TIDMCGEO

RNS Number : 7883V

Georgia Capital PLC

12 August 2022

FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS) [1]

 
 GEL '000, unless otherwise             Jun-22         Mar-22   Change      Dec-21    Change 
  noted 
  (Unaudited) 
 Georgia Capital NAV overview 
 NAV per share, GEL                      52.71          52.62     0.2%       63.03    -16.4% 
 NAV per share, GBP                      14.78          12.92    14.4%       15.10     -2.1% 
 Net Asset Value (NAV)               2,332,561      2,371,047    -1.6%   2,883,622    -19.1% 
 Total portfolio value               2,705,413      2,608,626     3.7%   3,616,231    -25.2% 
 Liquid assets and loans issued        688,741        882,574   -22.0%     426,531     61.5% 
 Net debt                            (365,914)      (239,385)    52.9%   (711,074)    -48.5% 
                                                                  -1.2                  -4.9 
 NCC ratio [2]                           27.0%          28.2%     ppts       31.9%      ppts 
 
 Georgia Capital Performance              2Q22           2Q21   Change        1H22      1H21   Change 
 Total portfolio value creation       (14,446)        331,912      NMF   (465,266)   340,449      NMF 
  of which, listed and observable 
   businesses                           18,646         70,288   -73.5%   (189,061)    43,836      NMF 
   of which, private businesses       (33,092)        261,624      NMF   (276,205)   296,613      NMF 
 Investments                           142,584          2,387      NMF     144,156    10,588      NMF 
  of which, conversion of 
   issued loans into equity            142,584              -      NMF     142,584         -      NMF 
 Divestments                                 -              -      NMF   (557,568)         -      NMF 
 Buybacks                               27,488          1,487      NMF      53,540     3,199      NMF 
 Dividend income                        32,226          9,691      NMF      34,421    14,430      NMF 
 Net (loss) / income                  (16,432)        368,139      NMF   (501,678)   323,295      NMF 
 
 Private portfolio companies' 
  performance(1, [3])                     2Q22           2Q21   Change        1H22      1H21   Change 
 Large portfolio companies 
 Revenue                               306,885        318,772    -3.7%     621,923   599,243     3.8% 
 EBITDA                                 35,337         44,336   -20.3%      75,113    81,334    -7.6% 
 Net operating cash flow                34,611         31,758     9.0%      63,276    40,709    55.4% 
 
 Investment stage portfolio 
  companies 
 Revenue                                41,980         45,345    -7.4%      85,121    78,932     7.8% 
 EBITDA                                 17,307         20,982   -17.5%      30,050    31,627    -5.0% 
 Net operating cash flow                18,322         18,023     1.7%      24,599    21,673    13.5% 
 
 Total portfolio [4] 
 Revenue                               470,472        449,747     4.6%     905,428   828,094     9.3% 
 EBITDA                                 62,737         78,446   -20.0%     116,558   132,634   -12.1% 
 Net operating cash flow                51,915         57,189    -9.2%      83,485    74,391    12.2% 
 

KEY POINTS

Ø NAV per share (GEL) [5] flat (up 0.2%) in 2Q22 (down 16.4% in 1H22), reflecting stabilisation following 16.5% decrease in 1Q22

Ø 2Q22 NAV per share (GBP)(5) increased 14.4% (down 2.1% in 1H22), reflecting the 14.2% appreciation of GEL against GBP during the second quarter (a 17.0% appreciation in 1H22)

Ø Net Capital Commitment (NCC) ratio decreased by 1.2 ppts to 27.0% in 2Q22, resulting from ongoing robust liquidity at the GCAP level and the strong GEL

Ø GEL 9.4 million dividends collected from the private portfolio companies in 2Q22, with an additional GEL 22.8 million dividends received from BoG in July 2022

Ø US$ 46.8 million loans issued to our beverages and real estate businesses converted into equity in 2Q22, as previously announced

Ø c.816,000 shares repurchased in 2Q22 (total bought back and cancelled now at c.6% of issued capital since 10-Aug-21)

Conference call: An investor/analyst conference call will be held on 12 August 2022, at 14:00 UK / 15:00 CET / 9:00 US Eastern Time. Please click the link to join the webinar: WEBINAR LINK , webinar ID: 823 2380 9213, passcode: 791297. Further details about the webinar are available on the Group's webpage .

CHAIRMAN AND CEO'S STATEMENT

Our 2Q22 results demonstrate Georgia Capital's strong operational and balance sheet resilience. While the uncertainties created by the Russia-Ukraine war persist and potential consequences can vary, our strong management teams have remained alert to navigate the challenges and opportunities created by these unprecedented times. This, when coupled with the recent strong growth in the Georgian economy, has enabled us to deliver solid operational performance in 2Q22 and 1H22, particularly reflecting our strategy to have the majority of our capital allocated to capital-light industries and sectors.

2Q22 NAV per share was up 0.2% (down 16.4% in 1H22). The NAV per share performance in 2Q22 resulted from a combination of factors: value creation across our listed and observable portfolio totalled GEL 18.6 million with 0.8 ppts positive impact on the NAV per share. This reflects a strong recovery in BoG's share price (up 9.9% in 2Q22) and robust value creation in the water utility business, the latter reflecting the strong EBITDA growth supported by the higher levels of economic activity as the impact of the pandemic recedes. Share buybacks under our ongoing buyback programme also supported the NAV per share growth with a 1.5 ppts impact. The increase was offset by a GEL 33.1 million value reduction in the private portfolio (-1.4 ppts impact), mainly reflecting a temporary value decrease at our healthcare facilities, as a result of their recent transition to the post-pandemic environment, and increased discount rates used in our private portfolio valuations. Management platform related costs had a 0.4 ppts negative impact on the 2Q22 NAV per share. In GBP terms, the NAV per share growth in 2Q22 was particularly significant - up 14.4% - reflecting the 14.2% appreciation of GEL against GBP during the quarter.

The decrease in the 1H22 NAV per share predominantly reflects the first quarter impact of the Russia-Ukraine war, with a stabilisation in the second quarter: a) a GEL 161.4 million operating performance related value reduction of the private portfolio companies (-5.6 ppts impact) and b) a GEL 317.5 million negative impact on portfolio asset valuations from market movements in BoG's share price, discount rates and listed peer multiples from the Russia-Ukraine war (-11.0 ppts impact). The decrease was partially offset by the accretive impact from share buybacks (+3.0 ppts impact in 1H22). In GBP terms, the NAV per share was down 2.1% in 1H22.

Underlying operating performances across our private portfolio remained solid. The aggregated revenue of our private portfolio companies totalled GEL 470 million (up 4.6% y-o-y), demonstrating modest top-line growth in 2Q22, while the aggregated EBITDA was down by 20.0% y-o-y to GEL 63 million in 2Q22.

Ø 2Q22 revenues of our retail (pharmacy) business reflect a recalibration of product prices due to GEL's appreciation against foreign currencies and the termination of low-profit generating contracts in the wholesale business line. 2Q22 EBITDA was further impacted by inflation and increased operating expenses in line with the continuing expansion of the retail (pharmacy) business.

Ø Our hospitals and clinics & diagnostics businesses are currently transitioning to the post-pandemic environment. The suspension of COVID contracts by the Government in 1Q22 and the subsequent restructuring of the cost base of COVID facilities have temporarily impacted the performance of the hospitals and clinics businesses, while substantially lower COVID cases during the quarter resulted in a significant decrease in diagnostics business revenues. The growth is expected to rebound over the next few quarters as the businesses complete the expected transition.

Ø The ongoing war negatively impacted the performance of our beverages (c.60% sales exposure of our wine business to Russia and Ukraine in 2021) and real estate businesses (significant growth in construction materials costs). To ensure their sustainable development, in 2Q22 we converted US$ 46.8 million loans issued to these businesses into equity, as previously announced.

For 1H22, the aggregated revenues of our private portfolio companies increased by 9.3% y-o-y while the aggregated y-o-y EBITDA was down by 12.1%.

NCC ratio [6] decreased by 1.2 ppts to 27.0% in 2Q22. GCAP's liquidity remained solid at GEL 686 million (US$ 234 million) in 2Q22. GEL's appreciation during the quarter positively impacted the gross debt balance (down 4.0% in 2Q22) and as a result, the NCC ratio was down by 1.2 ppts to 27.0% in 2Q22, demonstrating progress towards our stated strategic priority to bring down the NCC ratio to below 15% by Dec-25. The pro-forma NCC ratio, which reflects the subsequent improvements in BoG's share price and foreign exchange rates as well as the anticipated decrease in the GCAP's guarantee towards the beer business (see page 11 for details), was down to 23.5%. Solid liquidity at the GCAP level and a robust balance sheet and capital management framework also led to an upgrade in our corporate credit ratings to "B1" by Moody's and "B+" by S&P (from "B2" and "B", respectively) in 1H22.

Update on the buyback programme. During 2Q22, under the US$ 25 million share buyback and cancellation programme, we repurchased 816,054 shares for a total consideration of GEL 19.1 million (US$ 6.3 million). This brings the total number of shares bought back and cancelled to c.6% of issued capital since we launched the programme in August 2021.

From a macroeconomic perspective , the economy has continued double-digit growth in 2022, with real GDP expanding y-o-y by an estimated 10. 5 % in 1H22 following a 10.4% growth in 2021. On the external side, strong foreign demand throughout the year has been supplemented by substantial remittance inflows, with money transfers being up by 65% y-o-y in 1H22. Merchandise exports grew by 35% y-o-y in 1H22, and the tourism revenues reached 79% of 2019 levels in 1H22, including 92% in May-June 2022, reflecting the global resumption of travel as well as significant migration from certain regional countries. On the domestic side, credit expansion has also been robust, as the commercial bank loan portfolio grew by 18.7% y-o-y as of June 2022 (on a constant currency basis). Additionally, while fiscal support has moderated, the fiscal stance remains expansionary, with current expenditures growing by 9% and capital expenditures expanding by 4% y-o-y in 1H22, facilitated by a 34% surge in fiscal revenues. Despite USD strengthening globally, the Georgian Lari (GEL) has sustained its appreciation trend since mid-2021 and compared to the beginning of 2022 has appreciated by 14.1% against the US dollar as of 11 August 2022, driven by growing demand for Georgian exports, robust remittance inflows, tight monetary policy and accelerated foreign currency lending, as well as the travel recovery and strong market confidence. The fiscal deficit is projected to shrink to around 3.5% in 2022 as a result of the higher-than-expected growth and is expected to return to under 3% of GDP from 2023. The National Bank of Georgia (NBG) has maintained a tight monetary stance with the refinancing rate set at 11% since March 2022, reaffirming its commitment to pursue tight policy until inflationary pressures subside. Inflation reached 11.5% in July 2022 and 12.9% on average in January-July 2022, although it is expected to decelerate gradually from the second half of 2022.

Management change . In July, we announced that Nikoloz (Nick) Gamkrelidze was to step down as Chief Executive of Georgia Healthcare. He has been replaced as GHG's CEO by Irakli Gogia, previously Deputy CEO, Finance of GHG. On 9 May 2022, the Board announced the separation of the roles of Chairman and CEO, upon the completion of my current employment contract as Chairman and CEO in May 2023, with me continuing in the role of Board Chairman and Nick assuming the role of Georgia Capital's CEO in May 2023. Following Nick's departure from GHG, he will no longer take up the role of Georgia Capital CEO in May 2023, and the Board of Georgia Capital will announce a further update in due course with regard to the appointment of a new CEO. I will continue in the existing combined Chairman and CEO role until May 2023.

Outlook. Despite the ongoing regional tensions, we remain cautiously optimistic about the emerging capital-light investment opportunities, in line with our strategy, that lie ahead in Georgia and beyond. We are already witnessing the formation of attractive new markets resulting from the proven resilience of the Georgian economy and the favourable migration to our region. While we have increased our focus on balancing the varying risks and opportunities by taking a relatively conservative approach to managing our investment portfolio and balance sheet leverage, I believe Georgia Capital is well-positioned to tap attractive investment opportunities and deliver consistent NAV per share growth over the medium term. At the same time, we will continue demonstrating strong progress toward our key strategic priority of deleveraging the Group's balance sheet.

Irakli Gilauri, Chairman and CEO

DISCUSSION OF GROUP RESULTS

The discussion below analyses the Group's unaudited net asset value at 3 0 - Jun -22 and its income for the second quarter and first half period then ended on an IFRS basis (see "Basis of Presentation" on page 28 below).

Net Asset Value (NAV) Statement

NAV statement summarises the Group's IFRS equity value (which we refer to as Net Asset Value or NAV in the NAV Statement below) at the opening and closing dates for the second quarter (31- Mar -22 and 3 0 - Jun -22). The NAV Statement below breaks down NAV into its components and provides a roll forward of the related changes between the reporting periods. For the NAV Statement for the first half of 2022 see page 27.

NAV STATEMENT 2Q 22

 
 GEL '000,           Mar-22         1.          2a.           2b.         2c.         3.           4.           Jun       Change 
 unless                           Value     Investment      Buyback     Dividend   Operating   Liquidity/       -22          % 
 otherwise noted                 creation       and                                expenses     FX/Other 
 (Unaudited)                      ([7])     Divestments 
 Listed and 
 Observable 
 Portfolio 
 Companies 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Bank of Georgia 
  (BoG)                473,479      5,038             -             -   (22,798)           -            -       455,719    -3.8% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Water Utility         139,392     13,608             -             -          -           -            -       153,000     9.8% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Total Listed 
  and 
  Observable 
  Portfolio 
  Value                612,871     18,646             -             -   (22,798)           -            -       608,719    -0.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Listed and 
  Observable 
  Portfolio 
  value change 
  %                                  3.0%          0.0%          0.0%      -3.7%        0.0%         0.0%         -0.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Private 
 Portfolio 
 Companies 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Large Companies     1,410,482   (14,022)             -             -    (7,374)           -          107     1,389,193    -1.5% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Retail 
  (Pharmacy)           657,079     13,948             -             -          -           -            -       671,027     2.1% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Hospitals             524,296   (46,250)             -             -          -           -            -       478,046    -8.8% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Insurance (P&C 
  and 
  Medical)             229,107     18,280             -             -    (7,374)           -          107       240,120     4.8% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
    Of which, 
     P&C 
     Insurance         184,629     22,448             -             -    (7,374)           -          107       199,810     8.2% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
    Of which, 
     Medical 
     Insurance          44,478    (4,168)             -             -          -           -            -        40,310    -9.4% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Investment 
  Stage 
  Companies            447,247    (1,482)             -             -    (2,054)           -          256       443,967    -0.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Renewable 
  Energy               163,862     10,104             -             -    (2,054)           -          256       172,168     5.1% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Education             135,368     16,385             -             -          -           -            -       151,753    12.1% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Clinics and 
  Diagnostics          148,017   (27,971)             -             -          -           -            -       120,046   -18.9% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Other Companies       138,026   (17,588)       142,584             -          -           -          512       263,534    90.9% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Total Private 
  Portfolio 
  Value              1,995,755   (33,092)       142,584             -    (9,428)           -          875     2,096,694     5.1% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Private 
  Portfolio 
  value change %                    -1.7%          7.1%          0.0%      -0.5%        0.0%         0.0%          5.1% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Total Portfolio 
  Value (1)          2,608,626   (14,446)       142,584             -   (32,226)           -          875     2,705,413     3.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Total Portfolio 
  value change %                    -0.6%          5.5%          0.0%      -1.2%        0.0%         0.0%          3.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Net Debt (2)        (239,385)          -     (136,577)      (27,488)     32,226     (5,734)       11,044     (365,914)    52.9% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
   of which, 
    Cash and 
    liquid funds       718,525          -             -      (27,488)      9,428     (5,734)     (31,364)       663,367    -7.7% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
  of which, 
   Loans 
   issued              164,049          -     (136,577)             -          -           -      (2,098)        25,374   -84.5% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
  of which, 
   Accrued 
   dividend 
   income                    -          -             -             -     22,798           -            -        22,798     0.0% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
  of which, 
   Gross 
   Debt            (1,121,959)          -             -             -          -           -       44,506   (1,077,453)    -4.0% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Net other 
  assets/ 
  (liabilities) 
  (3)                    1,806          -       (6,007)             -          -     (4,661)        1,924       (6,938)      NMF 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
  of which, 
   share-based 
   comp.                     -          -             -             -          -     (4,661)        4,661             - 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Net Asset Value 
  (1)+(2)+(3)        2,371,047   (14,446)             -      (27,488)          -    (10,395)       13,843     2,332,561    -1.6% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 NAV change %                       -0.6%          0.0%         -1.2%       0.0%       -0.4%         0.6%         -1.6% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 
 Shares 
  outstanding(7)    45,063,039          -             -   (1,174,323)          -           -      361,031    44,249,747    -1.8% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 Net Asset Value 
  per share, GEL         52.62     (0.32)        (0.00)          0.78     (0.00)      (0.23)       (0.12)         52.71     0.2% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 NAV per share, 
  GEL 
  change %                          -0.6%          0.0%          1.5%       0.0%       -0.4%        -0.2%          0.2% 
----------------  ------------  ---------  ------------  ------------  ---------  ----------  -----------  ------------  ------- 
 

A 0.2% increase in NAV per share (GEL) in 2Q22 was mainly driven by an accretive impact from share buybacks (a 1.5 ppts impact on the NAV per share). The growth was partially offset by a GEL 14.4 million negative value creation across our portfolio companies (-0.6 ppts impact), management platform related costs (-0.4 ppts impact) and other expenses (-0.2 ppts impact).

Portfolio overview

Total portfolio value increased by GEL 96.8 million (3.7%) to GEL 2.7 billion in 2Q22:

-- The value of the listed and observable portfolio decreased by GEL 4.2 million (-0.7%), reflecting the net impact of GEL 18.6 million value creation, driven by a robust operating performance of the water utility business and strong recovery in BoG's share price, offset by a GEL 22.8 million accrued dividend income from BoG as of 30-Jun-22.

   --      Private portfolio value change in 2Q22 reflects: 

o A GEL 41.6 million value decrease, mainly resulting from a GEL 33.1 million negative value creation and GEL 9.4 million dividends paid to GCAP.

o Conversion of GEL 142.6 million loans issued predominantly to our beverages and real estate businesses into equity, due to the adverse financial impact of the Russia-Ukraine war on these businesses. This led to a GEL 100.9 million net increase in the value of our private portfolio (up 5.1% in 2Q22).

Consequently, as of 30-Jun-22, the listed and observable portfolio value totalled GEL 608.7 million (22.5% of the total portfolio value), and the private portfolio value amounted to GEL 2.1 billion (77.5% of the total).

   1)    Value creation 

Total portfolio value creation amounted to negative GEL 14.4 million in 2Q22.

-- A GEL 18.6 million value creation across listed and observable portfolio supported NAV per share growth in 2Q22. This reflects:

o A GEL 5.0 million value creation from BoG, resulting from a 9.9% increase in BoG's share price, partially offset by GEL appreciation against GBP by 14.2% in 2Q22.

o GEL 13.6 million value creation in Water Utility, reflecting the strong operating performance and the application of the put option valuation to GCAP's 20% holding in the business (where GCAP has a clear exit path through a put and call structure at pre-agreed EBITDA multiples).

-- The negative value creation in the private portfolio amounted to GEL 33.1 million in 2Q22, resulting from:

o GEL 117.1 million operating-performance related value reduction, mainly driven by the developments across our retail (pharmacy), hospitals, clinics & diagnostics and other businesses, as described in detail on pages 6-7.

o GEL 84.0 million value creation due to GEL's appreciation against foreign currencies and changes in valuation multiples in 2Q22.

The negative impact of the ongoing Russia-Ukraine war on the discount rates and listed peer multiples used in our DCF and multiple-based valuation assessments continued in 2Q22, with discount rates being up by approximately 0.5-1.0 ppts q-o-q. However, the resilience of the Georgian economy in almost all economic data points and stronger than expected outlook of our portfolio companies drove the stabilisation of value creation in 2Q22.

The table below summarises value creation drivers in our businesses in 2 Q22:

 
 Portfolio Businesses                    Operating Performance   Greenfields   Multiple Change   Value Creation 
                                                 ([8])                /         and FX ([10]) 
                                                                   buy-outs 
                                                                   / exits 
                                                                    ([9]) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 GEL '000, unless otherwise noted 
  (Unaudited)                                     (1)                (2)             (3)          (1)+(2)+(3) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Listed and Observable                                                                               18,646 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 BoG                                                                                                 5,038 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Water Utility                                                                                       13,608 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Private                                       (117,122)              -            84,030           (33,092) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Large Portfolio Companies                     (71,281)               -            57,259           (14,022) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Retail (pharmacy)                             (18,667)               -            32,615            13,948 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Hospitals                                     (62,339)               -            16,089           (46,250) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Insurance (P&C and Medical)                     9,725                -             8,555            18,280 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
   Of which, P&C Insurance                      15,482                -             6,966            22,448 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
   Of which, Medical Insurance                  (5,757)               -             1,589           (4,168) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Investment Stage Portfolio Companies          (15,032)               -            13,550           (1,482) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Renewable Energy                               11,625                -            (1,521)           10,104 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Education                                      12,058                -             4,327            16,385 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Clinics and Diagnostics                       (38,715)               -            10,744           (27,971) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Other                                         (30,809)               -            13,221           (17,588) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Total portfolio                               (117,122)              -            84,030           (14,446) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 

Valuation overview [11]

In 2Q22, valuation assessments of our large and investment stage portfolio companies were performed by a third-party independent valuation firm, Kroll (formerly known as Duff & Phelps), in line with International Private Equity Valuation ("IPEV") guidelines. Our renewable energy and education businesses were valued by Kroll for the first time in 2Q22 (the clinics & diagnostics business was previously valued externally as a component part of Healthcare Services). The independent valuation assessments, which serve as the basis for Georgia Capital's estimate of fair value, were performed by applying a combination of an income approach (DCF) and a market approach (listed peer multiples and, in some cases, precedent transactions). The independent valuations of the large and investment stage businesses are performed on a semi-annual basis. In line with our strategy, from time to time we may receive offers from interested buyers for our private portfolio companies. These would be considered in the overall valuation assessment, where appropriate.

The enterprise value and equity value development of our businesses in 2 Q22 are summarised in the following table:

 
                                    Enterprise Value                         Equity Value 
                                          (EV) 
--------------------------  -------------------------------  -------------------------------------------- 
 GEL '000, unless            30-Jun-22   31-Mar-22   Change   30-Jun-22   31-Mar-22   Change      % share 
  otherwise noted                                         %                                %     in total 
  (Unaudited)                                                                                   portfolio 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Listed and Observable 
  portfolio                                                     608,719     612,871    -0.7%        22.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 BoG                                                            455,719     473,479    -3.8%        16.8% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Water Utility                                                  153,000     139,392     9.8%         5.7% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Private portfolio           3,236,186   3,282,688    -1.4%   2,096,694   1,995,755     5.1%        77.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Large portfolio 
  companies                  1,821,489   1,850,595    -1.6%   1,389,193   1,410,482    -1.5%        51.3% 
 Retail (pharmacy)             915,257     900,218     1.7%     671,027     657,079     2.1%        24.8% 
 Hospitals                     678,687     735,626    -7.7%     478,046     524,296    -8.8%        17.7% 
 Insurance (P&C and 
  Medical)                     227,545     214,751     6.0%     240,120     229,107     4.8%         8.9% 
  Of which, P&C Insurance      199,810     184,629     8.2%     199,810     184,629     8.2%         7.4% 
  Of which, Medical 
   Insurance                    27,735      30,122    -7.9%      40,310      44,478    -9.4%         1.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Investment stage 
  portfolio companies          792,525     779,019     1.7%     443,967     447,247    -0.7%        16.4% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Renewable Energy              421,002     427,321    -1.5%     172,168     163,862     5.1%         6.4% 
 Education [12]                182,688     145,570    25.5%     151,753     135,368    12.1%         5.6% 
 Clinics and Diagnostics       188,835     206,128    -8.4%     120,046     148,017   -18.9%         4.4% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Other                         622,172     653,074    -4.7%     263,534     138,026    90.9%         9.7% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Total portfolio                                              2,705,413   2,608,626     3.7%       100.0% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 

Private large portfolio companies (51.3% of total portfolio value)

Retail (Pharmacy) (24.8% of total portfolio value) - the Enterprise Value (EV) of Retail (Pharmacy) increased by 1.7% to GEL 915.3 million in 2Q22, reflecting the robust outlook of the business, driven by the expansion of the retail chain and resilience of Georgian economy. 2Q22 revenues were down by 3.5% y-o-y, resulting from a) the recalibration of product prices due to GEL's appreciation against foreign currencies (the FX effect is directly transmitted into the pricing as c.70% of the inventory purchases are denominated in foreign currencies) and b) the termination of low-profit generating contracts in the wholesale business line. EBITDA (excl. IFRS 16) was down by 11.4% y-o-y in 2Q22, further reflecting inflation and the increased operating expenses in line with the expansion of the retail (pharmacy) business. See page 14 for details. Consequently, LTM EBITDA (incl. IFRS 16) was down by 1.5% to GEL 109.7 million in 2Q22. Net debt increased by 19.1% to GEL 159.5 million in 2Q22, as the business paid GEL 31.2 million to complete the buyout of the 10% minority stake (valued at GEL 41.2 million, of which GEL 10.0 million was paid in 1Q22). As a result, the fair value of GCAP's holding increased by 2.1% to GEL 671.0 million in 2Q22. The implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) increased to 8.3x as at 30-Jun-22 (up from 8.1x as of 31-Mar-22).

Hospitals (17.7% of total portfolio value) - Hospitals' EV decreased by 7.7% to GEL 678.7 million in 2Q22. The revenue was down by 10.6% y-o-y in 2Q22, reflecting the suspension of COVID contracts by the Government in 1Q22. Restructuring the cost base of COVID hospitals and phasing out from Government contracts temporarily suppressed business margins in 2Q22, which, coupled with the absence of a state income tax subsidy for low salary range employees that had been in effect during the entire 1H21 period, translated into a 6.3 ppts y-o-y decrease in the 2Q22 EBITDA margin (excl. IFRS 16). Consequently, EBITDA (excl. IFRS 16) was down 33.3% y-o-y in 2Q22. See page 16 for details. LTM EBITDA (incl. IFRS 16) decreased by 9.3% to GEL 64.9 million in 2Q22. As a result, the equity value of the business was assessed at GEL 478.0 million, down 8.8% q-o-q in 2Q22, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 10.5x at 30-Jun-22 (10.3x at 30-Mar-22).

Insurance (P&C and Medical) (8.9% of total portfolio value) - The insurance business combines: a) P&C Insurance valued at GEL 199.8 million and b) Medical Insurance valued at GEL 40.3 million.

P&C Insurance - Net premiums earned increased by 16.9% y-o-y to GEL 24.3 million in 2Q22, mainly reflecting the growth in the credit life and agricultural insurance lines. The combined ratio was down 0.6 ppts y-o-y in 2Q22, reflecting a) a 3.4 ppts decrease in loss ratio on the back of the robust revenue growth and b) a 2.8 ppts increase in expense ratio due to the increase in salaries and other operating expenses in line with the business growth. Consequently, 2Q22 net income was up 17.8% y-o-y to GEL 4.9 million. See page 17 for details. LTM net income [13] was up by 4.3% to GEL 18.2 million in 2Q22. The equity value of the P&C insurance business was assessed at GEL 199.8 million at 30-Jun-22 (up 8.2% q-o-q). The implied LTM P/E valuation multiple stood at 11.0x in 2Q22 (up from 10.6x in 1Q22).

Medical Insurance - Net premiums earned increased by 0.5% y-o-y to GEL 18.0 million in 2Q22, predominantly driven by a c.5% increase in the price of insurance policies and related decrease in the number of insured clients (down 4.9% y-o-y as of 30-Jun-22). Net claims expenses were also up by 4.8% y-o-y in 2Q22, 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 by GEL 0.4 million y-o-y to negative GEL 0.2 million in 2Q22. See page 17 for details. LTM net income [14] was down by 12.5% to GEL 2.8 million in 2Q22, and the equity value of the business was assessed at GEL 40.3 million at 30-Jun-22 (down 9.4% q-o-q). The implied LTM P/E valuation multiple was at 14.5x in 2Q22, up from 14.0x in 1Q22.

Private investment stage portfolio companies (16.4% of total portfolio value)

Renewable Energy (6.4% of total portfolio value) - The business was valued externally for the first time in 2Q22. EV in US$ terms was up by 4.3% to US$ 143.7 million in 2Q22 (down 1.5% to GEL 421.0 million in GEL terms, reflecting the local currency appreciation against US$ during the quarter). In US$ terms, revenue and EBITDA were up 2.3% and 4.4% y-o-y in 2Q22, reflecting a 12.6% y-o-y increase in average electricity selling prices (revenue and EBITDA in GEL terms were down by 7.6% and 5.9% y-o-y, respectively, in 2Q22). See page 20 for details. The pipeline renewable energy projects continued to be measured at an equity investment cost of GEL 42.0 million in aggregate. Net debt was down by GEL 14.6 million to GEL 248.8 million in 2Q22, also reflecting the currency movements (in US$ terms, the net debt remained flat at US$ 85.0 million). The business paid GEL 2.1 million dividends to GCAP in 2Q22. As a result, the equity value of Renewable Energy was assessed at GEL 172.2 million in 2Q22 (up by 5.1% q-o-q) (up 11.3% q-o-q to US$ 58.8 in US$ terms). The blended EV/EBITDA valuation multiple of the operational assets stood at 11.1x in 2Q22, up from 10.9x in 1Q22.

Education (5.6% of total portfolio value) - The business was valued externally for the first time in 2Q22. An 80.1% increase in total learner capacity in 2021 and higher than expected growth in total enrolments were reflected in the 2Q22 valuation assessment of the business, which led to a 25.5% increase in EV to GEL 182.7 [15] million in 2Q22. See page 21 for details. Notwithstanding a 19.7% y-o-y increase in 2Q22 EBITDA, the LTM EBITDA of the business was down by 1.6% to GEL 11.9 million. A temporary decrease in LTM EBITDA reflects the increased operating expenses resulting from the addition of the new learner capacity, while additional revenue is expected to derive in the 2023-2024 academic year, as the utilisation rate picks up gradually. Net debt was also up by 12.7% to GEL 8.9 million in 2Q22, reflecting an expansion. As a result, the education business was valued at GEL 151.8 million in 2Q22 (up 12.1% q-o-q). This translated into the implied valuation multiple of 15.3x in 2Q22, up from 12.0x in 1Q22. The forward-looking implied valuation multiple is estimated at 11.1x for the 2023-2024 academic year.

Clinics and Diagnostics (4.4% of total portfolio value) - The EV of the business decreased by 8.4% to GEL 188.8 million in 2Q22. Similar to the hospitals business, our clinics business was also impacted by the suspension of COVID contracts by the Government, which led to an 8.6% y-o-y decrease in revenues in 2Q22. The revenue of our diagnostics business, which apart from regular lab tests is actively engaged in COVID-19 testing, was impacted by substantially lower COVID cases during the quarter and was down by 48.5% y-o-y in 2Q22. This together with the expiration of the state income tax subsidy that had been in effect in the prior period led to a 62.1% y-o-y decrease in the combined 2Q22 EBITDA (excl. IFRS 16) of the clinics & diagnostics business. See page 22 for details. Consequently, LTM EBITDA (incl. IFRS 16) was down by 16.0% to GEL 19.2 million in 2Q22. As a result, the equity value of the business was assessed at GEL 120.0 million, down 18.9% q-o-q in 2Q22, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 9.8x at 30-Jun-22, up from 9.0x at 31-Mar-22.

Other businesses (9.7% 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 25. The portfolio had a combined value of GEL 263.5 million at 30-Jun-22, up by 90.9% q-o-q. The increase reflects the conversion of GEL 142.6 million loans issued predominantly to our beverages and real estate businesses into equity, due to the adverse financial impact of the Russia-Ukraine war on these businesses. In 2Q22, the negative value creation amounted to GEL 17.6 million.

Listed and observable portfolio companies (22.5% of total portfolio value)

BOG ( 16.8% of total portfolio value) [16] - In 1Q22, BoG delivered an annualised ROAE of 30.7% and strong 11.6% 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. In 2Q22, BoG's share price demonstrated a strong recovery and was up by 9.9 % q-o-q to GBP 13.06 at 30-Jun-22. The positive impact of BOG's share price performance on our valuations was partially offset by GEL's appreciation against GBP by 14.2% in 2Q22. In 2Q22, the Bank declared a final dividend for 2021 of GEL 2.33 per ordinary share. Consequently, the accrued dividend income for GCAP amounted to GEL 22.8 million as of 30-Jun-22. The final dividends were received on 14-Jul-22. In 2Q22, the Bank also announced the commencement of the GEL 72.7 million share buyback and cancellation programme, effective until 31 December 2022. The programme is in line with BoG's capital and distribution policy, which targets a dividend/share buyback payout ratio in the range of 30-50% of the Bank's annual profits. As a result of the developments described above, the market value of our equity stake in BoG decreased by 3.8% to GEL 455.7 million. BoG's public announcement of their 2Q22 results, when published, will be available on BoG's website .

Water Utility ( 5.7% of total portfolio value) - 2Q22 valuation of the Water Utility, where GCAP has a clear exit path through a put and call structure at pre-agreed EBITDA multiples) [17] , reflects the strong operating performance of the business. Positive developments in the normalised [18] LTM EBITDA and the application of the put option valuation led to GEL 13.6 million value creation in 2Q22. As a result, the fair value of GCAP's 20% holding in the business was assessed at GEL 153.0 million, up 9.8% q-o-q.

   2)    Investments [19] 

GCAP's investments of GEL 142.6 million in 2Q22 represent the non-cash conversion of the loans issued mainly to our real estate and beverages business into equity.

   3)    Share buybacks 

During 2Q22, 1,174,323 shares were bought back for a total consideration of GEL 27.5 million.

   --      358,269 shares were repurchased for the management trust. 

-- 816,054 shares were repurchased under the ongoing US$ 25 million share buyback and cancellation programme. The total value of shares repurchased under the programme amounted to GEL 19.1 million (US$ 6.3 million) in 2Q22.

-- As of 11-Aug-22 a total of 2,777,234 shares with the value of GEL 69.4 million (US$ 22.7 million) have been repurchased under the buyback programme, since 10 August 2021. The share buyback and cancellation programme is extended until 31 December 2022, as set out on page 27 of this report.

   4)    Dividends(19) 

In 2Q22, Georgia Capital received GEL 9.4 million regular dividends from the private portfolio companies, of which, GEL 7.4 million was collected from the P&C insurance and GEL 2.1 million from the renewable energy businesses. GEL 22.8 dividends, receivable from BOG as of 30-Jun-22, were collected on 14-Jul-22.

1H22 NAV STATEMENT HIGHLIGHTS

 
 GEL '000, unless     Dec-21        1.           2a.           2b.         2c.         3.           4.          Jun       Change 
  otherwise noted                  Value     Investment      Buyback     Dividend   Operating   Liquidity/       -22         % 
  (Unaudited)                     creation       and                                expenses     FX/Other 
                                   ([20])    divestments 
 Total Listed and 
  Observable 
  Portfolio 
  Value                681,186   (189,061)       139,392             -   (22,798)           -            -      608,719   -10.6% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 Listed and 
  Observable 
  Portfolio value 
  change 
  %                                 -27.8%         20.5%          0.0%      -3.3%        0.0%         0.0%       -10.6% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 
 Total Private 
  Portfolio 
  Companies          2,935,045   (276,205)     (552,804)             -   (11,623)           -        2,281    2,096,694   -28.6% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
  Of which, Large 
   Companies         2,249,260   (156,554)     (696,960)             -    (7,374)           -          821    1,389,193   -38.2% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
   Of which, 
    Investment 
    Stage 
    Companies          461,140    (14,970)         1,559             -    (4,249)           -          487      443,967    -3.7% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
   Of which, 
    Other 
    Companies          224,645   (104,681)       142,597             -          -           -          973      263,534    17.3% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 Private 
  Portfolio 
  value change %                     -9.4%        -18.8%          0.0%      -0.4%        0.0%         0.1%       -28.6% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 
 Total Portfolio 
  Value (1)          3,616,231   (465,266)     (413,412)             -   (34,421)           -        2,281    2,705,413   -25.2% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 Total Portfolio 
  value change %                    -12.9%        -11.4%          0.0%      -1.0%        0.0%         0.1%       -25.2% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 
 Net Debt (2)        (711,074)           -       419,419      (53,540)     34,421    (10,951)     (44,189)    (365,914)   -48.5% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 
 Net Asset Value 
  (1)+(2)+(3)        2,883,622   (465,266)             -      (53,540)          -    (19,700)     (12,555)    2,332,561   -19.1% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 NAV change %                       -16.1%          0.0%         -1.9%       0.0%       -0.7%        -0.4%       -19.1% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 
 Shares 
  outstanding(20)   45,752,362           -             -   (2,166,578)          -           -      663,963   44,249,747    -3.3% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 Net Asset Value 
  per share, GEL         63.03     (10.17)        (0.00)          1.90     (0.00)      (0.43)       (1.61)        52.71   -16.4% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 NAV per share, 
  GEL 
  change %                          -16.1%          0.0%          3.0%       0.0%       -0.7%        -2.5%       -16.4% 
-----------------  -----------  ----------  ------------  ------------  ---------  ----------  -----------  -----------  ------- 
 

NAV per share (GEL) decreased by 16.4% in 1H22, reflecting a) value reduction of BoG and private portfolio companies with a 7.0 ppts and 9.6 ppts negative impact on the NAV per share, respectively, and b) management platform related costs (-0.7 ppts impact) and net interest expenses (-0.7 ppts impact). The NAV per share decrease was partially offset by share buybacks (+3.0 ppts impact).

Portfolio overview

The total portfolio value decreased by GEL 910.8 million (25.2%) to GEL 2,705.4 million in 1H22:

-- The value of the water utility business decreased by GEL 544.0, reflecting the disposal of an 80% equity interest in the business.

-- The value of BoG and our private portfolio companies decreased by GEL 225.5 million and GEL 141.4 million, respectively, reflecting the impact of market movements on portfolio asset valuations resulting from the Russia-Ukraine war.

   1)    Value creation 

BoG's share price decreased by 21.7%, which coupled with a 17.0% appreciation of GEL against GBP in 1H22, translated into a GEL 202.7 million negative value creation. The negative value creation across our private portfolio amounted to GEL 276.2 million and reflect a) GEL 161.4 million operating performance related value decrease and b) GEL 114. 8 million value reduction due to changes in valuation multiples and foreign exchange rates in 1H22.

a) Operating performance related value decrease reflects the developments across our healthcare facilities as described earlier in this report and the spillover effect of the Russia-Ukraine war on our wine (c. 60% sales exposure to Russia and Ukraine in 2021) and housing businesses (significant growth in construction materials costs).

b) The value reduction due to changes in valuation multiples and FX reflect the uncertainties surrounding the geopolitical tensions, which translated into approximately a 2.0-3.0 ppts increase in discount rates and reduced listed peer multiples as reflected in the private portfolio companies' valuations in 1H22.

The developments described above led to negative GEL 465.3 million value creation in 1H22.

The table below summarises value creation drivers in our businesses in 1H 22:

 
 Portfolio Businesses                    Operating Performance   Greenfields   Multiple Change   Value Creation 
                                                 ([21])               /         and FX ([23]) 
                                                                   buy-outs 
                                                                   / exits 
                                                                    ([22]) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 GEL '000, unless otherwise noted 
  (Unaudited)                                     (1)                (2)             (3)          (1)+(2)+(3) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Listed and Observable                                                                             (189,061) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 BoG                                                                                               (202,669) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Water Utility                                                                                       13,608 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Private                                       (161,351)            (13)          (114,841)        (276,205) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Large Portfolio Companies                     (45,048)               -           (111,506)        (156,554) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Retail (pharmacy)                              50,859                -           (90,217)          (39,358) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Hospitals                                     (93,993)               -            (1,776)          (95,769) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Insurance (P&C and Medical)                    (1,914)               -           (19,513)          (21,427) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
   Of which, P&C Insurance                      12,484                -           (17,626)          (5,142) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
   Of which, Medical Insurance                 (14,398)               -            (1,887)          (16,285) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Investment Stage Portfolio Companies           (2,159)               -           (12,811)          (14,970) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Renewable Energy                                8,739                -            (6,492)           2,247 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Education                                      27,074                -            (6,333)           20,741 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Clinics and Diagnostics                       (37,972)               -              14             (37,958) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Other                                         (114,144)            (13)            9,476          (104,681) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 Total portfolio                               (161,351)            (13)          (114,841)        (465,266) 
--------------------------------------  ----------------------  ------------  ----------------  --------------- 
 

The enterprise value and equity value development of our businesses in 1H 22 are summarised in the following table:

 
                                    Enterprise Value                         Equity Value 
                                          (EV) 
--------------------------  -------------------------------  -------------------------------------------- 
 GEL '000, unless            30-Jun-22   31-Dec-21   Change   30-Jun-22   31-Dec-21   Change      % share 
  otherwise noted                                         %                                %     in total 
  (Unaudited)                                                                                   portfolio 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Listed and Observable 
  portfolio                                                     608,719     681,186   -10.6%        22.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 BoG                                                            455,719     681,186   -33.1%        16.8% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Water Utility                                                  153,000           -      NMF         5.7% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Private portfolio           3,236,186   4,633,145   -30.2%   2,096,694   2,935,045   -28.6%        77.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Large portfolio 
  companies                  1,821,489   3,126,186   -41.7%   1,389,193   2,249,260   -38.2%        51.3% 
 Retail (pharmacy)             915,257     952,269    -3.9%     671,027     710,385    -5.5%        24.8% 
 Hospitals                     678,687     791,756   -14.3%     478,046     573,815   -16.7%        17.7% 
 Water Utility                       -   1,129,902      NMF           -     696,960      NMF          NMF 
 Insurance (P&C and 
  Medical)                     227,545     252,259    -9.8%     240,120     268,100   -10.4%         8.9% 
  Of which, P&C Insurance      199,810     211,505    -5.5%     199,810     211,505    -5.5%         7.4% 
  Of which, Medical 
   Insurance                    27,735      40,754   -31.9%      40,310      56,595   -28.8%         1.5% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Investment stage 
  portfolio companies          792,525     779,824     1.6%     443,967     461,140    -3.7%        16.4% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Renewable Energy              421,002     428,248    -1.7%     172,168     173,288    -0.6%         6.4% 
 Education [24]                182,688     139,947    30.5%     151,753     129,848    16.9%         5.6% 
 Clinics and Diagnostics       188,835     211,629   -10.8%     120,046     158,004   -24.0%         4.4% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Other                         622,172     727,135   -14.4%     263,534     224,645    17.3%         9.7% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 Total portfolio                                              2,705,413   3,616,231   -25.2%       100.0% 
--------------------------  ----------  ----------  -------  ----------  ----------  -------  ----------- 
 
   2)    Investments [25] 

In 1H22, GCAP's cash 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). The investments presented in the 1H22 NAV statement also reflect the following non-cash operations: a) the transfer of the remaining 20% equity interest in the water utility business to the listed and observable portfolio (GEL 139.4 million) and b) the conversion of loans issued predominantly to our beverages and real estate businesses into equity (GEL 142.6 million).

   3)    Share buybacks 

During 1H22, 2,166,578 shares were bought back for a total consideration of GEL 53.5 million.

-- 1,689,480 shares were repurchased under the ongoing share buyback and cancellation programme. The total value of shares repurchased under the programme amounted to GEL 42.0 million (US$ 13.7 million) in 1H22.

   --      477,098 shares were repurchased for the management trust. 
   4)    Dividends [26] 

In 1H22, Georgia Capital received GEL 11.6 million regular dividends from the private portfolio companies, of which, GEL 7.4 million was collected from P&C insurance and GEL 4.3 million from the renewable energy businesses. The balance also reflects a GEL 22.8 million accrued dividend income from BoG.

Net Capital Commitment (NCC) overview

Below we describe the components of Net Capital Commitment (NCC) as of 30 June 2022 and as of 31 March 2022. NCC represents an aggregated view of all confirmed, agreed and expected capital outflows at the GCAP HoldCo level.

 
 Components of NCC                   30-Jun-22     31-Mar-22   Change     31-Dec-21   Change 
  GEL '000, unless otherwise 
  noted (unaudited) 
 Cash at banks                         359,262       425,911   -15.6%       132,580      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Liquid funds                          304,105       292,614     3.9%       139,737      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
  Of which, Internationally 
   listed debt securities              300,967       289,551     3.9%       137,215      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
  Of which, Locally listed 
   debt securities                       3,138         3,063     2.4%         2,522    24.4% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Total cash and liquid 
  funds                                663,367       718,525    -7.7%       272,317      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Loans issued [27]                      25,374        21,206    19.7%        21,540    17.8% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Accrued dividend income                22,798             -      NMF             -      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Gross debt                        (1,077,453)   (1,121,959)    -4.0%   (1,137,605)    -5.3% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Net debt (1)                        (365,914)     (382,228)    -4.3%     (843,748)   -56.6% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Guarantees issued (2)                (45,615)      (53,836)   -15.3%      (55,297)   -17.5% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Net debt and guarantees 
  issued (3)=(1)+(2)                 (411,529)     (436,064)    -5.6%     (899,045)   -54.2% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 
 Planned investments (5)             (158,675)     (168,015)    -5.6%     (131,933)    20.3% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
  of which, planned investments 
   in Renewable Energy                (88,024)      (93,205)    -5.6%     (101,834)   -13.6% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
  of which, planned investments 
   in Education                       (70,651)      (74,810)    -5.6%      (30,099)      NMF 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Announced Buybacks (6)               (12,597)      (17,463)   -27.9%       (9,330)    35.0% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Contingency/liquidity 
  buffer (7)                         (146,444)     (155,065)    -5.6%     (154,880)    -5.4% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Total planned investments, 
  announced buybacks and 
  contingency/liquidity buffer 
  (8)=(5)+(6)+(7)                    (317,716)     (340,543)    -6.7%     (296,143)     7.3% 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 Net capital commitment 
  (3)+(8)                            (729,245)     (776,607)    -6.1%   (1,195,188)   -39.0% 
                                                                 -1.2                   -4.9 
 NCC ratio                               27.0%         28.2%     ppts         31.9%     ppts 
--------------------------------  ------------  ------------  -------  ------------  ------- 
 

Cash and liquid funds . Total cash and liquid funds' balance was down by 7.7% to GEL 663.4 million (US$ 226.5 million) in 2Q22. The decrease was mainly driven by a) GEL's appreciation in 2Q22, as more than 90% of the cash and liquid funds were denominated in foreign currencies and b) a GEL 26.6 million cash outflow for buybacks. The decrease was partially offset by the dividend and interest receipts of GEL 9.4 and GEL 8.0 million in 2Q22, respectively. A 3.9% increase in internationally listed debt securities' balance was attributable to the temporary investments in dollar-denominated Eurobonds issued by Georgian corporates to generate yield on GCAP's liquid funds.

Total cash and liquid funds' balance was up 2.4x in 1H22, reflecting a) the receipt of GEL 526.7 million (US$ 173 million) cash proceeds (net of transaction fees) in 1Q22 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 11.6 million and GEL 13.6 million, respectively. The increase was partially offset by a) GEL 38.0 million Eurobond coupon payment, and b) GEL 58.1 million cash outflow for buybacks. The internationally listed debt securities' balance also more than doubled in 1H22. The increase was attributable to the temporary investments in dollar-denominated Eurobonds issued by Georgian corporates.

Loans issued(27) . Issued loans' balance, which primarily refers to loans issued to our private portfolio companies, was up by GEL 4.2 million in 2Q22 (up by GEL 3.8 million in 1H22). Loans are lent at market terms.

Gross debt. At 30-Jun-22, the outstanding balance of US$ 365 million six-year Eurobonds due in March 2024 was GEL 1,077.5 million (down 4.0% q-o-q). The decrease in gross debt reflects the GEL's appreciation against US$, which was partially offset by a GEL 17.8 million coupon accrual [28] during the quarter.

A 5.3% decrease in the gross debt balance in 1H22 reflects the impact of GEL's appreciation against US$ by 5.8% and a GEL 38.0 million coupon payment in 1Q22, partially offset by a GEL 37.7 million coupon accrual in 1H22.

Guarantees issued. The balance reflects GCAP's guarantee on the borrowing of the beer business. Due to the recent developments in the business' operating performance, GCAP's guarantee decreased by EUR 1.0 million to EUR 14.8 million.

Planned investments. Planned investments' balance represents US$ c.54 million expected investments in renewable energy (US$ c.30 million) and education (US$ c.24 million) businesses. The balance in US$ terms remained unchanged as at 30-Jun-22 (down by 5.6% in GEL terms due to the local currency appreciation in 2Q22). The balance was up 20.3% in 1H22, in line with our capital allocation outlook.

Announced buybacks . A 27.9% decrease in the announced buybacks' balance reflects the developments in the share buyback programme as described on pages 8 and 10. A 35.0% increase in the balance in 1H22 reflects a US$ 15 million increase in the programme in 1H22.

Contingency/liquidity buffer. The balance reflects the cash and liquid assets in the amount of US$ 50 million, held by GCAP at all times, for contingency/liquidity purposes. The balance remained unchanged in US$ terms as at 30-Jun-22.

As a result of the movements described above, NCC was down by 6.1% to GEL 729.2 million (US$ 249.0 million), translating into a 27.0% NCC ratio as at 30-Jun-22 (down by 1.2 ppts q-o-q).

Subsequent to 30-Jun-22, the beer business engaged in discussions with local lenders to reduce the required amount of GCAP's guarantee on their borrowing. As of today, local lenders have agreed in principle to reduce GCAP's guarantee to EUR 8.5 million, pending approvals from their risk/various committees, which are expected to be finalised in 3Q22. Following the reduction, the guarantee amount will be down by EUR 6.3 million to EUR 8.5 million (from EUR 14.8 million), bringing the pro-forma NCC ratio down to 23.5% as of 30 June 2022.

INCOME STATEMENT (ADJUSTED IFRS / APM)

Net loss under IFRS was GEL 19.6 million in 2Q22 (GEL 371.3 million net income in 2Q21) and GEL 509.1 million in 1H22 (GEL 325.2 million net income in 1H21). The IFRS income statement is prepared on the Georgia Capital PLC level and the results of all operations of the Georgian holding company JSC Georgia Capital are presented as one line item. As we conduct almost all of our operations through JSC Georgia Capital, through which we hold all of our portfolio companies, the IFRS results provide little transparency on the underlying trends.

Accordingly, to enable a more granular analysis of those trends, the following adjusted income statement presents the Group's results of operations for the period ending June 30 as an aggregation of (i) the results of GCAP (the two holding companies Georgia Capital PLC and JSC Georgia Capital, taken together) and (ii) the fair value change in the value of portfolio companies during the reporting period. For details on the methodology underlying the preparation of the adjusted income statement, please refer to page 98 in Georgia Capital PLC 2021 Annual report.

INCOME STATEMENT (Adjusted IFRS/APM)

 
 GEL '000, unless otherwise 
  noted 
  (Unaudited)                         2 Q22      2 Q21   Change       1H 22      1H 21   Change 
================================  =========  =========  =======  ==========  =========  ======= 
 Dividend income                     32,226      9,691      NMF      34,421     14,430      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Interest income                      9,364      6,120    53.0%      18,150     10,617    71.0% 
================================  =========  =========  =======  ==========  =========  ======= 
 Realised / unrealised 
  loss on liquid funds              (1,197)      1,687      NMF    (11,435)      1,516      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Interest expense                  (17,826)   (20,302)   -12.2%    (37,679)   (37,520)     0.4% 
================================  =========  =========  =======  ==========  =========  ======= 
 Gross operating income/(loss)       22,567    (2,804)      NMF       3,457   (10,957)      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Operating expenses                (10,395)    (9,225)    12.7%    (19,700)   (18,096)     8.9% 
================================  =========  =========  =======  ==========  =========  ======= 
 GCAP net operating 
  income/(loss)                      12,172   (12,029)      NMF    (16,243)   (29,053)   -44.1% 
================================  =========  =========  =======  ==========  =========  ======= 
 
 Fair value changes 
  of portfolio companies 
================================  =========  =========  =======  ==========  =========  ======= 
 Listed and Observable 
  Portfolio Companies               (4,152)     70,288      NMF   (211,859)     43,836      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Bank of 
     Georgia Group PLC             (17,760)     70,288      NMF   (225,467)     43,836      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Water Utility          13,608          -      NMF      13,608          -      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Private Portfolio 
  companies                        (42,520)    251,933      NMF   (287,828)    282,183      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
  Large Portfolio Companies        (21,396)    197,356      NMF   (163,928)    201,855      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Retail (pharmacy)      13,948     44,816   -68.9%    (39,358)     27,657      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Hospitals            (46,250)     64,276      NMF    (95,769)     90,889      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Water Utility               -     91,100      NMF           -     76,097      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Insurance 
     (P&C and Medical)               10,906    (2,836)      NMF    (28,801)      7,212      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
  Investment Stage Portfolio 
   Companies                        (3,536)     48,976      NMF    (19,219)     54,115      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Renewable 
     energy                           8,050     13,072   -38.4%     (2,002)      7,632      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Education              16,385     19,443   -15.7%      20,741     23,207   -10.6% 
================================  =========  =========  =======  ==========  =========  ======= 
    Of which, Clinics 
     and Diagnostics               (27,971)     16,461      NMF    (37,958)     23,276      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
  Other businesses                 (17,588)      5,601      NMF   (104,681)     26,213      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Total investment return           (46,672)    322,221      NMF   (499,687)    326,019      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 
 (Loss)/income before 
  foreign exchange movements 
  and non-recurring expenses       (34,500)    310,192      NMF   (515,930)    296,966      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 Net foreign currency 
  gain                               18,172     57,988   -68.7%      14,448     26,547   -45.6% 
================================  =========  =========  =======  ==========  =========  ======= 
 Non-recurring expenses               (104)       (41)      NMF       (196)      (218)   -10.1% 
================================  =========  =========  =======  ==========  =========  ======= 
 Net (loss)/income                 (16,432)    368,139      NMF   (501,678)    323,295      NMF 
================================  =========  =========  =======  ==========  =========  ======= 
 

Gross operating income of GEL 22.6 million in 2Q22 reflects a 3.3x and 53.0% increase in dividend and interest income, respectively, which was further supported by a decrease in interest expenses due to GEL's y-o-y appreciation against US$. Gross operating income of GEL 3.5 million in 1H22 also reflects increased dividend and interest inflows, which was partially offset by GEL 11.4 million realised and unrealised loss on liquid funds held by GCAP - which was mostly unrealised due to the market volatility driven by the regional geopolitical instability. The significant interest income growth in 2Q22 and 1H22 was mainly due to the increased liquid funds balance and related investments in internationally listed debt securities.

GCAP earned an average yield of 3.9% on the average balance of liquid assets of GEL 471.7 million in 1H22 (3.1% on GEL 240.9 million in 1H21).

The components of GCAP's operating expenses are shown in the table below.

GCAP Operating Expenses Components

 
 GEL '000, unless otherwise 
  noted 
  (Unaudited)                      2Q22      2Q21   Change       1H22       1H21   Change 
 Administrative expenses 
  ([29])                        (3,323)   (3,031)     9.6%    (6,087)    (5,840)     4.2% 
 Management expenses 
  - cash-based ([30])           (2,411)   (2,402)     0.4%    (4,864)    (4,997)    -2.7% 
 Management expenses 
  - share-based ([31])          (4,661)   (3,792)    22.9%    (8,749)    (7,259)    20.5% 
 Total operating expenses      (10,395)   (9,225)    12.7%   (19,700)   (18,096)     8.9% 
  Of which, fund type 
   expense ([32])               (3,091)   (3,278)    -5.7%    (6,084)    (6,384)    -4.7% 
  Of which, management 
   fee type expenses ([33])     (7,304)   (5,947)    22.8%   (13,616)   (11,712)    16.3% 
 

GCAP management fee expenses have a self-targeted cap of 2% of Georgia Capital's market capitalisation. The LTM management fee expense ratio was 2.6% at 30-Jun-22 (1.5% [34] as of 30-Jun-21). The total LTM operating expense ratio (which includes fund type expenses) was 3.9% at 30-Jun-22 (2.4%(34) at 30-Jun-21). The increase in the LTM management fee expense ratio and the total LTM operating expense ratio mainly reflect the movements in GCAP's market capitalisation.

Total investment return represents the increase (decrease) in the fair value of our portfolio. Total investment return was negative GEL 46.7 million in 2Q22 and GEL 499.7 million in 1H22, 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 5-7. The performance of each of our private large and investment stage portfolio companies is discussed on pages 14-24.

GCAP's net foreign currency liability balance amounted to c.US$ 152 million (GEL 445 million) at 30-Jun-22. Net foreign currency gain was GEL 18.2 million in 2 Q22 and GEL 14.4 million in 1H22. As a result of the movements described above, GCAP's adjusted IFRS net loss was GEL 16.4 million in 2Q22 and GEL 501.7 million in 1H22.

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 2Q22, 1H22, 2Q21 and 1H21 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 28 for more background.

LARGE PORTFOLIO COMPANIES

Discussion of Retail (pharmacy) Business Results

The retail (pharmacy) business, where GCAP owns a 77% equity interest through GHG [35] , 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 366 pharmacies, of which 358 are in Georgia, and 8 are in Armenia.

2Q22 & 1H22 performance (GEL '000), Retail (pharmacy) [36]

 
 Unaudited 
 INCOME STATEMENT HIGHLIGHTS          2Q22        2Q21   Change        1H22        1H21   Change 
 Revenue, net                      192,100     199,020    -3.5%     390,902     372,817     4.9% 
   Of which, retail                149,739     142,923     4.8%     304,617     270,452    12.6% 
   Of which, wholesale              42,361      56,097   -24.5%      86,285     102,365   -15.7% 
 Gross Profit                       55,745      49,927    11.7%     114,842      90,172    27.4% 
                                                            3.9                              5.2 
 Gross profit margin                 29.0%       25.1%     ppts       29.4%       24.2%     ppts 
 Operating expenses (ex. 
  IFRS 16)                        (37,896)    (29,780)    27.3%    (76,376)    (56,935)    34.1% 
 EBITDA (ex. IFRS 16)               17,849      20,147   -11.4%      38,466      33,237    15.7% 
 EBITDA margin, (ex.                                       -0.8                              0.9 
  IFRS 16)                            9.3%       10.1%     ppts        9.8%        8.9%     ppts 
 Net profit (ex. IFRS 
  16)                               19,477      21,242    -8.3%      36,522      29,550    23.6% 
 
 CASH FLOW HIGHLIGHTS 
 Cash flow from operating 
  activities (ex. IFRS 
  16)                               18,406      16,075    14.5%      35,212      13,553      NMF 
                                                           23.3                             50.7 
 EBITDA to cash conversion          103.1%       79.8%     ppts       91.5%       40.8%     ppts 
 Cash flow used in investing 
  activities [37]                 (25,278)     (3,806)      NMF    (45,672)     (5,627)      NMF 
 Free cash flow, (ex. 
  IFRS 16) [38]                   (17,780)      11,808      NMF    (19,744)       6,671      NMF 
 Cash flow used in financing 
  activities (ex. IFRS 
  16)                               24,863    (12,639)      NMF      15,166    (16,321)      NMF 
 
 BALANCE SHEET HIGHLIGHTS        30-Jun-22   31-Mar-22   Change   31-Dec-21      Change 
 Total assets                      532,014     516,303     3.0%     522,814        1.8% 
 Of which, cash and bank 
  deposits                          58,230      41,007    42.0%      54,616        6.6% 
 Of which, securities 
  and loans issued                  14,464      24,037   -39.8%      20,922      -30.9% 
 Total liabilities                 480,294     475,523     1.0%     497,954       -3.5% 
  Of which, borrowings             116,126      85,769    35.4%      89,844       29.3% 
  Of which, lease liabilities      111,051     112,012    -0.9%     104,613        6.2% 
 Total equity                       51,720      40,780    26.8%      24,860         NMF 
 

INCOME STATEMENT HIGHLIGHTS

Ø 2 Q22 total revenue (down 3.5%) reflects the recalibration of product prices due to the GEL's appreciation against the basket of foreign currencies (the FX effect is directly transmitted into the pricing as c.70% of the inventory purchases are denominated in foreign currencies).

Ø The 24.5% decline in the wholesale business line in 2Q22 was due to the continuing gradual transfer of hospitals business' procurement department from pharma to hospitals (which began in January 2021). This also translated into a reduction in revenue from wholesale in 1H22.

Ø The growth in retail revenues in both 2Q22 and 1H22 reflects improvement in economic activity and continued expansion of the pharmacy chain (adding 33 pharmacies over 12 months).

o Retail revenue share in total revenue was 77.9% in 2Q22 and 1H22 (71.8% in 2Q21 and 72.5% in 1H21).

o Revenue from para-pharmacy, as a percentage of retail revenue from the pharmacy, was 35. 2 % in 2Q22 and 34.9% in 1H22 (33.9% in 2Q21 and 34.3% in 1H21).

Ø Robust gross profit margins of 29.0% and 29.4% in 2Q22 and 1H22, respectively (up 3.9 ppts and 5.2 ppts y-o-y, respectively), reflect the increased sales of high-margin para-pharmacy products in the retail business line, as well as growing profitability of the wholesale business line notwithstanding the y-o-y revenue reduction.

o Gross margin growth was supported by increased marketing activities as well as the strong economic recovery compared to 2021, when due to the increased competition and the general macro backdrop business margins were significantly subdued.

Ø Negative operating leverage (operating expenses up 27.3% in 2Q22 and up 34.1% in 1H22) reflects increases in salary, marketing and utility expenditures associated with the openings of new pharmacies and The Body Shop stores in Azerbaijan and Armenia. Salary expense growth also reflects the base effect impact of the state income tax subsidy for low-salary range employees which was in effect in 1H21 (the subsidy was in place from May 2020 - June 2021).

Ø EBITDA margins stood at 9.3% in 2Q22 (down 0.8 ppts y-o-y) and 9.8% in 1H22 (up 0.9 ppts y-o-y), exceeding the targeted 9%+ in both periods. Excluding the impact of the state income tax subsidy in 2021, EBITDA margins (excl. IFRS 16) were down 0.2 ppts in 2Q22 and up 1.6 ppts in 1H22, y-o-y.

Ø Interest expense was down 39.9% in 2Q22 and down 38.8% in 1H22 y-o-y, due to the low average balance of net debt during the quarter.

Ø Overall, the business posted GEL 19.5 million net profit excluding IFRS 16 in 2Q22 and GEL 36.5 million in 1H22.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø Net debt increased at the end of the 2Q22 (up 109.6% q-o-q) to GEL 43.4 million, reflecting the payment of GEL 31.2 million to complete the buyout of a 10% minority stake (valued at GEL 41.2 million, of which GEL 10.0 million was paid in 1Q22), in line with the buyout scheme announced in 2021 (the remaining 23% minority stake to be acquired in stages through 2027).

Ø Strong cash flow from operating activities, in line with the enhanced revenue streams - with a 103.1% EBITDA to cash conversion ratio in 2Q22 and 91.5% in 1H22.

Ø Increased cash outflows from investing activities reflect a) payment to minorities to buyout a 10% minority share, as mentioned above, b) increased capex investments attributable to the implementation of a new core IT system discussed below (GEL 5.2 million in 1H22), c) launch of new projects such as new format pharmacies, The Body Shop stores in Armenia and Azerbaijan, and d) regular expansion of the chain in Georgia.

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø Added 33 pharmacies over the last 12 months, 29 in Georgia and 4 in Armenia, expanding from 333 to 366 stores.

Ø Entered Azerbaijan market and opened the first The Body Shop store in Baku in 2Q22.

Ø Added a second The Body Shop store in Armenia in June 2022.

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.

Ø Retail (Pharmacy)'s key operating performance highlights for 2Q22 and 1H22 are noted below:

 
 Unaudited           2Q22    2Q21   Change   1H22   1H21   Change 
 Same store                                                  -3.6 
  revenue growth    -1.6%   26.3%      NMF   5.0%   8.6%     ppts 
 Number of 
  bills issued 
  (mln)               7.4     7.2     3.0%   15.0   13.7     9.5% 
 Average bill 
  size (GEL)         18.7    18.5     0.9%   18.9   18.8     0.8% 
 

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.

2Q22 & 1H22 performance (GEL '000), Hospitals [39]

 
 Unaudited 
 INCOME STATEMENT HIGHLIGHTS           2Q22        2Q21   Change        1H22        1H21   Change 
 Revenue, net [40]                   72,483      81,053   -10.6%     149,557     151,749    -1.4% 
 Gross Profit                        26,576      32,888   -19.2%      54,353      62,540   -13.1% 
                                                            -4.1                             -5.1 
 Gross profit margin                  36.1%       40.2%     ppts       35.8%       40.9%     ppts 
 Operating expenses (ex. 
  IFRS 16)                         (13,118)    (12,716)     3.2%    (25,805)    (23,521)     9.7% 
 EBITDA (ex. IFRS 16)                13,458      20,172   -33.3%      28,548      39,019   -26.8% 
 EBITDA margin (ex. IFRS                                    -6.3                             -6.7 
  16)                                 18.3%       24.6%     ppts       18.8%       25.5%     ppts 
 N et profit (ex. IFRS 
  16) [41]                            1,767      10,513   -83.2%       4,784      17,156   -72.1% 
 
 CASH FLOW HIGHLIGHTS 
 Cash flow from operating 
  activities (ex. IFRS 16)            4,027      14,855   -72.9%      14,616      18,799   -22.3% 
 EBITDA to cash conversion                                 -43.7                              3.0 
  (ex. IFRS 16)                       29.9%       73.6%     ppts       51.2%       48.2%     ppts 
 Cash flow used in investing 
  activities [42]                     2,375     (3,992)      NMF       1,313    (14,183)      NMF 
 Dividends and intersegment 
  loans issued/received               2,817      12,137   -76.8%         999      18,441   -94.6% 
 Free cash flow (ex. IFRS 
  16) [43]                            5,637       8,208   -31.3%      14,248       1,656      NMF 
 Cash flow used from financing 
  activities (ex. IFRS 16)         (25,570)    (28,274)    -9.6%    (45,899)    (44,656)     2.8% 
 
 
 BALANCE SHEET HIGHLIGHTS         30-Jun-22   31-Mar-22   Change   31-Dec-21      Change 
 Total assets                       610,602     642,241    -4.9%     658,071       -7.2% 
 Of which, cash balance 
  and bank deposits                  15,958      33,625   -52.5%      46,131      -65.4% 
 Of which, securities and 
  loans issued                       11,120      12,763   -12.9%      11,678       -4.8% 
 Total liabilities                  247,151     275,377   -10.2%     293,428      -15.8% 
 Of which, borrowings               185,298     210,521   -12.0%     223,433      -17.1% 
 Total equity                       363,451     366,864    -0.9%     364,643       -0.3% 
 

KEY POINTS

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. 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, the Government suspended the COVID contracts with hospitals in mid-March 2022. Restructuring the cost base of COVID hospitals, and phasing out from Government contracts, temporarily suppressed the business margins in 2Q22 and 1H22.

INCOME STATEMENT HIGHLIGHTS

Ø As anticipated, after coming out from the COVID period, 2Q22 revenue was down 10.6% y-o-y (down 1.4% y-o-y in 1H22), reflecting a decrease in the number of admissions and occupancy rate. After a transition period the business expects a return to normal and a rebounding trend in top-line growth in the coming quarters.

Ø The cost of services in the business consists mainly of materials, salaries and utilities. Trends in materials and salary costs are captured in the materials and direct salary rates ([44]) :

o Building its own procurement department for hospitals as well as phasing from COVID, translated into an improved materials rate of 18.4% in 2Q22 (21.5% in 2Q21) and 19.1% in 1H22 (20.6% in 1H21) .

o Due to the lower base effect resulting from the state income tax subsidy for low salary range employees in effect during 1H21, as well as the suspension of COVID hospitals' contracts in March (COVID hospitals had mainly a fixed direct salary structure), the direct salary rate was up 6.0 ppts to 36.1% in 2Q22 and up 5.1 ppts to 35.2% in 1H22. After restructuring the COVID hospitals to a normal operating level, the salary rate is expected to stabilise over the next few quarters.

o Utilities and other costs were up in 2022, mainly resulting from increased tariffs on utilities, as well as globally increased fuel prices.

Ø As a result, the gross margins were down 4.1 ppts and 5.1 ppts in 2Q22 and 1H22 respectively. Adjusted for the impact of the state income tax subsidy, the gross profit margin was down 1.9 ppts in 2Q22 and 2.8 ppts in 1H22 y-o-y.

Ø Negative operating leverage reflects the increases in:

o Administrative salary expense during the quarter, up 1.0% in 2Q22 and up 6.0% in 1H22 y-o-y, which was in line with the organic growth of the hospitals business; and

o General and administrative expenses (excl. IFRS 16), up 32.8% in 2Q22 and up 30.8% in 1H22, mainly reflecting increased marketing costs due to the promotion of the new products and services to get back on track after phasing out from COVID programmes.

Ø The increased cost base in 1H22 resulted in the reduced EBITDA (excl. IFRS 16) and EBITDA margins (down 6.3 ppts in 2Q22 and down 6.7 ppts in 1H22 y-o-y). Reduced EBITDA margins (excl. IFRS 16), also reflect the base effect of the state income tax subsidy in 2Q21 and 1H21 (GEL c.1.7 million and c.3.5 million impact in 2Q21 and 1H21, respectively); Excluding the impact of state income tax subsidy, EBITDA margins (excl. IFRS 16) were down by 4.2 ppts in 2Q22 and by 4.4 ppts in 1H22, y-o-y.

Ø Increased interest rates (NBG refinancing rate up 1.5 ppts in the last twelve months) led to an increase in net interest expense (excl. IFRS 16) in 2Q22 and 1H22, up by 13.7% in 2Q22 and by 15.0% in 1H22 y-o-y.

Ø Overall, the business posted GEL 1.8 million net profit excluding IFRS 16 in 2Q22 and GEL 4.8 million in 1H22.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø Cash flow from operating activities (excl. IFRS 16) was down in 2Q22, due to the phasing out of Government COVID programmes, the payment term of which was payable within a month of origination, while the universal healthcare coverage ("UHC") collection period is around four months. The transition period resulted in a weak cash collection period for the quarter with a 29.9 % EBITDA to cash conversion rate (excl. IFRS 16) in 2Q22, which is anticipated to recover over the next few quarters.

Ø Capex investment was GEL 5.3 million in 2Q22 and GEL 9.1 million in 1H22, mainly reflecting maintenance capex.

Ø Net debt was at GEL 158.2 million as of 30-Jun-22 (down 3.6% q-o-q), reflecting the currency movements.

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

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 20 bps.

Ø Suspension of government contracts also translated into a reduction in occupancy rates and the number of admissions. The business key operating performance highlights for 2Q22 and 1H22 are noted below:

 
 Unaudited                2Q22    2Q21   Change    1H22    1H21   Change 
                                           -8.3                     -2.1 
 Occupancy rate          57.9%   66.2%     ppts   59.9%   62.0%     ppts 
 Number of admissions 
  (thousands)            301.7   314.9    -4.2%   616.4   550.0    12.1% 
 

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 20.3% market share in property and casualty insurance based on gross premiums as of 3 1 -Mar-22. P&C also offers a variety of non-property and casualty products, such as life insurance. Medical is the country's largest private health insurer, with a 22.5% market share based on FY21 net insurance premiums. Medical Insurance offers a variety of health insurance products primarily to corporate and (selectively) to state entities and also to retail clients in Georgia. GCAP owns a 100% equity stake in both insurance businesses.

2Q22 & 1H22 performance (GEL '000), Insurance (P&C and Medical) [45]

 
 Unaudited 
 INCOME STATEMENT HIGHLIGHTS         2Q22        2Q21   Change        1H22      1H21   Change 
 Earned premiums, net              42,302      38,700     9.3%      81,464    74,678     9.1% 
 Net underwriting profit           11,288      10,143    11.3%      22,089    20,453     8.0% 
 Net investment profit              2,285       2,650   -13.8%       3,994     4,973   -19.7% 
 Net profit                         4,735       4,343     9.0%       9,110     9,748    -6.5% 
 
 CASH FLOW HIGHLIGHTS 
 Net cash flows from 
  operating activities             13,079       1,648      NMF      15,131    10,086    50.0% 
 Free cash flow                    12,243       1,074      NMF      13,715     9,068    51.2% 
 
 BALANCE SHEET HIGHLIGHTS       30-Jun-22   31-Mar-22   Change   31-Dec-21    Change 
 Total assets                     297,154     278,392     6.7%     267,627     11.0% 
 Total equity                     114,581     119,836    -4.4%     116,464     -1.6% 
 

TOTAL INSURANCE BUSINESS HIGHLIGHTS

P&C and medical insurance have a broadly equal share in total revenues, while the combined net profit of GEL 4.7 million in 2Q22 was fully attributable to P&C (97.6% share in total net profit in 1H 22). The loss ratio was down by 1.7 ppts and the expense ratio was up by 2.6 ppts y-o-y in 2Q22 (down 0.7 ppts and up 1.7 ppts y-o-y in 1H22, respectively), translating into 0.9 ppts y-o-y increase in the combined ratio (up 0.9 ppts y-o-y in 1H22). Net profit was up by 9.0% y-o-y in 2Q22 (down 6.5% y-o-y in 1H22). As a result, ROAE was 18.2% in 2Q22 (16.9% in 2Q21) and 18.0% in 1H22 (19.0% in 1H21).

Discussion of results, P&C Insurance

 
 GEL '000 ( unaudited) 
 INCOME STATEMENT HIGHLIGHTS           2Q22        2Q21   Change        1H22     1H21   Change 
 Earned premiums, net                24,278      20,774    16.9%      45,983   39,481    16.5% 
 Net underwriting profit              9,943       8,133    22.3%      18,401   15,332    20.0% 
 Net investment profit                1,175       1,946   -39.6%       2,117    3,560   -40.5% 
 Net profit                           4,919       4,175    17.8%       8,890    8,348     6.5% 
 
 CASH FLOW HIGHLIGHTS 
 Net cash flows from operating 
  activities                         12,653       1,773      NMF      16,071    9,061    77.4% 
 Free cash flow                      12,083       1,334      NMF      15,019    8,210    82.9% 
 
 BALANCE SHEET HIGHLIGHTS         30-Jun-22   31-Mar-22   Change   31-Dec-21   Change 
 Total assets                       199,155     177,917    11.9%     188,805     5.5% 
 Total equity                        81,316      86,411    -5.9%      84,234    -3.5% 
 

INCOME STATEMENT HIGHLIGHTS

Ø Net premiums written were up by 25.6% y-o-y in 2Q22 (up by 9.3% y-o-y in 1H22), translated into increased earned premiums net in 2Q22 and 1H22.

o Credit life insurance revenues up by GEL 1.7 million y-o-y in 2 Q22 (up by GEL 3.0 million y-o-y in 1H22), resulted from growth in the banking sector.

o Credit unemployment insurance revenues up by GEL 0.7 million y-o-y in 2 Q22 (up by GEL 1.3 million y-o-y in 1H22), also attributable to the banking sector growth.

o Agricultural insurance revenues up by GEL 0.8 million y-o-y in 2 Q22 (up by GEL 0.8 million y-o-y in 1H22), driven by doubled Agro insurance written premiums from GEL 6 million in 1H21 to GEL 12 million in 1H22. Many market players have dropped out from selling Agro insurance due to difficulties in obtaining reinsurance and a lack of expertise in claims settlement.

o Border MTPL revenues increased by GEL 0.4 million y-o-y in 2Q22 (up by GEL 0.5 million y-o-y in 1H22), driven by the significant acceleration of the recovery in tourism in 2Q22. Border MTPL revenues amounted to 102% of the 2Q19 level and 90% of the 1H19 level.

Ø P&C Insurance's key performance ratios for 2Q22 and 1H22 are noted below:

 
 Unaudited 
 Key 
  Ratios       2Q22    2Q21   Change    1H22    1H21   Change 
 Combined                       -0.6                     -1.1 
  ratio       79.6%   80.2%     ppts   80.9%   82.0%     ppts 
 Expense                         2.8                      1.1 
  ratio       33.6%   30.8%     ppts   33.6%   32.5%     ppts 
 Loss                           -3.4                     -2.2 
  ratio       46.0%   49.4%     ppts   47.3%   49.5%     ppts 
 ROAE                            4.7                      2.3 
  [46]        27.7%   23.0%     ppts   25.7%   23.4%     ppts 
 

Ø The combined ratio decreased by 0.6 ppts y-o-y in 2Q22 (down by 1.1 ppts y-o-y in 1H22) and reflects:

o Improvement in loss ratios for the respective periods, which is mainly attributable to robust revenue growth. Reduction in COVID-19-related credit life insurance claims also positively contributed to the improved loss ratios. The volume of COVID-19-related credit life insurance claims incurred in 2Q22 and 1H22 amounts to GEL 0.1 million (GEL 1.0 million in 2Q21) and GEL 1.0 million (GEL 2.5 million in 1H21), respectively and represents 4% and 15% of total life insurance claims (27% in 2Q21 and 37% in 1H21).

o An increase in the 2Q22 and 1H22 expense ratios predominantly resulting from the increase in salary and other operating expenditures in line with the business growth.

Ø Improvement in the underwriting profit in 2Q22 and 1H22 is explained by revised underwriting practices, namely price segmentation in retail Motor insurance portfolio , as well as the improved loss ratio in the credit life insurance line due to the COVID-19 recovery.

Ø P&C Insurance's net investment profit was down 39.6% y-o-y in 2Q22 and down by 40.5% y-o-y in 1H22, mainly due to a loss incurred on investments placed in publicly traded securities in Eastern Europe, Russia and Ukraine.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø P&C Insurance's solvency ratio was 1 61 % as of 30 June 2022, significantly above the required minimum of 100%.

Ø The operating cash flow increase in 2Q22 and 1H22 is mainly associated with higher underwriting cash flows of the business, as well as the time gap between cash inflows on Agro insurance premiums and respective cash outflows to reimburse reinsurer's share in Agro.

Ø GEL 7. 4 million dividends were paid to GCAP in 2Q22 on the back of strong cash flow generation.

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø With its 20.3% market share in the local insurance market, P&C remained the largest player, although market share was down by 5.7 ppts y-o-y due to the decision not to participate in Government-related tenders, which are characterised by remarkably higher loss ratios.

Discussion of results, Medical Insurance

 
 GEL '000 ( unaudited) 
 INCOME STATEMENT HIGHLIGHTS           2Q22        2Q21   Change        1H22      1H21   Change 
 Earned premiums, net                18,024      17,926     0.5%      35,481    35,197     0.8% 
 Net underwriting profit              1,345       2,010   -33.1%       3,688     5,121   -28.0% 
 Net investment profit                1,110         704    57.7%       1,877     1,413    32.8% 
 Net profit                           (184)         168      NMF         220     1,400   -84.3% 
 
 CASH FLOW HIGHLIGHTS 
 Net cash flows from operating 
  activities                            426       (125)      NMF       (940)     1,025      NMF 
 Free cash flow                         160       (260)      NMF     (1,304)       858      NMF 
 
 BALANCE SHEET HIGHLIGHTS         30-Jun-22   31-Mar-22   Change   31-Dec-21    Change 
 Total assets                        97,999     100,475    -2.5%      78,822     24.3% 
 Total equity                        33,265      33,425    -0.5%      32,230      3.2% 
 

VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø The number of insured clients was c.160,000 as of 30-June-22, down 4.9% y-o-y, reflecting price increases for insurance policies implemented by the business.

Ø The insurance renewal rate was also down 6.4 ppts to 70.5% in 2Q22 and down 3.6 ppts to 70.5% in 1H22.

Ø Various incentives such as the direct settlement of claims with the provider mean that, on top of its own contribution to GHG's profitability (which was slightly negative in 2Q22), the medical insurance business plays a feeder role in originating and directing patients to GHG's healthcare facilities, mainly to polyclinics and to pharmacies but to a lesser extent also to hospitals. Direct settlement improves claims retention rates within GHG.

 
 Unaudited 
 Claims retention rates                   2Q22    2Q21     Change    1H22    1H21     Change 
 Total claims retained within the GHG    38.9%   36.5%   2.4 ppts   37.5%   36.2%   1.3 ppts 
 Total claims retained in outpatient     43.0%   36.4%   6.6 ppts   40.3%   37.6%   2.7 ppts 
 

INCOME STATEMENT HIGHLIGHTS

Ø The modest c.1% y-o-y increase in 2022 earned premiums net, reflects the combined effect of an increase in the price of insurance policies (c.5%) and a decrease in the number of insured clients for the same period.

Ø In 1H22, the net claims expenses were GEL 30.1 million (up 5.6% y-o-y), of which GEL 12.9 million ( 4 2 . 9% of total) was inpatient, GEL 11.2 million ( 3 7 . 2 % of total) was outpatient and GEL 6.0 million (19.9% of total) was related to pharmaceuticals.

Ø A rebounding trend in elective healthcare services, compared to patient footprint slowdown at healthcare facilities last year due to the pandemic, as well as increased claims in the first two quarters of 2022, resulted in an increased loss ratio, being up 3.5 ppts to 87.5% in 2Q22 and up 3.8 ppts to 84.8% in 1H22.

Ø As a result, the combined ratio increased by 4.8 ppts y-o-y to 106.7% for the quarter and by 4.8 ppts to 103.8% for the half year.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø The operating cash flow decline in 1H22 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 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.

2Q22 & 1H22 performance (GEL '000), Renewable Energy [47]

 
 Unaudited 
 INCOME STATEMENT HIGHLIGHTS         2Q22        2Q21   Change        1H22        1H21   Change 
                                                           -7. 
 Revenue                           12,834      13,897      6 %      19,244      20,432    -5.8% 
   of which, PPA                    5,442       8,242   -34.0%      11,397      14,776   -22.9% 
   of which, Non-PPA                7,392       5,656    30.7%       7,847       5,656    38.7% 
 Operating expenses               (2,311)     (2,719)   -15.0%     (5,017)     (5,570)    -9.9% 
 EBITDA                            10,523      11,178    -5.9%      14,227      14,862    -4.3% 
                                                           1.6                              1.2 
 EBITDA margin                      82.0%       80.4%     ppts       73.9%       72.7%     ppts 
 Net profit/(loss)                  1,165       1,693   -31.2%     (8,689)     (4,429)    96.2% 
 
 CASH FLOW HIGHLIGHTS 
 Cash flow from operating 
  activities                        7,766       8,275    -6.2%      11,262       9,998    12.6% 
 Cash flow used in investing 
  activities                        (106)     (4,594)   -97.7%     (7,032)    (16,467)   -57.3% 
 Cash flow used in financing 
  activities                      (9,115)     (3,309)      NMF    (22,235)    (18,088)    22.9% 
   Dividends paid out             (2,054)     (4,732)   -56.6%     (4,225)     (9,471)   -55.4% 
 BALANCE SHEET HIGHLIGHTS       30-Jun-22   31-Mar-22   Change   31-Dec-21      Change 
 Total assets                     366,225     392,589    -6.7%     405,932       -9.8% 
  Of which, cash balance           21,120      23,671   -10.8%      40,499      -47.9% 
  Of which, marketable 
   securities                      10,496      11,155    -5.9%       8,122       29.2% 
 Total liabilities                290,026     312,191    -7.1%     314,469       -7.8% 
  Of which, borrowings            281,934     300,041    -6.0%     305,536       -7.7% 
 Total equity                      76,199      80,398    -5.2%      91,463      -16.7% 
 

INCOME STATEMENT HIGHLIGHTS

Ø In US$ terms, 2Q22 revenue increased by 2.3% y-o-y (up 3.6% y-o-y in 1H22). A 7.6% decrease in revenue in GEL terms reflects the impact of GEL's appreciation against US$.

o The average electricity selling price for the business reached 48.7 US$/MWh in 2Q22 (52.1 US$/MWh in 1H22), compared to 4 3 . 3 US$/MWh in 2Q21 (47.7 US$/MWh in 1H21).

o The average market selling price (excluding PPAs) reached 42.1 US$/MWh in 2Q22, up by 36.9% y-o-y (42.7 US$/MWh in 1H22, up by 33% y-o-y)

o A 9.1% and 5.1% y-o-y decrease in 2Q22 and 1H22 electricity generation, respectively, was related to the better environmental conditions in 1H21. The average efficiency rate stood at c.57% and c.40% in 2Q22 and 1H22, respectively.

Ø Approximately 42% of electricity sales during 2Q22 ( c. 59% in 1H22) were covered by long-term fixed-price power purchase agreements (PPAs) formed with a Government-backed entity. In 2Q22, revenue from the PPA sales decreased by 34.0% y-o-y ( 22.9 % y-o-y decrease in 1H22) mainly due to the expiration of the government PPA with Akhmeta HPP (part of Hydrolea) .

Revenue and generation breakdown by power assets:

 
 Unaudited                                2Q22                                      1H22 
 GEL '000,                 Revenue   Change   Electricity   Change        Revenue   Change   Electricity   Change 
  unless otherwise            from    y-o-y    generation    y-o-y           from    y-o-y    generation    y-o-y 
  noted                electricity                 ( MWh)             electricity                 ( MWh) 
                             sales                                          sales 
 30MW Mestiachala 
  HPP                        4,236    -3.6%        33,762   -15.9%          4,513    -2.4%        35,389   -14.5% 
 21MW Qartli 
  wind farm                  3,970   -20.9%        20,495   -12.6%          7,815   -16.3%        39,586    -8.5% 
 20MW Hydrolea 
  HPPs                       4,628     3.1%        34,296     1.4%          6,916     6.8%        47,523     6.9% 
 Total                      12,834    -7.7%        88,553    -9.1%         19,244    -5.8%       122,498    -5.1% 
 
 

Ø A 15.0 % y-o-y decrease in operating expenses (down 9.9% y-o-y in 1H22), mainly reflects the GEL appreciation against the US dollar as well as lower costs associated with operating taxes and insurance expenses.

Ø As a result, in US$ terms, 2Q22 EBITDA increased by 4.4% y-o-y (up 5.6% y-o-y in 1H22).

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø The decrease in 2Q22 operating cash flow was related to GEL's appreciation against US$ as well as higher amounts of advances paid in 2Q22.

Ø A y-o-y decrease in investing cash flows was mainly driven by significantly lower capex both in 2Q22 and 1H22 as well as lower allocation of funds to short-term financial securities in 1H22 (GEL 3.1 million in 1H22 vs GEL 8.3 million in 1H21).

Ø An increase in cash outflow from financing activities in 2Q22 and 1H22 was mainly attributable to a GEL 7.0 million GGU Eurobond buybacks, as some of the bondholders exercised their put option under US$ 250 million Eurobonds, right before April 2022 deadlines. Renewable Energy made a dividend distribution of GEL 2.1 million in 2Q22 (GEL 4.2 million in 1H22). As a result, the cash balance of the business was down to GEL 21.1 million as of 30 -Jun -22.

Discussion of Education Business Results

Our education business currently combines majority stakes in four 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 and Green School (80%-90% ownership), well-positioned in the affordable segment.

2Q22 & 1H22 performance (GEL '000), Education [48]

 
 Unaudited 
 INCOME STATEMENT 
  HIGHLIGHTS                      2Q22        2Q21   Change        1H22       1H21   Change 
 Revenue                        11,351       8,804    28.9%      22,154     16,240    36.4% 
 Operating expenses            (6,879)     (5,068)    35.7%    (13,365)    (9,756)    37.0% 
 EBITDA                          4,472       3,736    19.7%       8,789      6,484    35.5% 
                                                       -3.0                            -0.2 
 EBITDA Margin                   39.4%       42.4%     ppts       39.7%      39.9%     ppts 
 Net income                      4,588       4,376     4.8%       8,479      5,789    46.5% 
 
 CASH FLOW HIGHLIGHTS 
 Net cash flows from 
  operating activities           8,833       6,003    47.1%      10,517      7,579    38.8% 
 Net cash flows used 
  in investing activities      (5,766)     (5,077)    13.6%     (8,201)   (11,845)   -30.8% 
 Net cash flows from                                    48. 
  financing activities           1,721       1,159      5 %       2,627      6,872   -61.8% 
 
 BALANCE SHEET HIGHLIGHTS    30-Jun-22   31-Mar-22   Change   31-Dec-21     Change 
 Total assets                  151,303     141,052     7.3%     138,080       9.6% 
   Of which, cash               13,503       9,156    47.5%       9,096      48.4% 
 Total liabilities              54,930      49,574    10.8%      51,764       6.1% 
                                                                  25,58      - 1.2 
   Of which, borrowings         25,288      25,402    -0.4%           5          % 
 Total equity                   96,373      91,478     5.4%      86,316      11.7% 
 

INCOME STATEMENT HIGHLIGHTS

Ø The increase in 2Q22 and 1H22 revenues was attributable to:

o Organic growth of 21.9% and 29.2% in 2Q22 and 1H22, respectively, which was driven by a combination of higher total enrolments, an increase in average fee per learner and a 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.

o The expansion of the affordable segment through the acquisition and launch of a new campus, which contributed 7.0% and 7.2% to the y-o-y revenue growth in 2Q22 and 1H22, respectively.

Ø Operating expenses were up by 35.7% y-o-y 2Q22 (up 37.0% y-o-y in 1H22), reflecting:

o The expansion in the affordable segment, contributing 9.9% to the y-o-y increase in 2Q22 (10.8% in 1H22);

o The remaining 25.9% y-o-y increase in 2Q22 (26.2% y-o-y increase in 1H22) was attributable mainly to the increased salary and utilities expenses. The growth of the operating expenses in 1H22 also reflects a higher number of on-campus learning days compared to 1H21.

Ø EBITDA was up by 19.7% in 2Q22 (up 35.5% y-o-y in 1H22), reflecting the strong business performance . EBITDA margin remained largely flat at 39.4% (down by 3.0 ppts y-o-y in 2Q22 and down by 0.2 ppts to 39.7% in 1H22), notwithstanding the addition of two new campuses in the affordable segment, which are in early ramp up stages and currently have low utilisation rates of 23.0%.

Ø The business posted a net income of GEL 4.6 and 8.5 million in 2Q22 and 1H22, respectively, reflecting strong performance of the business supported by the FX gains on the foreign currency denominated debt.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø S trong cash collection rates (at 96.7% as of 30-Jun-22, exceeding last year's 95.3%), combined with enhanced revenue streams, led to a 47.1% and 38.8% y-o-y increase in operating cash flow generation in the business in 2Q22 and 1H22, respectively.

Ø GEL 8.2 million cash outflow on investing activities in 1H22 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). Construction is expected to be completed before the start of the next academic year (September 2022).

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø Overall, the total number of learners was up by 26.0% y-o-y to 3,230 learners as of 30-Jun-22.

Ø The utilisation rate for the existing capacity (i.e. excluding the new capacity addition of 2,250 learners in 2021) was 96.5%, up by 5.3 ppts y-o-y and up by 0.6 ppts q-o-q as of 30-Jun-22.

Ø Utilisation of the newly added capacity of 2,250 learners was 23.0% as of 30-Jun-22.

Ø Starting September 2022, BGA (premium segment school) will switch from the current Georgian curriculum to International Baccalaureate (IB) curriculum. IB is a global leader in international education that offers high-quality educational programmes to more than 2 million learners aged 3 to 19 internationally. Through the introduction of the IB curriculum, BGA's offering will be more tailored towards existing demand on the market. Currently, BGA is a candidate school pursuing authorisation as an IB World School.

Discussion of Clinics and Diagnostics Business Results

The clinics and diagnostics business, where GCAP owns a 100% equity interest through GHG, is the second largest healthcare market participant in Georgia after our hospitals business. The business comprises two segments: 1) Clinics: 19 community clinics with 353 beds (providing outpatient and basic inpatient services); 17 polyclinics (providing outpatient diagnostic and treatment services) and 18 lab retail points at GPC pharmacies; 2) Diagnostics, operating the largest laboratory in the entire Caucasus region - "Mega Lab".

2Q22 & 1H22 performance (GEL '000), Clinics and Diagnostics [49]

 
 Unaudited 
 INCOME STATEMENT HIGHLIGHTS         2Q22        2Q21   Change        1H22       1H21   Change 
 Revenue, net [50]                 17,795      22,644   -21.4%      43,723     42,260     3.5% 
   Of which, clinics               15,188      16,613    -8.6%      34,795     31,919     9.0% 
   Of which, diagnostics            3,937       7,645   -48.5%      11,765     13,192   -10.8% 
   Of which, inter-business 
    eliminations                  (1,330)     (1,614)   -17.6%     (2,837)    (2,851)    -0.5% 
 Gross Profit                       7,546      11,176   -32.5%      17,999     19,830    -9.2% 
                                                          -6.8                            -5.7 
 Gross profit margin                42.2%       49.0%     ppts       41.0%      46.7%     ppts 
 Operating expenses (ex. 
  IFRS 16)                        (5,247)     (5,115)     2.6%    (10,980)    (9,553)    14.9% 
 EBITDA (ex. IFRS 16)               2,299       6,061   -62.1%       7,019     10,277   -31.7% 
 EBITDA margin (ex. IFRS                                 -13.7                            -8.2 
  16)                               12.9%       26.6%     ppts       16.0%      24.2%     ppts 
 N et (loss)/profit (ex. 
  IFRS 16)                        (1,230)       3,234      NMF         352      4,311   -91.8% 
 
 CASH FLOW HIGHLIGHTS 
 Cash flow from operating 
  activities (ex. IFRS 
  16)                               1,712       3,730   -54.1%       2,788      4,083   -31.7% 
 EBITDA to cash conversion                                13.0 
  (ex. IFRS 16)                     74.5%       61.5%     ppts       39.7%      39.7%      NMF 
 Cash flow from/used 
  in investing activities         (4,000)     (2,406)    66.3%     (6,442)    (3,899)    65.2% 
 Free cash flow (ex. 
  IFRS 16) [51]                   (2,325)       1,437      NMF     (3,638)        264      NMF 
 Cash flow from financing 
  activities (ex. IFRS 
  16)                                 440    (11,209)      NMF       (903)    (2,983)   -69.7% 
 
 BALANCE SHEET HIGHLIGHTS       30-Jun-22   31-Mar-22   Change   31-Dec-21     Change 
 Total assets                     187,735     184,281     1.9%     178,592       5.1% 
 Of which, cash balance 
  and bank deposits                 1,719       3,595   -52.2%       6,292     -72.7% 
 Of which, securities 
  and loans issued                  3,564       3,643    -2.2%       3,699      -3.6% 
 Total liabilities                 88,211      84,278     4.7%      80,613       9.4% 
 Of which, borrowings              55,265      51,062     8.2%      50,854       8.7% 
 Total equity                      99,524     100,003    -0.5%      97,979       1.6% 
 

Discussion of results, Clinics

KEY POINTS

The clinics business was 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 and revenue. These are expected to get back to normal operating levels after passing through the COVID transition period.

 
 GEL '000 ( unaudited) 
 INCOME STATEMENT HIGHLIGHTS         2Q22        2Q21   Change        1H22       1H21   Change 
 Revenue, net [52]                 15,188      16,613    -8.6%      34,795     31,919     9.0% 
 Gross Profit                       6,763       7,621   -11.3%      14,940     14,642     2.0% 
                                                          -1.2                            -2.8 
 Gross profit margin                44.3%       45.5%     ppts       42.7%      45.5%     ppts 
 Operating expenses (ex. 
  IFRS 16)                        (4,349)     (4,052)     7.3%     (8,881)    (7,854)    13.1% 
 EBITDA (ex. IFRS 16)               2,414       3,569   -32.4%       6,059      6,788   -10.7% 
 EBITDA margin (ex. IFRS                                  -5.5                            -3.8 
  16)                               15.8%       21.3%     ppts       17.3%      21.1%     ppts 
 N et (loss)/profit (ex. 
  IFRS 16)                          (808)       1,092      NMF          24      1,498   -98.4% 
 
 CASH FLOW HIGHLIGHTS 
 Cash flow from operating 
  activities (ex. IFRS 16)          2,146       3,304   -35.0%       3,569      5,411   -34.0% 
 EBITDA to cash conversion                                -3.7                           -20.8 
  (ex. IFRS 16)                     88.9%       92.6%     ppts       58.9%      79.7%     ppts 
 Cash flow used in investing 
  activities [53]                 (3,728)     (1,798)      NMF     (5,831)    (2,908)      NMF 
 Free cash flow (ex. IFRS 
  16) [54]                        (1,602)       1,475      NMF     (2,209)      2,376      NMF 
 Cash flow from financing 
  activities (ex. IFRS 16)            778    (11,329)      NMF       (257)    (2,943)   -91.3% 
 
 BALANCE SHEET HIGHLIGHTS       30-Jun-22   31-Mar-22   Change   31-Dec-21     Change 
 Total assets                     160,024     152,842     4.7%     147,368       8.6% 
 Of which, cash balance 
  and bank deposits                   613       1,447   -57.6%       3,149     -80.5% 
 Of which, securities and 
  loans issued                      3,823       3,897    -1.9%       3,947      -3.1% 
 Total liabilities                 80,702      73,587     9.7%      69,387      16.3% 
 Of which, borrowings              51,228      46,766     9.5%      46,417      10.4% 
 Total equity                      79,322      79,255     0.1%      77,981       1.7% 
 

INCOME STATEMENT HIGHLIGHTS

Ø In 2Q22 revenues were down due to the decreased traffic at polyclinics and clinics, as a result of the suspension of COVID contracts in March 2022. Top line growth is expected to rebound over the next few quarters, as the business passes through the COVID transition period.

Ø The cost of services in the business consists mainly of materials, salaries and utilities. Trends in materials and salary costs are captured in the materials and direct salary rates ([55]) .

o The materials rate remained well-controlled at 7.0% in 2Q22 (8.8% in 2Q21) and 9.9% in 1H22 (9.6% in 1H21).

o Due to the low base effect from the expiration of the state income tax subsidy that was in effect in 1H21, coupled with the opening of a new polyclinic and the suspension of the COVID clinics' contracts in March (COVID clinics had mainly a fixed direct salary structure), the direct salary rate was up 8.1 ppts to 37.1% in 2Q22 and up 5.6 ppts to 33.9% in 1H22, y-o-y. After restructuring the COVID clinics to a normal operating level, the salary rate is expected to stabilise in the coming quarters.

Ø As a result, gross profit margins of the clinics business were down by 1.2 ppts in 2Q22 and by 2.8 ppts 1H22, y-o-y. Adjusted for the impact of state income tax subsidy, the gross profit margin was up 2.1 ppts in 2Q22 and 0.6 ppts in 1H22, y-o-y.

Ø Operating expenses (excl. IFRS 16), mainly comprising of salaries and other employee benefits (up 7.5% in 2Q22 and up 14.2% in 1H22, y-o-y) and general and administrative expenses (excl. IFRS 16) (down 3.1% in 2Q22 and up 9.5% in 1H22, y-o-y), were up in 2022 mainly due to the increased cost structure for COVID clinics and the expansion of the business.

Ø As a result, business EBITDA margins (excl. IFRS 16) were down in both reporting periods (down 5.5 ppts in 2Q22 and down 3.8 ppts in 1H22). Excluding the impact of the absence of the state income tax subsidy, EBITDA margins (excl. IFRS 16) in 1H22 were down 2.2 ppts in 2Q22 and down 0.4 ppts in 1H22, y-o-y.

Ø The increase in net debt position (up 13.0% q-o-q) to GEL 46.8 million due to the opening of new polyclinics, coupled with increased interest rates on the market led to an increase in net interest expense (excl. IFRS 16), up 28.9% in 2Q22 and up 28.6% in 1H22, y-o-y.

CASH FLOW AND BALANCE SHEET HIGHLIGHTS

Ø In 2Q22, the business posted an 88.9% EBITDA to cash conversion ratio, demonstrating a strong rebound from a weak 1Q22 in terms of operating cash (1Q22 was impacted by the reimbursement of most of the payables by the Government in 4Q21).

Ø The business spent GEL 5.8 million on capex in 1H22, of which GEL 1.1 million was maintenance capex and GEL 4.7 million was growth capex, primarily related to the opening of two new polyclinics in Tbilisi.

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø Apart from community clinics, our polyclinics were also affected due to the reduced traffic for COVID services, such as COVID tests and vaccinations in 2Q22:

 
 Unaudited                2Q22    2Q21   Change      1H22      1H21   Change 
 Number of admissions 
  (thousands)            497.5   565.1   -12.0%   1,136.1   1,022.3    11.1% 
 

Ø The number of registered patients in Tbilisi increased by c.22,000 y-o-y to c.264,000 and by c.32,000 y-o-y to c.601,000 across the country as of 30-Jun-22.

Discussion of results, Diagnostics

 
 GEL '000 ( unaudited) 
 INCOME STATEMENT HIGHLIGHTS     2Q22      2Q21   Change      1H22      1H21   Change 
 Revenue, net [56]              3,937     7,645   -48.5%    11,765    13,192   -10.8% 
  Of which, from COVID-19 
   tests                          718     3,778   -81.0%     4,874     6,487   -24.9% 
  Of which, from regular 
   lab tests                    3,219     3,867   -16.8%     6,891     6,705     2.8% 
 Gross Profit                     783     3,555   -78.0%     3,053     5,188   -41.2% 
                                                   -26.6                        -13.4 
 Gross profit margin            19.9%     46.5%     ppts     25.9%     39.3%     ppts 
 Operating expenses (ex. 
  IFRS 16)                      (898)   (1,063)   -15.5%   (2,093)   (1,699)    23.2% 
 EBITDA (ex. IFRS 16)           (115)     2,492      NMF       960     3,489   -72.5% 
 EBITDA margin (ex. IFRS                           -35.5                        -18.2 
  16)                           -2.9%     32.6%     ppts      8.2%     26.4%     ppts 
 N et (loss)/profit (ex. 
  IFRS 16)                      (422)     2,142      NMF       328     2,813   -88.3% 
 

INCOME STATEMENT HIGHLIGHTS

Ø The diagnostics segment apart from regular diagnostics services was also actively engaged in COVID-19 testing.

Ø A 50% y-o-y decrease in 2Q22 revenue reflects a significantly reduced number of COVID cases in the country and the suspension of Government contracts from March 2022.

Ø As a result, the gross profit and EBITDA were reduced substantially.

OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS

Ø From March 2022, the Government has suspended the contracts with laboratories for COVID tests.

Ø The business opened a retail collection point in 2Q22 and another one in July 2022. As a result, the total number of retail branches reached five. The launch of the retail points will bring in additional revenue from regular lab tests as well as attract business-to-business (B2B) contracts.

Ø The key operating performance highlights for 2Q22 and 1H22 are noted below:

 
 Unaudited                 2Q22    2Q21   Change     1H22     1H21   Change 
 Number of tests 
  performed (thousands)     539     641   -15.9%    1,298    1,175    10.5% 
                                                                         -1 
 Average revenue                                                        9.3 
  per test (GEL)            7.3    11.9   -38.8%      9.1     11.2        % 
 
 

Discussion of Other Portfolio Results

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 263.5 million at 30-Jun-22, which represented 9.7% of our total portfolio.

2Q22 & 1H22 aggregated performance highlights (GEL '000), Other Portfolio

 
 Unaudited                           2Q22     2Q21   Change      1H22      1H21   Change 
 Revenue                          121,607   85,629    42.0%   198,384   149,919    32.3% 
 EBITDA                            10,093   13,128   -23.1%    11,395    19,673   -42.1% 
 Net cash flows from operating 
  activities                      (1,018)    7,408      NMF   (4,389)    12,008      NMF 
 

Ø Auto Service | The auto service business includes a periodic technical inspection (PTI) business, and a car services and parts business.

o Periodic technical inspection (PTI) business | PTI business's revenue was up by 19.2% y-o-y to GEL 3.6 million in 2Q22. Revenue growth was supported by an increase in total cars serviced, up by 13.7% y-o-y in 2Q22. As a result, the EBITDA of the PTI business was up by 32.2% y-o-y to GEL 1.7 million, with a y-o-y EBITDA margin growth of 4.6ppts to 46.6% in 2Q22. 1H22 revenue remained largely flat, up by 1.3% y-o-y to GEL 7.7 million. The number of cars serviced in 1H22 demonstrated a slight decrease, down by 3.0% and translated into a 5.9% y-o-y decrease in EBITDA.

o Car services and parts business In 2Q22, car services and parts business' revenue was up by 35.4% y-o-y to GEL 10.5 million (up 35.5% y-o-y to GEL 17.4 million in 1H22), reflecting an increase in corporate and retail customer segments. Similarly, the gross profit was up by 51.2% to GEL 2.7 million in 2Q22 and up by 46.4% to GEL 4.3 million in 1H22, y-o-y. As a result, the business posted GEL 1.0 million EBITDA in 2Q22, up by 2.3x y-o-y (GEL 1.0 million in 1H22, up by 80.1% y-o-y).

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 64% of the 1H21 net revenues were generated from sales in these markets (44% of revenues in 1H22). Due to the implications of the Russia-Ukraine war, the net revenue of the wine business was down by 19.4% to GEL 11.1 million in 2Q22 (down by 29.8% y-o-y to GEL 16.6 million in 1H22). The number of bottles sold was down by 9.4% y-o-y, resulting from the decreased export in Russia and Ukraine during the quarter. Consequently, EBITDA was down by 80.4% and stood at GEL 0.6 million in 2Q22, while 1H22 EBITDA was negative GEL 0.5 million.

o Beer business | The net revenue of the beer business increased by 35.7% y-o-y to GEL 24.9 million in 2Q22 and by 43.1% y-o-y to GEL 36.5 million in 1H22, reflecting the impact of the strong recovery in tourism and increased product prices due to the sale price inflation. Beer and lemonade y-o-y sales (in hectolitres) were up 10.6% and 26.9%, respectively in 2Q22. The average GEL price per litre (average for beer and lemonade) increased by 18.8% y-o-y. Consequently, the EBITDA of the business increased by GEL 4.5 million y-o-y to GEL 6.7 million in 2Q22 (up 4.9x y-o-y to GEL 7.3 million in 1H22). The positive dynamics in the business' operating performance were translated into the decrease of GCAP's issued guarantee by EUR 1.0 million to EUR 14.8 million.

o Distribution business | Revenue of the distribution business increased by 49.1% and 52.9% y-o-y to GEL 48.0 million and GEL 72.4 million in 2Q22 and 1H22 respectively, driving 2Q22 and 1H22 EBITDA up by 68.8% and 125.9% y-o-y.

Ø Housing development and hospitality businesses | In light of the increased sales and construction progress, 2Q22 revenue of the housing business was up by GEL 24.6 million to GEL 44.7 million (up by GEL 26.0 y-o-y to GEL 70.6 in 1H22), while 2Q22 EBITDA was down by 72.3% y-o-y to GEL 0.6 million (down by GEL 5.6 million to negative GEL 1.3 million in 1H22), reflecting the impact from significant inflation within the construction materials. The revenue of the hospitality business decreased by 76.5% y-o-y in 2Q22 and was down by 11.4% y-o-y in 1H22. This reflects the absence of revenues due to the divestment of commercial real estate assets during 2021. Consequently, the hospitality business EBITDA was down by GEL 4.1 million y-o-y to negative GEL 1.4 million in 2Q22 (down by GEL 3.4 million y-o-y to GEL 0.7 million in 1H22).

RECONCILIATION OF ADJUSTED INCOME STATEMENT TO IFRS INCOME STATEMENT

The table below reconciles the adjusted income statement to the IFRS income statement. Adjustments to reconcile adjusted income statement with IFRS income statement mainly relate to eliminations of income, expense and certain equity movement items recognised at JSC Georgia Capital, which are subsumed within gross investment (loss)/income in IFRS income statement of Georgia Capital PLC.

 
                                                        1H22                                    1H21 
 GEL '000, unless otherwise               Adjusted   Adjustment         IFRS       Adjusted   Adjustment         IFRS 
  noted                                       IFRS                    income    IFRS income                    income 
  (Unaudited)                               income                 statement      statement                 statement 
                                         statement 
                                       -----------  -----------  -----------  -------------  -----------  ----------- 
 Dividend income                            34,421     (34,421)            -         14,430     (14,430)            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Interest income                            18,150     (18,150)            -         10,617     (10,617)            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Realised / unrealised 
  (loss)/ gain on liquid 
  funds                                   (11,435)       11,435            -          1,516      (1,516)            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Interest expense                         (37,679)       37,679            -       (37,520)       37,520            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Gross operating income/(loss)               3,457      (3,457)            -       (10,957)       10,957            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Operating expenses (administrative, 
  salaries and other employee 
  benefits)                               (19,700)       19,700            -       (18,096)       18,096            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 GCAP net operating 
  loss                                    (16,243)       16,243            -       (29,053)       29,053            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 
 Total investment return 
  / (loss)/gain on investments 
  at fair value                          (499,687)      (1,562)    (501,249)        326,019        3,562      329,581 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 
 Administrative expenses, 
  salaries and other employee 
  benefits                                       -      (3,784)      (3,784)              -      (4,263)      (4,263) 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 
 (Loss)/income before 
  foreign exchange movements 
  and non-recurring expenses             (515,930)       10,897    (505,033)        296,966       28,352      325,318 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Net foreign currency 
  gain                                      14,448     (18,506)      (4,058)         26,547     (26,693)        (146) 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 Non-recurring expenses                      (196)          196            -          (218)          218            - 
-------------------------------------  -----------  -----------  -----------  -------------  -----------  ----------- 
 
 Net (loss)/income                       (501,678)      (7,413)    (509,091)        323,295        1,877      325,172 
=====================================  ===========  ===========  ===========  =============  ===========  =========== 
 

ADDITIONAL FINANCIAL INFORMATION

The 1H22 NAV Statement shows the development of NAV since 31-Dec-21:

 
 GEL '000, unless     Dec-21         1.           2a.           2b.         2c.      3.Operating       4.           Jun       Change 
  otherwise noted                   Value     Investment      Buyback     Dividend     expenses    Liquidity/       -22          % 
  Unaudited                        creation       and                                               FX/Other 
                                    ([57])    Divestments 
 Listed and 
 Observable 
 Portfolio 
 Companies 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Bank of Georgia 
  (BoG)                 681,186   (202,669)             -             -   (22,798)             -            -       455,719    -33.1% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Water Utility                -      13,608       139,392             -          -             -            -       153,000      0.0% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Total Listed and 
  Observable 
  Portfolio 
  Value                 681,186   (189,061)       139,392             -   (22,798)             -            -       608,719    -10.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Listed and 
  Observable 
  Portfolio value 
  change 
  %                                  -27.8%         20.5%          0.0%      -3.3%          0.0%         0.0%        -10.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Private 
 Portfolio 
 Companies 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Large Companies      2,249,260   (156,554)     (696,960)             -    (7,374)             -          821     1,389,193    -38.2% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Retail 
  (Pharmacy)            710,385    (39,358)             -             -          -             -            -       671,027     -5.5% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Hospitals              573,815    (95,769)             -             -          -             -            -       478,046    -16.7% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Water Utility          696,960           -     (696,960)             -          -             -            -             -   -100.0% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Insurance (P&C 
  and 
  Medical)              268,100    (21,427)             -             -    (7,374)             -          821       240,120    -10.4% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
    Of which, P&C 
     Insurance          211,505     (5,142)             -             -    (7,374)             -          821       199,810     -5.5% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
    Of which, 
     Medical 
     Insurance           56,595    (16,285)             -             -          -             -            -        40,310    -28.8% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Investment Stage 
  Companies             461,140    (14,970)         1,559             -    (4,249)             -          487       443,967     -3.7% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Renewable Energy       173,288       2,247           395             -    (4,249)             -          487       172,168     -0.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Education              129,848      20,741         1,164             -          -             -            -       151,753     16.9% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Clinics and 
  Diagnostics           158,004    (37,958)             -             -          -             -            -       120,046    -24.0% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Other Companies        224,645   (104,681)       142,597             -          -             -          973       263,534     17.3% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Total Private 
  Portfolio 
  Value               2,935,045   (276,205)     (552,804)             -   (11,623)             -        2,281     2,096,694    -28.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Private 
  Portfolio 
  value change %                      -9.4%        -18.8%          0.0%      -0.4%          0.0%         0.1%        -28.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Total Portfolio 
  Value (1)           3,616,231   (465,266)     (413,412)             -   (34,421)             -        2,281     2,705,413    -25.2% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Total Portfolio 
  value change %                     -12.9%        -11.4%          0.0%      -1.0%          0.0%         0.1%        -25.2% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Net Debt (2)         (711,074)           -       419,419      (53,540)     34,421      (10,951)     (44,189)     (365,914)    -48.5% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
   of which, Cash 
    and 
    liquid funds        272,317           -       555,996      (53,540)     11,623      (10,951)    (112,078)       663,367    143.6% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
  of which, Loans 
   issued               154,214           -     (136,577)             -          -             -        7,737        25,374    -83.5% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
  of which, 
   Accrued 
   dividend 
   income                     -           -             -             -     22,798             -            -        22,798      0.0% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
  of which, Gross 
   Debt             (1,137,605)           -             -             -          -             -       60,152   (1,077,453)     -5.3% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Net other 
  assets/ 
  (liabilities) 
  (3)                  (21,535)           -       (6,007)             -          -       (8,749)       29,353       (6,938)    -67.8% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
  of which, 
   share-based 
   comp.                      -           -             -             -          -       (8,749)        8,749             -      0.0% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Net Asset Value 
  (1)+(2)+(3)         2,883,622   (465,266)             -      (53,540)          -      (19,700)     (12,555)     2,332,561    -19.1% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 NAV change %                        -16.1%          0.0%         -1.9%       0.0%         -0.7%        -0.4%        -19.1% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 
 Shares 
  outstanding(57)    45,752,362           -             -   (2,166,578)          -             -      663,963    44,249,747     -3.3% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 Net Asset Value 
  per share, GEL          63.03     (10.17)        (0.00)          1.90     (0.00)        (0.43)       (1.61)         52.71    -16.4% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 NAV per share, 
  GEL 
  change %                           -16.1%          0.0%          3.0%       0.0%         -0.7%        -2.5%        -16.4% 
-----------------  ------------  ----------  ------------  ------------  ---------  ------------  -----------  ------------  -------- 
 

Extension of the Share Buyback and Cancellation Programme

As outlined on page 8 above, the Board has approved the extension of the current US$ 25 million share buyback and cancellation programme until 31 December 2022. 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 2022 annual general meeting ("AGM"), the maximum number of shares that may be repurchased is 6,944,294. The programme is conducted within certain pre-set parameters, and in accordance with the general authority to repurchase shares granted at the 2022 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 instructed Numis Securities Limited ("Numis"), appointed to manage an irrevocable, non--discretionary share buyback programme, to amend the terms of the share buyback programme accordingly. 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 continue to 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.

22. NCC Ratio - Equals Net Capital Commitment divided by portfolio value.

Principal risks and uncertainties

Understanding our risks

In the Group's 2021 Annual Report and Accounts we disclosed the principal risks and uncertainties and their potential impact, as well as the trends and outlook associated with these risks and the actions we take to mitigate these risks. We have updated this disclosure to reflect recent developments and this is set out in full below. If any of the following risks were to occur, the Group's business, financial condition, results of operations or prospects could be materially affected. The risks and uncertainties described below may not be the only ones the Group faces. The order in which the principal risks and uncertainties appear does not denote their order of priority. Additional risks and uncertainties, including those that the Group is currently not aware of or deems immaterial, may also result in decreased revenues, incurred expenses or other events that could result in a decline in the value of the Group's securities.

 
 REGIONAL INSTABILITY RISK 
 PRINCIPAL RISK / UNCERTAINTY   The Georgian economy and our business may be adversely 
                                 affected by regional tensions. Georgia shares 
                                 borders with Russia, Azerbaijan, Armenia and Turkey, 
                                 and has two breakaway territories, Abkhazia and 
                                 the Tskhinvali/South Ossetia regions. In addition 
                                 to strong political and geographic influences, 
                                 regional countries are highly linked to Georgian 
                                 economy representing its significant historical 
                                 trading partners. 
                                 Following a significant Russian military build-up 
                                 near the Russia-Ukraine border and months of rising 
                                 tensions, on February 24 Russian troops crossed 
                                 the border and the situation escalated into a 
                                 war. In response to the invasion, all G-7 countries, 
                                 the European Union and many other countries have 
                                 announced severe economic sanctions on Russia, 
                                 including selected high-profile Russian banks, 
                                 Russian entities and Russian individuals. At the 
                                 start of the war, there was a significant depreciation 
                                 of the Russian Ruble against foreign currencies, 
                                 although the Ruble has since recovered. The market 
                                 value of Russian securities has also decreased 
                                 significantly. As the situation grinds on, the 
                                 already steep humanitarian costs and economic 
                                 losses for Ukraine, Russia and the rest of the 
                                 world will only deepen. Ukraine and Russia are 
                                 particularly important trade partners of Georgia, 
                                 with visible negative effects on the most vulnerable 
                                 sectors already present. The length and outcome 
                                 of the war are clearly uncertain, but it is possible 
                                 that the war will have a negative impact on Georgian 
                                 economic growth in the short, medium and longer 
                                 term and could continue to have a material impact 
                                 on market confidence, affecting all regional countries. 
                                 Various tensions have also existed between Russia 
                                 and Georgia for more than 15 years, and the two 
                                 countries also had a brief armed conflict in 2008 
                                 (which led to Russia's control of the two breakaway 
                                 territories). Finally, there has also been ongoing 
                                 geopolitical tension, political instability, economic 
                                 instability and military conflict between other 
                                 regional countries, with the latest flare-up culminating 
                                 in a six-week war (September-November 2020) between 
                                 Armenia and Azerbaijan over the disputed Nagorno-Karabakh 
                                 region. Despite the peace agreement, skirmishes 
                                 have been reported to have occurred on several 
                                 occasions. The continuation or escalation of the 
                                 war, political instability, geopolitical conflict, 
                                 the economic decline of Georgia's trading partners 
                                 and any further tension with Russia, including 
                                 border and territorial disputes, may have a negative 
                                 impact on the political or economic stability 
                                 of Georgia, which in turn may affect our business 
                                 unfavourably, including putting adverse pressure 
                                 on our business model, our revenues, our financial 
                                 position and the valuations of our listed and 
                                 private portfolio companies. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           The Russian invasion of Ukraine has resulted in 
                                 extraordinary economic disruption, as market confidence 
                                 has plunged, unprecedented sanctions have been 
                                 imposed upon the Russian economy, food and energy 
                                 prices have surged and spillover risks have been 
                                 substantially aggravated, with further economic 
                                 consequences to follow as the situation develops. 
                                 The war has negatively affected the operating 
                                 performance of our wine (c.60% sales exposure 
                                 to Russia and Ukraine in 2021) and housing businesses 
                                 (significant growth in construction materials 
                                 costs). The magnitude of the impact on these businesses 
                                 cannot be reliably measured at this stage. Due 
                                 to their size, however, it is not expected to 
                                 be material overall for the Group (the value of 
                                 the wine and housing business represented approximately 
                                 2% of the total portfolio value as at 30 June 
                                 2022). 
                                 Regional instabilities also affected the discount 
                                 rates and listed peer multiples used in our DCF 
                                 and multiple-based valuation assessments. Discount 
                                 rates were up by 2.0-3.0 ppts on average in 1H22, 
                                 while the listed peer multiples demonstrated a 
                                 declining trend. These developments are reflected 
                                 in the private portfolio companies' valuations 
                                 in 1H22, as described earlier in this report. 
                                 While GCAP's exposure to liquid funds such as 
                                 debt securities issued by affected countries is 
                                 not material, our insurance business's investment 
                                 results were negatively affected during the first 
                                 half of the year. As the war is still waging, 
                                 it is impossible to reliably assess the impact 
                                 this may have on the Group's business as there 
                                 is uncertainty over the magnitude of the impact 
                                 on the economy in general. 
                                 Although a ceasefire agreement ended the six-week 
                                 Armenia-Azerbaijan war in November 2020, the conflict 
                                 has not been conclusively resolved. Russian peacekeeping 
                                 forces were deployed for an initial period of 
                                 five years. The risks of a further flare-up depend 
                                 on the success of the peacekeeping mission. The 
                                 war has also worsened the economic and political 
                                 outlook for Armenia, an important trading partner 
                                 of Georgia, and created significant spillover 
                                 risks in the region, with the rising influence 
                                 of Russia and Turkey altering the regional balance. 
                                 Russia imposed economic sanctions on Georgia in 
                                 2006, and conflict between the countries escalated 
                                 in 2008 when Russian forces crossed Georgian borders 
                                 and recognised the independence of Abkhazia and 
                                 the Tskhinvali/South Ossetia regions. Russian 
                                 troops continue to occupy the regions, and tensions 
                                 between Russia and Georgia persist. The introduction 
                                 of a preferential trade regime between Georgia 
                                 and the EU in 2016, the European Parliament's 
                                 approval of a proposal on visa liberalisation 
                                 for Georgia in 2017, and Georgia's recently attaining 
                                 "European perspective" for EU candidacy could 
                                 potentially intensify tensions between the countries. 
                                 Russia banned direct flights on 8 July 2019 and 
                                 recommended stopping the sale of holiday packages 
                                 to Georgia. The decision was made in response 
                                 to anti-Putin protests in Tbilisi, which started 
                                 after a member of the Russian parliament addressed 
                                 the Georgian parliament in Russian from the speaker's 
                                 chair. Sanctions were imposed on several Russian 
                                 individuals and entities on 2 March 2021 by the 
                                 US and the EU, relating to the use of chemical 
                                 weapons against Russian opposition figure Alexei 
                                 Navalny, amplifying tensions in the region. 
                               ------------------------------------------------------------------- 
 MITIGATION                     The Group actively monitors significant developments 
                                 in the region and risks related to political instability 
                                 and the Georgian Government's response thereto. 
                                 It also develops responsive strategies and action 
                                 plans of its own. The Georgian export market shifted 
                                 significantly away from the Russian market after 
                                 Russia's 2006 embargo, and the Group participated 
                                 in that shift. As of 1H22, Russia accounted for 
                                 10% of Georgian exports, as opposed to 17.8% in 
                                 2005. 
                                 Since the beginning of the war, the migration 
                                 effect from Russia, Ukraine and Belarus has altered 
                                 the composition of foreign currency inflows from 
                                 remittances and international visitors. The migration 
                                 effect has resulted in a 65% y-o-y increase in 
                                 remittance inflows in 1H22, including a fivefold 
                                 increase up to US$ 750 million from Russia. Moreover, 
                                 international travel receipts have increased substantially 
                                 from the three countries. With most of the migrants 
                                 expected to have arrived for long-term stays, 
                                 it is impossible yet to estimate the long-run 
                                 impact of the migration effect. Despite this surge 
                                 in foreign currency inflows predominantly from 
                                 Russia, both remittance inflows and tourism receipts 
                                 remain diversified, with the EU having emerged 
                                 as the top foreign currency provider since 2019 
                                 before the Russia-Ukraine war. As travel resumes 
                                 globally, it is hoped that the rising trend of 
                                 tourism revenues from the EU will continue. 
                                 While financial market turbulence and geopolitical 
                                 tensions affect regional trading partners, Georgia's 
                                 preferential trading regimes, including DCFTA 
                                 with the EU and FTA with China, support the country's 
                                 resilience to regional external shocks. Enhancing 
                                 linkages with the EU market will be further supported 
                                 by a new recovery plan for Eastern Partnership 
                                 countries, including ambitious investments in 
                                 improved connectivity and unlocked potential to 
                                 get full benefits from the DCFTA. Following the 
                                 signing of the DCFTA, the EU's share in foreign 
                                 currency inflows (merchandise exports, remittances 
                                 and tourism revenues) has increased from 19% in 
                                 2013 to 24% in 2021. Following Ukraine's plea 
                                 to join the European Union as it battles Russia's 
                                 invasion, Georgia and Moldova on 3 March 2022 
                                 submitted their applications to join the European 
                                 Union. Georgia previously planned to apply to 
                                 join the European Union in 2024. The European 
                                 Council granted a conditional European perspective 
                                 to all three countries, with Ukraine and Moldova 
                                 receiving the candidate status pre-emptively and 
                                 Georgia set to receive that status as the conditions 
                                 are satisfied. The European Commission plans to 
                                 assess the progress of the countries in 2023. 
                                 China remains the largest destination country 
                                 of Georgian exports in 2022 since claiming the 
                                 position in 2020, accounting for 15.6% of total 
                                 exports in 1H22 (14.5% in 2021), as well as being 
                                 the largest destination country of domestically 
                                 produced Georgian exports with a 20% share (18.6% 
                                 in 2021). 
                               ------------------------------------------------------------------- 
 CORONAVIRUS (COVID-19) RISK 
 PRINCIPAL RISK / UNCERTAINTY        The Georgian Government took significant actions 
                                      at the early stage of the COVID-19 outbreak, with 
                                      border checks and travel restrictions followed 
                                      by the first lockdown in March-May 2020. After 
                                      gradually lifting restrictions since late April, 
                                      the epidemiological situation worsened in Autumn, 
                                      and a two-month partial lockdown was imposed spanning 
                                      the period from end-November 2020 to February 
                                      2021. Since February, the economy was fully reopened 
                                      for the better part of the year. Despite new COVID-19 
                                      cases rising again periodically, most notably 
                                      in August and November 2021, as well as at the 
                                      beginning of 2022 due to the spread of the Omicron 
                                      variant, no new major restrictions have been imposed. 
                                      As is discussed below, lockdown and other significant 
                                      restrictions had a serious adverse effect on almost 
                                      all of our businesses, and as the virus is still 
                                      considered a pandemic, any new serious outbreak 
                                      of COVID-19 or a similar pandemic that required 
                                      significant new restrictions could do so again. 
                                       *    Our hospitals and clinics & diagnostics businesses 
                                            faced a number of COVID-19 related risks, among these 
                                            are: 
 
 
                                       *    The health of our own medical personnel affected 
                                            businesses' ability to continue to deliver their 
                                            services, and they were on the front line, especially 
                                            in the event of a renewed outbreak or a new, 
                                            vaccine-resistant variant; 
 
 
                                       *    Adjusting to the new mix between COVID-19 related 
                                            care and other care as COVID-19 recedes. Currently, 
                                            our hospitals and clinics & diagnostics businesses 
                                            are experiencing an organic transition to the 
                                            post-pandemic economy. Suspension of COVID contracts 
                                            by the Government in 1Q22 and restructuring of the 
                                            cost base of COVID facilities temporarily impacted 
                                            the performance of the hospitals and clinics 
                                            businesses, while substantially lower COVID cases 
                                            during the quarter resulted in a significant decrease 
                                            in diagnostics business revenues. The growth is 
                                            expected to rebound in the coming quarters as the 
                                            businesses pass through the transition period. 
 
 
                                       *    The Group's education business was also significantly 
                                            affected in 2020 by the lockdown and subsequent 
                                            restrictive measures and adjusted to distance 
                                            learning which involved offering tuition discounts 
                                            and rollovers of fees for transportation and catering 
                                            services. Given the improved epidemiological 
                                            developments in Georgia, the schools provided 
                                            on-campus learning during most of 2021. Schools in 
                                            Tbilisi were reopened from 15 February 2021 and 
                                            continued on-campus learning till the end of the year, 
                                            except for September. During the distance learning 
                                            period, schools offered 15%-25% discounts for tuition 
                                            fees and roll-over of fees for 
                                            transportation/catering services. While the education 
                                            business seems to have developed a model for coping 
                                            with COVID-type restrictions, it is not as effective, 
                                            attractive and profitable when distance learning is 
                                            imposed. 
 
 
                                       *    The Group's hospitality business is the business that 
                                            has been most affected by the COVID-19 outbreak, 
                                            reflecting pandemic-related uncertainties in the 
                                            tourism and real estate sectors. We reacted quickly 
                                            to the change in the environment and are in the 
                                            process of exiting from this business (we have 
                                            already exited from the commercial real estate 
                                            business, which was also significantly affected by 
                                            the pandemic). Any serious deterioration of the 
                                            epidemiological situation could adversely affect our 
                                            ability to sell the remaining properties at 
                                            attractive prices. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           Although vaccine development and the ongoing immunisation 
                                 process have raised hopes of global recovery, 
                                 exceptional uncertainty persists with respect 
                                 to new COVID variants and vaccine take-up rates. 
                                 The coronavirus has proven to be a significant 
                                 challenge for the Georgian economy, especially 
                                 the tourism sector. While tourism revenues have 
                                 displayed signs of rebounding, however, a significantly 
                                 delayed recovery in tourism revenues or a major 
                                 fall in foreign investment sentiment would impact 
                                 growth prospects substantially, raising the risk 
                                 premium and upsetting the balance of payments. 
                                 Furthermore, there can be no assurance on the 
                                 effectiveness of Government measures in preventing 
                                 the further spread of COVID-19, reducing its negative 
                                 economic impact or that more restrictive measures 
                                 will not be introduced, any of which could have 
                                 a material adverse effect on macroeconomic conditions 
                                 and, in turn, the Group's business. 
                               ------------------------------------------------------------------- 
 MITIGATION                     The resurgence in new COVID-19 cases in August-November 
                                 2021 and the beginning of 2022 has not been accompanied 
                                 by new restrictive measures, economic slowdown 
                                 or a substantial fall in consumer and investor 
                                 sentiment, suggesting experience has been gained 
                                 to aid in managing a potential epidemiological 
                                 deterioration without major negative spillovers. 
                                 In a population of about 3.7 million, there have 
                                 been 1.70 million confirmed cases, 1.64 million 
                                 recovery cases and 16,869 deaths as of 1 0 August 
                                 2022. The vaccination campaign began on 15 March 
                                 2021, with healthcare workers and risk groups 
                                 given priority. As of 1 0 August 2022, the number 
                                 of administered vaccines totalled 2.91 million, 
                                 with 1.27 million individuals receiving two vaccine 
                                 doses. Booster doses are also available . Various 
                                 programmes were introduced to increase the vaccine 
                                 take up with varying results, as the Government 
                                 intends to keep on working on raising the vaccination 
                                 level. 
                                 The Georgian economy remains vulnerable to external 
                                 shocks due to a mix of its historically high current 
                                 account deficit, low domestic savings rate and 
                                 high level of dollarisation. The external balance 
                                 deteriorated following the onset of the COVID-19 
                                 pandemic, with the current account deficit amounting 
                                 to 12.5% of GDP in 2020, as tourism revenues, 
                                 a major source of foreign currency inflows, evaporated. 
                                 However, the deficit improved to 10% of GDP in 
                                 2021 and is expected to improve further in 2022 
                                 as external inflows have accelerated significantly. 
                                 Major sources of financing the current account 
                                 deficit are remittance inflows (up 65% y-o-y in 
                                 1H22), merchandise exports (up 35% y-o-y), including 
                                 a particularly strong performance from domestic 
                                 merchandise exports (up 36% y-o-y), and tourism 
                                 revenues (79% of respective 2019 levels in 1H22, 
                                 including 92% in May-June). International reserves 
                                 reached $3.9 bn by the end of June 2022, up 0.1% 
                                 y-o-y and providing ample cover. The National 
                                 Bank of Georgia sold US$ 40 million on the foreign 
                                 exchange market in March 2022 shortly after the 
                                 beginning of the war, bought US$ 10 million in 
                                 May and an additional US$ 10 million in August, 
                                 through foreign exchange auctions following a 
                                 sustained GEL appreciation. 
                                 A large part of Georgia Capital's portfolio is 
                                 concentrated across defensive countercyclical 
                                 sectors: healthcare and retail (pharmacy) businesses. 
                                 Georgia Capital has a strong liquidity position, 
                                 with GEL 712 million liquid assets and loans issued 
                                 as of 30 June 2022. We are also satisfied that 
                                 Georgia Capital's liquidity forecast adequately 
                                 accounts for the novel coronavirus risk. Further, 
                                 Georgia Capital does not have capital commitments 
                                 or a primary mandate to deploy funds or divest 
                                 assets within a specific time frame. Therefore, 
                                 capital allocations to portfolio companies may 
                                 be suspended, if needed. The Group identified 
                                 the following mitigating actions in 2020: suspension 
                                 of capital allocations together with optimisation 
                                 of cash operating expenses. However, the improved 
                                 epidemiological environment and strong economic 
                                 recovery during 2021, have allowed for a smooth 
                                 and gradual transition from the cash accumulation 
                                 and preservation strategy, implemented in 2020 
                                 as our response to the pandemic, towards capturing 
                                 business growth opportunities across all our businesses. 
                               ------------------------------------------------------------------- 
 CURRENCY AND MACROECONOMIC ENVIRONMENT RISKS 
 PRINCIPAL RISK / UNCERTAINTY   Unfavourable dynamics of major macroeconomic variables, 
                                 including depreciation of the Lari against the 
                                 US dollar may have a material impact on the Group's 
                                 performance. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           The Group's operations are primarily located in, 
                                 and most of its revenue is sourced from Georgia. 
                                 Factors such as GDP, inflation, interest and currency 
                                 exchange rates, as well as unemployment, personal 
                                 income, tourist numbers and the financial situation 
                                 of companies can have a material impact on customer 
                                 demand for its products and services. 
                                 The Lari floats freely against major currencies. 
                                 After depreciating in 2020 due to capital outflows 
                                 from the emerging and frontier markets, a sudden 
                                 stop in tourism revenues and shrinking merchandise 
                                 exports, as well as rapidly deteriorating expectations, 
                                 the Lari has gained back the ground. Following 
                                 a period of stabilisation, the Lari began strengthening 
                                 since mid-May 2021 and has continued strengthening 
                                 into 2022, appreciating by 14.1% compared to the 
                                 beginning of 2021 as of 11 August 2022. Currency 
                                 appreciation has been aided by surging foreign 
                                 currency inflows, driven by the migrant effect, 
                                 strong external demand, improving terms of trade 
                                 and worldwide travel resumption, as well as tight 
                                 monetary policy, stronger than expected economic 
                                 growth, foreign currency lending and improved 
                                 expectations. Following rate cuts in 2020 to respond 
                                 to the COVID-19 shock, NBG reversed the stance 
                                 and hiked the policy rate by 300 basis points 
                                 cumulatively since March 2021 to 11% as of July 
                                 2022, responding to high inflation and subsequent 
                                 rising inflationary expectations. With COVID-19-induced 
                                 supply-side bottlenecks and rising costs exacerbated 
                                 by global food, energy and commodity prices surging 
                                 to record-high levels after the Russian invasion 
                                 of Ukraine, inflation is expected to remain elevated 
                                 throughout 2022 in Georgia like elsewhere around 
                                 the world. 
                                 On the macro-level, the free-floating exchange 
                                 rate works well as a shock absorber, but on the 
                                 micro-level, the currency fluctuation has affected 
                                 and may continue to adversely affect the Group's 
                                 results. There is a risk that the Group incurs 
                                 material losses or loses material amounts of revenue 
                                 and, consequently, deteriorates its solvency in 
                                 a specific currency or group of currencies due 
                                 to the fluctuation of exchange rates. The risk 
                                 is mainly caused by significant open foreign currency 
                                 positions in the balance sheets. 
                                 Real GDP has continued rapid growth in 2022, with 
                                 the economy growing by 10.5% y-o-y in 1H22 following 
                                 a 10.4% expansion in 2021. The above-mentioned 
                                 external factors as well as strong domestic demand, 
                                 continued credit expansion and moderated but still 
                                 expansionary fiscal policy have all been supporting 
                                 economic growth. The current account deficit was 
                                 13% of GDP in 1Q22, compared to 12.5% in 1Q21, 
                                 but is expected to improve substantially in 2Q22 
                                 as a result of surging foreign currency inflows 
                                 from remittances, merchandise exports and tourism 
                                 receipts. 
                                 In 2019, Fitch and S&P upgraded the sovereign 
                                 credit rating of Georgia from BB- to BB and maintained 
                                 a stable outlook. Resilience to negative external 
                                 shocks, robust economic growth, shrinking CA deficit, 
                                 increasing reserves and decreasing path of general 
                                 Government debt were the major drivers for the 
                                 reduced risk premium of the country. Georgia's 
                                 outlook was downgraded to negative by Fitch in 
                                 April 2020 and by S&P in February 2021. Fitch 
                                 Ratings revised the negative outlook to stable 
                                 in August 2021 (and reaffirmed the stable outlook 
                                 in February 2022). Moody's changed the outlook 
                                 to negative in April 2022, as a result of "heightened 
                                 geopolitical risks" after the beginning of the 
                                 Russia-Ukraine war, albeit noting that the materialisation 
                                 of these risks is not a baseline scenario for 
                                 the agency. 
                               ------------------------------------------------------------------- 
 MITIGATION                     The Group continually monitors market conditions, 
                                 reviews market changes and also performs stress 
                                 and scenario testing to test its position under 
                                 adverse economic conditions, including adverse 
                                 currency movements. 
                                 The currency risk management process is an integral 
                                 part of the Group's activities; currency risk 
                                 is managed through regular and frequent monitoring 
                                 of the Group's currency positions and through 
                                 the timely and efficient elaboration of responsive 
                                 actions and measures. Senior management reviews 
                                 the overall currency positions of the Group several 
                                 times during the year and elaborates on respective 
                                 overall currency strategies; the Finance department 
                                 monitors the daily currency position for stand-alone 
                                 Georgia Capital, weekly currency positions on 
                                 a portfolio company level and manages short-term 
                                 liquidity of the Group across different currencies. 
                                 Control procedures involve regular monitoring 
                                 and control of the currency gap and currency positions, 
                                 running currency sensitivity tests and elaborating 
                                 response actions/steps based on the results of 
                                 the tests. 
                               ------------------------------------------------------------------- 
 REGULATORY AND LEGAL RISKS 
 PRINCIPAL RISK / UNCERTAINTY   The Group owns businesses operating across a wide 
                                 range of industries: banking, healthcare, retail 
                                 (pharmacy) and distribution, property and casualty 
                                 insurance, medical insurance, real estate, water 
                                 utility and electric power generation, hydro and 
                                 wind power, beverages, education, auto service 
                                 and IT outsourcing. Many of these industries are 
                                 highly regulated. The regulatory environment continues 
                                 to evolve, and we cannot predict what additional 
                                 regulatory changes will be introduced in the future 
                                 or the impact they may have on our operations. 
                                 Georgia Capital and its businesses may be adversely 
                                 affected by risks related to litigations arising 
                                 from time to time in the ordinary course of business. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           Each of our businesses is subject to different 
                                 regulators and regulation. Legislation in certain 
                                 industries, such as banking, healthcare, energy, 
                                 insurance and utilities is continuously evolving. 
                                 Different changes, including but not limited to 
                                 governmental funding, licensing and accreditation 
                                 requirements and tariff structures, may adversely 
                                 affect our businesses. 
 
                                 Except as disclosed on page 60, there are no governmental, 
                                 legal or arbitration proceedings (including any 
                                 such proceedings which are pending or threatened 
                                 of which GCAP is aware), during the 12 months 
                                 preceding the date of this document which may 
                                 have, or have had in the recent past, significant 
                                 effects on either GCAP and/or its portfolio companies' 
                                 financial position or profitability. 
                               ------------------------------------------------------------------- 
 MITIGATION                     Continued investment in our people and processes 
                                 is enabling us to meet our current regulatory 
                                 requirements and means that we are well-placed 
                                 to respond to any future changes in regulation. 
                                 Further, our investment portfolio is well diversified, 
                                 limiting exposure to particular industry specific 
                                 regulatory risks. 
                                 In line with our integrated control framework, 
                                 we carefully evaluate the impact of legislative 
                                 and regulatory changes as part of our formal risk 
                                 identification and assessment processes and, to 
                                 the extent possible, proactively participate in 
                                 the drafting of relevant legislation. As part 
                                 of this process, we engage where possible in constructive 
                                 dialogue with regulatory bodies and seek external 
                                 advice on potential changes to legislation. We 
                                 then develop appropriate policies, procedures 
                                 and controls as required to fulfil our compliance 
                                 obligations. Our compliance framework, at all 
                                 levels, is subject to regular review by Internal 
                                 Audit and external assurance providers. 
                                 Our integrated control framework also ensures 
                                 the application and development of mechanisms 
                                 for identifying legal risks in the Group's activities 
                                 in a timely manner, the monitoring and investigation 
                                 of the Group's activities in order to identify 
                                 any legal risks, the planning and implementation 
                                 of all necessary actions for the elimination of 
                                 identified legal risks, participation in legal 
                                 proceedings on behalf of the Group where necessary 
                                 and the investigation of possibilities for increasing 
                                 the effectiveness of the Group's legal documentation 
                                 and its implementation in the Group's daily activities. 
                                 The framework also considers the engagement of 
                                 the external legal advisors, when appropriate. 
                               ------------------------------------------------------------------- 
 INVESTMENT RISK 
 PRINCIPAL RISK / UNCERTAINTY   The Group may be adversely affected by risks in 
                                 respect of specific investment decisions. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           An inappropriate investment decision might lead 
                                 to poor performance. Investment risks include 
                                 inadequate research and due diligence of new acquisitions 
                                 and bad timing of the execution of both acquisition 
                                 and divestment decisions. The valuation of investments 
                                 can be volatile in line with the market developments. 
                               ------------------------------------------------------------------- 
 MITIGATION                     The Group manages investment risk with established 
                                 procedures for thorough evaluation of target acquisitions. 
                                 Investment opportunities are subject to rigorous 
                                 appraisal and a multi-stage approval process. 
                                 Target entry and exit event prices are monitored 
                                 and updated regularly, in relation to market conditions 
                                 and strategic aims. The Group performs due diligence 
                                 on each target acquisition including financial 
                                 and legal matters. Subject to an evaluation of 
                                 the due diligence results an acceptable price 
                                 and funding structure is determined, and the pricing, 
                                 funding and future integration plan is presented 
                                 to the Investment Committee (consisting of the 
                                 full Board) for approval. The Committee reviews 
                                 and approves or rejects proposals for development, 
                                 acquisition and sale of investments and decides 
                                 on all major new business initiatives, especially 
                                 those requiring a significant capital allocation. 
                                 The Investment Committee focuses on both investment 
                                 strategy and exit processes, while also actively 
                                 managing exit strategies in light of the prevailing 
                                 market conditions. 
                               ------------------------------------------------------------------- 
 LIQUIDITY RISK 
 PRINCIPAL RISK / UNCERTAINTY   Risk that liabilities cannot be met, or new investments 
                                 made, due to a lack of liquidity. Such risk can 
                                 arise from not being able to sell an investment 
                                 due to lack of demand from the market, from suspension 
                                 of dividends from portfolio companies, from not 
                                 holding cash or being able to raise debt. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           The Group predominantly invests in private portfolio 
                                 businesses, potentially making the investments 
                                 difficult to monetise at any given point in time. 
                                 There is a risk that the Group will not be able 
                                 to meet its financial obligations and liabilities 
                                 on time due to a lack of cash or liquid assets 
                                 or the inability to generate sufficient liquidity 
                                 to meet payment obligations. This may be caused 
                                 by numerous factors, such as: the inability to 
                                 refinance long-term liabilities; suspended dividend 
                                 inflows from the investment entity subsidiaries; 
                                 excessive investments in long-term assets and 
                                 a resulting mismatch in the availability of funding 
                                 to meet liabilities; or failure to comply with 
                                 the creditor covenants causing a default. 
                               ------------------------------------------------------------------- 
 MITIGATION                     The liquidity management process is a regular 
                                 process, where the framework is approved by the 
                                 Board and is monitored by senior management and 
                                 the Chief Financial Officer. The framework models 
                                 the ability of the Group to fund under both normal 
                                 conditions (Base Case) and during stressed situations. 
                                 This approach is designed to ensure that the funding 
                                 framework is sufficiently flexible to ensure liquidity 
                                 under a wide range of market conditions. The Finance 
                                 department monitors certain liquidity measures 
                                 on a daily basis and actively analyses and manages 
                                 liquidity weekly. Senior management is involved 
                                 at least once a month and the Board on a quarterly 
                                 basis. Such monitoring involves a review of the 
                                 composition of the cash buffer, potential cash 
                                 outflows and management's readiness to meet such 
                                 commitments. It also serves as a tool to revisit 
                                 the portfolio composition and take necessary measures, 
                                 if required. JSC Georgia Capital successfully 
                                 issued US$ 300 million bonds in March 2018, which 
                                 was followed by a US$ 65 million tap issuance 
                                 on 16 March 2021. The debt is actively managed 
                                 so that Georgia Capital maintains a maximum LTV 
                                 ratio of 30%. GCAP has adopted the following measures 
                                 to manage its standalone credit profile: 
                                  *    GCAP depends on dividend inflows from its portfolio 
                                       companies, on its ability to sell its listed 
                                       securities on the public markets at favourable prices, 
                                       and on its ability over the longer term to monetise 
                                       its private portfolio investments. To limit this 
                                       dependency, the Group has adopted a policy to 
                                       maintain a cash buffer of at least US$ 50 million in 
                                       highly-liquid assets in order to always have 
                                       sufficient capacity for potential downside scenarios 
                                       as well as for potential acquisition opportunities. 
                                       Additionally, the Group will maintain at least US$ 50 
                                       million in marketable securities which can be 
                                       converted into cash within three to four weeks (this 
                                       includes BoG shares); 
 
 
                                  *    The market value leverage (Net Debt divided by Asset 
                                       Portfolio) should be no more than 30% at all times, 
                                       where "Net Debt" is defined as borrowings plus 
                                       guarantees issued and commitments from financial 
                                       institutions minus liquid assets and "Asset 
                                       Portfolio" is defined as the sum of fair values of 
                                       portfolio company investments and loans issued. The 
                                       ratio was 15.9% as of 30 June 2022. 
 
 
                                  *    Recourse debt and guarantees are limited at GCAP and 
                                       at each portfolio company level. 
 
 
                                 In May 2022, the Group adapted the capital management 
                                 framework, with significant prominence being given 
                                 to deleveraging. Deleveraging the Group's balance 
                                 sheet, at a time of significant potential economic 
                                 and regional instabilities, is a key priority 
                                 to safeguard our portfolio, and enable the Group 
                                 to take advantage of attractive investment opportunities 
                                 that may arise as a result of those instabilities. 
                                 The Group has introduced an NCC Ratio Navigation 
                                 Tool, which will drive the Group's share buyback 
                                 and investment policy; An NCC Ratio between 15-40% 
                                 will lead to tactical share buybacks/investments, 
                                 whilst an NCC ratio below 15% is expected to generate 
                                 more meaningful share buybacks/investments. The 
                                 Group targets the bring down the NCC ratio below 
                                 15% by Dec-2025. The deleveraging strategy was 
                                 also implemented across our private portfolio 
                                 companies, where individual leverage targets have 
                                 been developed. 
                                 In 1H22, GCAP's corporate credit ratings were 
                                 upgraded to "B1" by Moody's and "B+" by S&P (from 
                                 "B2" and "B", respectively). 
                               ------------------------------------------------------------------- 
 PORTFOLIO COMPANY STRATEGIC AND EXECUTION RISKS 
 PRINCIPAL RISK / UNCERTAINTY   Market conditions may adversely impact our strategy 
                                 and all our businesses have their own risks specific 
                                 to their industry. Our businesses have growth 
                                 and expansion strategies and we face execution 
                                 risk in implementing these strategies. 
                                 The Group will normally seek to monetise its investments, 
                                 primarily through strategic sale, typically within 
                                 five to ten years from acquisition, and we face 
                                 market and execution risk in connection with exits 
                                 at reasonable prices. 
                               ------------------------------------------------------------------- 
 KEY DRIVERS / TRS           Each of our private portfolio companies and our 
                                 listed assets (Bank of Georgia) face its own risks. 
                                 These include risks inherent to their industry, 
                                 or to their industry, particularly in Georgia, 
                                 and each faces significant competition. They also 
                                 face the principal risks and uncertainties referred 
                                 to in this table. 
                                 Macroeconomic conditions, the financial and economic 
                                 environment and other market conditions in international 
                                 capital markets may limit the Group's ability 
                                 to achieve a partial or full exit from its existing 
                                 or future businesses at reasonable prices. It 
                                 may not be possible or desirable to divest, including 
                                 because suitable buyers cannot be found at the 
                                 appropriate times, or because of difficulties 
                                 in obtaining favourable terms or prices, or because 
                                 the Group has failed to act at the appropriate 
                                 time. 
                               ------------------------------------------------------------------- 
 MITIGATION                     For each business, we focus on building a strong 
                                 management team and have successfully been able 
                                 to do so thus far. Management succession planning 
                                 is regularly on the agenda for the Nomination 
                                 Committee which reports to the Board on this matter. 
                                 The Board closely monitors the implementation 
                                 of strategy, financial and operational performance, 
                                 risk management and internal control framework 
                                 and corporate governance of our businesses. We 
                                 hold management accountable for meeting targets. 
                                 For each industry in which we operate, we closely 
                                 monitor industry trends, market conditions and 
                                 the regulatory environment. We have also sought, 
                                 and continue to seek, advice from professionals 
                                 with global experience in relevant industries. 
                                 We carry our private portfolio companies at fair 
                                 value in our NAV Statement. The valuations are 
                                 audited, increasing the credibility of fair valuation 
                                 and limiting the risk of mispricing the asset. 
                                 In addition, the valuation of private large and 
                                 investment portfolio companies (67.8% of total 
                                 portfolio value) is performed by an independent 
                                 valuation company on a semi-annual basis. 
                                 The Group has a strong track record of growth 
                                 and has accessed the capital markets on multiple 
                                 occasions as part of the BGEO Group PLC, prior 
                                 to the demerger in May 2018. JSC Georgia Capital, 
                                 the Georgian holding company of the Group's businesses, 
                                 successfully priced a US$ 65 million tap issue 
                                 under the Group's existing US$ 300 million 6.125% 
                                 senior unsecured notes due 2024, listed on the 
                                 Global Exchange Market of the Irish Stock Exchange. 
                                 Our acquisition history has also been successful, 
                                 and we have been able to integrate businesses 
                                 due to our strong management with integration 
                                 experience. 
                                 In 1Q22, GCAP 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 transaction marks 
                                 the achievement of our previously announced key 
                                 strategic priority to dispose of one of our large 
                                 portfolio companies. 
                               ------------------------------------------------------------------- 
 

Statement of Directors' Responsibilities

We, the Directors, confirm that to the best of our knowledge:

-- The unaudited interim condensed financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting", as adopted by the United Kingdom and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

-- This Results Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

-- This Results Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related parties' transactions and changes therein)

After making enquiries, the Directors considered it appropriate to adopt the going concern basis in preparing this Results Report.

The Directors of the Group are as follows:

Irakli Gilauri

David Morrison

Kim Bradley

Jyrki Talvitie

Massimo Gesua' sive Salvadori

Maria Chatti-Gautier

By order of the Board

Irakli Gilauri

Chairman & Chief Executive Officer

11 August 2022

Georgia Capital PLC Unaudited Interim

Condensed Financial Statements

CONTENTS

INTERIM CONDENSED FINANCIAL STATEMENTS

Interim Condensed Statement of Financial Position ..................................................................................................................... 39

Interim Condensed Statement of Profit or Loss and Comprehensive Income ............................................................................ 40

Interim Condensed Statement of Changes in Equity ..................................................................................................................... 41

Interim Condensed Statement of Cash Flows ................................................................................................................................ 42

SELECTED EXPLANATORY NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS

   1.        Principal Activities . 43 
   2.        Basis of Preparation . 43 
   3.        Significant accounting policies . 44 
   4.        Segment Information . 45 
   5.        Equity Investments at Fair Value . 53 
   6.        Equity 53 
   7.        Fair Value Measurements . 54 
   8.        Maturity Analysis 62 
   9.        Related Party Disclosures . 62 
   10.      Events after the Reporting Period . 63 

INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION

As at 30 June 2022

(Thousands of Georgian Lari)

 
                                                  Notes   30 June 2022 (unaudited)   31 December 2021 
                                                 ------  -------------------------  ----------------- 
 
 Assets 
 Cash and cash equivalents*                                                 32,232              7,200 
 Prepayments                                                                   448                406 
 Equity investments at fair value                   5                    2,303,029          2,881,373 
                                                         -------------------------  ----------------- 
 Total assets                                                            2,335,709          2,888,979 
                                                         =========================  ================= 
 
 
 Liabilities 
 Other liabilities                                                           3,148              5,357 
                                                         -------------------------  ----------------- 
 Total liabilities                                                           3,148              5,357 
                                                         -------------------------  ----------------- 
 
 
 Equity 
 Share capital                                      6                        1,502              1,547 
 Additional paid-in capital and merger reserve                             238,311            238,311 
 Treasury shares                                                              (10)                  - 
 Retained earnings                                                       2,092,758          2,643,764 
                                                         -------------------------  ----------------- 
 Total equity                                                            2,332,561          2,883,622 
 
 
 Total liabilities and equity                                            2,335,709          2,888,979 
                                                         =========================  ================= 
 

*As at 30 June 2022 and 31 December 2021 cash and cash equivalents consist of current accounts with credit institutions.

The Company's distributable reserves as at 30 June 2022 were GEL 1,243,272 (31 December 2021: 1,293,084).

The financial statements on page 39 to 63 were approved by the Board of Directors on 11 August and signed on its behalf by:

Irakli Gilauri Chief Executive Officer

11 August 2022

Georgia Capital PLC

Registered No. 10852406

The accompanying notes on pages 43 to 63 are an integral part of these interim condensed financial statements.

INTERIM CONDENSED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

For the six months ended 30 June 2022

(Thousands of Georgian Lari)

 
                                                       Notes   30 June 2022 (unaudited)   30 June 2021 (unaudited) 
                                                      ------  -------------------------  ------------------------- 
 
 
 
 (Losses)/gains on investments at fair value               5                  (501,249)                    329,581 
 Gross investment (loss) /profit                                              (501,249)                    329,581 
                                                              -------------------------  ------------------------- 
 
 
 Administrative expenses                                                        (2,436)                    (2,879) 
 Salaries and other employee benefits                                           (1,348)                    (1,384) 
 (Loss)/profit before foreign exchange and non-recurring 
  items                                                                       (505,033)                    325,318 
                                                              -------------------------  ------------------------- 
 
 
 Net foreign currency loss                                                      (3,929)                      (146) 
 Non-recurring expense                                                            (129)                          - 
 (Loss)/profit before income taxes                                            (509,091)                    325,172 
                                                              -------------------------  ------------------------- 
 
 
 Income tax                                                                           -                          - 
 (Loss)/profit for the period                                                 (509,091)                    325,172 
                                                              -------------------------  ------------------------- 
 
 
 Other comprehensive income                                                           -                          - 
 
 Total comprehensive (loss)/income for the period                             (509,091)                    325,172 
                                                              =========================  ========================= 
 
 
 (Loss)/earnings per share:                                6 
      - basic                                                                 (11.8388)                     7.3114 
      - diluted                                                               (11.8388)                     7.2583 
 

The accompanying notes on pages 43 to 63 are an integral part of these interim condensed financial statements.

INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2022

(Thousands of Georgian Lari)

 
                                            Additional 
                                          paid-in capital 
                                            and merger 
                        Share capital         reserve         Treasury Shares    Retained earnings     Total 
                      ---------------  -------------------  -----------------  -------------------  ---------- 
 31 December 2021               1,547              238,311                  -            2,643,764   2,883,622 
                      ===============  ===================  =================  ===================  ========== 
 Loss for the period                -                    -                  -            (509,091)   (509,091) 
 Total comprehensive 
  loss for the 
  period                            -                    -                  -            (509,091)   (509,091) 
 Increase in equity 
  arising from 
  share-based 
  payments                          -                    -                  -                  223         223 
 Cancellation of 
  shares (Note 6)                (45)                    -                 45                    -           - 
 Purchase of 
  treasury shares 
  (Note 6)                          -                    -               (55)             (42,138)    (42,193) 
 30 June 2022 
  (unaudited)                   1,502              238,311               (10)            2,092,758   2,332,561 
                      ===============  ===================  =================  ===================  ========== 
 
 
                                                    Additional paid-in capital 
                                  Share capital         and merger reserve         Retained earnings     Total 
                                ---------------  ------------------------------  -------------------  ---------- 
 31 December 2020                         1,574                         238,311            1,972,407   2,212,292 
                                ===============  ==============================  ===================  ========== 
 Profit for the period                        -                               -              325,172     325,172 
 Total comprehensive profit 
  for the period                              -                               -              325,172     325,172 
 Increase in equity arising 
  from share-based payments                   -                               -                  266         266 
 Purchase of treasury shares                  -                               -                (194)       (194) 
 30 June 2021 (unaudited)                 1,574                         238,311            2,297,651   2,537,536 
                                ===============  ==============================  ===================  ========== 
 
 

The accompanying notes on pages 43 to 63 are an integral part of these interim condensed financial statements.

INTERIM CONDENSED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2022

(Thousands of Georgian Lari)

 
                                                         Notes   30 June 2022 (unaudited)   30 June 2021 (unaudited) 
                                                        ------  -------------------------  ------------------------- 
 
 Cash flows from operating activities 
   Salaries and other employee benefits paid                                      (1,117)                    (1,104) 
   General, administrative and operating expenses paid                            (1,319)                    (3,456) 
   Net other expense paid                                                         (3,065)                          - 
                                                                                           ------------------------- 
 Net cash flows used in operating activities before 
  income tax                                                                      (5,501)                    (4,560) 
 
   Income tax paid                                                                      -                          - 
                                                                -------------------------  ------------------------- 
 Net Cash flows used in operating activities                                      (5,501)                    (4,560) 
                                                                -------------------------  ------------------------- 
 
 
 Cash flows from investing activities 
   Capital redemption from subsidiary                        5                     77,095                      4,500 
 Cash flows from investing activities                                              77,095                      4,500 
                                                                -------------------------  ------------------------- 
 
 
 Cash flows from financing activities 
   Other purchases of treasury shares                        6                   (41,946)                          - 
   Contributions under share-based payment plan              6                      (247)                      (194) 
 Net cash used in financing activities                                           (42,193)                      (194) 
                                                                -------------------------  ------------------------- 
 
 
   Effect of exchange rates changes on cash and cash 
    equivalents                                                                   (4,369)                       (52) 
                                                                -------------------------  ------------------------- 
 Net increase/ (decrease) in cash and cash equivalents                             25,032                      (306) 
                                                                -------------------------  ------------------------- 
 
 
 Cash and cash equivalents, beginning of the period                                 7,200                        855 
 Cash and cash equivalents, end of the period                                      32,232                        549 
 

The accompanying notes on pages 43 to 63 are an integral part of these interim condensed financial statements.

   1.     Principal Activities 

Georgia Capital PLC ("Georgia Capital" or the "Company") is a public limited liability company incorporated in England and Wales with registered number 10852406. Georgia Capital PLC holds 100% of the share capital of the JSC Georgia Capital ("JSC GCAP"), which makes up a group of companies (the "Group"), focused on buying, building and developing businesses in Georgia. The Group currently has the following portfolio businesses (i) a retail (pharmacy) business, (ii) a hospitals business, (iii) an insurance business (P&C and medical insurance); (iv) a clinics and diagnostics business, (v) a renewable energy business (hydro and wind assets) and (vi) an education business; Georgia Capital also holds other small private businesses across different industries in Georgia; a 20% equity stake in the water utility business and a 19.9% equity stake in LSE premium-listed Bank of Georgia Group PLC ("BoG"), a leading universal bank in Georgia. The shares of Georgia Capital are admitted to the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange PLC's Main Market for listed securities under the ticker CGEO, effective 29 May 2018.

Georgia Capital's registered legal address is 84 Brook Street, London W1K 5EH, England, United Kingdom.

As at 30 June 2022 and 31 December 2021, the following shareholders owned more than 5% of the total outstanding shares* of Georgia Capital. Other shareholders individually owned less than 5% of the outstanding shares.

 
 Shareholder        30 June 2022 (unaudited)   31 December 2021 
                   -------------------------  ----------------- 
 Gemsstock Ltd                           10%                 0% 
 Allan Gray Ltd                           7%                 6% 
 Others                                  83%                94% 
                   ------------------------- 
 Total                                  100%               100% 
                   -------------------------  ----------------- 
 

*For the purposes of calculating percentage of shareholding, the denominator includes total number of issued shares which includes shares held in the trust for share-based compensation purposes of the Group.

   2.     Basis of Preparation 

General

The Company's condensed half year financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the United Kingdom. They should be read in conjunction with the annual financial statements for the year ended 31 December 2021, which have been prepared in accordance with UK-adopted international accounting standards ("IFRS"), were approved by the Board on 24 March 2021 and delivered to the Registrar of Companies.

The interim condensed financial statements are unaudited, not reviewed by auditors pursuant to the Auditing Practices Board guidance on "Review of interim financial information".

These interim condensed financial statements are presented in thousands of Georgian Lari ("GEL"), except per share amounts, which are presented in Georgian Lari, and unless otherwise noted.

Going concern

The Board of Directors of Georgia Capital has made an assessment of the Company's ability to continue as a going concern and is satisfied that it has the resources to continue in business for a period of at least 12 months from the date of approval of the financial statements. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern for the foreseeable future. Therefore, the financial statements continue to be prepared on a going concern basis.

   3.     Significant accounting policies 

Accounting policies

The accounting policies and methods of computation applied in the preparation of these interim condensed financial statements are consistent with those disclosed in the annual financial statements of the Company as at and for the year ended 31 December 2021. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The following amendments became effective from 1 January 2022 and had no impact on the Company's condensed interim financial statements:

Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter

Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework

Amendments to IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities

Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use

Amendments to IAS 37 Provisions Contingent Liabilities and Contingent Assets - Onerous Contracts - Costs of Fulfilling a Contract

The following standards that are issued but not yet effective are also expected to have no impact on the Company's condensed interim financial statements:

IFRS 17 Insurance contracts

Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current

Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors - Definition of Accounting Estimates

Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

   4.     Segment Information 

For management purposes, the Group is organised into the following operating segments as follows:

listed and observable portfolio companies, private large portfolio companies, private investment stage portfolio companies, private other portfolio companies, and corporate centre.

Listed and observable portfolio companies segment

BOG - the Company has a significant investment in London Stock Exchange premium listed Bank of Georgia Group PLC.

Water Utility - the Company has 20% equity stake in the Water Utility business, following the disposal of 80% of its shares during 2021. Water Utility is a regulated monopoly in Tbilisi and the surrounding area, where it provides water and wastewater services.

Private portfolio companies segment

Large portfolio companies segment:

The large portfolio companies segment includes investments in hospitals, pharmacy and distribution, and insurance businesses.

Hospitals business owned through GHG, is the largest healthcare market participant in Georgia. Hospitals business provides secondary and tertiary level healthcare services.

Pharmacy and distribution business owned through GHG consists of a retail pharmacy chain and a wholesale business that sells pharmaceuticals and medical supplies to hospitals and other pharmacies.

Insurance business comprises a property and casualty insurance business owned through Aldagi and medical insurance business owned through GHG. Principally providing wide-scale property and casualty and medical insurance services to corporate and retail clients.

Investment stage portfolio companies segment:

The investment stage portfolio companies segment includes investments into clinics, diagnostics, renewable energy and education businesses.

Clinics & Diagnostics business owned through GHG consists of clinics, providing outpatient and basic inpatient services, polyclinics providing outpatient diagnostic and treatment services, and diagnostics business, operating the largest laboratory in the entire Caucasus region.

Renewable energy business principally operates three wholly owned commissioned renewable energy assets. In addition, a pipeline of renewable energy projects is in an advanced stage of development.

Education business combines majority stakes in four leading private schools in Tbilisi. It provides education for preschool to 12th grade (K-12);

Other portfolio companies segment:

The other portfolio companies segment includes Housing Development, Hospitality and Commercial Real Estate, Beverages, Auto Service and IT Outsourcing businesses.

Corporate Centre comprising of Georgia Capital PLC and JSC Georgia Capital.

Management monitors the fair values of its segments separately for the purposes of making decisions about resource allocation and performance assessment. Transactions between segments are accounted for at actual transaction prices.

In 2022, Georgia Capital revised the presentation of its segment note. Following the disposal of 80% of water utility shares, the remaining 20% equity stake in the business is presented under the listed and observable portfolio category, alongside the 19.9% investment in BoG. In addition, the healthcare services business (previously included under Large portfolio companies) is now split into two individual businesses (Hospitals, and Clinics & Diagnostics) given the differences in their stage of development. Hospitals business is still presented under the large portfolio category. Clinics and Diagnostics are presented alongside Renewable Energy and Education under the investment stage portfolio category. The information for the six months ended 30 June 2022 is presented on both the old basis and the new basis.

   4 .     Segment Information (continued) 

The following table presents the net asset value (NAV) of the Group's operating segments at 30 June 2022 and the roll-forward from 31 December 2021 (new basis):

 
   NAV Statement      31 December    1.Value        2a.         2b.         2c.      3.Operating       4.          30 June 
                         2021                   Investments   Buybacks   Dividends                  Liquidity       2022 
                                                     & 
                                                Divestments 
                     ------------              ------------  ---------  ----------                              ------------ 
                                    Creation                                          Expenses     Management/ 
                                                                                                   FX / Other 
                     ------------  ----------  ------------  ---------  ----------  ------------  ------------  ------------ 
 Listed and 
  Observable 
  Portfolio 
  Companies               681,186   (189,061)       139,392          -    (22,798)             -             -       608,719 
 BoG                      681,186   (202,669)             -          -    (22,798)             -             -       455,719 
 Water Utility                  -      13,608       139,392          -           -             -             -       153,000 
 Private Portfolio 
  Companies             2,935,045   (276,205)     (552,804)          -    (11,623)             -         2,281     2,096,694 
 Large Portfolio 
  Companies             2,249,260   (156,554)     (696,960)          -     (7,374)             -           821     1,389,193 
 Retail (Pharmacy)        710,385    (39,358)             -          -           -             -             -       671,027 
 Hospitals                573,815    (95,769)             -          -           -             -             -       478,046 
 Water Utility            696,960           -     (696,960)          -           -             -             -             - 
 Insurance (P&C and 
  Medical)                268,100    (21,427)             -          -     (7,374)             -           821       240,120 
   Of which, P&C 
    Insurance             211,505     (5,142)             -          -     (7,374)             -           821       199,810 
   Of which, Health 
    Insurance              56,595    (16,285)             -          -           -             -             -        40,310 
 Investment Stage 
  Portfolio 
  Companies               461,140    (14,970)         1,559          -     (4,249)             -           487       443,967 
 Clinics and 
  diagnostics             158,004    (37,958)             -          -           -             -             -       120,046 
 Renewable energy         173,288       2,247           395          -     (4,249)             -           487       172,168 
 Education                129,848      20,741         1,164          -           -             -             -       151,753 
 Other Portfolio 
  Companies               224,645   (104,681)       142,597          -           -             -           973       263,534 
 Total Portfolio 
  Value                 3,616,231   (465,266)     (413,412)          -    (34,421)             -         2,281     2,705,413 
                     ------------  ----------  ------------  ---------  ----------  ------------  ------------  ------------ 
 
 
 Net Debt               (711,074)           -       419,419   (53,540)      34,421      (10,951)      (44,189)     (365,914) 
   of which, Cash 
    and liquid 
    funds                 272,317           -       555,996   (53,540)      11,623      (10,951)     (112,078)       663,367 
   of which, Loans 
    issued                154,214           -     (136,577)          -           -             -         7,737        25,374 
   of which, 
    Dividend 
    receivable                  -           -             -          -      22,798             -             -        22,798 
   of which, Gross 
    Debt              (1,137,605)           -             -          -           -             -        60,152   (1,077,453) 
 Net other assets/ 
  (liabilities)          (21,535)           -       (6,007)          -           -       (8,749)        29,353       (6,938) 
 
 Net Asset Value        2,883,622   (465,266)             -   (53,540)           -      (19,700)      (12,555)     2,332,561 
                     ============  ==========  ============  =========  ==========  ============  ============  ============ 
 
   4 .     Segment Information (continued) 

The following table presents the net asset value (NAV) of the Group's operating segments at 30 June 2022 and the roll-forward from 31 December 2021 (old basis):

 
   NAV Statement      31 December    1.Value        2a.         2b.         2c.      3.Operating       4.          30 June 
                         2021                   Investments   Buybacks   Dividends                  Liquidity       2022 
                                                     & 
                                                Divestments 
                     ------------              ------------  ---------  ----------                              ------------ 
                                    Creation                                          Expenses     Management/ 
                                                                                                   FX / Other 
                     ------------  ----------  ------------  ---------  ----------  ------------  ------------  ------------ 
 Listed Portfolio 
  Companies               681,186   (202,669)             -          -    (22,798)             -             -       455,719 
 BoG                      681,186   (202,669)             -          -    (22,798)             -             -       455,719 
 Private Portfolio 
  Companies             2,935,045   (262,597)     (413,412)          -    (11,623)             -         2,281     2,249,694 
 Large Portfolio 
  Companies             2,407,264   (180,904)     (557,568)          -     (7,374)             -           821     1,662,239 
 Healthcare 
  Services                731,819   (133,727)             -          -           -             -             -       598,092 
 Retail (Pharmacy)        710,385    (39,358)             -          -           -             -             -       671,027 
 Water Utility            696,960      13,608     (557,568)          -           -             -             -       153,000 
 Insurance (P&C and 
  Medical)                268,100    (21,427)             -          -     (7,374)             -           821       240,120 
   Of which, P&C 
    Insurance             211,505     (5,142)             -          -     (7,374)             -           821       199,810 
   Of which, Health 
    Insurance              56,595    (16,285)             -          -           -             -             -        40,310 
 Investment Stage 
  Portfolio 
  Companies               303,136      22,988         1,559          -     (4,249)             -           487       323,921 
 Renewable energy         173,288       2,247           395          -     (4,249)             -           487       172,168 
 Education                129,848      20,741         1,164          -           -             -             -       151,753 
 Other Portfolio 
  Companies               224,645   (104,681)       142,597          -           -             -           973       263,534 
 Total Portfolio 
  Value                 3,616,231   (465,266)     (413,412)          -    (34,421)             -         2,281     2,705,413 
                     ------------  ----------  ------------  ---------  ----------  ------------  ------------  ------------ 
 
 
 
 Net Debt               (711,074)           -       419,419   (53,540)      34,421      (10,951)      (44,189)     (365,914) 
   of which, Cash 
    and liquid 
    funds                 272,317           -       555,996   (53,540)      11,623      (10,951)     (112,078)       663,367 
   of which, Loans 
    issued                154,214           -     (136,577)          -           -             -         7,737        25,374 
   of which, 
    Dividend 
    receivable                  -           -             -          -      22,798             -             -        22,798 
   of which, Gross 
    Debt              (1,137,605)           -             -          -           -             -        60,152   (1,077,453) 
 Net other assets/ 
  (liabilities)          (21,535)           -       (6,007)          -           -       (8,749)        29,353       (6,938) 
 
 Net Asset Value        2,883,622   (465,266)             -   (53,540)           -      (19,700)      (12,555)     2,332,561 
                     ============  ==========  ============  =========  ==========  ============  ============  ============ 
 
   4 .     Segment Information (continued) 

The following table presents the NAV statement of the Group's operating segments at 30 June 2021 and the roll forward from 31 December 2020:

 
   NAV Statement         31       1.Value        2a.         2b.         2c.      3.Operating       4.          30 June 
                      December               Investments   Buybacks   Dividends                  Liquidity       2021 
                        2020 
                     ----------             ------------  ---------  ----------                              ------------ 
                                  Creation                                         Expenses     Management/ 
                                                                                                FX / Other 
                     ----------  ---------  ------------  ---------  ----------  ------------  ------------  ------------ 
 Listed Portfolio 
  Companies             531,558     43,836             -          -           -             -             -       575,394 
 BoG                    531,558     43,836             -          -           -             -             -       575,394 
 Private Portfolio 
  Companies           2,376,130    296,613        10,588          -    (14,430)             -         3,031     2,671,932 
 Large Portfolio 
  Companies           1,858,237    230,090             -          -     (4,959)             -         1,408     2,084,776 
 Healthcare 
  Services              571,656    114,165             -          -           -             -             -       685,821 
 Retail (Pharmacy)      552,745     27,657             -          -           -             -             -       580,402 
 Water Utility          471,148     76,097             -          -           -             -           985       548,230 
 Insurance (P&C and 
  Medical)              262,688     12,171             -          -     (4,959)             -           423       270,323 
   Of which, P&C 
    Insurance           197,806     13,081             -          -     (4,959)             -           423       206,351 
   Of which, Health 
    Insurance            64,882      (910)             -          -           -             -             -        63,972 
 Investment Stage 
  Portfolio 
  Companies             302,964     40,310        10,338          -     (9,471)             -           627       344,768 
 Renewable energy       209,902     17,103         2,948          -     (9,471)             -           627       221,109 
 Education               93,062     23,207         7,390          -           -             -             -       123,659 
 Other Portfolio 
  Companies             214,929     26,213           250          -           -             -           996       242,388 
 Total Portfolio 
  Value               2,907,688    340,449        10,588          -    (14,430)             -         3,031     3,247,326 
                     ----------  ---------  ------------  ---------  ----------  ------------  ------------  ------------ 
 
 
 Net Debt             (697,999)          -      (10,588)    (3,199)      14,430      (10,837)       (5,872)     (714,065) 
   of which, Cash 
    and liquid 
    funds               175,289          -      (10,588)    (3,199)      14,430      (10,837)       118,802       283,897 
   of which, Loans 
    issued              108,983          -             -          -           -             -        49,208       158,191 
   of which, Gross 
    Debt              (982,271)          -             -          -           -             -     (173,882)   (1,156,153) 
 Net other assets/ 
  (liabilities)           2,603          -             -          -           -       (7,259)         8,931         4,275 
 
 Net Asset Value      2,212,292    340,449             -    (3,199)           -      (18,096)         6,090     2,537,536 
                     ==========  =========  ============  =========  ==========  ============  ============  ============ 
 

1.Value Creation - measures the annual shareholder return on each portfolio company for Georgia Capital. It is the aggregation of a) the change in beginning and ending fair values, b) dividend income during period. The net result is then adjusted to remove capital injections (if any) to arrive at the total value creation / investment return.; 2a.Investments and Divestments - represents capital injections and divestments in portfolio companies made by JSC GCAP; 2b. Buybacks - represent buybacks made by GCAP PLC and JSC GCAP in order to satisfy share compensation of executives and purchases under buyback program announced by GCAP PLC; 2c.Dividends - represent dividends received from portfolio companies by JSC GCAP; 3.Operating Expenses - holding company aggregated operating expenses of GCAP PLC and JSC GCAP; 4.Liquidity Management/FX/Other - holding company aggregated movements of GCAP PLC and JSC GCAP related to liquidity management, foreign exchange movement, non-recurring and other.

Net debt and Net other assets/(liabilities) represent corporate centre.

   4 .     Segment Information (continued) 

Reconciliation to IFRS financial statements:

 
                                                             30 June 2022 
                 --------------------------------------------------------------------------------------------------- 
                     Georgia       Aggregation    Elimination     Aggregated     Reclassifications**   NAV Statement 
                   Capital PLC      with JSC       of double        Holding 
                                     Georgia       effect on        Company 
                                    Capital*      investments 
                 --------------  --------------  -------------  --------------  --------------------  -------------- 
 Cash and cash 
  equivalents            32,232         150,688              -         182,920             (182,920)               - 
 Amounts due 
  from credit 
  institutions                -         182,881              -         182,881             (182,881)               - 
 Marketable 
  securities                  -         137,186              -         137,186             (137,186)               - 
 Investment in 
  redeemable 
  securities                  -          13,523              -          13,523              (13,523)               - 
 Accounts 
  receivable                448          22,909              -          23,357              (23,357)               - 
 Loans issued                 -          25,374              -          25,374              (25,374)               - 
 Other assets, 
  net                         -           2,718              -           2,718               (2,718)               - 
 Equity 
  investments 
  at fair value       2,303,029       2,705,413    (2,303,029)       2,705,413                     -       2,705,413 
 Total assets         2,335,709       3,240,692    (2,303,029)       3,273,372             (567,959)       2,705,413 
                 ==============  ==============  =============  ==============  ====================  ============== 
 
 
 Debt 
  securities 
  issued                      -         924,057              -         924,057             (924,057)               - 
 Other 
  liabilities             3,148          13,606              -          16,754              (16,754)               - 
 Total 
  liabilities             3,148         937,663              -         940,811             (940,811)               - 
                 ==============  ==============  =============  ==============  ====================  ============== 
 
 
 Net Debt                     -               -              -               -             (365,914)       (365,914) 
 of which, Cash 
  and liquid 
  funds                       -               -              -               -               663,367         663,367 
 of which, 
  Loans issued                -               -              -               -                25,374          25,374 
 of which, 
  Dividend 
  receivable                                                                                  22,798          22,798 
 of which, 
  Gross Debt                  -               -              -               -           (1,077,453)     (1,077,453) 
 Net other 
  assets/ 
  (liabilities)               -               -              -               -               (6,938)         (6,938) 
 
 Total 
  equity/NAV          2,332,561       2,303,029    (2,303,029)       2,332,561                     -       2,332,561 
                 ==============  ==============  =============  ==============  ====================  ============== 
 
 
 
                                                        30 June 2021 (unaudited) 
                 ----------------------------------------------------------------------------------------------------- 
                     Georgia        Aggregation     Elimination     Aggregated     Reclassifications**   NAV Statement 
                   Capital PLC       with JSC        of double        Holding 
                                      Georgia        effect on        Company 
                                     Capital*       investments 
                 ---------------  --------------  --------------  --------------  --------------------  -------------- 
 Cash and cash 
  equivalents                549         103,897               -         104,446             (104,446)               - 
 Amounts due 
  from credit 
  institutions                 -          85,593               -          85,593              (85,593)               - 
 Marketable 
  securities                   -          79,027               -          79,027              (79,027)               - 
 Prepayments                 530               -               -             530                 (530)               - 
 Loans issued                  -         158,191               -         158,191             (158,191)               - 
 Other assets, 
  net                          -           9,952               -           9,952               (9,952)               - 
 Equity 
  investments 
  at fair value        2,538,371       3,247,326     (2,538,371)       3,247,326                     -       3,247,326 
 Total assets          2,539,450       3,683,986     (2,538,371)       3,685,065             (437,739)       3,247,326 
                 ===============  ==============  ==============  ==============  ====================  ============== 
 
 Debt 
  securities 
  issued                       -       1,141,320               -       1,141,320           (1,141,320)               - 
 Other 
  liabilities              1,914           4,295               -           6,209               (6,209)               - 
 Total 
  liabilities              1,914       1,145,615               -       1,147,529           (1,147,529)               - 
                 ===============  ==============  ==============  ==============  ====================  ============== 
 
 Net Debt                      -               -               -               -             (714,065)       (714,065) 
 of which, Cash 
  and liquid 
  funds                        -               -               -               -               283,897         283,897 
 of which, 
  Loans issued                 -               -               -               -               158,191         158,191 
 of which, 
  Gross Debt                   -               -               -               -           (1,156,153)     (1,156,153) 
 Net other 
  assets/ 
  (liabilities)                -               -               -               -                 4,275           4,275 
 
 Total 
  equity/NAV           2,537,536       2,538,371     (2,538,371)       2,537,536                     -       2,537,536 
                 ===============  ==============  ==============  ==============  ====================  ============== 
 

* For a detailed breakdown of JSC Georgia Capital refer to note 7.

** Reclassification and adjustments to aggregated balances to arrive at the NAV specific presentation, such as: aggregating cash, marketable securities, repurchased GCAP bonds as cash and liquid funds, debt securities issued as gross debt and netting of other assets and liabilities; capitalization of project development related expenses.

   4 .     Segment Information (continued) 

The following table presents income statement information of the Group's operating segments for the six months ended 30 June 2022 (unaudited) (new basis) :

 
                                   Private Portfolio Companies 
                               ----------------------------------- 
                    Listed &      Large     Investment     Other     Corporate     Total     Intragroup    Equity    Investment 
                   observable                 Stage                    Center                Investment    Changes     Entity 
                   Portfolio                                                                  Reversal     in JSC      Total 
                   Companies                                                                     and        GCAP 
                                                                                             Adjustments 
                               ----------  -----------  ----------  ----------  ----------  ------------  -------- 
 (Losses)/gains 
  on investments 
  at fair value     (211,859)   (163,928)     (19,219)   (104,681)           -   (499,687)         5,851   (7,413)    (501,249) 
   Listed and 
    observable 
    Investments     (211,859)           -            -           -           -   (211,859)       211,859         -            - 
   Private 
    Investments             -   (163,928)     (19,219)   (104,681)           -   (287,828)     (206,008)   (7,413)    (501,249) 
 Dividend income       22,798       7,374        4,249           -           -      34,421      (34,421)         -            - 
 Interest income            -           -            -           -      18,150      18,150      (18,150)         -            - 
 Loss on liquid 
  funds                     -           -            -           -    (11,435)    (11,435)        11,435         -            - 
 Gross 
  investment 
  (loss)/profit     (189,061)   (156,554)     (14,970)   (104,681)       6,715   (458,551)      (35,285)   (7,413)    (501,249) 
                  -----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Administrative 
  expenses                  -           -            -           -     (6,087)     (6,087)         3,651         -      (2,436) 
 Salaries and 
  other employee 
  benefits                  -           -            -           -    (13,613)    (13,613)        12,265         -      (1,348) 
 Interest 
  expense                   -           -            -           -    (37,679)    (37,679)        37,679         -            - 
 (Loss)/Profit 
  before 
  provisions, 
  foreign 
  exchange and 
  non-recurring 
  items             (189,061)   (156,554)     (14,970)   (104,681)    (50,664)   (515,930)        18,310   (7,413)    (505,033) 
                  -----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Expected credit 
  loss                      -           -            -           -       (712)       (712)           712         -            - 
 Net foreign 
  currency 
  gain/(loss)               -           -            -           -      15,160      15,160      (19,089)         -      (3,929) 
 Non-recurring 
  expense                   -           -            -           -       (196)       (196)            67         -        (129) 
 Loss before 
  income taxes      (189,061)   (156,554)     (14,970)   (104,681)    (36,412)   (501,678)             -   (7,413)    (509,091) 
                  -----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Income tax                 -           -            -           -           -           -             -         -            - 
 
 Loss for the 
  period            (189,061)   (156,554)     (14,970)   (104,681)    (36,412)   (501,678)             -   (7,413)    (509,091) 
                  ===========  ==========  ===========  ==========  ==========  ==========  ============  ========  =========== 
 
   4 .     Segment Information (continued) 

The following table presents income statement information of the Group's operating segments for the six months ended 30 June 2022 (unaudited) (old basis) :

 
                                  Private Portfolio Companies 
                              ----------------------------------- 
                    Listed       Large     Investment     Other     Corporate     Total     Intragroup    Equity    Investment 
                   Portfolio                 Stage                    Center                Investment    Changes     Entity 
                   Companies                                                                 Reversal     in JSC      Total 
                                                                                                and        GCAP 
                                                                                            Adjustments 
                              ----------  -----------  ----------  ----------  ----------  ------------  -------- 
 (Losses)/gains 
  on investments 
  at fair value    (225,467)   (188,278)       18,739   (104,681)           -   (499,687)         5,851   (7,413)    (501,249) 
   Listed Equity 
    Investments    (225,467)           -            -           -           -   (225,467)       225,467         -            - 
   Private 
    Investments            -   (188,278)       18,739   (104,681)           -   (274,220)     (219,616)   (7,413)    (501,249) 
 Dividend income      22,798       7,374        4,249           -           -      34,421      (34,421)         -            - 
 Interest income           -           -            -           -      18,150      18,150      (18,150)         -            - 
 Loss on liquid 
  funds                    -           -            -           -    (11,435)    (11,435)        11,435         -            - 
 Gross 
  investment 
  (loss)/profit    (202,669)   (180,904)       22,988   (104,681)       6,715   (458,551)      (35,285)   (7,413)    (501,249) 
                  ----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Administrative 
  expenses                 -           -            -           -     (6,087)     (6,087)         3,651         -      (2,436) 
 Salaries and 
  other employee 
  benefits                 -           -            -           -    (13,613)    (13,613)        12,265         -      (1,348) 
 Interest 
  expense                  -           -            -           -    (37,679)    (37,679)        37,679         -            - 
 (Loss)/Profit 
  before 
  provisions, 
  foreign 
  exchange and 
  non-recurring 
  items            (202,669)   (180,904)       22,988   (104,681)    (50,664)   (515,930)        18,310   (7,413)    (505,033) 
                  ----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Expected credit 
  loss                     -           -            -           -       (712)       (712)           712         -            - 
 Net foreign 
  currency 
  gain/(loss)              -           -            -           -      15,160      15,160      (19,089)         -      (3,929) 
 Non-recurring 
  expense                  -           -            -           -       (196)       (196)            67         -        (129) 
 Loss before 
  income taxes     (202,669)   (180,904)       22,988   (104,681)    (36,412)   (501,678)             -   (7,413)    (509,091) 
                  ----------  ----------  -----------  ----------  ----------  ----------  ------------  --------  ----------- 
 
 
 Income tax                -           -            -           -           -           -             -         -            - 
 
 Loss for the 
  period           (202,669)   (180,904)       22,988   (104,681)    (36,412)   (501,678)             -   (7,413)    (509,091) 
                  ==========  ==========  ===========  ==========  ==========  ==========  ============  ========  =========== 
 
   4 .     Segment Information (continued) 

The following table presents income statement information of the Group's operating segments for the six months ended 30 June 2021 (unaudited) :

 
                                Private Portfolio Companies 
                              ------------------------------ 
                    Listed      Large    Investment   Other    Corporate    Total     Intragroup    Equity    Investment 
                   Portfolio               Stage                 Center               Investment    Changes     Entity 
                   Companies                                                           Reversal     in JSC      Total 
                                                                                          and        GCAP 
                                                                                      Adjustments 
                              --------  -----------  -------  ----------  ---------  ------------  -------- 
 Gains on 
  investments at 
  fair value          43,836   225,131       30,839   26,213           -    326,019         1,685     1,877      329,581 
   Listed Equity 
    Investments       43,836         -            -        -           -     43,836      (43,836)                      - 
   Private 
    Investments            -   225,131       30,839   26,213           -    282,183        45,521     1,877      329,581 
 Dividend income           -     4,959        9,471        -           -     14,430      (14,430)                      - 
 Interest income           -         -            -        -      10,617     10,617      (10,617)                      - 
 Realised / 
  unrealised 
  loss on liquid 
  funds                    -         -            -        -       1,516      1,516       (1,516)         -            - 
 Gross 
  investment 
  profit / 
  (loss)              43,836   230,090       40,310   26,213      12,133    352,582      (24,878)     1,877      329,581 
                  ----------  --------  -----------  -------  ----------  ---------  ------------  --------  ----------- 
 
 
 Administrative 
  expenses                 -         -            -        -     (5,840)    (5,840)         2,961         -      (2,879) 
 Salaries and 
  other employee 
  benefits                 -         -            -        -    (12,256)   (12,256)        10,872         -      (1,384) 
 Interest 
  expense                  -         -            -        -    (37,520)   (37,520)        37,520         -            - 
 Profit / (loss) 
  before 
  provisions, 
  foreign 
  exchange and 
  non-recurring 
  items               43,836   230,090       40,310   26,213    (43,483)    296,966        26,475     1,877      325,318 
                  ----------  --------  -----------  -------  ----------  ---------  ------------  --------  ----------- 
 
 
 Expected credit 
  loss                     -         -            -        -       (570)      (570)           570         -            - 
 Net foreign 
  currency gain            -         -            -        -      27,117     27,117      (27,263)         -        (146) 
 Non-recurring 
  expense                  -         -            -        -       (218)      (218)           218         -            - 
 Profit / (loss) 
  before income 
  taxes               43,836   230,090       40,310   26,213    (17,154)    323,295             -     1,877      325,172 
                  ----------  --------  -----------  -------  ----------  ---------  ------------  --------  ----------- 
 
 
 Income tax                -         -            -        -           -          -             -         -            - 
 
 Profit / (loss) 
  for the year        43,836   230,090       40,310   26,213    (17,154)    323,295             -     1,877      325,172 
                  ==========  ========  ===========  =======  ==========  =========  ============  ========  =========== 
 
   5.     Equity Investments at Fair Value 
 
                                     30 June 2022 (unaudited)    31 December 2021 
                                    -------------------------  -------------------- 
 Subsidiaries (Note 7)                              2,303,029             2,881,373 
 Equity Investments at Fair Value                   2,303,029             2,881,373 
                                    =========================  ==================== 
 
 
                                                2022                    2021 
                                       ---------------------  ----------------------- 
 At 1 January                                      2,881,373                2,213,290 
 Fair Value gain and dividend income               (501,249)                  329,581 
 Capital redemption*                                (77,095)                  (4,500) 
 At 30 June (unaudited)                            2,303,029                2,538,371 
                                       =====================  ======================= 
 

* During six months ended 30 June 2022 JSC Georgia Capital made a capital reduction to its 100% shareholder with total cash consideration of GEL 77,095 (30 June 2021: GEL 4,500), of which cash consideration GEL 77,095 (30 June 2021: GEL 4,500).

Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments, both meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or loss. For the breakdown and detailed information regarding the equity investments at fair value, refer to note 7.

   6.     Equity 

Share capital

As at 30 June 2022 issued share capital comprised 47,693,708 authorised common shares (30 June 2021: 47,903,785) , of which 47,693,708 (30 June 2021: 47,903,785) were fully paid . Each share has a nominal value of one British penny. Shares issued and outstanding as at 30 June 2022 and 30 June 202 are described below:

 
                                 Number 
                                of shares 
                                 Ordinary    Amount 
                              ------------  ------- 
 31 December 2021               47,080,203    1,547 
                              ============  ======= 
 Cancellation of shares        (1,386,495)     (45) 
 30 June 2022 (unaudited)       45,693,708    1,502 
                              ============  ======= 
 
 
                                 Number 
                                of shares 
                                Ordinary    Amount 
                              -----------  ------- 
 31 December 2020              47,903,785    1,574 
                              -----------  ------- 
 30 June 2021 (unaudited)      47,903,785    1,574 
                              ===========  ======= 
 

Treasury Shares

During six months ended 30 June 2022, the Company paid cash consideration of GEL 42,193 (30 June 2021: GEL 194) for acquisition of treasury shares, of which GEL 247 (30 June 2021: GEL 194) was related to shares acquired for settlement of employee share-based payments and GEL 41,946 (30 June 2021: GEL nil) were other acquisitions made by the Company, including those under the share buyback programme.

During the six months ended 30 June 2022 1,386,495 treasury shares bought back under the Buyback Program were cancelled.

   6 .     Equity (continued) 

(Loss)/earnings per share

 
                                                               30 June 2022 (unaudited)   30 June 2021 (unaudited) 
                                                              -------------------------  ------------------------- 
 Basic earnings per share 
   (Loss)/profit for the period attributable to ordinary 
    shareholders of the parent                                                (509,091)                    325,172 
   Weighted average number of ordinary shares outstanding 
    during the year                                                          43,001,913                 44,474,927 
   (Loss)/earnings per share                                                  (11.8388)                     7.3114 
 Diluted earnings per share 
   (Loss)/profit for the period attributable to ordinary 
    shareholders of the Group                                                 (509,091)                    325,172 
   Weighted average number of diluted ordinary shares 
    outstanding during the year                                              43,001,913                 44,799,824 
   Diluted (loss)/earnings per share                                          (11.8388)                     7.2583 
 
   7.     Fair Value Measurements 

Fair value hierarchy

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability. The following tables show analysis of assets and liabilities measured at fair value or for which fair values are disclosed by level of the fair value hierarchy:

 
 30 June 2022 (unaudited)                Level 1             Level 2            Level 3              Total 
                                   ------------------   -----------------  -----------------  ------------------ 
 
 Assets measured at fair value 
 Equity investments at fair value                  -                    -       2,303,029             2,303,029 
 Assets for which fair values are 
 disclosed 
 Cash and cash equivalents                         -              32,232                   -              32,232 
 
 
 
 31 December 2021                       Level 1             Level 2            Level 3              Total 
                                  ------------------   -----------------  -----------------  ------------------- 
 
 Assets measured at fair value 
 Equity investments at fair 
  value                                             -                  -          2,881,373            2,881,373 
 Assets for which fair values 
 are disclosed 
 Cash and cash equivalents                          -              7,200                  -                7,200 
 

Valuation techniques

The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques. These incorporate the Company 's estimate of assumptions that a market participant would make when valuing the instruments.

Assets for which fair value approximates carrying value

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months), it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate financial instruments.

Fixed rate financial instruments

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest-bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity.

   7.     Fair Value Measurement (continued) 

Valuation techniques (continued)

Investment in subsidiaries

Equity investments at fair value include investment in subsidiary at fair value through profit or loss representing 100% interest of JSC Georgia Capital. Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments, both meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or loss. Investments in investment entity subsidiaries and loans issued are accounted for as financial instruments at fair value through profit and loss in accordance with IFRS 9. Debt securities owned are measured at fair value. We determine that, in the ordinary course of business, the net asset value of investment entity subsidiaries is considered to be the most appropriate to determine fair value. JSC Georgia Capital's net asset value as of 30 June 2022 and 31 December 2021 is determined as follows:

 
                                                          As at 
                                                ------------------------- 
                                                 30 June 2022 (unaudited) 
                                                ------------------------- 
 
 Assets 
 Cash and cash equivalents                                        150,688 
 Amounts due from credit institutions                             182,881 
 Marketable securities                                            137,186 
 Investment in redeemable securities                               13,523 
 Accounts receivable                                               22,909 
 Equity investments at fair value                               2,705,413 
   Of which listed and observable investments                     608,719 
                                                ------------------------- 
      BOG                                                         455,719 
      Water utility                                               153,000 
   Of which private investments:                                2,096,694 
                                                ------------------------- 
      Large portfolio companies                                 1,389,193 
         Retail (Pharmacy)                                        671,027 
         Hospitals                                                478,046 
         P&C insurance                                            199,810 
         Medical insurance                                         40,310 
      Investment stage portfolio companies                        443,967 
         Clinics and diagnostics                                  120,046 
         Renewable energy                                         172,168 
         Education                                                151,753 
      Other portfolio companies                                   263,534 
 Loans issued                                                      25,374 
 Other assets                                                       2,718 
 Total assets                                                   3,240,692 
                                                ========================= 
 
 
 Liabilities 
 Debt securities issued                                           924,057 
 Other liabilities                                                 13,606 
 Total liabilities                                                937,663 
                                                ------------------------- 
 
 
 Net Asset Value                                                2,303,029 
                                                ========================= 
 
   7.     Fair Value Measurement (continued) 

Valuation techniques (continued)

Investment in subsidiaries (continued)

 
                                                                    As at 
                                             -------------------------------------------------- 
                                              30 June 2022 (unaudited)*     31 December 2021 
                                             --------------------------  ---------------------- 
 
 Assets 
 Cash and cash equivalents                                      150,688                  89,714 
 Amounts due from credit institutions                           182,881                  35,667 
 Marketable securities                                          137,186                  79,716 
 Investment in redeemable securities                             13,523                  17,849 
 Accounts receivable                                             22,909                       - 
 Equity investments at fair value                             2,705,413               3,616,231 
   Of which listed investments                                  455,719                 681,186 
                                             --------------------------  ---------------------- 
      BOG                                                       455,719                 681,186 
   Of which private investments:                              2,249,694               2,935,045 
                                             --------------------------  ---------------------- 
      Large portfolio companies                               1,662,239               2,407,264 
         Healthcare services                                    598,092                 731,819 
         Retail (Pharmacy)                                      671,027                 710,385 
         Water utility                                          153,000                 696,960 
         P&C insurance                                          199,810                 211,505 
         Medical insurance                                       40,310                  56,595 
      Investment stage portfolio companies                      323,921                 303,136 
         Renewable energy                                       172,168                 173,288 
         Education                                              151,753                 129,848 
      Other portfolio companies                                 263,534                 224,645 
 Loans issued                                                    25,374                 154,214 
 Other assets                                                     2,718                   8,475 
 Total assets                                                 3,240,692               4,001,866 
                                             ==========================  ====================== 
 
 
 Liabilities 
 Debt securities issued                                         924,057               1,095,433 
 Other liabilities                                               13,606                  25,060 
 Total liabilities                                              937,663               1,120,493 
                                             --------------------------  ---------------------- 
 
 
 Net Asset Value                                              2,303,029               2,881,373 
                                             ==========================  ====================== 
 

* 30 June 2022 figures are presented on old basis to be comparable with prior period numbers. Current period figures on new basis are presented in the table above.

In measuring fair values of JSC Georgia Capital's investments, following valuation methodology is applied:

Equity Investments in Listed and Observable Portfolio Companies

Equity instruments listed on an active market are valued at the price within the bid/ask spread, that is most representative of fair value at the reporting date, which usually represents the closing bid price. The instruments are included within Level 1 of the hierarchy in JSC GCAP financial statements. Listed and observable portfolio also includes instruments for which there is a clear exit path from the business, e.g. through a put and/or call options at pre-agreed multiples. In such cases, pre-agreed terms are used for valuing the company.

Equity Investments in Private Portfolio Companies

Large portfolio companies - An independent third-party valuation firm is engaged to assess fair value ranges of large private portfolio companies at the reporting date starting from 31 December 2020 . The independent valuation company has extensive relevant industry and emerging markets experience. Valuation is performed by applying several valuation methods including an income approach based mainly on discounted cash flow and a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are substantially identical to those described below for the other portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the income approach being more heavily weighted than the market approach. Management selects what is considered to be the most appropriate point in the provided fair value range at the reporting date.

   7.     Fair Value Measurement (continued) 

Valuation techniques (continued)

Equity Investments in Private Portfolio Companies (continued)

Investment stage portfolio companies - An independent third-party valuation firm is engaged to assess fair value ranges of investment stage private portfolio companies at the reporting date starting from 30 June 202 2 . The independent valuation company has extensive relevant industry and emerging markets experience. Valuation is performed by applying several valuation methods including an income approach based mainly on discounted cash flow and a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are substantially identical to those described below for the other portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the income approach being more heavily weighted than the market approach. Management selects what is considered to be the most appropriate point in the provided fair value range at the reporting date.

Other portfolio companies - fair value assessment is performed internally as described below.

Equity investments in private portfolio companies are valued by applying an appropriate valuation method, which makes maximum use of market-based public information, is consistent with valuation methods generally used by market participants and is applied consistently from period to period, unless a change in valuation technique would result in a more reliable estimation of fair value.

The value of an unquoted equity investment is generally crystallised through the sale or flotation of the entire business. Therefore, the estimation of fair value is based on the assumed realisation of the entire enterprise at the reporting date. Recognition is given to the uncertainties inherent in estimating the fair value of unquoted companies and appropriate caution is applied in exercising judgments and in making the necessary estimates.

The fair value of equity investments is determined using one of the valuation methods described below:

Listed Peer Group Multiples

This methodology involves the application of a listed peer group earnings multiple to the earnings of the business and is appropriate for investments in established businesses and for which the Company can determine a group of listed companies with similar characteristics.

The earnings multiple used in valuation is determined by reference to listed peer group multiples appropriate for the period of earnings calculation for the investment being valued. The Company identifies a peer group for each equity investment taking into consideration points of similarity with the investment such as industry, business model, size of the company, economic and regulatory factors, growth prospects (higher growth rate) and risk profiles. Some peer-group companies' multiples may be more heavily weighted during valuation if their characteristics are closer to those of the company being valued than others.

As a rule of thumb, last 12-month earnings will be used for the purposes of valuation as a generally accepted method. Earnings are adjusted where appropriate for exceptional, one-off or non-recurring items.

   a.     Valuation based on enterprise value 

Fair value of equity investments in private companies can be determined as their enterprise value less net financial debt (gross face value of debt less cash) appearing in the most recent Financial Statements.

Enterprise value is obtained by multiplying measures of a company's earnings by listed peer group multiple (EV/EBITDA) for the appropriate period. The measures of earnings generally used in the calculation is recurring EBITDA for the last 12 months (LTM EBITDA). In exceptional cases, where EBITDA is negative, peer EV/Sales (enterprise value to sales) multiple can be applied to last 12-month recurring/adjusted sales revenue of the business (LTM sales) to estimate enterprise value.

Once the enterprise value is estimated, the following steps are taken:

Net financial debt appearing in the most recent financial statements is subtracted from the enterprise value. If net debt exceeds enterprise value, the value of shareholders' equity remains at zero (assuming the debt is without recourse to Georgia Capital).

The resulting fair value of equity is apportioned between Georgia Capital and other shareholders of the company being valued, if applicable.

   7.     Fair Value Measurement (continued) 

Valuation techniques (continued)

Equity Investments in Private Portfolio Companies (continued)

Valuation based on enterprise value using peer multiples is used for businesses within non-financial industries.

   b.     Equity fair value valuation 

Fair value of equity investment in companies can be determined as using price to earnings (P/E) multiple of similar listed companies.

The measure of earnings used in the calculation is recurring adjusted net income (net income adjusted for non-recurring items and forex gains/ losses) for the last 12 months (LTM net income). The resulting fair value of equity is allocated between Georgia Capital and other shareholders of the portfolio company, if any. Fair valuation of equity using peer multiples can be used for businesses within financial sector (e.g. insurance companies).

Discounted cash flow

Under the discounted cash flow (DCF) valuation method, fair value is estimated by deriving the present value of the business using reasonable assumptions of expected future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that quantifies the risk inherent to the business. The discount rate is estimated with reference to the market risk-free rate, a risk adjusted premium and information specific to the business or market sector. Under the discounted cash flow analysis unobservable inputs are used, such as estimates of probable future cash flows and an internally-developed discounting rate of return.

Net Asset Value

The net assets methodology involves estimating fair value of an equity investment in a private portfolio company based on its book value at reporting date. This method is appropriate for businesses (such as real estate) whose value derives mainly from the underlying value of its assets and where such assets are already carried at their fair values (fair values determined by professional third-party valuation companies) on the balance sheet.

Price of recent investment

The price of a recent investment resulting from an orderly transaction, generally represents fair value as of the transaction date. At subsequent measurement dates, the price of a recent investment may be an appropriate starting point for estimating fair value. However, adequate consideration is given to the current facts and circumstances to assess at each measurement date whether changes or events subsequent to the relevant transaction imply a change in the investment's fair value.

Exit price

Fair value of a private portfolio company in a sales process, where the price has been agreed but the transaction has not yet settled, is measured at the best estimate of expected proceeds from the transaction, adjusted pro-rata to the proportion of shareholding sold.

Validation

Fair value of investments estimated using one of the valuation methods described above is cross-checked using several other valuation methods as follows:

Listed peer group multiples - peer multiples such as P/E, P/B (price to book) and dividend yield are applied to the respective metrics of the investment being valued depending on the industry of the company. The Company develops fair value range based on these techniques and analyse whether fair value estimated above falls within this range.

Discounted cash flow (DCF) - The discounted cash flow valuation method is used to determine fair value of equity investment. Based on DCF, the Company might make upward or downward adjustment to the value of valuation target as derived from primary valuation method. If fair value estimated using discounted cash flow analysis significantly differs from the fair value estimate derived using primary valuation method, the difference is examined thoroughly, and judgement is applied in estimating fair value at the measurement date.

In line with our strategy, from time to time, we may receive offers from interested buyers for our private portfolio companies, which would be considered in the overall valuation assessment, where appropriate.

   7.     Fair Value Measurement (continued) 

Valuation process for Level 3 valuations

Georgia Capital hired third-party valuation professionals to assess fair value of the large private portfolio companies as at 30 June 2021 and 31 December 2021. Starting from 2022 third-party valuation professionals are hired to assess fair value of the investment stage private portfolio companies as well. As of 30 June 2022 such businesses include Hospitals, P&C insurance, Retail (Pharmacy), Medical Insurance, Clinics & Diagnostics, Renewable energy, Education. The valuation is performed by applying several valuation methods that are weighted to derive fair value range, with the income approach being more heavily weighted than market approach. Management selects most appropriate point in the provided fair value range at the reporting date. Fair values of investments in other private portfolio companies are assessed internally in accordance with Georgia Capital's valuation methodology by the Valuation Workgroup.

Georgia Capital's Management Board proposes fair value to be placed at each reporting date to the Audit and Valuation Committee. Audit and Valuation Committee is responsible for the review and approval of fair value s of investments at the end of each reporting period.

Description of significant unobservable inputs to level 3 valuations

The approach to valuations as of 30 June 2022 was consistent with the Company 's valuation process and policy. Management continues to monitor the impact that the COVID-19 pandemic has on the valuation of portfolio companies.

The following tables show descriptions of significant unobservable inputs to level 3 valuations of investments in subsidiaries:

 
 30 June 2022 (unaudited) 
 Description                      Valuation technique    Unobservable input      Range [selected input]   Fair value 
-------------------------------  ---------------------  ----------------------  -----------------------  ------------- 
 Loans Issued                     DCF                    Discount rate                  5.5%-16%                25,374 
-------------------------------  ---------------------  ----------------------  -----------------------  ------------- 
 Equity investments at fair 
 value 
        Large portfolio                                                                                    1,389,193 
 Retail (Pharmacy)                DCF, EV/EBITDA         EV/EBITDA multiple            5.8x-21.6x         671,027 
                                                                                        [ 8.3x ] 
 Hospitals                        DCF, EV/EBITDA         EV/EBITDA multiple            6.1x-23.6x         478,046 
                                                                                       [ 10.5x ] 
 P&C insurance                    DCF, P/E               P/E multiple                  4.6x-20.1x         199,810 
                                                                                       [ 11.0x ] 
 Medical insurance                DCF, P/E               P/E multiple                  6.2x-9.8x          40,310 
-------------------------------  ---------------------  ----------------------                           ------------- 
                                                                                       [ 14.5x ] 
-------------------------------  ---------------------  ----------------------  -----------------------  ------------- 
        Investment stage                                                                                      443,967 
 Clinics and diagnostics          DCF, EV/EBITDA         EV/EBITDA multiple            6.1x-23.6x         120,046 
                                                                                         [9.8x] 
 Renewable energy                 DCF, EV/EBITDA         EV/EBITDA multiple            4.6x-19.9x         172,168 
                                                                                        [11.1 x] 
 Education                        DCF, EV/EBITDA         EV/EBITDA multiple            8.4x-41.7x         151,753 
-------------------------------  ---------------------  ----------------------                           ------------- 
                                                                                        [15.3x] 
-------------------------------  ---------------------  ----------------------  -----------------------  ------------- 
 Other                            Sum of the parts       EV/EBITDA multiples           1.4x-18.3x         263,534 
-------------------------------  ---------------------                                                   ------------- 
                                                                                      [4.0x-10.0x] 
                                                                                                         ------------- 
   EV/Sales multiple                                                                   1.1x-2.9x 
                                                                                         [1.6x] 
   Cashflow probability                                                                [90%-100%] 
   NAV multiple                                                                         [1.0 x] 
  ----------------------------------------------------------------------------  -----------------------  ------------- 
 
   7.     Fair Value Measurement (continued) 

Description of significant unobservable inputs to level 3 valuations (continued)

 
 31 December 2021 
       Description          Valuation technique        Unobservable           Range       Fair 
                                                           input             [selected     value 
                                                                              input] 
-------------------------  ---------------------  ----------------------  -------------  ------------ 
 Loans Issued               DCF                    Discount rate             5.5%-16%         154,214 
-------------------------  ---------------------  ----------------------  -------------  ------------ 
 Equity investments 
  at fair value 
        Large portfolio                                                                    2,407,264 
 Healthcare services        DCF, EV/EBITDA         EV/EBITDA multiple       6.9x-22.6x      731,819 
                                                                             [ 10.3x 
                                                                                 ] 
 Retail (Pharmacy)          DCF, EV/EBITDA         EV/EBITDA multiple       6.8x-19.9x      710,385 
                                                                              [ 9.3x 
                                                                                 ] 
 
 Water utility              DCF, EV/EBITDA         EV/EBITDA multiple          N/A          696,960 
 P&C insurance              DCF, P/E               P/E multiple             8.0x-28.7x      211,505 
                                                                             [ 12.0x 
                                                                                 ] 
 Medical insurance          DCF, P/E               P/E multiple             9.7x-16.6x      56,595 
-------------------------  ---------------------  ----------------------                 ------------ 
                                                                             [ 15.0x 
                                                                                 ] 
-------------------------  ---------------------  ----------------------  -------------  ------------ 
        Investment stage                                                                      303,136 
 Renewable energy           Sum of the parts       EV/EBITDA multiple      10.1x-19.6x      173,288 
                                                                           [9.2x-12.5x] 
 Education                  EV/EBITDA              EV/EBITDA multiple       7.3x-21.7x      129,848 
-------------------------  ---------------------  ----------------------                 ------------ 
                                                                             [12.5x] 
-------------------------  ---------------------  ----------------------  -------------  ------------ 
 Other                      Sum of the parts       EV/EBITDA multiples      1.1x-17.1x      224,645 
-------------------------  ---------------------                                         ------------ 
                                                                           [5.0x-9.8x] 
                                                                                         ------------ 
   EV/Sales multiple                                                        1.1x-2.7x 
                                                                              [1.9x] 
   Cashflow probability                                                     [90%-100%] 
   NAV multiple                                                               [0.9x] 
  ----------------------------------------------------------------------  -------------  ------------ 
 

Georgia Capital hired third-party valuation professionals to assess fair value of the large and investment stage private portfolio companies as at 30 June 2022 including Retail (Pharmacy), Hospitals, P&C insurance, Medical Insurance, Clinics and Diagnostics, Renewable Energy and Education. The valuation is performed by applying several valuation methods that are weighted to derive fair value range, with the income approach being more heavily weighted than market approach. Management selects most appropriate point in the provided fair value range at the reporting date.

On 31 December 2021, Georgia Capital signed SPA to dispose 80% interest in Water Utility business . The remaining 20% interest in Water Utility business was valued using the option valuation method as at 30 June 2022 as GCAP has a clear exit path from the business through a put and call structure at pre-agreed EBITDA multiples.

Comprehensive analysis was performed to determine the impact of the Russia-Ukraine war on the private portfolio valuations. During the analysis, the impact of the war on discount rates was estimated and changes in listed peer multiples and overall movement in emerging and regional markets were reviewed. Uncertainties surrounding the geopolitical tensions translated into an increase in discount rates and reduced listed peer multiples and were reflected accordingly in the private portfolio companies' valuations, where applicable.

As at 30 June 2022, several portfolio companies (Hospitals, Clinics, P&C Insurance, together "Defendants") were engaged in litigation that has been ongoing since 2015 with some of the former shareholders of Insurance Company Imedi L ("Claimants") in relation to the acquisition price of the business. Former shareholders claim that their 66% shares in Insurance Company Imedi L were sold under duress at a price below market value in 2012. Since the outset, GHG and Aldagi have vigorously defended their position that the claims are wholly without merit. Defendants won the case in Tbilisi City Court in 2018. The Claimants appealed against the court decision and in January 2020, Tbilisi Court of Appeals decided to return the case back to Tbilisi City Court for further analysis of the circumstances of the case, this decision was sustained by Supreme Court in February 2022 as well. In July 2022, Tbilisi City Court partially satisfied the Claimants and ruled that claims in the amount of USD 12.7 million principal amount plus an annual 5% interest charge as lost income (USD 21 million in total) should be paid. Defendants have not yet received the written substantiation of the judgment; they believe that no new evidence has been submitted and that there is no sound basis upon which to have reversed the initial ruling. Defendants intend to appeal, will continue to vigorously defend their position and are confident that they will prevail, accordingly defendants have not made a provision for a potential liability in their financial statements. Management shares Defendants' assessment of the merits of the case and considers that the probability of incurring losses on this claim is low, accordingly, fair values of portfolio companies do not take into account a potential liability in relation to this litigation.

   7.     Fair Value Measurement (continued) 

Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy

In order to determine reasonably possible alternative assumptions the Company adjusted key unobservable model inputs. The Company adjusted the inputs used in valuation by increasing and decreasing them within a range which is considered by the Company to be reasonable.

If the interest rate for each individual loan issued to subsidiaries as at 30 June 2022 decreased by 20% (31 December 2021: 20%), the amount of loans issued would have decreased by GEL 31 or 0.1% (31 December 2021: increased by GEL 3,174 or 2.1%). If the interest rates increased by 20% (31 December 2021: 20%) then loans issued would have increased by GEL 30 or 0.1% (31 December 2021: decreased by GEL 2,938 or 1.9%).

If the listed peer multiples used in the market approach to value unquoted investments as at 30 June 2022 decreased by 10% (31 December 2021: 10%), value of equity investments at fair value would decrease by GEL 77 million or 2.9% (31 December 2021: GEL 110 million or 3%). If the multiple increased by 10% (31 December 2021: 10%) then the equity investments at fair value would increase by GEL 71 million or 2.6% (31 December 2020: GEL 121 million or 3%).

If the discount rates used in the income approach to value unquoted investments decreased by 50 basis points (31 December 2021: 50 basis points), the value of equity investments at fair value would increase by GEL 70 million or 2.6% (31 December 2021: GEL 90 million or 2%). If the discount rates increased by 50 basis points (31 December 2021: 50 basis points) then the equity investments at fair value would decrease by GEL 72 million or 2.7% (GEL 80 million or 2%). If the discount rate decreased by 100 basis points, the value of equity investments at fair value would increase by GEL 146 million or 5.4% (31 December 2021: GEL 189 million or 5%). If the discount rate increased by 100 basis points then the equity investments at fair value would decrease by GEL 139 million or 5.1% (31 December 2021: GEL 156 million or 4%).

If the multiple used to value unquoted investments valued on NAV and recent transaction price basis (except for Hospitality and Commercial business) as at 30 June 2022 decreased by 10% (31 December 2021: 10%), value of equity investments at fair value would decrease by GEL 7 million or 0.3% (31 December 2021: GEL 7 million or 0.2%). If the multiple increased by 10% then the equity investments at fair value would increase by GEL 7 million or 0.3% (31 December 2021: GEL 7 million or 0.2%).

Movements in level 3 financial instruments measured at fair value

The following tables show a reconciliation of the opening and closing amounts of level 3 financial assets which are recorded at fair value:

 
                   At 1      Fair Value    Capital      Dividend      At 31      Fair Value    Capital     At 30 June 
                 January        gain      redemption     Income      December       loss      redemption 
                            -----------  -----------  -----------               -----------  ----------- 
                                                                                                              2022 
                   2021                                                2021                                (unaudited) 
               -----------  -----------  -----------  -----------  -----------  -----------  -----------  ------------ 
 Level 3 
 financial 
 assets 
 Equity 
  investments 
  at fair 
  value (Note 
  5)             2,213,290      704,243     (21,679)     (14,481)    2,881,373    (501,249)     (77,095)     2,303,029 
 
   8.     Maturity Analysis 

The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:

 
                                                        30 June 2022 (unaudited) 
                                        ------------------------------------------------------- 
 
                                            Less than          More than            Total 
                                              1 Year             1 Year 
                                        -----------------  -----------------  ----------------- 
 Cash and cash equivalents                         32,232                  -             32,232 
 Equity investments at fair value                       -          2,303,029          2,303,029 
 Prepayments                                          448                  -                448 
 Total assets                                      32,680          2,303,029          2,335,709 
                                        -----------------  -----------------  ----------------- 
 
 
 Other liabilities                                  3,148                  -              3,148 
 Total liabilities                                  3,148                  -              3,148 
                                        -----------------  -----------------  ----------------- 
 
 
 Net                                               29,532          2,303,029          2,332,561 
                                        =================  =================  ================= 
 
 
                                                            31 December 2021 
                                        ------------------------------------------------------- 
 
                                            Less than          More than            Total 
                                              1 Year             1 Year 
                                        -----------------  -----------------  ----------------- 
 
 Cash and cash equivalents                          7,200                  -              7,200 
 Equity investments at fair value                       -          2,881,373          2,881,373 
 Prepayments                                          406                  -                406 
 Total assets                                       7,606          2,881,373          2,888,979 
                                        -----------------  -----------------  ----------------- 
 
 
 Other liabilities                                  5,357                  -              5,357 
 Total liabilities                                  5,357                  -              5,357 
                                        -----------------  -----------------  ----------------- 
 
 
 Net                                                2,249          2,881,373          2,883,622 
                                        =================  =================  ================= 
 
   9.     Related Party Disclosures 

In accordance with IAS 24 "Related Party Disclosures", parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. All transactions with related parties are conducted on an arm's length basis. There were no related party transactions as of and for the periods ended 30 June 2021 and 30 June 2022, other than capital redemption from JSC GCAP (note 5) and compensation of key management personnel disclosed below:

Compensation of key management personnel comprised the following:

 
                                             30 June 2022 (unaudited)                30 June 2021 (unaudited) 
                                     ---------------------------------------  ------------------------------------- 
 
 Salaries and other benefits                                           (603)                                (1,232) 
 Share-based payments compensation                                     (223)                                  (266) 
 Total key management compensation                                     (826)                                (1,498) 
                                     =======================================  ===================================== 
 

Key management personnel do not receive cash settled compensation, except for fixed salaries. The number of key management personnel at 30 June 2022 was 7 (1 executive and 6 members of board of directors) (31 December 2021: 7 (1 executives and 6 members of board of directors ).

   10.   Events after the Reporting Period 

Change in fair value and ownership of listed investment

As at 11 August 2022, fair value of listed equity investment of JSC Georgia Capital, BoG, has increased by 22% (or GEL 101,897) compared to 30 June 2022 as a result of increased share price in subsequent period by 33% to GBP 17.4.

In 2Q22, the BoG also announced the commencement of the GEL 72.7 million share buyback and cancellation programme, starting from 11 July 2022 and effective until 31 December 2022. As a result of subsequent buybacks the ownership of JSC GCAP in BoG increased to 20.0% (30 June 2022: 19.9%).

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, (ii) a hospitals business, (iii) an insurance business (P&C and medical insurance); (iv) a clinics and diagnostics business, (v) a renewable energy business (hydro and wind assets) and (vi) an education business; Georgia Capital also holds other small private businesses across different industries in Georgia; a 20% equity stake in the water utility business and a 19.9% 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 this announcement and 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.

Disclaimer

Georgia Capital engaged Kroll (formerly known as Duff & Phelps), a third-party independent valuation firm to provide a range of fair values of certain subject investments. For the period ended 30 June 2022, Georgia Capital asked the independent valuation firm to independently estimate a range of fair value for 100 percent of Georgia Healthcare Group ("GHG"), JSC Insurance Company Aldagi Group ("Aldagi"), Georgia Global Utilities ("GGU") and Georgia Education Group ("GEG"). Kroll performed limited procedures and applied their judgement to estimate fair value range based on the facts and circumstances known to them as at the valuation date, 30 June 2022. The analysis performed by Kroll was based upon data and assumptions provided by Georgia Capital and received from third party sources, which the independent valuation firm relied upon as being accurate without independent verification. The advice of the third party independent valuation firm is one input that the Georgia Capital considered for determining the fair value of GHG, Aldagi, GGU and GEG for which the Company is ultimately and solely responsible. In this context, Kroll's role as independent valuation service provider did not constitute an endorsement of Georgia Capital either from a financial or operational point of view, nor did they provide a transaction, fairness or solvency opinion. The results of the independent valuation report should not be relied upon by anyone for any investment or transaction purpose related to the Company or any underlying investments.

COMPANY INFORMATION

Georgia Capital PLC

Registered Address

42 Brook Street

London W1K 5DB

United Kingdom

www.georgiacapital.ge

Registered under number 10852406 in England and Wales

Stock Listing

London Stock Exchange PLC's Main Market for listed securities

Ticker: "CGEO.LN"

Contact Information

Georgia Capital PLC Investor Relations

Telephone: +44 (0) 203 178 4052; +995 322 000000

E-mail: ir@gcap.ge

Auditors

PricewaterhouseCoopers LLP ("PwC")

Atria One, 144 Morrison Street,

Edinburgh EH3 8EX

United Kingdom

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol BS13 8AE

United Kingdom

Please note that Investor Centre is a free, secure online service run by our Registrar, Computershare,

giving you convenient access to information on your shareholdings.

Investor Centre Web Address - www.investorcentre.co.uk .

Investor Centre Shareholder Helpline - +44 (0) 370 873 5866

Share price information

Shareholders can access both the latest and historical prices via the website

www.georgiacapital.ge

[1] See "Basis of Presentation" for more background on page 28. Private portfolio companies' performance includes aggregated stand-alone IFRS results for our portfolio companies, which can be viewed as APMs for Georgia Capital, since Georgia Capital does not consolidate its subsidiaries and instead measures them at fair value under IFRS.

[2] Please see definition in glossary on page 28.

[3] Private portfolio companies' performance highlights are presented excluding the water utility business. Aggregated numbers are presented like-for-like basis.

[4] The results of our five smaller businesses included in other portfolio companies (described on page 25) 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).

[5] As of 11-Aug-22, NAV per share (GEL), adjusted for the BoG share price and exchange rate changes, stood at GEL 55.02 , up 4.4 % from 1H22. Similarly, in GBP terms, NAV per share was up 1 3 .7% to GBP 16. 80 from 1H22.

[6] Please see definition in glossary on page 28.

[7] Please see definition in glossary on page 28.

[8] 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.

[9] 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.

[10] Change in the fair value attributable to the change in valuation multiples and the effect of exchange rate movement on net debt.

[11] Please read more about valuation methodology on pages 28 in "Basis of presentation".

[12] Enterprise value is presented excluding the recently launched schools (Pesvebi and Tkekultura) and non-operational assets, added to the equity value of the education business at cost.

[13] Adjusted for non-recurring items.

[14] Adjusted for non-recurring items.

[15] Excluding the recently launched schools (Pesvebi and Tkekultura) and non-operational assets, added to the equity value of the education business at cost.

[16] Following BoG's share buybacks, GCAP's holding in the Bank increased to 20.0% as of 11-Aug-22 from 19.9% as of 30-Jun-22.

[17] More details are available on our website: https://georgiacapital.ge/ir/water-utility-disposal .

[18] Normalised for the items as set out in the terms of the disposal.

[19] Investments are made and dividends are received at JSC Georgia Capital level, the Georgian holding company.

[20] Please see definition in glossary on page 28.

[21] 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.

[22] 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.

[23] Change in the fair value attributable to the change in valuation multiples and the effect of exchange rate movement on net debt.

[24] Excluding the recently launched schools (Pesvebi and Tkekultura) and non-operational assets, added to the equity value of the education business at cost.

[25] Investments are made and dividends are received at JSC Georgia Capital level, the Georgian holding company.

[26] Investments are made and dividends are received at JSC Georgia Capital level, the Georgian holding company.

[27] Loans issued balance as at 31-Mar-22 and 31-Dec-21 reflect the retrospective conversions of the loans issued to our other businesses into equity.

[28] FX, coupon payment and coupon accrual are included in Liquidity Management /FX/Other column in NAV statement.

[29] Includes expenses such as external audit fees, legal counsel, corporate secretary and other similar administrative costs.

[30] Cash-based management expenses are cash salary and cash bonuses paid/accrued for staff and management compensation.

[31] Share-based management expenses are share salary and share bonus expenses of management and staff.

[32] Fund type expenses include expenses such as audit and valuation fees, fees for legal advisors, Board compensation and corporate secretary costs.

[33] Management fee is the sum of cash-based and share-based operating expenses (excluding fund-type costs).

[34] Ratios are calculated based on period-end market capitalisation due to significant price fluctuations during the respective periods in light of COVID-19 and Russia-Ukraine war.

[35] 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.

[36] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[37] Of which - capex of GEL 5.0 million in 2Q22 and GEL 13.8 million in 1H22 (GEL 4.3 million in 2Q21 and GEL 6.9 million in 1H21); acquisition of minority shares of GEL 31.2 million in 2Q22 and GEL 41.2 million in 1H22.

[38] Calculated by deducting capex and acquisition of subsidiaries from operating cash flows.

[39] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[40] Net revenue - Gross revenue less corrections and rebates. Margins are calculated from gross revenue.

[41] 2Q22 and 1H22 numbers are adjusted for a GEL 2.7 million loss from the sale of the Traumatology Hospital.

[42] Of which - capex of GEL 5.3 million in 2Q22 and GEL 9.1 million in 1H22 (GEL 6.6 million in 2Q21 and GEL 10.9 million in 1H21); payment of holdback of GEL 6.2 million in 1H22; and proceeds from sale of PPE/subsidiary of GEL 6.9 million in 2Q22 and GEL 8.7 million in 1H22.

[43] Operating cash flows less capex, less acquisition of subsidiaries / payment of holdback, plus net proceeds on sale of PPE/subsidiary .

[44] The respective costs divided by gross revenues.

[45] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[46] Calculated based on average equity, adjusted for preferred shares.

[47] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[48] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[49] The detailed IFRS financial statements are included in supplementary excel file, available at https://georgiacapital.ge/ir/financial-results .

[50] Net revenue - Gross revenue less corrections and rebates. Margins are calculated from Gross revenue.

[51] Operating cash flows less capex.

[52] Net revenue - Gross revenue less corrections and rebates. Margins are calculated from gross revenue.

[53] Of which - capex of GEL 3.7 million in 2Q22 and GEL 5.8 million in 1H22 (GEL 1.8 million in 2Q21 and GEL 3.0 million in 1H21).

[54] Operating cash flows less capex.

[55] The respective costs divided by gross revenues.

[56] Net revenue - Gross revenue less corrections and rebates.

[57] Please see definition in glossary on page 28.

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August 12, 2022 02:00 ET (06:00 GMT)

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