TIDMCGEO
RNS Number : 7068K
Georgia Capital PLC
09 May 2022
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS)[1]
GEL '000, unless otherwise Mar-22 Dec-21 Change
noted
Georgia Capital NAV overview
NAV per share, GEL 52.62 63.03 -16.5%
Net Asset Value (NAV) 2,371,047 2,883,622 -17.8%
Total portfolio value 2,608,626 3,616,231 -27.9%
Liquid assets and loans issued 882,574 426,531 106.9%
Net debt (239,385) (711,074) -66.3%
Georgia Capital Performance 1Q22 1Q21 Change
Total portfolio value creation (450,821) 8,536 NMF
of which, listed and observable
businesses (207,707) (26,452) NMF
of which, private businesses (243,114) 34,988 NMF
Investments 1,572 8,200 -80.8%
Divestments (557,568) - NMF
Buybacks (26,052) (1,712) NMF
Dividend income 2,195 4,738 -53.7%
Net loss (485,249) (44,850) NMF
Private portfolio companies'
performance(1,[2]) 1Q22 1Q21 Change
Large portfolio companies
Revenue 315,038 280,471 12.3%
EBITDA 39,776 36,998 7.5%
Net operating cash flow 28,665 8,952 NMF
Investment stage portfolio
companies
Revenue 43,141 33,586 28.4%
EBITDA 12,742 10,646 19.7%
Net operating cash flow 6,277 3,650 71.9%
Total portfolio[3]
Revenue 434,956 378,347 15.0%
EBITDA 53,821 54,188 -0.7%
Net operating cash flow 31,571 17,202 83.5%
KEY POINTS
Ø NAV per share (GEL) down 16.5% in 1Q22, reflecting the impact
on portfolio asset valuations from market movements in discount
rates and listed peer multiples resulting from the Russia-Ukraine
war:
o GEL 243.1 million value reduction in private portfolio assets
(-8.4 ppts impact on the NAV per share)
o GEL 207.7 million value reduction in BoG stake value as share
price decreased by 28.8% (-7.2 ppts impact)
Ø Receipt of GEL 526.7 million (US$ 173 million) cash proceeds
(net of transaction fees) from the disposal of an 80% equity
interest in the water utility business, leading to the portfolio
value reduction by GEL 557.6 million, and contributing to a 66.3%
decrease in the Group's net debt in 1Q22
Ø Outstanding growth in aggregated net operating cash flow
generation across our private businesses, up 83.5% in 1Q22
Ø c.873,000 shares (c.2% of issued capital) repurchased in 1Q22
under the current share buyback and cancellation programme,
bringing the total bought back and cancelled shares to c.4% of
issued capital as at 6 May 2022
Ø Market Value Leverage ("MVL")[4] down 7.7 ppts to 16.5% in
1Q22 (from 24.2% as of 31-Dec-21)
INVESTOR DAY 2022 DETAILS : Investor Day, organised by the
Group, will be held on 9 May 2022 in London, UK. 1Q22 results will
be discussed during the event. Further details about Investor Day
are available on our webpage: https://georgiacapital.ge/ir/news
.
CHAIRMAN AND CEO'S STATEMENT
The Russia-Ukraine war has resulted in extraordinary global
economic disruption, as unprecedented sanctions were imposed upon
the Russian economy; energy prices have surged, and global
spillover risks have been substantially increased. Besides its
devastating economic impact, the war has led to one of the largest
humanitarian crisis in contemporary history, with further
consequences expected to follow as the situation develops. Global
geopolitical and economic uncertainty has surged, leading to
increased volatility across both global and regional markets. While
the uncertainties remain and potential outcomes can vary, history
has shown that Georgia has a very strong track record of resilience
against such challenges. Georgia Capital is also well-positioned to
withstand any potential pressures, with a strong mix of portfolio
investments in predominantly defensive sectors. Against the
challenging economic and geopolitical backdrop created by the
regional conflict, the operational performance of our high-quality
businesses during the first quarter of 2022 was outstanding. This
performance reflects the high level of resilience of our portfolio
companies, run by our strong management teams.
Successful completion of the water utility business sale. In
1Q22, we successfully completed the first stage of the water
utility business disposal, which represents our most significant
monetisation event to date and marks the completion of the full
investment cycle for one of our large portfolio businesses: from
acquisition and development, to cash exit. The disposal realised
US$ 180 million cash proceeds in February 2022 and created
substantial value for our shareholders. The sale valuation
translates into 2.7x MOIC in US$ (3.6x MOIC in GEL) and 20% IRR in
US$ (27% IRR in GEL). This also further validates GCAP's NAV and
marks the delivery of our key strategic priority, announced in
November 2020, to dispose of one of our large businesses. At the
same time, proceeds from the sale also have a significant positive
impact on the Group's leverage profile, reducing a) net debt by
66.3% to GEL 239.4 million and b) Market Value Leverage by 7.7 ppts
to 16.5% as at 31-Mar-22.
Updating the NAV format. Following the disposal of 80% of water
utility shares, the remaining 20% equity stake in the business
(where we have a clear exit path through a put and call structure
at pre-agreed EBITDA multiples) will be presented under the listed
and observable portfolio category, alongside our 19.9% investment
in BoG. In addition, the healthcare services business is now split
into two individual businesses (Hospitals, and Clinics &
Diagnostics) given the differences in their stage of development.
With a GEL 524.3 million equity value as of 31-Mar-22, our growing,
market-leading, non-cyclical hospitals business will be presented
under the large portfolio category. Clinics and Diagnostics, where
we expect significant value creation over the next few years, will
be presented alongside Renewable Energy and Education under the
investment stage portfolio category.
NAV per share (GEL) was down 16.5% in 1Q22 to GEL 52.62. The
decrease in NAV per share (GEL) in 1Q22 reflects the impact on
portfolio asset valuations from market movements in discount rates
and listed peer multiples resulting from the Russia-Ukraine war. In
1Q22, the value reduction across our private portfolio companies
amounted to GEL 243.1 million (-8.4 ppts impact), of which, the
negative impact from changes in valuation multiples amounted to GEL
196.3 million within our private portfolio (-6.8 ppts impact).
BoG's share price during 1Q22 decreased by 28.8%, reducing the
value of GCAP's holding by GEL 207.7 million (-7.2 ppts impact).
The NAV per share was further impacted by management platform
related costs and other expenses (-2.2 ppts impact). The NAV per
share decrease was partially offset by the accretive impact from
share buybacks - in line with the current share buyback and
cancellation programme (+1.3ppts impact).
US$ 10 million increase to the existing share buyback programme
in 1Q22. Despite delivering on our strategy and validating our
private portfolio valuations, the discount to the NAV per share
remained high at above 50% during 1Q22. Accordingly, we took the
opportunity to increase the share buyback programme by an
additional US$ 10 million. As a result, c.873,000 shares (c.2% of
issued capital) were repurchased in 1Q22, under the current share
buyback and cancellation programme, bringing the total number of
shares bought back and cancelled to c.4% of issued capital since
August 2021. Today we are further increasing our buybacks by an
additional US$ 10 million (see page 23 for details).
Underlying operating performances across our private portfolio
were excellent. Despite the economic challenges, the aggregated
revenue across our large portfolio companies, which now excludes
the recently divested water utility business, increased by 12.3%
y-o-y to GEL 315.0 million and EBITDA was up 7.5% y-o-y to GEL 39.8
million in 1Q22. Revenue and EBITDA of investment stage portfolio
companies increased by 28.4% and 19.7% y-o-y, respectively, in
1Q22, reflecting the robust operating performance of the
businesses. In total, the aggregated revenue of our private
portfolio companies was up 15.0% y-o-y to GEL 435.0 million, while
EBITDA was down 0.7% y-o-y to GEL 53.8 million. The EBITDA decrease
reflects developments within our other portfolio, where the ongoing
war negatively impacted our wine (c. 60% sales exposure to Russia
and Ukraine in 2021) and housing businesses (significant growth in
construction materials costs).
Overall, the strong revenue growth translated into outstanding
aggregated net operating cash flow generation across our private
businesses, up 83.5% y-o-y in 1Q22.
From a macroeconomic perspective , Georgia's economic recovery
accelerated at the beginning of 2022, with real GDP growing by an
estimated 14.4% in 1Q22, following its 10.4% expansion in 2021. On
the domestic side, the recovery has been supported by the fiscal
stance remaining expansionary, as both current and capital
expenditures grew by 13% y-o-y in 1Q22, facilitated by a 33.5%
increase in fiscal revenues. Credit expansion has also been robust,
as commercial bank loans grew by 18% y-o-y in March on a nominal
basis. On the external side, strong remittance inflows (up 9.2%
y-o-y in 1Q22) were supported by merchandise exports (up 43.3%
y-o-y in 1Q22) and tourism revenues rebounding to over 71% of
pre-pandemic levels in March 2022. The impact of the war in Ukraine
has so far been relatively limited, as merchandise exports and
remittances grew by 26.3% and 2.6% y-o-y respectively in March
2022. The Georgian Lari (GEL) has appreciated by 8% against the US
dollar (USD) compared to the beginning of 2021 as of 5 May 2022,
driven by growing demand for Georgian exports (including a partial
recovery in service exports), robust remittance inflows, tight
monetary policy and accelerated foreign currency lending, as well
as strong market confidence. The public-debt-to-GDP ratio fell to
under 50% by the end of 2021, a reduction of over 10 percentage
points (pp) compared to the end of 2020, supported by
higher-than-expected growth and GEL strengthening. The overall
fiscal deficit is projected to fall to under 4.5% of GDP in 2022
and under 3% of GDP in 2023, as fiscal support has begun to
moderate and the operating balance has switched back to surplus.
The National Bank of Georgia (NBG) further tightened the GEL
refinancing rate by 50 basis points (bps) to 11% in March 2022,
reflecting the potential risk of entrenched inflationary
expectations due to a prolonged period of rising prices. Inflation
reached 12.8% in April 2022 and is expected to return to single
digits from the second half of the year.
Outlook. Despite the significant and ongoing global tensions and
their negative economic impact on the region, our portfolio
businesses, except for wine and housing businesses, have remained
unaffected. However, the long-term consequences of the war remain
unpredictable and very difficult to assess. I have always
highlighted that we must be constantly mindful of emerging risks,
whilst continuing to tap attractive investment opportunities. We
will be increasing our focus on balancing the varying risks and
opportunities in an ever-changing, very volatile environment, where
it is extremely difficult to predict the short and long-term
impacts of the recent geopolitical tensions on our people, our
businesses, and our country. Having adopted a relatively
conservative approach to managing our investment portfolio and
balance sheet leverage, I believe Georgia Capital is
well-positioned to withstand the potential pressures and deliver
consistent NAV per share growth over the medium term.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset
value at 3 1 - Mar -22 and its income for the first quarter then
ended on an IFRS basis (see "Basis of Presentation" on page 23
below).
Net Asset Value (NAV) Statement
NAV statement summarises the Group's IFRS equity value (which we
refer to as Net Asset Value or NAV in the NAV Statement below) at
the opening and closing dates for the first quarter (31- Dec -21
and 3 1 - Mar -22). 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 1Q 22
GEL '000, Dec-21 1. Value 2a. 2b. 2c. 3.Operating 4. Mar Change
unless creation Investment Buyback Dividend expenses Liquidity/ -22 %
otherwise noted ([5]) and FX/Other
Divestments
Listed and
Observable
Portfolio
Companies
Bank of Georgia
(BoG) 681,186 (207,707) - - - - - 473,479 -30.5%
Water Utility - - 139,392 - - - - 139,392 NMF
Total Listed
and
Observable
Portfolio
Value 681,186 (207,707) 139,392 - - - - 612,871 -10.0%
Listed and
Observable
Portfolio
value change
% -30.5% 20.5% 0.0% 0.0% 0.0% 0.0% -10.0%
Private
Portfolio
Companies
Large Companies 2,249,260 (142,532) (696,960) - - - 714 1,410,482 -37.3%
Retail
(Pharmacy) 710,385 (53,306) - - - - - 657,079 -7.5%
Hospitals 573,815 (49,519) - - - - - 524,296 -8.6%
Water Utility 696,960 - (696,960) - - - - - -100.0%
Insurance (P&C
and
Medical) 268,100 (39,707) - - - - 714 229,107 -14.5%
Of which,
P&C
Insurance 211,505 (27,590) - - - - 714 184,629 -12.7%
Of which,
Medical
Insurance 56,595 (12,117) - - - - - 44,478 -21.4%
Investment
Stage
Companies 461,140 (13,488) 1,559 - (2,195) - 231 447,247 -3.0%
Clinics and
Diagnostics 158,004 (9,987) - - - - - 148,017 -6.3%
Renewable
Energy 173,288 (7,856) 394 - (2,195) - 231 163,862 -5.4%
Education 129,848 4,355 1,165 - - - - 135,368 4.3%
Other Companies 224,645 (87,094) 13 - - - 462 138,026 -38.6%
Total Private
Portfolio
Value 2,935,045 (243,114) (695,388) - (2,195) - 1,407 1,995,755 -32.0%
Private
Portfolio
value change % -8.3% -23.7% 0.0% -0.1% 0.0% 0.0% -32.0%
Total Portfolio
Value (1) 3,616,231 (450,821) (555,996) - (2,195) - 1,407 2,608,626 -27.9%
Total Portfolio
value change % -12.5% -15.4% 0.0% -0.1% 0.0% 0.0% -27.9%
Net Debt (2) (711,074) - 555,996 (26,052) 2,195 (5,217) (55,233) (239,385) -66.3%
of which,
Cash and
liquid funds 272,317 - 555,996 (26,052) 2,195 (5,217) (80,714) 718,525 NMF
of which,
Loans
issued 154,214 - - - - - 9,835 164,049 6.4%
of which,
Gross
Debt (1,137,605) - - - - - 15,646 (1,121,959) -1.4%
Net other
assets/
(liabilities)
(3) (21,535) - - - - (4,088) 27,429 1,806 NMF
of which,
share-based
comp. - - - - (4,088) 4,088 -
Net Asset Value
(1)+(2)+(3) 2,883,622 (450,821) - (26,052) - (9,305) (26,397) 2,371,047 -17.8%
NAV change % -15.6% 0.0% -0.9% 0.0% -0.3% -0.9% -17.8%
Shares
outstanding(5) 45,752,362 - - (992,255) - - 302,932 45,063,039 -1.5%
Net Asset Value
per share, GEL 63.03 (9.86) (0.00) 0.81 (0.00) (0.21) (1.15) 52.62 -16.5%
NAV per share,
GEL
change % -15.6% 0.0% 1.3% 0.0% -0.3% -1.8% -16.5%
NAV per share (GEL) decreased by 16.5% in 1Q22, reflecting a)
value reduction of BoG and private portfolio companies with a 7.2
ppts and 8.4 ppts negative impact on the NAV per share,
respectively, and b) management platform related costs and other
expenses (-2.2 ppts impact). The NAV per share decrease was
partially offset by the accretive impact from share buybacks
(+1.3ppts impact).
Portfolio overview
The total portfolio value decreased by GEL 1,007.6 million
(27.9%) to GEL 2,608.6 million in 1Q22:
-- GEL 557.6 million value decrease was attributable to the
disposal of an 80% equity interest in the water utility business
which was converted into cash - 15.4 ppts of the total
decrease.
-- The value of our private portfolio companies decreased by GEL
242.3 million - 6.7 ppts of the total.
-- The value of BoG decreased by GEL 207.7 million - 5.7 ppts of the total.
Consequently, as of 31-Mar-22, the listed and observable
portfolio value totalled GEL 612.9 million (23.5% of total), and
the private portfolio value amounted to GEL 2.0 billion (76.5% of
total portfolio value). The total portfolio value reduction also
reflects GEL 2.2 million dividends paid to GCAP in 1Q22, which were
slightly offset by the investment of GEL 1.6 million predominantly
in the renewable energy and education businesses.
Value creation
The ongoing war between Russia and Ukraine, which began in
February 2022, has created substantial uncertainties in the
economic environment in the region and beyond. However, with
limited direct exposure to Russia or Ukraine, our portfolio of
high-quality and defensive companies has remained resilient in the
face of the geopolitical tensions. Aggregated revenue and EBITDA of
our large and investment stage portfolio companies increased by
14.0% and 10.2% y-o-y, respectively, in 1Q22, leading to a GEL 38.9
million operating-performance related increase in the value of our
private portfolio. The increase was offset by the developments
across our other businesses, where wine and housing businesses were
impacted by the spillover effect of the war (GEL 81.2 million
negative impact). As a result, the total operating-performance
related value reduction of our private assets amounted to GEL 42.3
million in 1Q22. The ongoing geopolitical tensions affected the
discount rates and listed peer multiples used in our DCF and
multiple-based valuation assessments. In total, the negative net
impact from changes in valuation multiples and foreign currency
exchange rates totalled GEL 200.8 million within our private
portfolio in 1Q22. BoG's share price during 1Q22 decreased by
28.8%, reducing the value of our investment by GEL 207.7 million.
The developments described above translated into GEL 450.8 million
negative value creation during 1Q22.
The table below summarises value creation drivers in our
businesses in 1 Q22:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([6]) / and FX ([8])
buy-outs
/ exits
([7])
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
Listed and Observable (207,707)
BoG (207,707)
Water Utility -
Private (42,264) (13) (200,837) (243,114)
Large Portfolio Companies 25,022 - (167,554) (142,532)
Retail (pharmacy) 67,304 - (120,610) (53,306)
Hospitals (31,024) - (18,495) (49,519)
Insurance (P&C and Medical) (11,258) - (28,449) (39,707)
Of which, P&C Insurance (2,914) - (24,676) (27,590)
Of which, Medical Insurance (8,344) - (3,773) (12,117)
Investment Stage Portfolio Companies 13,918 - (27,406) (13,488)
Clinics and Diagnostics 871 - (10,858) (9,987)
Renewable Energy (2,683) - (5,173) (7,856)
Education 15,730 - (11,375) 4,355
Other (81,204) (13) (5,877) (87,094)
Total portfolio (42,264) (13) (200,837) (450,821)
Valuation overview
In 1Q22 we performed a comprehensive analysis to determine the
impact of the Russia-Ukraine war on our private portfolio
valuations. In our analysis, we estimated the impact of the war on
discount rates as well as reviewed the changes in listed peer
multiples and overall movement in emerging and regional markets.
Uncertainties surrounding the geopolitical tensions translated into
approximately a 1.5%-2% increase in discount rates and reduced
listed peer multiples and were reflected accordingly in the private
portfolio companies' valuations in 1Q22.
In 1Q22, our private large portfolio companies were valued
internally by incorporating the portfolio companies' 1Q22 results,
in line with International Private Equity Valuation ("IPEV")
guidelines and methodology deployed at the end of 2021 by an
independent valuation company. The independent valuation
assessments, which serve as the basis for Georgia Capital's
estimate of fair value, were performed by applying a combination of
an income approach (DCF) and a market approach (listed peer
multiples and, in some cases, precedent transactions). 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.
Starting from 2Q22, similar to the private large portfolio
companies, the investment stage businesses will be also valued by
an independent valuation company on a semi-annual basis. In 1Q22, o
ur 20% equity stake in the water utility business was valued at the
recent transaction price.
The enterprise value and equity value development of our
businesses in 1 Q22 are summarised in the following table:
Enterprise Value Equity Value
(EV)
GEL '000, unless 31-Mar-22 31-Dec-21 Change 31-Mar-22 31-Dec-21 Change % share
otherwise noted % % in total
portfolio
Listed and Observable
portfolio 612,871 681,186 -10.0% 23.5%
BoG 473,479 681,186 -30.5% 18.2%
Water Utility 139,392 - NMF 5.3%
Private portfolio 3,277,591 4,628,048 -29.2% 1,995,755 2,935,045 -32.0% 76.5%
Large portfolio
companies 1,845,498 3,121,089 -40.9% 1,410,482 2,249,260 -37.3% 54.1%
Retail (pharmacy) 900,218 952,269 -5.5% 657,079 710,385 -7.5% 25.2%
Hospitals 735,626 791,756 -7.1% 524,296 573,815 -8.6% 20.1%
Water Utility - 1,129,902 NMF - 696,960 NMF 0.0%
Insurance (P&C and
Medical) 209,654 247,162 -15.2% 229,107 268,100 -14.5% 8.8%
Of which, P&C Insurance 184,629 211,505 -12.7% 184,629 211,505 -12.7% 7.1%
Of which, Medical
Insurance 25,025 35,657 -29.8% 44,478 56,595 -21.4% 1.7%
Investment stage
portfolio companies 779,019 779,824 -0.1% 447,247 461,140 -3.0% 17.1%
Clinics and Diagnostics 206,128 211,629 -2.6% 148,017 158,004 -6.3% 5.7%
Renewable Energy 427,321 428,248 -0.2% 163,862 173,288 -5.4% 6.3%
Education[9] 145,570 139,947 4.0% 135,368 129,848 4.3% 5.2%
Other 653,074 727,135 -10.2% 138,026 224,645 -38.6% 5.3%
Total portfolio 2,608,626 3,616,231 -27.9% 100.0%
Private large portfolio companies (54.1% of total portfolio
value) [10]
Retail (Pharmacy) (25.2% of total portfolio value) - Despite the
robust operating performance, the Enterprise Value (EV) of Retail
(Pharmacy) decreased by 5.5% to GEL 900.2 million in 1Q22, driven
by market movements in discount rates and listed peer multiples
resulting from the Russia-Ukraine war . Revenue was up by 14.4%
y-o-y in 1Q22, reflecting the launch of new pharmacies (added 37
pharmacies over the last 12 months) and organic sales growth
(same-store revenue up 17.5 ppts y-o-y in 1Q22) . EBITDA (excl.
IFRS 16) was up 57.5% y-o-y in 1Q22. See page 11 for details.
Consequently, LTM EBITDA (incl. IFRS 16) increased 8.2% to GEL
111.4 million in 1Q22. Net debt (incl. financial lease liabilities)
increased by 13.1% q-o-q to GEL 133.9 million, mainly reflecting a
decrease in cash balance due to the payment of GEL 10.0 million
under the first tranche of the minority interest buyout (10% valued
at GEL 41.2 million) in the business. As a result, the fair value
decreased by GEL 53.3 million in 1Q22 and the equity value of
GCAP's holding amounted to GEL 657.1 million as of 31-Mar-22. The
implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) decreased
to 8.1x as at 31-Mar-22 (down from 9.3x as of 31-Dec-21).
Hospitals (20.1% of total portfolio value) - Hospitals' EV
decreased by 7.1% to GEL 735.6 million in 1Q22, reflecting
decreases relating to both market movements resulting from the war,
and the operating performance of the business. The occupancy rate,
as well as the number of admissions, were up by 4.2 ppts and 33.9%
y-o-y, respectively, in 1Q22, translating into hospitals' y-o-y net
revenue growth of 9.0%. As the number of COVID cases started to
decrease substantially starting from 2022, the Government suspended
COVID contracts with hospitals in March 2022. Restructuring the
cost base of COVID hospitals and phasing out from Government
contracts temporarily suppressed business margins in 1Q22 which,
coupled with the absence of state income tax subsidy for low salary
range employees, effective from May 2020 till June 2021, translated
into a 7.3 ppts y-o-y decrease in the EBITDA margin (excl. IFRS
16). Consequently, EBITDA (excl. IFRS 16) was down 19.9% y-o-y in
1Q22. See page 13 for details. LTM EBITDA (incl. IFRS 16) decreased
by 4.8% to GEL 71.5 million in 1Q22 and the net debt (incl.
financial lease liabilities) was down 2.1% q-o-q to GEL 174.7
million. As a result, the equity
value of the business was assessed at GEL 524.3 million, down
8.6% q-o-q in 1Q22, translating into an implied LTM EV/EBITDA
multiple (incl. IFRS 16) of 10.3x at 31-Mar-22 (10.5x at
31-Dec-21).
Insurance (P&C and Medical) (8.8% of total portfolio value)
- The insurance business combines: a) P&C Insurance valued at
GEL 184.6 million and b) Medical Insurance valued at GEL 44.5
million.
P&C Insurance - Net premiums earned increased by 16.0% y-o-y
to GEL 21.7 million in 1Q22, mainly reflecting the growth in the
credit life and liability insurance lines. The revenue growth and
the well-controlled operating cost base of the business led to a
decrease in expense ratio by 0.7 ppts y-o-y in 1Q22. The loss ratio
was also down by 0.8 ppts, mainly reflecting improvement in the
loss ratio of the motor insurance line and decreased COVID-19-
related credit life insurance claims. The improved expense and loss
ratios translated into a decreased combined ratio by 1.5 ppts in
1Q22. However, net income was down 5.0% y-o-y in 1Q22, primarily
due to GEL 0.6 million loss incurred on investment securities
reflecting market movements. See page 14 for details. LTM net
income[11] was down by 1.2% to GEL 17.4 million in 1Q22.
Consequently, the equity value of the P&C insurance business
was assessed at GEL 184.6 million at 31-Mar-22 (down 12.7% q-o-q).
The implied LTM P/E valuation multiple stood at 10.6x in 1Q22 (down
from 12.0x in 4Q21).
Medical Insurance - Net premiums earned increased by 1.1% y-o-y
to GEL 17.5 million in 1Q22, predominantly driven by a c.5%
increase in the price of insurance policies. Net claims expenses
were also up by 6.4% y-o-y in 1Q22, in line with the rebounding
trend of elective healthcare services, compared to the patient
footprint slowdown last year due to the pandemic . As a result, the
net income of the medical insurance business was down 67.2% y-o-y
in 1Q22. See page 14 for details. LTM net income[12] was down by
15.8% to GEL 3.2 million in 1Q22, and the equity value of the
business was assessed at GEL 44.5 million at 31-Mar-22 (down 21.4%
q-o-q). The implied LTM P/E valuation multiple was at 14.0x in
1Q22, down from 15.0x in 4Q21.
Private investment stage portfolio companies (17.1% of total
portfolio value)
Clinics and Diagnostics (5.7% of total portfolio value) - The
business was valued by applying a combination of income and market
approaches. Despite the strong operating performance, movements in
the valuation inputs due to the Russia-Ukraine war led to a 2.6%
q-o-q decrease in EV of Clinics and Diagnostics to GEL 206.1
million in 1Q22. Revenue of the clinics business increased by 28.1%
y-o-y in 1Q22, reflecting increasing demand for regular outpatient
services. The diagnostics business, which, apart from regular
diagnostics services, is also engaged in COVID-19 testing, also
increased its revenue by 41.1% y-o-y in 1Q22 to GEL 7.8 million.
The combined EBITDA (excl. IFRS 16) of the clinics and diagnostics
business increased by 12.0% y-o-y to GEL 4.7 million. However,
similar to the hospitals business, our clinics and diagnostics
business was also impacted by the suspension of COVID contracts by
the Government, which together with the expiration of a 6-months
state income tax subsidy, led to a 3.2 ppts y-o-y decrease in the
combined EBITDA margin (excl. IFRS 16). See page 17 for details.
LTM EBITDA (incl. IFRS 16) increased by 2.5% to GEL 22.8 million in
1Q22. As a result, the equity value of the business was assessed at
GEL 148.0 million, down 6.3% q-o-q in 1Q22, translating into an
implied LTM EV/EBITDA multiple (incl. IFRS 16) of 9.0x at
31-Mar-22, down from 9.5x at 31-Dec-21.
Renewable Energy (6.3% of total portfolio value) - The business
was valued based on a sum of the parts (EV/EBITDA and replacement
cost). Enterprise value was slightly down 0.2% to GEL 427.3 million
in 1Q22, reflecting movement in the valuation inputs due to the
war. In US$ terms, revenue and EBITDA were up 6.3% and 9.4% y-o-y
in 1Q22 on the back of a 7.3% y-o-y increase in the electricity
generation levels at the power assets (revenue and EBITDA in GEL
terms, which reflect the impact of GEL's appreciation against US$,
were largely flat, down by 1.9% and up by 0.6% y-o-y, respectively,
in 1Q22). See page 19 for details. The pipeline renewable energy
projects continued to be measured at an equity investment cost of
GEL 44.2 million in aggregate. Net debt increased by GEL 8.5
million to GEL 263.5 million in 1Q22 which reflects GEL 2.2 million
dividends paid to GCAP in 1Q22 and GEL 3.0 million one-off costs
associated with the termination of the certain employee contracts
in connection with the separation of the business from Water
Utility. As a result, the equity value of Renewable Energy was
assessed at GEL 163.9 million in 1Q22 (down by 5.4% q-o-q).
Education (5.2% of total portfolio value) - The business was
valued based on LTM EV/EBITDA. Education EV increased by 4.0% to
GEL 145.6[13] million in 1Q22, reflecting the strong operating
performance of the business, which was partially offset by
developments in the valuation inputs as a result of market
movements. Revenue and EBITDA were up by 45.3% and 57.1% y-o-y in
1Q22, respectively, reflecting both the organic growth and
expansion of the business in the affordable segment. In 1Q22, GCAP
invested GEL 1.2 million in Education, predominantly for capacity
expansion of the existing campus of Buckswood (mid-scale segment)
and the development of land and building of the new campus of Green
School (affordable segment). See page 20 for details. LTM EBITDA
was up by 8.4% to GEL 12.1 million and net debt was down by 5.5% to
GEL 7.9 million in 1Q22. As a result, the education business was
valued at GEL 135.4 million in 1Q22 (up 4.3% q-o-q). The valuation
multiple was down to 12.0x in 1Q22, from 12.5x in 4Q21.
Other businesses (5.3% of total portfolio value) - The "other"
private portfolio (Auto Service, Beverages, IT Outsourcing, Housing
Development and Hospitality businesses) is valued based on LTM
EV/EBITDA except the housing development (DCF), wine business (DCF)
and hospitality businesses (NAV). See performance highlights of
other businesses on page 22. The portfolio had a combined value of
GEL 138.0 million at 31-Mar-22, down by 38.6% q-o-q in 1Q22. The
negative value creation amounted to GEL 87.1 million and mainly
reflects a) an operating-performance related decrease in the value
of the housing business, reflecting the higher inflation impact on
construction materials, and b) a reduced valuation of the wine
business, which was directly exposed to the Russian and Ukrainian
markets, as 61% of revenues were generated from sales in these
markets in FY21.
Listed and observable portfolio companies (23.5% of total
portfolio value)
BOG ( 18.2% of total portfolio value) - In 4Q21, BoG delivered
an annualised ROAE of 26.4% and strong 13.9% loan book growth
y-o-y. The 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 global equity market
movements stemming from the geopolitical tensions, BoG's share
price decreased by 28.8% q-o-q to GBP 11.88 at 31-Mar-22 and, as a
result, the market value of our equity stake in BoG decreased by
GEL 207.7 million to GEL 473.5 million. On 22 February 2022, the
Bank announced its Board intention to recommend a final dividend
for 2021 of GEL 2.33 per ordinary share at the Bank's 2022 Annual
General Meeting. This will make a total dividend paid to GCAP of
GEL 22.8 million. BoG's public announcement of their 4Q21 results
is available at:
https://www.bankofgeorgiagroup.com/results/earnings .
Water Utility ( 5.3% of total portfolio value) - In 1Q22, the
remaining 20% equity stake in the water utility business was valued
at the recent transaction price and amounted to GEL 139.4 million.
The first stage of the transaction, which was the initial sale of a
65% equity interest in Georgia Global Utilities JSC ("GGU"), a
holding company for the GCAP's water utility business and the
operational renewable energy assets, (representing an 80% economic
interest in the water utility business) was successfully completed
in 1Q22 with the receipt of full sale proceeds and transfer of the
respective shares of GGU to Aqualia. The second stage of the
transaction will follow the planned redemption of an existing bond
issued by GGU in July/August 2022. GCAP and Aqualia have put and
call options, respectively, over GCAP's remaining 20% equity
interest in the water utility business, which become exercisable in
2025-2026. The exercise price of the put and call options are set
at 8.25x and 8.90x EV/EBITDA multiple, respectively, based on the
normalized EBITDA of the business. More details on the transaction
are available on our website:
https://georgiacapital.ge/ir/water-utility-disposal .
2) Investments [14]
In 1Q22, GCAP's investments amounted to GEL 1.6 million, of
which GEL 1.2 million was allocated to our education business,
predominantly for the capacity expansion of the existing campus of
Buckswood (mid-scale segment) and the development of land and
building of the new campus of Green School (affordable
segment).
3) Share buybacks
During 1Q22, 992,255 shares were bought back for a total
consideration of GEL 26.1 million.
-- 873,426 shares were repurchased under the ongoing share
buyback and cancellation programme. The total value of shares
repurchased under the programme amounted to GEL 22.9 million (US$
7.4 million) in 1Q22. As of 6-May-22, a total of 2,064,354 shares
with the value of GEL 53.8 million (US$ 17.3 million) have been
repurchased under the buyback programme, beginning 10 August
2021.
-- 118,829 shares were repurchased for the management trust.
4) Dividends(14)
In 1Q22, Georgia Capital received GEL 2.2 million regular
dividends from the renewable energy business.
Net debt overview
Below we describe the components of net debt as of 31 March 2022
and as of 31 December 2021:
GEL '000, unless otherwise 31-Mar-22 31-Dec-21 Change
noted
Cash at banks 425,911 132,580 NMF
Internationally listed
debt securities 289,551 137,215 NMF
Locally listed debt
securities 3,063 2,522 21.5%
Loans issued 164,049 154,214 6.4%
Total cash and liquid
funds (a) 882,574 426,531 NMF
Gross debt (b) (1,121,959) (1,137,605) -1.4%
Net debt (a)+(b) (239,385) (711,074) -66.3%
Cash and liquid funds . Total cash and liquid funds' balance
more than doubled q-o-q to GEL 882.6 million (US$ 284.6 million) in
1Q22, reflecting a) the receipt of GEL 526.7 million (US$ 173
million) cash proceeds (net of transaction fees) from the disposal
of an 80% equity interest in the water utility business, following
the successful completion of the first stage of the transaction, b)
dividend and interest receipts of GEL 2.2 and GEL 5.7 million,
respectively. The increase was partially offset by a) GEL 38.0
million Eurobond coupon payment, and b) GEL 25.5 million cash
outflow for buybacks. The internationally listed debt securities'
balance also more than doubled q-o-q in 1Q22. The increase was
attributable to the temporary investments in dollar-denominated
Eurobonds issued by Georgian corporates to generate yield on GCAP's
liquid funds. The issued loans' balance primarily refers to loans
issued to our private portfolio companies, which are lent at market
terms.
Gross debt. At 31-Mar-22, the outstanding balance of US$ 365
million six-year Eurobonds due in March 2024 was GEL 1,122.0
million (down 1.4% q-o-q). The decrease in gross debt reflects a
GEL 38.0 million coupon payment, partially offset by a GEL 19.9
[15] million coupon accrual and GEL 2.5 million foreign exchange
loss, the latter led by GEL's depreciation against USD during
1Q22.
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net loss under IFRS was GEL 489.5 million in 1Q22. 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 March 31 as an
aggregation of (i) the results of GCAP (the two holding companies
Georgia Capital PLC and JSC Georgia Capital, taken together) and
(ii) the fair value change in the value of portfolio companies
during the reporting period. For details on the methodology
underlying the preparation of the adjusted income statement, please
refer to page 98 in Georgia Capital PLC 2021 Annual report.
INCOME STATEMENT (Adjusted IFRS/APM)
GEL '000, unless otherwise noted 1 Q22 1 Q21 Change
Dividend income 2,195 4,738 -53.7%
Interest income 8,785 4,497 95.4%
Realised / unrealised loss on liquid
funds (10,239) (172) NMF
Interest expense (19,853) (17,219) 15.3%
Gross operating loss (19,112) (8,156) NMF
Operating expenses (9,305) (8,873) 4.9%
GCAP net operating loss (28,417) (17,029) 66.9%
Fair value changes of portfolio
companies
Listed and Observable Portfolio
Companies (207,707) (26,452) NMF
Of which, Bank of Georgia Group
PLC (207,707) (26,452) NMF
Of which, Water Utility - - NMF
Private Portfolio companies (245,309) 30,250 NMF
Large Portfolio Companies (142,532) 4,497 NMF
Of which, Retail (pharmacy) (53,306) (17,159) NMF
Of which, Hospitals (49,519) 26,613 NMF
Of which, Water Utility - (15,005) NMF
Of which, Insurance (P&C and Medical) (39,707) 10,048 NMF
Investment Stage Portfolio Companies (15,683) 5,140 NMF
Of which, Clinics and Diagnostics (9,987) 6,815 NMF
Of which, Renewable energy (10,051) (5,439) 84.8%
Of which, Education 4,355 3,764 15.7%
Other businesses (87,094) 20,613 NMF
Total investment return (453,016) 3,798 NMF
Income before foreign exchange
movements and non-recurring expenses (481,433) (13,231) NMF
Net foreign currency loss (3,724) (31,442) -88.2%
Non-recurring expenses (92) (177) -48.0%
Net loss (485,249) (44,850) NMF
A gross operating loss of GEL 19.1 million in 1Q22 reflects a
15.3% increase in interest expenses and GEL 10.2 million realized
and unrealized loss on liquid funds held by GCAP - which is mostly
unrealized due to the market volatility driven by the regional
geopolitical instability. The significant interest income growth in
1Q22 was mainly due to the increased liquid funds balance and
related investments in internationally listed debt securities. The
GEL 2.5 million y-o-y decline in dividend income reflects the lower
dividends from the renewable energy business.
GCAP earned an average yield of 5.0% on the average balance of
liquid assets and issued loans of GEL 585.5 million in 1Q22 (5.1%
on GEL 323.0 million in 1Q21).
The components of GCAP's operating expenses are shown in the
table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise
noted 1Q22 1Q21 Change
Administrative expenses
([16]) (2,764) (2,811) -1.7%
Management expenses
- cash-based ([17]) (2,453) (2,595) -5.5%
Management expenses
- share-based ([18]) (4,088) (3,467) 17.9%
Total operating expenses (9,305) (8,873) 4.9%
Of which, fund type
expense ([19]) (2,993) (3,075) -2.7%
Of which, management
fee ([20]) (6,312) (5,798) 8.9%
GCAP management fee expenses have a self-targeted cap of 2% of
Georgia Capital's market apitalization. The LTM management fee
expense ratio was 2.1% at 31-Mar-22 (1.6% [21] as of 31-Mar-21).
The total LTM operating expense ratio (which includes fund type
expenses) was 3.1% at 31-Mar-22 (2.5%(21) at 31-Mar-21).
Total investment return represents the increase (decrease) in
the fair value of our portfolio. Total investment return was
negative GEL 453.0 million in 1Q22, reflecting the decrease in the
value of listed and observable and private businesses, as described
earlier in this report. We discuss valuation drivers for our
businesses on pages 5-8. The performance of each of our private
large and investment stage portfolio companies is discussed on
pages 11-20.
GCAP's net foreign currency liability balance amounted to c.US$
106 million (GEL 329 million) at 31-Mar-22. Net foreign currency
loss was GEL 3.7 million in 1 Q22. As a result of the movements
described above, GCAP's adjusted IFRS net loss was GEL 485.2
million in 1Q22.
DISCUSSION OF PORTFOLIO COMPANIES' RESULTS (STAND-ALONE
IFRS)
The following sections present the IFRS results and business
development extracted from the individual portfolio company's IFRS
accounts for large and investment stage entities, where 1Q22 and
1Q21 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 23 for more
background.
LARGE PORTFOLIO COMPANIES
Discussion of Retail (pharmacy) Business Results
The retail (pharmacy) business, where GCAP owns a 67% equity
interest through GHG[22], 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 operates a total
of 359 pharmacies, of which 353 are in Georgia, and 6 are in
Armenia.
1Q22 performance (GEL '000), Retail (pharmacy) [23]
INCOME STATEMENT HIGHLIGHTS 1Q22 1Q21 Change
Revenue, net 198,802 173,797 14.4%
Of which, retail 154,878 127,529 21.4%
Of which, wholesale 43,924 46,268 -5.1%
Gross Profit 59,097 40,245 46.8%
Gross profit margin 29.7% 23.2% 6.5ppts
Operating expenses (ex.
IFRS 16) (38,480) (27,155) 41.7%
EBITDA (ex. IFRS 16) 20,617 13,090 57.5%
EBITDA margin, (ex.
IFRS 16) 10.4% 7.5% 2.9ppts
Net profit (ex. IFRS
16) 17,045 8,308 105.2%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 16,806 (2,522) NMF
EBITDA to cash conversion 81.5% -19.3% 100.8ppts
Cash flow used in investing
activities[24] (20,394) (1,821) NMF
Free cash flow, (ex.
IFRS 16)[25] (1,964) (5,137) 61.8%
Cash flow used in financing
activities (ex. IFRS
16) (9,697) (3,682) NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 516,303 522,814 -1.2%
Of which, cash and bank
deposits 41,007 54,616 -24.9%
Of which, securities
and loans issued 24,037 20,922 14.9%
Total liabilities 475,523 497,954 -4.5%
Of which, borrowings 85,769 89,844 -4.5%
Of which, lease liabilities 112,012 104,613 7.1%
Total equity 40,780 24,860[26] 64.0%
KEY POINTS / VALUATION DRIVERS
Ø Strong growth in 1 Q22 revenues (up 14.4%) and EBITDA (excl.
IFRS 16) (up 57.5%) y-o-y, reflecting overall improvement in
economic activity and continued expansion of the pharmacy chain
Ø Robust gross profit margin of 29.7% in 1Q22 (up 6.5 ppts
y-o-y), reflecting the growing profitability of the wholesale
business line notwithstanding a 5.1% y-o-y revenue reduction in
1Q22 in that business, further supported by the increased sales of
high margin para-pharmacy products in the retail business line
Ø EBITDA margin at 10.4% in 1Q22 (up 2.9 ppts y-o-y), exceeding
the targeted 9%+
Ø Strong cash flow from operating activities, in line with the
enhanced revenue streams - with an 81.5% EBITDA to cash conversion
ratio
Ø Net debt [27] amounted to GEL 20.7 million as of 31-Mar-22, up
44.9% q-o-q, mainly reflecting a decrease in cash balance due to
the payment of GEL 10.0 million under the first tranche of the
minority interest buyout (10% valued at GEL 41.2 million) in the
business
Ø Added 37 pharmacies over the last 12 months, expanding from
322 to 35 9 stores
Ø Due to the expansion of local business as well as opening new
pharmacies internationally (currently in Armenia), the business is
upgrading its core IT system with SAP, which enables the company to
implement a more efficient operating system for the warehouse,
decrease operational risks and improve the day-to-day inventory
management process. The implementation process will last
approximately a year and a half, ending in June 2023, with the
total estimated cost at around USD 3.2 million.
INCOME STATEMENT HIGHLIGHTS
The retail (pharmacy) business delivered 14.4% y-o-y revenue
growth in 1Q22, reflecting expansion (adding 3 7 pharmacies over 12
months) as well as organic sales growth (same-store revenue up
12.5% in 1Q22). The retail revenue share in total revenue was 77.9%
in 1Q22 (73.4% in 1Q21). The revenue from para-pharmacy, as a
percentage of retail revenue from the pharmacy, was 34. 6 % in 1Q22
(34.8% in 1Q21).
Retail (Pharmacy)'s key operating performance highlights for
1Q22 are noted below:
1Q22 1Q21 Change
Same store revenue
growth 12.5% -5.0% 17.5ppts
Number of bills
issued (mln) 7.6 6.5 16 .6%
Average bill 4. 8
size (GEL) 19.3 18.4 %
Benefitting from the strong economic recovery, compared to 1Q21
when due to the increased competition and general macro backdrop
business margins were significantly subdued, as well as increased
marketing activities and sale of higher-margin para-pharmacy
products, the business posted 29.7% (up 6.5 ppts y-o-y) gross
profit margin in 1Q22.
Due to the continuous expansion of the pharmacy chains and
subsequent increase in salary, marketing and utility expenditures
associated with the openings of the new pharmacies, the operating
expenses increased by 41.7% y-o-y. Notwithstanding the increased
costs, the strong business performance led to a 57.5% increase in
EBITDA (excl. IFRS 16), while the 1Q22 EBITDA margin reached 10.4%
(up 2.9 ppts y-o-y). Excluding the impact from state tax subsidy
for low salary range employees, effective during May 2020 - June
2021, EBITDA margin (excl. IFRS 16) was up 3.6 ppts y-o-y, in
1Q22.
Interest expense, excluding IFRS 16, was down 37.6% y-o-y in
1Q22, due to the lower level of net debt position during the
quarter (also down 12.4 ppts q-o-q) . GEL 0.6 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 1Q22 compared to the same period last
year.
As a result, the business posted a GEL 17.0 million profit in
1Q22 (up 1 05.2 % y-o-y).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
On the back of increased revenue, the business posted GEL 16.8
million cash flow from operating activities, translating into an
81.5% EBITDA to cash conversion ratio for the same period.
Increased cash outflows from investing activities reflect increased
capex for implementation of SAP (GEL 4.8 million in 1Q22),
investments attributable to new projects such as opticians and
opening body shops in Armenia, new format pharmacies and regular
expansion of the chain. In 1Q22 the business paid the first tranche
payment of GEL 10.0 million, out of the total GEL 41.2 million
first tranche price, for a 10% minority interest buyout in the
retail (pharmacy) business.
Discussion of Hospitals Business Results
The hospitals business, where GCAP owns a 100% equity interest
through GHG, is the largest healthcare market participant in
Georgia, comprised of 16 referral hospitals with a total of 2,524
beds, providing secondary and tertiary level healthcare services
across Georgia.
1Q22 performance (GEL '000), Hospitals [28]
INCOME STATEMENT HIGHLIGHTS 1Q22 1Q21 Change
Revenue, net[29] 77,074 70,696 9.0%
Gross Profit 27,777 29,652 -6.3%
Gross profit margin 35.4% 41.7% -6.3ppts
Operating expenses (ex.
IFRS 16) (12,687) (10,805) 17.4%
EBITDA (ex. IFRS 16) 15,090 18,847 -19.9%
EBITDA margin (ex. IFRS
16) 19.2% 26.5% -7.3ppts
N et profit (ex. IFRS
16) 3,017 6,643 -54.6%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 10,591 3,943 168.6%
EBITDA to cash conversion
(ex. IFRS 16) 70.2% 20.9% 49.3ppts
Cash flow used in investing
activities[30] (1,063) (10,190) -89.6%
Dividends and intersegment
loans issued/received (1,817) 6,304 NMF
Free cash flow (ex. IFRS
16)[31] 8,612 (6,552) NMF
Cash flow used in financing
activities (ex. IFRS 16) (20,329) (16,383) 24.1%
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 642,241 658,071 -2.4%
Of which, cash balance
and bank deposits 33,625 46,131 -27.1%
Of which, securities and
loans issued 12,763 11,678 9.3%
Total liabilities 275,377 293,428 -6.2%
Of which, borrowings 210,521 223,433 -5.8%
Total equity 366,864 364,643 0.6%
KEY POINTS / VALUATION DRIVERS
Ø Revenues up 9.0% y-o-y in 1Q22, reflecting a 33.9% y-o-y
increase in the number of admissions during the quarter
Ø In March due to the reduced COVID cases in the country, the
Government of Georgia ceased contracting the healthcare facilities
for COVID treatments. Restructuring COVID hospitals to normal
operating levels and phasing out from the COVID cost structure
temporarily suppressed the business' margins in 1Q22
Ø Gross profit down 6.3% y-o-y with 35.4% gross profit margin in
1Q22 (down 6.3 ppts y-o-y)
Ø EBITDA margin (excl. IFRS 16) was down 7.3 ppts y-o-y in 1Q22,
also reflecting a base effect of a state income tax subsidy for low
salary range employees in 1Q21 (GEL c.1.7 million impact);
Excluding the impact of state income tax subsidy, EBITDA margin
(excl. IFRS 16) was down by 4.8 ppts y-o-y
Ø Operating cash (excl. IFRS 16) at GEL 10.6 million, with 70
.2% EBITDA to cash conversion rate (excl. IFRS 16)
Ø Net debt at GEL 164.1 million (down nearly 1% q-o-q),
reflecting solid cash flow generation during the quarter
Ø In April 2022, the hospitals business sold 100% equity
interest in one of the low ROIC generating hospitals - Traumatology
Hospital, for US$ 2.9 million. The transaction is in line with the
business strategy to divest from low ROIC generating assets. The
divestment improves the hospitals business ROIC (by 20bps)
INCOME STATEMENT HIGHLIGHTS
Over the course of the last two years, the hospitals business
was actively engaged in supporting the COVID-19 pandemic response
in Georgia and had mobilised 7 hospitals to receive COVID patients,
with a total aggregate number of c.800 beds across the country
during 1Q22. The Government of Georgia fully reimbursed costs
associated with COVID-19 treatments and paid a fixed fee amount per
bed designated for COVID patients. As the COVID cases declined
substantially in Georgia starting from 2022, in mid-March, the
Government suspended the COVID contracts with hospitals.
Restructuring the cost base of COVID hospitals, and phasing out
from Government contracts, temporarily suppressed the business
margins in1Q22.
Overall, the occupancy rate, as well as the number of
admissions, were up y-o-y by 4.2 ppts and by 33.9% respectively in
1Q22. These trends translated into hospitals' y-o-y net revenue
growth of 9.0% for the quarter.
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 ([32])
. The materials rate remained well-controlled throughout the
quarter (19.7% in 1Q22, 19.6% in 1Q21). However, due to the
expiration of a 6-months state income tax subsidy, effective from
May 2020 till June 2021, as well as COVID hospitals' contracts
suspension since March (COVID hospitals had mainly a fixed direct
salary structure), the direct salary rate was up 4.2 ppts to 34.4%.
After restructuring the COVID hospitals to a normal operating
level, the salary rate is expected to stabilise in the coming
quarters. Utilities and other costs were up in 1Q22, mainly
resulting from increased tariffs on water, gas and electricity,
effective since February 2021 as well as globally increased fuel
costs. As a result, the hospitals business posted a 35.4% gross
margin in 1Q22, down 6.3 ppts y-o-y. Adjusted for the impact of
state income tax subsidy, the gross profit margin was down 3.8 ppts
y-o-y.
The administrative salary expense during the quarter was up by
11.5% y-o-y, in line with the organic growth of the hospitals
business. Furthermore, increased marketing expenses in 1Q22
contributed to the higher general and administrative expenses
(excl. IFRS 16) by 28.3% y-o-y. The increased cost base in 1Q22
resulted in the reduced EBITDA (excl. IFRS 16) by 19.9% with an
EBITDA margin of 19.2%, down 7.3 ppts y-o-y. Adjusted for the state
income tax subsidy impact, the EBITDA margin (excl. IFRS 16) was
down by 4.8 ppts y-o-y.
Increased interest rates (NBG refinancing rate up 2.5 ppts in
the last twelve months) led to an increase in net interest expense
(excl. IFRS 16) in 1Q22, up by 16.4% y-o-y (down 6.5% q-o-q).
Overall, the business posted GEL 3 . 0 million net profit
excluding IFRS 16 in 1Q22, down by 5 4 . 6 % y-o-y.
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (excl. IFRS 16) was up
168.6% y-o-y, mainly due to the weak 1Q21 cash collection when the
business had considerably increased working capital needs. 1Q22
operating cash translated into a 70.2% EBITDA to cash conversion
rate. Capex investment was GEL 3.8 million in 1Q22, mainly
reflecting maintenance capex.
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 28.6%
market share (down by 0.3ppts y-o-y) in property and casualty
insurance based on gross premiums as of 3 1 -Dec-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 22.5% market share based on FY21 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.
1Q22 performance (GEL '000), Insurance (P&C and
Medical)[33]
INCOME STATEMENT HIGHLIGHTS 1Q22 1Q21 Change
Earned premiums, net 39,162 35,978 8.8%
Net underwriting profit 10,799 10,309 4.8%
Net investment profit 1,708 2,323 -26.5%
Net profit 4,369 5,404 -19.2%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 2,051 8,441 -75.7%
Free cash flow 1,470 7,998 -81.6%
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 278,392 267,627 4.0%
Total equity 119,836 116,464 2.9%
TOTAL INSURANCE BUSINESS HIGHLIGHTS
P&C and medical insurance have a broadly equal share in
total revenues, while P&C had a 91% share in total net profit
in 1Q22. The slight y-o-y increase in loss and expense ratios by
0.4 ppts and 0.5 ppts, respectively, translated into the combined
ratio of 90.6%, up by 0.9 ppts y-o-y in 1Q22. Net profit was down
y-o-y by 19.2% to GEL 4.4 million in 1Q22. As a result, ROAE was
17.7% in 1Q22 (21.1% in 1Q21).
Discussion of results, P&C Insurance
KEY POINTS / VALUATION DRIVERS
Ø 16.0% y-o-y increase in earned premiums net in 1Q22, mainly
resulted from growth in the credit life and credit unemployment
insurance lines
Ø Combined ratio down 1.5ppts y-o-y in 1Q22, reflecting a
decrease in the expense ratio by 0.7 ppts y-o-y and a decrease in
the loss ratio by 0.8 ppts y-o-y in 1Q22
Ø Due to the limited reliance on Russian reinsurance, the
current regional geopolitical situation has not caused any notable
impact on the P&C insurance portfolio.
INCOME STATEMENT HIGHLIGHTS
(GEL '000) 1Q22 1Q21 Change
Earned premiums, net 21,705 18,707 16.0%
Net underwriting profit 8,456 7,199 17.5%
Net investment profit 941 1,614 -41.7%
Net profit 3,965 4,174 -5.0%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 3,419 7,290 -53.1%
Free cash flow 2,937 6,878 -57.3%
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 177,917 188,805 -5.8%
Total equity 86,411 84,234 2.6%
INCOME STATEMENT HIGHLIGHTS
1Q22 revenues increased by 16.0% y-o-y, mainly driven by the
increase in credit life insurance revenue by GEL 1.3 million y-o-y.
An increase in liability insurance business line by GEL 0.8 million
y-o-y was the second-best contributor to the overall increase in
1Q22 revenues, predominantly reflecting the increase in credit
unemployment portfolio by GEL 0.6 million y-o-y. Similarly, the
motor insurance line (excluding compulsory border third-party
liability (MTPL) insurance) delivered GEL 0.4 million revenue
growth, mainly associated with the boost in the retail client
portfolio in FY21. The strong economic recovery since 2Q21 is also
reflected in other insurance lines, namely cargo and compulsory
MTPL insurance, where revenues have increased by 46.9% y-o-y and
26.1% y-o-y, respectively. Worldwide vaccination and reopening of
land borders are expected to support a gradual recovery in tourism.
However, recovery of visitor trips and compulsory MTPL premiums to
pre-pandemic levels are likely to be affected by the
Russian-Ukrainian war and its timely resolution.
The existing regional geopolitical situation does not pose a
significant threat to the risk profile of the insurance portfolio
due to very low dependency on Russian reinsurance , most of which
have already been substituted to date.
At 31-Mar-22, the distribution mix in 1Q22 gross premiums
written is as follows: various direct sales channels and brokers
have a majority share of 58% (67% in 1Q21), followed by partnership
agreements with financial institutions of 39% (30% in 1Q21) and
MTPL channels of 3% (2% in 1Q21).
P&C Insurance's key performance ratios for 1Q22 are noted
below:
Key Ratios 1Q22 1Q21 Change
Combined ratio 82.4% 83.9% -1.5ppts
Expense ratio 33.6% 34.3% -0.7ppts
Loss ratio 48.8% 49.6% -0.8ppts
ROAE [34] 23.4% 23.8% -0.4ppts
The 1 Q22 y-o-y decrease in expense ratio mainly reflects robust
revenue growth while operating expenses are gradually returning to
the pre-pandemic level. The volume of COVID-19-related credit life
insurance claims incurred in 1Q22 amounts to GEL 1.0 million (GEL
1.6 million in 1Q21) and represents 27% of total life insurance
claims (50% in 1Q21). There was also an improvement in the loss
ratio of the motor insurance line. This explains the decrease in
the 1Q22 loss ratio, which together with an improved expense ratio,
translated into a 1.5 ppts decrease in the combined ratio. P&C
Insurance's net profit was down 5.0% y-o-y in 1Q22, mainly due to a
GEL 0.6 million loss incurred on investments placed in publicly
traded securities in Eastern Europe, Russia and Ukraine. Adjusted
for this and the FX translation impact on the natural long dollar
position, net profit was up by 17.2% y-o-y in 1Q22.
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
P&C Insurance's solvency ratio was 174% as of 31 March 2022,
significantly above the required minimum of 100%. The operating
cash flow of the business was down by 53.1% y-o-y in 1Q22, affected
by the payment of some payable balances to agents and brokers as
well as the timing of annual discretionary bonus distribution to
the employees.
Discussion of results, Medical Insurance
KEY POINTS / VALUATION DRIVERS
Ø Earned premiums net up 1.1% y-o-y in 1Q22, mainly reflecting
c.5% increase in the price of the insurance policies
Ø Insurance renewal rate down 3.8 ppts to 67.7% in 1Q22, while
the number of insured clients was down 4.0% over the quarter to
c.159,000 as of 31-Mar-22, reflecting the increased price of
insurance policies
Ø On the back of increased demand for healthcare services, the
loss ratio was up 4.1 ppts in 1Q22 to 82.0%
INCOME STATEMENT HIGHLIGHTS
(GEL '000) 1Q22 1Q21 Change
Earned premiums, net 17,457 17,271 1.1%
Net underwriting profit 2,343 3,110 -24.7%
Net investment profit 767 709 8.2%
Net profit 404 1,230 -67.2%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities (1,368) 1,151 NMF
Free cash flow (1,467) 1,120 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 100,475 78,822 27.5%
Total equity 33,425 32,230 3.7%
INCOME STATEMENT HIGHLIGHTS
The modest 1.1% y-o-y increase in 1Q22 earned premiums net,
reflects the combined effect of an increase in the price of
insurance policies and a 7.6% decrease in the number of insured
clients for the same period (from c.172,000 in 1Q21 to 159,000 in
1Q22). 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 1Q22 1Q21 Change
Total claims retained within the GHG 36.5% 35.9% 0.6ppts
Total claims retained in outpatient 37.7% 39.0% -1.3ppts
In 1Q22, the net claims expenses were GEL 14.3 million (up 6.4%
y-o-y), of which GEL 6.3 million ( 44.2 % of total) was inpatient,
GEL 5.1 million ( 35.5 % of total) was outpatient and GEL 2.9
million ( 20.3 % of total) was related to pharmaceuticals.
Reflecting a rebounding trend in the number of admissions at
hospitals and clinics, compared to patient footprint slowdown at
healthcare facilities last year due to the pandemic, the loss ratio
was up 4.1 ppts to 82.0% in 1Q22. As a result, the combined ratio
increased by 4.9 ppts y-o-y to 100.8% for the quarter. The business
posted a net profit of GEL 0.4 million in 1Q22 (down 67.2%
y-o-y).
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
The operating cash flow decline is associated with the state
prepaying insurance policy fees on some of its largest contracts in
4Q21 in the preceding quarter and a corresponding decrease in
1Q22.
INVESTMENT STAGE PORTFOLIO COMPANIES
Discussion of Clinics and Diagnostics Business Results
The clinics and diagnostics business, where GCAP owns a 100%
equity interest through GHG, is the largest healthcare market
participant in Georgia. The business comprises two segments: 1)
Clinics: 19 community clinics with 353 beds (providing outpatient
and basic inpatient services); 15 polyclinics (providing outpatient
diagnostic and treatment services) and 16 lab retail points at GPC
pharmacies; 2) Diagnostics, operating the largest laboratory in the
entire Caucasus region - "Mega Lab".
1Q22 performance (GEL '000), Clinics and Diagnostics [35]
INCOME STATEMENT HIGHLIGHTS 1Q22 1Q21 Change
Revenue, net[36] 25,928 19,616 32.2%
Of which, clinics 19,607 15,306 28.1%
Of which, diagnostics 7,828 5,547 41.1%
Of which, inter-business
eliminations (1,507) (1,237) 21.8%
Gross Profit 10,453 8,654 20.8%
Gross profit margin 40.2% 43.9% -3.7ppts
Operating expenses (ex. IFRS
16) (5,733) (4,438) 29.2%
EBITDA (ex. IFRS 16) 4,720 4,216 12.0%
EBITDA margin (ex. IFRS 16) 18.2% 21.4% -3.2ppts
N et profit (ex. IFRS 16) 1,582 1,077 46.9%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 1,076 352 205.7%
EBITDA to cash conversion
(ex. IFRS 16) 22.8% 8.3% 14.5ppts
Cash flow from/used in investing
activities (2,442) (1,493) 63.6%
Free cash flow (ex. IFRS
16)[37] (1,313) (1,174) 11.8%
Cash flow from financing
activities (ex. IFRS 16) (1,344) 8,225 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 184,281 178,592 3.2%
Of which, cash balance and
bank deposits 3,595 6,292 -42.9%
Of which, securities and loans
issued 3,643 3,699 -1.5%
Total liabilities 84,278 80,613 4.5%
Of which, borrowings 51,062 50,854 0.4%
Total equity 100,003 97,979 2.1%
Discussion of results, Clinics
KEY POINTS / VALUATION DRIVERS
Ø As explained on page 13 above, at the hospitals business
discussion, suspension of COVID contracts from the Government also
affected the clinics business, as 12 of our community clinics, with
c.300 beds, were engaged in the programme. Apart from community
clinics, our polyclinics were also affected due to the reduced
traffic for COVID services, such as COVID tests and vaccinations.
Phasing out from the COVID cost structure temporarily suppressed
the clinic's business margins in 1Q22
Ø Revenues up 28.1% y-o-y in 1Q22, reflecting increasing demand
for regular outpatient services
Ø Revenue growth was further reflected in increased gross profit
up by 16.5% in 1Q22 y-o-y, with a 41.6% margin (down 4.0 ppts
y-o-y)
Ø EBITDA (excl. IFRS 16) was up 13.2% 1Q22, with an 18.5% EBITDA
margin (down 2.4 ppts y-o-y), also reflecting an absence of a state
income tax subsidy for low salary range employees in 1Q22;
excluding the GEL 0.6 million impact of state income tax subsidy,
EBITDA margin (excl. IFRS 16) was up by 1.2 ppts y-o-y in 1Q22
Ø The business spent GEL 2.0 million on capex, of which GEL 0.7
million was maintenance capex and GEL 1.3 million was growth capex,
primarily related to the opening of two new polyclinics in
Tbilisi
INCOME STATEMENT HIGHLIGHTS
(GEL '000) 1Q22 1Q21 Change
Revenue, net[38] 19,607 15,306 28.1%
Gross Profit 8,177 7,021 16.5%
Gross profit margin 41.6% 45.6% -4.0ppts
Operating expenses (ex. IFRS
16) (4,532) (3,802) 19.2%
EBITDA (ex. IFRS 16) 3,645 3,219 13.2%
EBITDA margin (ex. IFRS
16) 18.5% 20.9% -2.4ppts
N et profit (ex. IFRS 16) 832 406 104.9%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 1,423 2,107 -32.5%
EBITDA to cash conversion
(ex. IFRS 16) 39.0% 65.5% -26.5ppts
Cash flow used in investing
activities[39] (2,103) (1,111) 89.3%
Free cash flow (ex. IFRS
16)[40] (607) 900 NMF
Cash flow from financing
activities (ex. IFRS 16) (1,036) 8,385 NMF
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 152,842 147,368 3.7%
Of which, cash balance and
bank deposits 1,447 3,149 -54.0%
Of which, securities and
loans issued 3,897 3,947 -1.3%
Total liabilities 73,587 69,387 6.1%
Of which, borrowings 46,766 46,417 0.8%
Total equity 79,255 77,981 1.6%
INCOME STATEMENT HIGHLIGHTS
The clinics business was also actively engaged in supporting the
COVID-19 pandemic response in Georgia, allocating 12 community
clinics, with a total c.300 beds across the country. The Government
of Georgia fully reimbursed costs associated with COVID-19
treatments and paid a fixed fee amount per bed designated for COVID
patients. In March 2022, similarly to the hospitals business, the
Government suspended the COVID contracts with clinics which
temporarily suppressed the business' margins. At our clinics, the
number of admissions was up by 39.7% in 1Q22 y-o-y. The number of
registered patients in Tbilisi also increased by c.27,000 y-o-y to
c.262,000 and by c.57,000 y-o-y to c.595,000 across the country in
1Q 22. This translated into clinics' y-o-y net revenue growth of
28.1% in 1Q22.
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 ([41])
. The materials rate remained well-controlled at 12.2% in 1Q22.
However, due to the expiration of a 6-months state income tax
subsidy, effective from May 2020 till June 2021 as well COVID
clinics' contracts suspension in March (COVID clinics had mainly
fixed direct salary structure), the direct salary rate was up 3.7
ppts to 31.4%. After restructuring the COVID clinics to a normal
operating level, the salary rate is expected to stabilise in the
coming quarters. As a result, the clinics business posted a 41.6%
gross profit margin in 1Q22, down 4.0 ppts y-o-y. Adjusted for the
impact of state income tax subsidy, the gross profit margin was
down 0.4 ppts y-o-y in 1Q22.
Salaries and other employee benefits, as well as general and
administrative expenses (excl. IFRS 16), were up y-o-y, by 21.2%
and 23.5% respectively, in 1Q22, mainly due to the increased cost
structure for COVID clinics and the expansion of the business. This
translated into the business' EBITDA margin (excl. IFRS 16) being
down by 2.4 ppts, at 18.5%. When adjusted for the state subsidy
impact, the EBITDA margin (excl. IFRS 16) was up 1.2 ppts y-o-y.
Since April 2022, the COVID clinics also started to restructure to
a normal opening level, which is expected to stabilise the
operating cost base going forward. Increased interest rates on the
market led to an increase in net interest expense (excl. IFRS 16)
in 1Q22 up 28.3% y-o-y (up 3.1% q-o-q). Overall, the business
posted GEL 0.8 million net profit excluding IFRS 16 in 1Q22, up
104.9% y-o-y.
CASH FLOW HIGHLIGHTS
In 4Q21 the business had a strong performance in terms of
operating cash when the Government reimbursed most of the payables
by the end of the year. This translated into reduced operating cash
inflows in 1Q22, with a 39.0% EBITDA to cash conversion rate. The
rate is expected to rebound in the coming quarters.
Discussion of results, Diagnostics
KEY POINTS / VALUATION DRIVERS
Ø The number of tests performed amounted to c.759,000 in 1Q22,
up 42.2% y-o-y, of which, c.80% were related to the regular lab
tests (up by 24.8% y-o-y), and c.20% to COVID tests (up 3.0x
y-o-y)
Ø Average Revenue per test of GEL 10.3 in 1Q22, down 0.7%
y-o-y
INCOME STATEMENT HIGHLIGHTS
(GEL '000) 1Q22 1Q21 Change
Revenue, net[42] 7,828 5,547 41.1%
Of which, from COVID-19
tests 4,156 2,710 53.4%
Of which, from regular
lab tests 3,672 2,837 29.4%
Gross Profit 2,270 1,633 39.0%
Gross profit margin 29.0% 29.4% -0.4ppts
Operating expenses (ex.
IFRS 16) (1,195) (636) 87.9%
EBITDA (ex. IFRS 16) 1,075 997 7.8%
EBITDA margin (ex. IFRS
16) 13.7% 18.0% -4.3ppts
N et profit (ex. IFRS
16) 750 671 11.8%
INCOME STATEMENT HIGHLIGHTS
The diagnostics segment, which, apart from regular diagnostics
services, is also engaged in COVID-19 testing, increased its
revenue by 41.1% y-o-y in 1Q22 to GEL 7.8 million. Approximately
half of diagnostics revenue relates to COVID-19 testing and another
half to regular lab tests. From March the Government has also
suspended the contracts with laboratories for COVID tests which is
expected to reduce the revenues from COVID in the coming months.
The business posted a 29.0% gross profit margin and 13.7% EBITDA
margin, the latter being down 4.3 ppts y-o-y due to the increased
operating costs, mainly related to marketing. The net profit (excl.
IFRS 16) amounted to GEL 0.8 million in 1Q22, up 11.8% y-o-y.
Discussion of Renewable Energy Business Results
The renewable energy business operates three wholly-owned
commissioned renewable assets: 30MW Mestiachala HPP, 20MW Hydrolea
HPPs and 21MW Qartli wind farm. In addition, 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.
1Q22 performance (GEL '000), Renewable Energy [43]
INCOME STATEMENT HIGHLIGHTS 1Q22 1Q21 Change
Revenue 6,410 6,534 -1.9%
5,95
of which, PPA 5 6,534 -8.8%
of which, Non-PPA 455 - NMF
Operating expenses (2,707) (2,852) -5.1%
EBITDA 3,703 3,682 0.6%
EBITDA margin 57.8% 56.4% 1.4ppts
Non-recurring expenses[44] (4,998) (44) NMF
( 9,854 6 1
Net loss ) (6,122) . 0 %
CASH FLOW HIGHLIGHTS
Cash flow from operating 1,72
activities 3,496 1 103.1%
Cash flow used in investing (11,87
activities (6,926) 4 ) -41.7%
Cash flow used in financing
activities (13,120) (14,778) -11.2%
Dividends paid out (2,171) (4,738) -54.2%
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Mar-21 Change
405,9
Total assets 392,589 32 -3.3%
Of which, cash balance 23,671 40,499 -41.6%
312,
Total liabilities 1 9 1 314,469 -0.7%
300, -1. 8
Of which, borrowings 041 305,536 %
91,4 -12.
Total equity 80, 398 63 1 %
KEY POINTS / VALUATION DRIVERS
Ø In US$ terms, revenue and EBITDA were up 6.3% and 9.4% y-o-y
in 1Q22 on the back of a 7.3% y-o-y increase in the electricity
generation levels at the power assets
Ø Revenue and EBITDA in GEL terms, which reflect the impact of
GEL's appreciation against US$, were largely flat, down by 1.9% and
up by 0.6% y-o-y, respectively, in 1Q22
Ø In 1Q22, revenue from the PPA sales decreased by 8.8% due to
the PPA expiration of Akhmeta HPP. Non-PPA revenue of Akhmeta HPP
amounted to GEL 0.5 million in 1Q22 with an average electricity
selling price of 56.3 US$/MWh compared to 55.4 US$/MWh based on
expired PPA
Ø Electricity generation reached 33.9 GWh in 1Q22 compared to
31.6 GWh in 1Q21, reflecting the improved performance of the hydro
power assets
Ø A slight decrease in the average electricity selling price,
amounting to 61.0 US$/MWh for the business in 1Q22, (61.5 US$ / MWh
in 1Q21) is due to the decreased share of Qartli Wind Farm in total
generation, a high margin contributor to the renewable energy
business
Ø GEL 2.2 million dividends paid to GCAP in 1Q22 (GEL 4.7
million in 1Q21)
INCOME STATEMENT HIGHLIGHTS
The renewable energy business remained fully resilient to the
pandemic and the Russian-Ukrainian war, considering the increasing
electricity deficit and the worsening supply-demand dynamics.
1Q22 revenue amounted to GEL 6.4 million, down by 1.9% y-o-y. A
decrease in revenue in GEL terms reflects GEL appreciation against
foreign currencies in 1Q22. However, in US$ terms, 1Q22 revenue
increased by 6.3% y-o-y. The revenue increase in US$ terms was
attributable to the increased electricity generation ( 33.9 GWh in
1Q22 compared to 31.6 GWh in 1Q21). U p to 95% of electricity sales
during 1Q22 were covered by long-term fixed-price power purchase
agreements (PPAs) formed with a Government-backed entity.
1Q22
GEL '000, Revenue Change Electricity Change
unless otherwise from y-o-y generation y-o-y
noted electricity ( MWh)
sales
30MW Mestiachala
HPP[45] 277 20.4% 1,626 30.1%
21MW Qartli
wind farm 3,846 -10.9% 19,091 -3.5%
20MW Hydrolea
HPPs 2,288 15.2% 13,227 24.7%
Total 6,410 -1.9% 33,945 7.3%
1Q22 operating expenses were down by 5.1%, amounting to GEL 2.7
million. As a result, 1Q22 EBITDA remained broadly stable, standing
at GEL 3.7 million. In US$ terms, 1Q22 EBITDA increased by 9 . 4 %
y-o-y .
The business recorded GEL 5.3 million net interest expense in
1Q22, slightly down by 7.8% y-o-y, reflecting GEL appreciation
against foreign currencies (GEL 5. 8 million in 1 Q21 ).
CASH FLOW HIGHLIGHTS
1Q22 operating cash flow amounted to GEL 3.5 million, up from
GEL 1.7 million in 1Q21. The increase was mainly driven by higher
generation levels in the Dec-21-Feb-22 period compared to the same
period last year . 1Q22 cash outflow from investing activities was
at GEL 6.9 million compared to GEL 11.9 million in 1Q21. 1Q22 cash
outflow from investing activities reflects GEL 3.0 million one-off
costs associated with the termination of the certain employee
contracts in connection with the separation of the business from
Water Utility. 1Q22 cash outflow from financing activities
decreased by GEL 1.7 million to GEL 13.1 million mainly
attributable to lower dividend payments in 1Q22. Renewable Energy
made a dividend distribution of GEL 2.2 million in 1Q22. As a
result, the cash balance of the renewable energy business was down
substantially but remained at a comfortable GEL 23.7 million as of
31-Mar-22.
Discussion of Education Business Results
Our education business currently combines majority stakes in
five private school brands and campuses, acquired in 2019-2021:
British-Georgian Academy and British International School of
Tbilisi (70% stake), the leading schools in the premium and
international segments; Buckswood International School (80% stake),
well-positioned in the midscale segment, Green School (80%-90%
ownership[46]) and Georgian-Austrian School Pesvebi LLC (81%[47]
ownership), both well-positioned in the affordable segment.
1Q22 performance (GEL '000), Education[48]
INCOME STATEMENT
HIGHLIGHTS 1Q22 1Q21 Change
Revenue 10,803 7,436 45.3%
Operating expenses (6,486) (4,688) 38.4%
EBITDA 4,317 2,748 57.1%
EBITDA Margin 40.0% 37.0% 3.0ppts
Net income 3,891 1,413 175.4%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 1,684 1,576 6.9%
Net cash flows used
in investing activities (2,435) (6,768) -64.0%
Net cash flows from
financing activities 906 5,716 -84.1%
BALANCE SHEET HIGHLIGHTS 31-Mar-22 31-Dec-21 Change
Total assets 141,052 138,080 2.2%
Of which, cash 9,156 9,096 0.7%
Total liabilities 49,574 51,764 -4.2%
Of which, borrowings 25,402 25,585 -0.7%
Total equity 91,478 86,316 6.0%
KEY POINTS / VALUATION DRIVERS
Ø Revenue up by 45. 3 % y-o-y in 1Q22 , reflecting a 20.3% y-o-y
growth in average tuition revenue per learner for the existing
capacity[49] and a 25.9% y-o-y growth in the total number of
learners ( 661 learners)
Ø Utilization rate for the existing capacity(49) was up by 5.1
ppts y-o-y to 95.9% as of 31-Mar-22
Ø Utilization rate of the newly added capacity of 2,250 learners
was 23.1% as of 31-Mar-22, up by 0.4 ppts q-o-q
Ø Cash collection rates in 1Q22 remained largely at 1Q21 levels
at 90.6%, while operating cash flow was up by 6.9% y-o-y to GEL 1.7
million in 1Q22
Ø GEL 2.4 million investment in the expansion of existing
campuses in mid-scale and premium segments (construction is
expected to be completed before the start of the next academic year
(September 2022) and add c.600 learners' capacity)
INCOME STATEMENT HIGHLIGHTS
Given the improved epidemiological situation in Georgia, the
schools provided on-campus learning during the full 1Q22 compared
to only 1.5 months in 1Q21. During the distance learning period in
1Q21, schools offered 15-25% discounts for tuition fees and
roll-over of fees for transportation/catering services. No
discounts were offered during on-campus learning in 1Q22.
Revenue was up by 45.3% y-o-y in 1Q22. The expansion of the
affordable segment through the acquisition and launch of a new
campus contributes to 7.4% of the total revenue growth, while the
organic growth of 37.9% was driven by the combination of growth in
total enrolments, increase in average fee per learner and shift in
academic days. Growth in average fee per learner was supported by
tuition fee increases via contract renewals in line with
grade-level progression for existing learners and enrolments of new
learners.
The enrolment remained strong for all grades, especially for
1(st) grade with a 16.5% y-o-y increase in the number of 1st
graders for the 2021-2022 academic year. Overall, the total number
of learners was up by 25.9% y-o-y to 3,215 learners as of 31-Mar-22
(2,554 learners as of 31-Mar-21). The utilisation rate as of
31-Mar-22 for the existing capacity (i.e. excluding a new capacity
addition of 2,250 learners in 3Q21) was 95.9%, up 5.1 ppts from
1Q21 (90.9%). Utilization of the newly added capacity of 2,250
learners in 3Q21, was 23.1% as of 31-Mar-22.
The business growth combined with the increased number of
on-campus learning days in 1Q22 compared to 1Q21 was reflected in
an increase in operating expenses by 38.4% in 1Q22 y-o-y, of which,
11.3% was attributable to the e xpansion of the affordable segment.
Consequently, EBITDA was up by 57.1% y-o-y in 1Q22 with EBITDA
margin improvement of 3.0 ppts from 37.0% in 1Q21 to 40.0% in
1Q22.
Overall, the business posted GEL 3.9 million net income in 1Q22
(GEL 1.4 million in 1Q21), reflecting foreign currency exchange
gains of GEL 0.1 million in 1Q22, compared to foreign currency
exchange losses of GEL 0.4 million in 1Q21.
CASH FLOW HIGHLIGHTS
Operating cash flow generation by the education business was up
by 6.9% y-o-y to GEL 1.7 million in 1Q22. Overall, the combined
cash collection rate for 2021-2022 tuition fees stood at 90.6%
(91.0% at 31-Mar-21), which was in line with the schools' cash
collection policies. Furthermore, the schools initiated cash
collection for the 2022-23 academic year in 1Q22.
GEL 2.4 million cash outflow on investing activities in 1Q22
reflects investments in capacity expansion of the operational
campuses of Buckswood by 240 learners (midscale segment) and
British-Georgian Academy by 350 learners (premium segment).
Discussion of Other Portfolio Results
In 1Q22, there were the following changes in the other portfolio
breakdown:
-- The commercial real estate assets have been fully sold.
-- Digital Services has evolved its business profile and will
continue operating as IT Outsourcing.
Consequently, the five businesses in our "other" private
portfolio are Auto Service, Beverages, IT Outsourcing, Housing
Development, and Hospitality. They had a combined value of GEL
138.0 million at 31-Mar-22, which represented only 5.3% of our
total portfolio.
1Q22 aggregated performance highlights (GEL '000), Other
Portfolio
1Q22 1Q21 Change
Revenue 76,777 64,290 19.4%
EBITDA 1,302 6,545 -80.1%
Net cash flows from operating
activities (3,371) 4,600 NMF
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's
revenue was down by 10.6% y-o-y to GEL 4.1 million 1Q22, resulting
from a 13.5% decrease in the total number of cars serviced during
the quarter. The decline in revenue was further reflected in a
24.6% decrease in EBITDA y-o-y to GEL 2.0 million in 1Q22.
o Car services and parts business (Amboli) | In 1Q22, Amboli's
revenue was up by 35.5% y-o-y to GEL 6.9 million, reflecting an
increase in corporate and wholesale customer segments. Increased
salary expenses, resulting from the expansion of the business, led
to the decrease in EBITDA (down 60.2% y-o-y to GEL 0.1 million in
1Q22).
Ø Beverages | The beverages business combines three business
lines: a wine business, a beer business, and a distribution
business
o Wine business | The wine business had significant exposure to
the Russian and Ukrainian markets as 61% of the 2021 revenues were
generated from sales in these markets (34% of revenues in 1Q22).
Due to the implications of the geopolitical tensions, the net
revenue of the wine business was down by 44.5% y-o-y in 1Q22. The
number of bottles sold was down by 45.9% y-o-y, resulting from the
decreased export in Russia and Ukraine during the quarter.
Consequently, EBITDA was down by GEL 3.2 million and stood at
negative GEL 1.1 million in 1Q22.
o Beer business | The net revenue of the beer business increased
by 62.2% to GEL 11.5 million in 1Q22, as the business benefited
from fading of COVID cases and related restrictions and increased
sale prices. Beer and lemonade y-o-y sales (in hectolitre) were up
26.2% and 2.7x, respectively in 1Q22. GEL average price per litre
(average for beer and lemonade) increased by 9.2% y-o-y.
Consequently, the EBITDA of the business increased by GEL 1.3
million and stood at GEL 0.6 million in 1Q22.
o Distribution business | Revenue of the distribution business
increased by 61.2% y-o-y to GEL 24.4 million in 1Q22, while 1Q21
negative EBITDA recovered and stood at GEL 0.6 million in 1Q22,
resulting in a 16.2% q-o-q increase.
Ø Housing development, hospitality and commercial real estate
businesses | In 1Q22 revenue of the housing business was up by 5.7%
y-o-y and stood at GEL 25.9 million, while EBITDA was down by GEL
4.0 million to negative GEL 1.9 million, reflecting impact from
inflation on the construction materials. The revenue of the
hospitality business demonstrated a significant growth (up by 62.4%
y-o-y in 1Q22), reflecting increased revenue streams, associated
with the resumption of the operations at the ski resort hotel
(Gudauri Lodge). Consequently, the hospitality business EBITDA was
up by 45.4% y-o-y to GEL 2.1 million in 1Q22.
US$ 10 million increase in share buybacks
As outlined in the Chairman and CEO's Statement above, the Board
has approved a US$ 10 million increase in share buybacks. Shares
for the consideration of US$ 5 million will be repurchased under
the current share buyback and cancellation programme, while the
remaining US$ 5 million will be bought back for the management
trust. The purpose of buyback is to reduce the share capital and
the cancellation of the treasury shares is executed on a monthly
basis. Under the buyback programme, the maximum price paid per
share will not exceed the latest reported NAV per share amount.
In accordance with the authority granted by the shareholders at
the 2021 annual general meeting ("AGM"), the maximum number of
shares that may be repurchased is 7,180,777. The programme is
conducted within certain pre-set parameters, and in accordance with
the general authority to repurchase shares granted at the 2021 AGM,
Chapter 12 of the FCA Listing Rules and the provisions of the
Market Abuse Regulation 596/2014/EU and the Commission Delegated
Regulation (EU) 2016/1052 (also as in force in the UK, from time to
time, including, where relevant, pursuant to the UK's Market Abuse
(Amendment) (EU Exit) Regulations 2019).
The Company has appointed Numis Securities Limited ("Numis") to
manage an irrevocable, non--discretionary share buyback programme
until the end of the programme on 9 August 2022. During closed
periods the Company and its directors have no power to invoke any
changes to the programme and it is being executed at the sole
discretion of Numis.
The Company will make further announcements in due course
following the completion of any share repurchases.
Basis of presentation
Th is 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 98 in Georgia Capital PLC 2021 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).
This announcement contains unaudited financial results presented
in accordance UK-adopted international accounting standards
("IFRS"). The financial results are unaudited and derived from
management accounts.
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.
21. Market Value Leverage ("MVL"), also Loan to Value ("LTV") -
Interchangeably used across the document and is calculated by
dividing net debt to the total portfolio value.
ABOUT GEORGIA CAPITAL PLC
Georgia Capital PLC (LSE: CGEO LN) is a platform for buying,
building and developing businesses in Georgia (together with its
subsidiaries, "Georgia Capital" or "the Group"). The Group's
primary business is to develop or buy businesses, help them
institutionalise their management and grow them into mature
businesses that can further develop largely on their own, either
with continued oversight or independently. Once Georgia Capital has
successfully developed a business, the Group actively manages its
portfolio to determine each company's optimal owner. Georgia
Capital will normally seek to monetise its investment over a 5-10
year period from initial investment.
Georgia Capital currently has the following portfolio
businesses: (i) a retail (pharmacy) business, (i) a hospitals
business, (iii) an insurance business (P&C and medical
insurance); (i) a clinics and diagnostics business, (iv) a
renewable energy business (hydro and wind assets) and (v) an
education business; Georgia Capital also holds other small private
businesses across different industries in Georgia; a 20% equity
stake in the water utility business and a 19.9% 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: regional instability; impact
of COVID-19; 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 Georgia Capital PLC's Annual Report and
Accounts 2021. 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 23.
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] Private portfolio companies' performance highlights are
presented excluding the water utility business. The healthcare
services business is now split into two individual businesses:
Hospitals (large portfolio companies) and Clinics & Diagnostics
(investment stage portfolio companies). Aggregated numbers are
presented like-for-like basis.
[3] The results of our five smaller businesses included in other
portfolio companies (described on pages 21-22) 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).
[4] Please see definition in glossary on page 23.
[5] Please see definition in glossary on page 23.
[6] 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.
[7] Greenfields / buy-outs represent the difference between fair
value and acquisition price in the first reporting period in which
the business/greenfield project is no longer valued at acquisition
price/cost. Exits represent the difference between the latest
reported fair value and the value of the disposed asset (or assets
in the process of disposal) assessed at a transaction price.
[8] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[9] Enterprise value is presented excluding non-operational
assets, added to the equity value of the education business at
cost.
[10] Please read more about valuation methodology on pages 23 in
"Basis of presentation".
[11] Adjusted for non-recurring items.
[12] Adjusted for non-recurring items.
[13] Excluding non-operational assets, added to the equity value
of the education business at cost.
[14] Investments are made and dividends are received at JSC
Georgia Capital level, the Georgian holding company.
[15] FX, coupon payment and coupon accrual are included in
Liquidity Management /FX/Other column in NAV statement.
[16] Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative
costs.
[17] Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
[18] Share-based management expenses are share salary and share
bonus expenses of management and staff.
[19] Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and
corporate secretary costs.
[20] Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
[21] 1Q22 and FY21 ratios are calculated based on period-end
market capitalization due to significant price fluctuations during
the respective periods in light of COVID-19.
[22] In October 2021, GHG signed a share purchase agreement to
acquire the remaining 33% minority interest in its retail
(pharmacy) business by 2027. The buyout will be executed in six
annual tranches at a 5.25x EV/EBITDA multiple. For details, please
see page 12 of our Annual Report 2021.
[23] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[24] Of which - capex of GEL 8.8 million in 1Q22 (GEL 2.6
million in 1Q21); acquisition of minority share of GEL 10.0 million
in 1Q22.
[25] Calculated by deducting capex and acquisition of
subsidiaries / payment of holdback from operating cash flows.
[26] Adjusted for the impact of the minority buyout, previously
reflected in the equity of the healthcare services business.
[27] Net debt is calculated from cash balance and bank deposits,
securities and loans issued minus gross debt.
[28] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[29] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
[30] Of which - capex of GEL 3.8 million in 1Q22, GEL 4.3
million in 1Q21; acquisition of subsidiaries / payment of holdback
of GEL 6.2 million in 1Q21; first tranche proceeds from sale of
Traumatology hospital of GEL 1.8 million in 1Q22.
[31] Operating cash flows less capex, less acquisition of
subsidiaries / payment of holdback, plus net proceeds on sale of
subsidiaries/associates.
[32] The respective costs divided by gross revenues.
[33] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[34] Calculated based on net income and average equity, adjusted
for preferred shares.
[35] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[36] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from Gross revenue.
[37] Operating cash flows less capex.
[38] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
[39] Of which - capex of GEL 2.0 million in 1Q22 (GEL 1.2
million in 1Q21).
[40] Operating cash flows less capex.
[41] The respective costs divided by gross revenues.
[42] Net revenue - Gross revenue less corrections and
rebates.
[43] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[44] Consists of one-off costs associated with the termination
of the certain employee contracts in connection with the separation
of the business from Water Utility.
[45] The first quarter is generally characterised by the low
level of generation (c.3% of annual generation), as the generation
levels peak seasonally during the second and third quarters of the
year.
[46] 80% equity stake in the existing campus and 90% in new
campus launched under the existing affordable brand in 3Q21.
[47] Georgia Capital has a call option on the 9% equity stake
during the 12 months starting from August 2022.
[48] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[49] Excludes the addition of 2,250 learners' capacity in 3Q21,
through the following investments: (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).
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END
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