Georgia Capital PLC · LSE:CGEO
Georgia Capital — Q1 2019 Earnings Presentation
47 slides from Georgia Capital's earnings presentation, Apr 26, 2019
Slide 1: Georgia-focused investment company: 1Q19 results
Georgia-focused investment company Investor Presentation: 1Q19 results 10 x = 10 y 26 April Page2019 1
Slide 2: Forward looking statements
Forward looking statements Disclaimer This presentation 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, p
Slide 3: Content
Content 1. 1Q19 results discussion | Georgia Capital 2. Portfolio Overview 3. Georgian Macro Overview 4. Appendices Page 3
Slide 4: Georgia Capital at a glance
Georgia Capital at a glance Georgia Capital portfolio Holding company of a diversified group focused on investing in and developing businesses in Georgia Listed Private Pipeline Late stage Bank of Georgia (Banking) Water Utility Housing Development P&C Insurance Education 19.9% (managed by GGU) (man
Slide 5: CGEO:LN performance
CGEO:LN performance LSE premium listed, with more than 90% institutional shareholder base GCAP shareholders allocation by geography Outstanding shares 31-Mar-19 As of 24 April 2019 USA 39,384,712 15.0% 1,529,829 Average daily 1,330,154 UK/Ireland trading volume – 31.2% 697,090 1.1 GBP (million) 2.0%
Slide 6: Key portfolio highlights | March 2019
Key portfolio highlights | 31 March 2019 Gross cash invested of GEL 911 million translating into GEL 2.0 billion portfolio value Listed Private late stage Private early stage Pipeline Net cash invested (260) 140 300 Fair value 1,097 631 288 Holding Period 6.3 10.3 3.0 7.9 9.3 1.8 2.0 2.4 (years) 568
Slide 7: NAV Statement
NAV Statement Valuation GEL thousands unless otherwise noted Ownership % Multiples Fair Values Change% Total Return1 Total Return % Method Mar-19 Dec-18 Mar-19 Dec-18 1Q19 Listed Equity Portfolio Companies 1,096,510 977,827 12.1% 118,683 12.1% Georgia Healthcare Group PLC2 57.0% LSE 528,038 520,332
Slide 8: GCAP – Total investment return during 1Q19
GCAP – Total investment return during 1Q19 Fair value Capital Dividend Total Total Business change in 1Q19 allocations inflows Return return % Gel thousands (1) (2) (3) (1)+(2)+(3) Listed businesses 118,683 - - 118,683 12.1% GHG 7,706 - - 7,706 1.5% BoG 110,978 - - 110,977 24.3% Private businesses 2
Slide 9: Total investment return summary | private businesses
Total investment return summary | private businesses Valuation Multiple Total returns as of Business Total return drivers method applied 31-Mar-19 • LTM EBITDA up by GEL 2.0mln resulting in GEL 18.1mln increase in fair value EV/EBITDA (Based on Water Utility LTM EBITDA) 8.8 GEL 18.4mln • Multiple fl
Slide 10: Capital allocation outlook through 2022
Capital allocation outlook through 2022 Highly disciplined approach to unlock value through investments Total capital allocation GEL millions 1Q19 2019E2 2020E 2021E 2022E 2019-2022 BoG - (25) (27) (29) (31) Listed investments GHG - (4) (6) (8) (11) +141 million dividend inflows Private investments
Slide 11: Liquidity and cash management at Georgia Capital (stand-alone)
Liquidity and cash management at Georgia Capital (stand-alone) GEL 581 million GEL 214 million1 Liquid assets & Loans issued | 31-Mar-2019 Net debt | 31-Mar-2019 ► Cash at bank of GEL 111 million ► Georgia Capital issued inaugural US$ 300mln ► Internationally listed debt securities of GEL 170 millio
Slide 12: 1Q19 private portfolio performance highlights
1Q19 private portfolio performance highlights Late stage Water Utility Housing Development P&C Insurance +2.8% -43.1% 32.3 33.2 +13.6% 28.7 +16.7% 17.1 16.3 17.4 +9.3% 15.0 NMF 14.9 0.7 3.9 4.3 (1.6) Revenue EBITDA Revenue EBITDA Earned premiums, net Net income 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 Early st
Slide 13: Content
Content 1. 1Q19 results discussion | Georgia Capital 2. Portfolio overview 3. Georgian macro overview 4. Appendices Page 13
Slide 14: Bank of Georgia (BoG) Overview
Listed investments Bank of Georgia (BoG) Overview http://bankofgeorgiagroup.com/ Investment rationale Market opportunity ▪ The first entity from Georgia to be listed on the premium segment of the Main Market of the London Stock Exchange (LSE:BGEO) since February 2012. Banking sector assets, loans an
Slide 15: Healthcare and pharmacy business (GHG) overview
Listed investments Healthcare http://ghg.com.ge/ and pharmacy business (GHG) overview Market opportunity Investment rationale ▪ Very low base: healthcare services spending per capita only US$ 325 Total healthcare market (including healthcare services and pharmacy) ▪ Growing market: healthcare spendi
Slide 16: Water utility business overview
Private late stage portfolio Water utility business overview Investment rationale Key highlights | 31-March-2019 ▪ Natural monopoly in Tbilisi and surrounding area ▪ utilities sector represents 3% of total Georgian economic output with c. 8.2% CAGR (2006-2017) ▪ Stable regulatory environment with fa
Slide 17: Housing development business overview
Private late stage portfolio Housing development business overview Investment rationale Key highlights | 31-March-2019 ▪ The shortage of housing from Soviet era combined with Georgian tradition of multi generations living under one roof, average household size is significantly higher at 3.3 compared
Slide 18: P&C insurance business overview
Private late stage portfolio P&C insurance business overview Key highlights | 31-March-2019 Investment rationale Original investment GEL 10 million • Significantly underpenetrated insurance market in Georgia • Market leader with a powerful distribution network of point of sale and sales agents Net a
Slide 19: Renewable energy business overview
Private early stage portfolio Renewable energy business overview Investment rationale Key highlights | 31-March-2019 ▪ Underdeveloped energy market with potential for significant growth - Low per capita power usage ▪ Cheap to develop – up to US$1.5mln for 1MW hydro and up to US$1.4mln for wind Origi
Slide 20: Hospitality and commercial real estate business overview
Private early stage portfolio Hospitality and commercial real estate business overview Investment rationale Key highlights | 31-March-2019 ▪ Record number of tourists visiting Georgia every year: 4.8 million visitors in 2018, up 16.9% y-o-y, 10.5% CAGR over the last 5 years; Tourism inflows up 18.4%
Slide 21: Beverages business overview
Private early stage portfolio Beverages business overview Investment rationale Key highlights | 31-March-2019 • High growth sector, which has doubled during the last 5 years to GEL 1.9 billion market • Beer consumption per capital at one of the lowest levels in the wider region at 27.5 liters Wine B
Slide 22: Further value creation opportunity – education business
Pipeline Further value creation opportunity – education business Industry investment rationale HIGHLY FRAGMENTED PRIVATE SCHOOL MARKET EFFICIENCY UPSIDE ▪ Fragmented – 2,321 schools in total, only 10% is private and also private ▪ Inefficient government spending market itself is fragmented ▪ 83% of
Slide 23: Attractive service business – Auto service
Pipeline Attractive service business – Auto service Industry investment rationale LARGE AND GROWING MARKET Large and growing automotive market | 12.7 % CAGR over 2012-2018 ▪ 8.0% CAGR for registered vehicles in Georgia during the years 2012-2018 Automotive market size in Georgia (GEL millions) ▪ Ave
Slide 24: Content
Content 1. 1Q19 results discussion | Georgia Capital 2. Portfolio overview 3. Georgian macro overview 4. Appendices Page 24
Slide 25: Sovereign ratings with stable outlook and favourable macro fundamentals
Sovereign ratings with stable outlook and favourable macro fundamentals Key Ratings Highlights General Facts Rating Agency Rating Outlook Affirmed / Upgraded Ba2 Stable March 2019 BB- Positive April 2019 Georgia BB Stable February 2019 Georgia is favorably placed among peers Fitch Rating Country Cou
Slide 26: Georgia's key economic drivers
Georgia’s key economic drivers Top performer globally in WB Doing Business over the past 12 years Liberal economic ▪ Liberty Act (effective January 2014) ensures a credible fiscal and monetary framework: policy ▪ Public expenditure/GDP capped at 30%; Fiscal deficit/GDP capped at 3%; Public debt/GDP
Slide 27: Institutional oriented reforms
Institutional oriented reforms Ease of Doing Business | 2019 (WB Doing Business Report) Economic Freedom Index | 2019 (Heritage Foundation) UK 7 New Zealand 1 Singapore 2 USA 12 Georgia 6 up from 9th in 2018 Estonia 15 Top 8 in Europe region out of 44 Norway 7 Georgia 16 US 8 Latvia 35 countries Est
Slide 28: Diversified resilient economy
Diversified resilient economy Gross domestic product Diversified nominal GDP structure, 2018 Source: Geostat Source: Geostat 20 US$ bln 16% Hotels and Education Other 12.6% Trade restaurants 4.7% 5.2% 17.0% 9.6% 9.4% 12% Financial 15 3.1% 7.2% intermediation 5.8% 6.2% 6.4% 4.8% 4.7% 8% 4.4% Healthca
Slide 29: Room for further job creation
Room for further job creation Unemployment rate down 1.3 ppts y/y to 12.7% UNDP Human Development Index in 2018 Sources: UNDP 0.78 0.78 0.77 0.77 Sources: GeoStat 0.76 18.3 17.4 17.9 0.75 2000 17.4 17.3 17.2 16.9 20 0.74 0.74 15.1 15.4 0.73 0.73 14.6 14.1 14.0 0.73 1900 13.5 13.9 13.9 0.72 12.4 12.6
Slide 30: May-15 Nov-15 May-16
20 60 80 40 0 -40 -20 Jul-11 Feb-00 Aug-00 Nov-11 Feb-01 Mar-12 Aug-01 Feb-02 Jul-12 Aug-02 Sources: Geostat, NBG Sources: NBG, GeoStat Nov-12 Feb-03 Aug-03 Mar-13 Feb-04 Aug-04 Jul-13 Feb-05 Nov-13 Aug-05 Feb-06 Mar-14 Aug-06 Jul-14 Feb-07 Aug-07 Nov-14 Feb-08 Mar-15 Aug-08 Feb-09 Jul-15 M2 vs. inf
Slide 31: Current account deficit supported by FDI
Current account deficit supported by FDI Current account balance (% of nominal GDP) Exports and Re-exports, US$ bln Sources: NBG Source: NBG Goods, net Services, net 30% Investment income, net Current transfers, net 30% 10.0 Current account FDI Service exports Goods exports, geo-originated Re-export
Slide 32: Diversified sources of capital
Diversified sources of capital Strong foreign investor interest Visitors and tourism revenues on the rise Sources: GeoStat Sources: GNTA, NBG 2,000 FDI, US$ mln, LHS FDI as a % of GDP 25% mln $ 3600 8.7 10.0 7.9 3100 17.2% 20% 6.3 6.7 8.0 1,500 2600 5.7 5.9 15.1% 2100 4.7 6.0 12.3% 11.9% 12.6% 15% 1
Slide 33: Tourism sector on the rise
Tourism sector on the rise Tourism revenues to GDP Spending per arrival, 2017 Sources: NBG, Geostat Source: WDI 3600 25% 1600 20% 1400 3100 18% 20% 1200 2600 14% 15% 1000 15% US$ mn 2100 11% 11% 9% 800 1600 6% 10% 600 1100 400 5% 600 200 100 0% 0 2011 2012 2013 2014 2015 2016 2017 2018 Tourism inflo
Slide 34: Diversified foreign trade
Diversified foreign trade Goods’ Trade Deficit Oil imports Source: GeoStat Source: GeoStat 0 50% 1200 90% 40% 1000 -100 30% 800 70% -200 20% 600 50% -300 10% 400 30% 0% -400 200 10% -10% 0 -500 -20% -10% -200 -600 -30% -30% -400 May-16 May-17 May-18 Jan-17 Oct-17 Jan-18 Jan-19 Mar-16 Oct-16 Oct-18 N
Slide 35: Diversified foreign trade
Diversified foreign trade Imports of Goods, contribution to growth Exports of Goods, 2018 Source: NBG Investment goods Intermediate goods Source:, Geostat 40% 40% Consumer goods Import growth, y/y, % Food and beverages 30% 30% 0% 14% 23% Industrial supplies 20% 20% 10% 10% Fuels and lubricants 15% 0
Slide 36: Prudent monetary policy ensures macro-financial stability
Prudent monetary policy ensures macro-financial stability International reserves Monetary policy rate Sources: NBG Sources: NBG 3500 Official Reserve Assets, US$ mln Net Foreign Assets, US$ mln 3500 14 NBG continued gradual exit from moderately tightened monetary policy 3000 3000 and decreased its r
Slide 37: Flexible exchange rate regime plays a shock-absorber role
50 -200 -150 -100 0 100 150 -50 0 20 40 60 80 100 120 140 180 160 Dec-12 Jan-15 Feb-15 120 Sources: NBG Sources: NBG Mar-13 Mar-15 4040 Apr-15 Jun-13 May-15 Jun-15 Sep-13 Jul-15 Aug-15 Dec-13 Sep-15 Oct-15 absorber role Mar-14 Nov-15 27202020 Dec-15 60 Jun-14 Jan-16 EUR/GEL Feb-16 Sep-14 Mar-16 -15
Slide 38: Low public debt
Low public debt Public debt as % of GDP is capped at 60% Breakdown of public debt Sources: MOF Source: MOF, as of December 2018 80% External public debt to GDP, % Total public debt to GDP, % 80% 60% 60% Multilateral 40% 40% 59% Domestic External 19% 81% 20% 20% 0% 0% Bilateral 2003 2016 2004 2005 20
Slide 39: Growth-oriented government reforms (2018-2020)
Growth-oriented government reforms (2018-2020) 1 Structural Reforms 2 Promoting Transit & Tourism Hub ▪ Small government concept ▪ Roads ▪ Optimization of government units and decrease bureaucracy expenses to get small, efficient and ▪ Plan to finish all spinal projects by 2020 – East-West Highway,
Slide 40: Content
Content 1. 1Q19 results discussion | Georgia Capital 2. Portfolio overview 3. Georgian macro overview 4. Appendices Page 40
Slide 41: Portfolio management principles
Portfolio management principles Investment Stage Early Late Exit Acquisition/Entrance Target to Exit Possible Completion of Exit Discovery Young Portfolio Large Portfolio Mature Portfolio Companies Companies Companies Education Renewable Beverages P&C Energy Insurance Housing Auto Service Developmen
Slide 42: Georgia Capital's board of directors
Georgia Capital’s board of directors Board of directors - Georgia Capital PLC Irakli Gilauri, Chairman & CEO David Morrison, Senior Independent Director Experience: formerly BGEO Group CEO; Up to 20 years of Experience: formerly Director at Sullivan & Cromwell with a experience in the banking, inves
Slide 43: Georgia Capital's highly experienced management team
Georgia Capital’s highly experienced management team Georgia Capital Management Irakli Gilauri, Chairman & CEO Nikoloz Gamkrelidze, CEO, Georgia Healthcare Group Formerly CEO of BGEO Group since 2011, joined as CFO of Bank of Previously deputy CEO (Finance) of BGEO Group. Our healthcare business sto
Slide 44: Analyst valuation summary | March 2019
Analyst valuation summary | 31 March 2019 Average of analyst valuation1 | GEL 2.5 billion Listed | GEL 1.6 billion Private | GEL 903 million 828 Water utility & GEL millions 731 Renewable energy 568 Housing development & 528 512 Hospitality & Commercial 483 real estate P&C insurance 216 Beverages 18
Slide 45: Glossary
Glossary • GCAP refers to the aggregation of stand-alone Georgia Capital PLC and stand-alone JSC Georgia Capital accounts. • Georgia Capital and “the Group” refer to Georgia Capital PLC and its portfolio companies as a whole. • NMF – Not meaningful. • NAV – Net Asset Value, represents the net value
Slide 46: Georgia Capital PLC company information
Georgia Capital PLC company information Registered Address 84 Brook Street London W1K 5EH 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 Georg
Slide 47: Georgia Capital
GEORGIA CAPITAL