TIDMCGEO
RNS Number : 7481F
Georgia Capital PLC
09 November 2022
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS) [1]
GEL '000, unless otherwise Sep-22 Jun-22 Change Dec-21 Change
noted
Georgia Capital NAV overview
NAV per share, GEL 57.04 52.71 8.2% 63.03 -9.5%
NAV per share, GBP 18.55 14.78 25.5% 15.10 22.8%
Net Asset Value (NAV) 2,484,804 2,332,561 6.5% 2,883,622 -13.8%
Liquid assets and loans issued 632,930 688,741 -8.1% 426,531 48.4%
-2.6 -7.5
NCC ratio [2] 24.4% 27.0% ppts 31.9% ppts
Georgia Capital Performance 3Q22 3Q21 Change 9M22 9M21 Change
Total portfolio value creation 169,906 244,631 -30.5% (295,360) 585,080 NMF
of which, listed and observable
businesses 142,450 66,246 NMF (46,611) 110,082 NMF
of which, private businesses 27,456 178,385 -84.6% (248,749) 474,998 NMF
Investments 12,792 6,542 95.5% 156,948 17,130 NMF
of which, conversion of
issued loans into equity - - NMF 142,584 - NMF
Divestments - - NMF (557,568) - NMF
Buybacks 15,256 9,335 63.4% 68,796 12,534 NMF
Dividend income 32,019 30,000 6.7% 66,440 44,430 49.5%
Net income / (loss) 162,013 229,849 -29.5% (339,666) 553,148 NMF
Private portfolio companies'
performance(1, [3]) 3Q22 3Q21 Change 9M22 9M21 Change
Large portfolio companies
Revenue 303,066 316,092 -4.1% 924,989 915,335 1.1%
EBITDA 36,714 45,050 -18.5% 111,827 126,384 -11.5%
Net operating cash flow 34,947 57,537 -39.3% 98,223 98,247 NMF
Investment stage portfolio
companies
Revenue 39,586 42,050 -5.9% 124,707 120,982 3.1%
EBITDA 13,951 15,473 -9.8% 44,001 47,100 -6.6%
Net operating cash flow 18,987 21,809 -12.9% 43,586 43,482 0.2%
Total portfolio [4]
Revenue 494,671 447,250 10.6% 1,400,099 1,275,344 9.8%
EBITDA 69,581 68,377 1.8% 186,139 201,011 -7.4%
Net operating cash flow 69,891 88,744 -21.2% 153,376 163,135 -6.0%
KEY POINTS
Ø NAV per share (GEL) up 8.2% in 3Q22, following stabilisation
in 2Q22, driven by strong growth in BOG value
Ø NAV per share (GBP) increased 25.5% in 3Q22, reflecting the
16.0% appreciation of GEL against GBP during the third quarter and
strong growth in GEL terms
Ø Net Capital Commitment (NCC) ratio decreased by 2.6 ppts to
24.4% in 3Q22, resulting from strong growth in the portfolio value
and GEL's appreciation against US$
Ø GEL 32.0 million regular dividend income from the portfolio
companies in 3Q22 (GEL 66.4 million in 9M22)
Ø US$ 102 million GCAP Eurobonds re-purchased to date, including
$29 million through the Modified Dutch Auction ("MDA") in October
2022, of which, US$ 65 million were cancelled
Conference call: An investor/analyst conference call will be
held on 9 November 2022, at 13:00 UK / 14:00 CET / 08:00 US Eastern
Time. Please register at the Registration link to attend the event.
Further details about the webinar are available on the Group's
webpage .
CHAIRMAN AND CEO'S STATEMENT
Our 3Q22 results demonstrate the significant strategic,
operational and financial progress of Georgia Capital, and reflect
the high level of resilience of our portfolio companies, bolstered
by the outstanding growth of the Georgian economy.
3 Q22 NAV per share was up 8.2%. The NAV per share growth in
3Q22 resulted mainly from positive value creation across our
portfolio companies. In 3Q22, BoG's share price demonstrated a
strong recovery (up 52.2% q-o-q), leading to GEL 142.5 million
value creation (6.1 ppts positive impact on the NAV per share). The
value creation across our private portfolio amounted to GEL 27.5
million (1.2 ppts impact), demonstrating solid growth. The NAV per
share growth was further supported by share buybacks and GEL's
appreciation against US$ (+1.4 ppts impact), partially offset by
management platform related costs and net interest expense (-0.8
ppts impact). In GBP terms, the NAV per share growth in 3Q22 was
significant - up 25.5% - reflecting the 16.0% appreciation of GEL
against GBP during the quarter.
As discussed in more detail in this report, healthy performance
in our non-healthcare businesses enabled us to manage the value
creation across the private portfolio notwithstanding a GEL 35.9
million value reduction in our Hospitals and Clinics &
Diagnostics businesses. Substantially lower COVID cases in Georgia
led to the suspension of COVID contracts by the Government in 1Q22.
As a result, we have been restructuring the cost base of our
COVID-earmarked hospitals. Together with slow summer admissions,
this negatively impacted the performance of our healthcare
businesses in 2Q22 and 3Q22. We expect this effect to be temporary
and that performance will rebound over the next few quarters as the
businesses complete the transition to a more normal post-pandemic
operating and demand environment.
We have once again demonstrated our superior access to capital.
In October 2022, our renewable energy and housing businesses
successfully completed bond placements on the Georgian capital
market. The transactions, completed during challenging debt capital
market conditions, represent milestone achievements for the
businesses.
Ø Our renewable energy business closed a US$ 80 million green
secured bond offering, which represents the largest-ever corporate
bond placement in Georgia. The notes are US$-denominated with
5-year bullet maturity (callable after two years) and carry a 7.00%
coupon. The proceeds of the notes were fully used to refinance the
shareholder loan from GCAP, provided for redeeming the renewable
energy business' portion of GGU's US$ 250 million 7.75%
Eurobond.
Ø Our housing business issued a US$ 35 million 2-year bond,
carrying an 8.5% coupon. Full proceeds of the notes were used to
refinance the 3-year 7.5% coupon US$ 35 million local bonds that
matured on 7 October 2022.
Strong progress on our key strategic priority of deleveraging
GCAP. In 3Q22, the NCC ratio decreased by 2.6 ppts to 24.4%. The
decrease resulted from a combination of factors: a) solid liquidity
[5] of GEL 633 million (US$ 223 million) at GCAP, including GEL
32.0 million dividend income from the portfolio companies in 3Q22,
b) a 61.4% decrease in GCAP's bank guarantee on the borrowings of
the beer business, reflecting the recent strong operating
performance of the business, c) growth in the portfolio value,
reflecting the strong value creation of our portfolio companies in
3Q22, and d) a 4.5% decrease in the gross debt balance due to GEL's
appreciation against US$.
In October 2022, we conducted a Modified Dutch Auction through
which we bought back US$ 29.2 million GCAP Eurobonds. In addition
to the tendered amount, we had accumulated US$ 72.9 million GCAP
Eurobonds through repurchases on the open market. Upon completion
of the MDA we cancelled US$ 65.0 million notes, decreasing our
outstanding gross debt balance to US$ 300.0 million and leaving US$
37.1 GCAP Eurobonds in our treasury. The transaction is in line
with our key strategic priority to deleverage Georgia Capital's
balance sheet. On a pro-forma basis, reflecting the results of the
Modified Dutch Auction as well as the subsequent movements in BoG's
share price and foreign exchange rates, the NCC ratio reduced
further to 22.2% as of 30-Sep-22.
From a macroeconomic perspective , the economy has continued to
deliver double-digit growth so far in 2022, with real GDP expanding
y-o-y by an estimated 10. 2 % in 9M22, following 10.4% real GDP
growth in 2021. On the external side, strong foreign demand
throughout the year has been supplemented by substantial remittance
inflows, with money transfers up by 65% y-o-y in 9M22. Merchandise
exports grew by 37% y-o-y in 9M22, and tourism revenues reached 98%
of 2019 levels in 9M22, including 122% in July-September 2022,
reflecting the global resumption of travel as well as significant
migration, especially from Russia. On the domestic side, credit
expansion has also been robust, as the commercial bank loan
portfolio grew by 13.7% y-o-y as of September 2022 (on a constant
currency basis). Additionally, while fiscal support has moderated,
Georgia's fiscal stance remains expansionary, with current
expenditures growing by 9% and capital expenditures expanding by
15% y-o-y in 9M22. Despite US$ strengthening globally, the Georgian
Lari (GEL) has sustained its appreciation trend since mid-2021 and,
compared to the beginning of 2022, had appreciated by 13.0% against
the US dollar as of 8 November 2022. This appreciation is driven by
the growing demand for Georgian exports, robust remittance and
migration inflows, tight monetary policy, accelerated foreign
currency lending and the strong tourism recovery. The fiscal
deficit is projected to shrink to around 3.2% in 2022, as a result
of the higher-than-expected growth, and is expected to return to
under 3% of GDP in 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 a tight
monetary
policy until the current inflationary pressures subside.
Inflation was 11.5% in September 2022, and 12.5% on average in
January-September 2022, although it is expected to decelerate
gradually during 2023.
Outlook. I continue to be extremely impressed by the leadership
teams of our portfolio companies and how successfully they have
handled the considerable uncertainties created by the
Russia-Ukraine war and remain cautiously optimistic about the
emerging opportunities that lie ahead. Our strategic priorities
continue to be at the heart of our planning and execution. We have
made good progress in deleveraging the business towards our
targeted Net Capital Commitment ratio of 15%, and to reduce and
maintain our portfolio companies' individually targeted leverage
levels. I am pleased with the progress we have made in the
achievement of our strategic priorities, while consistently growing
NAV per share on the back of capital light investments. With the
recent extension of my CEO contract, I am equally excited about the
opportunity to help lead the Company into the next phase of its
journey. Based on our proven governance and highly experienced
Board, further strengthened by Neil Janin's recent appointment as
an independent non-executive director, I believe Georgia Capital is
extremely well-positioned to continue delivering consistent NAV per
share growth over the medium to long term.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset
value at 3 0 - Sep -22 and its income for the third quarter and
nine-month period then ended on an IFRS basis (see "Basis of
Presentation" on page 26 below).
Net Asset Value (NAV) Statement
NAV statement summarises the Group's IFRS equity value (which we
refer to as Net Asset Value or NAV in the NAV Statement below) at
the opening and closing dates for the third quarter (30- Jun -22
and 3 0 - Sep -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 nine
months of 2022 see page 26.
NAV STATEMENT 3Q 22
GEL '000, Jun-22 1. 2a. 2b. 2c. 3. 4. Sep Change
unless Value Investment Buyback Dividend Operating Liquidity/ -22 %
otherwise noted creation and expenses FX/Other
([6]) Divestments
Listed and
Observable
Portfolio
Companies
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Bank of Georgia
(BoG) 455,719 142,450 - - - - - 598,169 31.3%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Water Utility 153,000 - - - - - - 153,000 0.0%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Total Listed
and
Observable
Portfolio
Value 608,719 142,450 - - - - - 751,169 23.4%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Listed and
Observable
Portfolio
value change
% 23.4% 0.0% 0.0% 0.0% 0.0% 0.0% 23.4%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Private
Portfolio
Companies
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Large Companies 1,389,193 4,897 - - (30,034) - - 1,364,056 -1.8%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Retail
(Pharmacy) 671,027 22,229 - - (16,018) - - 677,238 0.9%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Hospitals 478,046 (32,804) - - (13,015) - - 432,227 -9.6%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Insurance (P&C
and
Medical) 240,120 15,472 - - (1,001) - - 254,591 6.0%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Of which,
P&C
Insurance 199,810 14,090 - - - - - 213,900 7.1%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Of which,
Medical
Insurance 40,310 1,382 - - (1,001) - - 40,691 0.9%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Investment
Stage
Companies 443,967 7,950 4,392 - (1,985) - 256 454,580 2.4%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Renewable
Energy 172,168 3,753 - - (1,985) - 256 174,192 1.2%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Education 151,753 7,287 4,392 - - - - 163,432 7.7%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Clinics and
Diagnostics 120,046 (3,090) - - - - - 116,956 -2.6%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Other Companies 263,534 14,609 8,400 - - - 512 287,055 8.9%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Total Private
Portfolio
Value 2,096,694 27,456 12,792 - (32,019) - 768 2,105,691 0.4%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Private
Portfolio
value change % 1.3% 0.6% 0.0% -1.5% 0.0% 0.0% 0.4%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Total Portfolio
Value (1) 2,705,413 169,906 12,792 - (32,019) - 768 2,856,860 5.6%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Total Portfolio
value change % 6.3% 0.5% 0.0% -1.2% 0.0% 0.0% 5.6%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Net Debt (2) (365,914) - (12,792) (15,256) 32,019 (5,095) (29,022) (396,060) 8.2%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
of which,
Cash and
liquid funds 663,367 - (12,792) (15,256) 54,817 (5,095) (305,397) 379,644 -42.8%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
of which,
Loans
issued 25,374 - - - - - 227,912 253,286 NMF
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
of which,
Accrued
dividend
income 22,798 - - - (22,798) - - - -100.0%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
of which,
Gross
Debt (1,077,453) - - - - - 48,463 (1,028,990) -4.5%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Net other
assets/
(liabilities) 35,668
(3) (6,938) - - - - (4,726) [7] 24,004 NMF
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
of which,
share-based
comp. - - - - - (4,726) 4,726 - 0.0%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Net Asset Value
(1)+(2)+(3) 2,332,561 169,906 - (15,256) - (9,821) 7,414 2,484,804 6.5%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
NAV change % 7.3% 0.0% -0.7% 0.0% -0.4% 0.3% 6.5%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Shares
outstanding(6) 44,249,747 - - (689,014) - - - 43,560,733 -1.6%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
Net Asset Value
per share, GEL 52.71 3.84 0.00 0.49 0.00 (0.22) 0.21 57.04 8.2%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
NAV per share,
GEL
change % 7.3% 0.0% 0.9% 0.0% -0.4% 0.4% 8.2%
---------------- ------------ --------- ------------ ---------- --------- ---------- ----------- ------------ --------
An 8.2% increase in NAV per share (GEL) in 3Q22 reflects both
increased valuation of BoG and value creation across our private
portfolio companies with a positive 6.1 ppts and 1.2 ppts impact on
the NAV per share, respectively. The NAV per share growth was
further supported by share buybacks (+0.9 ppts impact) and GEL's
appreciation against US$, resulting in a foreign currency gain of
GEL 12.1 million on GCAP net debt (+0.5 ppts impact). The NAV per
share growth was slightly offset by management platform related
costs and net interest expense with negative 0.4 ppts and 0.4 ppts
impact, respectively.
Portfolio overview
Total portfolio value increased by GEL 151.4 million (5.6%) to
GEL 2.9 billion in 3Q22:
-- The value of the listed and observable portfolio was up by
GEL 142.5 million (23.4%), resulting from the strong recovery in
BoG's share price.
-- The value of the private portfolio increased by GEL 9.0
million (0.4%). This mainly reflects the net impact of a) GEL 27.5
million value creation, b) investments of GEL 12.8 million, and c)
a decrease of GEL 32.0 million due to dividends paid to GCAP.
Consequently, as of 30-Sep-22, the listed and observable
portfolio value totalled GEL 751.2 million (26.3% of the total
portfolio value), and the private portfolio value amounted to GEL
2.1 billion (73.7% of the total).
1) Value creation
Total portfolio value creation amounted to GEL 169.9 million in
3Q22.
-- A GEL 142.5 million value creation from the listed and
observable portfolio was attributable to a 52.2% increase in BoG's
share price, partially offset by GEL's appreciation against GBP by
16.0% in 3Q22.
-- The value creation in the private portfolio amounted to GEL
27.5 million in 3Q22, reflecting:
o GEL 109.7 million operating-performance related value
reduction, mainly driven by the developments across our healthcare
businesses (Hospitals and Clinics and Diagnostics), as described in
detail on pages 6-7.
o GEL 137.1 million value creation due to GEL's appreciation
against both US$ and EUR and changes in valuation multiples in
3Q22, resulting from the resilience of the Georgian economy in
almost all economic data points and the strong outlook for our
private portfolio companies.
The table below summarises value creation drivers in our
businesses in 3 Q22:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([8]) / and FX ([10])
buy-outs
/ exits
([9])
--------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless
otherwise noted (1) (2) (3) (1)+(2)+(3)
--------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable 142,450
--------------------------- ---------------------- ------------ ---------------- ---------------
BoG 142,450
--------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility -
--------------------------- ---------------------- ------------ ---------------- ---------------
Private (109,662) - 137,118 27,456
--------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio
Companies (79,919) - 84,816 4,897
--------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) (13,682) - 35,911 22,229
--------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (92,162) - 59,358 (32,804)
--------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and
Medical) 25,925 - (10,453) 15,472
--------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 19,539 - (5,449) 14,090
--------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical
Insurance 6,386 - (5,004) 1,382
--------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage
Portfolio Companies (18,687) - 26,637 7,950
--------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy 22,920 - (19,167) 3,753
--------------------------- ---------------------- ------------ ---------------- ---------------
Education 10,844 - (3,557) 7,287
--------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics (52,451) - 49,361 (3,090)
--------------------------- ---------------------- ------------ ---------------- ---------------
Other (11,056) - 25,665 14,609
--------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio (109,662) - 137,118 169,906
--------------------------- ---------------------- ------------ ---------------- ---------------
Valuation overview [11]
In 3Q22, our private large and investment stage portfolio
companies were valued internally by incorporating the portfolio
companies' 3Q22 results, in line with International Private Equity
Valuation ("IPEV") guidelines and methodology deployed in 1H22 by
an independent valuation company. The independent valuation
assessments, which serve as the basis for Georgia Capital's
estimate of fair value, were performed by applying a combination of
an income approach (DCF) and a market approach (listed peer
multiples and, in some cases, precedent transactions). The
independent valuations of large and investment stage businesses are
performed on a semi-annual basis. In line with our strategy, from
time to time we may receive offers from interested buyers for our
private portfolio companies, which would be considered in the
overall valuation assessment, where appropriate.
The enterprise value and equity value development of our
businesses in 3 Q22 are summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-22 30-Jun-22 Change 30-Sep-22 30-Jun-22 Change % share
otherwise noted % % in total
portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 751,169 608,719 23.4% 26.3%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 598,169 455,719 31.3% 20.9%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 153,000 153,000 0.0% 5.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 3,229,308 3,236,186 -0.2% 2,105,691 2,096,694 0.4% 73.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,810,508 1,821,489 -0.6% 1,364,056 1,389,193 -1.8% 47.7%
Retail (pharmacy) 923,623 915,257 0.9% 677,238 671,027 0.9% 23.7%
Hospitals 646,175 678,687 -4.8% 432,227 478,046 -9.6% 15.1%
Insurance (P&C and
Medical) 240,710 227,545 5.8% 254,591 240,120 6.0% 8.9%
Of which, P&C Insurance 213,900 199,810 7.1% 213,900 199,810 7.1% 7.5%
Of which, Medical
Insurance 26,810 27,735 -3.3% 40,691 40,310 0.9% 1.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 795,249 792,525 0.3% 454,580 443,967 2.4% 15.9%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 416,536 421,002 -1.1% 174,192 172,168 1.2% 6.1%
Education [12] 194,827 182,688 6.6% 163,432 151,753 7.7% 5.7%
Clinics and Diagnostics 183,886 188,835 -2.6% 116,956 120,046 -2.6% 4.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 623,551 622,172 0.2% 287,055 263,534 8.9% 10.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 2,856,860 2,705,413 5.6% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private large portfolio companies (47.7% of total portfolio
value)
Retail (Pharmacy) (23.7% of total portfolio value) - the
Enterprise Value (EV) of Retail (Pharmacy) was up by 0.9% to GEL
923.6 million in 3Q22, reflecting the continued strong outlook of
the business driven by the expansion of the retail chain and
resilience of Georgian economy. 3Q22 revenues were down by 1.8%
y-o-y in 3Q22, reflecting 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) continuing
gradual transfer of the hospitals business' procurement department
from pharmacy to hospitals (which began in January 2021 and is
expected to complete by the end of 2022). EBITDA (excl. IFRS 16)
was down by 11.9% y-o-y in 3Q22, reflecting the increased operating
expenses in line with the expansion of the retail (pharmacy)
business and inflation. See page 14 for details. Consequently, LTM
EBITDA (incl. IFRS 16) was down by 2.1% to GEL 107.4 million in
3Q22. Net debt (incl. IFRS 16) remained largely flat, down by 0.7%
q-o-q to GEL 158.4 million in 3Q22. The business paid a GEL 16.0
million dividend to GCAP in 3Q22. As a result, the fair value of
GCAP's stake in Retail (Pharmacy) amounted to GEL 677.2 million, up
by 0.9% y-o-y in 3Q22. The implied LTM EV/EBITDA valuation multiple
(incl. IFRS 16) increased to 8.6x as at 30-Sep-22 (up from 8.3x as
of 30-Jun-22).
Hospitals (15.1% of total portfolio value) - Hospitals' EV
decreased by 4.8% to GEL 646.2 million in 3Q22. Revenues were down
by 18.1% y-o-y in 3Q22, reflecting the temporary impact from 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, which
translated into a 7.1 ppts y-o-y decrease in the 3Q22 EBITDA margin
(excl. IFRS 16). Consequently, EBITDA (excl. IFRS 16) was down
44.9% y-o-y in 3Q22. See page 16 for details. Net debt, which
reflects GEL 13.0 million dividend payment to GCAP in 3Q22, was up
by 8.5% q-o-q to GEL 182.9 million as of 30-Sep-22. LTM EBITDA
(incl. IFRS 16) decreased by 12.6% to GEL 56.7 million in 3Q22 as
the business completes the transition to the post-pandemic
environment. As a result, the equity value of the business was
assessed at GEL 432.2 million, down 9.6% q-o-q in 3Q22, translating
into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 11.4x at
30-Sep-22 (up from 10.5x at 30-Jun-22 due to the temporary decrease
in the LTM EBITDA from transition into the post-pandemic
environment ).
Insurance (P&C and Medical) (8.9% of total portfolio value)
- The insurance business combines: a) P&C Insurance valued at
GEL 213.9 million and b) Medical Insurance valued at GEL 40.7
million.
P&C Insurance - Net premiums earned increased by 20.5% y-o-y
to GEL 27.3 million in 3Q22, mainly reflecting the growth in the
credit life and agricultural insurance lines. The combined ratio
was down 2.7 ppts y-o-y in 3Q22, reflecting a) a 3.9 ppts decrease
in loss ratio on the back of the robust revenue growth, supported
by a reduced number of COVID-19-related credit life insurance
claims and b) a 1.3 ppts increase in expense ratio due to the
increase in salaries and other operating expenses in line with the
business growth. Consequently, 3Q22 net income was up 38.5% y-o-y
to GEL 6.6 million. See page 17 for details. LTM net income [13]
was up by 10.1% to GEL 20.0 million in 3Q22. As a result, the
equity value of the P&C insurance business was assessed at GEL
213.9 million at 30-Sep-22 (up 7.1% q-o-q). The implied LTM P/E
valuation multiple stood at 10.7x in 3Q22 (down from 11.0x in
2Q22).
Medical Insurance - Net premium earned increased by 2.7% y-o-y
to GEL19.4 million in 3Q22, reflecting the net impact of c.5%
increase in the prices of insurance policies and related decrease
in the number of insured clients for the same period ( down 4.9%
y-o-y as of 30-Sep-22 ) . The combined ratio was down by 1.0 ppts
y-o-y to 90.7%, resulting from the 1.5 ppts y-o-y decrease in the
loss ratio in 3Q22. Consequently, the net income of the medical
insurance business was up by 28.9% y-o-y to GEL 2.3 million in
3Q22. See page 17 for details. LTM net income [14] was up by 15.3%
to GEL 3.2 million in 3Q22. The business paid GEL 1.0 million
dividends to GCAP. As a result, the equity value of the business
was assessed at GEL 40.7 million at 30-Sep-22 (up 0.9% q-o-q). The
implied LTM P/E valuation multiple was at 12.7x in 3Q22, down from
14.5x in 2Q22.
Private investment stage portfolio companies (15.9% of total
portfolio value)
Renewable Energy (6.1% of total portfolio value) - EV in US$
terms was up by 2.2% to US$ 146.9 million in 3Q22 (down 1.1% to GEL
416.5 million in GEL terms, reflecting the local currency
appreciation against US$ during the quarter). In US$ terms, revenue
and EBITDA were up 23.9% and 30.4% y-o-y in 3Q22, respectively,
reflecting an increase in both the average electricity selling
price (up 8.8% y-o-y) and the electricity generation (up 19.1%
y-o-y) in 3Q22. Revenue and EBITDA in GEL terms were up by 12.5%
and 18.4% y-o-y, respectively, in 3Q22. See page 20 for details.
The pipeline renewable energy projects continued to be measured at
an equity investment cost of GEL 40.9 million in aggregate. Net
debt was down by 2.6% to GEL 242.3 million in 3Q22, also reflecting
the currency movements (in US$ terms, the net debt remained largely
flat, up by 0.6% q-o-q to US$ 85.5 million). The business paid GEL
2.0 million dividends to GCAP in 3Q22. As a result, the equity
value of Renewable Energy was assessed at GEL 174.2 million in 3Q22
(up by 1.2% q-o-q), (up 4.5% q-o-q to US$ 61.4 in US$ terms). The
blended EV/EBITDA valuation multiple of the operational assets
stood at 10.7x in 3Q22, down from 11.1x in 2Q22.
Education (5.7% of total portfolio value) - EV of Education was
up by 6.6% to GEL 194.8 million in 3Q22, reflecting the strong
operating performance of the business. Strong intakes and a ramp-up
of utilization, in line with both the organic growth and expansion
of the business, led to a 100 .9% and 83.3% y-o-y increase in
revenue and EBITDA in 3Q22, respectively. In 3Q22, GCAP invested
GEL 4.4 million in Education predominantly for capacity expansion
of Buckswood (mid-scale segment) and Green School (affordable
segment). See page 21 for details. LTM EBITDA was up 10.2% to GEL
13.2 million in 3Q22. Net debt was down by 16.8% to GEL 7.4 million
in 3Q22, reflecting GEL's appreciation against foreign currencies
during the quarter. As a result, the GCAP's stake in the education
business was valued at GEL 163.4 million in 3Q22 (up 7.7% q-o-q).
This translated into the implied valuation multiple of 14.8x in
3Q22, down from 15.3x in 2Q22. The forward-looking implied
valuation multiple is estimated at 11.8x for the 2023-2024 academic
year.
Clinics and Diagnostics (4.1% of total portfolio value) - The EV
of the business decreased by 2.6% to GEL 183.9 million in 3Q22.
Similar to the hospitals business, our clinics business was also
impacted by the suspension of COVID contracts by the Government,
which led to a 20.1% y-o-y decrease in revenues in 3Q22. 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 and was down by 49.4% y-o-y in
3Q22. Consequently, the combined 3Q22 revenue of the clinics and
diagnostics business was down by 30.1% y-o-y leading to a 78.6%
y-o-y decrease in 3Q22 EBITDA (excl. IFRS 16). See page 22 for
details. LTM EBITDA (incl. IFRS 16) of the business was down by
24.2% to GEL 14.5 million in 3Q22. As a result, the equity value of
the business was assessed at GEL 117.0 million, down 2.6% q-o-q in
3Q22, translating into an implied LTM EV/EBITDA multiple (incl.
IFRS 16) of 12.7x at 30-Sep-22, up from 9.8x at 30-Jun-22.
Other businesses (10.0% of total portfolio value) - The "other"
private portfolio (Auto Service, Beverages, 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 287.1 million at
30-Sep-22, up by 8.9% q-o-q. The increase in the portfolio value
mainly reflects a) GEL 14.6 million value creation predominantly
resulting from the positive developments across our beer and auto
services businesses and b) GEL 8.4 million investment in Housing
Development for the bridge financing of the business.
Listed and observable portfolio companies (26.3% of total
portfolio value)
BOG ( 20.9% of total portfolio value) - In 2Q22, BoG delivered
an annualised ROAE of 32.8% and strong 10.2% 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, MSME and corporate portfolios. In 3Q22, BoG's share price
demonstrated a robust recovery and was up by 52.2 % q-o-q to GBP
19.88 at 30-Sep-22. The positive impact of BOG's share price
performance on our valuations was partially offset by GEL's
appreciation against GBP by 16.0% in 3Q22. As a result, the market
value of our equity stake in BoG increased by 20.9% to GEL 598.2
million in 3Q22. GCAP received GEL 22.8 million dividends from the
Bank In 3Q22. In addition, on 20-Oct-22, GCAP received GEL 18.1
million interim dividends from BoG, up 24.8% compared to interim
dividends received in 2021. Under its ongoing share buyback and
cancellation programme, the Bank repurchased 1.0 million shares in
3Q22, which led to an increase in GCAP's holding in BoG to 20.3% at
30-Sep-22 (up from 19.9% at 30-Jun-22). BoG's public announcement
of their 3Q22 results, when published, will be available on BoG's
website .
Water Utility ( 5.4% of total portfolio value) - In 3Q22, the
fair value of GCAP's 20% holding in the water utility business,
where GCAP has a clear exit path through a put and call structure
at pre-agreed EBITDA multiples [15] , remained unchanged at GEL
153.0 million. In 1H22, GCAP's stake was valued by the application
of the put option valuation to the normalised [16] LTM EBITDA of
the business as at 30-Jun-22.
2) Investments [17]
In 3Q22, GCAP invested GEL 12.8 million in private portfolio
companies.
-- GEL 4.4 million was allocated to the education business
predominantly for the capacity expansion of the existing campus of
Buckswood (mid-scale segment), the development of the land and
building of the existing campuses of Green School (affordable
segment), the buyout of 9% minority shareholders in one of the
Green School campuses (GCAP's stake increased to 90%) as well as
earnout payments to minority shareholders.
-- GEL 8.4 million was invested in Housing Development for the
bridge financing of the business.
3) Share buybacks
During 3Q22, 689,014 shares were bought back for a total
consideration of GEL 15.3 million.
-- 126,153 shares were repurchased for the management trust.
-- 562,861 shares were repurchased under the US$ 25 million
share buyback and cancellation programme. The total value of shares
repurchased under the programme amounted to GEL 12.2 million (US$
4.4 million) in 3Q22.
4) Dividends [18]
In 3Q22, Georgia Capital recorded GEL 32.0 million regular
dividend income from portfolio companies, of which:
-- GEL 16.0 million was collected from Retail (Pharmacy),
-- GEL 13.0 million from Hospitals,
-- GEL 2.0 million from Renewable Energy,
-- GEL 1.0 million from Medical Insurance.
9M22 NAV STATEMENT HIGHLIGHTS
GEL '000, unless Dec-21 1. 2a. 2b. 2c. 3. 4. Sep Change
otherwise noted Value Investment Buyback Dividend Operating Liquidity/ -22 %
creation and expenses FX/Other
([19]) divestments
Total Listed and
Observable
Portfolio
Value 681,186 (46,611) 139,392 - (22,798) - - 751,169 10.3%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Listed and
Observable
Portfolio value
change
% -6.8% 20.5% 0.0% -3.3% 0.0% 0.0% 10.3%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Total Private
Portfolio
Companies 2,935,045 (248,749) (540,012) - (43,642) - 3,049 2,105,691 -28.3%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Of which, Large
Companies 2,249,260 (151,657) (696,960) - (37,408) - 821 1,364,056 -39.4%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Of which,
Investment
Stage
Companies 461,140 (7,020) 5,951 - (6,234) - 743 454,580 -1.4%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Of which,
Other
Companies 224,645 (90,072) 150,997 - - - 1,485 287,055 27.8%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Private
Portfolio
value change % -8.5% -18.4% 0.0% -1.5% 0.0% 0.1% -28.3%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Total Portfolio
Value (1) 3,616,231 (295,360) (400,620) - (66,440) - 3,049 2,856,860 -21.0%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Total Portfolio
value change % -8.2% -11.1% 0.0% -1.8% 0.0% 0.1% -21.0%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Net Debt (2) (711,074) - 400,627 (68,796) 66,440 (16,046) (73,211) (396,060) -44.3%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Net Asset Value
(1)+(2)+(3) 2,883,622 (295,360) - (68,796) - (29,521) (5,141) 2,484,804 -13.8%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
NAV change % -10.2% 0.0% -2.4% 0.0% -1.0% -0.2% -13.8%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Shares
outstanding(19) 45,752,362 - - (2,855,592) - - 663,963 43,560,733 -4.8%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
Net Asset Value
per share, GEL 63.03 (6.46) (0.00) 2.59 (0.00) (0.65) (1.46) 57.04 -9.5%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
NAV per share,
GEL
change % -10.2% 0.0% 4.1% 0.0% -1.0% -2.3% -9.5%
----------------- ----------- ---------- ------------ ------------ --------- ---------- ----------- ----------- -------
NAV per share (GEL) decreased by 9.5% in 9M22, reflecting a)
value reduction across our listed and observable and private
portfolio companies with a 1.6 ppts and 8.6 ppts negative impact on
the NAV per share, respectively, and b) management platform related
costs (-1.0 ppts impact) and net interest expenses (-1.0 ppts
impact). The NAV per share decrease was partially offset by share
buybacks (+4.1 ppts impact) and GEL's appreciation against US$ by
9.3%, resulting in a foreign currency gain of GEL 26.6 million on
GCAP net debt (+0.9 ppts impact).
Portfolio overview
The total portfolio value decreased by GEL 759.4 million (21.0%)
in 9M22.
-- The value of the water utility business decreased by GEL
544.0, reflecting the net impact of the disposal of an 80% equity
interest in the business and the application of the put option
valuation to GCAP's remaining 20% holding in the business, the
latter leading to GEL 13.6 million value creation in 9M22.
-- The value of GCAP's holding in BoG was down by GEL 83.0
million, reflecting GEL 60.2 million negative value creation and
GEL 22.8 million dividend receipt from the Bank in 9M22.
-- The value of the private portfolio decreased by GEL 132.4 million in 9M22.
1) Value creation
Total portfolio value reduction amounted to GEL 295.4 million in
9M22.
-- 19.2% increase in BoG's share price was fully offset by GEL's
35.7% appreciation against GBP in 9M22, resulting in a GEL 60.2
million negative value creation.
-- The negative value creation across our private portfolio
amounted to GEL 248.7 million, resulting from a) GEL 286.7 million
operating performance related value reduction and b) GEL 38.0
million value creation due to the changes in foreign exchange rates
(GEL 22.8 million) and valuation multiples (GEL 15.2 million) in
9M22.
a) Operating performance related value decrease reflects the
organic transition of our healthcare businesses to the
post-pandemic environment 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 creation due to changes in valuation multiples and
FX reflects the strong outlook of our private portfolio companies,
supported by the resilience of the Georgian economy,
notwithstanding the continued uncertainties surrounding the
regional geopolitical tensions, the latter leading to approximately
2.0-3.0 ppts increase in discount rates and the reduction of listed
peer multiples in 9M22.
The table below summarises value creation drivers in our
businesses in 9M 22:
Portfolio Businesses Operating Performance Greenfields Multiple Change Value Creation
([20]) / and FX ([22])
buy-outs
/ exits
([21])
-------------------------------------- ---------------------- ------------ ---------------- ---------------
GEL '000, unless otherwise noted (1) (2) (3) (1)+(2)+(3)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Listed and Observable (46,611)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
BoG (60,219)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Water Utility 13,608
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Private (286,742) (13) 38,006 (248,749)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Large Portfolio Companies (131,214) - (20,443) (151,657)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Retail (pharmacy) 38,944 - (56,073) (17,129)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Hospitals (195,794) - 67,221 (128,573)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Insurance (P&C and Medical) 25,636 - (31,591) (5,955)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, P&C Insurance 31,862 - (22,914) 8,948
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Of which, Medical Insurance (6,226) - (8,677) (14,903)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Investment Stage Portfolio Companies (32,150) - 25,130 (7,020)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Renewable Energy 30,591 - (24,591) 6,000
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Education 37,273 - (9,245) 28,028
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Clinics and Diagnostics (100,014) - 58,966 (41,048)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Other (123,378) (13) 33,319 (90,072)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
Total portfolio (286,742) (13) 38,006 (295,360)
-------------------------------------- ---------------------- ------------ ---------------- ---------------
The enterprise value and equity value development of our
businesses in 9M 22 are summarised in the following table:
Enterprise Value Equity Value
(EV)
-------------------------- ------------------------------- --------------------------------------------
GEL '000, unless 30-Sep-22 31-Dec-21 Change 30-Sep-22 31-Dec-21 Change % share
otherwise noted % % in total
portfolio
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Listed and Observable
portfolio 751,169 681,186 10.3% 26.3%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
BoG 598,169 681,186 -12.2% 20.9%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Water Utility 153,000 - NMF 5.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Private portfolio 3,229,308 4,633,145 -30.3% 2,105,691 2,935,045 -28.3% 73.7%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Large portfolio
companies 1,810,508 3,126,186 -42.1% 1,364,056 2,249,260 -39.4% 47.7%
Retail (pharmacy) 923,623 952,269 -3.0% 677,238 710,385 -4.7% 23.7%
Hospitals 646,175 791,756 -18.4% 432,227 573,815 -24.7% 15.1%
Water Utility - 1,129,902 NMF - 696,960 NMF NMF
Insurance (P&C and
Medical) 240,710 252,259 -4.6% 254,591 268,100 -5.0% 8.9%
Of which, P&C Insurance 213,900 211,505 1.1% 213,900 211,505 1.1% 7.5%
Of which, Medical
Insurance 26,810 40,754 -34.2% 40,691 56,595 -28.1% 1.4%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Investment stage
portfolio companies 795,249 779,824 2.0% 454,580 461,140 -1.4% 15.9%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Renewable Energy 416,536 428,248 -2.7% 174,192 173,288 0.5% 6.1%
Education [23] 194,827 139,947 39.2% 163,432 129,848 25.9% 5.7%
Clinics and Diagnostics 183,886 211,629 -13.1% 116,956 158,004 -26.0% 4.1%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Other 623,551 727,135 -14.2% 287,055 224,645 27.8% 10.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
Total portfolio 2,856,860 3,616,231 -21.0% 100.0%
-------------------------- ---------- ---------- ------- ---------- ---------- ------- -----------
2) Investments [24]
In 9M22, GCAP's cash investments amounted to GEL 14.4 million,
of which:
-- GEL 5.6 million was invested in the education business, in
line with GCAP's capital allocation outlook.
-- GEL 8.4 million was allocated to Housing Development for the bridge financing of business.
The investments presented in the 9M22 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 9M22, 2,855,592 shares were bought back for a total
consideration of GEL 68.8 million.
-- 603,251 shares were repurchased for the management trust.
-- 2,252,341 shares were repurchased under the US$ 25 million
share buyback and cancellation programme. The total value of shares
repurchased under the programme amounted to GEL 54.3 million (US$
18.1 million) in 9M22.
Since the commencement of the buyback programme in August 2021,
3,075,923 shares (6.4% of issued capital) have been repurchased and
cancelled. The total value of shares amounted to GEL 76.2 million
(US$ 25.0 million).
4) Dividends [25]
In 9M22, Georgia Capital collected GEL 66.4 million dividends in
aggregate from the portfolio companies, of which:
-- GEL 22.8 million was received from BoG,
-- GEL 16.0 million from Retail (Pharmacy),
-- GEL 13.0 million from Hospitals,
-- GEL 7.4 million from P&C Insurance,
-- GEL 6.2 million from Renewable Energy,
-- GEL 1.0 million from Medical Insurance.
Net Capital Commitment (NCC) overview
Below we describe the components of Net Capital Commitment (NCC)
as of 30 September 2022 and as of 30 June 2022. NCC represents an
aggregated view of all confirmed, agreed and expected capital
outflows at the GCAP HoldCo level.
Components of NCC 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
GEL '000, unless otherwise
noted
Cash at banks 147,010 359,262 -59.1% 132,580 10.9%
-------------------------------- ------------ ------------ ------- -------------- -------
Liquid funds 232,634 304,105 -23.5% 139,737 66.5%
-------------------------------- ------------ ------------ ------- -------------- -------
Of which, Internationally
listed debt securities 229,336 300,967 -23.8% 137,215 67.1%
-------------------------------- ------------ ------------ ------- -------------- -------
Of which, Locally listed
debt securities 3,298 3,138 5.1% 2,522 30.8%
-------------------------------- ------------ ------------ ------- -------------- -------
Total cash and liquid
funds 379,644 663,367 -42.8% 272,317 39.4%
-------------------------------- ------------ ------------ ------- -------------- -------
Loans issued [26] 253,284 25,374 NMF 21,540 NMF
-------------------------------- ------------ ------------ ------- -------------- -------
Accrued dividend income - 22,798 NMF - NMF
-------------------------------- ------------ ------------ ------- -------------- -------
Gross debt (1,028,990) (1,077,453) -4.5% (1,137,605) -9.5%
-------------------------------- ------------ ------------ ------- -------------- -------
Net debt (1) (396,062) (365,914) 8.2% (843,748) -53.1%
-------------------------------- ------------ ------------ ------- -------------- -------
Guarantees issued (2) (17,588) (45,615) -61.4% (55,297) -68.2%
-------------------------------- ------------ ------------ ------- -------------- -------
Net debt and guarantees
issued (3)=(1)+(2) (413,650) (411,529) 0.5% (899,045) -54.0%
-------------------------------- ------------ ------------ ------- -------------- -------
Planned investments (5) (149,195) (158,675) -6.0% (131,933) 13.1%
-------------------------------- ------------ ------------ ------- -------------- -------
of which, planned investments
in Renewable Energy (85,208) (88,024) -3.2% (101,834) -16.3%
-------------------------------- ------------ ------------ ------- -------------- -------
of which, planned investments
in Education (63,987) (70,651) -9.4% (30,099) NMF
-------------------------------- ------------ ------------ ------- -------------- -------
Announced Buybacks (6) - (12,597) NMF (9,330) NMF
-------------------------------- ------------ ------------ ------- -------------- -------
Contingency/liquidity
buffer (7) (141,760) (146,444) -3.2% (154,880) -8.5%
-------------------------------- ------------ ------------ ------- -------------- -------
Total planned investments,
announced buybacks and
contingency/liquidity buffer
(8)=(5)+(6)+(7) (290,955) (317,716) -8.4% (296,143) -1.8%
-------------------------------- ------------ ------------ ------- -------------- -------
Net capital commitment (704,60
(3)+(8) 5 ) (729,245) -3.4% (1,195,188) -41.0%
2,885,210
Portfolio value [27] 2,705,413 6.6% 3,748,905(26) -23.0%
-2.6 -7.5
NCC ratio 24.4% 27.0% ppts 31.9% ppts
-------------------------------- ------------ ------------ ------- -------------- -------
Cash and liquid funds . Total cash and liquid funds' balance was
down by 42.8% to GEL 379.6 million (US$ 133.9 million) in 3Q22. The
decrease was mainly driven by a) GEL 234.4 million in issued loans,
b) a GEL 32.0 million coupon payment in 3Q22, c) a GEL 16.7 million
cash outflow for buybacks, d) GEL 12.8 million capital allocations
and e) GEL's appreciation in 3Q22, as more than 90% of the cash and
liquid funds were denominated in foreign currencies. The decrease
was partially offset by the dividend and interest receipts of GEL
54.8 and GEL 6.5 million in 3Q22, respectively.
Internationally listed debt securities balance includes
dollar-denominated Eurobonds issued by Georgian corporates to
generate yield on GCAP's liquid funds. As at 30-Sep-22, the balance
amounted to GEL 229.3 million, of which GEL 185.2 million (US$ 65.3
million) was allocated to GCAP's Eurobond.
In 9M22, total cash and liquid funds' balance was up 39.4% in
9M22, 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,
b) dividend and interest receipts of GEL 66.4 million and GEL 20.1
million, respectively. The increase was partially offset by a) GEL
248.7 million loans issued to our private portfolio companies, b)
GEL 70.0 million coupon payment and c) GEL 74.8 million cash
outflow for buybacks.
Loans issued(26) . Issued loans' balance primarily refers to
loans issued to our private portfolio companies and are lent at
market terms. The increase in issued loans' balance both in 3Q22
and 9M22 reflects US$ 90 million (GEL 261.3 million) financing
provided to the renewable energy business to redeem the renewable
energy business's portion of GGU's US$ 250.0 million Green Eurobond
in September 2022. Out of US$ 90 million, a US$ 80 million
shareholder loan from GCAP was repaid by the business in October
2022 from the proceeds of a US$ 80 million green secured bond
placement on the local market. The remaining US$ 10 million (GEL
28.4 million), which is currently presented under the net other
assets/ (liabilities) balance on our 3Q22 NAV statement, is
intended to be converted into a quasi-equity type instrument in
4Q22.
Gross debt. At 30-Sep-22 the outstanding balance of US$ 365
million six-year Eurobonds due in March 2024 was GEL 1,029.0
million, down 4.5% in 3Q22 and down 9.5% in 9M22, reflecting the
GEL's appreciation against US$. As a result of the Modified Dutch
Auction, completed in October 2022, and the subsequent cancellation
of the US$ 65 million GCAP Eurobond, as described earlier in this
report, the outstanding balance of GCAP's Eurobonds decreased to
US$ 300 million in 4Q22.
Guarantees issued. The balance reflects GCAP's guarantee on the
borrowing of the beer business. Due to the recent strong operating
performance of the business, GCAP's guarantee decreased by EUR 8.4
million to EUR 6.4 million in 3Q22.
Planned investments. Planned investments' balance represents
expected investments in renewable energy and education businesses
over the next 2-3 years. The balance was down by 6.0% due to the
investments in the education business in 3Q22 as well as GEL's
appreciation during the quarter.
Announced buybacks . The decrease in the announced buybacks'
balance reflects the completion of the US$ 25 million share buyback
and cancellation programme, as described on pages 7 and 9.
Contingency/liquidity buffer. The balance reflects the cash and
liquid assets in the amount of US$ 50 million, held by GCAP at all
times, for contingency/liquidity purposes. The balance remained
unchanged in US$ terms as at 30-Sep-22.
As a result of the movements described above, NCC was down by
3.4% to GEL 704.6 million (US$ 248.5 million), translating into a
24.4% NCC ratio as at 30-Sep-22 (down by 2.6 ppts q-o-q).
Calculated on a pro-forma basis to reflect the subsequent
movements in BoG's share price and foreign exchange rates, as well
as the results of the Modified Dutch Auction, conducted in Oct-22,
the NCC ratio was down to 22.2% as of 30-Sep-22.
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 164.5 million in 3Q22 (GEL 234.5
million net income in 3Q21). Net loss was GEL 344.6 million in 9M22
(GEL 559.7 million net income in 9M21). The IFRS income statement
is prepared on the Georgia Capital PLC level and the results of all
operations of the Georgian holding company JSC Georgia Capital are
presented as one line item. As we conduct almost all of our
operations through JSC Georgia Capital, through which we hold all
of our portfolio companies, the IFRS results provide little
transparency on the underlying trends.
Accordingly, to enable a more granular analysis of those trends,
the following adjusted income statement presents the Group's
results of operations for the period ending September 30 as an
aggregation of (i) the results of GCAP (the two holding companies
Georgia Capital PLC and JSC Georgia Capital, taken together) and
(ii) the fair value change in the value of portfolio companies
during the reporting period. For details on the methodology
underlying the preparation of the adjusted income statement, please
refer to page 98 in Georgia Capital PLC 2021 Annual report.
INCOME STATEMENT (Adjusted IFRS/APM)
GEL '000, unless otherwise
noted 3 Q22 3 Q21 Change 9M 22 9M 21 Change
================================ ========= ========= ======= ========== ========= =======
Dividend income 32,019 30,000 6.7% 66,440 44,430 49.5%
================================ ========= ========= ======= ========== ========= =======
Interest income 8,165 6,267 30.3% 26,315 16,884 55.9%
================================ ========= ========= ======= ========== ========= =======
Realised / unrealised
(loss)/gain on liquid
funds (1,719) (547) NMF (13,154) 967 NMF
================================ ========= ========= ======= ========== ========= =======
Interest expense (16,573) (19,519) -15.1% (54,253) (57,039) -4.9%
================================ ========= ========= ======= ========== ========= =======
Gross operating income 21,892 16,201 35.1% 25,348 5,242 NMF
================================ ========= ========= ======= ========== ========= =======
Operating expenses (9,821) (8,888) 10.5% (29,521) (26,984) 9.4%
================================ ========= ========= ======= ========== ========= =======
GCAP net operating
income/(loss) 12,071 7,313 65.1% (4,173) (21,742) -80.8%
================================ ========= ========= ======= ========== ========= =======
Fair value changes
of portfolio companies
================================ ========= ========= ======= ========== ========= =======
Listed and Observable
Portfolio Companies 142,450 66,246 NMF (69,409) 110,082 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Bank of Georgia
Group PLC 142,450 66,246 NMF (83,017) 110,082 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Water Utility - - NMF 13,608 - NMF
================================ ========= ========= ======= ========== ========= =======
Private Portfolio companies (4,563) 148,385 NMF (292,391) 430,568 NMF
================================ ========= ========= ======= ========== ========= =======
Large Portfolio Companies (25,137) 152,482 NMF (189,065) 354,337 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Retail (pharmacy) 6,211 37,224 -83.3% (33,147) 64,881 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Hospitals (45,819) 30,371 NMF (141,588) 121,260 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Water Utility - 71,260 NMF - 147,357 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Insurance
(P&C and Medical) 14,471 13,627 6.2% (14,330) 20,839 NMF
================================ ========= ========= ======= ========== ========= =======
Investment Stage Portfolio
Companies 5,965 (6,818) NMF (13,254) 47,297 NMF
================================ ========= ========= ======= ========== ========= =======
Of which, Renewable
energy 1,768 (13,000) NMF (234) (5,368) -95.6%
================================ ========= ========= ======= ========== ========= =======
Of which, Education 7,287 (1,595) NMF 28,028 21,612 29.7%
================================ ========= ========= ======= ========== ========= =======
Of which, Clinics and
Diagnostics (3,090) 7,777 NMF (41,048) 31,053 NMF
================================ ========= ========= ======= ========== ========= =======
Other businesses 14,609 2,721 NMF (90,072) 28,934 NMF
================================ ========= ========= ======= ========== ========= =======
Total investment return 137,887 214,631 -35.8% (361,800) 540,650 NMF
================================ ========= ========= ======= ========== ========= =======
Income/(loss) before
foreign exchange movements
and non-recurring expenses 149,958 221,944 -32.4% (365,973) 518,908 NMF
================================ ========= ========= ======= ========== ========= =======
Net foreign currency
gain 12,137 7,932 53.0% 26,585 34,485 -22.9%
================================ ========= ========= ======= ========== ========= =======
Non-recurring expenses (82) (27) NMF (278) (245) 13.5%
================================ ========= ========= ======= ========== ========= =======
Net income/(loss) 162,013 229,849 -29.5% (339,666) 553,148 NMF
================================ ========= ========= ======= ========== ========= =======
Gross operating income of GEL 21.9 million in 3Q22 reflects a
6.7% and 30.3% 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 25.3 million in 9M22 also reflects
increased dividend and interest inflows, which was partially offset
by GEL 13.2 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 3Q22 and 9M22 was mainly due
to the increased average liquid funds balance in 2022.
GCAP earned an average yield of 3.7% on the average balance of
liquid assets of GEL 442.8 million in 9M22 (3.3% on GEL 242.5
million in 9M21).
The components of GCAP's operating expenses are shown in the
table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise
noted 3Q22 3Q21 Change 9M22 9M21 Change
Administrative expenses
([28]) (2,693) (2,613) 3.1% (8,780) (8,453) 3.9%
Management expenses
- cash-based ([29]) (2,402) (2,484) -3.3% (7,266) (7,481) -2.9%
Management expenses
- share-based ([30]) (4,726) (3,791) 24.7% (13,475) (11,050) 21.9%
Total operating expenses (9,821) (8,888) 10.5% (29,521) (26,984) 9.4%
Of which, fund type
expense ([31]) (2,597) (2,947) -11.9% (8,681) (9,340) -7.1%
Of which, management
fee type expenses ([32]) (7,224) (5,941) 21.6% (20,840) (17,644) 18.1%
GCAP management fee expenses have a self-targeted cap of 2% of
Georgia Capital's market capitalisation. The LTM management fee
expense ratio was 3.18% at 30-Sep-22 (1.96% [33] as of 30-Sep-21).
The total LTM operating expense ratio (which includes fund type
expenses) was 4.57% at 30-Sep-22 (3.00%(33) at 30-Sep-21). The
increase in the LTM management fee expense ratio and the total LTM
operating expense ratio mainly reflects 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 GEL
137.9 million in 3Q22, mainly reflecting the growth in the value of
our listed business. In 9M22, total investment return was negative
GEL 361.8 million reflecting the decrease in the value of listed
and private businesses, as described earlier in this report. We
discuss valuation drivers for our businesses on pages 5-7. The
performance of each of our private large and investment stage
portfolio companies is discussed on pages 14-24.
GCAP's net foreign currency liability balance amounted to c.US$
139 million (GEL 394 million) at 30-Sep-22. Net foreign currency
gain was GEL 12.1 million in 3 Q22 and GEL 26.6 million in 9M22. As
a result of the movements described above, GCAP's adjusted IFRS net
income was GEL 162.0 million in 3Q22 (GEL 339.7 million net loss in
9M22).
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 3Q22, 9M22,
3Q21 and 9M21 portfolio company's accounts and respective IFRS
numbers are unaudited. We present key IFRS financial highlights,
operating metrics and ratios along with the commentary explaining
the developments behind the numbers. For the majority of our
portfolio companies the fair value of our equity investment is
determined by the application of an income approach (DCF) and a
market approach (listed peer multiples and precedent transactions).
Under the discounted cash flow (DCF) valuation method, fair value
is estimated by deriving the present value of the business using
reasonable assumptions of expected future cash flows and the
terminal value, and the appropriate risk-adjusted discount rate
that quantifies the risk inherent to the business. Under the market
approach, listed peer group earnings multiples are applied to the
trailing twelve months (LTM) stand-alone IFRS earnings of the
relevant business. As such, the stand-alone IFRS results and
developments driving the IFRS earnings of our portfolio companies
are key drivers of their valuations within GCAP's financial
statements. See "Basis of Presentation" on page 26 for more
background.
LARGE PORTFOLIO COMPANIES
Discussion of Retail (pharmacy) Business Results
The retail (pharmacy) business, where GCAP owns a 77% equity
interest through GHG [34] , 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 business operates a total of
368 pharmacies (of which 359 are in Georgia and 9 are in Armenia)
and 10 franchise stores.
3Q22 & 9M22 performance (GEL '000), Retail (pharmacy)
[35]
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue, net 189,809 193,317 -1.8% 580,711 566,134 2.6%
Of which, retail 148,398 145,129 2.3% 453,015 415,581 9.0%
Of which, wholesale 41,411 48,188 -14.1% 127,696 150,553 -15.2%
Gross Profit 56,461 53,035 6.5% 171,303 143,207 19.6%
Gross profit margin 29.7% 27.4% 2.3ppts 29.5% 25.3% 4.2ppts
Operating expenses (ex. (38,40 (114,7
IFRS 16) 3 ) (32,541) 18.0% 79 ) (89,476) 28.3%
18,05 56,5
EBITDA (ex. IFRS 16) 8 20,494 -11.9% 24 53,731 5.2%
EBITDA margin, (ex.
IFRS 16) 9.5% 10.6% -1.1ppts 9.7% 9.5% 0.2ppts
Net profit (ex. IFRS 14,68 51,
16) 3 17,728 -17.2% 205 47,278 8.3%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 19,268 26,182 -26.4% 54,480 39,733 37.1%
EBITDA to cash conversion 106.7% 127.8% -21.1ppts 96.4% 73.9% 22.5ppts
Cash flow used in investing
activities [36] (8,887) (7,736) 14.9% (54,558) (13,363) NMF
Free cash flow, (ex.
IFRS 16) [37] 15,822 22,398 -29.4% (3,921) 29,067 NMF
Cash flow used in financing
activities (ex. IFRS
16) (5,059) (9,349) -45.9% 10,107 (25,670) NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 545,461 532,014 2.5% 522,814 4.3%
Of which, cash and bank
deposits 63,273 58,230 8.7% 54,616 15.9%
Of which, securities
and loans issued 21,526 14,464 48.8% 20,922 2.9%
Total liabilities 496,415 480,294 3.4% 497,954 -0.3%
Of which, borrowings 131,124 116,126 12.9% 89,844 45.9%
Of which, lease liabilities 107,110 111,051 -3.5% 104,613 2.4%
Total equity 49,046 51,720 -5.2% 24,860 97.3%
INCOME STATEMENT HIGHLIGHTS
Ø 3 Q22 total revenue (down 1.8%) 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 14.1% decline in the wholesale business line in 3Q22 was
due to the continuing gradual transfer of the hospitals business'
procurement department from pharma to hospitals (which began in
January 2021 and is expected to complete by the end of 2022). This
also translated into a reduction in revenue from wholesale in
9M22.
Ø The growth in retail revenues in both 3Q22 and 9M22 reflects
a) continued expansion of the pharmacy chain and franchise stores,
b) improvement in the economic activities, partially offset by c)
the recalibration of product prices.
o Retail revenue share in total revenue was 78.2% in 3Q22 and
78.0% in 9M22 (75.1% in 3Q21 and 73.4% in 9M21).
o Revenue from para-pharmacy, as a percentage of retail revenue,
was 37.4% in 3Q22 and 35.7% in 9M22 (35.8% in 3Q21 and 34.7% in
9M21).
Ø Robust gross profit margins of 29.7% and 29.5% in 3Q22 and
9M22, respectively (up 2.3 ppts and 4.2 ppts y-o-y, respectively),
reflect the increased sales of high-margin para-pharmacy products
in the retail business line, as well as focus on growing profitable
parts 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 subdued.
Ø Negative operating leverage (operating expenses up 18.0% in
3Q22 and up 28.3% in 9M22) reflects increases in salary and utility
expenditures associated with the openings of new pharmacies and
franchise stores in Azerbaijan and Armenia. 9M22 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 margin stood at 9.5% in 3Q22 (down 1.1 ppts y-o-y) and
9.7% in 9M22 (up 0.2 ppts y-o-y). Excluding the impact of the state
income tax subsidy in 2021, the EBITDA margin (excl. IFRS 16) was
up 0.7 ppts in 9M22, y-o-y.
Ø Interest expense was down 64.3% in 3Q22 and down 47.1% in 9M22
y-o-y, due to the lower average net debt balance (excl. IFRS 16)
during respective periods.
Ø Overall, the business posted GEL 14.7 million net profit
excluding IFRS 16 in 3Q22 and GEL 51.2 million in 9M22, which also
reflects one-off costs associated with the termination of contracts
due to changes in management.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Q-o-q increase in net debt, up 6.7% to GEL 46.3 million,
reflects the dividend payment of GEL 16.0 million to GCAP in 3Q22.
Apart from the dividend payment, the y-o-y increase in net debt
balance, up 25.3%, is also attributable to the payment of GEL 41.2
million to complete the buyout of a 10% minority stake (described
in footnote 34 on the previous page).
Ø Strong cash flow from operating activities, with a 106.7%
EBITDA to cash conversion ratio in 3Q22 and 96.4% in 9M22. A 21.1
ppts y-o-y decrease in the EBITDA to cash conversion ratio in 3Q22
reflects the higher base effect of strong revenue growth in 3Q21
(up 21.1% y-o-y), resulting from the rebound in economic activities
following the removal of lock-down related restrictions.
Ø Increased cash outflows from investing activities in 9M22
reflect a) the payment to minorities to buyout a 10% minority
share, b) increased capex investments attributable to the
implementation of a new core IT system for improved inventory
management (GEL 5.2 million in 9M22), c) launch of new projects,
such as new large-scale pharmacies, The Body Shop franchise stores
in Armenia and Azerbaijan, and d) regular expansion of the chain in
Georgia.
Ø The increase in cash flow from financing activities in 9M22 is
also attributable to the sourcing of the new loan facility to
finance the scheduled buyout of minority shareholders.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø Added 27 pharmacies and 4 franchise stores over the last 12
months.
Sep-22 Jun-22 Change Sep-21 Change
(q-o-q) (y-o-y)
Number of pharmacies 368 366 2 341 27
Of which, Georgia 359 358 1 337 22
Of which, Armenia 9 8 1 4 5
Number of franchise
stores 10 8 2 6 4
Of which, Georgia 7 6 1 6 1
Of which, Armenia 2 2 - - 2
Of which, Azerbaijan 1 - 1 - 1
Ø Retail (Pharmacy)'s key operating performance highlights for
3Q22 and 9M22 are noted below:
3Q22 3Q21 Change 9M22 9M21 Change
Same store -8.4
revenue growth -3.1% 14.8% -17.9ppts 2.2% 10.6% ppts
Number of bills
issued (mln) 7.5 7.4 1.6% 22.5 21.1 6.7%
Average bill
size (GEL) 18.8 18.5 1.7% 19.1 18.5 3.3%
-- The y-o-y decrease in the same store revenue growth rates in
3Q22 and 9M22 is attributable to GEL's appreciation against foreign
currencies.
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.
3Q22 & 9M22 performance (GEL '000), Hospitals [38]
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue, net [39] 66,580 81,256 -18.1% 216,137 233,005 -7.2%
Gross Profit 22,834 30,472 -25.1% 77,187 93,012 -17.0%
Gross profit margin 33.9% 37.0% -3.1ppts 35.2% 39.5% -4.3ppts
Operating expenses (ex.
IFRS 16) (12,893) (12,433) 3.7% (38,698) (35,954) 7.6%
EBITDA (ex. IFRS 16) 9,941 18,039 -44.9% 38,489 57,058 -32.5%
EBITDA margin (ex. IFRS
16) 14.8% 21.9% -7.1ppts 17.5% 24.2% -6.7ppts
N et (loss) / profit (ex.
IFRS 16) [40] (3,497) 5,188 NMF 1,287 22,344 -94.2%
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 3,768 22,927 -83.6% 18,384 41,728 -55.9%
EBITDA to cash conversion
(ex. IFRS 16) 37.9% 127.1% -89.2ppts 47.8% 73.1% -25.3ppts
Cash flow used in investing
activities [41] (4,870) (10,275) -52.6% (3,557) (24,458) -85.5%
Free cash flow (ex. IFRS
16) [42] (1,650) 10,372 NMF 12,598 12,030 4.7%
Dividends and intersegment
loans issued/received (2,052) 13,192 NMF (1,053) 31,633 NMF
Cash flow from financing
activities (ex. IFRS 16) 6,737 (48,429) NMF (39,163) (93,086) -57.9%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 612,987 610,602 0.4% 658,071 -6.9%
Of which, cash balance
and bank deposits 19,048 15,958 19.4% 46,131 -58.7%
Of which, securities and
loans issued 12,125 11,120 9.0% 11,678 3.8%
Total liabilities 266,657 247,151 7.9% 293,428 -9.1%
Of which, borrowings 203,879 185,298 10.0% 223,433 -8.8%
Total equity 346,330 363,451 -4.7% 364,643 -5.0%
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,
has temporarily suppressed the business margins in 2022. The
business expects to return to normal operating levels starting from
2023.
INCOME STATEMENT HIGHLIGHTS
Ø After coming out from the COVID period, 3Q22 revenue was down
18.1% y-o-y (down 7.2% y-o-y in 9M22), reflecting a decrease in the
number of admissions and occupancy rate. After a transition period,
the business expects a return to normal operating levels, starting
from 2023.
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 ([43])
:
o Developing its own procurement department for hospitals
coupled with phasing out of COVID, translated into an improved
materials rate of 17.7% in 3Q22 (21.3% in 3Q21) and 18.7% in 9M22
(20.9% in 9M21) .
o Due to the suspension of COVID hospitals' contracts in March
and the related decrease in revenue (a significant portion of
direct salaries are fixed), the direct salary rate was up 5.8 ppts
y-o-y to 38.5% in 3Q22 . Apart from this, a lower base effect
resulting from the state income tax subsidy for low salary range
employees in effect during 1H21, translated into an increased
direct salary rate, up 5.2 ppts to 36.2% in 9M22, y-o-y. 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, resulting from
inflation pressures, such as increased utility prices and increased
fuel prices.
Ø As a result, the gross margins were down 3. 1 ppts and 4.3
ppts in 3Q22 and 9M22 y-o-y, respectively. Adjusted for the impact
of the state income tax subsidy, the gross profit margin was down
2.8 ppts in 9M22 y-o-y.
Ø Negative operating leverage further reflects the increases in
the general and administrative expenses (excl. IFRS 16), up 15.1%
in 3Q22 and up 25.4% in 9M22 y-o-y, mainly resulting from increased
marketing costs due to the promotion of the new products and
services, launched to support the transition to the post-covid
environment.
Ø The developments described above resulted in the reduced
EBITDA (excl. IFRS 16) and EBITDA margins (down 7.1 ppts in 3Q22
and down 6.7 ppts in 9M22 y-o-y). Reduced EBITDA margins (excl.
IFRS 16), also reflect the base effect of the state income tax
subsidy in 9M21 (GEL c.3.5 million impact); Excluding the impact of
state income tax subsidy, EBITDA margin (excl. IFRS 16) was down by
5.2 ppts in 9M22, y-o-y.
Ø Increased interest rates (NBG refinancing rate up 1. 0 ppts in
the last twelve months) led to an increase in net interest expense
(excl. IFRS 16) in 3Q22 and 9M22, up by 16.7% and by 15.6% y-o-y,
respectively.
Ø Overall, the business posted a GEL 3.5 million net loss
excluding IFRS 16 in 3Q22 and GEL 1.3 million [44] net profit in
9M22, which also reflects one-off costs associated with the
termination of contracts due to changes in management.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Cash flow from operating activities (excl. IFRS 16) was down
in 2022, 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 led to weaker cash
collections in 3Q22 and 9M22, with a 37.9 % and 47.8% EBITDA to
cash conversion rate (excl. IFRS 16), respectively, which is
anticipated to recover over the coming quarters.
Ø Capex investment was GEL 5.4 million in 3Q22 and GEL 14.5
million in 9M22, mainly reflecting maintenance capex.
Ø Net debt was at GEL 172.7 million as of 30-Sep-22 (up 9.2%
q-o-q), reflecting a GEL 13.1 million dividend payment to GCAP in
3Q22.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø To streamline the state funding financing in healthcare and
improve the reimbursement process, the Georgian Government
introduced an initiative to implement Diagnosis Related Group (DRG)
financing system. The DRG system categorises inpatient case types
that are clinically similar and expected to use the same or similar
resources into groups by applying various criteria (age, sex,
intervention needed, comorbidity, etc.). The rollout of the DRG
system started on 1-Nov-22 and will be in a testing phase until
1-Jan-23. While it is too early to estimate its impact on the
financial performance of our hospitals business, the implementation
of the DRG system is being implemented to increase the efficiency
of state financing and improve the quality of healthcare service on
the market. The system is expected to better reflect inflation and
other price pressures that are present in the healthcare
sector.
Ø The suspension of government contracts also translated into a
reduction in occupancy rates and the number of admissions. The
business key operating performance highlights for 3Q22 and 9M22 are
noted below:
3Q22 3Q21 Change 9M22 9M21 Change
-24.1 -11.7
Occupancy rate 43.6% 67.7% ppts 52.1% 63.8% ppts
- 32
Number of admissions 426 . 6 976 -7.4
(thousands) 287.5 . 7 % 903.9 . 7 %
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 26.0%
market share in property and casualty insurance based on gross
premiums as of 3 0 -Jun-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.
3Q22 & 9M22 performance (GEL'000), Insurance (P&C and
Medical) [45]
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Earned premiums, net 46,677 41,519 12.4% 128,141 116,196 10.3%
Net underwriting profit 15,834 13,111 20.8% 37,921 33,563 13.0%
Net investment profit 2,524 2,044 23.5% 6,517 7,017 -7.1%
Net profit 8,864 6,522 35.9% 17,970 16,268 10.5%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 12,452 9,100 36.8% 27,585 19,190 43.7%
Free cash flow 11,687 8,312 40.6% 25,404 17,384 46.1%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 304,286 297,154 2.4% 267,627 13.7%
Total equity 122,299 114,581 6.7% 116,464 5.0%
TOTAL INSURANCE BUSINESS HIGHLIGHTS
P&C and medical insurance have a broadly equal share in
total revenues, while the combined net profit in 3Q22 and 9M22 was
mainly attributable to P&C (74.1% and 86.0% share in total net
profit in 3Q22 and 9M22, respectively). The loss ratio was down by
4.0 ppts and the expense ratio was up by 1.5 ppts y-o-y in 3Q22
(down 1.9 ppts and up 1.5 ppts y-o-y in 9M22, respectively),
translating into 2.4 ppts y-o-y decrease in the combined ratio
(down 0.4 ppts y-o-y in 9M22). As a result, ROAE [46] was 33.3% in
3Q22 (25.8% in 3Q21) and 23.2% in 9M22 (21.2% in 9M21).
Discussion of results, P&C Insurance
GEL '000
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Earned premiums, net 27,273 22,631 20.5% 73,256 62,112 17.9%
Net underwriting profit 11,542 9,146 26.2% 29,941 24,478 22.3%
Net investment profit 1,554 1,306 19.0% 3,671 4,866 -24.6%
Net profit 6,568 4,741 38.5% 15,454 13,088 18.1%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 9,976 7,573 31.7% 26,048 16,637 56.6%
Free cash flow 9,462 6,827 38.6% 24,482 15,040 62.8%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 208,365 199,155 4.6% 188,805 10.4%
Total equity 87,689 81,316 7.8% 84,234 4.1%
INCOME STATEMENT HIGHLIGHTS
Ø Increased earned premiums net in 3Q22 and 9M22 reflect the
combination of factors.
o Credit life insurance revenues up by GEL 2.0 million y-o-y in
3 Q22 (up by GEL 5.0 million y-o-y in 9M22), resulting from the
growth in the mortgage, consumer loan, and other portfolios by
banks.
o Credit unemployment insurance revenues up by GEL 0.5 million
y-o-y in 3 Q22 (up by GEL 1.8 million y-o-y in 9M22), also
attributable to the growth in the banking sector.
o Agricultural insurance revenues up by GEL 1.6 million y-o-y in
3 Q22 (up by GEL 2.3 million y-o-y in 9M22), driven by doubled Agro
insurance gross premiums written, up from GEL 6 million in 9M21 to
GEL 12 million in 9M22. Strong performance and market share growth
in Agro insurance were due to the competitors' difficulties in
obtaining reinsurance approvals and general lack of expertise in
claims settlement.
o Border MTPL revenues increased by GEL 0.8 million y-o-y in
3Q22 (up by GEL 1.3 million y-o-y in 9M22), reflecting the direct
impact of migration and the significant recovery in tourism. Border
MTPL revenues equalled 101% of the 3Q19 level and 95% of the 9M19
level.
Ø P&C Insurance's key performance ratios for 3Q22 and 9M22
are noted below:
Key
Ratios 3Q22 3Q21 Change 9M22 9M21 Change
Combined -2.7 -1.6
ratio 77.5% 80.2% ppts 79.7% 81.3% ppts
Expense 1.3 1.2
ratio 33.0% 31.7% ppts 33.4% 32.2% ppts
Loss -3.9 -2.8
ratio 44.5% 48.4% ppts 46.3% 49.1% ppts
2 6.9 9.6 29.3 24.4 4.9
ROAE(46) 36.5% % ppts % % ppts
Ø The combined ratio decreased by 2.7 ppts y-o-y in 3Q22 (down
by 1.6 ppts y-o-y in 9M22).
-- Improvement in loss ratios for the respective periods
reflect:
o Robust revenue growth, as described above.
o Reduction in COVID-19-related credit life insurance claims.
The volume of COVID-19-related credit life insurance claims
incurred in 3Q22 and 9M22 amounted to GEL 0.1 million (GEL 0.9
million in 3Q21) and GEL 1.1 million (GEL 3.4 million in 9M21),
respectively, and represented 3% and 11% of total life insurance
claims (26% in 3Q21 and 34% in 9M21).
o Exceptionally low Agro insurance claims in 3Q22 and 9M22, due
to favourable environmental conditions during 2022, which, together
with the boost in Agricultural revenues, translated into a lower
Agro loss ratio of 5.6% in 3Q22 and 10.2% in 9M22 (21.9% in 3Q21
and 26.9% in 9M21).
o Revised underwriting practices, in particular improved price
segmentation in the retail Motor insurance portfolio.
-- An increase in the 3Q22 and 9M22 expense ratios predominantly
resulted from the increase in salary and other operating
expenditures reflecting inflation and business growth.
Ø P&C Insurance's net investment profit was up by 19.0%
y-o-y in 3Q22, reflecting the direct impact of the increase in
global interest rates coupled with a higher average liquid funds
balance. Net investment profit was down 24.6% y-o-y in 9M22,
resulting from the unrealized losses on investments placed in
publicly traded debt securities.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø P&C Insurance's solvency ratio was 192% as of 30 September
2022, significantly above the required minimum of 100%.
Ø The operating cash flow increase in 3Q22 and 9M22 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 the reinsurer's
share in Agro.
Ø GEL 7. 4 million dividends were paid to GCAP in 9M22 on the
back of strong operating performance.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø With its 26.0% market share in the local insurance market,
P&C remained the largest market player, although market share
was down by 4.2 ppts y-o-y due to management's decision to decline
participations in certain Government-announced insurance services
tenders, which are historically characterised by high loss
ratios.
Discussion of results, Medical Insurance
GEL '000
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Earned premiums, net 19,404 18,888 2.7% 54,885 54,084 1.5%
Net underwriting profit 4,292 3,965 8.2% 7,980 9,085 -12.2%
Net investment profit 970 738 31.4% 2,846 2,151 32.3%
Net profit 2,296 1,781 28.9% 2,516 3,180 -20.9%
CASH FLOW HIGHLIGHTS
Net cash flows from operating
activities 2,476 1,527 62.1% 1,537 2,553 -39.8%
Free cash flow 2,225 1,485 49.8% 922 2,344 -60.7%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 95,921 97,999 -2.1% 78,822 21.7%
Total equity 34,610 33,265 4.0% 32,230 7.4%
INCOME STATEMENT HIGHLIGHTS
Ø The modest 2.7% 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 9M22, the net claims expenses were GEL 44.3 million (up
3.9% y-o-y), of which GEL 19.4 million ( 4 3.7% of total) was
inpatient, GEL 16.1 million ( 3 6 . 4% of total) was outpatient and
GEL 8.8 million (19.9% of total) was related to
pharmaceuticals.
Ø The loss ratio was down 1.5 ppts y-o-y in 3Q22, reflecting the
reduced traffic for COVID services at the healthcare facilities.
9M22 loss ratio was up 1.9 ppts y-o-y to 80.6% resulting from
increased claims incurred in 1H22.
Ø As a result, the combined ratio was down 1. 0 ppts to 90. 7 %
for the quarter and up 2. 8 ppts to 99. 2 % for the 9M22,
y-o-y.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Improvements in combined ratio led to a 62.1% y-o-y increase
in the operating cash flow in 3Q22 (down 39.8% y-o-y in 9M22).
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
The number of insured clients was c.160,000 as of 30-Sep-22,
down 4.9% y-o-y, reflecting price increases for insurance policies
implemented by the business. The business remains the largest
medical insurer on the market with a 22.5% market share based on
FY21 net insurance premiums. The insurance renewal rate was up 6.2
ppts to 85.0% in 3Q22 and down 2.6 ppts to 75.6% in 9M22.
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 varying stages of
development. The renewable energy business is 100% owned by Georgia
Capita l. As electricity sales in Georgia is a dollar business, the
financial data below is presented in US$.
3Q22 & 9M22 performance (US$ '000), Renewable Energy
[47]
INCOME STATEMENT HIGHLIGHTS
(US$) 3Q22 3Q21 Change 9M22 9M21 Change
Revenue 5,356 4,322 23.9% 11,740 10,486 12.0%
Of which, PPA 2,638 2,230 18.3% 6,374 6,636 -3.9%
Of which, Non-PPA 2,718 1,898 43.2% 5,366 3,656 46.8%
Of which, BI Reimbursement - 194 NMF - 194 NMF
Operating expenses (824) (846) -2.6% (2,471) (2,524) -2.1%
EBITDA 4,532 3,476 30.4% 9,269 7,962 16.4%
EBITDA margin 84.6% 80.4% 4.2ppts 79.0% 75.9% 3.1ppts
Net profit/(loss) [48] 1,345 1,391 -3.3% (1,430) 76 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities 4,313 3,327 29.6% 8,042 6,323 27.2%
Cash flow from investing
activities 2,515 798 NMF 263 (4,070) NMF
Cash flow used in financing
activities (8,331) (4,915) 69.5% (15,628) (10,430) 49.8%
Dividends paid out (700) (1,601) -56.3% (2,101) (4,487) -53.2%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 120,573 125,038 -3.6% 131,047 -8.0%
Of which, cash balance 5,852 7,212 -18.9% 13,074 -55.2%
Total liabilities 94,078 99,022 -5.0% 101,520 -7.3%
Of which, borrowings 90,960 96,259 -5.5% 98,636 -7.8%
Total equity 26,495 26,016 1.8% 29,527 -10.3%
INCOME STATEMENT HIGHLIGHTS
(GEL) 3Q22 3Q21 Change 9M22 9M21 Change
Revenue 15,176 13,490 12.5% 34,420 33,922 1.5%
EBITDA 12,840 10,849 18.4% 27,067 25,711 5.3%
INCOME STATEMENT HIGHLIGHTS
Ø Revenues in US$ term were up in 3Q22 and 9M22.
o The average electricity selling price was up 8.8% y-o-y to
54.3 US$/MWh in 3Q22 (up 9.3% y-o-y to 53.1 US$/MWh in 9M22)
o The average market selling price (excluding PPAs) reached 49.1
US$/MWh in 3Q22, up by 18.8% y-o-y (45.7 US$/MWh in 9M22, up by
29.1% y-o-y)
o 19.1% and 4.4% y-o-y increases in 3Q22 and 9M22 electricity
generation, respectively, were related to the favourable weather
conditions for hydro and wind power plants in 9M22. The average
efficiency rate stood at c.63% and c.47% in 3Q22 and 9M22,
respectively.
Ø Approximately 49% of electricity sales during 3Q22 ( c. 55% in
9M22) were covered by long-term fixed-price power purchase
agreements (PPAs) formed with a Government-backed entity.
Revenue and generation breakdown by power assets:
3Q22 9M22
US$ '000, Revenue Change Electricity Change Revenue Change Electricity Change
unless otherwise from y-o-y generation y-o-y from y-o-y generation y-o-y
noted electricity ( MWh) electricity ( MWh)
sales sales
30MW Mestiachala
HPP 2,984 24.9% 58,569 11.7% 4,508 18.5% 93,958 0.2%
21MW Qartli
wind farm 1,620 30.8% 24,921 30.7% 4,193 3.5% 64,507 3.5%
20MW Hydrolea
HPPs 752 50.4% 15,195 33.8% 3,040 24.6% 62,718 12.4%
Total 5,356 29.8% 98,685 19.1% 11,740 14.1% 221,182 4.4%
=================== ============= ======= ============ ======= ============= ======= ============ =========
Ø Operating expenses remained largely flat, down 2.6 % y-o-y in
3Q22 (down 2.1% y-o-y in 9M22).
Ø As a result, in US$ terms, 3Q22 EBITDA increased by 30.4%
y-o-y (up 16.4% y-o-y in 9M22).
Ø In GEL terms, 3Q22 revenue and EBITDA were up by 12.5% and
18.4% y-o-y, respectively (up by 1.5% and 5.3% y-o-y in 9M22),
reflecting GEL's appreciation against US$.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø A y-o-y increase in 3Q22 and 9M22 operating cash flow was
related to the improved generation levels of power assets in the
Jun-Aug and Dec-Aug periods, respectively, reflecting better
environmental conditions throughout 2022.
Ø A y-o-y increase in investing cash inflows was mainly related
to the sale of the financial securities, previously held for
liquidity management purposes.
Ø In 3Q22, the business refinanced its borrowings, leading to a
US$ 3.4 million and US$ 5.2 million y-o-y increase in net cash
outflows from the financing activities in 3Q22 and 9M22,
respectively,
Ø Renewable Energy made a dividend distribution of US$ 0.7
million in 3Q22 (US$ 2.1 million in 9M22). As a result, the cash
balance of the business was down to US$ 5.9 million as of 30 -Sep
-22.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In October 2022, the renewable energy business successfully
closed a US$ 80 million green secured bond offering. The notes are
US$-denominated with 5-year bullet maturity (callable after two
years) and carry a 7.00% coupon (75 bps improvement compared to the
previous notes issued by the business). The proceeds from the
transaction were fully used to refinance the shareholder loan from
GCAP. The issuance represents the first-ever green secured bond
placement and the largest corporate transaction on the Georgian
capital market.
Discussion of Education Business Results
Our education business currently combines majority stakes in
four private school brands operating across five 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.
3Q22 & 9M22 performance (GEL '000), Education [49]
INCOME STATEMENT
HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue 6,747 3,359 100.9% 28,901 19,599 47.5%
Operating expenses (6,963) (4,655) 49.6% (20,328) (14,411) 41.1%
EBITDA (216) (1,296) 83.3% 8,573 5,188 65.2%
35.4 3.2
EBITDA Margin -3.2% -38.6% ppts 29.7% 26.5% ppts
Net (loss)/income (1,042) (2,310) 54.9% 7,437 3,479 113.8%
CASH FLOW HIGHLIGHTS
Net cash flows from
operating activities 4,889 3,658 33.7% 15,406 11,237 37.1%
Net cash flows used
in investing activities (8,171) (7,309) 11.8% (16,372) (19,154) -14.5%
Net cash flows from
financing activities 3,398 4,870 -30.2% 6,025 11,742 -48.7%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 157,833 151,303 4.3% 138,080 14.3%
Of which, cash 13,219 13,503 -2.1% 9,096 45.3%
Total liabilities 57,978 54,930 5.5% 51,764 12.0%
Of which, borrowings 22,750 25,288 -10.0% 25,585 -11.1%
Total equity 99,855 96,373 3.6% 86,316 15.7%
In 3Q22, the education business increased its capacity by 590
learners to 5,650 learners by expanding the operational campuses of
Buckswood (additional 240 learner capacity) and British-Georgian
Academy (additional 350 learner capacity). Since the commencement
of the expansion programme in Education in 3Q21, the business added
2,840 learner capacity, in line with Georgia Capital's capital
allocation outlook.
The 2022-2023 academic year has started with a significant
increase in the total number of learners as the business
transitioned to post-COVID environment. In total, 966 learners were
added (up by 30.7% y-o-y to 4,116 learners as of 30-Sep-22), where
growth in 1(st) grader intakes was 272 learners (up by 98.5%
y-o-y), growth of intakes in the kindergartens and pre-schools was
248 learners (up by 2.4x y-o-y) and growth in the number of 2-to-12
graders was 446 learners (up 16.6% y-o-y).
INCOME STATEMENT HIGHLIGHTS
Ø Strong intakes and a ramp-up of the utilization, as stated
above, led to a 100 .9% and 47.5% y-o-y increase in revenue in 3Q22
and 9M22, respectively, in line with both the organic growth and
expansion of the business.
Ø Operating expenses were up by 49.6% y-o-y in 3Q22 (up 41.1%
y-o-y in 9M22), due to the increased salary, catering and utility
expenses, in line with the expansion of the business and inflation.
The growth of the operating expenses in 9M22 also reflects a higher
number of learning days compared to 9M21.
Ø The third quarter is usually a slow season for the education
business, as the schools are not operational during the July-August
holidays. However, as a result of the strong start of the 2022-2023
academic year, the business demonstrated robust EBITDA growth, up
by 83.3% y-o-y in 3Q22 and up 65.2% y-o-y in 9M22.
Ø The business posted GEL 7.4 million net income in 9M22, up
113.8% y-o-y (GEL 1.0 million net loss in 3Q22, up by 54.9% y-o-y),
reflecting the strong operating performance, which was partially
supported by the FX gains on the borrowings denominated in foreign
currencies.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø S trong cash collection rates (at 60.8% as of 30-Sep-22,
largely at last year's level of 62.7%), combined with enhanced
revenue streams, led to a 33.7% and 37.1% y-o-y increase in
operating cash flow generation of the business in 3Q22 and 9M22,
respectively.
Ø A GEL 16.4 million cash outflow on investing activities in
9M22 reflects investments in the capacity expansion of the campuses
described above. Construction works were completed before the start
of the 2022-2023 academic year.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In September 2022, BGA (premium segment) successfully
completed the authorization stage, required for switching to the
International Baccalaureate (IB) and Cambridge Education
programmes. With this switch, BGA's offering of international
curriculums/programs will be more tailored towards existing demand
on the market. Cambridge Education and IB programmes are global
leaders in international education, offering high-quality
educational programmes.
Ø The utilisation rate for the total 5,650 learner capacity was
72.8%, up 10.6 ppts y-o-y as of 30-Sep-22.
o The utilisation rate for the pre-expansion 2,810 learner
capacity (i.e., excluding the new capacity addition of 2,840
learners since 3Q21) was 100%, up by 5.4 ppts y-o-y as of
30-Sep-22.
o The utilisation of the added capacity of 2,840 learners was
46.0% as of 30-Sep-22.
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 17 lab retail points at GPC pharmacies; 2)
Diagnostics, operating the largest laboratory in the entire
Caucasus region - "Mega Lab".
3Q22 & 9M22 performance (GEL '000), Clinics and Diagnostics
[50]
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue, net [51] 17,663 25,285 -30.1% 61,386 67,545 -9.1%
Of which, clinics 14,443 18,077 -20.1% 49,238 49,996 -1.5%
Of which, diagnostics 4,459 8,807 -49.4% 16,224 21,999 -26.3%
Of which, inter-business
eliminations (1,239) (1,599) -22.5% (4,076) (4,450) -8.4%
Gross Profit 6,946 11,510 -39.7% 24,945 31,340 -20.4%
Gross profit margin 39.1% 45.3% -6.2ppts 40.5% 46.1% -5.6ppts
Operating expenses (ex.
IFRS 16) (5,663) (5,526) 2.5% (16,643) (15,079) 10.4%
EBITDA (ex. IFRS 16) 1,283 5,984 -78.6% 8,302 16,261 -48.9%
EBITDA margin (ex. IFRS
16) 7.2% 23.5% -16.3ppts 13.5% 23.9% -10.5ppts
N et (loss)/profit (ex.
IFRS 16) (1,333) 2,753 NMF (981) 7,064 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS
16) 1,731 7,844 -77.9% 4,518 11,925 -62.1%
EBITDA to cash conversion
(ex. IFRS 16) 134.9% 131.1% 3.8ppts 54.4% 73.3% -18.9ppts
Cash flow used in investing
activities (1,675) (2,076) -19.3% (8,116) (5,975) 35.8%
Free cash flow (ex.
IFRS 16) [52] 73 6,096 -98.8% (3,565) 6,358 NMF
Cash flow used in financing
activities (ex. IFRS
16) (50) 721 NMF (954) (2,262) -57.8%
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
Total assets 186,461 187,735 -0.7% 178,592 4.4%
Of which, cash balance
and bank deposits 1,729 1,719 0.6% 6,292 -72.5%
Of which, securities
and loans issued 3,493 3,564 -2.0% 3,699 -5.6%
Total liabilities 86,839 88,211 -1.6% 80,613 7.7%
Of which, borrowings 54,593 55,265 -1.2% 50,854 7.4%
Total equity 99,622 99,524 0.1% 97,979 1.7%
Discussion of results, Clinics
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 starting from
2023.
GEL '000
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue, net [53] 14,443 18,077 -20.1% 49,238 49,996 -1.5%
Of which, polyclinics 9,462 9,424 0.4% 30,349 27,206 11.6%
Of which, community clinics 4,981 8,653 -42.4% 18,889 22,790 -17.1%
Gross Profit 6,068 8,046 -24.6% 21,008 22,688 -7.4%
Gross profit margin 41.7% 44.2% -2.5ppts 42.4% 45.0% -2.6ppts
Operating expenses (ex.
IFRS 16) (4,777) (4,327) 10.4% (13,658) (12,181) 12.1%
EBITDA (ex. IFRS 16) 1,291 3,719 -65.3% 7,350 10,507 -30.0%
EBITDA margin (ex. IFRS
16) 8.9% 20.4% -11.5ppts 14.8% 20.9% -6.1ppts
N et (loss)/profit (ex.
IFRS 16) (985) 863 NMF (961) 2,361 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating
activities (ex. IFRS 16) 1,802 3,476 -48.2% 5,371 8,886 -39.6%
EBITDA to cash conversion
(ex. IFRS 16) 139.6% 93.5% 46.1ppts 73.1% 84.6% -11.5ppts
Cash flow used in investing
activities [54] (1,597) (1,412) 13.1% (7,428) (4,320) 71.9%
Free cash flow (ex. IFRS
16) [55] 236 1,932 -87.8% (1,973) 4,307 NMF
Cash flow from financing
activities (ex. IFRS 16) 287 2,691 -89.3% 30 (252) NMF
BALANCE SHEET HIGHLIGHTS 30-Sep-22 30-Jun-22 Change 31-Dec-21 Change
159, 1 60 8.
Total assets 6 82 , 024 -0.2% 147,368 4 %
8 1 -6 4
Of which, cash balance 1, 1 . 1 . 8
and bank deposits 10 613 % 3,149 %
Of which, securities and
loans issued 3,759 3,823 -1.7% 3,947 -4.8%
Total liabilities 79,513 80,702 -1.5% 69,387 14.6%
Of which, borrowings 50,818 51,228 -0.8% 46,417 9.5%
80, 79, 1. 2.
Total equity 1 69 322 1 % 77,981 8 %
INCOME STATEMENT HIGHLIGHTS
Ø 3Q22 revenues of the polyclinics remained largely flat y-o-y,
reflecting the net impact of a) an 85.4% y-o-y decrease in
COVID-related revenues, and b) a 22.1% y-o-y increase in the
revenues from non-COVID, regular ambulatory services, resulting
from the expansion of the business (adding two new polyclinics in
1H22). 9M22 revenues from polyclinics were up 11.6% y-o-y,
reflecting a 20.7% increase in revenues from non-COVID services,
partially offset by a 34.7% decrease from COVID-related
services.
Ø A 42.4% y-o-y decrease in 3Q22 revenues of the community
clinics reflects a 96.4% y-o-y decrease in the COVD-related
revenues, partially offset by a 22.1% y-o-y increase in revenues
from non-COVID services. 9M22 revenues were down by 17.1% y-o-y.
The top-line growth is expected to rebound starting from 2023, 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 ([56])
.
o The transition from COVID was reflected in the improved
materials rate (COVID treatments have a high materials rate) at
7.4% in 3Q22 (10.5% in 3Q21) and 9.2% in 9M22 (9.9% in 9M21).
o Due to the opening of a new polyclinic and the suspension of
the COVID clinics' contracts in March and related decrease in
revenue, and the fact that a significant portion of direct salaries
is fixed, the direct salary rate was up 6.8 ppts y-o-y to 37.6% in
3Q22. This, coupled with the low base effect from the expiration of
the state income tax subsidy that was in effect in 1H21, led to an
increase in the direct salary rate in 9M22, up 5.7 ppts y-o-y to
34.9%. 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, the gross profit margin of the clinics business
was down by 2.5 ppts in 3Q22 and by 2.6 ppts in 9M22, y-o-y.
Adjusted for the impact of state income tax subsidy, the gross
profit margin was down 0.4 ppts in 9M22, y-o-y.
Ø Operating expenses (excl. IFRS 16), mainly comprising of
salaries and other employee benefits (up 1 2 . 8 % in 3Q22 and up
13.7% in 9M22, y-o-y) and general and administrative expenses
(excl. IFRS 16) (up 5.0% in 3Q22 and up 7.9% in 9M22, 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, the EBITDA margin (excl. IFRS 16) was down in
both reporting periods (down 11.5 ppts in 3Q22 and down 6.1 ppts in
9M22, y-o-y). Excluding the impact of the absence of the state
income tax subsidy, the EBITDA margin (excl. IFRS 16) was down 3.9
ppts y-o-y in 9M22.
Ø The increase in net debt position (up 14.3% y-o-y) to GEL 45.9
million due to the opening of new polyclinics, coupled with
increased interest rates on the market, led to an increase in 9M22
net interest expense (excl. IFRS 16), up 19.0%, y-o-y.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø In 3Q22, the business posted a 139.6% EBITDA to cash
conversion ratio, led by a collection of stronger revenues that
were generated in the preceding quarters.
Ø The business spent GEL 7.3 million on capex in 9M22, of which
GEL 1.4 million was maintenance capex and GEL 5.9 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 3Q22:
3Q22 3Q21 Change 9M22 9M21 Change
Number of admissions
(thousands) 483.8 670.1 -27.8% 1,619.8 1,692.4 -4.3%
Of which, polyclinics 374.5 474.5 -21.1% 1,245.6 1,280.0 -2.8%
Of which, community
clinics 109.3 195.6 -44.1% 374.2 410.3 -8.8%
Ø The number of registered patients in Tbilisi increased by
c.19,000 y-o-y to c.270,000 and by c.30,000 y-o-y to c.608,000
across the country as of 30-Sep-22 y-o - y.
Discussion of results, Diagnostics
GEL '000
INCOME STATEMENT HIGHLIGHTS 3Q22 3Q21 Change 9M22 9M21 Change
Revenue, net [57] 4,459 8,807 -49.4% 16,224 21,999 -26.3%
Of which, from COVID-19 -8
tests 876 5,148 3.0% 5,750 11,636 - 50.6%
Of which, from regular 3, 3,
lab tests 583 659 - 2.1% 10,474 10,363 1.1%
Gross Profit 878 3,464 -74.7% 3,931 8,652 -54.6%
-19.6 -15.1
Gross profit margin 19.7% 39.3% ppts 24.2% 39.3% ppts
Operating expenses (ex.
IFRS 16) (886) (1,199) -26.1% (2,979) (2,898) 2.8%
EBITDA (ex. IFRS 16) (8) 2,265 NMF 952 5,754 -83.5%
EBITDA margin (ex. IFRS -25.9 -20.3
16) -0.2% 25.7% ppts 5.9% 26.2% ppts
N et (loss)/profit (ex.
IFRS 16) (348) 1,890 NMF (20) 4,703 NMF
INCOME STATEMENT HIGHLIGHTS
Ø A 49.4% y-o-y decrease in the 3Q22 revenue of the business,
which apart from regular diagnostics services was also actively
engaged in COVID-19 testing, reflects a significantly reduced
number of COVID cases in the country and the suspension of
Government contracts from March 2022.
Ø Decrease in revenue translated into reduced gross profit and
EBITDA. The growth is expected to rebound over the next few
quarters from the launch of the new ambulatory services as well as
referrals and tests ordered from the expanded polyclinics
chain.
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 two new retail collection points in 2022
and the total number 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 3Q22 and 9M22 are
noted below:
3Q22 3Q21 Change 9M22 9M21 Change
Number of tests
performed (thousands) 501 668 -25.1% 1,799 1,843 -2.4%
Average revenue
per test (GEL) 8.9 13.2 -32.4% 9.0 11.9 -24.4%
Discussion of Other Portfolio Results
The four businesses in our "other" private portfolio are Auto
Service, Beverages, Housing Development, and Hospitality. They had
a combined value of GEL 287.1 million at 30-Sep-22, which
represented 10.0% of our total portfolio.
3Q22 & 9M22 aggregated performance highlights (GEL '000),
Other Portfolio
3Q22 3Q21 Change 9M22 9M21 Change
Revenue 152,019 89,108 70.6% 350,403 239,027 46.6%
EBITDA 18,916 7,854 NMF 30,311 27,526 10.1%
Net cash flows from operating
activities 15,957 9,398 69.8% 11,568 21,406 -46.0%
Ø Auto Service | The auto service business includes a car
services and parts business, and a periodic technical inspection
(PTI) business.
o Car services and parts business | In 3Q22, car services and
parts business' revenue was up by 53.9% y-o-y to GEL 13.3 million
(up 42.9% y-o-y to GEL 30.8 million in 9M22), reflecting an
increase in corporate, wholesale and retail customer segments.
Similarly, the gross profit was up by 56.6% to GEL 3.1 million in
3Q22 and up by 50.5% to GEL 7.4 million in 9M22, y-o-y. As a
result, the business posted GEL 0.9 million EBITDA in 3Q22, up by
59.4% y-o-y (GEL 1.9 million in 9M22, up by 69.9% y-o-y).
o Periodic technical inspection (PTI) business | PTI business's
revenue was up by 12.0% y-o-y to GEL 4.8 million in 3Q22. Revenue
growth was supported by an increase in total cars serviced, up by
6.1% y-o-y in 3Q22. As a result, the EBITDA of the PTI business was
up by 6.4% y-o-y to GEL 2.7 million, translating into the EBITDA
margin of 57.0% in 3Q22. 9M22 revenue was up by 5.2% y-o-y to GEL
12.5 million. The number of cars serviced remained largely flat, up
by 0.3% in 9M22 and translated into GEL 6.4 million EBITDA, down
1.0% y-o-y.
Ø Beverages | The beverages business combines three business
lines: a beer business, a distribution business and a wine
business.
o Beer business | The net revenue of the beer business increased
by 39.0% y-o-y to GEL 26.9 million in 3Q22 and by 41.3% y-o-y to
GEL 63.4 million in 9M22, reflecting the impact of the strong
recovery in tourism and increased product prices due to the sale
price increases. Beer and lemonade y-o-y sales (in hectolitres)
were up 9.9 % and 66.2 %, respectively in 3Q22. The average GEL
price per litre (average for beer and lemonade) increased by 1 5.9
% y-o-y. Consequently, the EBITDA of the business doubled y-o-y and
stood at GEL 7.1 million in 3Q22 (up 2.9x y-o-y to GEL 14.4 million
in 9M22). The positive dynamics in the business' operating
performance were translated into the decrease of GCAP's issued
guarantee by EUR 8. 4 million to EUR 6. 4 million during the
quarter.
o Distribution business | Revenue of the distribution business
increased by 61.0% and 56.7% y-o-y to GEL 65.8 million and GEL
138.2 million in 3Q22 and 9M22 respectively, driving 3Q22 and 9M22
EBITDA up by 87.8% and 104.6% y-o-y.
o Wine business | The wine business had significant exposure to
the Russian and Ukrainian markets as 6 2 % of the 9M21 net revenues
were generated from sales in these markets (5 1 % of revenues in
9M22). Due to the implications of the Russia-Ukraine war, the net
revenue of the wine business was down by 9.9% to GEL 12.4 million
in 3Q22 (down by 22.5% y-o-y to GEL 29.0 million in 9M22). The
decrease in revenue was also impacted by GEL's appreciation against
foreign currencies, translating into subdued revenues from exports.
The number of bottles sold was down by 1.9 % y-o-y, resulting from
the decreased export in Ukraine during the quarter. Consequently,
EBITDA was down by 86.0% and stood at GEL 0.4 million in 3Q22,
while 9M22 EBITDA was negative GEL 0.1 million.
Ø Housing development and hospitality businesses | In light of
the increased sales and construction progress, 3Q22 revenue of the
housing business was up by GEL 39.7 million y-o-y to GEL 54.5
million (up by GEL 65.6 million y-o-y to GEL 125.1 million in
9M22). Consequently, 3Q22 EBITDA increased by GEL 7.6 million y-o-y
to GEL 4.2 million (up by GEL 2.0 million to GEL 2.9 million in
9M22). In October 2022, the business closed a US$ 35 million local
bond offering. Full proceeds of the notes were used to refinance
the 3-year US$ 35 million local bonds that matured on 7 October
2022.
The revenue of the hospitality business decreased by 39.9% y-o-y
in 3Q22 and was down by 17.8% y-o-y in 9M22. This reflects the
absence of revenues due to the divestment of commercial real estate
assets in 2021. Consequently, the hospitality business EBITDA was
down by GEL 1.4 million y-o-y to negative GEL 1.1 million in 3Q22
(down by GEL 4.8 million y-o-y to negative GEL 0.4 million in
9M22).
ADDITIONAL FINANCIAL INFORMATION
The 9M22 NAV Statement shows the development of NAV since
31-Dec-21:
GEL '000, unless Dec-21 1. 2a. 2b. 2c. 3.Operating 4. Sep Change
otherwise noted Value Investment Buyback Dividend expenses Liquidity/ -22 %
creation and FX/Other
([58]) Divestments
Listed and
Observable
Portfolio
Companies
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Bank of Georgia
(BoG) 681,186 (60,219) - - (22,798) - - 598,169 -12.2%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Water Utility - 13,608 139,392 - - - - 153,000 0.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Total Listed and
Observable
Portfolio
Value 681,186 (46,611) 139,392 - (22,798) - - 751,169 10.3%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Listed and
Observable
Portfolio value
change
% -6.8% 20.5% 0.0% -3.3% 0.0% 0.0% 10.3%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Private
Portfolio
Companies
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Large Companies 2,249,260 (151,657) (696,960) - (37,408) - 821 1,364,056 -39.4%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Retail
(Pharmacy) 710,385 (17,129) - - (16,018) - - 677,238 -4.7%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Hospitals 573,815 (128,573) - - (13,015) - - 432,227 -24.7%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Water Utility 696,960 - (696,960) - - - - - -100.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Insurance (P&C
and
Medical) 268,100 (5,955) - - (8,375) - 821 254,591 -5.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Of which, P&C
Insurance 211,505 8,948 - - (7,374) - 821 213,900 1.1%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Of which,
Medical
Insurance 56,595 (14,903) - - (1,001) - - 40,691 -28.1%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Investment Stage
Companies 461,140 (7,020) 5,951 - (6,234) - 743 454,580 -1.4%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Renewable Energy 173,288 6,000 395 - (6,234) - 743 174,192 0.5%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Education 129,848 28,028 5,556 - - - - 163,432 25.9%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Clinics and
Diagnostics 158,004 (41,048) - - - - - 116,956 -26.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Other Companies 224,645 (90,072) 150,997 - - - 1,485 287,055 27.8%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Total Private
Portfolio
Value 2,935,045 (248,749) (540,012) - (43,642) - 3,049 2,105,691 -28.3%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Private
Portfolio
value change % -8.5% -18.4% 0.0% -1.5% 0.0% 0.1% -28.3%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Total Portfolio
Value (1) 3,616,231 (295,360) (400,620) - (66,440) - 3,049 2,856,860 -21.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Total Portfolio
value change % -8.2% -11.1% 0.0% -1.8% 0.0% 0.1% -21.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Net Debt (2) (711,074) - 406,626 (68,796) 66,440 (16,046) (73,211) (396,060) -44.3%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
of which, Cash
and
liquid funds 272,317 - 543,204 (68,796) 66,440 (16,046) (471,475) 379,644 39.4%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
of which, Loans
issued 154,214 - (136,577) - - - 235,649 253,286 64.2%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
of which, Gross
Debt (1,137,605) - - - - - 108,615 (1,028,990) -9.5%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Net other
assets/
(liabilities)
(3) (21,535) - (6,007) - - (13,475) 65,021 24,004 NMF
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
of which,
share-based
comp. - - - - - (13,475) 13,475 - 0.0%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Net Asset Value
(1)+(2)+(3) 2,883,622 (295,360) - (68,796) - (29,521) (5,141) 2,484,804 -13.8%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
NAV change % -10.2% 0.0% -2.4% 0.0% -1.0% -0.2% -13.8%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Shares
outstanding(58) 45,752,362 - - (2,855,592) - - 663,963 43,560,733 -4.8%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
Net Asset Value
per share, GEL 63.03 (6.46) (0.00) 2.59 (0.00) (0.65) (1.46) 57.04 -9.5%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
NAV per share,
GEL
change % -10.2% 0.0% 4.1% 0.0% -1.0% -2.3% -9.5%
----------------- ------------ ---------- ------------ ------------ --------- ------------ ----------- ------------ --------
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 with 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 the aggregate amount of total equity
and borrowed funds.
9. Loss ratio equals net insurance claims expense divided by net earned premiums.
10. Expense ratio in P&C Insurance equals sum of acquisition
costs and operating expenses divided by net earned premiums.
11. Combined ratio equals sum of the loss ratio and the expense
ratio in the insurance business.
12. ROAE - Return on average total equity (ROAE) equals profit
for the period attributable to shareholders divided by monthly
average equity attributable to shareholders of the business for the
same period.
13. Net investment - gross investments less capital returns
(dividends and sell-downs).
14. EV - enterprise value.
15. Liquid assets & loans issued include cash, marketable
debt securities and issued short-term loans at GCAP level.
16. Total return / value creation - total return / value
creation of each portfolio investment is calculated as follows: we
aggregate a) change in beginning and ending fair values, b) gains
from realised sales (if any) and c) dividend income during period.
We then adjust the net result to remove capital injections (if any)
to arrive at the total value creation / investment return.
17. WPP - Wind power plant.
18. HPP - Hydro power plant.
19. PPA - Power purchase agreement.
20. Number of shares outstanding - Number of shares in issue
less total unawarded shares in JSC GCAP's management trust.
21. Market Value Leverage ("MVL"), also Loan to Value ("LTV") -
Interchangeably used across the document and is calculated by
dividing net debt to the total portfolio value.
22. NCC Ratio - Equals Net Capital Commitment divided by
portfolio value.
ABOUT GEORGIA CAPITAL PLC
Georgia Capital PLC (LSE: CGEO LN) is a platform for buying,
building and developing businesses in Georgia (together with its
subsidiaries, "Georgia Capital" or "the Group"). The Group's
primary business is to develop or buy businesses, help them
institutionalise their management and grow them into mature
businesses that can further develop largely on their own, either
with continued oversight or independently. Once Georgia Capital has
successfully developed a business, the Group actively manages its
portfolio to determine each company's optimal owner. Georgia
Capital will normally seek to monetise its investment over a 5-10
year period from initial investment.
Georgia Capital currently has the following portfolio
businesses: (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 20% 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 1H22 Results 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.
COMPANY INFORMATION
Georgia Capital PLC
Registered Address
42 Brook Street
London W1K 5DB
United Kingdom
www.georgiacapital.ge
Registered under number 10852406 in England and Wales
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "CGEO.LN"
Contact Information
Georgia Capital PLC Investor Relations
Telephone: +44 (0) 203 178 4052; +995 322 000000
E-mail: ir@gcap.ge
Auditors
PricewaterhouseCoopers LLP ("PwC")
Atria One, 144 Morrison Street,
Edinburgh EH3 8EX
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online
service run by our Registrar, Computershare,
giving you convenient access to information on your
shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk .
Investor Centre Shareholder Helpline - +44 (0) 370 873 5866
Share price information
Shareholders can access both the latest and historical prices
via the website
www.georgiacapital.ge
[1] See "Basis of Presentation" for more background on page 26.
Private portfolio companies' performance includes aggregated
stand-alone IFRS results for our portfolio companies, which can be
viewed as APMs for Georgia Capital, since Georgia Capital does not
consolidate its subsidiaries and instead measures them at fair
value under IFRS.
[2] Please see definition in glossary on page 27.
[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 four 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] Includes the loans issued to our private portfolio
companies.
[6] Please see definition in glossary on page 27.
[7] Includes US$ 10 million (GEL 28.4 million) financing
provided to Renewable Energy, which is intended to be converted
into a quasi-equity type instrument in 4Q22.
[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 26 in
"Basis of presentation".
[12] Enterprise value is presented excluding the recently
launched schools (Pesvebi and Tkekultura) and non-operational
assets, which are added to the equity value of the education
business at cost.
[13] Adjusted for non-recurring items.
[14] Adjusted for non-recurring items.
[15] More details are available on our website:
https://georgiacapital.ge/ir/water-utility-disposal .
[16] Normalised for the items as set out in the terms of the
disposal.
[17] Investments are made at JSC Georgia Capital level, the
Georgian holding company.
[18] Dividends are received at JSC Georgia Capital level, the
Georgian holding company.
[19] Please see definition in glossary on page 27.
[20] 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.
[21] 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.
[22] Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net
debt.
[23] Excluding the recently launched schools (Pesvebi and
Tkekultura) and non-operational assets, added to the equity value
of the education business at cost.
[24] Investments are made at JSC Georgia Capital level, the
Georgian holding company.
[25] Dividends are received at JSC Georgia Capital level, the
Georgian holding company.
[26] Loans issued balance and portfolio value as at 31-Dec-21
reflect the retrospective conversions of the loans issued to our
other businesses into equity.
[27] Includes US$ 10 million (GEL 28.4 million) financing
provided to Renewable energy, which is intended to be converted
into a quasi-equity type instrument in 4Q22.
[28] Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative
costs.
[29] Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
[30] Share-based management expenses are share salary and share
bonus expenses of management and staff.
[31] Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and
corporate secretary costs.
[32] Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
[33] 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.
[34] In October 2021, GHG signed a share purchase agreement to
acquire the then 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. The first tranche of
10% was acquired in 1H22. For details, please see page 12 of our
Annual Report 2021.
[35] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[36] Of which - capex of GEL 3.4 million in 3Q22 and GEL 17.2
million in 9M22 (GEL 3.8 million in 3Q21 and GEL 10.7 million in
9M21); acquisition of minority shares of GEL 41.2 million in
9M22.
[37] Calculated by deducting capex and acquisition of minority
share from operating cash flows.
[38] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[39] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
[40] 9M22 net profit is adjusted for a GEL 2.7 million loss from
the sale of the Traumatology Hospital.
[41] Of which - capex of GEL 5.4 million in 3Q22 and GEL 14.5
million in 9M22 (GEL 6.7 million in 3Q21 and GEL 17.6 million in
9M21); payment of holdback of GEL 5.8 million in 3Q21 and GEL 12.1
million in 9M21; and proceeds from sale of PPE/subsidiary of GEL
8.7 million in 9M22.
[42] Operating cash flows less capex, less acquisition of
subsidiaries / payment of holdback, plus net proceeds on sale of
PPE/subsidiary .
[43] The respective costs divided by gross revenues.
[44] 9M22 net profit is adjusted for a GEL 2.7 million loss from
the sale of the Traumatology Hospital.
[45] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results.
[46] Calculated based on net income, adjusted for non-recurring
items and average equity, adjusted for preferred shares.
[47] The detailed IFRS financial statements (in both US$ and
GEL) are included in supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[48] 3Q21 and 9M21 net profit/(loss) includes GEL 2.4 million
gain from the sale of the project rights of pre-construction
"Bakhvi 2" HPP.
[49] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[50] The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results .
[51] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from Gross revenue.
[52] Operating cash flows less capex.
[53] Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
[54] Of which - capex of GEL 1.6 million in 3Q22 and GEL 7.3
million in 9M22 (GEL 1.5 million in 3Q21 and GEL 4.6 million in
9M21).
[55] Operating cash flows less capex.
[56] The respective costs divided by gross revenues.
[57] Net revenue - Gross revenue less corrections and
rebates.
[58] Please see definition in glossary on page 27.
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