Georgia Capital PLC · LSE:CGEO
Georgia Capital — H1 2019 Earnings Presentation
57 slides from Georgia Capital's earnings presentation, Aug 15, 2019
Slide 1: Investor presentation: 1H19 results
Investor presentation: 1H19 results Investment portfolio overview 10 x = 10 y 15 August Page 12019
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. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 3
Slide 4: Water utility business financial highlights
Late stage Water utility business financial highlights Income statement Statement of cash flow GEL thousands, unless otherwise noted 1H19 1H18 Change GEL thousands, unless otherwise noted 1H19 1H18 Change Cash received from customers 74,034 66,031 12.1% Revenue from water supply to legal entities 43
Slide 5: Water utility business financial highlights (cont'd)
Late stage Water utility business financial highlights (cont’d) Balance sheet GEL thousands, unless otherwise noted Jun-19 Dec-18 Change Inventories 4,010 3,913 2.5% Trade and other receivables 23,436 19,657 19.2% Prepaid taxes other than income tax 565 1,465 -61.4% Prepayments 2,350 1,647 -42.7% Ot
Slide 6: Water utility business overview
Late stage Water utility business overview GEL millions, unless otherwise noted Key Highlights 1H19 1H18 change Natural monopoly in water utility LTM revenue 153.8 144.3 6.6% servicing c. 1.4m population LTM EBITDA 86.5 78.7 9.9% LTM development capex2 99.3 154.9 -35.9% LTM maintenance capex2 21.2 2
Slide 7: Water utility business performance highlights
Late stage Water utility business performance highlights Financial highlights EBITDA Revenue composition +6.7% EBITDA margin 53.3% 54.2% Total revenue 70 75 +8.4% 4 GEL millions GEL millions 3 5 8 40 37 62 63 1H18 1H19 1H18 1H19 Revenue from water supply Revenue from electricity power sales Other re
Slide 8: Utility market overview
Late stage Utility market overview Largely privatized utility sector with high barriers to entry Coverage Coverage byby population population ▪ Utilities sectoral output increasing at a robust growth rate (on average 9.5% in the last 10 years) Water 36.6% GGU ▪ Bulk of sector players are natural mon
Slide 9: Utility market overview (cont'd)
Late stage Utility market overview (cont’d) Existing assets Net book value WACC Return on assets New CAPEX Depreciation • Independent regulator – GNERC1 Total operating • New tariff setting methodology since August, 2017 expenses • 3-year tariff setting period • WACC of 15.99% for first regulation p
Slide 10: Water utility business strategy
Late stage Water utility business strategy Medium-term outlook Numbers are given in GEL million 2018 CAGR over 2018-2023 2023 Revenue 149 +7.4% 212 Revenue, water 140 +4.6% 175 Revenue, energy 9 +32.7% 37 EBITDA 83 +11.3% 142 Net debt 307 +8.9% 470 Capex 1191 -7.9% 79 (1) 2018 Capex excludes one-off
Slide 11: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 11
Slide 12: Housing development business financial highlights
Late stage Housing development business financial highlights Income statement Statement of cash flow GEL thousands, unless otherwise noted 1H19 1H18 Change GEL thousands, unless otherwise noted 1H19 1H18 Change Gross profit from apartments sale 1,998 9,993 -80.0% Proceeds from sales of apartments 14
Slide 13: Housing development business financial highlights (cont'd)
Late stage Housing development business financial highlights (cont’d) Balance sheet GEL thousands, unless otherwise noted Jun-19 Dec-18 Change Cash and cash equivalents 3,335 8,833 -62.2% Amounts due from credit institutions 422 1,634 -74.2% Investment securities 1,305 512 NMF Accounts receivable an
Slide 14: m2 – a leading player on Georgian real estate market
Late stage m2 – a leading player on Georgian real estate market Housing Development – Market of US$ 1.6 bln1 1 Affordable housing 2 Franchise m2 3 Construction Management Fully Develop land bank with total Develop third-party land plots under Earn construction management fees value of US$ 20.2mln an
Slide 15: The largest ever in-house residential project - Digomi
Late stage The largest ever in-house residential project - Digomi Digomi, the only in-house project in the pipeline of Housing Development in line with its asset-light strategy ➢ The project will be developed in three stages and the construction and development of 168,000 sq.m. residential and 84,00
Slide 16: Housing development business performance highlights
Late stage Housing development business performance highlights Strong sales performance Key highlights 1H19 apartments sales track record 90.4% of apartments are sold-out GEL millions, unless otherwise noted 1H19 1H18 Change LTM Revenue 114.41 120.5 -5.1% LTM Gross real estate profit 14.9 1 23.4 -36
Slide 17: Affordable housing track record
Late stage Affordable housing track record Operating/Financial data for completed and on-going projects as of 30 June 2019 Deferred revenue Total Sq.m. # of # of sq.m. # of Sq.m. of Deferred Sq.m. of # of Construction Recognised expected Land value Realised & (Net # of apartments apartments apartmen
Slide 18: Housing development business - market opportunity
Late stage Housing development business - market opportunity Household size further reduction driving demand for housing market Most of the housing stock needs replacement Source: Eurostat, TBC Capital Source: TBC Capital 58% 57% 54% 60% 54% 75% 71% 75% 69% 68% 70% of total 56% of total 92% 91% 90%
Slide 19: Housing development strategy
Late stage Housing development strategy … 2018 … 2023 US$ 50mln NAV available for dividend distribution The best Top of mind platform to capitalize on real estate growing developer in demand on Georgia Asset light housing 39 strategy market 51 generating fees from third-party 12 development NAV Orga
Slide 20: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 20
Slide 21: P&C insurance business financial highlights
Late stage P&C insurance business financial highlights Income statement Statement of Cash Flow GEL thousands, unless otherwise noted 1H19 1H18 Change GEL thousands, unless otherwise noted 1H19 1H18 Change Gross premium written 52,739 45,885 14.9% Insurance premium received 39,225 38,127 2.9% Earned
Slide 22: P&C insurance business financial highlights
Late stage P&C insurance business financial highlights Balance Sheet GEL thousands, unless otherwise noted Jun-19 Dec-18 Change Cash and cash equivalents 4,365 11,104 -60.7% Amounts due from credit institutions 33,644 23,456 43.4% Investment securities 7,225 4,408 63.9% Insurance premiums receivable
Slide 23: P&C insurance market overview
Late stage P&C insurance market overview Market & Aldagi Revenue (GEL millions) Market Share YE18 (earned premium, gross) Market PL & Combined Ratio YE18 Market PL Combined Ratio Total Market CAGR 2010-2018 286 * Profit GEL 41 mln Market – 13% 17.7 Aldagi – 15% 32% 227 202 97% 95% 99% 94% 96% 179 89
Slide 24: P&C insurance business performance highlights
Late stage P&C insurance business performance highlights Earned Premium, gross (GEL millions) Earned Premium, gross | Composition Profit (GEL millions) +9.3% y-o-y flat y-o-y GEL 46.5 mln GEL 8.3mln Other, Compulsory lines, 6% 13% 46.5 Government, 8.3 8.3 42.6 3% Credit Life, Motor, 4.7 5.0 60% 18.2
Slide 25: P&C insurance business overview
Late stage P&C insurance business overview Well-diversified business model (1) Sources: Insurance State Key Segments Motor(2) Property(3) Credit life(4) Liability(5) Other(6) Supervision Service of Georgia. Market shares by earned premium gross. Market size (YE18) (1) GEL 116mln GEL 75mln GEL 36mln
Slide 26: P&C insurance business strategy
Late stage P&C insurance business strategy 2018 Growth Drivers 2023 Combined ratio 75% <80% ▪ Compulsory lines Market share 32% ▪ Synergies with auto service 30%+ business ROAE 34%* ▪ Improved perception of 30%+ insurance Dividend payout 70% ▪ Simplicity through digital 60%+ approaches Retail concen
Slide 27: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 27
Slide 28: Renewable energy financial highlights
Early stage Renewable energy financial highlights Income statement Statement of cash flow GEL thousands, unless otherwise noted 1H19 1H18 Change GEL thousands, unless otherwise noted 1H19 1H18 Change Total Revenue 2,395 - NMF Cash received from customers 639 - NMF Salaries and benefits (219) (134) 6
Slide 29: Renewable energy financial highlights (cont'd)
Early stage Renewable energy financial highlights (cont’d) Balance sheet GEL thousands, unless otherwise noted Jun-19 Dec-18 Change Total current assets 27,007 11,895 NMF Property, plant and equipment 141,708 114,645 23.6% Other non-current assets 44,398 42,764 3.8% Total non-current assets 186,106
Slide 30: Renewable energy business overview
Early stage Renewable energy business overview GEL millions, unless otherwise noted Ownership: 65% GCAP | 35% RP Global Key highlights 1H19 1H18 change Renewable energy platform LTM revenue 2.4 n/a NMF Hydro Wind LTM EBITDA 1.1 (1.1) NMF 170MW 210MW LTM Capex 69.4 86.5 -19.7% At a glance Mestiachala
Slide 31: Electricity market overview
Early stage Electricity market overview Electricity supply and consumption, 2018 Actual and forecasted consumption GWh Source: ESCO GWh 1,500 23,000 6.6 TWh 1,000 18,000 13,000 500 8,000 0 3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Generation, renewables1 Generation, TPPs Net imports Inte
Slide 32: Electricity market deregulation
Early stage Electricity market deregulation Electricity market deregulation rationale Effect of new consumers on the market 13.6 TWh 13.6 TWh Increasing demand on electricity and rising prices led to moving big industrial customers to free market, keeping 6% subsidized electricity prices (Enguri & V
Slide 33: Renewable energy projects overview
Early stage Renewable energy projects overview HPPs – total capacity 170 MW WPPs – total capacity 210 MW Mestiachala Zoti Bakhvi Racha Tbilisi Kaspi Phase 2 Total capacity, MW 50 46 36 38 57 54 99 Cost per MW, US$ millions 1.2 1.3 1.3 1.5 1.2 1.4 1.4 Net generation, GWh 171 170 127 165 172 211 341 T
Slide 34: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 34
Slide 35: Hospitality & Commercial real estate business financial highlights
Early stage Hospitality & Commercial real estate business financial highlights Income statement Statement of cash flow GEL thousands, unless otherwise noted 1H19 1H18 Change GEL thousands, unless otherwise noted 1H19 1H18 Change Gross profit from operating leases 2,791 1,901 46.8% Net proceeds from
Slide 36: Hospitality & Commercial real estate business financial highlights (cont'd)
Early stage Hospitality & Commercial real estate business financial highlights (cont’d) Balance sheet GEL thousands, unless otherwise noted Jun-19 Dec-18 Change Cash and cash equivalents1 7,347 28,614 -74.3% Prepayments 29,903 15,713 90.3% Investment property 294,758 225,343 30.8% Land bank 55,606 3
Slide 37: Targeting to spin-off yielding properties as a listed REIT managed by m2
Early stage Targeting to spin-off yielding properties as a listed REIT managed by m2 Amber Group1 – Market of US$ 6.7bln2 1 Rent-earning assets 2 Hotels Grow Portfolio of rent-earning assets through Develop hotels with combined room-count of residential developments/opportunistic acquisitions more t
Slide 38: Hospitality & Commercial real estate business performance highlights
Early stage Hospitality & Commercial real estate business performance highlights Strong Performance Key performance metrics | Ramada Encore on Kazbegi ave. Key highlights NOI from operating leases yielding business performance All amounts in GEL millions 1H19 1H18 Change 46.8% 2,791 LTM Revenue 49.7
Slide 39: Hospitality business overview
Early stage Hospitality business overview Hotel rooms by types | operational, construction, design stages Hotel rooms by types | operational, construction, design stages Luxury Hotel, 8% Budget Hotel, 13% Under Construction, 42% Business Hotel, 20% Design, 46% Resort Hotel, 59% Operational, 12% Room
Slide 40: Hospitality & Commercial market overview
Early stage Hospitality & Commercial market overview 16% CAGR of tourist arrival over the last three years Leasable modern office stock has grown over the past few years, although it remains scarce Source: Georgian National Tourism Administration Source: Colliers International National Bank of Georg
Slide 41: Hospitality & Commercial real estate strategy
Early stage Hospitality & Commercial real estate strategy … 2018 … 2023 3.4x growth in NAV Managing hotels REIT with AUM of US$ c. 183mln 78 Asset light Balance 27 39 US$ mln Sheet Managing 208 commercial assets REIT 64 with AUM of US$ c. 121mln NAV Capital Value created on Value created NAV 30- Jun
Slide 42: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 42
Slide 43: Beverages financial highlights
Early stage Beverages financial highlights Consolidated income statement Income statement | Wine business Income statement | Beer business GEL ‘000, unless otherwise noted 1H19 1H18 Change GEL ‘000, unless otherwise noted 1H19 1H18 Change GEL ‘000, unless otherwise noted 1H19 1H18 Change Wine busine
Slide 44: Beverages financial highlights (Wine business)
Early stage Beverages financial highlights (Wine business) Statement of Cash Statement Flow of cash flow Balance sheet GEL ‘000, unless otherwise noted 1H19 1H18 Change GEL ‘000, unless otherwise noted Jun-19 Dec-18 change Cash received from customers 19,921 11,697 70.3% Cash and cash equivalents 5,
Slide 45: Beverages financial highlights (Beer business)
Early stage Beverages financial highlights (Beer business) Statement of cash flow Balance sheet GEL ‘000, unless otherwise noted 1H19 1H18 Change GEL ‘000, unless otherwise noted Jun-19 Dec-18 change Proceeds from sales 21,802 18,189 19.9% Cash and cash equivalents 3,055 1,249 NMF Cash outflows for
Slide 46: Wine business performance highlights
Early stage Wine business performance highlights Key facts Georgian Wine Revenue, by export countries ( 1H19, bottles) ➢ Two wineries with total capacity of 9 million bottles production per annum; 63% Source: LEPL Georgian National wine agency; ➢ In top five wine producers by vineyard base (increase
Slide 47: Beer business performance highlights
Early stage Beer business performance highlights 1H19 performance MTD Jun-19 performance 1H19 developments HL 1H18 1H19 HL Jun-18 Jun-19 Focused on launching new brands within the first five months of 2019 Beer 65,138 84,594 Beer 19,494 31,396 Lemonade 10,943 11,474 Lemonade 1,329 3,072 Apr-19: Acqu
Slide 48: Wine business strategy
Early stage Wine business strategy Strategic goals GEL millions, unless otherwise noted 2018 CAGR 2023 Diversify exports & focus on key destinations Revenue 29 27% 95 + ▪ Maintain positions on traditional markets EBITDA 7.2 30% 27 + ▪ Better focus on EU, US and Asian markets EBITDA % 24% 28% + ▪ Re-
Slide 49: Beer business strategy
Early stage Beer business strategy Organic growth strategy 2018 2023 Growth Strategy Drivers Sales Volume, HL 159,825 2.5x 1 Increase footprint in HORECA Revenue, GEL mln 29.3 2.5x 2 Enhancing recently launched Kazbegi lemonade EBITDA, GEL mln 3 Enhancing coverage of newly (13.8) >18 launched upper-
Slide 50: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 50
Slide 51: PTI business financial highlights
Pipeline PTI business financial highlights Income statement GEL thousands, unless otherwise noted 1H19 Revenue 5,304 Gross profit 3,023 Operating expenses (2,410) EBITDA 613 Depreciation & amortization expenses (1,000) Interest expense (2,409) Net loss (3,321) Cash Flow GEL thousands, unless otherwi
Slide 52: PTI market overview
Pipeline PTI market overview Auto park in Georgia (‘000) Auto park by age in years (2018 data) Market share by inspection lines CAGR 2012-2018 Auto park growth – 8% 4-6 1-3 0-1 7-9 3.9% 1.5% 0.4% Growth in cars per 1,000 people – 8% 1,322 1,196 1,258 4.2% 1,108 1,024 10-12 860 934 268 245 256 8.6% 2
Slide 53: PTI business performance highlights
Pipeline PTI business performance highlights Number of inspection checks 1H19 (‘000) Running market share* Total checks Primary checks 47% 35% 23% 4% 36% Regions Tbilisi Total 28% Occupancy rate 140K 101K 101K 72% 64% 96% 37% 36% 36% Primary Secondary Tbilisi Regions Light Heavy Regions Tbilisi Tota
Slide 54: Content
Content 1. 1H19 results discussion | Investment portfolio Late stage • Water Utility • Housing Development • P&C Insurance Early stage • Renewable Energy • Hospitality & Commercial Real Estate • Beverages Pipeline • Auto Service 2. Appendices Page 54
Slide 55: Glossary
Glossary • Combined ratio equals sum of the loss ratio and the expense ratio • EBITDA - Earnings before interest, taxes, non-recurring items, FX gain/losses and depreciation and amortization; The Group has presented these figures in this document because management uses EBITDA as a tool to measure t
Slide 56: Company information
Company information Georgia Capital PLC Registered Address 84 Brook Street London W1K 5EH United Kingdom www.georgiacapital.ge Registered under number 10852406 in England and Wales Stock Listing London Stock Exchange PLC’s Main Market for listed securities Ticker: “CGEO.LN” Contact Information Georg
Slide 57: Georgia Capital
GEORGIA CAPITAL