Georgia Capital PLC · LSE:CGEO
Georgia Capital — Q3 2018 Earnings Presentation
36 slides from Georgia Capital's earnings presentation, Nov 7, 2018
Slide 1: Georgia-focused investment company: 3Q18 trading update
Georgia-focused investment company Investor Presentation: 3Q18 trading update 10 x = 10 y 7 November Page 1 2018
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. 3Q18 trading update | Georgia Capital 2. Portfolio overview 3. Georgian Macro Overview Page 3
Slide 4: CGEO:LN overview
CGEO:LN overview Historical GCAP share price vs. Average analyst value per share GCAP shareholders allocation by geography 25.00 Average analyst value per share1 UK/Ireland 20.00 18.2% 15.00 GCAP share price USA 28.8% 10.00 Luxembourg 3.4% 5.00 Scandinavia - 4.8% 4-Jun 4-Jul 14-Sep 20-Sep 26-Sep 10-
Slide 5: Georgia Capital at glance
Georgia Capital at glance Georgia Capital portfolio Investment company 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 19.9% (managed by GGU) (managed by m2) (managed by Aldagi)
Slide 6: NAV statement | 30-Sep-2018
NAV statement | 30-Sep-2018 Net Asset Value breakdown Ownership % Management Adjusted Value Change Change % GEL thousand unless otherwise noted 30-Sep-18 30-Jun-18 Listed Equity Investments 1,135,561 1,202,571 (67,010) -5.6% GHG (75,118,503 shares at market) 57.0% 564,035 608,502 (44,467) -7.3% BoG
Slide 7: Key portfolio highlights | 30-Sep-2018
Key portfolio highlights | 30-Sep-2018 Portfolio value | GEL 1.8 billion Average of analyst valuation1 | GEL 2.6 billion Listed | GEL 1.1 billion Private | GEL 673 million Listed | GEL 1.6 billion Private | GEL 989 million 931 GEL millions GEL millions Water utility & Renewable energy 711 564 572 La
Slide 8: Liquidity and cash management at Georgia Capital (stand-alone)
Liquidity and cash management at Georgia Capital (stand-alone) GEL 284 million GEL 198 million1 Liquid assets | 30-Sep-2018 Net debt | 30-Sep-2018 ► Cash at bank of GEL 90 million ► Georgia Capital issued inaugural US$ 300 million ► Internationally listed debt securities of GEL 154 million internati
Slide 9: Capital allocation outlook through 2022
Capital allocation outlook through 2022 Highly disciplined approach to unlock value through investments GEL millions 20181 2019 2020 2021 2022 BoG (24) (26) (27) (29) (31) Listed investments GHG - - - - - +137 million dividend inflows Private investments Water utility (28) (30) (32) (34) (35) Late s
Slide 10: Content
Content 1. 3Q18 trading update | Georgia Capital 2. Portfolio overview 3. Georgian Macro Overview Page 10
Slide 11: Further value creation opportunity – education business
Pipeline Further value creation opportunity – education business Industry investment rationale Market opportunity Government spending on education as GDP % (2016) Secondary private school enrollment % (2016) LARGE AND GROWING MARKET 23.6 7.1 6.9 6.6 22.1 8.0 6.4 6.1 5.9 25.0 5.6 5.5 5.4 5.0 ▪ Grow
Slide 12: Water utility business overview
Private late stage portfolio Water utility business overview Key facts Own consumption of electricity (KWh million) Investment rationale 350 325 330 321 322 kWh millions Natural monopoly in Tbilisi and surrounding district 313 ▪ 291 ▪ Utilities sector represents ~3% of total Georgian economic output
Slide 13: Housing development business overview
Private late stage portfolio Housing development business overview Key facts Market opportunity Investment rationale Average household size and home ownership ▪ Shortage of housing from Soviet era combined with Georgian tradition of multi generations living under one roof, average household size is
Slide 14: P&C insurance business overview
Private late stage portfolio P&C insurance business overview Key facts Market opportunity Investment rationale 10.2% 9.2% Georgia P&C • Significantly underpenetrated insurance market in Georgia 8.9% Penetration 0.6% • Market leader with a powerful distribution network of point of sale and sales agen
Slide 15: Renewable energy business overview
Private early stage portfolio Renewable energy business overview Key facts Market opportunity GWh Investment rationale 23,000 ▪ Underdeveloped energy market with potential for significant growth - Low per capita power usage ▪ Cheap to develop – up to US$1.5 million for 1MW hydro and up to US$1.3 mil
Slide 16: Hospitality and commercial real estate business overview
Private early stage portfolio Hospitality and commercial real estate business overview Key facts Market opportunity Investment rationale Arrivals of tourists and tourism revenue | Georgia Source: Georgian National Tourism Administration ▪ Record number of tourists visiting Georgia every year: 3.8 mi
Slide 17: Beverages business overview
Private early stage portfolio Beverages business overview Key facts Market opportunity Investment rationale Low consumption per capita compared to peers • High growth sector, which has doubled during the last 5 years to GEL 1.9 billion market Beer consumption in Peer Countries 2017 (l/capita) 1H18:
Slide 18: Content
Content 1. 3Q18 trading update | Georgia Capital 2. Portfolio overview 3. Georgian Macro Overview Page 18
Slide 19: 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 Ba2 Stable September 2018 BB- Stable May 2018 Georgia BB- Positive August 2018 Georgia is favorably placed among peers Fitch Rating Country Country Ratin
Slide 20: 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 21: Institutional oriented reforms
Institutional oriented reforms Ease of Doing Business | 2019 (WB Doing Business Report) Economic Freedom Index | 2018 (Heritage Foundation) New Zealand 1 Singapore 2 Estonia 7 Georgia 6 up from 9th in 2018 UK 8 Top 9 in Europe region out of 44 Norway 7 Georgia 16 US 8 USA 18 countries Estonia 16 Lat
Slide 22: Diversified resilient economy
Diversified resilient economy Gross domestic product Diversified nominal GDP structure, 2018 Q2 Source: Geostat Source: Geostat Hotels and Other Industry US$ billion restaurants 11.1% 17.1% 20 12.6% 16% 2.9% Financial 9.6% 9.4% 12% intermediation 15 4.8% 7.2% 5.8% 6.2% 6.4% 4.6% 5.0% 5.4% 8% Healthc
Slide 23: Room for further job creation
Room for further job creation Unemployment rate down 0.1ppts y/y to 13.9% UNDP Human Development Index in 2017 0.78 Sources: UNDP 0.78 0.77 Sources: GeoStat 18.3 17.4 17.9 0.77 2000 17.4 17.3 17.2 16.9 20 15.1 15.4 14.6 14.1 14.0 13.9 1900 13.5 13.9 12.4 12.6 12.7 15 0.75 1800 10.3 11.1 1000 p 1700
Slide 24: Inflation and monetary indicators
20 60 80 40 0 -40 -20 Jul-11 Sep-11 Jan-00 Nov-11 Sep-00 Jan-12 Mar-12 May-01 May-12 Jan-02 Jul-12 Sep-12 Sep-02 Sources: Geostat, NBG Sources: NBG, GeoStat Nov-12 May-03 Jan-13 Mar-13 Jan-04 May-13 Sep-04 Jul-13 Sep-13 May-05 Nov-13 Jan-14 M2 Y/Y % LHS Jan-06 Mar-14 Sep-06 May-14 Jul-14 May-07 Sep-
Slide 25: Current account deficit supported by FDI
Current account deficit supported by FDI Current account balance (% of nominal GDP) Exports and Re-exports, US$ bln 30 Sources: NBG 30 Source: NBG 20 20 3.0 3.0 4.0 10 10 2.6 3.2 3.4 0 0 2.0 -10.6 -10.3 -5.8 -10.7 -8.9 -8.8 -10.9 -12.8 -11.7 -12.6 -13.2 -11.8 -10 -15.3 -10 1.3 1.6 -19.6 1.1 1.3 3.1
Slide 26: 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 25% 3000 8.0 17.2% 20% 2500 1,500 15.1% 6.0 2000 12.3% 11.9% 12.5% 15% 11.0% 10.9% 1500 4.0 1,000 9.6% 8.5% 8.6% 7.1% 7.3% 7.8% 10% 1000 6.2% 6.5% 6.3%
Slide 27: Tourism sector on the rise
Tourism sector on the rise Tourism revenues to GDP Spending per arrival, 2016 Sources: NBG Source: WDI 1600 3100 18.1% 20% US$ 15.1% 1400 2600 13.8% 15% 1200 2100 10.7% 10.8% 1000 US$ mln 8.9% 1600 6.6% 10% 800 5.7% 1100 3.8% 4.0% 3.8% 3.5% 4.4% 600 5% 600 400 100 0% 200 2017 2005 2006 2007 2008 200
Slide 28: Diversified foreign trade
Diversified foreign trade Goods’ Trade Deficit Oil imports Source: GeoStat 0 50% 1200 90% 40% 1000 -100 30% 800 70% -200 600 50% 20% -300 10% 400 30% 0% 200 -400 10% -10% 0 -10% -500 -200 -20% -400 -30% -600 -30% -600 -50% Jun-16 Nov-16 Jun-17 Nov-17 Jun-18 Jul-16 Aug-16 Sep-16 Oct-16 Jul-17 Aug-17
Slide 29: Diversified foreign trade
Diversified foreign trade Imports of Goods, contribution to growth Foreign Demand, 9M2018 Source: NBG 40% 40% Source:, Geostat 30% 30% 0% 4% 3% Industrial supplies 20% 20% 13% Food and beverages 10% 10% 0% 0% 44% Transport equipment -10% -10% 14% Consumer goods -20% -20% Capital goods -30% -30% Fuel
Slide 30: Prudent monetary policy ensures macro-financial stability
Prudent monetary policy ensures macro-financial stability International reserves Monetary policy rate Sources: NBG Sources: NBG 3500 3500 14 NBG started gradual exit from moderately tightened monetary policy and decreased its refinancing rate by 25 basis points to 3000 3000 12 7% on 25 July 2018. 25
Slide 31: Floating exchange rate - policy priority
50 -200 -150 -100 0 100 150 -50 0 Jan-15 Feb-15 0 20 40 60 80 120 140 160 180 100 120 Mar-15 Dec-12 Apr-15 Sources: NBG Sources: NBG May-15 Mar-13 Jun-15 Jun-13 Jul-15 0 Aug-15 Sep-13 Sep-15 Oct-15 Dec-13 Nov-15 2020 Dec-15 shock-absorber Mar-14 Jan-16 0 Feb-16 EUR/GEL Jun-14 Mar-16 -15 Apr-16 -40 S
Slide 32: 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 31 December 2017 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% Multilateral 59% 20% 20% Domestic External 10% 10% 21% 79% 0% 0% 2018E 2019F 2010 2014 2003 2004 2005 2006 2007 2008 2009 2011 20
Slide 33: 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 34: Glossary
Glossary ● GCAP refers to the aggregation of standalone Georgia Capital PLC and standalone 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 ● EBITDA - Earnings before inte
Slide 35: 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 36: Georgia Capital
GEORGIA CAPITAL