Georgia Capital PLC · LSE:CGEO
Georgia Capital — FY2018 Earnings Presentation
62 slides from Georgia Capital's earnings presentation, Feb 21, 2019
Slide 1: Investor Presentation: 2H18 & FY18 results
Georgia-focused investment company Investor Presentation: 2H18 & FY18 results 10 x = 10 y 21 February Page 1 2019
Slide 2: Forward looking statements
Forward looking statements Disclaimer This presentation contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, p
Slide 3: Content
Content 1. 2H18 & FY18 results discussion | Georgia Capital 2. Capital allocation 3. Investment strategy & portfolio overview 4. Georgian Macro Overview 5. Appendices Page 3
Slide 4: Georgia Capital at a glance
Georgia Capital at a glance Georgia Capital portfolio 2H18 & FY18 results | Georgia Capital Holding company of a diversified group focused on investing in and developing businesses in Georgia allocation Capital Listed Private Pipeline Late stage Bank of Georgia Investment strategy & overview portfol
Slide 5: CGEO:LN performance
CGEO:LN performance LSE premium listed, with more than 90% institutional shareholder base GCAP shareholders allocation by geography Historical GCAP share price vs. Average analyst value per share 2H18 & FY18 results | Georgia Capital USA 22.00 15.3% Average analyst value per share UK/Ireland 30.5% 1
Slide 6: Performance highlights (management accounts)
2H18 & FY18 performance highlights (management accounts) Georgia Capital NAV overview Georgia Capital performance Change change FY18 change GEL millions, except for per share information 31-Dec-18 (y-o-y) GEL millions unless otherwise noted 2H18 (y-o-y) (y-o-y) 2H18 & FY18 Investment Portfolio Value
Slide 7: NAV Statement
NAV Statement Net Asset Value Overview Valuation Change Difference with Ownership % Management Fair Value Change % Total return Total return % Book Value method amount Management FV GEL thousands unless otherwise noted 31-Dec-18 31-Dec-17 31-Dec-18 Listed Portfolio Companies 977,827 933,481 44,346 4
Slide 8: Valuation summary | private businesses
Valuation summary | private businesses Valuation Multiple applied Fair value change Business Value change drivers method Dec-18 Dec-17 during 2018 2H18 & FY18 • 15% EBITDA increase +GEL 102mln results | Georgia Capital EV/EBITDA (Based on Water Utility LTM EBITDA) 8.8 9.4 GEL (67.2)mln • Multiple co
Slide 9: GCAP – Total investment return during 2018
GCAP – Total investment return during 2018 Inter-business 31-Dec-17 Fair value 31-Dec-18 Capital Dividend Total Total Business capital Fair Value change Fair value allocations inflows Return return % allocation2 Listed businesses 1,639,483 (661,656) 977,827 - - 23,875 (637,781) -38.9% 2H18 & FY18 re
Slide 10: Key portfolio highlights | December 2018
Key portfolio highlights | 31 December 2018 Portfolio value | GEL 1.9 billion Average of analyst valuation1 | GEL 2.5 billion Portfolio value up to GEL 2.0 billion at 20-Feb-2019 2H18 & FY18 results | Georgia Capital Listed | GEL 978 million3 Private | GEL 906 million Listed | GEL 1.6 billion Privat
Slide 11: Management income statement
Management accounts Management income statement 2H18 2H17 Change 1H18 Change FY18 FY17 Change GEL thousands unless otherwise noted Dividend income 41,164 17,500 NMF 31,340 31.3% 72,504 35,000 NMF 2H18 & FY18 Interest income 24,845 1,109 NMF 14,741 68.5% 39,586 1,380 NMF results | Georgia Capital Int
Slide 12: Georgia Capital stand-alone cash flow highlights
Management accounts Georgia Capital stand-alone cash flow highlights 2H18 2H17 Change 1H18 Change FY18 FY17 Change GEL thousands unless otherwise noted y-o-y h-o-h y-o-y 2H18 & FY18 Dividends received 62,446 28,000 NMF 10,000 NMF 72,446 28,000 NMF results | Georgia Capital Interest received 17,484 1
Slide 13: Liquidity and cash management at Georgia Capital (stand-alone)
Liquidity and cash management at Georgia Capital (stand-alone) GEL 605 million GEL 197 million1 GEL 49 million Liquid assets & Loans issued | 31-Dec-2018 Net debt | 31-Dec-2018 GCAP stand-alone FY18 net operating income 2H18 & FY18 ► Cash at bank of GEL 142 million ► Georgia Capital issued inaugural
Slide 14: FY18 private portfolio performance highlights
FY18 private portfolio performance highlights Late stage Water Utility Housing Development P&C Insurance 2H18 & FY18 +10.5% +19.7% results | Georgia Capital 149 +14.9% +16.3% 135 138 +7.5% 115 83 82 -59.6% NMF +8.8% +65.1% 73 70 63 67 allocation Capital 22 19 18 21 9 16 13 (10) Revenue EBITDA Operat
Slide 15: Content
Content 1. 2H18 & FY18 results discussion | Georgia Capital 2. Capital allocation 3. Investment strategy & portfolio overview 4. Georgian Macro Overview 5. Appendices Page 15
Slide 16: Portfolio management principles
Portfolio management principles Investment Stage Early Late Exit Acquisition/Entrance Target to Exit Possible Completion of Exit 2H18 & FY18 results | Georgia Capital Discovery Young Portfolio Large Portfolio Mature Portfolio Companies Companies Companies Education Renewable Beverages P&C Energy all
Slide 17: Early stage portfolio – 3x1,000 target
Georgia Capital’s early stage portfolio – 3x1,000 target 2H18 & FY18 Target Current | 31 December 2018 results | Georgia Capital 1,000 Georgia Capital targets to have 1,000 operating hotel rooms Currently 152 are operational and 969 are in the pipeline, in total 1,121 in its hospitality business por
Slide 18: Value creation
Value creation Georgia Capital invested GEL 6701 million translating into GEL 1,4261 million portfolio value and generated ROI2 37.9% at 31 December 2018 2H18 & FY18 results | Georgia Capital Listed investments Late stage portfolio businesses Early stage portfolio businesses Water Utility Housing Re
Slide 19: Capital allocation outlook through 2022
Capital allocation outlook through 2022 Highly disciplined approach to unlock value through investments Total capital allocation GEL millions 2018A 2019E 2020E 2021E 2022E 2019-2022 BoG (23.9) (25) (27) (29) (31) +112 million 2H18 & FY18 Listed investments results | Georgia Capital GHG - - - - - div
Slide 20: Content
Content 1. 2H18 & FY18 results discussion | Georgia Capital 2. Capital allocation 3. Investment strategy & portfolio overview 4. Georgian Macro Overview 5. Appendices Page 20
Slide 21: Georgia Capital – a ground floor opportunity
Georgia Capital – a ground floor opportunity Investment company focused on investing in and developing businesses in Georgia capitalizing with its robust corporate governance on fast-growing economy across the last decade, having the access to capital and management 2H18 & FY18 results | Georgia Cap
Slide 22: Georgia - Diversified Resilient Economy
Georgia - Diversified Resilient Economy Leading economy in the region ▪ Diversified non-commodity reliant economy with strong growth prospects 2H18 & FY18 results | Georgia Capital Top-ranked in economy environment indices ▪ #6 in ease of doing business (2019) allocation Capital ▪ Top-8 in Europe re
Slide 23: Georgia Capital value proposition – 3 fundamental enablers
Georgia Capital value proposition – 3-fundamental enablers 1 2 Superior access to capital Access to management 2H18 & FY18 ▪ Only investment company in Georgia ▪ Reputation among talented managers as the - “best group to work for” results | Georgia Capital ▪ Uniquely positioned given the access to c
Slide 24: Capital allocation & harvesting investments
Capital allocation & harvesting investments Georgia focused diversified investment company aiming to deliver total shareholder returns of 10-times over 10-years 2H18 & FY18 results | Georgia Capital 1 ▪ Highly disciplined approach to unlock value through investments, targeting ▪ High-multiple busine
Slide 25: Solid track record
Solid track record Acquisitions Capital raise Exit IRR 2H18 & FY18 results | Georgia Capital The Georgia Capital management Uniquely positioned given the access 121% IRR from GHG IPO allocation to capital in a small frontier economy, Capital team, under the BGEO Group, has a where access to capital
Slide 26: Successful track record of delivering strong results
Successful track record of delivering strong results Value creation across our late stage private portfolio and listed assets 2H18 & FY18 results | Georgia Capital Dividend CAGR 34.3% EBITDA more than tripled in 2014-2018 Dividend per share CAGR (2010-2018) EBITDA more than tripled from GEL 37 milli
Slide 27: Georgia Capital’s board of directors
Georgia Capital’s board of directors Board of directors - Georgia Capital PLC Irakli Gilauri, Chairman & CEO David Morrison, Senior Independent Director 2H18 & FY18 Experience: formerly BGEO Group CEO; Up to 20 years of Experience: formerly Director at Sullivan & Cromwell with a results | Georgia Ca
Slide 28: Georgia Capital’s highly experienced management team
Georgia Capital’s highly experienced management team Georgia Capital Management Irakli Gilauri, Chairman & CEO Nikoloz Gamkrelidze, CEO, Georgia Healthcare Group Formerly CEO of BGEO Group since 2011, joined as CFO of Bank of Previously deputy CEO (Finance) of BGEO Group. Our healthcare business sto
Slide 29: Bank of Georgia (BoG) Overview
Listed investments Bank of Georgia (BoG) Overview http://bankofgeorgiagroup.com/ Investment rationale Market opportunity ▪ The first entity from Georgia to be listed on the premium segment of the Main Market of the London Stock Exchange (LSE:BGEO) since February 2012. Banking sector assets, loans an
Slide 30: Healthcare and pharmacy business (GHG) overview
Listed investments Healthcare http://ghg.com.ge/ and pharmacy business (GHG) overview Market opportunity Investment rationale ▪ Very low base: healthcare services spending per capita only US$ 325 ▪ Growing market: healthcare spending growth estimated at 8% CAGR 2018-2021 Total healthcare market (inc
Slide 31: Water utility business overview
Private late stage portfolio Water utility business overview Investment rationale Performance track record ▪ Natural monopoly in Tbilisi and surrounding district ▪ utilities sector represents 3% of total Georgian economic output with c. 8.2% CAGR (2006-2017) ▪ Stable regulatory environment with fair
Slide 32: Housing development business overview
Private late stage portfolio Housing development business overview Investment rationale Market opportunity ▪ Shortage of housing from Soviet era combined with Georgian tradition of multi generations living under one roof, average household size is significantly higher at 3.3 compared to Eastern or W
Slide 33: P&C insurance business overview
Private late stage portfolio P&C insurance business overview Investment rationale Market opportunity • Significantly underpenetrated insurance market in Georgia • Market leader with a powerful distribution network of point of sale and sales agents Georgia P&C 9.6% 9.0% Penetration 0.6% 8.5% Value cr
Slide 34: Renewable energy business overview
Private early stage portfolio Renewable energy business overview Investment rationale Market opportunity ▪ Underdeveloped energy market with potential for significant growth - Low per capita power GWh usage 23,000 ▪ Cheap to develop – up to US$1.5mln for 1MW hydro and up to US$1.4mln for wind 2H18 &
Slide 35: Hospitality and commercial real estate business overview
Private early stage portfolio Hospitality and commercial real estate business overview Investment rationale Market opportunity ▪ Record number of tourists visiting Georgia every year: 4.8 million visitors in 2018, up 16.9% y-o-y, Arrivals of tourists and tourism revenue | Georgia Source: Georgian Na
Slide 36: Beverages business overview
Private early stage portfolio Beverages business overview Investment rationale Market opportunity • High growth sector, which has doubled during the last 5 years to GEL 1.9 billion market • Beer consumption per capital at one of the lowest levels in the wider region at 27.5 liters per Per cap beer c
Slide 37: Further value creation opportunity – education business
Pipeline Further value creation opportunity – education business Industry investment rationale HIGHLY FRAGMENTED PRIVATE SCHOOL MARKET EFFICIENCY UPSIDE 2H18 & FY18 ▪ Fragmented – 2,321 schools in total, only 10% is private and also private ▪ Inefficient government spending results | Georgia Capital
Slide 38: Content
Content 1. 2H18 & FY18 results discussion | Georgia Capital 2. Capital allocation 3. Investment strategy & portfolio overview 4. Georgian Macro Overview 5. Appendices Page 38
Slide 39: Sovereign ratings with stable outlook and favourable macro fundamentals
Sovereign ratings with stable outlook and favourable macro fundamentals Key Ratings Highlights General Facts 2H18 & FY18 Rating Agency Rating Outlook Affirmed results | Georgia Capital Ba2 Stable September 2018 BB- Stable May 2018 allocation Georgia Capital BB- Positive August 2018 Georgia is favora
Slide 40: Georgia’s key economic drivers
Georgia’s key economic drivers Top performer globally in WB Doing Business over the past 12 years Liberal economic ▪ Liberty Act (effective January 2014) ensures a credible fiscal and monetary framework: policy ▪ Public expenditure/GDP capped at 30%; Fiscal deficit/GDP capped at 3%; Public debt/GDP
Slide 41: Institutional oriented reforms
Institutional oriented reforms Ease of Doing Business | 2019 (WB Doing Business Report) Economic Freedom Index | 2019 (Heritage Foundation) UK 7 New Zealand 1 Singapore 2 USA 12 up from 9th in 2018 2H18 & FY18 Georgia 6 Estonia 15 Top 8 in Europe region out of 44 results | Georgia Capital Norway 7 G
Slide 42: Diversified resilient economy
Diversified resilient economy Gross domestic product Diversified nominal GDP structure, 2018 Q3 Hotels and restaurants Other Source: Geostat Source: Geostat Financial intermediation 3.3% 5.2% Trade 20 16% US$ bln 12.6% Real GDP growth in 2018 was 4.8%¹ 18.1% 3.5% Education 2H18 & FY18 9.6% 9.4% 12%
Slide 43: Room for further job creation
Room for further job creation Unemployment rate down 0.1ppts y/y to 13.9% UNDP Human Development Index in 2017 Sources: UNDP 0.78 0.78 0.77 0.77 Sources: GeoStat 0.76 18.3 0.75 2000 17.4 17.9 17.4 17.3 17.2 16.9 20 0.74 0.74 2H18 & FY18 0.73 15.1 15.4 0.73 0.73 14.6 14.1 14.0 13.9 results | Georgia
Slide 44: Inflation and monetary indicators
-40 -20 0 20 40 60 80 Jul-11 Mar-00 Dec-11 Dec-00 Sep-01 May-12 Jun-02 Sources: Geostat, NBG Sources: NBG, GeoStat Oct-12 Mar-03 Dec-03 Mar-13 Sep-04 Aug-13 Jun-05 Jan-14 Mar-06 Dec-06 Jun-14 Sep-07 Nov-14 M2 Y/Y % LHS Jun-08 Apr-15 Mar-09 M2 vs. inflation, y-o-y,% Dec-09 Sep-15 Sep-10 Feb-16 Jun-11
Slide 45: Current account deficit supported by FDI
Current account deficit supported by FDI Current account balance (% of nominal GDP) Exports and Re-exports, US$ bln 40%Sources: NBG Goods, net Services, net 40% Source: NBG Investment income, net Current transfers, net 30% 2H18 & FY18 results | Georgia 20% 20% Capital 3.0 3.0 4.0 10% 2.6 3.2 3.4 0.3
Slide 46: Diversified sources of capital
Diversified sources of capital Strong foreign investor interest Visitors and tourism revenues on the rise Sources: GeoStat Sources: GNTA, NBG 2,000 25% 1,800 3000 8.0 2H18 & FY18 1,600 17.2% 20% 2500 results | Georgia Capital 1,400 15.1% 6.0 2000 1,200 12.3% 11.9% 12.6% 15% 11.0% 10.9% 1500 4.0 1,00
Slide 47: Tourism sector on the rise
Tourism sector on the rise Tourism revenues to GDP Spending per arrival, 2017 Sources: NBG Source: WDI 3100 20% 1600 18.1% 15.1% 1400 2600 13.8% 2H18 & FY18 15% 1200 results | Georgia Capital 2100 10.7% 10.8% 1000 US$ mln 8.9% 1600 6.6% 10% 800 5.7% 4.4% 600 1100 3.8% 4.0% 3.8% 3.5% 5% 400 600 200 a
Slide 48: Diversified foreign trade
Diversified foreign trade Goods’ Trade Deficit Oil imports Source: GeoStat Source: GeoStat 0 50% 1200 40% 90% -100 1000 2H18 & FY18 results | Georgia 30% Capital 800 70% -200 20% 600 50% -300 10% 400 30% 0% -400 200 -10% 10% allocation Capital -500 0 -20% -10% -600 -30% -200 Jan-17 Mar-18 May-16 May
Slide 49: Diversified foreign trade
Diversified foreign trade Imports of Goods, contribution to growth Foreign Demand, 2018 40% Source: NBG Investment goods Intermediate goods 40% Source:, Geostat Consumer goods Import growth, y/y, % 30% 30% Food and beverages 0% 20% 20% 14% 2H18 & FY18 23% Industrial supplies results | Georgia Capita
Slide 50: Prudent monetary policy ensures macro-financial stability
Prudent monetary policy ensures macro-financial stability International reserves Monetary policy rate Sources: NBG Sources: NBG Official Reserve Assets, US$ mln Net Foreign Assets, US$ mln NBG continued gradual exit from moderately tightened 3500 3500 14 monetary policy and decreased its refinancing
Slide 51: Flexible exchange rate regime as shock-absorber
0 20 40 60 80 100 120 140 160 180 50 -200 -150 -100 0 -50 100 150 Dec-12 0 Jan-15 Feb-13 Feb-15 120 Sources: NBG Sources: NBG Apr-13 Mar-15 Jun-13 Apr-15 May-15 Aug-13 Jun-15 Oct-13 Jul-15 0 Dec-13 Aug-15 Sep-15 Feb-14 Oct-15 Apr-14 Nov-15 shock-absorber 2020 EUR/GEL Jun-14 Dec-15 Jan-16 Aug-14 Feb-
Slide 52: Low public debt
Low public debt Public debt as % of GDP is capped at 60% Breakdown of public debt Sources: MOF Source: MOF, as of December 2018 70% 70% 2H18 & FY18 60% 60% results | Georgia Capital 50% 50% 40% 40% Multilateral 30% 30% 57% Domestic External 20% 20% 22% 78% allocation Capital 10% 10% 0% 0% Bilateral
Slide 53: Growth-oriented government reforms (2018-2020)
Growth-oriented government reforms (2018-2020) 1 Structural Reforms 2 Promoting Transit & Tourism Hub ▪ Small government concept ▪ Roads 2H18 & FY18 ▪ Optimization of government units and decrease bureaucracy expenses to get small, efficient and ▪ Plan to finish all spinal projects by 2020 – East-We
Slide 54: Content
Content 1. 2H18 & FY18 results discussion | Georgia Capital 2. Capital allocation 3. Investment strategy & portfolio overview 4. Georgian Macro Overview 5. Appendices Page 54
Slide 55: Consolidated IFRS Income Statement
Group Consolidated IFRS Accounts Consolidated IFRS Income Statement 2H18 2H17 Change 1H18 Change 2018 2017 Change 2H18 & FY18 GEL thousands, unless otherwise noted results | Georgia Revenue 666,699 586,256 13.7% 616,167 8.2% 1,282,866 1,127,170 13.8% Capital Cost of sales (406,156) (365,027) 11.3% (
Slide 56: Consolidated IFRS Balance Sheet and Cash Flow
Group Consolidated IFRS Accounts Consolidated IFRS Balance Sheet Consolidated IFRS Statement of Cash Flow GEL thousands, unless otherwise noted Dec-18 Dec-17 Change GEL thousands, unless otherwise noted 2018 2017 Change Cash and cash equivalents 256,930 346,241 -25.8% 2H18 & FY18 results | Georgia A
Slide 57: Reconciliation of management accounts to IFRS: income statement
Reconciliation of management accounts to IFRS Income statement reconciliation for FY18 Inter- Housing P&C Renewable Hospitality & Corporate Business Group GEL thousands, unless otherwise noted GHG BOG Water Utility Beverages Other development Insurance Energy Commercial Center Eliminations/ Total Co
Slide 58: Reconciliation of management accounts to IFRS: balance sheet
Reconciliation of management accounts to IFRS Balance sheet reconciliation, 31 December 2018 Inter- Commercial BOGG Water Housing P&C Renewable Corporate Business Group GEL thousands, unless otherwise noted GHG PLC and Beverage Other PLC Utility development insurance energy Center Eliminations/ Tota
Slide 59: Reconciliation of stand-alone IFRS net income to Management Account
Reconciliation of stand-alone IFRS net income to Management Account Income Statement Stand-alone IFRS income statement | portfolio investment Management accounts Net foreign currency loss Net adjusted earnings of 2H18 & FY18 Net income Net non-recurring expense Attributable income to (gain) portfoli
Slide 60: Glossary
Glossary • GCAP refers to the aggregation of stand-alone Georgia Capital PLC and stand-alone JSC Georgia Capital accounts. • Georgia Capital and “the Group” refer to Georgia Capital PLC and its portfolio companies as a whole. • NMF – Not meaningful. • NAV – Net Asset Value, represents the net value
Slide 61: Georgia Capital PLC company information
Georgia Capital PLC company information Registered Address 84 Brook Street London W1K 5EH United Kingdom www.georgiacapital.ge Registered under number 10852406 in England and Wales Stock Listing London Stock Exchange PLC’s Main Market for listed securities Ticker: “CGEO.LN” Contact Information Georg
Slide 62: Georgia Capital
GEORGIA CAPITAL