REG - Georgia Capital PLC - Final Results
22/02/2024 07:00
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RNS Number : 0034E Georgia Capital PLC 22 February 2024
FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS) 1 (#_ftn1)
GEL '000, unless otherwise noted (unaudited) Dec-23 Sep-23 Change Dec-22 Change
Georgia Capital NAV overview
NAV per share, GEL 82.94 76.99 7.7% 65.56 26.5%
NAV per share, GBP 24.23 23.44 3.4% 20.12 20.4%
Net Asset Value (NAV) 3,378,512 3,187,680 6.0% 2,817,391 19.9%
Shares outstanding(2) 40,736,528 41,401,750 -1.6% 42,973,462 -5.2%
Liquid assets and loans issued 117,122 109,261 7.2% 438,674 -73.3%
NCC ratio 2 (#_ftn2) 15.6% 15.9% -0.3 ppts 21.1% -5.5 ppts
Georgia Capital Performance 4Q23 4Q22 Change FY23 FY22 Change
Total portfolio value creation 223,132 329,432 -32.3% 680,515 34,073 NMF
of which, listed and observable businesses 161,316 252,394 -36.1% 553,255 205,783 NMF
of which, private businesses 61,816 77,038 -19.8% 127,260 (171,710) NMF
Investments 3 (#_ftn3) 2,135 39,002 -94.5% 22,588 195,949 -88.5%
Buybacks 4 (#_ftn4) 22,483 14,312 57.1% 76,477 83,108 -8.0%
Dividend income 34,148 27,435 24.5% 235,883 93,875 NMF
of which, recurring dividend income 5 (#_ftn5) 34,148 27,435 24.5% 179,822 93,875 91.6%
of which, one-off dividend income 6 (#_ftn6) - - NMF 56,061 - NMF
Net income 208,305 341,132 -38.9% 615,589 1,464 NMF
Private portfolio companies' performance(1, 7 (#_ftn7) ) 4Q23 4Q22 Change FY23 FY22 Change
Large portfolio companies
Revenue 357,192 333,565 7.1% 1,345,682 1,274,794 5.6%
EBITDA 32,046 43,057 -25.6% 149,177 156,816 -4.9%
Net operating cash flow 31,844 48,231 -34.0% 92,381 148,082 -37.6%
Investment stage portfolio companies
Revenue 44,450 34,714 28.0% 155,280 141,488 9.7%
EBITDA 14,860 10,462 42.0% 54,666 51,699 5.7%
Net operating cash flow 10,399 11,178 -7.0% 50,609 53,132 -4.7%
Total portfolio 8 (#_ftn8)
Revenue 541,774 502,294 7.9% 2,073,903 1,900,700 9.1%
EBITDA 54,447 57,986 -6.1% 247,556 243,293 1.8%
Net operating cash flow 35,166 52,675 -33.2% 135,466 206,047 -34.3%
KEY POINTS
Ø NAV per share (GEL) up 7.7% q-o-q to GEL 82.94 (GBP 24.23), reflecting
strong value creation across our portfolio companies. NAV per share (GEL) was
up 26.5% y-o-y in FY23
Ø Net Capital Commitment (NCC) ratio improved by 0.3 ppts q-o-q to 15.6% as
at 31-Dec-23 (a 5.5 ppts improvement y-o-y), despite the launch of the US$ 15
million share buyback programme in 4Q23
Ø GEL 34.2 million dividend income from the portfolio companies in 4Q23,
driving FY23 total dividend income to GEL 235.9 million (of which, recurring
dividend income of GEL 179.8 million). This compares to total dividend income
of GEL 93.9 million in FY22
Ø c.665,000 shares repurchased in 4Q23 (total bought back and cancelled now
at c.4.8% of issued capital since Jan-23)
Ø Sale of one of the regional and community hospitals for a total
consideration of GEL 34.6 million at 15.2x EV/EBITDA multiple, representing a
43% premium to its pre-disposal valuation
Ø Acquisition of GEL 73 million portfolio of medical insurance contracts
together with the strong brand name "Ardi" for a total cash outflow of GEL 27
million, doubling our presence in the medical insurance business
Conference call: An investor/analyst conference call will be held on 22
February 2024, at 13:00 UK / 14:00 CET / 8:00 US Eastern Time. Please register
at the Registration Link
(https://gcap-ge.zoom.us/webinar/register/WN_2A0diTH7RceuIof7wQqk5A) to attend
the event. Further details are available on the Group's webpage
(https://georgiacapital.ge/) .
CHAIRMAN AND CEO'S STATEMENT
Our 4Q23 results demonstrate the significant strategic, operational and
financial progress of Georgia Capital, supported by the sustained growth of
the Georgian economy.
NAV per share (GEL) was up 7.7% to GEL 82.94 in 4Q23. The NAV per share growth
in 4Q23 mainly resulted from the continued increase in BoG's share price, up
7.7% q-o-q in 4Q23, translating into GEL 161.3 million value creation (5.1
ppts positive impact on the NAV per share). Value creation across our private
portfolio companies amounted to GEL 61.8 million (1.9 ppts impact), reflecting
a robust operating performance of our high-quality, resilient assets combined
with movements in implied valuation multiples and foreign currency exchange
rates. The NAV per share growth was further supported by our share buyback and
cancellation programme (+0.9 ppts impact), partially offset by management
platform related costs and net interest expense (-0.5 ppts impact). In GBP
terms, the NAV per share growth in 4Q23 was 3.4%, driven by GEL's slight
depreciation against GBP during the quarter.
Underlying operating performances across our private portfolio remain strong.
The aggregated revenue of our private portfolio companies in 4Q23 totalled GEL
541.8 million (up 7.9% y-o-y), demonstrating decent top-line growth, while the
aggregated EBITDA was down by 6.1% y-o-y to GEL 54.4 million, largely
reflecting operating expense investments in growth. This performance
underscores the resilience of our businesses, as they navigate through the
temporary influence of various external factors (including regulatory changes)
affecting operations in certain business segments.
Ø The operating performance of our retail (pharmacy) business was strong in
4Q23, and more than offset the impact of several recent healthcare-related
regulatory changes (see page 14 for details). The 4Q23 revenue was up 6.9%
y-o-y, reflecting increased sales of higher-margin para-pharmacy products and
significant expansion of the retail chain (the business added 18 pharmacies
and 10 franchise stores in 4Q23), the latter also having an immediate impact
on the operating expenses, which translated into a 21.5% y-o-y decrease in
EBITDA in 4Q23. We expect these investments to deliver a substantial increase
in business results in the short term supported by the gradual increase in
customer traffic to recently launched new stores, the ongoing optimisation of
the retail chain and the continued growth of the Georgian economy.
Ø Our insurance businesses had a very strong fourth quarter. Revenues were up
by 22.5% y-o-y in 4Q23, reflecting positive developments both in the P&C
and medical insurance segments. To further capitalise on the emerging
opportunities in the insurance sector, in January 2024, our medical insurance
business signed a Memorandum of Understanding ("MOU") to acquire a GEL 73
million portfolio of medical insurance contracts and brand name from "Ardi,"
the third-largest player in the Georgian health insurance market with a 17%
market share based on 9M23 net insurance premiums. Upon the successful
completion of this transaction, the combined market share of our medical
insurance business will make it the largest health insurer in the country.
Ardi's portfolio is concentrated in the upscale segment, presenting an
opportunity to further diversify our health insurance portfolio and achieve
significant financial and strategic synergies. The total cash outflow for this
transaction is GEL 27 million, which will be fully financed by funds already
available in the medical insurance business, with no cash investment required
from GCAP. Following this acquisition, the insurance business will operate
under three brand names: Aldagi, Imedi L, and Ardi, all of which will be
managed under GCAP.
Ø As previously disclosed, to address challenges and capitalise on
opportunities from the recently introduced facility regulation rules in the
healthcare sector, as detailed on page 15 of this report, our hospitals
business underwent strategic restructuring in 4Q23, following which the
business was split into two distinct segments: "Large and Specialty Hospitals"
and "Regional and Community Hospitals". The Regional and Community Hospitals
now also incorporate the community clinics that were previously managed and
presented as part of the clinics and diagnostics business. The 4Q23 revenue of
Large and Specialty Hospitals was up by 5.4% y-o-y, reflecting resilient
underlying performance at the seven hospitals comprising the business on the
back of the diversified range of services they offer, which enabled them to
partially offset the impact of the new regulations. These new regulations had
a more pronounced impact on our Regional and Community Hospitals (the 4Q23
revenue was down 12.7% y-o-y), as the 27 smaller facilities in this business
offer services that are relatively more limited in scope than those of our
Large and Specialty Hospitals. Consequently, the combined revenue and EBITDA
of the hospitals business were down by 1.4% and 49.0% y-o-y, respectively, in
4Q23. Following the successful implementation of strategic restructuring to
align with new regulations, the business is now well-positioned to capitalise
on the competitive advantages offered by recent shifts in the healthcare
market.
In line with its strategy to divest low-ROIC generating assets, in December
2023, the business signed an agreement to sell one of its regional and
community hospitals for a total consideration of GEL 34.6 million, at a 15.2x
EV/EBITDA multiple, representing a 43% premium to its pre-disposal valuation.
The ROIC of the divested hospital was 3.1%. The proceeds from this transaction
were collected in January 2024 and are being utilised for deleveraging the
balance sheet of the business.
Ø The performance of our investment-stage businesses was outstanding in 4Q23.
An increase in electricity generation in Renewable Energy, strong intakes and
a ramp-up of utilisation in Education, along with increased demand for
ambulatory services in our Clinics and Diagnostics, all contributed to a 28.0%
and 42.0% y-o-y increase in combined revenue and EBITDA respectively, for our
investment-stage businesses in the quarter.
NCC ratio decreased to 15.6% in 4Q23. A 0.3 ppts q-o-q improvement in the NCC
ratio in 4Q23 was mainly driven by a) a 5.5% growth in total portfolio value,
and b) a 7.5% increase in cash and liquid funds balances, which mainly
reflects the net impact of GEL 34.2 million dividend income from our portfolio
companies, partially offset by GEL 22.5 million (US$ 8.3 million) share
buybacks in the quarter under GCAP's US$ 15 million share buyback and
cancellation programme. On a y-o-y basis, the progress on the NCC ratio was
substantial, down 5.5 ppts, which reflects the record-high GEL 235.9 million
dividend inflows in FY23 together with a significant decrease in the gross
debt balance.
We continue to deliver on our strategic priorities. Looking back, 2023 was an
eventful year for the Group. 1) At the beginning of 2023, our shareholders
overwhelmingly approved a proposal to transfer GCAP to an LSE Standard
listing, a move we believe is more suited to the Company's size and strategy
and will help create greater value for shareholders. 2) We achieved
significant deleveraging progress through the successful issuance of a US$ 150
million sustainability-linked bond on the Georgian market. This issuance,
combined with GCAP's existing liquid funds, was utilised to fully redeem our
US$ 300 million Eurobond. 3) During 2023, we launched two share buyback
programmes totalling US$ 25 million, under which 2,135,222 shares (4.8% of the
issued capital) have been repurchased to date. 4) Our retail (pharmacy)
business completed the buyout of the minority shareholders to increase GCAP's
stake to 97.6%. 5) Our hospitality business successfully completed the sale of
two operational hotels, two under-construction properties, and a vacant land
plot for a total consideration of US$ 38.6 million. The proceeds from these
sales were utilised for deleveraging the hospitality business's balance sheet.
These transactions marked further substantial progress towards two of our core
strategic priorities: to divest, over the next few years, subscale portfolio
companies, and to significantly reduce leverage in the Group's balance sheet.
As a result of the robust operational and strategic advancements demonstrated
by Georgia Capital in 2023, GCAP's adjusted IFRS net income reached GEL 615.6
million in FY23, a substantial increase from the adjusted IFRS net income of
GEL 1.5 million in FY22.
Proposed acquisition of Ameriabank CJSC by Bank of Georgia Group PLC. On
19-Feb-24, Bank of Georgia Group PLC (the "Bank") announced that it has
reached an agreement for the proposed acquisition of 100% of Ameriabank CJSC a
leading universal bank in Armenia with an attractive franchise (the
"Transaction"). The Transaction price is approximately US$ 303.6 million,
which will be fully financed by the Bank's surplus capital at an attractive
valuation of 0.65x net asset value as at 31 October 2023 and 2.6x P/E 2023.
The Transaction - expected to be EPS and RoAE accretive - represents a
significant catalyst for the Bank and its shareholders. The Bank intends to
keep the targeted pay-out ratio unchanged in the range of 30-50% of annual
profits, potentially enabling increased capital distributions for the Bank's
shareholders. The Transaction is subject to shareholder and regulatory
approvals and is expected to close in 1Q24. Further information about the
Transaction can be found on the Bank's website
(https://bankofgeorgiagroup.com/news?id=726) .
Macroeconomic update. Following two consecutive years of double-digit growth,
real GDP expanded by 7.5% in 2023. The growth was supported by macroeconomic
developments on both the external and domestic sides, with strong foreign
currency inflows complementing strong aggregate demand. On the domestic side,
strong credit expansion, continued fiscal outlays and strong business
sentiment were key contributors to economic activity. The Georgian Lari
remains above pre-pandemic levels, compared to the US Dollar, reflecting
record-high total FX inflows, increased lending in foreign currency, ample FX
liquidity, a strict monetary policy stance, and overall positive economic
growth. Annual inflation saw a significant decline in 2023, with the annual
average at 2.5%, below the 3% target. In January 2024, headline inflation
stood at 0.0%. The National Bank of Georgia (NBG) has started to exit from
tightened monetary policy and reduced the reference rate by 200 bps during May
2023 - January 2024 to 9.0%. The external balance sheet is strengthening,
marked by a reduction in the current account deficit to 2.6% of GDP in 9M23, a
decline in government debt to levels lower than those seen prior to the
pandemic, and the attainment of historically high reserves reaching US$ 5.0
billion as of December 2023.
Outlook. The resilient performance of our portfolio companies coupled with our
robust balance sheet and capital management drove our outstanding 4Q23
results. We have made strong progress in deleveraging the business towards our
medium-term targeted NCC ratio of 15%, while consistently growing NAV per
share on the back of capital light and sustainable investments. Looking ahead,
as our hospitals and retail (pharmacy) businesses adapt to the evolving
regulatory landscape, we anticipate an even more significant opportunity for
value creation across our portfolio companies. This outlook is underpinned by
the resilience of the Georgian economy and the emerging opportunities
presented by the approval of Georgia's candidacy status by the EU in December
2023. I believe that Georgia Capital is extremely well positioned to deliver
consistent NAV per share growth over the medium to long term, while also
continuing to make significant progress on our key strategic priorities.
Irakli Gilauri, Chairman and CEO
DISCUSSION OF GROUP RESULTS
The discussion below analyses the Group's unaudited net asset value at
31-Dec-23 and its income for the fourth quarter and full year period then
ended on an IFRS basis (see "Basis of Presentation" on page 36 below).
Net Asset Value (NAV) Statement
NAV statement summarises the Group's IFRS equity value (which we refer to as
Net Asset Value or NAV in the NAV Statement below) at the opening and closing
dates for the fourth quarter (30-Sep-23 and 31-Dec-23). The NAV Statement
below breaks down NAV into its components and provides a roll forward of the
related changes between the reporting periods. For the NAV Statement for the
full year of 2023 see page 36.
NAV STATEMENT 4Q23
GEL '000, unless otherwise noted Sep-23 1. Value creation(( 9 (#_ftn9) )) 2a. 2b. 2c. Dividend 3. Operating expenses 4. Liquidity/ FX/Other Dec-23 Change
(Unaudited) Investment and Divestments Buyback %
Listed and Observable Portfolio Companies
Bank of Georgia (BoG) 1,092,209 161,316 - - (27,678) - - 1,225,847 12.2%
Water Utility 159,000 - - - - - - 159,000 NMF
Total Listed and Observable Portfolio Value 1,251,209 161,316 - - (27,678) - - 1,384,847 10.7%
Listed and Observable Portfolio value change % 12.9% 0.0% 0.0% -2.2% 0.0% 0.0% 10.7%
Private Portfolio Companies
Large Companies 1,402,924 41,177 - - (6,470) - (1,400) 1,436,231 2.4%
Retail (Pharmacy) 679,245 34,397 - - - - 359 714,001 5.1%
Hospitals 381,870 (35,589) - - - - (1,925) 344,356 -9.8%
Insurance (P&C and Medical) 341,809 42,369 - - (6,470) - 166 377,874 10.6%
Of which, P&C Insurance 267,811 24,059 - - (6,470) - 166 285,566 6.6%
Of which, Medical Insurance 73,998 18,310 - - - - - 92,308 24.7%
Investment Stage Companies 527,808 34,017 2,135 - - - 2,654 566,614 7.4%
Renewable Energy 260,810 5,179 500 - - - 138 266,627 2.2%
Education 170,856 16,584 1,635 - - - 151 189,226 10.8%
Clinics and Diagnostics 96,142 12,254 - - - - 2,365 110,761 15.2%
Other Companies 297,265 (13,378) - - - - 366 284,253 -4.4%
Total Private Portfolio Value 2,227,997 61,816 2,135 - (6,470) - 1,620 2,287,098 2.7%
Private Portfolio value change % 2.8% 0.1% 0.0% -0.3% 0.0% 0.1% 2.7%
Total Portfolio Value (1) 3,479,206 223,132 2,135 - (34,148) - 1,620 3,671,945 5.5%
Total Portfolio value change % 6.4% 0.1% 0.0% -1.0% 0.0% 0.0% 5.5%
Net Debt (2) (294,185) - (1,464) (22,196) 34,148 (5,459) (7,652) (296,808) 0.9%
of which, Cash and liquid funds 100,356 - (1,464) (22,196) 34,148 (5,459) 2,525 107,910 7.5%
of which, Loans issued 8,905 - - - - - 307 9,212 3.4%
of which, Gross Debt (403,446) - - - - - (10,484) (413,930) 2.6%
Net other assets/ (liabilities) (3) 2,659 - (671) (287) - (3,347) 5,021 3,375 26.9%
of which, share-based comp. - - - - - (3,347) 3,347 - NMF
Net Asset Value (1)+(2)+(3) 3,187,680 223,132 - (22,483) - (8,806) (1,011) 3,378,512 6.0%
NAV change % 7.0% 0.0% -0.7% 0.0% -0.3% 0.0% 6.0%
Shares outstanding(9) 41,401,750 - - (665,222) - - - 40,736,528 -1.6%
Net Asset Value per share, GEL 76.99 5.39 0.00 0.71 0.00 (0.21) 0.04 82.94 7.7%
NAV per share, GEL change % 7.0% 0.0% 0.9% 0.0% -0.3% 0.1% 7.7%
NAV per share (GEL) was up by 7.7% q-o-q in 4Q23, reflecting a GEL 223.1
million value creation across our portfolio companies with a positive 7.0 ppts
impact and share buybacks (+0.9 ppts impact). The NAV per share growth was
slightly offset by management platform-related costs and net interest expense
(-0.5 ppts impact in total).
Portfolio overview
Total portfolio value increased by GEL 192.7 million (5.5%) to GEL 3.7 billion
in 4Q23:
· The value of the listed and observable portfolio increased by GEL
133.6 million (up 10.7%), reflecting the net impact of the continued growth in
BoG's share price and GEL 27.7 million dividends paid to GCAP.
· The value of the private portfolio increased by GEL 59.1 million
(up 2.7%), driven by a positive GEL 61.8 million value creation, slightly
offset by GEL 6.5 million dividends paid to GCAP by our private portfolio
companies.
Consequently, as of 31-Dec-23, the listed and observable portfolio value
totalled GEL 1.4 billion (37.7% of the total portfolio value), and the private
portfolio value amounted to GEL 2.3 billion (62.3% of the total).
1) Value creation
Total portfolio value creation amounted to GEL 223.1 million in 4Q23:
· A GEL 161.3 million value creation from the listed and observable
portfolio was attributable to the 7.7% increase in BoG's share price,
supported by a 4.2% appreciation of GBP against GEL during the quarter.
· A GEL 61.8 million value creation from private portfolio
companies reflects the net effect of:
o GEL 79.6 million operating-performance related value reduction, as
detailed on pages 6-7 below.
o GEL 141.4 million value creation due to changes in implied valuation
multiples in 4Q23, resulting from the strong outlook for our private portfolio
companies in the context of the continued resilience of the Georgian economy.
The table below summarises value creation drivers in our businesses in 4Q23:
Portfolio Businesses Operating Performance(( 10 (#_ftn10) )) Greenfields / Multiple Change Value Creation
buy-outs / exits(( 11 (#_ftn11) )) and FX(( 12 (#_ftn12) ))
GEL '000, unless otherwise noted (unaudited) (1) (2) (3) (1)+(2)+(3)
Listed and Observable portfolio 161,316
BoG 161,316
Water Utility -
Private portfolio (79,553) - 141,369 61,816
Large Portfolio Companies (120,402) - 161,579 41,177
Retail (pharmacy) (28,857) - 63,254 34,397
Hospitals (94,105) - 58,516 (35,589)
Insurance (P&C and Medical) 2,560 - 39,809 42,369
Of which, P&C Insurance (1,644) - 25,703 24,059
Of which, Medical Insurance 4,204 - 14,106 18,310
Investment Stage Portfolio Companies 35,284 - (1,267) 34,017
Renewable Energy 4,150 - 1,029 5,179
Education 9,136 - 7,448 16,584
Clinics and Diagnostics 21,998 - (9,744) 12,254
Other 5,565 - (18,943) (13,378)
Total portfolio (79,553) - 141,369 223,132
Valuation overview 13 (#_ftn13)
In 4Q23, valuation assessments of our large and investment stage portfolio
companies were performed by a third-party independent valuation firm, Kroll
(formerly known as Duff & Phelps), in line with International Private
Equity Valuation ("IPEV") guidelines. The independent valuation assessments,
which serve as an input for Georgia Capital's estimate of fair value, were
performed by applying a combination of an income approach (DCF) and a market
approach (listed peer multiples and, in some cases, precedent transactions).
The independent valuations of large and investment stage businesses are
performed on a semi-annual basis. In line with our strategy, from time to time
we may receive offers from interested buyers for our private portfolio
companies, which would be considered in the overall valuation assessment,
where appropriate.
The enterprise value and equity value development of our businesses in 4Q23 is
summarised in the following table:
Enterprise Value (EV) Equity Value
GEL '000, unless otherwise noted 31-Dec-23 30-Sep-23 Change % 31-Dec-23 30-Sep-23 Change % % share in total portfolio
(Unaudited)
Listed and Observable portfolio 1,384,847 1,251,209 10.7% 37.7%
BoG 1,225,847 1,092,209 12.2% 33.4%
Water Utility 159,000 159,000 NMF 4.3%
Private portfolio 3,463,259 3,411,385 1.5% 2,287,098 2,227,997 2.7% 62.3%
Large portfolio companies 2,021,278 1,978,870 2.1% 1,436,231 1,402,924 2.4% 39.1%
Retail (pharmacy) 1,043,800 1,006,309 3.7% 714,001 679,245 5.1% 19.4%
Hospitals 618,912 645,372 -4.1% 344,356 381,870 -9.8% 9.4%
Insurance (P&C and Medical) 358,566 327,189 9.6% 377,874 341,809 10.6% 10.3%
Of which, P&C Insurance 285,566 267,811 6.6% 285,566 267,811 6.6% 7.8%
Of which, Medical Insurance 73,000 59,378 22.9% 92,308 73,998 24.7% 2.5%
Investment stage portfolio companies 856,787 835,040 2.6% 566,614 527,808 7.4% 15.5%
Renewable Energy 456,236 452,797 0.8% 266,627 260,810 2.2% 7.3%
Education 14 (#_ftn14) 228,799 205,343 11.4% 189,226 170,856 10.8% 5.2%
Clinics and Diagnostics 171,752 176,900 -2.9% 110,761 96,142 15.2% 3.0%
Other 585,194 597,475 -2.1% 284,253 297,265 -4.4% 7.7%
Total portfolio 3,671,945 3,479,206 5.5% 100.0%
Private large portfolio companies (39.1% of total portfolio value)
Retail (Pharmacy) (19.4% of total portfolio value) - the Enterprise Value (EV)
of Retail (Pharmacy) was up by 3.7% to GEL 1.0 billion in 4Q23, reflecting the
continued strong outlook of the business, driven by a significant expansion
and ongoing optimisation of the retail chain (the business added 18 pharmacies
and 10 franchise stores in 4Q23) as well as the resilience of the Georgian
economy. 4Q23 revenue was up 6.9%, reflecting a) increased sales of
higher-margin para-pharmacy products and b) the chain expansion which had a
positive impact on the revenue growth, driven by gradually increasing customer
traffic in recently launched stores. The expansion also led to an increase in
operating expenses (up 19.4% y-o-y in 4Q23) due to increased rent and salary
costs. This translated into a 21.5% y-o-y decrease in EBITDA (excl. IFRS 16)
in 4Q23. See page 13 for details. Consequently, LTM EBITDA (incl. IFRS 16) was
down by 2.8% to GEL 107.6 million in 4Q23. Net debt (incl. IFRS 16) remained
largely flat at GEL 322.2 million as at 31-Dec-23. As a result of the chain
expansion, increasing revenues and positive outlook for the business, the fair
value of GCAP's 97.6% holding increased by 5.1% to GEL 714.0 million in 4Q23.
The implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) increased to 9.7x
as at 31-Dec-23 (up from 9.1x as of 30-Sep-23).
Hospitals (9.4% of total portfolio value) - The EV of the combined Hospitals,
which now also incorporates the community clinics that were previously managed
and presented as part of the clinics and diagnostics business, stood at GEL
618.9 million in 4Q23. The revenue of Large and Specialty Hospitals was up by
5.4% y-o-y in 4Q23, reflecting resilient underlying performance at the seven
hospitals comprising the business on the back of the diversified range of
services they offer, which enabled them to partially offset the impact of the
new regulations, as detailed on page 15 of this report. These new regulations
had a more pronounced impact on our Regional and Community Hospitals (the 4Q23
revenue was down 12.7% y-o-y), as the 27 smaller facilities in this business
offer services that are relatively more limited in scope than those of our
Large and Specialty Hospitals. Consequently, the combined revenue and EBITDA
(excl. IFRS 16) of the hospitals business were down by 1.4% and 49.0% y-o-y
respectively, in 4Q23. In December 2023, the business signed an agreement to
sell one of its regional and community hospitals for a total consideration of
GEL 34.6 million at 15.2x EV/EBITDA multiple. The proceeds from this
transaction were collected in January 2024 and are being utilised for
deleveraging the balance sheet of the business. The sale is in line with our
strategy to divest low-ROIC generating assets. Taking into account the
disposal, LTM EBITDA (incl. IFRS 16) stood at GEL 44.8 million in 4Q23, and
the net debt amounted to GEL 241.1 million. As a result, the equity value of
Hospitals stood at GEL 344.4 million in 4Q23, translating into an implied LTM
EV/EBITDA multiple (incl. IFRS 16) of 13.8x at 31-Dec-23.
Insurance (P&C and Medical) (10.3% of total portfolio value) - The
insurance business combines: a) P&C Insurance valued at GEL 285.6 million
and b) Medical Insurance valued at GEL 92.3 million.
P&C Insurance - Insurance revenue was up by 26.8% y-o-y to GEL 31.2
million in 4Q23, mainly reflecting the growth in the motor and credit life
insurance lines. The combined ratio increased by 10.7 ppts y-o-y in 4Q23,
attributable to the following factors: a) a 2.3 ppts y-o-y increase in the
loss ratio mainly due to the increased cargo and property insurance claims, b)
a 4.0 ppts increase in expense ratio driven by increased salary expenses in
line with business growth and c) a 4.4 ppts y-o-y increase in FX ratio,
reflecting the impact of FX movements on the business operations.
Consequently, 4Q23 net income increased by 0.6% y-o-y to GEL 5.8 million. See
page 17 for details. Pre-tax LTM net income was down by 3.0% to GEL 22.0
million in 4Q23. The equity value of the P&C insurance business, which
also reflects the application of the recently enforced Estonian Taxation
Model, was assessed at GEL 285.6 million at 31-Dec-23 (up 6.6% q-o-q),
translating into an implied LTM P/E valuation multiple of 13.0x at 31-Dec-23
(up from 11.8x at 30-Sep-23).
Medical Insurance - Insurance revenue increased by 17.5% y-o-y to GEL 24.8
million in 4Q23, reflecting the increase in the price of insurance policies
and the number of insured clients primarily in the corporate client segment.
The combined ratio was at 92.6% in 4Q23 (down 2.5 ppts y-o-y), mainly
resulting from the well-managed loss ratio, down 3.8 ppts y-o-y. Consequently,
the net income of the medical insurance business was up by 12.6% y-o-y to GEL
2.2 million in 4Q23. See page 17 for details. Pre-tax LTM net income was up by
5.7% to GEL 8.4 million in 4Q23. As a result, the equity value of the
business, which also reflects the application of the Estonian Taxation Model,
was assessed at GEL 92.3 million at 31-Dec-23 (up 24.7% q-o-q), translating
into the implied LTM P/E valuation multiple of 11.0x at 31-Dec-23 (up from
9.3x at 30-Sep-23).
Private investment stage portfolio companies (15.5% of total portfolio value)
Renewable Energy (7.3% of total portfolio value) - The EV of the business was
up 0.3% to US$ 169.6 million in 4Q23 (up 0.8% to GEL 456.2 million in GEL
terms, reflecting a slight depreciation of GEL against US$ during the
quarter). In US$ terms, 4Q23 revenue and EBITDA were up by 4.7% and 6.6%
y-o-y, respectively, reflecting the net impact of a) a 7.8% y-o-y increase in
electricity generation in 4Q23, mainly driven by the resumption of operations
of two power-generating units of Hydrolea HPPs, which were taken offline
during the November 2022 - June 2023 period to enable scheduled rehabilitation
works and b) 2.7% y-o-y decrease in the average electricity selling price in
4Q23. Revenue and EBITDA in GEL terms were up 3.2% and 4.7% y-o-y in 4Q23,
respectively. See page 20 for details. The pipeline renewable energy projects
continued to be measured at an equity investment cost (GEL 56.2 million in
aggregate as at 31-Dec-23). Net debt decreased by 1.6% to US$ 70.5 million in
4Q23 (down 1.2% to GEL 189.6 million in GEL terms) due to strong cash flow
generation during the quarter. As a result, the equity value of Renewable
Energy was assessed at GEL 266.6 million in 4Q23 (up 2.2% q-o-q), (up 1.8%
q-o-q to US$ 99.1 million in US$ terms). The blended EV/EBITDA implied
valuation multiple of the operational assets stood at 12.6x as at 31-Dec-23,
up from 12.5x at 30-Sep-23.
Education (5.2% of total portfolio value) - EV of Education was up by 11.4% to
GEL 228.8 million in 4Q23, reflecting the strong operating performance of the
business. Revenue in 4Q23 increased by 41.5% y-o-y resulting from a) organic
growth through strong intakes and a ramp-up of the utilisation and b)
expansion of the business, which coupled with the overall inflation, also led
to a 50.0% y-o-y increase in operating expenses. Consequently, EBITDA was up
by 26.9% y-o-y in 4Q23. See page 21 for details. LTM EBITDA was up by 10.3% to
GEL 13.7 million in 4Q23. Net debt was up by 27.6% q-o-q to GEL 16.5 million
in 4Q23, reflecting the CAPEX investments for the expansion projects. As a
result, GCAP's stake in the education business was valued at GEL 189.2 million
at 31-Dec-23 (up 10.8% q-o-q). This translated into the implied valuation
multiple of 16.7x as at 31-Dec-23, up from 16.5x at 30-Sep-23. The
forward-looking implied multiple is estimated at 10.5x for the 2024-2025
academic year.
Clinics and Diagnostics (3.0% of total portfolio value) - In 4Q23, the EV of
the clinics and diagnostics business was GEL 171.8 million. 4Q23 revenue and
EBITDA of the combined clinics and diagnostics business were up by 28.8% and
up GEL 2.8 million y-o-y, respectively. This growth reflects the high demand
for non-COVID services and the expansion of the business. See page 22 for
details. Consequently, the LTM EBITDA (incl. IFRS 16) of the business was GEL
14.7 million and the net debt stood at GEL 58.5 million in 4Q23. As a result,
the equity value of the business was assessed at GEL 110.8 million,
translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 11.7x at
31-Dec-23.
Other businesses (7.7% of total portfolio value) - Of the "other" private
portfolio businesses, Auto Service and Beverages (other than wine) are valued
based on LTM EV/EBITDA. Wine and Housing Development are valued based on DCF,
Hospitality is valued based on NAV. See performance highlights of other
businesses on page 24. The portfolio value of other businesses decreased by
4.4% to GEL 284.3 in 4Q23, primarily attributable to the value reduction of
our housing development business resulting from the remeasurement of the
remaining construction budgets for ongoing residential projects.
Listed and observable portfolio companies (37.7% of total portfolio value)
BOG (33.4% of total portfolio value) - In 3Q23, BoG delivered an annualised
ROAE of 30.7% and a 19.0% loan book growth y-o-y (on a constant currency
basis, the loan portfolio increased by 17.6% y-o-y). In 4Q23, BoG's share
price was up by 7.7% q-o-q to GBP 39.8 at 31-Dec-23, reflecting the strong
growth in BoG's earnings. In 4Q23, GCAP received GEL 27.7 million interim
dividends (declared in August 2023 and paid in October 2023), representing a
52.3% increase compared to the interim dividends received in 2022. As a result
of the developments described above, the market value of GCAP's equity stake
in BoG increased by 12.2% to GEL 1,225.8 million. The LTM P/E valuation
multiple was at 3.5x at 30-Sep-23 (3.4x at 30-Jun-23). BoG's public
announcement of their 4Q23 and FY23 results when published will be available
on BoG's website (https://bankofgeorgiagroup.com/results/earnings) .
Water Utility (4.3% of total portfolio value) - In December 2023, the Georgian
National Energy and Water Supply Regulatory Commission ("GNERC"), the
independent body that regulates the GCAP's water utility business, approved
new tariffs for water supply and sanitation ("WSS") for the 2024-2026
regulatory period. The WSS tariffs for legal entities in Tbilisi increased
from GEL 6.5 to GEL 8.8 per cubic meter compared to the previous regulatory
period of 2021-2023. WSS tariffs for residential customers remained unchanged.
The anticipated changes in WSS tariffs had previously been reflected in the
valuation assessment of the water utility business, which was performed based
on the application of the put option valuation to GCAP's 20% holding in the
business (GCAP has a clear exit path through a put and call structure at
pre-agreed EBITDA multiples). Consequently, the fair value of Water Utility
remained unchanged at GEL 159.0 million in 4Q23.
2) Investments 15 (#_ftn15)
In 4Q23, GCAP invested GEL 2.1 million in private portfolio companies.
· GEL 1.6 million was allocated to the education business,
predominantly for the expansion of a new campus in the mid-scale segment.
· GEL 0.5 million was invested in the renewable energy business for
the development of the pipeline projects.
3) Share buybacks
During 4Q23, 665,222 shares with a total value of US$ 8.3 million (GEL 22.5
million) were bought back under GCAP's US$ 15 million share buyback and
cancellation programme announced in October 2023.
4) Dividends 16 (#_ftn16)
In 4Q23, Georgia Capital collected GEL 34.2 million cash dividends from the
portfolio companies, of which:
· GEL 27.7 million interim dividends were received from BoG.
· GEL 6.5 million dividends were collected from P&C Insurance.
FY23 NAV STATEMENT HIGHLIGHTS
GEL '000, unless otherwise noted Dec-22 1. Value creation(( 17 (#_ftn17) )) 2a. 2b. 2c. Dividend 3. Operating expenses 4. Liquidity/ FX/Other Dec-23 Change
(Unaudited) Investment and divestments Buyback %
Total Listed and Observable Portfolio Value 985,463 553,255 - - (153,871) - - 1,384,847 40.5%
Listed and Observable Portfolio value change % 56.1% 0.0% 0.0% -15.6% 0.0% 0.0% 40.5%
Total Private Portfolio Companies 2,213,164 127,260 18,420 - (82,012) - 10,266 2,287,098 3.3%
Of which, Large Companies 1,437,610 74,786 - - (76,825) - 660 1,436,231 -0.1%
Of which, Investment Stage Companies 501,407 47,044 18,388 - (5,187) - 4,962 566,614 13.0%
Of which, Other Companies 274,147 5,430 32 - - - 4,644 284,253 3.7%
Private Portfolio value change % 5.8% 0.8% 0.0% -3.7% 0.0% 0.5% 3.3%
Total Portfolio Value 3,198,627 680,515 18,420 - (235,883) - 10,266 3,671,945 14.8%
Total Portfolio value change % 21.3% 0.6% 0.0% -7.4% 0.0% 0.3% 14.8%
Net Debt (380,905) - (20,887) (76,190) 235,883 (21,786) (32,923) (296,808) -22.1%
Net Asset Value 2,817,391 680,515 - (76,477) - (36,779) (6,138) 3,378,512 19.9%
NAV change % 24.2% 0.0% -2.7% 0.0% -1.3% -0.2% 19.9%
Shares outstanding(17) 42,973,462 - - (2,817,070) - - 580,136 40,736,528 -5.2%
Net Asset Value per share, GEL 65.56 15.84 0.00 2.70 0.00 (0.85) (0.30) 82.94 26.5%
NAV per share, GEL change % 24.2% 0.0% 4.1% 0.0% -1.3% -0.5% 26.5%
NAV per share (GEL) increased by 26.5% in FY23, reflecting a) GEL 680.5
million value creation across our portfolio companies with a positive 24.2
ppts impact, b) share buybacks (+4.1 ppts impact) and c) GEL's appreciation
against US$, resulting in a foreign currency gain of GEL 6.5 million on GCAP
net debt (+0.2 ppts impact). The NAV per share growth was slightly offset by
management platform-related costs and net interest expense with a negative 2.4
ppts impact in total.
Portfolio overview
Total portfolio value increased by GEL 473.3 million (14.8%) in FY23:
· The value of GCAP's holding in BoG was up by GEL 395.4 million,
reflecting a robust GEL 549.3 million value creation, partially offset by GEL
153.9 million dividend income from the Bank in FY23.
· The value of the water utility business increased by GEL 4.0
million, reflecting an increase in the put option valuation to GCAP's 20%
holding in the business which was attributed in 2Q23.
· The value of the private portfolio increased by GEL 73.9 million
in FY23, mainly reflecting the net impact of a) GEL 127.3 million value
creation, b) investments of GEL 22.6 million predominantly in the investment
stage businesses and c) a decrease of GEL 82.0 million due to dividends paid
to GCAP.
1) Value creation
Total portfolio value creation amounted to GEL 680.5 million in FY23.
· A 52.6% increase in BoG's share price, supported by a 5.1%
appreciation of GBP against GEL in FY23, led to a GEL 549.3 million value
creation.
· GEL 4.0 million value was created in our water utility business
in FY23, as described above.
· The value creation in the private portfolio amounted to GEL 127.3
million in FY23, reflecting:
o GEL 87.6 million operating performance-related increase in the value of
our private assets, resulting from the continued strong performance of our
private portfolio companies, partially subdued by the performance of the
hospitals business, which has been impacted by the recently introduced
government regulations as described elsewhere in this report.
o GEL 39.7 million net impact from changes in implied valuation
multiples(( 18 (#_ftn18) )) and foreign currency exchange rates.
The table below summarises value creation drivers in our businesses in FY23:
Portfolio Businesses Operating Performance(( 19 (#_ftn19) )) Greenfields / Multiple Change Value Creation
buy-outs / exits(( 20 (#_ftn20) )) and FX(( 21 (#_ftn21) ))
GEL '000, unless otherwise noted (unaudited) (1) (2) (3) (1)+(2)+(3)
Listed and Observable 553,255
BoG 549,255
Water Utility 4,000
Private 87,558 - 39,702 127,260
Large Portfolio Companies (52,946) - 127,732 74,786
Retail (pharmacy) 2,267 - 37,130 39,397
Hospitals (154,041) - 72,515 (81,526)
Insurance (P&C and Medical) 98,828 - 18,087 116,915
Of which, P&C Insurance 19,503 - 51,944 71,447
Of which, Medical Insurance 79,325 - (33,857) 45,468
Investment Stage Portfolio Companies 54,471 - (7,427) 47,044
Renewable Energy 6,754 - 31,930 38,684
Education 15,165 - (2,883) 12,282
Clinics and Diagnostics 32,552 - (36,474) (3,922)
Other 86,033 - (80,603) 5,430
Total portfolio 87,558 - 39,702 680,515
The enterprise value and equity value development of our businesses in FY23 is
summarised in the following table:
Enterprise Value (EV) Equity Value
GEL '000, unless otherwise noted 31-Dec-23 31-Dec-22 Change % 31-Dec-23 31-Dec-22 Change % % share in total portfolio
(Unaudited)
Listed and Observable portfolio 1,384,847 985,463 40.5% 37.7%
BoG 1,225,847 830,463 47.6% 33.4%
Water Utility 159,000 155,000 2.6% 4.3%
Private portfolio 3,463,259 3,310,981 4.6% 2,287,098 2,213,164 3.3% 62.3%
Large portfolio companies 2,021,278 1,875,688 7.8% 1,436,231 1,437,610 -0.1% 39.1%
Retail (pharmacy) 1,043,800 957,686 9.0% 714,001 724,517 -1.5% 19.4%
Hospitals 618,912 653,335 -5.3% 344,356 433,193 -20.5% 9.4%
Insurance (P&C and Medical) 358,566 264,667 35.5% 377,874 279,900 35.0% 10.3%
Of which, P&C Insurance 285,566 228,045 25.2% 285,566 228,045 25.2% 7.8%
Of which, Medical Insurance 73,000 36,622 99.3% 92,308 51,855 78.0% 2.5%
Investment stage portfolio companies 856,787 816,023 5.0% 566,614 501,407 13.0% 15.5%
Renewable Energy 456,236 417,903 9.2% 266,627 224,987 18.5% 7.3%
Education 22 (#_ftn22) 228,799 218,264 4.8% 189,226 164,242 15.2% 5.2%
Clinics and Diagnostics 171,752 179,856 -4.5% 110,761 112,178 -1.3% 3.0%
Other 585,194 619,270 -5.5% 284,253 274,147 3.7% 7.7%
Total portfolio 3,671,945 3,198,627 14.8% 100.0%
2) Investments 23 (#_ftn23)
In FY23, GCAP invested GEL 22.6 million in private portfolio companies.
· GEL 12.2 million was allocated to the education business, mainly
for the acquisition of the new campus in the affordable segment and the
development of a new campus in the mid-scale segment.
· GEL 6.2 million was invested in the renewable energy business for
the development of the pipeline projects.
· GEL 4.2 million was invested in the auto service business.
3) Share buybacks
During FY23, 2,817,070 shares were bought back for a total consideration of
GEL 76.5 million.
· 1,665,222 shares with a total value of US$ 18.3 million (GEL 47.9
million) were bought back under GCAP's share buyback and cancellation
programmes during 2023. As of 20-Feb-24, an additional 470,000 shares with the
value of GEL 17.2 million (US$ 6.5 million) have been repurchased under the
ongoing US$ 15 million share buyback programme in 1Q24.
· 1,151,848 shares were repurchased for the management trust for a
total consideration of GEL 28.6 million, fully securing the management trust
in the form of unawarded shares for the next three years.
4) Dividends 24 (#_ftn24)
In FY23, Georgia Capital recorded GEL 235.9 million dividend income from its
portfolio companies:
Dividend income Recurring One-off Total
GEL million (unaudited)
BoG 124.5 29.4 153.9
Of which, cash dividends 80.5 - 80.5
Of which, buyback dividends 44.0 29.4 73.4
Retail (Pharmacy) 24.2 26.7 50.9
Insurance business 19.9 - 19.9
Of which, P&C Insurance 14.9 - 14.9
Of which, Medical Insurance 5.0 - 5.0
Hospitals business 6.0 - 6.0
Renewable Energy 5.2 - 5.2
Total 179.8 56.1 235.9
A one-off dividend of GEL 29.4 million from BoG, represents the participation
in the Bank's 2022 buybacks in FY23. GEL 26.7 million one-off dividend was
collected from the retail (pharmacy) business, following the minority buyout
transaction in 3Q23.
Net Capital Commitment (NCC) overview
Below we describe the components of Net Capital Commitment (NCC) as of 31
December 2023, 30 September 2023 and 31 December 2022. NCC represents an
aggregated view of all confirmed, agreed and expected capital outflows
(including a buffer for contingencies) at both Georgia Capital PLC and JSC
Georgia Capital levels.
Components of NCC 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
GEL '000, unless otherwise noted (unaudited)
Cash at banks 72,122 68,851 4.8% 235,255 -69.3%
Liquid funds 35,788 31,505 13.6% 176,589 -79.7%
Of which, Internationally listed debt securities 18,254 13,975 30.6% 173,395 -89.5%
Of which, Locally listed debt securities 17,534 17,530 0.0% 3,194 NMF
Total cash and liquid funds 107,910 100,356 7.5% 411,844 -73.8%
Loans issued 9,212 8,905 3.4% 26,830 -65.7%
Gross debt (413,930) (403,446) 2.6% (819,579) -49.5%
Net debt (1) (296,808) (294,185) 0.9% (380,905) -22.1%
Guarantees issued (2) - - NMF (18,460) NMF
Net debt and guarantees issued (3)=(1)+(2) (296,808) (294,185) 0.9% (399,365) -25.7%
Planned investments (4) (125,143) (126,752) -1.3% (141,396) -11.5%
of which, planned investments in Renewable Energy (77,637) (77,814) -0.2% (81,205) -4.4%
of which, planned investments in Education (47,506) (48,938) -2.9% (60,191) -21.1%
Announced Buybacks (5) (18,087) - NMF - NMF
Contingency/liquidity buffer (6) (134,470) (133,915) 0.4% (135,100) -0.5%
Total planned investments, announced buybacks and contingency/liquidity buffer (277,700) (260,667) 6.5% (276,496) 0.4%
(7)=(4)+(5)+(6)
Net capital commitment (3)+(7) (574,508) (554,852) 3.5% (675,861) -15.0%
Portfolio value 3,671,945 3,479,206 5.5% 3,198,627 14.8%
NCC ratio 15.6% 15.9% -0.3 ppts 21.1% -5.5 ppts
Cash and liquid funds. Total cash and liquid funds' balance was up by 7.5%
q-o-q to GEL 107.9 million (up 7.1% q-o-q to US$ 40.1 million) in 4Q23, mainly
reflecting the net effect of dividend inflows and share buybacks during the
quarter, as described above. The total cash and liquid funds' balance in FY23
decreased by 73.8%, mostly reflecting the use of funds for redemption of
GCAP's Eurobonds in 2023.
Loans issued. Issued loans' balance primarily refers to loans issued to our
private portfolio companies and are lent at market terms. The balance was up
by GEL 0.3 million in 4Q23, reflecting the interest accrual on the loans
issued (down by GEL 17.6 million in FY23, mainly reflecting the loan
repayments from the hospitality and auto service businesses).
Gross debt. In US$ terms the balance increased by 2.2% q-o-q in 4Q23,
reflecting the interest accrual on the US$ 150 million sustainability-linked
bonds. In GEL terms, the balance was up by 2.6% in 4Q23, further reflecting
the foreign exchange rate movements. The FY23 gross debt balance in US$ terms
was down by 49.3%, representing the full redemption of US$ 300 million GCAP
Eurobonds and the issuance of US$ 150 million sustainability-linked bonds in
2023.
Guarantees issued. The balance reflected GCAP's guarantee on the borrowing of
the beer business, which was reduced to zero in 2023, leaving no outstanding
guarantees.
Planned investments. Planned investments' balance represents expected
investments in renewable energy and education businesses over the next 2-3
years. The balance in US$ terms decreased by 1.7% and 11.1% in 4Q23 and FY23,
respectively, due to the investments made in these businesses, as described
above (the balance in GEL terms was down 1.3% and 11.5% in 4Q23 and FY23,
respectively).
Announced buybacks. The balance of the announced buybacks at 31-Dec-23
reflects the unutilised share buybacks under GCAP's US$ 15 million share
buyback and cancellation programme.
Contingency/liquidity buffer. The balance reflects the cash and liquid assets
in the amount of US$ 50 million, held by GCAP at all times, for
contingency/liquidity purposes. The balance remained unchanged in US$ terms as
at 31-Dec-23.
As a result of the movements described above, NCC was up by 3.5% q-o-q to GEL
574.5 million (US$ 213.6 million) which, together with the 5.5% increase in
the portfolio value translated into a 15.6% NCC ratio as at 31-Dec-23 (down by
0.3 ppts q-o-q).
INCOME STATEMENT (ADJUSTED IFRS / APM)
Net income under IFRS was GEL 213.2 million in 4Q23 (GEL 332.4 million net
income in 4Q22) and GEL 608.6 million in FY23 (GEL 12.2 million net loss in
FY22). The IFRS income statement is prepared on the Georgia Capital PLC level
and the results of all operations of the Georgian holding company JSC Georgia
Capital are presented as one line item. As we conduct almost all of our
operations through JSC Georgia Capital, through which we hold all of our
portfolio companies, the IFRS results provide little transparency on the
underlying trends.
Accordingly, to enable a more granular analysis of those trends, the following
adjusted income statement presents the Group's results of operations for the
period ending December 31 as an aggregation of (i) the results of GCAP (the
two holding companies Georgia Capital PLC and JSC Georgia Capital, taken
together) and (ii) the fair value change in the value of portfolio companies
during the reporting period. For details on the methodology underlying the
preparation of the adjusted income statement, please refer to page 96 in
Georgia Capital PLC 2022 Annual report.
INCOME STATEMENT (Adjusted IFRS/APM)
GEL '000, unless otherwise noted (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Dividend income 34,148 27,435 24.5% 235,883 93,875 NMF
Of which, regular dividend income 34,148 27,435 24.5% 162,527 93,875 73.1%
Of which, buyback dividend income - - NMF 73,356 - NMF
Interest income 2,345 6,641 -64.7% 16,642 32,955 -49.5%
Realised / unrealised gain/(loss) on liquid funds / Gain/(Loss) on GCAP 772 10,437 -92.6% (1,574) (2,717) -41.2%
Eurobond buybacks
Interest expense (9,026) (15,521) -41.8% (47,808) (69,774) -31.5%
Gross operating income 28,239 28,992 -2.6% 203,143 54,339 NMF
Operating expenses (8,807) (10,473) -15.9% (36,779) (39,996) -8.0%
GCAP net operating income 19,432 18,519 4.9% 166,364 14,343 NMF
Fair value changes of portfolio companies
Listed and Observable Portfolio Companies 133,638 234,294 -43.0% 399,384 164,885 NMF
Of which, Bank of Georgia Group PLC 133,638 232,294 -42.5% 395,384 149,277 NMF
Of which, Water Utility - 2,000 NMF 4,000 15,608 -74.4%
Private Portfolio companies 55,346 67,703 -18.3% 45,248 (224,687) NMF
Large Portfolio Companies 34,707 73,554 -52.8% (2,039) (115,511) -98.2%
Of which, Retail (pharmacy) 34,397 47,279 -27.2% (11,507) 14,132 NMF
Of which, Hospitals (35,589) 966 NMF (87,544) (140,622) -37.7%
Of which, Insurance (P&C and Medical) 35,899 25,309 41.8% 97,012 10,979 NMF
Investment Stage Portfolio Companies 34,017 18,325 85.6% 41,857 5,072 NMF
Of which, Renewable energy 5,179 23,079 -77.6% 33,497 22,846 46.6%
Of which, Education 16,584 24 NMF 12,282 28,052 -56.2%
Of which, Clinics and Diagnostics 12,254 (4,778) NMF (3,922) (45,826) -91.4%
Other businesses (13,378) (24,176) -44.7% 5,430 (114,248) NMF
Total investment return 188,984 301,997 -37.4% 444,632 (59,802) NMF
Income/(loss) before foreign exchange movements and non-recurring expenses 208,416 320,516 -35.0% 610,996 (45,459) NMF
Net foreign currency gain 28 20,965 -99.9% 6,491 47,550 -86.3%
Non-recurring expenses (139) (349) -60.2% (1,898) (627) NMF
Net income 208,305 341,132 -38.9% 615,589 1,464 NMF
The gross operating income stood at GEL 28.2 million in 4Q23 and amounted to
GEL 203.1 million in FY23, reflecting robust dividend income, further
supported by a decrease in interest expenses due to significant deleveraging
progress in 2023.
The components of GCAP's operating expenses are shown in the table below.
GCAP Operating Expenses Components
GEL '000, unless otherwise noted (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Administrative expenses(( 25 (#_ftn25) )) (2,858) (2,998) -4.7% (10,909) (11,779) -7.4%
Management expenses - cash-based(( 26 (#_ftn26) )) (2,602) (2,475) 5.1% (10,877) (9,741) 11.7%
Management expenses - share-based(( 27 (#_ftn27) )) (3,347) (5,000) -33.1% (14,993) (18,476) -18.9%
Total operating expenses (8,807) (10,473) -15.9% (36,779) (39,996) -8.0%
Of which, fund type expense(( 28 (#_ftn28) )) (2,660) (2,651) 0.3% (9,667) (11,334) -14.7%
Of which, management fee type expenses(( 29 (#_ftn29) )) (6,147) (7,822) -21.4% (27,112) (28,662) -5.4%
GCAP management fee expenses starting from 2024 have a self-targeted cap of
0.75% of Georgia Capital's NAV. The LTM management fee expense ratio was 0.80%
at 31-Dec-23 (1.02% as of 31-Dec-22).
Total investment return represents the increase (decrease) in the fair value
of our portfolio. Total investment return was GEL 189.0 million in 4Q23 and
GEL 444.6 million in FY23, mostly reflecting the changes in the value of our
portfolio companies. We discuss valuation drivers for our businesses on pages
5-7. The performance of each of our private large and investment stage
portfolio companies is discussed on pages 13-24.
GCAP's net foreign currency liability balance amounted to US$ 130 million (GEL
350 million) at 31-Dec-23, up from US$ 129 million (GEL 346 million) at
30-Sep-23. As a result of the movements described above, GCAP's adjusted IFRS
net income was GEL 208.3 million in 4Q23 and GEL 615.6 million in FY23.
DISCUSSION OF PORTFOLIO COMPANIES' RESULTS (STAND-ALONE IFRS)
The following sections present the IFRS results and business development
extracted from the individual portfolio company's IFRS accounts for large and
investment stage entities, where the 2023 portfolio company's accounts and
respective IFRS numbers are unaudited. We present key IFRS financial
highlights, operating metrics and ratios along with commentary explaining the
developments behind the numbers. For the majority of our portfolio companies,
the fair value of our equity investment is determined by the application of an
income approach (DCF) and a market approach (listed peer multiples and
precedent transactions). Under the discounted cash flow (DCF) valuation
method, fair value is estimated by deriving the present value of the business
using reasonable assumptions of expected future cash flows and the terminal
value, and the appropriate risk-adjusted discount rate that quantifies the
risk inherent to the business. Under the market approach, listed peer group
earnings multiples are applied to the trailing twelve months (LTM) stand-alone
IFRS earnings of the relevant business. As such, the stand-alone IFRS results
and developments driving the IFRS earnings of our portfolio companies are key
drivers of their valuations within GCAP's financial statements. See "Basis of
Presentation" on page 36 for more background.
LARGE PORTFOLIO COMPANIES
Discussion of Retail (pharmacy) Business Results
The retail (pharmacy) business, where GCAP owns a 97.6% equity interest, is
the largest pharmaceuticals retailer and wholesaler in Georgia, with a 32%
market share based on the 2022 revenues. The business consists of a retail
pharmacy chain and a wholesale business that sells pharmaceuticals and medical
supplies to hospitals and other pharmacies. The business operates a total of
412 pharmacies (of which 397 are in Georgia and 15 in Armenia) and 23
franchise stores (of which, two are in Armenia and four in Azerbaijan).
4Q23 & FY23 performance (GEL '000), Retail (pharmacy) 30 (#_ftn30)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue, net 223,548 209,182 6.9% 823,692 789,893 4.3%
Of which, retail 177,767 167,921 5.9% 653,960 620,936 5.3%
Of which, wholesale 45,781 41,261 11.0% 169,732 168,957 0.5%
Gross Profit 63,245 59,967 5.5% 244,322 231,270 5.6%
Gross profit margin 28.3% 28.7% -0.4 ppts 29.7% 29.3% 0.4 ppts
Operating expenses (ex. IFRS 16) (47,228) (39,564) 19.4% (166,979) (154,343) 8.2%
EBITDA (ex. IFRS 16) 16,017 20,403 -21.5% 77,343 76,927 0.5%
EBITDA margin, (ex. IFRS 16) 7.2% 9.8% -2.6 ppts 9.4% 9.7% -0.3 ppts
Net loss/profit (ex. IFRS 16) (104) 7,400 NMF 45,614 58,605 -22.9%
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 34,210 22,619 51.2% 52,361 77,099 -32.1%
EBITDA to cash conversion 213.6% 110.9% 102.7 ppts 67.7% 100.2% -32.5 ppts
Cash flow used in investing activities 31 (#_ftn31) (11,335) (3,808) NMF (84,130) (58,367) 44.1%
Free cash flow, (ex. IFRS 16) 32 (#_ftn32) 20,647 18,938 9.0% (56,130) 15,016 NMF
Cash flow from financing activities (ex. IFRS 16) 3,126 (6,716) NMF 17,686 3,392 NMF
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 631,218 580,104 8.8% 576,060 9.6%
Of which, cash and bank deposits 60,383 34,426 75.4% 75,279 -19.8%
Of which, securities and loans issued 2,623 4,578 -42.7% 22,857 -88.5%
Total liabilities 597,611 544,160 9.8% 515,081 16.0%
Of which, borrowings 228,261 216,232 5.6% 131,547 73.5%
Of which, lease liabilities 151,916 136,836 11.0% 107,455 41.4%
Total equity 33,607 35,944 -6.5% 60,979 -44.9%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in retail revenues in 4Q23 and FY23 was driven by a
combination of factors:
o The expansion of the pharmacy chain and franchise stores - the business
added 18 pharmacies and 10 franchise stores over the last quarter (40
pharmacies and 11 franchise stores over the last 12 months).
o Increased focus on higher margin para-pharmacy product sales - the
para-pharmacy revenue as a percentage of retail revenue increased from 38.6%
in 4Q22 to 40.0% in 4Q23 (up from 36.5% in FY22 to 39.7% in FY23).
o Overall economic growth in Georgia.
o The revenue growth was partially subdued by a) implementation of the
External Reference Pricing model, which sets a maximum retail price for
state-financed prescription medicines. The list of regulated products was
further expanded in 4Q23 (detailed in other valuation drivers and operating
highlight section below) and b) a decrease in product prices due to the
appreciation of GEL against foreign currencies (as approximately 70% of
inventory purchases are denominated in foreign currencies).
Ø The 4Q23 wholesale revenue growth is attributable to new high-margin
contracts signed during the quarter, which more than offset the negative
impact of the retail pricing regulations introduced in 2023.
Ø The increase in operating expenses in 4Q23 reflects increased rent and
salary expenses in line with the substantial expansion of the pharmacy chain
and franchise stores during the quarter. This also translated into the
temporarily subdued EBITDA margin (excluding IFRS 16) of 7.2% in 4Q23.
Overall, in FY23 the business maintained the EBITDA margin (excluding IFRS 16)
at 9.4%, above the targeted threshold of 9%, and we expect the investments in
the recently opened stores to deliver a substantial increase in business
revenues in the coming quarters as customer traffic gradually increases.
Ø The significant y-o-y increase in interest expense (excluding IFRS 16) in
4Q23 and FY23 is due to the higher average net debt balance, as explained
below.
Ø The developments described above translated into a GEL 7.5 million y-o-y
decrease in 4Q23 net profit (excluding IFRS 16) (down 22.2% y-o-y in FY23).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The net debt balance was down to GEL 165.3 million as at 31-Dec-23, from
GEL 177.2 million at 30-Sep-23, mainly reflecting robust cash flow generation
in 4Q23. The net debt balance was up by GEL 131.8 million from 31-Dec-22,
further reflecting increased borrowings that partially financed the minority
buyout transaction in June 2023.
Ø In 4Q23, the business sold a significant portion of its inventory stock,
resulting in a 213.6% EBITDA-to-cash conversion ratio. The ratio was at 67.7%
in FY23, reflecting the business's strategy of making advance payments to key
vendors to secure substantial supplier discounts for high-volume inventory
purchases.
Ø GEL 50.9 million dividends were paid to GCAP in FY23.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø Effective from 2023, the Government introduced two new quality regulations:
i) Good Manufacturing Practice ("GMP") and ii) Good Distribution Practice
("GDP"). These regulations establish the minimum standards that medicine
distributors must meet to ensure the quality and integrity of medicines
throughout the supply chain. Compliance with GMP and GDP ensures that
medicines are consistently stored under the appropriate conditions, including
during transportation, to prevent contamination. The implementation of the new
standards resulted in the closure of several of our partner small pharmacies,
leading to a reduction in revenues and gross profit. In 4Q23 and FY23, the
wholesale business revenue was affected by GEL 4.0 million and GEL 21.4
million, respectively, while the effect on gross profit was GEL 0.9 million in
4Q23 and GEL 5.0 million in FY23. To meet the requirements the business
incurred additional CAPEX of GEL c.4.0 million in FY23.
Ø In November 2023, the state announced the third wave of price regulations
under the External Reference Pricing model, affecting both prescription and
non-prescription medicine. The new prices, aligned with these latest
regulations, took effect from January 2024. Overall, the anticipated impact of
these price regulations on the 2024-year EBITDA is estimated at negative GEL
8.0 million. In response to these regulatory challenges, the business's
strategic focus lies in the optimisation of the chain and increasing the share
of para-pharmacy products in sales, which remain unaffected by regulations.
Ø In December 2023, the Georgian National Competition Agency (the "Agency")
imposed fines on four companies in the Georgian pharmaceutical retailers'
sector, including GCAP's retail (pharmacy) business, for alleged
anti-competitive actions related to price quotations on certain prescription
medicines funded under the state programme. The penalty amount assessed by the
Agency on our retail (pharmacy) business is GEL 20.0 million derived by
utilising the single rate across all the alleged participants. We have since
appealed the Agency's decision in court and plan to vigorously defend our
position.
Ø The number of pharmacies and franchise stores is provided below:
(Unaudited) Dec-23 Sep-23 Change (q-o-q) Dec-22 Change (y-o-y)
Number of pharmacies 412 394 18 372 40
Of which, Georgia 397 381 16 362 35
Of which, Armenia 15 13 2 10 5
Number of franchise stores 23 13 10 12 11
Of which, Georgia 17 7 10 8 9
Of which, Armenia 2 2 - 2 -
Of which, Azerbaijan 4 4 - 2 2
Ø Retail (Pharmacy)'s key operating performance highlights for 4Q23 and FY23
are noted below:
Key metrics (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Same store revenue growth -1.0% -8.7% 7.7 ppts 0.4% -0.8% 1.2 ppts
Number of bills issued (mln) 8.2 8.5 -3.8% 31.3 31.0 0.8%
Average bill size (GEL) 20.6 18.7 10.1% 19.8 19.0 4.5%
Discussion of Hospitals Business Results 33 (#_ftn33)
The hospitals business, where GCAP owns a 100% equity, is the largest
healthcare market participant in Georgia, comprised of 7 Large and Specialty
Hospitals, providing secondary and tertiary level healthcare services across
Georgia and 27 Regional and Community Hospitals, providing outpatient and
basic inpatient services.
4Q23 & FY23 performance (GEL '000), Hospitals 34 (#_ftn34)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue, net 35 (#_ftn35) 77,638 78,721 -1.4% 313,748 313,407 0.1%
Gross Profit 23,046 30,906 -25.4% 104,616 114,460 -8.6%
Gross profit margin 28.9% 38.7% -9.8 ppts 32.8% 36.0% -3.2 ppts
Operating expenses (ex. IFRS 16) (15,138) (15,409) -1.8% (58,487) (57,704) 1.4%
EBITDA (ex. IFRS 16) 7,908 15,497 -49.0% 46,129 56,756 -18.7%
EBITDA margin (ex. IFRS 16) 9.9% 19.4% -9.5 ppts 14.5% 17.8% -3.3 ppts
Net (loss) (ex. IFRS 16) 36 (#_ftn36) (27,322) (3,127) NMF (36,615) (1,566) NMF
CASH FLOW HIGHLIGHTS
Cash flow used in operating activities (ex. IFRS 16) (3,697) 11,717 NMF 10,621 31,730 -66.5%
EBITDA to cash conversion (ex. IFRS 16) -46.8% 75.6% NMF 23.0% 55.9% -32.9 ppts
Cash flow used in investing activities 37 (#_ftn37) (13,031) (11,626) 12.1% (44,746) (17,443) NMF
Free cash flow (ex. IFRS 16) 38 (#_ftn38) (17,226) (135) NMF (35,069) 12,855 NMF
Cash flow from financing activities (ex. IFRS 16) 26,066 4,542 NMF 22,362 (35,786) NMF
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 707,614 679,183 4.2% 680,355 4.0%
Of which, cash balance and bank deposits 9,753 1,845 NMF 23,557 -58.6%
Of which, securities and loans issued 9,557 8,990 6.3% 14,040 -31.9%
Total liabilities 357,658 306,921 16.5% 293,983 21.7%
Of which, borrowings 281,352 246,182 14.3% 227,960 23.4%
Total equity 349,956 372,262 -6.0% 386,372 -9.4%
The 4Q23 and FY23 performance of the hospitals business reflects the temporary
impact of the recently introduced facility regulation rules, implemented to
address the oversupply of beds and enhance the quality of the healthcare
industry in the country. This regulation, which became effective from
September 2023, established upgraded standards for healthcare facilities and
imposed minimum requirements for space allotted per hospital bed. In order to
adapt to the new standards, our hospitals business initiated a number of
renovation projects in all of its facilities. This resulted in certain
sections of our healthcare facilities being temporarily closed and unable to
accept patients. Most renovation works took place throughout the second half
of 2023, with most of the work being completed by the end of November. The
CAPEX investment for the renovation projects amounted to GEL 11.3 million in
2023. The negative annualised impact of increased expenses that will result
from additional requirements is estimated at GEL c.4.0 million. We believe
that this new regulation's mandate of higher quality healthcare facilities in
Georgia offers an opportunity to build on the competitive advantage of our
high-quality healthcare businesses in the medium to long term.
To capture emerging opportunities in the healthcare sector and enhance
operational efficiencies, our healthcare businesses underwent strategic
restructuring. The hospitals business was split into two distinct segments:
"Large and Specialty Hospitals" and "Regional and Community Hospitals". The
Regional and Community Hospitals now also incorporate the community clinics
that were previously managed and presented as part of the clinics and
diagnostics business. For our patients, the transition was seamless and
business operations continued uninterrupted. A new CEO from a local competitor
joined the Regional and Community Hospitals business in December to focus on
the service and efficiency from this group of hospitals.
INCOME STATEMENT HIGHLIGHTS
Ø In FY23, the Large and Specialty Hospitals and Regional and Community
Hospitals represent approximately 65% and 35%, respectively, of the
consolidated hospitals business revenue.
Total revenue breakdown (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Total revenue, net 77,638 78,721 -1.4% 313,748 313,407 0.1%
Of which, Large and Specialty Hospitals 51,992 49,349 5.4% 204,690 198,883 2.9%
Of which, Regional and Community Hospitals 25,966 29,733 -12.7% 110,551 115,768 -4.5%
Of which, Inter-business eliminations (320) (361) -11.6% (1,493) (1,244) 20.0%
Ø The 4Q23 revenue of Large and Specialty Hospitals was up by 5.4% y-o-y.
This growth reflects the resilient underlying performance of the hospitals and
their ability to offer a diversified range of services, partially offsetting
the impact of the new facility regulations. The relatively modest 2.9% y-o-y
increase in FY23 revenue further reflects the following factors:
o The COVID related inflation of 2022 revenue as the Government contracts
continued through mid-March 2022.
o The absence of revenues from the Traumatology Hospital, which was divested
in April 2022.
Ø Our Regional and Community Hospitals primarily concentrate on delivering
outpatient and basic inpatient services, which are smaller and offer services
relatively more limited in scope than the services provided by our Large and
Specialty Hospitals. The works and related facilities closures mandated by the
new regulations therefore had a more pronounced impact on this group of
hospitals in terms of revenue growth (down 12.7% and 4.5% y-o-y in 4Q23 and
FY23, respectively).
Ø The cost of services in the business consists mainly of salaries, materials
and utilities. Trends in salary and materials costs are captured in the direct
salary and materials rates(( 39 (#_ftn39) )).
o The direct salary rates were up 6.1 ppts to 42.4% y-o-y in 4Q23 and up 3.2
ppts y-o-y to 39.6% in FY23, mainly attributable to increased minimum salary
rates for medical staff.
o The materials rate was up 2.4 ppts y-o-y to 18.1% in 4Q23 and down 0.5
ppts y-o-y to 17.2% for the FY23.
o Utilities and other costs were down y-o-y by 0.5% in 4Q23 and up 4.5% in
FY23, resulting from overall inflation.
Ø As a result of the developments described above, 4Q23 and FY23 gross profit
margins were down y-o-y by 9.8 ppts and 3.2 ppts, respectively.
Ø Operating expenses, mainly comprising administrative salaries and other
employee benefits and general and administrative expenses (excl. IFRS 16),
were largely flat (down by 1.8% y-o-y in 4Q23 and up 1.4% y-o-y in FY23).
Ø The developments described above translated into 49.0% and 18.7% y-o-y
decrease in EBITDA (excluding IFRS 16) in 4Q23 and FY23, respectively.
Total EBITDA (excl. IFRS 16), breakdown (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Total EBITDA (excl. IFRS 16) 7,908 15,497 -49.0% 46,129 56,756 -18.7%
Of which, Large and Specialty Hospitals 6,587 9,457 -30.3% 34,339 35,915 -4.4%
Of which, Regional and Community Hospitals 1,321 6,040 -78.1% 11,790 20,841 -43.4%
Ø Net interest expense (excluding IFRS 16) was up by 31.1% in 4Q23 and up
36.3% in FY23, y-o-y, reflecting the increased net debt balance (as described
below) and increased interest rates on the market.
Ø The business posted a net loss (excluding IFRS 16) of GEL 27.3 million in
4Q23 (GEL 36.6 million in FY23), which reflects a GEL 18.6 million one-off
costs associated with the write-off of historic receivables due to their
extremely low probability of recovery.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Net debt balance was up 11.3% q-o-q and up 37.7% y-o-y as at 31-Dec-23,
mainly resulting from high capex investments associated with new facility
regulation. The y-o-y increase in the net debt balance further reflects the
delay in the collection of receivables from the State in 2023 due to one-off
processing delays related to the introduction of the Diagnosis Related Group
("DRG") financing system.
Ø Capex investment was GEL 14.1 million in 4Q23, reflecting maintenance and
capex related to the new facility regulation at hospitals. In FY23, the capex
investment amounted to GEL 48.5 million, which apart from the 4Q23 capex
described above includes renovation works in Iashvili Hospital.
Ø In December 2023, the business signed an agreement to sell one of its
regional and community hospitals for a total consideration of GEL 34.6 million
at 15.2x EV/EBITDA multiple. The proceeds from this transaction were collected
in January 2024 and will be primarily utilised for deleveraging hospitals
business's balance sheet. The sale is in line with the business's strategy to
divest low-ROIC generating assets.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The business key operating performance highlights for 4Q23 and FY23 are
noted below:
Key metrics (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Number of admissions (thousands) 375.1 376.9 -0.5% 1,468.1 1,640.2 -10.5%
Of which, Large and Specialty Hospitals 165.5 138.3 19.7% 599.9 614.7 -2.4%
Of which, Regional and Community Hospitals 209.6 238.6 -12.2% 868.2 1,025.5 -15.3%
Occupancy rates:
Large and Specialty Hospitals 54.6% 55.8% -1.2 ppts 53.5% 55.5% -2.0 ppts
Regional Hospitals 50.3% 52.2% -1.9 ppts 49.4% 46.4% 3.0 ppts
The decrease in the number of admissions in FY23 reflects the renovation works
in our hospitals as described above.
Discussion of Insurance (P&C and Medical) Business Results
As at 31-Dec-23, the insurance business comprises a) Property and Casualty
(P&C) insurance business and b) medical insurance business. The P&C
insurance business is a leading player in the local insurance market with a
30% market share in property and casualty insurance based on gross premiums as
of 30-Sep-23. P&C also offers a variety of non-property and casualty
products, such as life insurance. The medical insurance business is one of the
country's largest private health insurers, with a 19% market share based on
9M23 net insurance premiums. Medical Insurance offers a variety of health
insurance products primarily to corporate and (selectively) to state entities
and also to retail clients in Georgia. GCAP owns a 100% equity stake in both
insurance businesses.
4Q23 & FY23 performance (GEL'000), Insurance (P&C and Medical) 40
(#_ftn40)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Insurance revenue 56,005 45,709 22.5% 208,243 171,540 21.4%
Net underwriting profit 16,310 14,942 9.2% 53,829 51,644 4.2%
Net investment profit 3,878 3,023 28.3% 14,272 9,809 45.5%
Net profit 8,023 7,740 3.7% 25,626 24,866 3.1%
CASH FLOW HIGHLIGHTS
Net cash flows from operating activities 2,170 14,860 -85.4% 33,687 42,443 -20.6%
Free cash flow 1,127 13,874 -91.9% 28,821 39,275 -26.6%
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 248,906 254,101 -2.0% 217,373 14.5%
Total equity 130,538 127,808 2.1% 121,486 7.5%
Ø In January 2024, our medical insurance business signed a Memorandum of
Understanding ("MOU") to acquire the portfolio of medical insurance contracts
and the brand name from "Ardi," the third-largest player in the health
insurance market with a 17% market share based on 9M23 net insurance premiums.
Upon the successful completion of this transaction, the combined market share
of our medical insurance business will make it the largest health insurer in
the country. Ardi's portfolio is concentrated in the upscale segment category,
presenting an opportunity to further diversify our health insurance portfolio
and achieve significant synergies from both financial and strategic
perspectives. The total cash outflow for this transaction amounts to GEL 27
million, which will be fully financed by the funds available in our medical
insurance business, with no cash investments required from GCAP. Following
this acquisition, the insurance business will operate under three brand names:
Aldagi, Imedi L, and Ardi, all of which will be managed under GCAP.
Ø The Georgian insurance sector has adopted the Estonian Taxation Model,
which came into force at the beginning of 2024. Before this change, a 15%
corporate income tax was applied to the pre-tax profit of insurance
businesses. With the Estonian Taxation Model, a 15% corporate income tax is
now applied only to earnings distributed to individuals or non-resident legal
entities. As a result, GCAP's insurance businesses are no longer subject to
corporate income tax payments, freeing up resources for both business
development and enhanced dividend payments to GCAP.
Ø In 2023, P&C and medical insurance businesses adopted the IFRS 17
"Insurance contracts" accounting standard. Comparative periods were also
retrospectively restated.
TOTAL INSURANCE BUSINESS HIGHLIGHTS
P&C and medical insurance had a broadly equal share in total revenues in
4Q23 and FY23, while the combined net profit in both reporting periods was
mainly attributable to P&C (72.7% and 74.6% share in total net profit in
4Q23 and FY23, respectively). The loss ratio was down by 0.9 ppts, the expense
ratio was up by 3.1 and the FX ratio was up by 2.4 ppts y-o-y in 4Q23 (up by
2.5, 0.1 and 1.2 ppts y-o-y in FY23, respectively), translating into 4.6 ppts
y-o-y increase in the combined ratio in 4Q23 (up 3.8 ppts y-o-y in FY23). As a
result, ROAE 41 (#_ftn41) was 27.2% in 4Q23 (27.5% in 4Q22) and 22.0% in FY23
(23.5% in FY22).
Discussion of results, P&C Insurance
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Insurance revenue 31,238 24,637 26.8% 116,912 96,648 21.0%
Net underwriting profit 10,820 11,223 -3.6% 37,700 41,011 -8.1%
Net investment profit 2,901 1,975 46.9% 9,824 5,915 66.1%
Net profit 5,830 5,793 0.6% 19,109 21,469 -11.0%
CASH FLOW HIGHLIGHTS
Net cash flows used in operating activities (2,003) 11,731 NMF 23,075 37,778 -38.9%
Free cash flow (2,139) 11,094 NMF 21,258 35,575 -40.2%
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 180,206 186,426 -3.3% 151,795 18.7%
Total equity 92,411 91,939 0.5% 86,090 7.3%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 4Q23 and FY23 insurance revenue reflects a combination of
factors:
o Motor insurance revenues were up by GEL 4.5 million y-o-y in 4Q23 (up by
GEL 10.9 million in FY23), mainly attributable to the growth in the retail
client portfolio.
o Credit life insurance revenues were up by GEL 1.3 million y-o-y in 4Q23
(up by GEL 4.9 million in FY23), resulting from the growth of banks'
portfolios in the mortgage, consumer loan, and other sectors.
o Revenues from other insurance lines increased by GEL 0.8 million y-o-y in
4Q23 and GEL 4.5 million y-o-y in FY23.
Ø P&C Insurance's key performance ratios for 4Q23 and FY23 are noted
below:
Key ratios (unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Combined ratio 89.0% 78.3% 10.7 ppts 89.5% 79.2% 10.3 ppts
Expense ratio 38.5% 34.5% 4.0 ppts 35.8% 34.1% 1.7 ppts
Loss ratio 49.8% 47.5% 2.3 ppts 53.8% 47.3% 6.5 ppts
FX ratio 0.7% -3.7% 4.4 ppts -0.1% -2.2% 2.1 ppts
ROAE(38) 28.8% 30.0% -1.2 ppts 24.4% 29.7% -5.3 ppts
Ø The combined ratio increased by 10.7 ppts y-o-y in 4Q23 (up by 10.3 ppts
y-o-y in FY23).
§ The expense ratio was up by 4.0 ppts y-o-y in 4Q23 and up by 1.7 ppts
y-o-y in FY23, driven by increased salary expenses in line with the business
growth.
§ The 4Q23 loss ratio was up 2.3 ppts y-o-y, mainly attributable to the
increased cargo and property insurance claims. The FY23 loss ratio (up 6.5
ppts y-o-y) further reflects a number of extraordinary events that occurred
during 2023:
o Increased agro insurance claims due to an abnormal number of hailstorms
during the year resulted in a 2.9 ppts y-o-y increase in the FY23 loss ratio.
The increase additionally reflects the base effect of exceptionally low agro
insurance claims in FY22.
o Increased property insurance claims, resulting from a) an unprecedented
landslide in one of the regions of Georgia with the estimated net loss of GEL
2.6 million (2.2 ppts impact on the FY23 loss ratio); and b) a large property
insurance claim incurred in 1Q23, with an estimated net loss of GEL 1.2
million.
§ A 4.4 ppts y-o-y increase in the FX ratio in 4Q23 (up by 2.1 ppts y-o-y
in FY23) reflects the impact of foreign exchange rate movements on the
business's insurance operations.
Ø P&C Insurance's net investment profit was up by 46.9% y-o-y in 4Q23 (up
by 66.1% y-o-y in FY23), attributable to a) a higher average liquid funds
balance, b) an increase in global interest rates, and c) a reversal of
market-driven losses in 4Q23 and FY23 on investments placed in publicly traded
debt securities.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø P&C Insurance's solvency ratio was 171% as of 31 December 2023,
significantly above the required minimum of 100%.
Ø A y-o-y decrease in the net cash flows from operating activities in 4Q23
reflects the cash outflows for the reimbursement of the abnormal amount of
claims mentioned above. The FY23 numbers further reflect the timing difference
of payment of some payable balances to reinsurers.
Ø GEL 6.5 million dividends were paid to GCAP in 4Q23 (GEL 14.9 million in
FY23).
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In 2023, the business expanded its operations into the regional reinsurance
markets of Armenia and Azerbaijan. The expansion has positively contributed to
the operating performance of the business.
Ø In 2023, Aldagi became the first insurance company on the local market to
obtain an international credit rating of bb+ from AM Best. The credit rating
is expected to further support the regional expansion of the business'
reinsurance operations.
Discussion of results, Medical Insurance
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Insurance revenue 24,767 21,072 17.5% 91,331 74,892 22.0%
Net underwriting profit 5,490 3,719 47.6% 16,129 10,633 51.7%
Net investment profit 977 1,048 -6.8% 4,448 3,894 14.2%
Net profit 2,193 1,947 12.6% 6,517 3,397 91.8%
CASH FLOW HIGHLIGHTS
Net cash flows from operating activities 4,173 3,129 33.4% 10,612 4,665 127.5%
Free cash flow 3,266 2,780 17.5% 7,563 3,700 104.4%
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 68,700 67,675 1.5% 65,578 4.8%
Total equity 38,127 35,869 6.3% 35,396 7.7%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in 4Q23 and FY23 insurance revenue is due to the increase in
the price of insurance policies and a 3.3% y-o-y increase in the total number
of insured clients (c.169,100 as of Dec-23) mainly in the corporate client
segment.
Ø FY23 net claims expenses stood at GEL 71.4 million (up 17.7% y-o-y), out of
which:
o GEL 28.0 million (39.3% of the total) was inpatient.
o GEL 31.3 million (43.8% of the total) was outpatient; and
o GEL 12.1 million (16.9% of the total) was related to pharmaceuticals.
Ø 4Q23 combined ratio decreased by 2.5 ppts y-o-y to 92.6% (down by 4.7 ppts
y-o-y to 94.8% in FY23), reflecting:
o Improved loss ratio, down 3.8 ppts y-o-y to 73.9% in 4Q23 (down 2.8 ppts
y-o-y to 78.2% in FY23), driven by robust revenue growth.
o The slight increase in expense ratio in 4Q23 (up 1.3 ppts y-o-y to 18.7%)
was mainly due to the increased salaries and other employee benefits (up 60.7%
in 4Q23 y-o-y) in line with the business growth. Overall, in FY23 expense
ratio was down 1.9 ppts to 16.6% reflecting the top-line growth of the
business.
Ø The developments described above translated into a 12.6% and 91.8% y-o-y
increase in the 4Q23 and FY23 net profit, respectively.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø GEL 5.0 million dividends were paid to GCAP in FY23.
Ø The solid operating performance of the business led to a 33.4% and 127.5%
y-o-y increase in the net cash flows from operating activities in 4Q23 and
FY23, respectively.
INVESTMENT STAGE PORTFOLIO COMPANIES
Discussion of Renewable Energy Business Results
The renewable energy business operates three wholly-owned commissioned
renewable assets: 30MW Mestiachala HPP, 20MW Hydrolea HPPs and 21MW Qartli
wind farm. In addition, the business has a pipeline of renewable energy
projects in varying stages of development. The renewable energy business is
100% owned by Georgia Capital. As electricity sales in Georgia is a dollar
business, the financial data below is presented in US$.
4Q23 & FY23 performance (US$ '000), Renewable Energy 42 (#_ftn42)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue 2,978 2,843 4.7% 14,449 14,583 -0.9%
Of which, PPA 2,431 2,588 -6.1% 8,529 8,962 -4.8%
Of which, Non-PPA 547 255 114.5% 5,920 5,621 5.3%
Operating expenses (947) (937) 1.1% (4,068) (3,408) 19.4%
EBITDA 2,031 1,906 6.6% 10,381 11,175 -7.1%
EBITDA margin 68.2% 67.0% 1.2 ppts 71.8% 76.6% -4.8 ppts
Net (loss)/profit (1,098) 2,363 NMF (666) 933 NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities 3,035 3,302 -8.1% 9,877 11,344 -12.9%
Cash flow used in investing activities (398) 2,698 NMF (3,561) 2,961 NMF
Cash flow used in financing activities (2,581) (2,627) -1.8% (5,170) (18,255) -71.7%
Dividends paid out - (700) NMF (2,000) (2,800) -28.6%
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 122,579 124,757 -1.7% 122,645 -0.1%
Of which, cash balance 10,525 10,585 -0.6% 9,468 11.2%
Total liabilities 83,911 85,176 -1.5% 84,288 -0.4%
Of which, borrowings 80,935 82,195 -1.5% 80,570 0.5%
Total equity 38,667 39,581 -2.3% 38,357 0.8%
INCOME STATEMENT HIGHLIGHTS (GEL) 4Q23 4Q22 Change FY23 FY22 Change
Revenue 8,048 7,801 3.2% 38,065 42,221 -9.8%
EBITDA 5,488 5,244 4.7% 27,357 32,311 -15.3%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in 4Q23 revenue in US$ terms reflects the net impact
of the following factors:
o A 7.8% y-o-y increase in electricity generation in 4Q23, mainly driven by
the resumption of operations of two power-generating units of Hydrolea HPPs,
which were taken offline during November 2022-June 2023 periods due to
previously planned phased rehabilitation works.
o The average electricity selling price was down 2.7% y-o-y to 58.7 US$/MWh
in 4Q23.
Ø The y-o-y decrease in FY23 revenue in US$ terms reflects the net impact
of the following factors:
o A 5.3% y-o-y decrease in electricity generation in FY23 due to the
rehabilitation works at Hydrolea HPPs, as described above.
o A 4.6% y-o-y increase in the average electricity selling price in FY23 (up
to 56.8 US$/MWh). This reflects the export of 32.3 GWh of electricity to the
Republic of Türkiye in May-July 2023, with an average export price of 68.4
US$/MWh.
Ø Approximately 80% of electricity sales during 4Q23 (c.55% in FY23) were
covered by long-term fixed-price power purchase agreements (PPAs) formed with
a government-backed entity.
Revenue and generation breakdown by power assets:
(Unaudited) 4Q23 FY23
US$ '000, Revenue from Change Electricity Change Revenue from Change Electricity Change
electricity sales
y-o-y
generation (MWh)
y-o-y
electricity sales
y-o-y
generation (MWh)
y-o-y
unless otherwise noted
30MW Mestiachala HPP 480 -16.5% 8,733 -16.4% 5,491 8.0% 99,697 -4.5%
20MW Hydrolea HPPs 1,214 54.6% 22,310 60.7% 3,366 -12.0% 68,308 -10.8%
21MW Qartli wind farm 1,284 -13.4% 19,758 -13.4% 5,592 -1.5% 86,033 -1.5%
Total 2,978 4.7% 50,801 7.8% 14,449 -0.9% 254,038 -5.3%
Ø Operating expenses were flat in 4Q23. As for the FY23, the operating
expenses were up by 19.4% y-o-y reflecting electricity and transmission costs
incurred due to electricity export in the Republic of Türkiye.
Ø The developments described above led to a 6.6% y-o-y increase in EBITDA in
4Q23 (down 7.1% y-o-y in FY23).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø A y-o-y decrease in the cash flow from investing activities reflects the
high base effect of the following factors on 2022 numbers: a) consideration
received from the Mestiachala 1 HPP sale and b) the sale of financial
securities, previously held for liquidity management purposes.
Ø A y-o-y decrease in the FY23 cash outflows from financing activities is
attributable to the y-o-y decrease in the average gross debt balance.
Ø Subsequent to 4Q23, the business repurchased and cancelled US$ 5.1 million
of its outstanding US$ 80.0 million green bonds. Consequently, the gross debt
balance of Renewable Energy now stands at US$ 74.9 million.
Discussion of Education Business Results
Our education business currently combines majority stakes in four private
school brands operating across seven campuses acquired over the period
2019-2023: British-Georgian Academy and British International School of
Tbilisi (70% stake), the leading schools in the premium and international
segments; Buckswood International School (80% stake), well-positioned in the
midscale segment and Green School (80%-90% ownership), well-positioned in the
affordable segment.
4Q23 & FY23 performance (GEL '000), Education 43 (#_ftn43)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue 19,346 13,676 41.5% 55,491 42,577 30.3%
Operating expenses (12,936) (8,625) 50.0% (41,053) (28,953) 41.8%
EBITDA 6,410 5,051 26.9% 14,438 13,624 6.0%
EBITDA Margin 33.1% 36.9% -3.8 ppts 26.0% 32.0% -6.0 ppts
Net profit 8,223 3,901 110.8% 13,263 11,338 17.0%
CASH FLOW HIGHLIGHTS
Net cash flows used in operating activities (115) 1,048 NMF 17,363 16,454 5.5%
Net cash flows used in investing activities (3,504) (7,707) -54.5% (31,254) (24,079) 29.8%
Net cash flows from financing activities 1,634 (525) NMF 15,897 5,500 NMF
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 191,723 186,718 2.7% 156,320 22.6%
Of which, cash 7,535 9,491 -20.6% 5,709 32.0%
Total liabilities 62,149 66,340 -6.3% 52,168 19.1%
Of which, borrowings 27,750 26,443 4.9% 21,740 27.6%
Total equity 129,574 120,378 7.6% 104,152 24.4%
INCOME STATEMENT HIGHLIGHTS
Ø The y-o-y increase in 4Q23 and FY23 revenues was driven by a) organic
growth through strong intakes and a ramp-up of the utilisation and b)
expansion of the business, as described in other valuation drivers and
operating highlights section below. The revenue growth was partially subdued
by GEL's y-o-y appreciation against US$, as the tuition fees for our premium
and international schools are denominated in US$.
Ø Operating expenses were up by 50.0% and 41.8% y-o-y in 4Q23 and FY23,
respectively, mainly reflecting increased salary, catering and utility
expenses, in line with the expansion of the business and inflation.
Ø Consequently, EBITDA was up by 26.9% y-o-y in 4Q23 (up by 6.0% y-o-y in
FY23).
Ø The business posted a net income of GEL 8.2 million in 4Q23 (GEL 13.3
million in FY23).
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø Strong cash collection rates (at 77.2% as of 31-Dec-23, slightly below last
year's level of 79.5%), combined with enhanced revenue streams, led to a 5.5%
y-o-y increase in operating cash flow generation of the business in FY23.
Ø Investing cash flows of GEL 31.3 million in FY23 mainly reflect the cash
outflows for the investment projects, in line with the business expansion
strategy.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø In 2023, the total learner capacity of the education business increased by
1,600 learners to 7,270 learners, reflecting a) the launch of a new campus in
the mid-scale segment and b) the acquisition of the new campus in the
affordable segment during 2023.
Ø The total number of learners increased by 1,665 learners y-o-y to 5,827
learners at 31-Dec-2023.
Ø The utilisation rate for the total 7,270 learner capacity was up by 6.8
ppts y-o-y to 80.2% as of 31-Dec-23.
o The utilisation rate for the pre-expansion 2,810 learner capacity was
100%.
o The utilisation of the newly added capacity of 4,460 learners was 67.6%.
Ø The number of campuses across the different segments is noted below:
(Unaudited) Dec-23 Sep-23 Change (q-o-q) Dec-22 Change (y-o-y)
Total number of campuses 7 7 - 5 2
Premium and International segment 1 1 - 1 -
Mid-scale segment 2 2 - 1 1
Affordable segment 4 4 - 3 1
Discussion of Clinics and Diagnostics Business Results 44 (#_ftn44)
The clinics and diagnostics business, where GCAP owns a 100% equity interest,
is the second largest healthcare market participant in Georgia after our
hospitals business. Following the strategic restructuring, as outlined in the
hospitals business discussion section on page 15, the business comprises two
segments: 1) 19 polyclinics (providing outpatient diagnostic and treatment
services) and 14 lab retail points at GPC pharmacies; 2) Diagnostics,
operating the largest laboratory in the entire Caucasus region - "Mega Lab".
4Q23 & FY23 performance (GEL '000), Clinics and Diagnostics 45 (#_ftn45)
(Unaudited)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue, net 46 (#_ftn46) 17,047 13,238 28.8% 61,723 56,691 8.9%
Of which, clinics 13,717 10,446 31.3% 49,170 41,133 19.5%
Of which, diagnostics 4,950 4,253 16.4% 18,435 20,477 -10.0%
Of which, inter-business eliminations (1,620) (1,461) 10.9% (5,882) (4,919) 19.6%
Gross Profit 8,350 5,058 65.1% 29,240 23,622 23.8%
Gross profit margin 48.9% 38.0% 10.9 ppts 47.2% 41.6% 5.6 ppts
Operating expenses (ex. IFRS 16) (5,429) (4,986) 8.9% (16,345) (18,013) -9.3%
EBITDA (ex. IFRS 16) 2,921 72 NMF 12,895 5,609 129.9%
EBITDA margin (ex. IFRS 16) 17.1% 0.5% 16.6 ppts 20.8% 9.9% 10.9 ppts
Net profit/(loss) (ex. IFRS 16) 1,008 (3,934) NMF 2,307 (5,187) NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 2,274 988 NMF 6,901 3,878 78.0%
EBITDA to cash conversion (ex. IFRS 16) 77.9% NMF NMF 53.5% 69.1% -15.6 ppts
Cash flow used in investing activities 8,951 (1,044) NMF (1,451) (8,460) -82.8%
Free cash flow (ex. IFRS 16) 47 (#_ftn47) 14,780 (29) NMF 10,508 (3,985) NMF
Cash flow used in financing activities (ex. IFRS 16) (9,960) 3,405 NMF (5,982) 4,117 NMF
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 135,848 141,259 -3.8% 125,598 8.2%
Of which, cash balance and bank deposits 4,500 3,240 38.9% 5,033 -10.6%
Of which, securities and loans issued 8,357 4,869 71.6% 3,607 NMF
Total liabilities 83,901 88,230 -4.9% 71,908 16.7%
Of which, borrowings 48,630 56,753 -14.3% 47,252 2.9%
Total equity 51,947 53,029 -2.0% 53,690 -3.2%
Discussion of results, Clinics
(Unaudited, GEL '000)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue, net 13,717 10,446 31.3% 49,170 41,133 19.5%
Gross Profit 6,985 4,357 60.3% 24,550 18,990 29.3%
Gross profit margin 50.8% 41.4% 9.4 ppts 49.7% 46.0% 3.7 ppts
Operating expenses (ex. IFRS 16) (4,420) (4,001) 10.5% (12,845) (14,043) -8.5%
EBITDA (ex. IFRS 16) 2,565 356 NMF 11,705 4,947 136.6%
EBITDA margin (ex. IFRS 16) 18.7% 3.4% 15.3 ppts 23.7% 12.0% 11.7 ppts
Net profit/(loss) (ex. IFRS 16) 1,113 (3,302) NMF 3,027 (4,529) NMF
CASH FLOW HIGHLIGHTS
Cash flow from operating activities (ex. IFRS 16) 2,042 90 NMF 8,214 3,832 NMF
EBITDA to cash conversion (ex. IFRS 16) 79.6% 25.3% 54.3 ppts 70.2% 77.5% -7.3 ppts
Cash flow used in investing activities 48 (#_ftn48) 9,255 (1,019) NMF (194) (7,748) -97.5%
Free cash flow (ex. IFRS 16) 14,855 (891) NMF 13,094 (3,256) NMF
Cash flow used in financing activities (ex. IFRS 16) (10,260) 3,759 NMF (7,649) 5,454 NMF
BALANCE SHEET HIGHLIGHTS 31-Dec-23 30-Sep-23 Change 31-Dec-22 Change
Total assets 105,789 110,761 -4.5% 95,250 11.1%
Of which, cash balance and bank deposits 4,261 3,229 32.0% 3,892 9.5%
Of which, securities and loans issued 8,357 4,869 71.6% 3,607 NMF
Total liabilities 71,840 75,541 -4.9% 60,782 18.2%
Of which, borrowings 42,340 50,833 -16.7% 43,056 -1.7%
Total equity 33,949 35,220 -3.6% 34,468 -1.5%
INCOME STATEMENT HIGHLIGHTS
Ø The increase in revenue is the result of higher demand for non-COVID
regular ambulatory services and the expansion of the business, which added two
new ambulatory centres in the second half of 2022 and two in 2023.
Ø The cost of services in the clinics consists mainly of salaries, cost of
providers, materials and utilities:
o The trend in salary cost is captured in the direct salary rate(( 49
(#_ftn49) )). A significant portion of direct salaries is fixed, which on the
back of increased revenue improved by 4.9 ppts to 30.2% in 4Q23 and by 2.0
ppts to 31.5% in FY23.
o The cost of providers mainly consists of outsourced laboratory services,
which as a percentage of revenue also improved y-o-y, down 1.7 ppts to 12.0%
in 4Q23 and down 0.5 ppts to 11.6% in FY23, attributable to additional
discounts from the laboratory services provider.
Ø As a result of the developments described above, the gross profit margins
improved substantially in 4Q23 and FY23, up 9.4 and 3.7 ppts, y-o-y,
respectively.
Ø Operating expenses (excl. IFRS 16) were up by 10.5% y-o-y in 4Q23,
reflecting increased salaries and administrative expenses (excl. IFRS 16) in
line with the expansion of the business as described above. The FY23 operating
expenses (excl. IFRS 16) were down by 8.5% y-o-y which mainly reflect a GEL
2.9 million gain recognised from the sale of one of the polyclinic buildings
in 3Q23.
Ø Business performance translated into an 18.7% EBITDA margin in 4Q23 (up
15.3 ppts y-o-y) and 23.7% in FY23 (up 11.7 ppts y-o-y). Excluding the gain
recognised from the disposal, the FY23 EBITDA margin was 17.8% (up 5.8 ppts
y-o-y).
Ø The net interest expense (excl. IFRS 16) was up 12.9% in FY23 y-o-y (down
1.6% y-o-y in 4Q23) reflecting a) an increased balance of net debt during the
year due to investment made for the expansion of the business and b) increased
interest rates on the market.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Ø The EBITDA to cash conversion ratio was up 54.3 ppts in 4Q23, y-o-y to
79.6% and stood at 70.2% for FY23.
Ø In FY23, the business spent GEL 11.2 million on capex, primarily related to
the expansion of the services and the polyclinics chain. Capex investment in
4Q23 amounted to GEL 3.2 million.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The number of admissions at our clinics is highlighted below:
(Unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Number of admissions (thousands) 449.4 447.1 0.5% 1,640.0 1,707.5 -4.0%
Ø The number of polyclinics operated by the business is provided below.
(Unaudited) Dec-23 Sep-23 Change (q-o-q) Dec-22 Change (y-o-y)
Number of polyclinics 19 17 2 17 2
As of 31-Dec-23, the total number of registered patients in our polyclinics
reached c.301,000 (c.277,000 as of 31-Dec-22) in Tbilisi and c.636,000
(c.616,000 as of 31-Dec-22) in Georgia.
Discussion of results, Diagnostics
(Unaudited, GEL '000)
INCOME STATEMENT HIGHLIGHTS 4Q23 4Q22 Change FY23 FY22 Change
Revenue, net 4,950 4,253 16.4% 18,435 20,477 -10.0%
Of which, from regular lab tests 4,877 3,943 23.7% 17,910 14,417 24.2%
Of which, from COVID-19 tests 73 310 -76.5% 525 6,060 -91.3%
Gross Profit 1,365 701 94.7% 4,690 4,632 1.3%
Gross profit margin 27.6% 16.5% 11.1 ppts 25.4% 22.6% 2.8 ppts
Operating expenses (ex. IFRS 16) (1,009) (985) 2.4% (3,500) (3,964) -11.7%
EBITDA (ex. IFRS 16) 356 (284) NMF 1,190 668 78.1%
EBITDA margin (ex. IFRS 16) 7.2% -6.7% 13.9 ppts 6.5% 3.3% 3.2 ppts
Net loss (ex. IFRS 16) (105) (632) 83.4% (1,172) (652) -79.8%
INCOME STATEMENT HIGHLIGHTS
Ø As part of the post-COVID transition, the business has been actively
broadening its client base and diversifying its range of non-COVID services.
This translated into a 23.7% y-o-y increase in revenues from regular lab tests
in 4Q23 and 24.2% in FY23.
Ø Overall, the 10.0% y-o-y decrease in the net revenue of the diagnostics
business in FY23 was driven by the suspension of Government contracts for
COVID testing in March 2022 as infections slowed and became less severe. After
having been the revenue driver in 2021 and the first quarter of 2022, revenues
from COVID testing decreased dramatically and were down 91.3% y-o-y in FY23.
Ø In 4Q23, the business posted a 94.7% y-o-y increase in gross profit with
27.6% gross profit margin (up 11.1 ppts y-o-y) and GEL 0.4 million EBITDA with
7.2% EBITDA margin (up 13.9 ppts y-o-y), reflecting increased demand on higher
margin non-COVID services. The FY23 gross profit was up 1.3% with 25.4% gross
profit margin (up 2.8 ppts y-o-y), while in the same period, the EBITDA was up
78.1% with 6.5% EBITDA margin (up 3.2 ppts y-o-y), the latter reflecting a
reduction in the operating expenses.
OTHER VALUATION DRIVERS AND OPERATING HIGHLIGHTS
Ø The key operating performance highlights for 4Q23 and FY23 are noted below:
(Unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Number of non-Covid tests performed (thousands) 658 607 8.4% 2,449 2,174 12.7%
Average revenue per non-Covid test (GEL) 7.4 6.5 14.1% 7.3 6.6 10.2%
Discussion of Other Portfolio Results
The four businesses in our "other" private portfolio are Auto Service,
Beverages, Housing Development, and Hospitality. They had a combined value of
GEL 284.3 million at 31-Dec-23, which represented 7.7% of our total portfolio.
4Q23 & FY23 aggregated performance highlights (GEL '000), Other Portfolio
(Unaudited) 4Q23 4Q22 Change FY23 FY22 Change
Revenue 140,132 134,014 4.6% 572,941 484,417 18.3%
EBITDA 7,541 4,467 68.8% 43,714 34,778 25.7%
Net cash flows used in operating activities (7,076) (6,734) -5.1% (7,525) 4,834 NMF
Ø Auto Service | The auto service business includes a car services and parts
business, and a periodic technical inspection (PTI) business.
o Car services and parts business | In 4Q23, revenue was up by 24.1% y-o-y
to GEL 22.9 million (up 28.7% y-o-y to GEL 63.3 million in FY23), reflecting
an increase in retail, corporate and wholesale segments. Similarly, the gross
profit was up by 26.4% to GEL 5.7 million in 4Q23 and up by 37.4% to GEL 16.3
million in FY23, y-o-y. In 4Q23, operating expenses were up by 38.5% y-o-y (up
by 45.8% y-o-y in FY23), reflecting the business growth. As a result, the
business posted GEL 1.9 million EBITDA in 4Q23, up by 7.5% y-o-y (GEL 4.3
million in FY23, up by 18.3% y-o-y).
o Periodic technical inspection (PTI) business | PTI business's revenue was
up by 33.7% y-o-y to GEL 5.7 million in 4Q23 (up by 24.1% y-o-y to GEL 20.8
million in FY23). Revenue growth was driven by an increase in primary vehicle
inspections during the quarter, further supported by the introduction of fees
for secondary checks in 2023 as compared to the preceding periods, when this
service was provided free of charge. The number of total cars serviced was up
by 20.8% and 10.9% y-o-y in 4Q23 and FY23, respectively, translating into a
10.6% and 18.4% y-o-y increase in EBITDA (4Q23 and FY23 EBITDA were GEL 2.5
and GEL 10.3 million, respectively).
Ø Beverages | The beverages business combines three business lines: a beer
business, a distribution business and a wine business.
o Beer business | The gross revenue of the beer business increased by 8.2%
y-o-y to GEL 27.6 million in 4Q23 and was up by 18.9% y-o-y to GEL 136.2
million in FY23, resulting from the strong recovery in tourism and increased
product prices due to higher demand. Sales in hectolitres were flat in 4Q23
(up by 0.2% y-o-y) and were up by 8.8% y-o-y in FY23. The average 4Q23 GEL
price per litre (average for beer and lemonade) increased by 8.0% y-o-y (up by
9.3% in FY23). The operating expenses were down by 30.1% and 29.6% y-o-y in
4Q23 and FY23, deriving from the structural changes across beer and
distribution business lines. Consequently, the EBITDA of the business
increased by more than four times y-o-y and stood at GEL 3.7 million in 4Q23
(up 44.2% y-o-y to GEL 22.0 million in FY23).
o Distribution business | Revenue of the distribution business increased by
16.1% and 9.6% y-o-y to GEL 41.7 million and GEL 190.8 million in 4Q23 and
FY23, respectively. The gross profit margin was up by 0.5 ppts and 3.1 ppts
y-o-y in 4Q23 and FY23, respectively, reflecting the improved trade terms from
the suppliers. In 4Q23, operating expenses were up by 33.7% y-o-y (up by 45.6%
y-o-y in FY23), reflecting the business growth, increased marketing expenses
and inflation. As a result, the business posted GEL 1.2 million EBITDA in
4Q23, down by 24.6% y-o-y (GEL 9.4 million in FY23, down by 1.2% y-o-y).
o Wine business | The net revenue of the wine business was down by 18.7% to
GEL 15.0 million in 4Q23 (up by 22.8% y-o-y to GEL 58.1 million in FY23). The
decline was driven by a 13.7% decrease in the number of bottles sold in 4Q23
(a 37.9% increase in FY23), primarily due to a decrease in exports. The share
of exports in total sales was down by 1.0 ppts y-o-y to 80.9% in 4Q23 (up by
4.1 ppts y-o-y in FY23). Operating expenses decreased by 13.3% y-o-y in 4Q23
due to cost savings (down by 5.7% in FY23). Consequently, EBITDA increased by
27.6% to GEL 1.5 million in 4Q23 (up by GEL 3.3 million to GEL 4.4 million in
FY23).
Ø Real estate businesses | The combined revenue of the real estate businesses
was flat y-o-y in 4Q23 at GEL 56.9 million (up by 24.9% y-o-y to GEL 238.2
million in FY23). The FY23 EBITDA decreased by GEL 6.5 million y-o-y to
negative GEL 7.0 million, mainly resulting from the remeasurement of the
construction budgets for ongoing residential projects at our housing
development business (4Q23 EBITDA was down by GEL 0.5 million to negative GEL
3.4 million y-o-y). In FY23, the hospitality business successfully completed
the sale of two operational hotels, a vacant land plot and two
under-construction hotels located in Tbilisi and Kutaisi. The total
consideration from these transactions amounts to US$ 38.6 million. The
proceeds from these sales were utilised for deleveraging the hospitality
business's balance sheet.
RECONCILIATION OF ADJUSTED INCOME STATEMENT TO IFRS INCOME STATEMENT
The table below reconciles the adjusted income statement to the IFRS income
statement. Adjustments to reconcile adjusted income statement with IFRS income
statement mainly relate to eliminations of income, expense and certain equity
movement items recognised at JSC Georgia Capital, which are subsumed within
gross investment (loss)/income in IFRS income statement of Georgia Capital
PLC.
4Q23, unaudited FY23, unaudited
GEL '000, unless otherwise noted Adjusted IFRS income statement Adjustment IFRS income statement Adjusted IFRS income statement Adjustment IFRS income statement
(Unaudited)
Dividend income 34,148 (8,342) 25,806 235,883 (188,224) 47,659
Interest income 2,345 (2,345) - 16,642 (16,642) -
Realised / unrealised gain/(loss) on liquid funds / 772 (772) - (1,574) 1,574 -
Loss on Eurobond buybacks
Interest expense (9,026) 9,026 - (47,808) 47,808 -
Gross operating income/(loss) 28,239 (2,433) 25,806 203,143 (155,484) 47,659
Operating expenses (administrative, salaries and other employee benefits) (8,807) 8,807 - (36,779) 36,779 -
GCAP net operating income/(loss) 19,432 6,374 25,806 166,364 (118,705) 47,659
Total investment return / gain on investments at fair value 188,984 241 189,225 444,632 123,719 568,351
Administrative expenses, salaries and other employee benefits - (2,025) (2,025) - (6,563) (6,563)
Income/(loss) before foreign exchange movements and non-recurring expenses 208,416 4,590 213,006 610,996 (1,549) 609,447
Net foreign currency gain/(loss) 28 15 43 6,491 (7,446) (955)
Non-recurring expenses (139) 139 - (1,898) 1,898 -
Net gains from investments measured at FVPL - 125 125 - 125 125
Net income/(loss) 208,305 4,869 213,174 615,589 (6,972) 608,617
DETAILED FINANCIAL INFORMATION
IFRS STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
OF GEORGIA CAPITAL PLC
GEL '000, unless otherwise noted 2023, unaudited 2022, audited
Gains on investments at fair value 568,351 925
Dividend income 47,659 -
Gross investment profit 616,010 925
Administrative expenses (4,476) (4,389)
Salaries and other employee benefits (2,087) (2,374)
Profit/(loss) before foreign exchange and non-recurring items 609,447 (5,838)
Net foreign currency loss (955) (6,075)
Non-recurring expense - (240)
Net gains from investment securities measured at FVPL 125
Profit/(loss) before income taxes 608,617 (12,153)
Income tax - -
(Profit/(loss) for the year 608,617 (12,153)
Other comprehensive income - -
Total comprehensive income/(loss) for the year 608,617 (12,153)
Earnings/(loss) per share:
- basic 15.4102 (0.2887)
- diluted 14.9311 (0.2887)
IFRS STATEMENT OF FINANCIAL POSITION OF GEORGIA CAPITAL PLC
GEL '000, unless otherwise noted 31 December 2023 Unaudited 31 December 2022 Audited
Assets
Cash and cash equivalents 50 (#_ftn50) 12,319 23,361
Investment in redeemable securities 3,517 -
Prepayments 976 363
Equity investments at fair value 3,363,411 2,795,060
Total assets 3,380,223 2,818,784
Liabilities
Other liabilities 1,711 1,393
Total liabilities 1,711 1,393
Equity
Share capital 1,420 1,473
Additional paid-in capital and merger reserve 238,311 238,311
Treasury shares (2) -
Retained earnings 3,138,783 2,577,607
Total equity 3,378,512 2,817,391
Total liabilities and equity 3,380,223 2,818,784
IFRS STATEMENT OF CASH FLOWS OF GEORGIA CAPITAL PLC
GEL '000, unless otherwise noted 2023 2022
Unaudited Audited
Cash flows from operating activities
Salaries and other employee benefits paid (1,546) (1,877)
General, administrative and operating expenses paid (4,685) (4,780)
Transaction costs paid - (3,172)
Net cash flows used in operating activities before income tax (6,231) (9,829)
Income tax paid - -
Net Cash flow used in operating activities (6,231) (9,829)
Cash flows used in investing activities
Capital redemption from subsidiary - 87,238
Purchase of redeemable securities (3,382) -
Dividends received 47,659 -
Cash flows from investing activities 44,277 87,238
Cash flows from financing activities
Other purchases of treasury shares (47,834) (54,326)
Acquisition of treasury shares under share-based payment plan (203) (247)
Net cash used in financing activities (48,037) (54,573)
Effect of exchange rates changes on cash and cash equivalents (1,051) (6,675)
Net (decrease)/increase in cash and cash equivalents (11,042) 16,161
Cash and cash equivalents, beginning of the year 23,361 7,200
Cash and cash equivalents, end of the year 12,319 23,361
IFRS STATEMENT OF CHANGES IN EQUITY OF GEORGIA CAPITAL PLC
Unaudited, GEL '000, unless otherwise noted Share capital Additional paid-in capital Treasury Retained earnings Total
and merger reserve Shares
31 December 2022 1,473 238,311 - 2,577,607 2,817,391
Profit for the year - - - 608,617 608,617
Total comprehensive income for the year - - - 608,617 608,617
Increase in equity arising from share-based payments - - - 541 541
Cancellation of shares (53) - 53 - -
Purchase of treasury shares - - (55) (47,982) (48,037)
31 December 2023 1,420 238,311 (2) 3,138,783 3,378,512
SEGMENT INFORMATION - RECONCILIATION TO IFRS FINANCIAL STATEMENTS (2023)
Unaudited, GEL '000, unless otherwise noted Georgia Capital PLC Aggregation with JSC Georgia Capital Elimination of double effect on investments Aggregated Holding Company Reclassifications 51 (#_ftn51) NAV Statement
Cash and cash equivalents 12,319 51,138 - 63,457 (63,457) -
Amounts due from credit institutions - 8,678 - 8,678 (8,678) -
Marketable securities - 18,203 - 18,203 (18,203) -
Investment in redeemable securities 3,517 14,068 - 17,585 (17,585) -
Prepayments 976 - - 976 (976) -
Loans issued - 9,212 - 9,212 (9,212) -
Other assets, net - 5,060 - 5,060 (5,060) -
Equity investments at fair value 3,363,411 3,671,945 (3,363,411) 3,671,945 - 3,671,945
Total assets 3,380,223 3,778,304 (3,363,411) 3,795,116 (123,171) 3,671,945
Debt securities issued - 413,930 - 413,930 (413,930) -
Other liabilities 1,711 963 - 2,674 (2,674) -
Total liabilities 1,711 414,893 - 416,604 (416,604) -
Net Debt - - - - (296,808) (296,808)
of which, Cash and liquid funds - - - - 107,910 107,910
of which, Loans issued - - - - 9,212 9,212
of which, Gross Debt - - - - (413,930) (413,930)
Net other assets/ (liabilities) - - - - 3,375 3,375
Total equity/NAV 3,378,512 3,363,411 (3,363,411) 3,378,512 - 3,378,512
RETAIL (PHARMACY) - RECONCILIATION TO IFRS 16 (2023)
Unaudited, GEL '000, unless otherwise noted Before IFRS 16 IFRS 16 effects After IFRS 16
Income statement
Gross profit 244,322 - 244,322
Operating Expenses (166,979) 30,286 (136,693)
EBITDA 77,343 30,286 107,629
Depreciation and amortization (8,468) (26,620) (35,088)
Net interest (expense)/income (13,545) (8,543) (22,088)
Net (losses)/gains from foreign currencies (5,342) 16 (5,326)
Net non-recurring (expense)/income (3,567) - (3,567)
Profit before income tax expense 46,421 (4,861) 41,560
Income tax (expense)/benefit (807) - (807)
Profit for the year 45,614 (4,861) 40,753
Cash flow statement
Net cash flow from operating activities 52,361 30,500 82,861
Net cash flow used in investing activities (84,130) - (84,130)
Net cash flow from financing activities 17,686 (30,500) (12,814)
Exchange (losses)/gains on cash equivalents (813) - (813)
Total cash inflow (14,896) - (14,896)
Cash balance
Cash, beginning balance 75,279 - 75,279
Cash, ending balance 60,383 - 60,383
HOSPITALS - RECONCILIATION TO IFRS 16 (2023)
Unaudited, GEL '000, unless otherwise noted Before IFRS 16 IFRS 16 effects After IFRS 16
FY21 (in GEL '000)
Income statement
Gross profit 104,616 - 104,616
Operating Expenses (58,487) 966 (57,521)
EBITDA 46,129 966 47,095
Depreciation and amortization (31,886) (2,860) (34,746)
Net interest (expense)/income (30,345) (385) (30,730)
Net (losses)/gains from foreign currencies (1,144) (52) (1,196)
Net non-recurring (expense)/income (19,369) - (19,369)
Profit before income tax expense (36,615) (2,331) (38,946)
Income tax benefit/(expense) - - -
Profit for the year (36,615) (2,331) (38,946)
Cash flow statement
Net cash flow from operating activities 10,621 966 11,587
Net cash flow used in investing activities (44,746) - (44,746)
Net cash flow from financing activities 22,362 (966) (21,396)
Exchange (losses)/gains on cash equivalents (2,041) - (2,041)
Total cash (outflow)/inflow from continuing operations (13,804) - (13,804)
Cash balance
Cash, beginning balance 23,557 - 23,557
Cash, ending balance 9,753 - 9,753
CLINICS - RECONCILIATION TO IFRS 16 (2023)
Unaudited, GEL '000, unless otherwise noted Before IFRS 16 IFRS 16 effects After IFRS 16
FY21 (in GEL '000)
Income statement
Gross profit 24,550 - 24,550
Operating Expenses (12,845) 1,841 (11,004)
EBITDA 11,705 1,841 13,546
Depreciation and amortization (5,147) (1,117) (6,264)
Net interest (expense)/income (3,095) (804) (3,899)
Net (losses)/losses from foreign currencies (170) (42) (212)
Net non-recurring expense/(income) (266) - (266)
Profit before income tax expense 3,027 (122) 2,905
Income tax benefit/(expense) - - -
Profit for the year 3,027 (122) 2,905
Cash flow statement
Net cash flow from operating activities 8,214 1,841 10,055
Net cash flow used in investing activities (194) - (194)
Net cash flow used in financing activities (7,649) (1,841) (9,490)
Exchange (losses)/gains on cash equivalents (2) - (2)
Total cash inflow/(outflow) from continuing operations 369 - 369
Cash balance
Cash, beginning balance 3,892 - 3,892
Cash, ending balance 4,261 - 4,261
SELECTED EXPLANATORY NOTES TO THE IFRS FINANCIAL STATEMENTS OF GEORGIA CAPITAL
PLC (UNAUDITED).
Numbers are presented in GEL thousands, unless noted otherwise.
GOING CONCERN
The Board of Directors of Georgia Capital has made an assessment of the
Company's ability to continue as a going concern and is satisfied that it has
the resources to continue in business for a period of at least 12 months from
the date of approval of the financial statements, i.e. the period ending 31
March 2025. Furthermore, management is not aware of any material uncertainties
that may cast significant doubt upon the Company's ability to continue as a
going concern for the foreseeable future. Therefore, the financial statements
continue to be prepared on a going concern basis.
The Directors have made an assessment of the appropriateness of the going
concern basis of preparation and reviewed Georgia Capital's liquidity outlook
for the period ending 31 March 2025.
The main source of cash inflow for GCAP PLC is capital redemption from JSC
GCAP, which holds the liquid assets to support the liquidity needs of the
Company as well. As at 31 December 2023, JSC GCAP holds cash in the amount of
GEL 51,138, amounts due from credit institutions in the amount of GEL 8,678
and marketable debt securities and redeemable securities in the amount of GEL
18,203 and GEL 14,068. Securities are considered to be highly liquid, as they
are debt instruments listed on international and local markets.
The liquidity needs of the Group during the Going Concern review period mainly
consist of the coupon payments on JSC GCAP sustainability-linked bonds and the
operating costs of running the holding companies and capital allocations to
its portfolio companies. The liquidity outlook also assumes dividend income
from the private portfolio companies (healthcare, retail (pharmacy), renewable
energy, and insurance businesses) and Bank of Georgia Group PLC. Capital
allocations are assumed in relation to investment stage companies (Renewable
Energy and Education).
On August 3, 2023, JSC GCAP issued USD 150 million sustainability-linked local
bonds in Georgia, with an 8.5% coupon rate, payable in August 2028. The
proceeds from the transaction, together with GCAP's existing liquid funds,
were fully used to redeem GCAP's USD 300 million Eurobonds. Following these
transactions, GCAP's gross debt balance decreased from USD 300 million to USD
150 million. In February 2024, GCAP made its first coupon payment on the bond
in the amount of USD 6.4 million. The Directors remain confident that, given
the strong liquidity and the Group's track record of proven access to capital,
GCAP will successfully continue to service its existing bonds.
The Company has been increasingly assessing climate related risk and
opportunities that may be present to the Group. During the going concern
period no significant risk has been associated to the Group and portfolio
companies that would materially impact their ability to generate sufficient
cash and continue as a going concern.
Based on the considerations outlined above, management of Georgia Capital
concluded that the going concern basis of preparation remains appropriate for
these financial statements.
FAIR VALUE MEASUREMENTS
VALUATION TECHNIQUES
The following is a description of the determination of fair value for
financial instruments which are recorded at fair value using valuation
techniques. These incorporate the Company's estimate of assumptions that a
market participant would make when valuing the instruments.
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or have a
short-term maturity (less than three months), it is assumed that the carrying
amounts approximate to their fair value. This assumption is also applied to
demand deposits, savings accounts without a specific maturity and variable
rate financial instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at
amortised cost are estimated by comparing market interest rates when they were
first recognised with current market rates offered for similar financial
instruments. The estimated fair value of fixed interest-bearing deposits is
based on discounted cash flows using prevailing money-market interest rates
for debts with similar credit risk and maturity.
Investment in subsidiaries
Equity investments at fair value include investment in subsidiary at fair
value through profit or loss representing 100% interest of JSC Georgia
Capital. Georgia Capital PLC holds a single investment in JSC Georgia Capital
(an investment entity on its own), which holds a portfolio of investments,
both meet the definition of investment entity and Georgia Capital PLC measures
its investment in JSC Georgia Capital at fair value through profit or loss.
Investments in investment entity subsidiaries and loans issued are accounted
for as financial instruments at fair value through profit and loss in
accordance with IFRS 9. Debt securities owned are measured at fair value. We
determine that, in the ordinary course of business, the net asset value of
investment entity subsidiaries is considered to be the most appropriate to
determine fair value. JSC Georgia Capital's net asset value as of 31 December
2023 and 31 December 2022 is determined as follows:
31 December 2023 31 December 2022
Assets
Cash and cash equivalents 51,138 199,771
Amounts due from credit institutions 8,678 16,278
Marketable securities 18,203 25,445
Investment in redeemable securities 14,068 12,631
Equity investments at fair value 3,671,945 3,198,627
Of which listed and observable investments 1,384,847 985,463
BOG 1,225,847 830,463
Water Utility 159,000 155,000
Of which private investments: 2,287,098 2,213,164
Large portfolio companies 1,436,231 1,437,610
Retail (Pharmacy) 714,001 724,517
Hospitals 344,356 433,193
P&C insurance 285,566 228,045
Medical insurance 92,308 51,855
Investment stage portfolio companies 566,614 501,407
Clinics and diagnostics 110,761 112,178
Renewable energy 266,627 224,987
Education 189,226 164,242
Other portfolio companies 284,253 274,147
Loans issued 9,212 26,830
Other assets 5,060 2,351
Total assets 3,778,304 3,481,933
Liabilities
Debt securities issued 413,930 681,067
Other liabilities 963 5,806
Total liabilities 414,893 686,873
Net Asset Value 3,363,411 2,795,060
In measuring fair values of JSC Georgia Capital's investments, following
valuation methodology is applied:
Equity Investments in Listed and Observable Portfolio Companies
Equity instruments listed on an active market are valued at the price within
the bid/ask spread, that is most representative of fair value at the reporting
date, which usually represents the closing bid price. The instruments are
included within Level 1 of the hierarchy in JSC GCAP financial statements.
Listed and observable portfolio also includes instruments for which there is a
clear exit path from the business, e.g. through a put and/or call options at
pre-agreed multiples. In such cases, pre-agreed terms are used for valuing the
company.
Equity Investments in Private Portfolio Companies
Large portfolio companies - An independent third-party valuation firm is
engaged to assess fair value ranges of large private portfolio companies at
the reporting date starting from 31 December 2020. The independent valuation
company has extensive relevant industry and emerging markets experience.
Valuation is performed by applying several valuation methods including an
income approach based mainly on discounted cash flow and a market approach
based mainly on listed peer multiples (the DCF and listed peer multiples
approaches applied are described below for the other portfolio companies).
The different valuation approaches are weighted to derive a fair value range,
with the income approach being more heavily weighted than the market approach.
Management selects what is considered to be the most appropriate point in the
provided fair value range at the reporting
date.
Investment stage portfolio companies - An independent third-party valuation
firm is engaged to assess fair value ranges of investment stage private
portfolio companies at the reporting date starting from 30 June 2022. The
independent valuation company has extensive relevant industry and emerging
markets experience. Valuation is performed by applying several valuation
methods including an income approach based mainly on discounted cash flow and
a market approach based mainly on listed peer multiples (the DCF and listed
peer multiples approaches applied are substantially identical to those
described below for the other portfolio companies). The different valuation
approaches are weighted to derive a fair value range, with the income approach
being more heavily weighted than the market approach. Management selects what
is considered to be the most appropriate point in the provided fair value
range at the reporting date.
Other portfolio companies - fair value assessment is performed internally as
described below.
Equity investments in private portfolio companies are valued by applying an
appropriate valuation method, which makes maximum use of market-based public
information, is consistent with valuation methods generally used by market
participants and is applied consistently from period to period, unless a
change in valuation technique would result in a more reliable estimation of
fair value.
The value of an unquoted equity investment is generally crystallised through
the sale or flotation of the entire business. Therefore, the estimation of
fair value is based on the assumed realisation of the entire enterprise at the
reporting date. Recognition is given to the uncertainties inherent in
estimating the fair value of unquoted companies and appropriate caution is
applied in exercising judgments and in making the necessary estimates.
The fair value of equity investments is determined using one of the
valuation methods described below:
Listed Peer Group Multiples
This methodology involves the application of a listed peer group earnings
multiple to the earnings of the business and is appropriate for investments in
established businesses and for which the Company can determine a group of
listed companies with similar characteristics.
The earnings multiple used in valuation is determined by reference to listed
peer group multiples appropriate for the period of earnings calculation for
the investment being valued. The Company identifies a peer group for each
equity investment taking into consideration points of similarity with the
investment such as industry, business model, size of the company, economic and
regulatory factors, growth prospects (higher growth rate) and risk profiles.
Some peer-group companies' multiples may be more heavily weighted during
valuation if their characteristics are closer to those of the company being
valued than others.
As a rule of thumb, last 12-month earnings will be used for the purposes of
valuation as a generally accepted method. Earnings are adjusted where
appropriate for exceptional, one-off or non-recurring items.
a. Valuation based on enterprise value
Fair value of equity investments in private companies can be determined as
their enterprise value less net financial debt (gross face value of debt less
cash) appearing in the most recent Financial Statements.
Enterprise value is obtained by multiplying measures of a company's earnings
by listed peer group multiple (EV/EBITDA) for the appropriate period. The
measures of earnings generally used in the calculation is recurring EBITDA for
the last 12 months (LTM EBITDA). In exceptional cases, where EBITDA is
negative, peer EV/Sales (enterprise value to sales) multiple can be applied to
last 12-month recurring/adjusted sales revenue of the business (LTM sales) to
estimate enterprise value.
Once the enterprise value is estimated, the following steps are taken:
Net financial debt appearing in the most recent financial
statements is subtracted from the enterprise value. If net debt exceeds
enterprise value, the value of shareholders' equity remains at zero (assuming
the debt is without recourse to Georgia Capital).
The resulting fair value of equity is apportioned between
Georgia Capital and other shareholders of the company being valued, if
applicable.
Valuation based on enterprise value using peer multiples is used
for businesses within non-financial industries.
b. Equity fair value valuation
Fair value of equity investment in companies can also be determined as using
price to earnings (P/E) multiple of similar listed companies.
The measure of earnings used in the calculation is recurring adjusted net
income (net income adjusted for non-recurring items and forex gains/ losses)
for the last 12 months (LTM net income). The resulting fair value of equity is
allocated between Georgia Capital and other shareholders of the portfolio
company, if any. Fair valuation of equity using peer multiples can be used for
businesses within financial sector (e.g. insurance companies).
Discounted cash flow
Under the discounted cash flow (DCF) valuation method, fair value is estimated
by deriving the present value of the business using reasonable assumptions of
expected future cash flows and the terminal value, and the appropriate
risk-adjusted discount rate that quantifies the risk inherent to the business.
The discount rate is estimated with reference to the market risk-free rate, a
risk adjusted premium and information specific to the business or market
sector. Under the discounted cash flow analysis unobservable inputs are used,
such as estimates of probable future cash flows and an internally-developed
discounting rate of return.
Net Asset Value
The net assets methodology involves estimating fair value of an equity
investment in a private portfolio company based on its book value at reporting
date. This method is appropriate for businesses (such as real estate) whose
value derives mainly from the underlying value of its assets and where such
assets are already carried at their fair values (fair values determined by
professional third-party valuation companies) on the balance sheet.
Price of recent investment
The price of a recent investment resulting from an orderly transaction,
generally represents fair value as of the transaction date. At subsequent
measurement dates, the price of a recent investment may be an appropriate
starting point for estimating fair value. However, adequate consideration is
given to the current facts and circumstances to assess at each measurement
date whether changes or events subsequent to the relevant transaction imply a
change in the investment's fair value.
Exit price
Fair value of a private portfolio company in a sales process, where the price
has been agreed but the transaction has not yet settled, is measured at the
best estimate of expected proceeds from the transaction, adjusted pro-rata to
the proportion of shareholding sold.
Validation
Fair value of investments estimated using one of the valuation methods
described above is cross-checked using several other valuation methods as
follows:
Listed peer group multiples - peer multiples such as P/E, P/B
(price to book) and dividend yield are applied to the respective metrics of
the investment being valued depending on the industry of the company. The
Company develops fair value range based on these techniques and analyses
whether fair value estimated above falls within this range.
Discounted cash flow (DCF) - The discounted cash flow valuation
method is used to determine fair value of equity investment. Based on DCF, the
Company might make upward or downward adjustment to the value of valuation
target as derived from primary valuation method. If fair value estimated using
discounted cash flow analysis significantly differs from the fair value
estimate derived using primary valuation method, the difference is examined
thoroughly, and judgement is applied in estimating fair value at the
measurement date.
In line with our strategy, from time to time, we may receive
offers from interested buyers for our private portfolio companies, which would
be considered in the overall valuation assessment, where appropriate.
Valuation process for Level 3 valuations
Georgia Capital hired third-party valuation professionals to assess fair value
of the large private portfolio companies as at 31 December 2021. Starting from
2022 third-party valuation professionals are hired to assess fair value of the
investment stage private portfolio companies as well. As of 31 December 2023,
such businesses include Hospitals (Large and Specialty & Regional and
Community Hospitals), P&C insurance, Retail (Pharmacy), Medical Insurance,
Clinics & Diagnostics, Renewable energy, Education. The valuation is
performed by applying several valuation methods that are weighted to derive
fair value range, with the income approach being more heavily weighted than
market approach. Management selects most appropriate point in the provided
fair value range at the reporting date. Fair values of investments in other
private portfolio companies are assessed internally in accordance with Georgia
Capital's valuation methodology by the Valuation Workgroup.
Georgia Capital's Management Board proposes fair value to be placed at each
reporting date to the Audit and Valuation Committee. Audit and Valuation
Committee is responsible for the review and approval of fair values of
investments at the end of each reporting period.
Description of significant unobservable inputs to level 3 valuations
The approach to valuations as of 31 December 2023 was consistent with the
Company's valuation process and policy.
Management analyses the impact of climate change on the valuations, such as by
incorporation of known effects of climate risks to the future cash flow
forecasts or through adjusting peer multiples the known differences in the
climate risk exposure as compared to the investment being fair valued. As at
31 December 2023, the management concluded that the effects of the climate
risks are reflected in the peer multiples and discount rates used in the
valuations and that no specific adjustments are required in relation of the
Group's investment portfolio measurement and respective fair value sensitivity
disclosures.
The following table show descriptions of significant unobservable inputs to
level 3 valuations of equity investments:
31 December 2023
Description Valuation technique Unobservable input Range* Fair value
[implied multiple**]
Loans Issued DCF Discount rate 15.0%-16.5% 9,212
Equity investments at fair value
Large portfolio 1,436,231
Retail (Pharmacy) DCF, EV/EBITDA EV/EBITDA multiple 6.3x-28.2x 714,001
9.7x
Hospitals DCF, EV/EBITDA EV/EBITDA multiple 7.2x-12.8x 344,356
13.8x
P&C insurance DCF, P/E P/E multiple 4.6x-12.6x 13.0x 285,566
Medical insurance DCF, P/E P/E multiple 5.7x-11.6x 92,308
11.0x
Investment stage 566,614
Clinics and diagnostics DCF, EV/EBITDA EV/EBITDA multiple 9.4x-12.8x 110,761
11.7x
Renewable energy DCF, EV/EBITDA EV/EBITDA multiple 2.8x-17.0x 266,627
12.6x
Education DCF, EV/EBITDA EV/EBITDA multiple 6.1x-42.7x 189,226
16.7x
Other Sum of the parts EV/EBITDA multiples 2.1x-19.0x 284,253
6.7x-14.6x
Cashflow probability 90%-100%
NAV multiple
1.0x
*For equity investments at fair value the range refers to LTM multiples of
listed peer group companies, prior to any adjustments.
**Implied multiples are derived by dividing selected value of the company by
respective LTM earnings measure.
Georgia Capital hired third-party valuation professionals to assess fair value
of the large and investment stage private portfolio companies as at 31
December 2023 and 31 December 2022 including P&C insurance, Hospitals
(Large and Specialty & Regional and Community Hospitals), Retail
(Pharmacy), Medical Insurance and Clinics and Diagnostics. Starting from 30
June 2022, fair value assessment for Renewable Energy and Education businesses
are performed by third-party valuation professionals as well. The valuation is
performed by applying several valuation methods that are weighted to derive
fair value range, with the income approach being more heavily weighted than
market approach. Management selects most appropriate point in the provided
fair value range at the reporting date.
On 31 December 2021, Georgia Capital signed SPA to dispose 80% interest in
Water Utility business, which was previously included within the large private
portfolio companies. As at 31 December 2023 the remaining 20% interest in
Water Utility business was valued using the pre-agreed put option multiple in
reference to the signed contract with the buyer as GCAP has a clear exit path
from the business through a put and call structure at pre-agreed EBITDA
multiples.
As at 31 December 2023, several portfolio companies (Hospitals, Clinics,
P&C Insurance, together "Defendants") were engaged in litigation with the
former shareholders of Insurance Company Imedi L who allege that they sold
their 66% shares in Imedi L to Defendants under duress at a price below market
value in 2012. Since the outset, Defendants have vigorously defended their
position that the claims are wholly without merit. The initial judgment of the
First Instance Court in 2018 which was in favour of the Defendants was
overruled by the Appellate Court in 2020 and the case was returned for
reconsideration to the First Instance Court. Upon reconsideration, in 2022
the First Instance Court partially satisfied the claim and ruled that USD 12.7
million principal amount plus an annual 5% interest charge as lost income (c.
USD 21 million in total) should be paid by Defendants. The Defendants appealed
the decision of the First Instance Court and as of 31 December 2023 the case
is at the stage of consideration at the Appellate Court. No hearing date has
been set.
Defendants are confident that they will prevail and there have not been made a
provision for a potential liability in their financial statements. Management
shares Defendants' assessment of the merits of the case and considers that the
probability of incurring losses on this claim is low, accordingly, fair values
of portfolio companies do not take into account a potential liability in
relation to this litigation.
In December 2023, the Georgian National Competition Agency (the "Agency")
imposed fines on four companies in the Georgian pharmaceutical retailers'
sector, including GCAP's retail (pharmacy) business, for alleged
anti-competitive actions related to price quotations on certain prescription
medicines funded under the state programme. The penalty amount assessed by the
Agency on our retail (pharmacy) business is GEL 20.0 million derived by
utilising the single rate across all the alleged participants. The company has
appealed the Agency's decision in court and plans to vigorously defend its
position.
ADDITIONAL FINANCIAL INFORMATION
The FY23 NAV Statement shows the development of NAV since 31-Dec-22:
GEL '000, unless otherwise noted Dec-22 1. Value creation(( 52 (#_ftn52) )) 2a. 2b. 2c. Dividend 3.Operating expenses 4. Liquidity/ FX/Other Dec-23 Change
(Unaudited) Investment and Divestments Buyback %
Listed and Observable Portfolio Companies
Bank of Georgia (BoG) 830,463 549,255 - - (153,871) - - 1,225,847 47.6%
Water Utility 155,000 4,000 - - - - - 159,000 2.6%
Total Listed and Observable Portfolio Value 985,463 553,255 - - (153,871) - - 1,384,847 40.5%
Listed and Observable Portfolio value change % 56.1% 0.0% 0.0% -15.6% 0.0% 0.0% 40.5%
Private Portfolio Companies
Large Companies 1,437,610 74,786 - - (76,825) - 660 1,436,231 -0.1%
Retail (Pharmacy) 724,517 39,397 - - (50,904) - 991 714,001 -1.5%
Hospitals 433,193 (81,526) - - (6,018) - (1,293) 344,356 -20.5%
Insurance (P&C and Medical) 279,900 116,915 - - (19,903) - 962 377,874 35.0%
Of which, P&C Insurance 228,045 71,447 - - (14,888) - 962 285,566 25.2%
Of which, Medical Insurance 51,855 45,468 - - (5,015) - - 92,308 78.0%
Investment Stage Companies 501,407 47,044 18,388 - (5,187) - 4,962 566,614 13.0%
Renewable Energy 224,987 38,684 6,218 - (5,187) - 1,925 266,627 18.5%
Education 164,242 12,282 12,170 - - - 532 189,226 15.2%
Clinics and Diagnostics 112,178 (3,922) - - - - 2,505 110,761 -1.3%
Other Companies 274,147 5,430 32 - - - 4,644 284,253 3.7%
Total Private Portfolio Value 2,213,164 127,260 18,420 - (82,012) - 10,266 2,287,098 3.3%
Private Portfolio value change % 5.8% 0.8% 0.0% -3.7% 0.0% 0.5% 3.3%
Total Portfolio Value (1) 3,198,627 680,515 18,420 - (235,883) - 10,266 3,671,945 14.8%
Total Portfolio value change % 21.3% 0.6% 0.0% -7.4% 0.0% 0.3% 14.8%
Net Debt (2) (380,905) - (20,887) (76,190) 235,883 (21,786) (32,923) (296,808) -22.1%
of which, Cash and liquid funds 411,844 - (20,887) (76,190) 235,883 (21,786) (420,954) 107,910 -73.8%
of which, Loans issued 26,830 - - - - - (17,618) 9,212 -65.7%
of which, Gross Debt (819,579) - - - - - 405,649 (413,930) -49.5%
Net other assets/ (liabilities) (3) (331) - 2,467 (287) - (14,993) 16,519 3,375 NMF
of which, share-based comp. - - - - - (14,993) 14,993 - -
Net Asset Value (1)+(2)+(3) 2,817,391 680,515 - (76,477) - (36,779) (6,138) 3,378,512 19.9%
NAV change % 24.2% 0.0% -2.7% 0.0% -1.3% -0.2% 19.9%
Shares outstanding(52) 42,973,462 - - (2,817,070) - - 580,136 40,736,528 -5.2%
Net Asset Value per share, GEL 65.56 15.84 0.00 2.70 0.00 (0.85) (0.30) 82.94 26.5%
NAV per share, GEL change % 24.2% 0.0% 4.1% 0.0% -1.3% -0.5% 26.5%
Basis of presentation
This announcement contains unaudited financial results presented in accordance
UK-adopted international accounting standards ("IFRS"). The financial results
are unaudited and derived from management accounts.
The information in this Announcement in respect of full year 2023 preliminary
results, which was approved by the Board of Directors on 21 February 2024,
does not constitute statutory accounts as defined in Section 435 of the UK
Companies Act 2006. The Group's financial statements for the year ended 31
December 2022 were filed with the Registrar of Companies, and the audit
reports were unqualified and contained no statements in respect of Sections
498 (2) or (3) of the UK Companies Act 2006. The financial statements for the
year ended 31 December 2023 will be included in the Annual Report and Accounts
to be published in March 2024 and filed with the Registrar of Companies in due
course.
Under IFRS 10, Georgia Capital PLC meets the "investment entity" definition
and does not consolidate its portfolio companies, instead the investments are
measured at fair value. Our Group level discussion is therefore based on the
IFRS 10 investment entity accounts.
Net Asset Value statement, as included in notes to IFRS financial statements
(page 31 in this document), summarises the Group's equity value and drivers of
related changes between the reporting periods. Georgia Capital PLC holds a
single investment - in JSC Georgia Capital (an investment entity on its own) -
which in turn owns a portfolio of investments, each measured at fair value.
Georgia Capital PLC measures its investment in JSC Georgia Capital at fair
value through profit and loss under IFRS, estimated with reference to JSC
Georgia Capital's own investment portfolio value as offset against its net
debt. NAV is calculated at stand-alone GCAP level, which represents the
aggregation of the stand-alone assets and liabilities of Georgia Capital PLC
and JSC Georgia Capital.
The income statement presents the Group's results of operations for the
reporting period. As we conduct most of our operations through JSC Georgia
Capital, through which we hold our portfolio companies, the IFRS results
provide little transparency on the underlying trends. To enable a
comprehensive view of the combined operations of Georgia Capital PLC and JSC
Georgia Capital (together referred to herein as "GCAP") as if it were one
holding company, we adjust the accounts ("adjusted IFRS 10 Income Statement").
For details on the methodology underlying the preparation of the adjusted
income statement, please refer to page 96 in Georgia Capital PLC 2022 Annual
report. A full reconciliation of the adjusted income statement, to the IFRS
income statement is provided on page 26. Our adjusted IFRS 10 income statement
may be viewed as alternative performance measure (APM).
Additionally, for the majority of our portfolio companies the fair value of
our equity investment is determined by the application of a market approach
(listed peer multiples and precedent transactions) and an income approach
(DCF). Under the market approach, listed peer group earnings multiples are
applied to the trailing twelve month (LTM) stand-alone IFRS earnings of the
relevant business. Under the discounted cash flow (DCF) valuation method, fair
value is estimated by deriving the present value of the business using
reasonable assumptions of expected future cash flows and the terminal value,
and the appropriate risk-adjusted discount rate that quantifies the risk
inherent to the business. As such, the stand-alone IFRS results and
developments behind IFRS earnings of our portfolio companies are key drivers
in their valuations. Following the Group discussion, we therefore also present
IFRS financial statements for material companies and a related brief results
discussion.
Summary of valuation methodology for our investment portfolio
The fair values of the large private portfolio and investment stage companies
at year-end 2023 were assessed by an independent valuation company.
Combination of income approach (DCF) and market approach (listed peer
multiples and in some cases precedent transactions) was applied consistently
under both, internal and external valuation approaches. However, the
independent valuation company's approach is more highly weighted towards DCF.
More details on the methodology underlying the independent valuation are
provided on pages 29-35 in fair value measurement note to IFRS financial
statements and also will be provided in the Annual Reports and Accounts.
GLOSSARY
1. APM - Alternative Performance Measure.
2. GCAP refers to the aggregation of stand-alone Georgia Capital PLC
and stand-alone JSC Georgia Capital accounts.
3. Georgia Capital and "the Group" refer to Georgia Capital PLC and
its portfolio companies as a whole.
4. NMF - Not meaningful.
5. NAV - Net Asset Value, represents the net value of an entity and is
calculated as the total value of the entity's assets minus the total value of
its liabilities.
6. LTM - last twelve months.
7. EBITDA - Earnings before interest, taxes, non-recurring items, FX
gain/losses and depreciation and amortisation; The Group has presented these
figures in this document because management uses EBITDA as a tool to measure
the Group's operational performance and the profitability of its operations.
The Group considers EBITDA to be an important indicator of its representative
recurring operations.
8. ROIC - return on invested capital is calculated as EBITDA less
depreciation, divided by the aggregate amount of total equity and borrowed
funds.
9. Loss ratio equals net insurance claims expense divided by net
earned premiums.
10. Expense ratio in P&C Insurance equals sum of acquisition costs and
operating expenses divided by net earned premiums.
11. Combined ratio equals sum of the loss ratio and the expense ratio in the
insurance business.
12. ROAE - Return on average total equity (ROAE) equals profit for the
period attributable to shareholders divided by monthly average equity
attributable to shareholders of the business for the same period.
13. Net investment - gross investments less capital returns (dividends and
sell-downs).
14. EV - enterprise value.
15. Liquid assets & loans issued include cash, marketable debt
securities and issued short-term loans at GCAP level.
16. Total return / value creation - total return / value creation of each
portfolio investment is calculated as follows: we aggregate a) change in
beginning and ending fair values, b) gains from realised sales (if any) and c)
dividend income during period. We then adjust the net result to remove capital
injections (if any) to arrive at the total value creation / investment return.
17. WPP - Wind power plant.
18. HPP - Hydro power plant.
19. PPA - Power purchase agreement.
20. Number of shares outstanding - Number of shares in issue less total
unawarded shares in JSC GCAP's management trust.
21. Market Value Leverage ("MVL"), also Loan to Value ("LTV") -
Interchangeably used across the document and is calculated by dividing net
debt to the total portfolio value.
22. NCC - Net Capital Commitment, represents an aggregated view of all
confirmed, agreed and expected capital outflows at both Georgia Capital PLC
and JSC Georgia Capital levels.
23. NCC Ratio - Equals Net Capital Commitment divided by portfolio value.
ABOUT GEORGIA CAPITAL PLC
Georgia Capital PLC (LSE: CGEO LN) is a platform for buying, building and
developing businesses in Georgia (together with its subsidiaries, "Georgia
Capital" or "the Group"). The Group's primary business is to develop or buy
businesses, help them institutionalise their management and grow them into
mature businesses that can further develop largely on their own, either with
continued oversight or independently. Once Georgia Capital has successfully
developed a business, the Group actively manages its portfolio to determine
each company's optimal owner. Georgia Capital will normally seek to monetise
its investment over a 5-10 year period from initial investment.
Georgia Capital currently has the following portfolio businesses: (1) a retail
(pharmacy) business, (2) a hospitals business, (3) an insurance business
(P&C and medical insurance); (4) a renewable energy business (hydro and
wind assets) and (5) an education business; and (6) a clinics and diagnostics
business. Georgia Capital also holds other small private businesses across
different industries in Georgia; a 20.0% equity stake in the water utility
business and a 19.71% equity stake (at 31-Dec-23) in LSE premium-listed Bank
of Georgia Group PLC ("BoG"), a leading universal bank in Georgia.
Forward looking statements
This announcement 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, plans or intentions relating to
acquisitions, competitive strengths and weaknesses, plans or goals relating to
financial position and future operations and development. Although Georgia
Capital PLC believes that the expectations and opinions reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations and opinions will prove to have been correct. By their nature,
these forward-looking statements are subject to a number of known and unknown
risks, uncertainties and contingencies, and actual results and events could
differ materially from those currently being anticipated as reflected in such
statements. Important factors that could cause actual results to differ
materially from those expressed or implied in forward-looking statements,
certain of which are beyond our control, include, among other things: regional
instability; impact of COVID-19; regulatory risk across a wide range of
industries; investment risk; liquidity risk; portfolio company strategic and
execution risks; currency fluctuations, including depreciation of the Georgian
Lari, and macroeconomic risk; and other key factors that could adversely
affect our business and financial performance, which are contained elsewhere
in this document and in our past and future filings and reports and also the
'Principal Risks and Uncertainties' included in 1H23 Results Announcement and
in Georgia Capital PLC's Annual Report and Accounts 2022. No part of this
document constitutes, or shall be taken to constitute, an invitation or
inducement to invest in Georgia Capital PLC or any other entity and must not
be relied upon in any way in connection with any investment decision. Georgia
Capital PLC and other entities undertake no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise, except to the extent legally required. Nothing in this
document should be construed as a profit forecast.
Disclaimer
Georgia Capital engaged Kroll (formerly known as Duff & Phelps), a
third-party independent valuation firm to provide a range of fair values of
certain subject investments. For the period ended 31 December 2023, Georgia
Capital asked the independent valuation firm to independently estimate a range
of fair value for 100 percent of Georgia Healthcare Group ("GHG"), JSC
Insurance Company Aldagi Group ("Aldagi"), Georgian Renewable Power Holding
("GRPH") and Georgia Education Group ("GEG"). Kroll performed limited
procedures and applied their judgement to estimate fair value range based on
the facts and circumstances known to them as at the valuation date, 31
December 2023. The analysis performed by Kroll was based upon data and
assumptions provided by Georgia Capital and received from third party sources,
which the independent valuation firm relied upon as being accurate without
independent verification. The advice of the third party independent valuation
firm is one input that the Georgia Capital considered for determining the fair
value of GHG, Aldagi, GRPH and GEG for which the Company is ultimately and
solely responsible. In this context, Kroll's role as independent valuation
service provider did not constitute an endorsement of Georgia Capital either
from a financial or operational point of view, nor did they provide a
transaction, fairness or solvency opinion. The results of the independent
valuation report should not be relied upon by anyone for any investment or
transaction purpose related to the Company or any underlying investments.
COMPANY INFORMATION
Georgia Capital PLC
Registered Address
42 Brook Street
London W1K 5DB
United Kingdom
www.georgiacapital.ge (http://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
Georgia Capital PLC Investor Relations
Telephone: +44 (0) 203 178 4052; +995 322 000000
E-mail: ir@gcap.ge (mailto:ir@gcap.ge)
Auditors
PricewaterhouseCoopers LLP ("PwC")
Atria One, 144 Morrison Street,
Edinburgh EH3 8EX
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online service run by our
Registrar, Computershare,
giving you convenient access to information on your shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk
(http://www.investorcentre.co.uk) .
Investor Centre Shareholder Helpline - +44 (0) 370 873 5866
Share price information
Shareholders can access both the latest and historical prices via the
website
www.georgiacapital.ge (http://www.georgiacapital.ge)
1 (#_ftnref1) See "Basis of Presentation" for more background on page 36.
Private portfolio companies' performance includes aggregated stand-alone IFRS
results for our portfolio companies, which can be viewed as APMs for Georgia
Capital, since Georgia Capital does not consolidate its subsidiaries and
instead measures them at fair value under IFRS.
2 (#_ftnref2) Please see definition in glossary on page 38.
(( 3 (#_ftnref3) )) 4Q22 number includes the non-cash conversion of GEL 27.4
million loans issued to our private businesses into equity (GEL 169.9 million
in FY22).
4 (#_ftnref4) Includes both the buybacks under the share buyback and
cancellation programme and for the management trust.
5 (#_ftnref5) Includes regular cash and buyback dividends.
(( 6 (#_ftnref6) )) One-off dividend income in FY23 includes a non-recurring
GEL 26.7 million dividend collected from the retail (pharmacy) business and
GEL 29.4 million buyback dividend attributable to participation in BoG's 2022
share buybacks.
7 (#_ftnref7) Private portfolio companies' performance highlights are
presented excluding the water utility business. Aggregated numbers are
presented like-for-like basis.
8 (#_ftnref8) The results of our four smaller businesses included in other
portfolio companies (described on page 24) are not broken out separately.
Performance totals, however, include the other portfolio companies' results
(and are therefore not the sum of large and investment stage portfolio
results).
9 (#_ftnref9) Please see definition in glossary on page 38.
10 (#_ftnref10) Change in the fair value attributable to the change in
actual or expected earnings of the business, as well as the change in net
debt.
11 (#_ftnref11) Greenfields / buy-outs represent the difference between fair
value and acquisition price in the first reporting period in which the
business/greenfield project is no longer valued at acquisition price/cost.
Exits represent the difference between the latest reported fair value and the
value of the disposed asset (or assets in the process of disposal) assessed at
a transaction price.
12 (#_ftnref12) Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net debt.
13 (#_ftnref13) Please read more about valuation methodology on page 36 in
"Basis of presentation".
14 (#_ftnref14) Enterprise value is presented excluding the recently
acquired schools and non-operational assets, added to the equity value of the
education business at cost.
15 (#_ftnref15) Investments are made at JSC Georgia Capital level, the
Georgian holding company.
16 (#_ftnref16) Dividends are received at JSC Georgia Capital level, the
Georgian holding company.
17 (#_ftnref17) Please see definition in glossary on page 38.
(( 18 (#_ftnref18) )) Valuation multiples implied by dividing the final
valuations of the business assigned as described under "Valuation Overview" by
the respective trailing twelve-month EBITDA or net income, as applicable.
19 (#_ftnref19) Change in the fair value attributable to the change in
actual or expected earnings of the business, as well as the change in net
debt.
20 (#_ftnref20) Greenfields / buy-outs represent the difference between fair
value and acquisition price in the first reporting period in which the
business/greenfield project is no longer valued at acquisition price/cost.
Exits represent the difference between the latest reported fair value and the
value of the disposed asset (or assets in the process of disposal) assessed at
a transaction price.
21 (#_ftnref21) Change in the fair value attributable to the change in
valuation multiples and the effect of exchange rate movement on net debt.
22 (#_ftnref22) Excluding the recently launched schools and non-operational
assets, added to the equity value of the education business at cost.
23 (#_ftnref23) Investments are made and dividends are received at JSC
Georgia Capital level, the Georgian holding company.
24 (#_ftnref24) Dividends are received at JSC Georgia Capital level, the
Georgian holding company.
25 (#_ftnref25) Includes expenses such as external audit fees, legal
counsel, corporate secretary and other similar administrative costs.
26 (#_ftnref26) Cash-based management expenses are cash salary and cash
bonuses paid/accrued for staff and management compensation.
27 (#_ftnref27) Share-based management expenses are share salary and share
bonus expenses of management and staff.
28 (#_ftnref28) Fund type expenses include expenses such as audit and
valuation fees, fees for legal advisors, Board compensation and corporate
secretary costs.
29 (#_ftnref29) Management fee is the sum of cash-based and share-based
operating expenses (excluding fund-type costs).
30 (#_ftnref30) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
31 (#_ftnref31) Of which - cash outflow on capex of GEL 13.6 million in 4Q23
and GEL 34.0 million in FY23 (GEL 3.7 million in 4Q22 and GEL 20.9 million in
FY22); cash outflow on minority acquisition; proceeds from sale of PPE of GEL
14.6 million in FY23 (none in 4Q23, 4Q22 and in FY22).
32 (#_ftnref32) Calculated by deducting capex and minority acquisition from
operating cash flows and adding proceeds from sale of PPE.
33 (#_ftnref33) The numbers were adjusted retrospectively to account for the
recent strategic reorganisation in the healthcare businesses.
34 (#_ftnref34) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
35 (#_ftnref35) Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from gross revenue.
(( 36 (#_ftnref36) )) FY22 figure is adjusted for a GEL 2.7 million loss from
the sale of the Traumatology Hospital.
37 (#_ftnref37) Of which - capex of GEL 14.1 million in 4Q23 (GEL 11.9
million in 4Q22) and GEL 48.5 million in FY23 (GEL 27.6 million in FY22).
38 (#_ftnref38) Operating cash flows less capex, plus net proceeds on sale
of PPE.
39 (#_ftnref39) The respective costs divided by gross revenues.
40 (#_ftnref40) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
41 (#_ftnref41) Calculated based on average equity, adjusted for preferred
shares.
42 (#_ftnref42) The detailed IFRS financial statements (in both US$ and GEL)
are included in supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
43 (#_ftnref43) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
44 (#_ftnref44) The numbers were adjusted retrospectively to account for the
recent strategic reorganisation in the healthcare businesses.
45 (#_ftnref45) The detailed IFRS financial statements are included in
supplementary excel file, available at
https://georgiacapital.ge/ir/financial-results
(https://georgiacapital.ge/ir/financial-results) .
46 (#_ftnref46) Net revenue - Gross revenue less corrections and rebates.
Margins are calculated from Gross revenue.
47 (#_ftnref47) Operating cash flows less capex.
48 (#_ftnref48) Of which capex of GEL 3.2 million in 4Q23 and GEL 11.2
million in FY23 (GEL 1.0 million in 4Q22 and GEL 7.1 million in FY22).
49 (#_ftnref49) The respective costs divided by gross revenues.
50 (#_ftnref50) As at 31 December 2023 and 31 December 2022 cash and cash
equivalents consist of current accounts with credit institutions.
51 (#_ftnref51) Reclassification to aggregated balances to arrive at the NAV
specific presentation, such as: aggregating cash, marketable securities,
investment in redeemable securities, repurchased GCAP bonds as cash and liquid
funds, debt securities issued as gross debt and netting of other assets and
liabilities.
52 (#_ftnref52) Please see definition in glossary on page 38.
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. END FR QKDBKFBKDOBBRecent news on Georgia Capital
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