Lion Finance Group Plc · LSE:BGEO
Lion Finance — BGEO Group — Investor Day (November 2015)
44 slides from Lion Finance's investor day presentation, November 2015
Slide 1: Capturing Growth Opportunities
Capturing Growth Opportunities Performance on group strategy Speaker: Irakli Gilauri, Group CEO www.BGEO.com November 2015
Slide 2: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years www.BGEO.com page 2 November 2015
Slide 3: Platform for Efficiently Allocating Cash & Human Capital
Renaming the group to reflect 4x20 strategy Platform for Efficiently Allocating Cash & Human Capital BGEO is a Georgia focused bank holding company with investment arm BGEO aims to deliver on its 4X20 strategy by allocating capital efficiently www.BGEO.com page 3 November 2015
Slide 4: 4x20 strategy – Overview
4x20 strategy – Overview We are a Georgia Focused Banking Group with an Investment Arm Banking Business Investment Business 1 ROE c.20% 4 2 Min. IRR of 20% Tier I c.20% Target investments with min. 20% IRR and partial or full exit in max 6 years 3 Retail loan book Growth c.20% Profit Contribution At
Slide 5: 4x20 strategy – Strong performance in 2015, 9M
4x20 strategy – Strong performance in 2015, 9M We are a Georgia Focused Banking Group with an Investment Arm Banking Business Investment Business 1 ROE •ROAE of 23.3% in 3Q15 c.20% •ROAE of 20.6% in 9M15 121% IRR from 4 Min. IRR GHG IPO 2 N/A – became non-relevant: Tier I 1.Regulation moved to Basel
Slide 6: 4x20 strategy going forward
4x20 strategy going forward We are a Georgia Focused Banking Group with an Investment Arm Banking Business Investment Business 1 3 ROE c.20% Min. IRR of 20% Target investments with min. 20% IRR and partial or full exit in max 6 years 2 4 Growth c.20% Profit up to 20% of retail loan book of BGEO Grou
Slide 7: Solid regular dividend payout from banking business
Solid regular dividend payout from banking business Payout 11% 16% 29% 34% 31% 2010 2011 2012 2013 2014 ratio CAGR’10-14 3.00 +62.7% 2.50 2.10 2.00 Dividend GEL 2.00 1.50 1.50 per share 1.00 0.70 0.50 0.30 0.00 2010 2011 2012 2013 2014 www.BGEO.com page 7 November 2015
Slide 8: 3 forms of Capital Returns
3 forms of Capital Returns 3 forms of Capital Retuns Capital 1 2 3 Return forms Cash Dividends Stock dividends Share buy-back As of today we are starting US$ 10mln buy-back for management trust Strategy 3 capital returns 3 capital returns Capital Announced during 2014-2019 during 2019-2024 Return ti
Slide 9: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years www.BGEO.com page 9 November 2015
Slide 10: BGEO – Strong group performance in 2015, 9M | Revenues
BGEO – Strong group performance in 2015, 9M | Revenues Revenues, BGEO +36.0% 250.0 +12.7% 216.6 200.0 +7.7% 159.2 GEL millions 150.0 131.2 141.3 100.0 50.0 0.0 3Q12 3Q13 3Q14 3Q15 Y-o-Y growth www.BGEO.com page 10 November 2015
Slide 11: BGEO – Strong group performance in 2015, 9M | Profit
BGEO – Strong group performance in 2015, 9M | Profit Profit, BGEO +29.8% 90.0 +6.3% 80.9 80.0 +25.6% 70.0 62.3 58.6 GEL millions 60.0 50.0 46.6 40.0 30.0 20.0 10.0 0.0 3Q12 3Q13 3Q14 3Q15 Y-o-Y growth www.BGEO.com page 11 November 2015
Slide 12: BGEO – Strong group performance in 2015, 9M | EPS
BGEO – Strong group performance in 2015, 9M | EPS EPS, BGEO +17.2% 2.50 +5.4% +22.2% 2.04 2.00 1.74 1.65 GEL millions 1.50 1.35 1.00 0.50 0.00 3Q12 3Q13 3Q14 3Q15 Y-o-Y growth www.BGEO.com page 12 November 2015
Slide 13: Banking Business – Strong performance in 2015, 3Q
Banking Business – Strong performance in 2015, 3Q Income Statement highlights GEL’000 3Q 2015 3Q 2014 Change y-o-y Net interest income 129,249 89,977 43.6% Net non-interest income 60,796 46,310 31.3% Total revenue 190,045 136,287 39.4% Operating expenses (66,167) (54,718) 20.9% Pre-provision income
Slide 14: Banking Business – Strong performance in 2015, 9M
Banking Business – Strong performance in 2015, 9M Income Statement highlights GEL’000 9M 2015 9M 2014 Change y-o-y Net interest income 378,710 256,208 47.8% Net non-interest income 171,468 127,912 34.1% Total revenue 550,178 384,120 43.2% Operating expenses (196,687) (158,493) 24.1% Pre-provision in
Slide 15: GHG – Outstanding performance in 2015, 9M
GHG – Outstanding performance in 2015, 9M Income Statement GHG Consolidated Healthcare services Medical insurance highlights GEL’000 Change Change Change 9M 2015 9M 2014 9M 2015 9M 2014 9M 2015 9M 2014 y-o-y y-o-y y-o-y Revenue 171,430 142,711 20.1% 137,028 101,849 34.5% 40,724 59,171 -31.2% Gross p
Slide 16: GHG roadmap | Creating single largest healthcare player
GHG roadmap | Creating single largest healthcare player EV/EBITDA BGH Investment Year Milestone Investment per bed GEL mln Facilities & beds Decision to 2011 State infrastructure reform starts 6 145 invest Istitutionalising the business Started investing in hospitals Merged with Block Georgia (non-c
Slide 17: BGEO achieved 121% IRR at GHG IPO
BGEO achieved 121% IRR at GHG IPO 2011-2015 2015 GEL 153m GEL 553m invested valued IPO Investment Valued (GEL mln) (GEL mln) 142 553 Market Total equity Capitalisation 191 792 Achieved 3.9x money at IPO www.BGEO.com page 17 November 2015
Slide 18: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years www.BGEO.com page 18 November 2015
Slide 19: The way we invest & manage the companies
The way we invest & manage the companies 1 Be opportunistic & disciplined • Big opportunities = Small economy + limited capital & management skills • Start small and step up investment as company gets institutionalised • Buy cheap 2 In scale we trust • Targeting 30%+ market share • Economy of scale
Slide 20: BGEO – Capital allocation
BGEO – Capital allocation Data as of 30 Sep, 2015 unless otherwise stated GEL 1,668mln Banking Business Investment Business Unallocated Cash 6 At a glance 74 20 % % % GEL 1,228mln GEL 329mln GEL 111mln ROAE / IRR 25% 15% 43% 100% -26% 22% 121% 65% n/a n/a n/a 600 566 525 As a result of IPO, 500 mark
Slide 21: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years • m2 Real Estate www.BGEO.com page 21 November 2015
Slide 22: m2 Real Estate – Strong project performance and pipeline
m2 Real Estate – Strong project performance and pipeline No of Total Apartments Sales Land value Project status projects Apartments sold % US$ mln unlocked, US$m Completion date Completed 3 866 97% 73.0 8.5 n/a Dec’2015 Ongoing 3 803 70% 45.5 7.9 Mar’2016 Apr’2016 Pre-sales 1 819 16% 9.0 5.8 Sep’201
Slide 23: m2 Real Estate – Outstanding project IRR
m2 Real Estate – Outstanding project IRR Project IRR 165% 71% 58% 47% 46% 31% 31% Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 www.BGEO.com page 23 November 2015
Slide 24: m2 Real Estate – Strategy
m2 Real Estate – Strategy Real estate developer • Continue unlocking land value by developing housing projects • Start developing 3rd party lands Business lines • Accumulate yielding assets, by: • Mainly retain commercial real estate in residential buildings • Develop hotels and apartments (mixed-us
Slide 25: m2 Real Estate – Hotel strategy
m2 Real Estate – Hotel strategy 3-star hotel opportunity in Tbilisi Develop 3 hotels in next 7 years in Visitors in Georgia Limited supply – last Tbilisi catering to budget travelers 30% CAGR’03-14 Branded hotel opening in Tbilisi in 2012 Distribution of rooms in Tbilisi 7,000 by accommodation type,
Slide 26: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years • Renewable Energy Business www.BGEO.com page 26 November 2015
Slide 27: Renewable Energy opportunity
Renewable Energy opportunity 1 Underpenetrated Only 20-25% of Georgia’s hydro resources utilised industry 2 Cheap to develop US$ 1.5mln for 1MW development in Georgia Opportunities 3 Strategic partnership Strategic partnership with industry specialists – RP Global (Austria) 4 Small investment Only U
Slide 28: Renewable Energy – 5 year roadmap
Renewable Energy – 5 year roadmap Establish renewable energy platform, Goal targeting 100MW+ in 4 medium size hydro power plants by 2019 Development 2 ongoing projects – 105MW, 4 HPPs Mestiachala Zoti Projects 1&2 1&2 Pipeline Estimated Capacity 100 MW 50MW 55MW Estimated Project Timeline2 2017-2018
Slide 29: Renewable Energy – 5 year roadmap
Renewable Energy – 5 year roadmap Establish renewable energy platform, Goal targeting 100MW+ in 4 medium size hydro power plants by 2019 Financing BGEO contribution US$ 28mln over next 4 years (estimated total equity US$ 43mln) 40.0 Small Staged investments 35.0 investment 4 years Pipeline 30.0 unti
Slide 30: Renewable Energy – 5 year roadmap
Renewable Energy – 5 year roadmap Goal Expected IRR 25%+ Math Total BGEO share EBITDA (run rate) US$ 15.9mln US$ 10.3mln Equity contribution US$ 43mln US$ 28mln 1 Sale in parts Exit opportunities 2 Scale up (2nd stage) and public listing or strategic sale www.BGEO.com page 30 November 2015
Slide 31: GGU – Overview
GGU – Overview Business overview Highlights Two core activities: • We acquired 25% of shareholding, December 2014 1. Water utility – Provides water to 1.4mln people (1/3 of Georgia) • We had an option to acquire an additional 24.9% share in GGU. We did not exercise this 2. Generation of electric pow
Slide 32: GGU – EBITDA dynamics
GGU – EBITDA dynamics GGU EBITDA CAGR’14-18 90 +11.1% 80 77.3 66.5 69.1 70 GEL millions 58.7 60 50.8 50 40 30 20 10 0 2014 2015E 2016F 2017F 2018F EBITDA growth drivers • Cost saving from reduction in water delivery losses to 40%, from current 50% • Double effect from water delivery loss reduction –
Slide 33: Contents
Contents Update on strategy Update on performance Planned capital allocations for next 2-3 years • Teliani Valey www.BGEO.com page 33 November 2015
Slide 34: Teliani Valley – Business overview
Teliani Valley – Business overview Goal Become leading beverages producer and distributor in Caucasus Strong existing franchise New business line With wide Leading wine producer Launch beer production distribution platform Teliani Russian Federation Caspian Black Sea Business Sea Poti Georgia Batumi
Slide 35: Teliani Valley – Exclusive Heineken producer in Caucasus
Teliani Valley – Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Strong management with Low consumption per capita Highly concentrated market proven track record compared to peers Domestic market segmentation (Q1 Beer Consumption in Peer Countries 2014 2015) (l/capita
Slide 36: Teliani Valley – Exclusive Heineken producer in Caucasus
Teliani Valley – Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Investment EBITDA projection Exit options EBITDA Evolution, USDmn (2015- 2020) • Total investment – US$ 37.9mln, of 23.2% Financials which US$ 15mln is equity 15.0 20.5% 21.2% 25% 18.4% 12.0 20% • BGEO t
Slide 37: BGEO – Planned capital allocations
BGEO – Planned capital allocations US$ mln 2015 2016 2017 2018 Total Energy & Utility - 3 7 15 25 Teliani Valley (Heineken Project) 10 - - - 10 m2 Real Estate - - - - 0 Total 10 3 7 15 35 Cash balance at BGEO is GEL 111.5 million www.BGEO.com page 37 November 2015
Slide 38: BGEO Group structure
BGEO Group structure Investors Regular dividends Capital Returns Cash buffer Banking Business Investment Business M2 Retail Corporate Investment GHG GGU BGEO Banking Banking Management (Healthcare) (Real Estate) (Utilities) Group Aldagi BNB GRE Teliani Valley (P&C (Bank in (Renewable (Wine & Insuran
Slide 39: Questions?
Questions? www.BGEO.com November 2015
Slide 40: Wrap-up
Wrap-up www.BGEO.com November 2015
Slide 41: Targets & priorities – Banking Business
Targets & priorities – Banking Business Current Target 3-year Targets 9M 2015 1 ROAE c. 20% 20%+ 21% 2 Retail Banking c.20% 20%+ 48% Growth 3 GrowinRetail share loan book - 65% 54% Increase Product 4 to Client Ratio - 3.0 1.7 De-concentrate 5 Corporate Loan - 10% Top 10 borrowers 13% Book 6 NIM 7.5%
Slide 42: Targets & priorities – Investment Business
Targets & priorities – Investment Business Target description Healthcare Business Double 2015 revenue in 2018, with 30% EBITDA margin (GHG) Real Estate Business Capital Return of US$ 20-25 million by 2019 (m2 Real Estate) Utility Business Achieve EBITDA of GEL c. 80mln in 2018 (from GEL 51mln in 201
Slide 43: www.BGEO.com
www.BGEO.com homepage Most Main visited menu documents 1 3 News Research Reports 2 4 www.BGEO.com page 43 November 2015
Slide 44: Disclaimer
Disclaimer Forward Looking Statements This presentation contains forward-looking statements that are based on current beliefs or expectations, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or curr