34.7% 69,443 30.9%
Of which, Medical Insurance 31,778 31,537 0.8% 32,064 -0.9%
TOTAL INSURANCE BUSINESS HIGHLIGHTS
P&C and medical insurance have a broadly equal share in
total revenues, while P&C had a 73% share in total net profit
in 3Q21 (80% in 9M21). In 3Q21, the loss ratio remained largely
flat y-o-y , and a decrease in expense ratio by 1.9 ppts y-o-y
contributed to the decline in the combined ratio by 1.9 ppts y-o-y.
However, in 9M21 loss ratio was up by 3.7 ppts y-o-y, and despite
the decrease in expense ratio by 2.0 ppts y-o-y, the combined ratio
was slightly up by 1.7 ppts y-o-y to 88.4%. Net profit was up 21.4%
to GEL 6.5 million in 3Q21 and up by 0.7% to GEL 16.3 million in
9M21, y-o-y. As a result, ROAE was 23.7% in 3Q21 (23.3% in 3Q20)
and 20.5% in 9M21 (23.3% in 9M20).
Discussion of results, P&C Insurance
KEY POINTS / VALUATION DRIVERS
Ø Net premiums written up by 15.8% y-o-y in 3Q21 (up by 23.5%
y-o-y in 9M21), reflecting a 33.2% y-o-y increase in the number of
insurance policies written (up 18.6% y-o-y in 9M21)
Ø A 23.7% y-o-y increase in earned premiums net in 3Q21 (up by
17.3% y-o-y in 9M21), mainly resulting from the growth in the motor
insurance line on the back of a boost in the retail client
portfolio
Ø Combined ratio down 5.4ppts y-o-y in 3Q21 (down 0.8 ppts y-o-y
in 9M21), reflecting a decrease in the expense ratio
Ø Net profit up by 22.2% y-o-y in 3Q21 (up by 8.8% y-o-y in
9M21)
INCOME STATEMENT HIGHLIGHTS
3Q21 revenues increased y-o-y by 23.7% (up 17.3% y-o-y in 9M21),
mainly driven by the increase in the motor insurance line
(excluding compulsory border third-party liability (MTPL)
insurance) by GEL 2.4 million (GEL 5.5 million in 9M21) on the back
of a boost in the retail client portfolio. An increase in credit
life insurance revenue by GEL 0.7 million y-o-y (up by GEL 2.1
million y-o-y in 9M21) was the second-best contributor to the
overall increase in 3Q21 revenue. An increase in the agricultural
insurance business line by GEL 0.5 million y-o-y (up by GEL 1.0
million y-o-y in 9M21) also contributed to the overall growth.
In aggregate, despite COVID-19 impact and changes in customer
spending habits, net premiums written across the portfolio through
direct sales channels was up by 12.9% y-o-y in 3Q21 (up 21.7% y-o-y
in 9M21). The negative trend of declining MTPL premiums written
reversed from 2Q21 and led to a 26.1% y-o-y growth in 3Q21 MTPL
revenues . Worldwide vaccination and reopening of land borders are
expected to support a gradual recovery in tourism. However,
recovery of compulsory MTPL premiums to pre-pandemic levels are
impeded by uncertainty around the lifting of travel restrictions
set by neighbouring countries, recurring waves of Covid-19 and slow
vaccination rate.
At 30-Sep-21, the distribution mix in 3Q21 and 9M21 gross
premiums written is as follows: various direct sales channels and
brokers have a majority share of 72% (72% in 3Q20) and 74% (75% in
9M20), followed by partnership agreements with financial
institutions of 26% (25% in 3Q20) and 24% (23% in 9M20) and MTPL
channels of 2% (3% in 3Q20) and 2% (2% in 9M20), respectively.
P&C Insurance's key performance ratios for 3Q21 and 9M21 are
noted below:
3Q21 3Q20 Change 9M21 9M20 Change
-5.4 -0.8
Combined ratio 80.2% 85.6% ppts 81.3% 82.1% ppts
-7.0 -5.0
Expense ratio 31.8% 38.8% ppts 32.2% 37.2% ppts
4.2
Loss ratio 48.4% 46.8% 1.6 ppts 49.1% 44.9% ppts
-0.6
ppts
ROAE 23.7% 21.6% 2.1 ppts 23.2% 23.8% ppts
The 3Q21 and 9M21 y-o-y decreases in expense ratio reflects
robust revenue growth while operating expenses remained largely
flat, which translated into a decrease in the combined ratio of the
respective periods. The increase in the 9M21 loss ratio reflects
higher passenger mobility and thus increased volume of motor claims
in 1H21 due to the lifted pandemic-related lockdown restriction as
well as the occurrence of several large property claims in 3Q21.
The volume of COVID-19-related credit life insurance claims
incurred in 3Q21 and 9M21 amounts to GEL 0.9 million (no claims
reported in 3Q20), and GEL 3.4 million (GEL 0.2 million in 9M20),
respectively and represents 26% and 34% of total life insurance
claims (2% in 9M20). As a result, P&C Insurance's net profit
was up by 22.2% y-o-y in 3Q21 and up 8.8% y-o-y in 9M21. Adjusted
for the FX loss on the natural long position, net profit is up by
32.7% y-o-y in 3Q21 and up by 17.1% y-o-y in 9M21.
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
P&C Insurance's solvency ratio was 205% as of 30 September
2021, comfortably above the required minimum of 100%. The 7.6%
y-o-y increase in 3Q21 operating cash inflows resulted from higher
underwriting cash flows in 3Q21 compared to 3Q20. The business paid
GEL 5.0 million dividends in 9M21.
Discussion of results, Medical Insurance
KEY POINTS / VALUATION DRIVERS
Ø Earned premiums net up 11.7% y-o-y in 3Q21 (up 5.1% y-o-y in
9M21), reflecting increased prices of the insurance policies
Ø Loss ratio remained largely flat in 3Q21 (down 0.4 ppts y-o-y
to 74.5%). Loss ratio was up 4.8 ppts y-o-y to 78.7% in 9M21,
reflecting the increased demand for elective healthcare services
during the year
Ø Insurance renewal rate at 78.8% in 3Q21 (71.0% in 3Q20) and
78.2% in 9M21 (72.6% in 9M20)
Ø Net profit up 19.3% y-o-y in 3Q21 to GEL 1.8 million, down
22.7% to GEL 3.2 million in 9M21
Ø The number of insured clients at c.168,000 as of 30-Sep-21,
stable over the quarter
Ø The business paid GEL 2 million in dividends[46] in 3Q21
INCOME STATEMENT HIGHLIGHTS
The 11.7% and 5.1% y-o-y increases in 3Q21 and 9M21 earned
premiums net reflect an increase in the prices of insurance
policies. Various incentives such as the direct settlement of
claims with the provider mean that, on top of its own positive
contribution to GHG's profitability, the medical insurance business
plays a feeder role in originating and directing patients to GHG's
healthcare facilities, mainly to polyclinics and to pharmacies. The
direct settlement improves claims retention rates within GHG.
Claims retention rates 3Q21 3Q20 Change 9M21 9M20 Change
Total claims retained within the GHG 33.9% 34.8% -0.9 ppts 35.5% 40.5% -5.0 ppts
Total claims retained in outpatient 42.4% 42.9% -0.5 ppts 39.1% 41.7% -2.6 ppts
In 9M21, the net claims expenses were GEL 42.6 million (up 11.9%
y-o-y), of which GEL 17.9 million (42.0% of total) was inpatient,
GEL 15.1 million (35.7% of total) was outpatient and GEL 9.6
million (22.3% of total) was related to drugs. The loss ratio
remained almost flat for the quarter, down 0.4 ppts y-o-y in 3Q21
(from 74.9% to 74.5%). Overall, reflecting a rebounding trend in
the number of admissions at hospitals and clinics in 2021, compared
to patient footprint slowdown at healthcare facilities last year
due to the pandemic, the 9M21 the loss ratio was up 4.8 ppts y-o-y
to 78.7%.
As a result, the combined ratio deteriorated by 2.4 ppts y-o-y
to 91.7% for the quarter and by 5.1 ppts y-o-y for the 9M21 to
96.4%. The business posted a net profit of GEL 1.8 million in 3Q21
(up 19.3% y-o-y) and GEL 3.2 million in 9M21 (down 22.7%
y-o-y).
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
Operating cash flow decline is associated with the increased
claims expense of the business. Also, 9M21 operating cash flow
reflects a significant prepayment (c. GEL 1.9 million) of a
one-month service fee by a large client at the end of 2020. The
business paid GEL 2 million dividends in 3Q21.
INVESTMENT STAGE PORTFOLIO COMPANIES
Discussion of Renewable Energy Business Results
The Renewable energy business operates three wholly-owned
commissioned renewable assets: 50MW Mestiachala HPP[47], 20MW
Hydrolea HPPs and 21MW Qartli wind farm. In addition, a pipeline of
up to 172MW renewable energy projects is in an advanced stage of
development. The renewable energy business is 100% owned by Georgia
Capital.
3Q21 & 9M21 performance (GEL '000), Renewable Energy
[48]
INCOME STATEMENT HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Revenue 13,490 16,009 -15.7% 33,922 34,895 -2.8%
of which, PPA 6,963 8,467 -17.8% 21,740 20,798 4.5%
of which, Non-PPA 5,922 5,822 1.7% 11,577 9,757 18.7%
of which, BI Reimbursement 605 1,719 -64.8% 605 4,340 -86.1%
Operating expenses (2,641) (2,597) 1.7% (8,211) (7,393) 11.1%
EBITDA 10,849 13,412 -19.1% 25,711 27,502 -6.5%
-3.4 -3.0
EBITDA margin 80.4% 83.8% ppts 75.8% 78.8% ppts
Net profit/(loss) 4,341 (5,789) NMF (88) (10,222) -99.1%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities 10,384 11,289 -8.0% 20,381 29,032 -29.8%
Cash flow used in investing
activities 2,494 11,327 -78.0% (13,973) (12,125) 15.2%
Cash flow used in financing
activities (15,355) (18,252) -15.9% (33,443) (28,554) 17.1%
Dividends paid out (5,000) - NMF (14,471) (4,927) NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
Total assets 448,703 454,715 -1.3% 482,986 -7.1%
Of which, cash balance 37,589 41,520 -9.5% 66,821 -43.7%
Total liabilities 308,153 314,190 -1.9% 326,252 -5.5%
29 8 - 3 .
Of which, borrowings , 302 307,505 0 % 318,269 -6.3%
Total equity 140,550 140,525 NMF 156,734 -10.3%
KEY POINTS / VALUATION DRIVERS
Ø Revenue and EBITDA were down 15.7% and 19.1% y-o-y,
respectively, in 3Q21, mainly reflecting a 9.5% y-o-y decrease in
electricity generation levels during the quarter. Excluding the
impact of business interruption (BI) reimbursements for 2020
revenues of 20MW Mestiachala HPP[49] unit, revenue and EBITDA were
down by 9.8% and 12.4% y-o-y in 3Q21, respectively
Ø 9 M21 revenue and EBITDA were down by 2.8% and 6.5% y-o-y,
respectively, mainly driven by the impact of BI reimbursements.
Adjusted to exclude the BI reimbursement impact, 9 M21 revenue and
EBITDA were up by 9.0% and 8.4% y-o-y, respectively
Ø Electricity generation levels were up 11.4% y-o-y in 9M21,
while electricity market sales price averaged at 35.0 US$/MWh
Ø The business sold its project rights of pre-construction
"Bakhvi 2" HPP at a total price of US$ 2.05 million, translating
into 31.9% equity IRR for the business
Ø GEL 5.0 million dividends paid in 3Q21 (GEL 14.5 million in
9M21)
INCOME STATEMENT HIGHLIGHTS
Up to 60% and 70% of electricity sales in the renewable energy
business in 3Q21 and 9M21, respectively, were covered by
fixed-priced long-term power purchase agreements (PPAs) formed with
a Government-backed entity. The business continues to realise
generated electricity during non-PPA months in an efficient way
through making bilateral contracts with the industrial customers at
favourable terms. Revenue was down by 15.7% y-o-y in 3Q21 to GEL
12.9 million and down by 2.8% y-o-y to GEL 33.9 million in 9M21.
The decrease in 3Q21 revenue was mainly attributable to 9.5% y-o-y
lower electricity generation levels at the power assets and
reflects a) lower generation levels at Qartli Wind Farm in 3Q21,
compared to the extraordinarily high generation levels in the
corresponding 2020 period, and b) lower generation levels at
Mestiachala and Hydrolea HPPs due to the unfavourable hydrological
conditions during the quarter. The revenue decrease in 9M21
predominantly reflects the impact of BI reimbursements for 2020
revenues of the 20MW Mestiachala HPP unit . Excluding the effect of
BI reimbursements, 3Q21 revenue was down by only 9.8% y-o-y, and
9M21 revenue was up by 9.0% y-o-y. However, on the back of more
favourable hydrological and wind generation conditions during the
first half of the year, 9M21 generation was up by 11.4% y-o-y to
211.9 GWh. The overall financial performance during 9M21 was also
supported by favourable market electricity sales prices, which
amounted to 35.0 US$/MWh for the business.
3Q21 9M21
GEL '000, Revenue Change Electricity Change Revenue Change Electricity Change
unless otherwise from y-o-y generation y-o-y from y-o-y generation y-o-y
noted electricity ( GWh) electricity ( GWh)
sales sales
30MW Mestiachala
HPP 7,456 -4.8% 52.4 -6.0% 12,079 11.2% 93.8 15.1%
21MW Qartli
wind farm 3,868 -18.4% 19.1 -17.7% 13,203 -6.2% 62.3 -10.7%
20MW Hydrolea
HPPs 1,561 -8.9% 11.4 -10.0% 8,035 45.3% 55.8 43.2%
Total 12,885 -9.8% 82.8 -9.5% 33,317 9.0% 211.9 11.4%
3Q21 operating expenses were flat y-o-y at GEL 2.6 million but
were up by 11.1% y-o-y in 9M21 to GEL 8.2 million (the latter
mainly reflects accounting adjustment for the consultancy fees,
which was timing-related and will not have an effect on full-year
numbers). As a result, 3Q21 EBITDA was down by 19.1% y-o-y to GEL
10.8 million and down by 6.5% y-o-y to GEL 25.7 million in 9M21.
Excluding the effect of business interruption (BI) reimbursement
accruals, 3Q21 EBITDA was down by 12.4% y-o-y, and 9M21 EBITDA was
up by 8.4% y-o-y. The business recorded GEL 5.3 million net
interest expense in 3Q21, down by 11.1% y-o-y (GEL 16.8 million in
9M21, down by 0.7% y-o-y).
In 3Q21, the renewable energy business sold its project rights
of pre-construction "Bakhvi 2" HPP to a third-party investor. The
transaction price amounted to US$ 2.05 million, out of which US$
1.5 million was paid upon signing the SPA, while the remaining
amount is an earn-out dependent on several conditions. The sale
resulted in a 31.9% equity IRR for the business.
As a result of the developments described above, the business
recorded a GEL 4.3 million profit in 3Q21 and a loss of GEL 0.1
million in 9M21.
CASH FLOW HIGHLIGHTS
3Q21 and 9M21 operating cash flow amounted to GEL 10.4 million
(down by 8.0% y-o-y) and GEL 20.4 million (down by 29.8% y-o-y).
Excluding the one-off effect of BI reimbursement proceeds received
from the insurance company, 3Q21 and 9M21 operation cash flows were
up by 7.1% and 14.7% y-o-y. Cash inflow from investing activities
in 3Q21 amounted to GEL 2.5 million, mainly reflecting
pre-construction "Bakhvi 2" HPP sale proceeds. 9M21 cash outflow
from investing activities was at GEL 14.0 million (up by 15.2%
y-o-y), reflecting the low base impact as GEL 10.5 million proceeds
were received for the reimbursement of property damage of 50MW
Mestiachala HPPs in 9M20. Excluding the impact of the property
reimbursement, investing activities in 9M21 were down by 38.1%
y-o-y. 3Q21 cash outflow from financing activities was down by
15.9% y-o-y to GEL 15.4 million. 9M21 cash outflow from financing
activities increased by 17.1% y-o-y to GEL 33.4 million, mainly
reflecting increased dividend payments made to Georgia Capital on
the back of strong operational performance. The business made a
dividend distribution of GEL 5.0 million in 3Q21 and GEL 14.5
million during 9M21, up from GEL 4.9 million in 9M20. As a result,
the cash balance of the renewable energy business amounted to GEL
37.6 million as of 30-Sep-21.
Discussion of Education Business Results
Our education business currently combines majority stakes in
five private school brands and campuses, acquired in 3Q19-3Q21:
British-Georgian Academy and British International School of
Tbilisi (70% stake), the leading schools in the premium segment;
Buckswood International School (80% stake), well-positioned in the
mid-level segment, Green School (80%-90% ownership[50]) and
Georgian-Austrian School Pesvebi LLC (81%[51] ownership), both
well-positioned in the affordable education segment.
3Q21 & 9M21 performance (GEL '000), Education[52]
INCOME STATEMENT HIGHLIGHTS 3Q21 3Q20 Change 9M21 9M20 Change
Revenue 3,359 3,155 6.5% 19,599 17,111 14.5%
Operating expenses (4,655) (4,166) 11.7% (14,411) (12,974) 11.1%
EBITDA (1,296) (1,011) -28.2% 5,188 4,137 25.4%
-6.5 2.3
EBITDA Margin -38.6% -32.0% ppts 26.5% 24.2% ppts
Net loss (2,310) (3,283) 29.6% 3,479 (1,189) NMF
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 3,658 3,234 13.1% 11,237 8,084 39.0%
Net cash flows used
in investing activities (7,309) (2,015) NMF (19,154) (5,052) NMF
Net cash flows from
financing activities 4,870 471 NMF 11,742 719 NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-21 30-Jun-21 Change 31-Dec-20 Change
Total assets 132,778 122,808 8.1% 110,541 20.1%
Of which, cash 9,809 8,648 13.4% 6,399 53.3%
Total liabilities 56,509 48,804 15.8% 53,396 5.8%
Of which, borrowings 24,838 23,347 6.4% 24,947 -0.4%
Total equity 76,269 74,004 3.1% 57,145 33.5%
KEY POINTS / VALUATION DRIVERS
Ø Education business has expanded from the current capacity of
2,810 learners to 5,060 learners in 3Q21 through investments in (1)
the acquisition of an 81% equity interest in Georgian-Austrian
School Pesvebi ( 1,200 learner capacity), (2) the launch of a new
(second) campus under the existing affordable brand - Green School
( 600 learner capacity) and (3) the expansion of Green School's
existing campus (450 learner capacity)
Ø Revenue up by 6. 5 % and up by 14.5% y-o-y in 3Q21 and 9M2 1 ,
reflecting a 15.2% y-o-y growth in average tuition revenue per
learner in 9M21 and growth in the number of learners by 20.5%
y-o-y
Ø EBITDA down by 28 . 2 % and up by 25.4% y-o-y in 3Q21 and 9M2
1 , respectively, reflecting the decreased number of academic days
as the schools modified the academic calendar
Ø GEL 19.2 million investments in the launch of new campus and
expansion of existing campuses in affordable (construction
completed) and mid-scale segments (construction is expected to
complete in 1Q22) and the acquisition of an 81% interest in
Georgian-Austrian School Pesvebi, in 9M21
NEW INVESTMENTS
In 3Q21, the education business expanded in the affordable
segment through 2 investment projects:
Ø In 3Q21, Georgia Capital has signed a share purchase agreement
to acquire an 81%(51) equity interest in Georgian-Austrian School
Pesvebi, which is located in a densely populated urban area in
Tbilisi with a considerable residential apartment development
pipeline. The School has a capacity of 1,200 learners and is one of
the largest private schools in Georgia with recently renovated
c.7,400 sq.m. building facilities and a 1.4ha land plot.
Ø The new (second) campus has been launched under the existing
affordable brand in Group's portfolio - Green School. The campus is
located in the central district of Tbilisi. Despite its urban
location, the school has a unique infrastructure with a 5ha land
plot, offering an ecologically friendly environment and areas for
outdoor activities. The new campus will provide education to 600
learners, with the potential to expand its capacity to 1,500-2,000
learners over the next years by utilising the existing
premises.
INCOME STATEMENT HIGHLIGHTS
The third quarter is usually a slow season for the education
business, as the schools are not operational during the July-August
holidays. In light of COVID-19, some schools started distance
learning in September 2021 and reopened for on-campus learning from
October 2021, while others elected to start the 2021-22 academic
year directly at school premises in October 2021.
To mitigate the impact of distance learning on academic and
social life, the schools modified the academic calendar by shifting
academic days from 3Q21 to the subsequent quarters to coincide with
the on-campus learning resumption. As a result, a lower portion of
the revenue was recognised in 3Q21 compared to 3Q20; however, 3Q21
revenue was still up by 6.5% y-o-y. The expansion of the affordable
segment through the acquisition and launch of a new campus
contributes to 4.3% of the total revenue growth, while the rest is
driven by growth in total enrolments and average fee per learner.
Growth in average fee per learner is supported by tuition fee
increases via contract renewals in line with grade-level
progression for existing learners.
The intakes remained strong for all grades with a c.76%
utilisation rate for 1(st) graders in the 2021-2022 academic year.
Overall, the total number of learners was up 20.5% y-o-y to 3,150
learners at 30-Sep-21, translating in the utilisation rate of 62.3
% compared to last year's 93.0 %, reflecting the addition of a new
capacity of 2,250 learners in 3Q21 .
The business growth reflects an increase in operating expenses
by 11.7% in 3Q21 y-o-y. Consequently, EBITDA was down by 28.2%
y-o-y in 3Q21 (up 25.4% y-o-y in 9M21).
Overall, the business posted GEL 3.5 million net income in 9M21
(GEL 1.2 million net loss in 9M20) and GEL 2.3 million net loss in
3Q21 (GEL 3.3 million net loss in 3Q20), reflecting foreign
currency exchange gains in 9M21 compared to foreign currency
exchange losses in 9M20.
CASH FLOW HIGHLIGHTS
Operating cash flow generation by the education business was up
by 13.1% y-o-y in 3Q21 and up by 39.0% y-o-y in 9M21.
The schools managed to deliver strong cash collection rates
before the start of the 2021-22 academic year. Overall, the
combined cash collection rate for 202 1 -202 2 tuition fees stood
at 62.7 % ( 63.6% at 3 0 - Sep - 20 ), which was in line with the
schools' cash collection policies. GEL 19.2 million cash outflow
from investing activities in 9M21 reflects investments in capacity
expansion of the operational campuses of Buckswood by 240 learners
and Green School by 450 learners, acquisition of land and building
for the new campus location of Green School with the capacity of
600 learners, and acquisition of an 81% interest in
Georgian-Austrian School Pesvebi with 1,200 learner capacity.
Discussion of Other Portfolio Results
The five businesses in our "other" private portfolio are Housing
Development, Hospitality and Commercial Real Estate, Beverages,
Auto Services and Digital Services. They had a combined value of
GEL 246.0 million at 30-Sep-21, which represented only 6.9% of our
total portfolio.
3Q21 & 9M21 aggregated performance highlights (GEL '000),
Other Portfolio
3Q21 3Q20 Change 9M21 9M20 Change
Revenue 89,108 83,174 7.1% 239,027 197,911 20.8%
EBITDA 7,854 11,125 -29.4% 27,527 14,345 91.9%
Net cash flows from operating
activities 9,398 27,746 -66.1% 21,406 56,485 -62.1%
The y-o-y growth in the aggregated revenues of our other
businesses (up 7.1% in 3Q21 and 20.8% in 9M21) was led by strong
performances of the beverages and auto services businesses. The
decline in net cash flow from operating activities was in line with
the organic transition to revenue growth and the corresponding
increase in working capital requirements.
Ø Housing Development | Revenue was down by 43.9% in 3Q21 and by
1.6% y-o-y in 9M21, reflecting a base effect of increased apartment
sales in corresponding 2020 periods on the back of the Government's
mortgage subsidy programme, implemented as a support mechanism for
the COVID-19 pandemic, which expired at the end of 2020 . Decrease
in revenue translated into a y-o-y decline of EBITDA by GEL 4.4
million to negative GEL 3.4 million in 3Q21 and by 50.6% y-o-y to
GEL 1.0 million in 9M21. Consequently, operating cash flow was down
59.9% y-o-y to GEL 5.9 million in 3Q21 (down by 85.5% to GEL 5.7
million in 9M21).
Ø Hospitality and Commercial Real Estate | In 3Q21, revenue was
down 47.4% y-o-y to 2.3 GEL million (down 21.9% y-o-y to GEL 10.5
million in 9M21), and EBITDA, adjusted for revaluation gain/loss on
investment property of the business, was down by 81.8% y-o-y to GEL
0.3 million (up 2.9x y-o-y to GEL 4.4 million in 9M21), mainly
reflecting the absence of revenues associated with the divestment
of a significant portion of commercial real estate assets. Net cash
flow from operating activities was down by GEL 2.6 million y-o-y to
negative GEL 0.3 million in 3Q21 and up by 173.3% y-o-y to GEL 2.2
million in 9M21.
Since June 2021, we successfully completed the sale to a
combination of local and regional investors of selected commercial
real estate assets for US$ 45.0 million with an 11.3% premium (US$
4.6 million) to the book value as of 31-Mar-21. The proceeds from
the sale will be used to repay the existing US$ 30 million bonds
issued by the commercial real estate business and maturing on 31
December 2021. The book value of the remaining disposable assets is
approximately US$ 14.0 million as of 30-Sep-21 and is split between
commercial real estate assets (18%) and land plots (82%).
Ø Beverages | The beverages business combines three business
lines: a wine business, a beer business, and distribution
business.
o Wine business | The net revenues of the wine business
increased by 27.0% y-o-y to GEL 13.7 million in 3Q21 (up by 44.3%
y-o-y to GEL 37.4 in 9M21), mainly attributable to increased sales
on the local market. The gross profit margin was up by 0.8 ppts
y-o-y to 43.3% in 3Q21 and by 5.6ppts y-o-y to 44.5% in 9M21. The
number of bottles sold was up 30.3% in 3Q21 and up by 44.1%, y-o-y
in 9M21, while the average price per bottle (GEL) remained largely
flat, down by 0.4% y-o-y both in 3Q21 and 9M21. Consequently,
EBITDA increased by 63.0% y-o-y to GEL 2.6 million in 3Q21 (up 2.7x
y-o-y to GEL 7.9 million in 9M21). The net operating cash flow of
the business also demonstrated growth of 12.2% y-o-y in 9M21, in
line with the increased revenue.
o Beer business | The net revenue of the beer business increased
by 17.9% to GEL 19.4 million in 3Q21 and by 19.5% to GEL 44.9
million in 9M21, y-o-y. Beer and lemonade sales (in hectolitre)
were up 16.6% y-o-y in 3Q21 and up 17.0% in 9M21. The average price
per litre in GEL was up by 0.8% y-o-y in 3Q21 and up by 3.3% in
9M21. However, despite the revenue growth, the EBITDA of the
business remained largely flat at GEL 3.5 million in 3Q21,
reflecting changes in product mix and increased prices of raw
materials. 9M21 EBITDA was up by 37.6% y-o-y, resulting from the
strong revenue growth of the business. The solid performance of the
business over the past two years translated into enhanced
creditworthiness, and as a result of reassessment by the creditors,
GCAP's guarantee on the borrowing of beer business decreased by c.
EUR 2.7 million to EUR 15.8 million in 3Q21.
o Distribution business | Revenue of the distribution business
increased by 30.2% y-o-y to GEL 40.9 million in 3Q21 (up 20.9%
y-o-y to GEL 88.2 million in 9M21), while EBITDA increased by 54.5%
y-o-y to GEL 2.2 million in 3Q21 (up 53.4% y-o-y to GEL 3.9 million
in 9M21).
Ø Auto Service | The auto service business includes a periodic
technical inspection (PTI) business, a car services and parts
business under the Amboli brand and a secondary car trading
business.
o Periodic technical inspection (PTI) business | PTI business
demonstrated a solid performance growth with a 15.2% y-o-y revenue
growth to GEL 4.2 million in 3Q21 and 52.3% y-o-y growth to GEL
11.9 million in 9M21. Revenue growth was supported by an increase
in total cars serviced, up by 10.4% y-o-y in 3Q21 and by 43.6%
y-o-y in 9M21. As a result, the EBITDA of the PTI business was up
by 25.2% y-o-y to GEL 2.6 million in 3Q21 and up 2.2x to GEL 6.5
million in 9M21, with a y-o-y EBITDA margin growth of 4.8 ppts to
59.9% and 17.2 ppts to 54.3% in 3Q21 and 9M21, respectively.
o Car services and parts business (Amboli) | In 3Q21, Amboli's
revenue was up by 44.1% y-o-y to GEL 8.7 million (up 76.8% y-o-y to
GEL 21.5 million in 9M21), reflecting the increase in corporate and
wholesale customer segments. Similarly, the 3Q21 gross profit was
up by 44.3% to GEL 2.0 million and up by 89.0% to GEL 4.9 million
in 9M21, y-o-y. As a result, the business posted more than GEL 0.5
million EBITDA in 3Q21, up by 10.5% y-o-y (GEL 1.1 million in 9M21,
up by more than 2.3x times from 9M20).
ADDITIONAL FINANCIAL INFORMATION
The 9M21 NAV Statement shows the development of NAV since
31-Dec-20:
GEL '000, unless Dec-20 1. Value 2a. 2b. 2c. 3.Operating 4. Sep-21 Change
otherwise noted creation Investment Buyback Dividend expenses Liquidity/ %
([53]) FX/Other
Listed Portfolio
Companies
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Bank of Georgia
(BoG) 531,558 110,082 - - - - - 641,640 20.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Listed
Portfolio
Value 531,558 110,082 - - - - - 641,640 20.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Listed Portfolio
value change % 20.7% 0.0% 0.0% 0.0% 0.0% 0.0% 20.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Private
Portfolio
Companies
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Large Companies 1,858,237 415,349 - - (29,959) - 1,657 2,245,284 20.8%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Healthcare
Services 571,656 163,858 - - (11,545) - - 723,969 26.6%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Retail
(Pharmacy) 552,745 76,341 - - (11,460) - - 617,626 11.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Water Utility 471,148 147,357 - - - - 1,234 619,739 31.5%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Insurance (P&C
and
Medical) 262,688 27,793 - - (6,954) - 423 283,950 8.1%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Of which, P&C
Insurance 197,806 23,165 - - (4,959) - 423 216,435 9.4%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Of which,
Medical
Insurance 64,882 4,628 - - (1,995) - - 67,515 4.1%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Investment
Stage
Companies 302,964 30,715 16,515 - (14,471) - 876 336,599 11.1%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Renewable Energy 209,902 9,103 3,724 - (14,471) - 876 209,134 -0.4%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Education 93,062 21,612 12,791 - - - - 127,465 37.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Other Companies 214,929 28,934 615 - - - 1,494 245,972 14.4%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Private
Portfolio
Value 2,376,130 474,998 17,130 - (44,430) - 4,027 2,827,855 19.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Private
Portfolio
value change % 20.0% 0.7% 0.0% -1.9% 0.0% 0.2% 19.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Portfolio
Value (1) 2,907,688 585,080 17,130 - (44,430) - 4,027 3,469,495 19.3%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Total Portfolio
value change % 20.1% 0.6% 0.0% -1.5% 0.0% 0.1% 19.3%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Debt (2) (697,999) - (17,130) (12,534) 44,430 (15,934) (12,954) (712,121) 2.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which, Cash
and liquid
funds 175,289 - (17,130) (12,534) 44,430 (15,934) 82,067 256,188 46.2%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which, Loans
issued 108,983 - - - - - 49,759 158,742 45.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which, Gross
Debt (982,271) - - - - - (144,780) (1,127,051) 14.7%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net other
assets/
(liabilities)
(3) 2,603 - - - - (11,050) 13,917 5,470 NMF
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
of which,
share-based
comp. - - - - - (11,050) 11,050 - 0.0%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Asset Value
(1)+(2)+(3) 2,212,292 585,080 - (12,534) - (26,984) 4,990 2,762,844 24.9%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
NAV change % 26.4% 0.0% -0.6% 0.0% -1.2% 0.2% 24.9%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Shares
outstanding(53) 45,977,247 - - (473,162) - - 717,859 46,221,944 0.5%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
Net Asset Value
per share, GEL 48.12 12.72 (0.00) 0.22 (0.00) (0.59) (0.70) 59.77 24.2%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
NAV per share,
GEL
change % 26.4% 0.0% 0.5% 0.0% -1.2% -1.4% 24.2%
----------------- ----------- --------- ----------- ---------- --------- ------------ ----------- ------------ -------
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 97 in Georgia Capital PLC 2020 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 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.
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 six private businesses: (i) a
healthcare services business; (ii) a water utility business; (iii)
a retail (pharmacy) business, (iv) an insurance business (P&C
and medical insurance); (v) a renewable energy business and (vi) an
education business; We also hold other small private businesses
across different industries in Georgia and a 19.9% equity stake 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: impact of COVID-19; regional
instability; regulatory risk across a wide range of industries;
investment risk; liquidity risk; portfolio company strategic and
execution risks; currency fluctuations, including depreciation of
the Georgian Lari, and macroeconomic risk; 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 the 1H21 Result Announcement and in
Georgia Capital PLC's Annual Report and Accounts 2020. 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
Ernst & Young LLP
1 More London Place
London, SE1 2AF
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater 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 2 6
. 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] The results of our five smaller businesses included in other
portfolio companies (described on pages 2 3 -2 4 ) 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).
[3] Please see definition in glossary on page 2 6 .
[4] 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.
[5] 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.
[6] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[7] Enterprise value is presented excluding non-operational
assets, added to the equity value of the education business at
cost.
[8] Please read more about valuation methodology on pages 2 6 in "Basis of presentation".
[9] Please refer to Georgia Capital PLC 2Q21 and 1H21 results for more details.
[10] adjusted to exclude HTMC hospital, sold in August 2020.
[11] Adjusted for non-recurring items.
[12] Excluding non-operational assets, added to the equity value
of the education business at cost.
[13] Investments are made and dividends are received at JSC
Georgia Capital level, the Georgian holding company.
[14] Georgia Capital has a call option on the 9% equity stake
during the 12 months starting from August 2022.
[15] FX, coupon payment and coupon accrual are included in
Liquidity Management /FX/Other column in NAV statement.
[16] The detailed 9M21 NAV statement is included in appendix on
page 2 5 .
[17] Please see definition in glossary on page 2 6 .
[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] 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.
[20] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[21] Enterprise value is presented excluding 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] Georgia Capital has a call option on the 9% equity stake
during the 12 months starting from August 2022.
[24] Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative
costs.
[25] Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
[26] Share-based management expenses are share salary and share
bonus expenses of management and staff.
[27] Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and
corporate secretary costs.
[28] Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
[29] The management fee and total operating expense ratio in
9M20 was calculated based on average market capitalization during
the period. 9M21 ratio is calculated based on period-end market
capitalization due to significant price fluctuations during the
last twelve months.
[30] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[31] All numbers in income statement and cash flow statement are
adjusted to exclude HTMC hospital, sold in August 2020.
[32] Net revenue - Gross revenue excluding corrections and
rebates. Margins are calculated from Gross revenue.
[33] Of which - capex of GEL 8.5 million in 3Q21 (GEL 3.8
million in 3Q20) and GEL 23.2 million in 9M21 (GEL 16.4 million in
9M20); acquisition of subsidiaries / payment of holdback of GEL 5.8
million in 3Q21 (GEL 0.5 million in 3Q20) and GEL 12.1 million in
9M21 (GEL 5.9 million in 9M20); net proceeds on sale of
subsidiaries of GEL 32.8 in 3Q20 (sale of HTMC hospital - sold in
August 2020).
[34] Operating cash flows less capex, less acquisition of
subsidiaries / payment of holdback, plus net proceeds on sale of
subsidiaries.
[35] In September 2021, Georgia Healthcare Group paid GEL 25
million dividends to GCAP, which is reflected solely in the cash
flow of the healthcare services business at GHG level. At GCAP
level, dividends collected from GHG were allocated across all three
GHG businesses, Healthcare Services (GEL 11.5 million), Retail
(Pharmacy) (GEL 11.5 million) and Medical Insurance (GEL 2
million).
[36] The respective costs divided by gross revenues.
[37] In September 2021, Georgia Healthcare Group paid GEL 25
million dividends to GCAP, which is reflected solely in the cash
flow of the healthcare services business at GHG level. At GCAP
level, dividends collected from GHG were allocated across all three
GHG businesses, Healthcare Services (GEL 11.5 million), Retail
(Pharmacy) (GEL 11.5 million) and Medical Insurance (GEL 2
million).
[38] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[39] Of which - capex of GEL 3.8 million in 3Q21 (GEL 1.4
million in 3Q20) and GEL 10.7 million in 9M21 (GEL 3.8 million in
9M20);
[40] Calculated by deducting capex from operating cash flows.
[41] Net debt is calculated from Cash balance and bank deposits,
securities and loans issued minus gross debt.
[42] In September 2021, Georgia Healthcare Group paid GEL 25
million dividends to GCAP, which is reflected solely in the cash
flow of the healthcare services business at GHG level. At GCAP
level, dividends collected from GHG were allocated across all three
GHG businesses, Healthcare Services (GEL 11.5 million), Retail
(Pharmacy) (GEL 11.5 million) and Medical Insurance (GEL 2
million).
[43] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[44] The tariff increase translates into the annual growth of
approximately 38% in allowed water revenues of Georgian Water and
Power LLC (GWP) in the three-year regulatory period effective from
1 January 2021.
[45] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[46] In September 2021, Georgia Healthcare Group paid GEL 25
million dividends to GCAP, which is reflected solely in the cash
flow of the healthcare services business at GHG level. At GCAP
level, dividends collected from GHG were allocated across all three
GHG businesses, Healthcare Services (GEL 11.5 million), Retail
(Pharmacy) (GEL 11.5 million) and Medical Insurance (GEL 2
million).
[47] 20MW Mestiachala HPP was flooded and taken offline in late
July 2019. The restoration process is on-going.
[48] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[49] On the 20MW Mestiachala HPP unit, the restoration process
is still ongoing, pending the outcome of the comprehensive cost and
feasibility assessment
[50] 80% equity stake in the current campus and 90% equity stake
in new schools that will be developed under Green School brand.
[51] Georgia Capital has a call option on the 9% equity stake
during the 12 months starting from August 2022.
[52] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[53] Please see definition in glossary on page 2 6 .
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Georgia Capital (LSE:CGEO)
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