Georgia Capital PLC · LSE:CGEO
Georgia Capital — H1 2020 Earnings Presentation
128 slides from Georgia Capital's earnings presentation, Aug 20, 2020
Slide 1: Investor presentation
Investor presentation 20 August Page 12020
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. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 3
Slide 4: COVID-19 statistics
COVID-19 update | Georgia COVID-19 statistics Lowest number of confirmed cases and deaths per capita in the region Georgia: COVID-19 response COVID-19 cases: dynamics in Georgia* 1600 Total Recovered Total Cases Active Cases – Border checks began on 27 February and schools switched to distance learn
Slide 5: Government measures
COVID-19 update | Georgia Government measures US$ 3 billion funding facility Economic Plan – US$ 3 billion (predominantly loans) from international donors (incl. US$ 450m from IMF): Total budget – GEL 3.5 billion – US$1.5 billion intended for the private sector ➢ Social aid GEL 1.03 billion – US$1.5
Slide 6: Macroeconomic fundamentals in 1H20
COVID-19 update | Georgia Macroeconomic fundamentals in 1H20 Monthly Economic Activity Estimate, y-o-y growth Fast indicators ➢ Economy contraction has been eased from April and GDP contraction in June was 7.7% y-o-y. ➢ Merchandise trade and money transfers have recovered significantly, with remitta
Slide 7: Macroeconomic fundamentals in 1H20 (cont’d)
COVID-19 update | Georgia Macroeconomic fundamentals in 1H20 (cont’d) Unemployment rate 1H20 tax revenues | Actual vs. Planned 6.0 +0.9ppts 100.4% 5.0 4.57 4.59 14.0% +0.4ppts 12.8% 4.0 13.0% 12.3% 12.3% GEL billions 12.1% 12.2% 11.9% 12.0% 11.4% 3.0 11.1% 10.9% 101.6% 11.0% 100.1% 2.0 1.63 1.63 1.6
Slide 8: Our response to COVID-19
COVID-19 update | Georgia Capital Our response to COVID-19 We implemented a cash accumulation and preservation strategy at the end of 1Q20 COVID-19 measures Progress in 2Q20 Limited capital allocations at GCAP level, only critical investments No capital allocations in 2Q20 throughout the remainder o
Slide 9: Rebound in revenues across all portfolio companies
COVID-19 update | Georgia Capital Rebound in revenues across all portfolio companies Rebound in revenues across all portfolio companies from April’s lows, resulting in 11% y-o-y aggregated revenue growth* in June Change (y-o-y) +12.6% +15.5% +12.0% -16.7% -12.8% +11.0% +6.9% 146 135 137 +48.0% 128 G
Slide 10: Monthly performance analysis | impact of COVID-19
COVID-19 update | Georgia Capital Monthly performance analysis | impact of COVID-19 GHG | Consolidated revenue GHG | Healthcare Services revenue Change (y-o-y) Change (y-o-y) +6.9% +15.7% +9.2% -19.4% -15.2% +6.0% +5.1% +0.7% +4.7% -15.9% -43.7% -26.7% +1.2% +0.1% 28.4 28.5 28.1 95.0 30.0 27.5 89.3
Slide 11: Monthly performance analysis | impact of COVID-19 (cont’d)
COVID-19 update | Georgia Capital Monthly performance analysis | impact of COVID-19 (cont’d) Water Utility Water supply revenue Electricity sales revenue Change (y-o-y) Change (y-o-y) +9.1% +6.4% -13.7% -29.7% -24.8% -12.7% -5.5% +31.7% -130.1% -109.1% -6.1% -72.6% -80.4% -78.7% 13.0 12.5 11.1 11.2
Slide 12: Monthly performance analysis | impact of COVID-19 (cont’d)
COVID-19 update | Georgia Capital Monthly performance analysis | impact of COVID-19 (cont’d) Renewable Energy Revenue Average selling price per kw, US$* Change (y-o-y) Change (y-o-y) +6.8% -21.9% +23.3% +18.8% +69.6% +29.8% +19.2% +0.2% -1.4% -2.7% -0.7% +22.1% +27.2% +14.6% 0.06 0.06 0.06 0.06 GEL
Slide 13: Monthly performance analysis | impact of COVID-19 (cont’d)
COVID-19 update | Georgia Capital Monthly performance analysis | impact of COVID-19 (cont’d) Beverages Wine revenue Beer revenue Change (y-o-y) Change (y-o-y) -40.9% -63.5% -11.7% -42.3% -35.5% +18.7% +32.7% +55.8% +10.7% +24.1% +11.1% +12.6% +8.8% +11.4% 5.0 8.0 6.9 4.5 6.2 3.6 GEL millions GEL mil
Slide 14: Monthly performance analysis | impact of COVID-19 (cont’d)
COVID-19 update | Georgia Capital Monthly performance analysis | impact of COVID-19 (cont’d) Commercial Real Estate Cash inflows at commercial RE Cash collection rate 87.2% 99.6% 96.4% 95.3% 96.8% 97.2% 97.2% 400 350 318 296 US$ thousands 300 268 247 254 250 215 218 200 150 100 January February Marc
Slide 15: Strong operating cash flow generation across portfolio companies
COVID-19 update | Georgia Capital Strong operating cash flow generation across portfolio companies Portfolio company aggregated* operating cash flow generation up 96.0% y-o-y to GEL 179.8 million in 1H20 Late stage: +48% Early stage: +4.9x GEL 42.7 GEL 63.1 GEL (7.3) GEL 28.0 +96.0% 179.8 +57.7% +63
Slide 16: COVID-19 impact
COVID-19 update | Georgia Capital COVID-19 impact Level of resilience across our portfolio High Medium Low Renewable Housing Hospitality Water Utility P&C Insurance Digital Services Energy Development Commercial GHG Education Beverages Auto Service Real Estate Having focused on financial discipline
Slide 17: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 17
Slide 18: CGEO:LN performance
CGEO:LN performance LSE premium listed, with more than 90% institutional shareholder base GCAP shareholders allocation by geography Number of outstanding shares as at 30-Jun-20 As of 18 August 2020 39,384,712 USA (2,650,375) Average daily 31.6% 27.1% 3,435,438 37,811,929 (2,357,846) trading volume –
Slide 19: Our portfolio at a glance | 30 June 2020
Our portfolio at a glance | 30 June 2020 Management platform Public portfolio Private portfolio – GEL 1,096mln – GEL 730mln Late Stage – GEL 607mln Pipeline - GEL 26mln2 Georgia Housing P&C Water Utility Auto Service Healthcare Group Development Insurance 70.6%5 100% 100% 100% 90%-100%4 GEL 336mln1
Slide 20: Portfolio highlights | June 2020
Portfolio highlights | 30 June 2020 Gross cash invested of GEL 1.3bln Net cash invested of GEL 452mln Portfolio fair value of GEL 1.8bln Listed Private late stage Private early stage Pipeline Original investment 252 129 215 93 10 144 197 162 56 14 9 MOIC1 1.9 6.3 2.4 1.9 17.8 1.3 0.7 0.4 1.4 1.1 NMF
Slide 21: Solid track record
Solid track record Created three listed companies from Georgia, on the premium segment of the London Stock Exchange Acquisitions Capital raise Exit IRR The Georgia Capital management team Uniquely positioned given the access 121% IRR from GHG IPO has a track record of executing more to capital in a
Slide 22: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 22
Slide 23: Georgia Capital – Your ground floor investment opportunity
Georgia Capital – Your ground floor investment opportunity Capitalizing on fast-growing economy with strong governance, management and access to capital Access to capital Access to management Three fundamental enablers Strong corporate governance Page 23
Slide 24: Strong corporate governance
Strong corporate governance How we run Georgia Capital Strong board, composed solely of independent directors with extensive international experience Approximately 40 employees at the management company level Highly experienced management team in each portfolio company with a strong measure of indep
Slide 25: Strong corporate governance
Strong corporate governance Aligned shareholder and management interests by share compensation Platform costs - targeted at maximum c.2% of MCAP Key things to know Cash preservation is a key target for GCAP: two thirds of total 1 operating expenses are related to share-based compensation. 33% c. 1%
Slide 26: Managing investments
Managing investments Share ownership plan of management in portfolio companies Investment stage Pipeline Acquisition/ Early Late Target to Listed Possible Entrance completion exit Discovery Young Portfolio Large Portfolio Mature Portfolio of Exit Companies Companies Companies Sector Digital Auto Edu
Slide 27: Our investment philosophy
Our investment philosophy We will pick well, we will manage very well and sell extremely well Cash generation at both GCAP and portfolio company level is a key success factor 2nd exit 1st exit: cash-out ▪ Trade sale, IPO, Fund ▪ Cash inflows through leveraging up and/or Entry dividend payouts ▪ Usin
Slide 28: Capital allocations
Capital allocations 360-degree analysis – a strong foundation for value creation Buying assets at attractive prices is a key part of our investment philosophy Targeting to buy assets at a higher discount to their Discounts at 30 June 2020 listed peers than GCAP’s fair value discount New opportunitie
Slide 29: Capital allocations: Buybacks
Capital allocations Buybacks US$45 million share buyback programme, commenced in Jun-18, was completed in Aug-19 US$ 45 million 3,336,843 GBP 10.45 Programme amount Shares bought back Average price of shares bought back From 1 August 2019 through 20 August 2020, we repurchased CGEO shares of up to U
Slide 30: Capital allocations: Clear exit paths
Capital allocations Clear exit paths Trade sale IPO Fund Promote Water Utility x x x P&C Insurance x Housing Development x x Renewable Energy x x x Hospitality & Commercial x x Beverages x x Education x x Auto Service x Digital services x Exit options are set prior to making an investment decision P
Slide 31: How we evaluate investment performance
Capital allocations How we evaluate investment performance ROIC, MOIC and IRR combination is the key decision making matrix ROIC for financing projects and reinvestment MOIC and IRR at GCAP level at portfolio companies’ level Money multiples. We want to know achievable money multiples ROIC. We measu
Slide 32: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 32
Slide 33: NAV Statement | 1H20
NAV Statement | 1H20 2b. 2c. 3. Operating 4. Liquidity GEL ‘000, unless otherwise noted Dec-19 1. Value creation 2a. Investments Jun-20 Change % Buybacks Dividends expenses mgmt./FX/Other Listed Portfolio Companies GHG1 430,079 (94,412) - - - - - 335,667 -22.0% BoG1 597,735 (203,333) - - - - - 394,4
Slide 34: Value creation in 1H20
Value creation in 1H20 Operating Multiple Change Portfolio Businesses Greenfields Value Creation Performance and FX GEL thousands (1) (2) (3) (1)+(2)+(3) Listed (297,745) GHG (94,412) BoG (203,333) Private (268,932) 55,482 28,459 (184,991) Late Stage (156,187) - 68,613 (87,574) Water Utility (130,17
Slide 35: Capital allocations in 1H20
Capital allocations in 1H20 1Q20 2Q20 GEL millions Investments Buybacks Dividends Investments Buybacks Dividends Total Investments highlights ➢ Renewable Energy: BOG - - - - - - - Listed portfolio o GEL 38.7mln for RP Global buyout (34.4% minority) GHG - - - - - - - o GEL 5.6mln for the development
Slide 36: NAV per share developments in 1H20
NAV per share developments in 1H20 NAV per share down 32.4% in 1H20 reflecting negative impact of COVID-19 NAV per share -21.0% -7.8% -1.0% -0.5% -5.4% -35.6% +6.2% -4.3% -0.6% +3.6% +4.9% change % GEL 46.84 (9.82) (3.65) (0.46) (0.21) (2.52) 1.86 (1.28) 1.08 (0.17) GEL 31.67 GEL 30.18 NAV per share
Slide 37: Liquidity management at Georgia Capital
Liquidity management at Georgia Capital GEL 633 million Liquid assets & Loans issued | 30 June 2020 Net debt | 30-Jun-2020 ► Georgia Capital issued inaugural US$ 300m international corporate bonds in March 2018 Loans issued (48%) GEL millions Net debt overview | 30 June 2020 Cash & liquid funds (52%
Slide 38: Portfolio performance highlights | 1H20
Portfolio performance highlights | 1H20 Listed portfolio Private late stage Pipeline GHG Water Utility Housing Development P&C Insurance Auto Service -18.5% +0.3% +44.6% 80 75 550 472 473 20 -26.7% -35.9% 70 61 16 450 57 -4.5% 60 GEL millions GEL millions GEL millions 45 15 350 50 40 39 36 35 -32.5%
Slide 39: GGU issued US$ 250 million green bonds
GGU issued US$ 250 million green bonds First-ever Green Bonds from Georgia ➢ Considerable interest from investors, demonstrating our superior access to capital even during the current challenging times. ➢ The issuance of the bonds significantly improves the financial flexibility of GGU and enhances
Slide 40: Recommended final share exchange offer for GHG shareholders
Recommended final share exchange offer for GHG shareholders Final share exchange offer for GHG shareholders was completed and our holding in GHG will reach 100% on 28 August 2020 ➢ Further strengthening GCAP private portfolio with three strong overarching free cash flow generative businesses, being
Slide 41: GHG agreed terms to sell HTMC hospital
GHG agreed terms to sell HTMC hospital ➢ Divestment of one of the lowest return generating hospital, improving GHG’s ROIC and leverage profile Transaction overview US$ 12mln ➢ On 19 August 2020, GHG’s signed a Sales and Purchase Agreement (“SPA”) to sell a 40% equity interest in High Technology Tota
Slide 42: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 42
Slide 43: Georgian healthcare market overview
Listed portfolio Georgian healthcare market overview Growth in Healthcare Services Market Expected to Continue State healthcare budget is increasing for the last several years Double digit growth on the back of favorable dynamics expected State healthcare spending dynamics CAGR 2,100 15% ▪ The count
Slide 44: GHG at a glance
Listed portfolio GHG at a glance A well diversified business model with cost and synergy advantages Extensive geographic coverage - diversified healthcare services and pharmacy network covering 3/4 of Georgia’s population Healthcare services Pharmacy and Medical insurance Hospitals Clinics Diagnosti
Slide 45: GHG’s track record of delivering strong results
Listed portfolio GHG’s track record of delivering strong results Revenue EBITDA1 Operating cash flow1 EBITDA to cash conversion ratio1: 500 81% 54% 54% 75% 81% 77% 178% 74% 144% 1,200 963.1 500 1,000 849.9 400 747.8 +0.3% 400 800 GEL millions 300 -9.8% 300 600 472.9 474.5 -16.3% +63.1% 426.4 +61.8%
Slide 46: Healthcare services business overview
Listed portfolio Healthcare services business overview The largest healthcare service provider in Georgia: more than 23% market Businesses major growth drivers share by number of referral hospitals and community clinics beds – 3,320 Referral hospitals Clinics & Polyclinics Diagnostics Market share b
Slide 47: Healthcare services business overview (cont’d)
Listed portfolio Healthcare services business overview (cont’d) Hospitals Clinics 18 Bed occupancy rate 19 15 Number of referral Average 4.9 5.2 5.5 5.4 5.4 5.4 5.8 5.4 5.6 Number of community clinics Number of polyclinics hospitals length of stay 2,967 80% -16.3ppts -9.0ppts Number of hospital beds
Slide 48: Pharmacy and distribution business overview
Listed portfolio Pharmacy and distribution business overview Country’s largest retailer in terms of both, revenue and number of bills issued Businesses major growth drivers Market share by revenue, 20181 › Expending retail footprint › Enhancing retail margin (private label products) GHG in 32% pharm
Slide 49: Pharmacy and distribution business overview (cont’d)
Listed portfolio Pharmacy and distribution business overview (cont’d) Margin enhancement and strong growth in para-pharmacy sales Performance track record ▪ Strong sales in para-pharmacy products of Revenue Average bill size & Number of bills issued GEL 81.6 million in 1H20 (up 21.1% y-o-y), Gross p
Slide 50: Medical insurance business overview
Listed portfolio Medical insurance business overview Largest medical insurer in the country with 27.8%1 market share Offering a variety of medical Businesses major growth drivers insurance products, with a wide distribution network to the Georgian population ▪ Growing the number of insured clients M
Slide 51: Medical insurance business overview (cont’d)
Listed portfolio Medical insurance business overview (cont’d) Performance track record Number of Insured & Renewal rate Revenue (Net insurance premiums earned) Retention rate within the Group (%) 19.2% 23.3% 34.7% 39.4% 42.5% 41.1% 43.4% 75.1% 73.4% 76.9% 77.5% 77.5% 90 69.7% 71.3% 75.4 400 80.0% -5
Slide 52: Digital transformation
Listed portfolio Digital transformation Taking healthcare beyond buildings Successful implementation of almost all elements of the Healthcare Information System (“HIS”) in all its healthcare facilities across the country: Picture Archiving and Laboratory Information Electronic Medical Records Inpati
Slide 53: A fully integrated digital healthcare platform
Listed portfolio A fully integrated digital healthcare platform EKIMO – Health at your hand 51,269 Registered users Innovative, independent and fully integrated digital healthcare platform combining all components of primary healthcare doctors, clinics, laboratories, radiology units, retail 33,991 p
Slide 54: Bank of Georgia (BoG) Overview
Listed portfolio Bank of Georgia (BoG) Overview http://bankofgeorgiagroup.com/ Market opportunity Investment rationale ▪ The first entity from Georgia to be listed on the premium segment of the Main Market of the Banking sector assets, loans and deposits London Stock Exchange (LSE:BGEO) since Februa
Slide 55: Bank of Georgia (BoG) Overview (cont’d)
Listed portfolio Bank of Georgia (BoG) Overview (cont’d) http://bankofgeorgiagroup.com/ Stock price performance Financial metrics (GEL millions) GBP 7.93 2015 2016 2017 2018 2019 2Q19 2Q20 1H19 1H20 Change 23 as of 18-Aug-20 ROAE 21.9% 22.2% 25.2% 26.4%2 26.1%3 22.9%3 21.8% 23.7%3 1.4% -22.3ppts 18
Slide 56: Water utility business overview
Private late stage portfolio Water utility business overview Investment rationale Effect of new consumers on the market ▪ Regulated monopoly in Tbilisi and surrounding districts with high entry barriers 13.6 TWh 13.6 TWh ▪ Sectoral output increasing at a robust growth rate (on average 9.5% in the la
Slide 57: Water utility business overview (cont’d)
Private late stage portfolio Water utility business overview (cont’d) Valuation highlights | 30 June 2020 Financial metrics (GEL millions) 2015 2016 2017 2018 2019 1H19 1H20 Change Jun-20 Dec-19 Change Total revenue 119 127 135 149 163 75 61 -18.5% LTM EBITDA 85 95 -11.0% Of which, utility revenue 1
Slide 58: Housing development business overview
Private late stage portfolio Housing development business overview Significant room for further growth in mortgages Investment rationale ▪ Shortage of housing from Soviet era combined with Georgian tradition of multi generations living under one roof - Mortgage loans to GDP %, 2019 average household
Slide 59: Housing development business overview (cont’d)
Private late stage portfolio Housing development business overview (cont’d) Valuation highlights | 30 June 2020 Financial metrics (GEL millions)1 2015 2016 2017 2018 2019 1H19 1H20 Change GEL millions, unless otherwise noted Jun-20 Dec-19 Change Apartments sales revenue 45 96 92 95 55 16.6 33.9 NMF
Slide 60: P&C insurance business overview
Private late stage portfolio P&C insurance business overview Investment rationale Market share 1Q20 Market composition by • Significantly underpenetrated P&C insurance market in Georgia (0.7% penetration) (earned premium, gross) product lines • Market leader with a powerful distribution network of p
Slide 61: P&C insurance business overview (cont’d)
Private late stage portfolio P&C insurance business overview (cont’d) Valuation highlights | 31 March 2020 Financial metrics (GEL millions) GEL millions, unless otherwise noted Jun-20 Dec-19 Change 2015 2016 2017 2018 2019 1H19 1H20 Change Earned premiums, net 47 50 63 67 75 36.3 34.7 -4.5% LTM net
Slide 62: Renewable energy business overview
Private early stage portfolio Renewable energy business overview Investment rationale Electricity supply and consumption, LTM ▪ Growing electricity market as supply lags behind the increasing demand, creating opportunities. ▪ Underutilized energy resources - availability of economically feasible hyd
Slide 63: Renewable energy business overview (cont’d)
Private early stage portfolio Renewable energy business overview (cont’d) Renewable energy platform Financial metrics (GEL millions) Hydro: 208 MW Wind: 228 MW 2017 2018 2019 1H19 1H20 Change Of which operational 71MW Of which operational 21MW Revenue NMF NMF 16.2 2.4 18.9 NMF EBITDA (1.7) (0.8) 13.
Slide 64: Hospitality and commercial real estate business overview
Private early stage portfolio Hospitality and commercial real estate business overview ➢ We are re-evaluating our commitment to develop the hospitality business in light of the Arrivals of tourists and tourism revenue | Georgia continuing uncertainty regarding the effects of COVID-19. Source: Georgi
Slide 65: Hospitality and commercial real estate business overview (cont’d)
Private early stage portfolio Hospitality and commercial real estate business overview (cont’d) Valuation highlights | 30 June 2020 Financial metrics (GEL millions)2 GEL millions, unless otherwise noted Jun-20 Dec-19 Change 2016 2017 2018 2019 1H19 1H20 Change NOI3 from operating leases 3 3 5 6 2.8
Slide 66: Beverages business overview | Wine
Private early stage portfolio Beverages business overview | Wine Investment rationale Vineyard productivity – 2019 (TON/HA) ▪ Georgia is considered the “cradle of wine” with a rich, 8,000-year history of wine-making and home to over 500 unique grape varieties ➢ At 5.1 tons per hectare, grapes yield
Slide 67: Beverages business overview | Beer
Private early stage portfolio Beverages business overview | Beer Strong export market for carbonated soft drinks (CSD) Investment rationale ▪ Georgia falls behind beer consumption per capita against EU Growing market ▪ Georgia’s favorable trade regimes (free trade agreements with EU and China) provi
Slide 68: Beverages business overview (cont’d)
Private early stage portfolio Beverages business overview (cont’d) Wine business Beer business Financial metrics (GEL millions) Financial metrics (GEL millions) 2015 2016 2017 2018 2019 1H19 1H20 Change 2017 2018 2019 1H19 1H20 Change Wine Revenue 18 18 20 29 42 17.3 15.1 -12.6% Beer Revenue 18 29 4
Slide 69: Education business overview
Private early stage portfolio Education business overview Fragmented education market offers attractive opportunity for a scaled player Diversified business model with strategy 1-2-3 Strong platform to facilitate growth and scale to become the leading integrated education player with up to 27,000 le
Slide 70: Education business overview (cont’d)
Private early stage portfolio Education business overview (cont’d) Industry investment rationale Medium term demand outlook for private high schools ➢ Highly fragmented private school market currently- 10% private in 5-years - 20% private ➢ Large and growing market ➢ Efficiency upside Private 10% 20
Slide 71: Attractive service business – Auto Service
Pipeline Attractive service business – Auto Service We aim to build a diversified business model combining different auto-related services to capitalise on the large and growing automotive services market Auto park in Georgia (‘000) Room for growth in the highly fragmented auto service market in Geo
Slide 72: Auto Service business overview
Pipeline Auto Service business overview Investment rationale Valuation highlights | 30 June 2020 ▪ Georgia’s Auto park continues to grow steadily, with 7.4% CAGR during the years 2012-2019 ▪ Georgia lags behind developed countries by number of private passenger cars per capita, showing room for GEL
Slide 73: Digital Services business overview
Pipeline Digital Services business overview Acquisition of Redberry enables us to have a platform for investments in the digital business US$ 2.8 million new capital injected for digital start-up development About Redberry 1 ➢ One of the most successful Georgian digital marketing agency Joint ventur
Slide 74: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices Page 74
Slide 75: Sovereign ratings with favourable macro fundamentals
Sovereign ratings with favourable macro fundamentals Key Ratings Highlights General Facts Rating Agency Rating Outlook Affirmed Ba2 Stable September 2019 BB Stable October 2019 Georgia BB Negative April 2020 Georgia is favorably placed among peers Fitch Rating Country Country Rating Outlook Armenia
Slide 76: 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 framework: policy ▪ Fiscal deficit/GDP capped at 3%; Public debt/GDP capped at 60%; ▪ Business friendly environment and
Slide 77: Institutional oriented reforms
Institutional oriented reforms Ease of Doing Business | 2020 (WB Doing Business Report) Economic Freedom Index | 2020 (Heritage Foundation) New Zealand 1 Singapore 2 Ireland 6 US 6 UK 7 Georgia Norway 7 9 Georgia 12 Up by four places compared to 2018 Lithuania 11 Lithuania 16 Estonia 18 Czech Republ
Slide 78: COVID-19 impact – IMF forecasts
COVID-19 impact – IMF forecasts Gross Domestic Product Consumer Price Inflation Source: IMF Source: IMF US$ b 7% 20 16% 6.0% 6% 15 12% 4.9% 4.7% 5% 10 4.8% 4.8% 5.1% 8% 4.0% 4.0% 3.6% 3.0% 2.9% 4% 5 4% 3% 2.6% 0 0% 2.1% 2% -5 -4% 1% -4.0% -10 -8% 0% 2015 2016 2017 2018 2019* 2020F 2021F 2015 2016 20
Slide 79: Diversified resilient economy
Diversified resilient economy Gross domestic product Diversified nominal GDP structure, 1Q2020 Source: Geostat Source: Geostat Growth was robust in 2019, but will be negative in 2020 due to Information and US$ bln the pandemic, with IMF expecting real GDP to contract by 4% Accommodation and food ser
Slide 80: Room for further job creation
Room for further job creation Unemployment rate down 1.1 ppts y-o-y to 11.6% in 2019 UNDP Human Development Index Sources: GeoStat Sources: UNDP 0.79 0.79 0.78 18.3 0.78 2000 17.4 17.9 17.4 17.3 17.2 16.9 20 0.77 0.77 0.76 15.1 15.4 0.75 1900 14.6 14.1 14.0 13.9 13.9 0.74 13.5 0.74 12.4 12.6 12.7 12
Slide 81: Inflation targeting since 2009
Inflation targeting since 2009 Inflation y-o-y vs. inflation target Inflation y-o-y Sources: NBG, GeoStat Source: GeoStat 10 Core inflation remains high, pointing to a persistent 10 As demand and supply shocks stemming from the pandemic move 15.0 trend in prices inflation in different directions, we
Slide 82: Current account
Current account Current account balance (% of nominal GDP) Exports and Re-exports, US$ billion Sources: NBG Source: NBG Double digit shrinking in the trade deficit helped the Current Account balance (CAB) to improve to a historic low of 5.1% in 2019, providing a strong position 30% to withstand the
Slide 83: Diversified sources of capital
Diversified sources of capital Strong foreign investor interest Visitors and tourism revenues Sources: GeoStat Sources: GNTA, NBG 2,500 25% 2Q20 tourism revenues fell by 97% y-o-y, as borders remain closed (down 69% y-o-y in 1H20) 8.7 9.4 2,000 20% $4,100 7.9 10.0 6.3 6.7 $3,100 5.7 5.9 8.0 1,500 11
Slide 84: Tourism sector
Tourism sector Tourism revenues to GDP Spending per arrival, 2017 Sources: NBG, Geostat Source: WDI 18% 18% 3600 17% 20% 1496 15% 1600 3100 14% 1310 13% 1400 2600 11% 15% 1200 US$ million 10% 10% 2100 9% 1000 857 848 823 10% 771 763 757 714 1600 6% 692 661 629 800 591 555 527 1100 600 458 441 5% 600
Slide 85: Diversified foreign trade
Diversified foreign trade Goods’ Trade Deficit Oil imports Source: GeoStat Source: GeoStat In 2Q20, the trade deficit fell by 34%, as exports were cut by 23.7% and imports contracted by 1200 29.3% on the back of the pandemic Oil imports, US$ mn Oil imports, % change, y/y 90% 1000 0 50% 40% 800 70% -
Slide 86: Diversified foreign trade
Diversified foreign trade Imports of Goods, contribution to growth Foreign Demand, 1H20 Source: NBG Source:, Geostat All types of goods contributed to shrinking imports in Q2, with consumer goods driving the half of the decline Crude materials except fuels Investment goods Intermediate goods Consume
Slide 87: Prudent monetary policy ensures macro-financial stability
Prudent monetary policy ensures macro-financial stability International reserves Monetary policy rate Sources: NBG Sources: NBG Reserve assets were $3.6 billion at the end of June, worth 4.3 14 3700 months of imports as of 1Q20 data, providing adequate cover 3700 NBG lowered the monetary policy rate
Slide 88: Floating exchange rate - policy priority
Floating exchange rate - policy priority Central Bank’s interventions Real effective exchange rate (REER) Sources: NBG Sources: NBG NBG sold $270mln in Mar-Jul 2020 on the foreign exchange market and 155 250 220 maintains a declaration of active intervention policy to provide liquidity 145 200 150 1
Slide 89: Low public debt
Low public debt Public debt Breakdown of public debt Sources: MOF Source: MOF, as of 30 April 2020 Low public debt ensures a strong position to borrow to fight the pandemic, with MoF expecting public debt to rise to around 55% 60% 60% 50% 50% Multilateral 40% 40% 57% 30% 30% Domestic External 20% 20
Slide 90: Growth-oriented government reforms (2019-2020)
Growth-oriented government reforms (2019-2020) 1 Structural Reforms 2 Promoting Transit & Tourism Hub ▪ Tax Reform ▪ Roads ▪ Favorable tax rates for SME development ▪ Plan to finish all spinal projects by 2020 – East-West Highway, other supporting infrastructure ▪ Special tax regimes for regional of
Slide 91: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices ➢ Georgia Capital results discussion ➢ Georgia Capital financial
Slide 92: Maturity profile across portfolio companies
Maturity profile across portfolio companies Gross debt maturity as of 30 June 20201 Gel millions, unless otherwise noted 2H20 2021 2022 2023 2024 2024+ Total GHG 70 94 181 33 77 - 455 Late Stage - 29 121 2 31 481 664 Water Utility - - - - - 477 477 Housing development2 - 29 121 2 31 4 187 P&C Insura
Slide 93: Multiple of Invested Capital (MOIC) | 30 June 2020
Multiple of Invested Capital (MOIC) | 30 June 2020 Gross GEL millions Sell down Dividends Fair Value MOIC Realized MOIC Investment (1) (2) (3) (4) (2+3+4) / (1) (2+3) / (1) Listed Investments 381 418 138 730 3.4x 1.5x Georgia Healthcare Group PLC 252 131 4 336 1.9x 0.5x Bank of Georgia Group PLC 129
Slide 94: Net Asset Value evolution
Net Asset Value evolution Change since Change since 31-Dec-18 31-Dec-19 GEL 44.32 GEL 46.84 +5.7% GEL 31.67 -32.4% NAV per share GBP 13.05 GBP 12.46 -4.5% GBP 8.41 -32.5% Private GEL millions, except per share information 70% Private Private 54% 1,225 92% 906 1,096 Listed Listed 59% 58% Listed 978 1
Slide 95: Acquisitions in 2019 | private portfolio
Acquisitions in 2019 | private portfolio July 2019 August 2019 Buckswood International Alaverdi winery November 2019 May 2019 • The leading school in the mid-level • Purchase of 100% equity stake Redberry segment Qartli wind farm • 244 hectares of vineyards and 135 • Purchase of 100% equity stake Ma
Slide 96: 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 97: Georgia Capital’s highly experienced management team
Georgia Capital’s highly experienced management team Georgia Capital Management Irakli Gilauri, Chairman & CEO Archil Gachechiladze, CEO, Bank of Georgia Formerly CEO of BGEO Group since 2011, joined as CFO of Bank of Georgia in 2004. Mr Listed Previously CEO at GGU, the Group’s water utility and re
Slide 98: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices ➢ Georgia Capital results discussion ➢ Georgia Capital financial
Slide 99: NAV Statement | 2Q20
NAV Statement | 2Q20 2c. 3. Operating 4b. Liquidity GEL ‘000, unless otherwise noted Mar-20 1. Value creation 2a. Investments 2b. Buybacks Jun-20 Change % Dividends expenses mgmt./FX/Other Listed Portfolio Companies 660,067 70,002 - - - - - 730,069 10.6% GHG1 295,455 40,212 - - - - - 335,667 13.6% B
Slide 100: Georgia Capital 1H20 performance (adjusted IFRS10 accounts)
Georgia Capital 1H20 performance (adjusted IFRS10 accounts) Income statement Reconciliation of adjusted IFRS10 accounts to IFRS GEL ‘000, unless otherwise noted 1H20 1H19 Change Dividend income 4,927 55,667 -91.1% Income statement IFRS income GEL ‘000, unless otherwise noted Adjustment Interest inco
Slide 101: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices ➢ Georgia Capital results discussion ➢ Georgia Capital financial
Slide 102: Georgian healthcare market overview
Georgian healthcare market overview Healthcare coverage of Georgia’s 3.7m population: ▪ UHC was introduced in February 2013 and replaced most of the previously existing state- 2015 funded medical insurance plans Overview ▪ The main goal is to provide basic healthcare coverage to the entire populatio
Slide 103: Housing development business | completed and on-going projects
Housing development business | Overview of completed and on-going projects as of 30 June 2020 Deferred Actual / Number of Number of sq.m. Number of Sq.m. of revenue Total Sq.m. Sq.m. of Number of Planned Recognised as Deferred Land value Number of apartments apartments apartments apartments apartmen
Slide 104: P&C insurance business | segment results in 1H20
P&C insurance business | segment results in 1H20 Well-diversified business model (1) Sources: Insurance State Key Segments Motor(2) Property(3) Credit life(4) Liability(5) Other(6) Supervision Service of Georgia. Market shares by earned premium gross. Market size (1Q20) (1) GEL 38mln GEL 19mln GEL 1
Slide 105: Hospitality and commercial RE business | portfolio highlights
Hospitality and commercial RE business | commercial portfolio & hotel portfolio highlights Commercial portfolio breakdown | 30-Jun-20 Commercial portfolio growth Commercial portfolio growth -9.0% 77.3% 45 42 45 39 42 7% 10% Retail 56.8% 10 8 6 39 5 25 15 4 40% Office 16 25 US$ millions US$ millions
Slide 106: Content
Content 1. COVID-19 update 2. Georgia Capital at a glance 3. Georgia Capital strategy & capital allocations 4. Georgia Capital 1H20 results discussion and key developments 5. Portfolio overview 6. Georgian macro overview 7. Appendices ➢ Georgia Capital results discussion ➢ Georgia Capital financial
Slide 107: GHG Consolidated financial highlights
GHG Consolidated financial highlights Income statement GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change Revenue, gross 474,522 472,872 0.3% 214,469 237,660 -9.8% Corrections & rebates (1,593) (1,164) 36.9% (636) (605) 5.1% Revenue, net 472,929 471,708 0.3% 213,833 237,055 -9.8
Slide 108: GHG Consolidated financial highlights (cont’d)
GHG Consolidated financial highlights (cont’d) Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Jun-19 Change Cash flows from / (used in) operating activities Total assets, of which
Slide 109: Healthcare services business financial highlights (cont’d)
Healthcare services business financial highlights (cont’d) Income statement Hospitals Clinics Diagnostics Eliminations Total GEL thousands, unless otherwise noted 1H20 1H19 Change 1H20 1H19 Change 1H20 1H19 Change 1H20 1H19 1H20 1H19 Change Revenue, gross 126,720 148,992 -14.9% 21,461 21,984 -2.4% 3
Slide 110: Healthcare services business financial highlights (cont’d)
Healthcare services business financial highlights (cont’d) Income statement Hospitals Clinics Diagnostics Eliminations Total GEL thousands, unless otherwise noted 2Q20 2Q19 Change 2Q20 2Q19 Change 2Q20 2Q19 Change 2Q20 2Q19 2Q20 2Q19 Change Revenue, gross 55,901 74,218 -24.7% 9,321 10,877 -14.3% 1,7
Slide 111: Healthcare services business financial highlights (cont’d)
Healthcare services business financial highlights (cont’d) Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Jun-19 Change Cash flows from / (used in) operating activities Total asse
Slide 112: Pharmacy and distribution business financial highlights
Pharmacy and distribution business financial highlights Income statement GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change Revenue 318,840 295,193 8.0% 143,811 149,414 -3.7% Costs of services (235,122) (220,944) 6.4% (105,378) (113,463) -7.1% Cost of pharma – wholesale (68,116)
Slide 113: Pharmacy and distribution business financial highlights (cont’d)
Pharmacy and distribution business financial highlights (cont’d) Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Jun-19 Change Cash flows from / (used in) operating activities Tota
Slide 114: Medical insurance business financial highlights
Medical insurance business financial highlights Income statement GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change Revenue 34,559 36,366 -5.0% 16,491 18,873 -12.6% Costs of services (26,571) (31,916) -16.7% (11,506) (16,233) -29.1% Net insurance claims incurred (25,375) (30,501
Slide 115: Medical insurance business financial highlights (cont’d)
Medical insurance business financial highlights (cont’d) Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change 2Q20 2Q19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Jun-19 Change Cash flows from / (used in) operating activities Total assets
Slide 116: GHG selected ratios and KPIs
GHG selected ratios and KPIs Selected ratios and KPIs 2Q20 2Q19 Change 1H20 1H19 Change Selected ratios and KPIs 2Q20 2Q19 Change 1H20 1H19 Change GHG, consolidated Diagnostics ROIC (%) 7.7% 12.2% -4.5ppts 9.8% 12.2% -2.4ppts EBITDA margin excluding IFRS 16 impact 1.5% 4.3% -2.8ppts -3.5% 4.2% -7.7p
Slide 117: Water utility business financial highlights
Water utility business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Revenue from water supply to lega
Slide 118: Housing development business financial highlights
Housing development business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Jun-19 Change Gross profit from apartment
Slide 119: P&C insurance business financial highlights
P&C insurance business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 change Gross premiums written 56,000 52,
Slide 120: Renewable energy business financial highlights
Renewable energy business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Revenue from electricity sales
Slide 121: Hospitality & Commercial RE business financial highlights
Hospitality & Commercial RE business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Jun-19 Change Revenue from operat
Slide 122: Beverages business financial highlights
Beverages business financial highlights Income statement Balance sheet (Wine business) Balance sheet (Beer business) GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 change GEL thousands, unless otherwise noted Jun-20 Dec-19 change Wine Busin
Slide 123: Beverages business financial highlights (cont’d)
Beverages business financial highlights (cont’d) Statement of cash flow (Wine business) Statement of cash flow (Beer business) GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change Cash received from customers 19,604 19,921 -1.6% Proceeds from
Slide 124: Education business financial highlights
Education business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 change Revenues 13,955 12,235 14.1% Cash rec
Slide 125: Auto service business financial highlights
Auto service business financial highlights Income statement Statement of cash flow Balance sheet GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted 1H20 1H19 Change GEL thousands, unless otherwise noted Jun-20 Dec-19 Change Revenue 16,031 5,304 NMF Operating
Slide 126: 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 of
Slide 127: Company information
Company information Georgia Capital PLC 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 128: Georgia Capital
GEORGIA CAPITAL