Lion Finance Group PLC · LSE:BGEO

Lion Finance — BGEO Group — Investor Presentation (April 2018)

52 slides from Lion Finance's investor presentation, April 2018

  1. Slide 1: Demerger to Unlock Additional Long-Term Value for Shareholders

    Demerger to Unlock Additional Long-Term Value for Shareholders Investor Presentation April 2018

  2. Slide 2: Disclaimer Forward looking statements

    Disclaimer 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, financi

  3. Slide 3: Content

    CONTENT 1 Update on Demerger 2 Bank of Georgia 3 Georgia Capital 4 Appendix 3

  4. Slide 4: Update on the Demerger Progress

    UPDATE ON THE DEMERGER PROGRESS Bank of Georgia Group PLC Georgia Capital PLC February 2018 30 April 2018 21 May 2018 Board approval General Meeting Admission of Bank of BGEO Board of Directors shareholder approval Georgia formally approved the Listing of Bank of Georgia Demerger will be subject to

  5. Slide 5: BGEO Demerger Overview

    On the 3rd of July, 2017 BGEO announced intention to demerge BGEO DEMERGER OVERVIEW BGEO Group PLC (“BGEO Group”) into two entities Bank of Georgia Georgia Capital Overall More business: • The only professionally managed Clear play • Enhanced flexibility and stronger publicly listed investment • Two

  6. Slide 6: Two Distinct London-Listed Entities Post Demerger

    TWO DISTINCT LONDON-LISTED ENTITIES POST DEMERGER Industry-leading systemically important universal bank Diversified holding company focused on investing in and focused on Georgia developing businesses in Georgia LSE listed Private Corporate and Retail Banking 57% 100% 100% Investment Banking GHG m2

  7. Slide 7: Content

    CONTENT 1 Update on Demerger 2 Bank of Georgia 3 Georgia Capital 4 Appendix 7

  8. Slide 8: BOG - The Leading Bank in Georgia

    BOG - THE LEADING BANK IN GEORGIA PREMIUM BANK IN ATTRACTIVE BANKING SECTOR  34.4% market share by assets Leading market position1  32.4% market share by loans Systemically important  33.9% market share by client deposits financial institution  29.3% market share by equity  Real GDP average ann

  9. Slide 9: BOG - Strong Track Record of Delivery on Targets

    BOG - STRONG TRACK RECORD OF DELIVERY ON TARGETS Targets 2017 2017 Progress Targets 2018 TARGETS 1 ROAE 20%+ 25.2% 1 ROAE 20%+ KEY 2 Retail Banking 2 Loan Book 20%+ 29.3% 15% - 20% Growth Growth 1 Grow RB’s share in 65% 68.0% loan book Increase Mass Retail Increase Mass Retail 2 3.0 1.8 1 3.0 PRIORI

  10. Slide 10: BOG - Systemically Important Financial Institution

    BOG - SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION THE COMPETITION Peer group’s market share in total assets Peer group’s market share in gross loans 36.4% 38.2% 34.4% 32.4% 15.5% 16.1% 5.2% 3.9% 4.5% 4.3% 4.5% 4.4% BOG TBC LB PCB VTB Others BOG TBC LB PCB VTB Others Foreign banks market share by as

  11. Slide 11: BOG – Performance Highlights

    BOG – PERFORMANCE HIGHLIGHTS Income Statement Highlights Key Ratios Change 2017 2016 2015 GEL millions unless otherwise noted 2017 2016 2015 y-o-y ROAA 3.2% 3.1% 3.1% Net banking interest income 672.10 21.4% 553.61 510.60 ROAE 25.2% 22.2% 21.9% Net fee and commission income 131.47 5.3% 124.91 121.22

  12. Slide 12: BOG – Strong Underlying Performance

    BOG – STRONG UNDERLYING PERFORMANCE Total assets Net loans to customers Client deposits CAGR +19.4% CAGR +20.1% CAGR +18.9% 12,908 11,123 GEL millions GEL millions GEL millions 7,741 7,078 9,051 6,682 5,756 5,367 5,011 2015 2016 2017 2015 2016 2017 2015 2016 2017 Total equity Revenue Profit CAGR +11

  13. Slide 13: BOG – Strong Underlying Performance

    BOG – STRONG UNDERLYING PERFORMANCE Best-in-class Profitability Strong Margins Resilient Loan Portfolio Quality 92.7% ROAE, % 83.4% 86.7% 25.2% 14.7% 14.2% 14.2% 21.9% 22.2% 7.7% 7.4% 7.3% GEL millions 295 301 241 5.1% 4.7% 4.7% 2015 2016 2017 2015 2016 2017 2015 2016 2017 NIM Loan yields Cost of fu

  14. Slide 14: BOG – Retail Banking Overview

    BOG – RETAIL BANKING OVERVIEW RB Loans RB Deposits Strong Margins CAGR +34.3% CAGR +31.8% 17.6% 16.8% 16.1% 5,044 3,902 3,267 2,462 2,414 9.6% 9.2% GEL millions 8.5% GEL millions 2,796 1,880 2,372 2,356 1,518 1,810 3.9% 3.3% 2.9% 1,393 2,583 1,278 1,531 911 487 603 2015 2016 2017 2015 2016 2017 2015

  15. Slide 15: BOG – Corporate Investment Banking Overview

    BOG – CORPORATE INVESTMENT BANKING OVERVIEW CIB Loans CIB Deposits Strong Margins CAGR +1.1% CAGR +9.7% 10.7% 10.4% 10.7% 3,457 2,395 3,059 2,260 2,871 2,211 GEL millions GEL millions 2,181 2,073 2,287 1,994 1,877 4.1% 1,990 3.9% 4.0% 3.9% 3.6% 3.4% 1,276 798 772 221 400 383 2015 2016 2017 2015 2016

  16. Slide 16: BOG - Board of Directors

    BOG - BOARD OF DIRECTORS Robust Corporate Governance based on UK Corporate Governance Code Neil Janin, Independent Non-Executive Chairman Kaha Kiknavelidze, Chief Executive Officer Experience: formerly Director at McKinsey & Company in Paris; Experience: With the Group since 2008; originally joined

  17. Slide 17: BOG - Highly Experienced Management Team

    BOG - HIGHLY EXPERIENCED MANAGEMENT TEAM Senior Executive Compensation Policy will continue to apply to top executives and envisages long-term deferred and discretionary awards of securities and no cash bonuses to be paid to such executives Kaha Kiknavelidze, Chief Executive Officer David Tsiklauri,

  18. Slide 18: Content

    CONTENT 1 Update on Demerger 2 Bank of Georgia 3 Georgia Capital 4 Appendix 18

  19. Slide 19: Georgia Capital – Strategy

    GEORGIA CAPITAL – STRATEGY Georgia Capital strategy is based on three pillars 1 2 3 Capital allocation & Georgia 3-fundamental enablers Managing investments Leading economy in the region Access to capital Capital allocation  Diversified non-commodity reliant economy with  Highly disciplined approa

  20. Slide 20: Access to a 2.8bn Market without Customs Duties

    1 2 3 Capital 3-fundamental allocations & Georgia enablers managing investments Access to a 2.8bn Market without Customs Duties Georgia is the second country in the world, after Switzerland, with FTAs with both EU and China Georgia highlights  WTO member since 2001  Very simple and service-oriente

  21. Slide 21: Ground Floor Opportunity

    GROUND FLOOR OPPORTUNITY 1 2 3-fundamental 3 Capital allocations & Georgia enablers managing investments Georgian Economy 1990-2017: collapse, stabilization, acceleration, crisis, rebound, sustainable economic growth and finally strong future growth potential Real GDP Index, 1990=100 160 140 120 100

  22. Slide 22: Georgia Capital Value Proposition – 3-Fundamental Enablers

    GEORGIA CAPITAL VALUE PROPOSITION – 1 2 3-fundamental 3 Capital allocations & 3-FUNDAMENTAL ENABLERS Georgia enablers managing investments 1 2 Superior access to capital Access to management  Only investment company in Georgia  Reputation among talented managers as the - “best group to work for” 

  23. Slide 23: Georgia Capital as an Investment Platform

    GEORGIA 2. CAPITAL AS 3-FUNDAMENTAL AN INVESTMENT ENABLERS 1 2 3-fundamental 3 Capital allocations & PLATFORM Georgia enablers managing investments Private Equity 2% Management Fee n/a  20% Success Fee n/a  c.2% Operating Expenses  n/a Holdco operating expenses - c.2% of NAV Key takeaways  Cash

  24. Slide 24: Capital Allocation & Harvesting

    CAPITAL 2. ALLOCATION 3-FUNDAMENTAL & HARVESTING ENABLERS 1 2 3-fundamental 3 Capital allocations & INVESTMENTS Georgia enablers managing investments Georgia Focused Diversified Investment Company Targeting Minimum IRR of 25% 1  Highly disciplined approach to unlock value through investments, targe

  25. Slide 25: Georgia Capital Business Model

    1 2 3 Capital GEORGIA CAPITAL BUSINESS MODEL Georgia 3-fundamental enablers allocations & managing investments Investment Stage Early Late Exit Acquisition/Entrance Target to Exit Possible Completion of Exit Young Portfolio Large Portfolio Mature Portfolio Discovery Companies Companies Companies Por

  26. Slide 26: Georgia Capital's US$300mm Eurobonds Issuance

    GEORGIA 2. CAPITAL’SENABLERS 3-FUNDAMENTAL US$300MM EUROBONDS ISSUANCE First ever non-sovereign owned corporate international bond from Georgia  US$ 300 million, 6 year, 6.125% Georgia Capital’s risk management policy key Notes: Eurobonds measures Listing:  Irish Stock Exchange, GEM market Notes r

  27. Slide 27: Successful Track Record of Delivering Strong Results

    SUCCESFUL TRACK RECORD OF DELIVERING STRONG RESULTS Total 2017 EBITDA of GEL 211 m1 Portfolio value of GEL 2.2 billion | 31-Dec-2017 108 Pro-forma fair value of 19.9% equity 933 LSE Market value adjustment Book value of equity 732 72 GEL millions GEL millions 662 27 285 17 149 271 64 1 51 (2) GHG GG

  28. Slide 28: 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 With the Group since 2004. Formerly an EBRD (European With the Group since 2005. Our healthcare business story starts with Nick, who start

  29. Slide 29: Georgia Capital's Board of Directors

    GEORGIA GEORGIACAPITAL’S CAPITAL’SBOARD BOARDOF OFDIRECTORS DIRECTORS Board of Directors - Georgia Capital PLC Irakli Gilauri, Chairman & CEO David Morrison, Senior Independent Director Experience: formerly EBRD banker; MS in banking Experience: formerly Director at Sullivan & from CASS Business Sch

  30. Slide 30: Georgia Capital - Performance Highlights

    GEORGIA CAPITAL - PERFORMANCE HIGHLIGHTS P&L Highlights For the year ended 31 December GEL millions unless otherwise noted 2017 2017-2016 Change (%) 2016 2015 Gross utility and energy profit 88 128% 39 - Gross real estate profit 35 62% 22 21 Gross insurance profit 27 7% 25 21 Gross beverage profit 2

  31. Slide 31: Healthcare and Pharmacy Business (GHG) Overview

    HEALTHCARE AND PHARMACY BUSINESS (GHG) OVERVIEW Key facts Market opportunity Only Premium-listed company in the Georgian corporate industry Total healthcare market (including healthcare services and pharmacy) GEL million Market Leader 6,000  24.5% market share by number of beds (3,014) 5,000 4,397

  32. Slide 32: Utility and Energy Business (GGU) Overview

    UTILITY AND ENERGY BUSINESS (GGU) OVERVIEW Key facts Market opportunity GWh Utility 22,000 6.1 17,000  Natural monopoly 12,000 Twh  Stable cash collection rates 7,000 2,000  Growing dividend payment capacity 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

  33. Slide 33: Real Estate Business (m²) Overview

    REAL ESTATE BUSINESS (m²) OVERVIEW Key facts Market opportunity Solid track record  Generated IRR ranging from 31% to 329% on 7 completed residential projects Tourist inflow expected to double over  Cost advantage through the vertical integration of its construction, project management the next 3

  34. Slide 34: P&C Insurance Business (Aldagi) Overview

    P&C INSURANCE BUSINESS (ALDAGI) OVERVIEW Key facts Market opportunity Industry investment rationale Penetration (GPW I GDP) & Density (GPW per Capita USD)(1)  Underpenetrated insurance market  Lack of digitalisation providing first-mover advantage 8,0 00 12.0%  Compulsory border TPL kicked in fro

  35. Slide 35: Beverage Business (Teliani Valley) Overview

    BEVERAGE BUSINESS (TELIANI VALLEY) OVERVIEW Key facts Market opportunity Industry investment rationale Low consumption per capita compared to peers  High growth sector which has doubled during last 5 years to GEL 1.8 billion Beer consumption in Peer Countries 2015 (l/capita) 2.5  High multiple bus

  36. Slide 36: Content – Appendix: Track record of disciplined acquisitions

    CONTENT 1 Update on Demerger 2 Bank of Georgia 3 Georgia Capital 4 Appendix – Track record of disciplined acquisitions | Georgia Capital 36

  37. Slide 37: Track Record of Disciplined Acquisitions

    TRACK RECORD OF DISCIPLINED ACQUISITIONS Selected acquisitions Key takeaways Privatbank Valuation: 1.12 P/BV • We have been disciplined when Consideration: US$ 48.6mln investing, by buying cheaply Aldagi (Insurance) GGU (75%) (Water utility) Valuation: 0.94xP/GPW GGU (25%) (Water utility) Valuation:

  38. Slide 38: Content – Appendix: Georgia Market Overview

    CONTENT 1 Update on Demerger 2 Bank of Georgia 3 Georgia Capital 4 Appendix – Georgia Market Overview 38

  39. Slide 39: Georgia's Key Economic Drivers

    GEORGIA’S KEY ECONOMIC DRIVERS Liberal Top performer globally in WB Doing Business over the past 12 years  Liberty Act (effective January 2014) ensures a credible fiscal and monetary framework: economic  Public expenditure/GDP capped at 30%; Fiscal deficit/GDP capped at 3%; Public debt/GDP capped

  40. Slide 40: Institutional Oriented Reforms

    INSTITUTIONAL ORIENTED REFORMS Ease of Doing Business | 2018 (WB-IFC Doing Business Report) Economic Freedom Index | 2018 (Heritage Foundation) New Zealand 1 Estonia 7 Singapore 2 US 6 UK 8 Georgia Top 9 in Europe region out of 44 countries Norway 8 16 Georgia 9 up from 16th in 2017 USA 18 Estonia 1

  41. Slide 41: Diversified Resilient Economy

    DIVERSIFIED RESILIENT ECONOMY Economy Diversified Nominal GDP Structure, 2017(5)  Leading economy in the region on the back of wide sector activities Hotels & rest.  Diversified non-commodity reliant economy with consistently high GDP growth across the last 3.0% decade Trade Financial interm. 17.6

  42. Slide 42: Growing Hub with Diversified Business Opportunities

    GROWING HUB WITH DIVERSIFIED BUSINESS OPPORTUNITIES Rising Tourism Revenue(1) Exports of Goods and Services(2) 27% 2,751 22% 7.6 7.2 7.0 6.0 6.2 6.2 2,166 1,936 18.1% 5.2 1,720 1,787 3.6 15.1% 4.0 4.2 4.0 1,411 13.8% 3.7 3.0 2.9 3.2 3.2 3.5 10.7% 10.8% 2.2 2.5 3.2 8.9% 1.6 955 2.4 1.3 2.4 1.9 659 2.

  43. Slide 43: Sovereign Ratings with Stable Outlook and Favorable Macro Fundamentals

    SOVEREIGN RATINGS WITH STABLE OUTLOOK AND FAVORABLE MACRO FUNDAMENTALS Key Ratings Highlights Revenues and expenditures, consolidated budget(1) Rating Agency Rating Outlook Affirmed 14,000 70% 12,000 29.9% 60% 29.9% September 10,000 30.9% 50% Ba2 Stable 37.2% 30.4% 2017 8,000 33.9% 30.7% 30.6% 30.2%

  44. Slide 44: Current Account Deficit Supported by FDI

    CURRENT ACCOUNT DEFICIT SUPPORTED BY FDI Current Account Balance: original vs. adjusted (% of Nominal Current Account Balance (% of Nominal GDP)(1,2) GDP)(1,2) Tourism revenues on the rise 5% For the first time in Georgia, the CA balance was positive in 3Q17, excluding reinvestment. Trade deficit dr

  45. Slide 45: Diversified Foreign Trade

    DIVERSIFIED FOREIGN TRADE Imports of goods and services Remittances up from all major countries 25 140 60% 120 50% 20 100 40% 80 30% 15 60 20% 9.4 40 9.1 9.3 10.0 8.7 8.5 10% 10 7.5 8.0 20 6.1 1.5 1.6 1.7 0% 5.9 5.2 1.7 1.7 2.0 0 1.2 1.3 -10% 3.3 4.4 -20 5 0.9 1.0 1.1 1.8 2.5 0.7 8.3 -40 -20% 6.2 6.

  46. Slide 46: Floating Exchange Rate - Policy Priority

    FLOATING EXCHANGE RATE - POLICY PRIORITY Currency weakening vs US$(1) Real Effective Exchange Rate (REER) (1) 53.8% 135 135 52.9% 49.6% 130 130 47.8% 42.4% 44.2% 125 125 120 120 115 115 28.1% 110 110 105 105 15.2% 15.9% 100 100 8.2% 95 95 90 90 85 85 Aug-03 Feb-06 Nov-04 Sep-06 Dec-07 Aug-08 Nov-09

  47. Slide 47: Demonstrated Fiscal Discipline

    DEMONSTRATED FISCAL DISCIPLINE High Ratio of Government Capital Spending…(1) …Provides Low Cost Fiscal Stimulus to the Economy...(1) Current Expenditures, share in total 100% Capital Expenditures and net Lending, share in total 1,600 8% 6.7% 1,400 7% 80% 1,200 6% 79.8% 79.9% 81.6% 78.0% 79.9% 75.9%

  48. Slide 48: Low Public Debt

    LOW PUBLIC DEBT Fiscal Deficit(1) Breakdown of Public Debt(1) 0% -1% -2% -3.0% -3.4% -3% -4.1% Multilateral External public debt -4% 59% portfolio -5% weighted average -6% Domestic External interest rate 2.0% 21% 79% -7% -8% Contractual maturity -9% 21 years -10% Bilateral 2017E 2003 2004 2005 2006

  49. Slide 49: Inflation Targeting Since 2009

    INFLATION TARGETING SINCE 2009 Annual Inflation(1) Monthly Inflation Rate(1) 9% 9% 3.5% 3.5% 8% 8% 3.0% 3.0% 7% 7% 2.5% 2.5% 6% 6% 2.0% 2.0% 5% 5% 4% 1.5% 1.5% 2.8% 4% 3% 3% 1.0% 1.0% 2% 2% 0.5% 0.5% 1% 1.8% 1% 0.0% 0.0% 0% 0% -0.5% -0.5% -1% -1% -1.0% -1.0% Jan-14 Mar-14 May-14 Jan-15 Jan-16 May-16

  50. Slide 50: Growing and Well Capitalised Banking Sector

    GROWING AND WELL CAPITALISED BANKING SECTOR Summary Banking sector assets, loans and deposits • Prudent regulation ensuring financial stability 26.2% CAGR − High level of liquidity requirements from NBG at 30% of liabilities, resulting in 40 34.6 banking sector liquid assets to client deposits of 40

  51. Slide 51: Underpenetrated Retail Banking Sector Provides Room for Further Growth

    UNDERPENETRATED RETAIL BANKING SECTOR PROVIDES ROOM FOR FURTHER GROWTH Banking sector corporate and households loans to GDP Mortgage loans Source: NBG 60% 3,838 54,538 50% 3,099 41,753 37,472 40% 28% 31% 29,840 24% 2,156 21% 80.1% 30% 18% 13% 11% 11% 13% 14% 91.7% 28,431 33,331 20% 9% 6% 87.2% 10% 4

  52. Slide 52: Government 4-Pillar of Reforms

    GOVERNMENT 4-PILLAR OF REFORMS 1 Structural Reforms 2 Promoting Transit & Tourism Hub  Tax Reform  Roads  Corporate income tax reform  Plan to finish all spinal projects by 2020 – East-West Highway, other  Enhancing easiness of tax compliance supporting infrastructure  Capital Market Reform 

BGEO Group — Investor Presentation (April 2018) on 6ix