Georgia Capital Q4 2024 Earnings Report

Georgia Capital EPS Results

• Actual EPS: GBX 274.45
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Georgia Capital Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Georgia Capital Announcement Details

• Quarter: Q4 2024
• Date: 2/24/2025
• Time: Before Market Opens
• Conference Call Date: Monday, February 24, 2025
• Conference Call Time: 10:00AM ET

Georgia Capital (LON:CGEO) (“Georgia Capital” or “the Group” or “GCAP”– LSE: CGEO LN) is a platform for buying, building and developing businesses in Georgia with holdings in sectors that are expected to benefit from the continued growth and further diversification of the Georgian economy. The Group’s focus is typically on larger-scale investment opportunities in Georgia, which have the potential to reach at least GEL 300 million equity value over 3-5 years from the initial investment and to monetise them through exits, as investments mature. Georgia Capital currently has the following portfolio businesses: (i) a retail (pharmacy) business, (ii) a hospitals business, (iii) an insurance business (P&C and medical insurance); (iv) a clinics and diagnostics business, (v) a renewable energy business (hydro and wind assets) and (vi) an education business; Georgia Capital also holds other small private businesses across different industries in Georgia; a 20% equity stake in the water utility business and a 19.9% equity stake in LSE premium-listed Bank of Georgia Group PLC (“BoG”), a leading universal bank in Georgia.

Georgia Capital Q4 2024 Earnings Call Transcript

Presentation

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Nino, our chief economist, will talk about macroeconomic update update macro update. Giorgi, our CFO, will talk about the portfolio company results and valuation, and he also do an overview of our liquidity and dividend income outlook. In the end, I will do the wrap up and we will have a Q and A session as always. So we had a just a summary, we had a probably best quarter not probably best quarter in GECAP history in terms of the growth of NAV as well as growth of operating results of our portfolio companies. So NAV grew in a quarter by 15% and over the year it grew 15.7%.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

We had outstanding performance in terms of EBITDA growth and cash flow growth. We had more than 50% growth in EBITDA in Q4 and 25% growth over the year. The operating cash flow grew more than two times and basically our portfolio companies continue to print cash. Obviously, revenue grew nicely nearly 9% in the quarter and over the year. Another milestone we achieved to divest 80% of equity interest in our peer and distribution businesses, we received the cash of $63,000,000 net of sales proceeds in December 2024.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So it's another, big divestment with which the group has achieved and our strategy to, build the companies in Georgia and then sell to international strategic investors at at higher multiple. It has proven that, this system works. As you know, we did a water utility sale a couple of years ago. We've done some hotel sales, which we have built over the times. We've done some real estate sales, but this time we did another sale of the operating company like beer and distribution.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

And we have managed to sell that very attractive multiples way above our NAV, which we're acquiring this investment. NTC ratio, our one of the key metrics what we are looking and the following has decreased as a result of the cash receipt receipt what we had. End of the year, it has decreased by three percentage points to 12.8%. So we are in a very good shape in terms of the leverage, but we want to bring down the leverage even farther in medium in short to medium term. We have announced the buyback program along with our three sixty investment strategy basically.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

We've done most of the buybacks already of the $25,000,000 in Q4 and in two months of this year. So in total, we did buy 1,800,000.0 shares in Q4 and Q1 twenty twenty five, which is pretty significant. And over the time, we bought more than 12,000,000 shares, that's which is pretty, large proportion of our market cap around 25% of the issued share capital we've done in in buybacks along with our, promise basically what we we had. So in terms of the NAV per share overview, the growth came from listed portfolio and more than 9%. Operating performance was, key one of the key contributors, nearly 9%.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

However, we did decrease the multiples marks in our books by 3.7 percentage points. So, So basically, right now, we have a we are carrying our investment at lesser multiples than in the beginning of the year. And plus, we had a 15%, growth in NME per share. So we are pretty happy with that one. Buyback contributed in the quarter for its one percentage point and then we have some negative contribution from 0.3 from operating expense and liquidity management FX basically minus 0.1%.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So basically, we are at 95.95 lari. But I think the live one is more than hundred lari per share now, which is basically more than £27 per share, our NME per share. So discount is pretty big even though we had some rally recent days. So you see our track record in terms of the NAV per share growth. We have a cover of nearly 14% over its GCAP inception in 2018, and we have a nice growth in 2024 by 15.7% per share.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Let me update you now on the overall, I talk about these numbers but basically, we are at 38,400,000.0 shares. We made a significant buyback, so more than 12,000,000 shares and now our number of shares is less than after the demerger which was 39,400,000.0 shares. So in total 140,000,000 plus in buybacks has been done over the past years and we are looking forward to do more at these attractive prices. So the let me update you on the 300,000,000, lottery capital return program, which we have put in place in May 2024. Out of 300,000,000 lari, nearly two thirds of it is already executed and we have one third to go, and we will be executing this buybacks, in coming months.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

I think that our target of, doing the 300 meter buyback by the end of twenty twenty six, is going to be fulfilled much earlier than end of twenty twenty six. So basically, I think that we can achieve this buyback targets way earlier. So we'll please follow us our announcements. So free cash flow, one of the key metrics, another key metrics which we look at, has been strong, dollars 48,000,000. These are the basically dividend income minus operating expense minus interest expense what we have.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So pretty strong free cash flow generation in '24 along with after '23. So it's becoming pretty elevated, and we expect this to grow further as our private companies will be delivering more dividends going forward. As you see, the operating performance of our private company is pretty strong. So we have this aggregate revenue growth around 9% in the quarter and over the year. Strong performance by the large companies.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

You see that large companies contributed more than 18% growth in revenue in Q4 and 12% gross in year over year. So very strong revenue generation overall across the board, but especially by large portfolio companies. So these large portfolio companies being pharmacies, insurance, healthcare. Then we have a, you see, a pretty strong growth of the EBITDA. Overall, we had a 53% in the quarter, but large companies contributed even more 65% plus.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So excellent performance by the large portfolio companies, and we expect that to continue. We had a very strong start in January and February along the numbers we had in Q4. So we continue to our portfolio companies continue to deliver good operating performance. We'll say excellent operating performance. This is cash flow generation.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Here we are talking in multiples, not in percentages, as cash generation is two times more in '24 than in '23. And that's what gives us the kind of outlook for the growth of dividends from our portfolio companies. Now on deleveraging our and other metrics, we see the we see the decline in NCC ratio. Please note that here we include the buyback commitment in what we have and that's also is already this $25,000,000 of buyback committed what we have is part of this ratio, which is stands pretty strong. To be honest, overall, we are our experience of having a leverage at holdco level is that we need to have a less less leverage in general.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So here is decline in the you see the overtime, how we delever the the old core, and that will continue. Now I'll let Dino to talk about the macro, and I'll talk to you about the wrap up and the Q and A.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

Hello, everyone. We now turn our focus to macroeconomic development and key growth drivers of our country. In 2024, they, we had, a political uncertainty related to the elections as it was the case for in many other countries around the world, and we had some, geopolitical context. And, so there there was trade protests and unrest in our country. And despite these uncertainties, our economy remained very resilient with 9.5% growth, according to the preliminary estimate.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

And this growth was supported mainly by the strong domestic consumption and increased service exports. And if you look at the sectors, all of the sectors, mostly all of the sectors contributed positively in the growth, which means that this growth was quite diversified. And so the trade information and communication, education, construction were the key drivers of the growth, We are the other sectors also contributed quite significantly. On the funding side, the banking sector was the major funding source for our growth as the loan book increased by 70% excluding exchange rate impact. And this strong growth was also reflected in our labor markets as we have the number of employed persons which is at historic high and unemployment level, at historic low as of 2024.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

And, despite the significant wage growth in the recent years, we still see the double digit growth in our wages, which support, purchasing power and the consumption. So if you look at the, like, the several years of strong growth led to significant kind of restructure of our economy and, like, the GDP nominal GDP in US Dollar, which was stuck at $1,570,000,000,000 for decades now doubled to 34,000,000,000. And, even during this social unrest and protests according to the leading indicators, we still expect some close to double digit growth in real GDP in January. Also, we then expect GDP growth to be aligned to our potential level. On the next slide, we have some charts on the monetary side of macroeconomic equation.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

So inflation is still below target and inflation is below target since April 2023. And, so despite this below target inflation, we now see some pickup in headline number mainly driven by the less contribution from the imported inflation and increasing mixed inflation, in the recent months as exchange rate is, depreciated compared to the last year and we have very strong economic activity, we now expect inflation to increase slightly and we might see some overshooting of the inflation target. Nation, National Bank of Georgia reduced the rate to 8%. So they did some 150 basis point cuts in 2024, despite the fact that inflation was, below the target for years. So they were quite cautious because of some uncertainty, in in our country and in in in the region as well.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

National Bank of Georgia was quite active to intervene in the market in order to curb the negative expectations and to kind of stabilize the currency. And, they did one of the highest interventions in the third quarter before the election. And so we have the reserves, which is, like, 8% lower compared to the last year. But after that after the election, we see National Bank of Georgia to be net buyer. Also, the amounts are small, but still it is net buyer.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

The exchange rate, there was some depreciation, depreciation periods of exchange rate is related to some strict protests, but now we see exchange rates to stabilize around 2.8. In the next slide, we are showing the external balance sheet of our country and it is important to know that the several years of significant growth as well as stable exchange rate, which is close to the levels we observed before the COVID helped the leveraging of our external balance sheet and the gross external debt is lowest since 02/2013 at 76.9%, which means that all of the sectors of the economy, government and non government saw significant deleveraging on the back of high growth and stable exchange rate. Current account deficit continued to narrow mainly due to the service balance and transfer balance and increasing service expert. And so according to the March numbers, current account deficit was at 3.5% of gross domestic product compared to 4.8% last year. And, what is very important is that, as you may remember, so we had significant surge in money transfers from Russia after the war due to the migration impact.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

And last year, this, money transfers from Russia almost returned to pre war level and we had significant, decline in remittances from Russia despite this fact, despite this fact, FX inflows which include export money transfer and tourist revenues was almost flattish. Despite 90% drop in money transfers, the FX inflows was compensated by the increased exports by more than, 7% and increased tourism revenues. On the FDA side, so we saw FDA to be quite muted and mainly the reinvestment component to be the major part of the foreign direct investment and it should be attributable to this election year and related uncertainty. On the next slide, we have the fiscal stance. We are showing that, despite the election year, which pressures the current expenses, so we had the positive operating balance, and operating balance even increased compared to last year, on the back of significant tax revenue collection as the GDP was significantly higher compared to what was projected when the year was started.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

And this, historically, we had the positive operating surplus and we had the deficit years only during the crisis period. And this fiscal deficit is mostly driven by the capital expenditure rather than current expenses, which is, which highlights this solid fiscal management. And this high growth and exchange rate appreciation compared to the close to the pre COVID year was also very important for the government balance sheet. And, as you can see in the chart, the government's debt, external debt is at 36% of gross domestic product, which is lowest since 02/2014, and external government debt is at 25%, which is also lowest since 02/2014. And, as, there is a kind of commitment to to reduce the exchange rate vulnerability.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

So they got external government debt is expected to decline even further to 21% in, for 2028. And to wrap, to wrap up the macroeconomic developments, we have very strong GDP growth despite the, uncertainty. Also, we expect growth to align to our potential level. Inflation remains below target since 2023. We might see some, increase in inflation, for a short term period.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

National Bank of Georgia was quite active to intervene and to curb negative expectations during the pre election period. Despite the significant drop in remittances, the FX inflows was flattish on the bank of rising export and tourism revenues. And, the several years of very strong GDP growth reshaped our economy and we saw some significant deleveraging in our external balance sheet, including the government balance sheets where total debt is lowest since February and 02/1940. So, I guess this was all from my side. I will now hand over to Georgi to continue the presentation, and I will be more than happy to answer your questions during the Q and A session.

[Nino Vakhvakhishvili, Chief Economist at Georgia Capital]

Thank you.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Thank you, Nino. Hello, everyone. I will now continue to take you through our excellent fourth quarter results. So starting with the valuations, the fourth quarter and the year end, as you know, is the time when we engage our third party independent valuation company, Kroll, previously known as Doves and Phelps. So they have done the full valuations of our portfolio companies, that is across large portfolio companies and the investment stage portfolio companies.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

You see the summary on this slide. And one thing that you will notice is that across the board for all our portfolio companies, we saw the, the multiples or the implied multiples come down significantly, from the beginning of the year. That also reflects partially, one that our discount rates wax, were increased during the year, given the, the political vulnerabilities and the uncertainties that we saw in the country. And then two, because of the EBITDAS growing significantly during the quarter, especially across our large portfolio companies. So that resulted in higher EBITDAS and lower multiples.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

To highlight few important items on this slide is, we continue to have more than 40% of our portfolio within listed and observable investments that includes Lion Finance Group, previously known as Bank of Georgia and The Water Utility. So together, they were 43%. And during the quarter, we recorded gains in both Lion Finance Group and The Water Utility. The large portfolio companies now represent about 38% and the largest private investment that we hold is retail pharmacy followed by the insurance business and then by hospitals. Other portfolio declined from previous 4% to 8% of the portfolio as a result of the sale of the beer and distribution business where we sold 80% as you heard earlier and therefore the portfolio was reduced by the 80%.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

We can see the change on the next slide where we have a breach of the portfolio valuation changes. So here, you can see that Lion Finance Group added about $275,000,000 lari. We had a revaluation, in the water utility business as a result of the, put call structure that we currently have in that business. So we used the latest, 2024 financial information, which currently represents estimates and is not audited. And based on that information, we recorded the gain of 28,000,000, lari.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Now in the other portfolio companies, we see that retail pharmacy generated about 58,000,000 Lari gains, valuation gains for us followed by hospitals at 47 and insurance at 29, which combined was 126,000,000 lari positive valuation gains. In the investment state businesses, we had primarily clinics and diagnostics and the renewable energy generating the 32,000,000 lari. And other portfolio as I said earlier the decrease was due to the divestment of the 80% stake of the BRN distribution business. So we reduced the portfolio value by the 80% and we received the cash accordingly which was reflected in the net debt and we will look at that later. Now briefly about the performance operating performance of our portfolio company.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So across the board all portfolio companies had the extraordinary fourth quarter results. I will walk you through the large portfolio companies now. And if you have questions later for any other portfolio companies, we're happy to take them as well. So starting with the retail pharmacy, here we see very strong performance and management has done an exceptional work, especially in increasing the gross profit margins that we earn in this business. When we look at on a year over year basis in the fourth quarter of twenty twenty four, our gross profit margins increased by four twenty bps and it is now in excess of 31%, which is what we look at as a run rate at the moment, but we do expect that the gross profit margins will continue to grow.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So this resulted in about 53% growth within the EBITDA. And on a full year basis, the pharmacy business also grew by about 5%. We have continued to rebalance our and optimize our stores within the pharmacy business. So we currently have four twenty nine stores and we are starting to see that the same store revenue growth is back and we are seeing that the same store revenues are growing. That's together with the average bill size also growing, at close to 6%.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

We expect that this growth that we show in the fourth quarter will in fact continue in the first quarter. So based on the data that we have so far, retail pharmacy business is doing pretty well and we should be looking at another close to 50%, five-zero percent growth in EBITDA in the first quarter, especially on the back of the increased gross profit margins that I highlighted earlier. Now in terms of the valuations, we saw earlier that this business generated NOK58 million valuation gains from us. For us, Most of these gains came from the growth in the EBITDA, that 50% growth, 53% growth that we looked at earlier, but by also decreasing the net debt of the business and growing the cash of, cash available to pay down the debt in this business. So here you will also note that the value of this business was up by 9% in the quarter and the implied multiples have come down from 9.7% at the end of twenty twenty three to 8.4% at the end of twenty twenty four.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Similarly, we saw that improved cash collection in the business has helped the net debt to EBITDA measurements and we have now net debt coming down to 1.9 times already at the end of the year, approaching Again, we had also very strong quarter here, very, Again, we had also very strong quarter here, very exceptionally strong work done by the management here as well. Couple of things to highlight is that strong growth both in revenues and the net income was driven by the combined ratios on the P and C side approaching back to 85%, which is where we think that this business should be going forward. And in the Medical Insurance business, combined ratios also being less than 95%. Previously, it used to be more than 100%. It also continues to be a case where the acquisition of RD has added a very strong growth trajectory to this business and we are seeing the benefits of that throughout the eight months when we owned the since we owned the RD business.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Also we are seeing the growth is very diversified. So it's in the P and C across the motor portfolio, credit life, agriculture and the property insurance. So we like the growth. We like the profitability that it comes with and we expect that this will continue into the Q1. So far, we're seeing very positive trends and this business should also be based on what we look at right now reporting at least 30% growth in the net income in the first quarter, which is very strong as you would agree.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Now in terms of the insurance business valuation, given this strong growth in the pretax income or the net income, we have about 30,000,000 lari change in the value here. And on the back of that, the multiple has also decreased from 12.4 to 11.1 times. We don't like to carry leverage in this business, but as you know, we took on leverage as part of the acquisition of the RD business that it's a five year facility where we had the grace period for one year and we are now starting to, pay the principal on this business from the second half of this year. And we would expect that the leverage in this period will be zero by the, you know, along these times as we pay down this debt. The next, we have a hospitals business, which also had a very strong rebound in the fourth quarter.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Strong growth in the revenues. We are reporting 16%, but on a like for like basis, it's actually more than that. And we like to see the growth in this business. And what we also like is that the large portion of the growth is coming from the business that management is investing their time in, which is the ambulatory business. And we also like that the EBITDA margins are growing in this business.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So this quarter they reached about 19%, which is still lower than where we expect this business to be, but it is up by 900 bps versus the fourth quarter twenty twenty three. The admissions are growing, the occupancy rates are growing as you see here, it's close to 69% in the large and specialty hospitals and the regional and community clinics are also rebounding. So current trends also in this business are very positive and we do expect that they will be reporting also at least 30% EBITDA growth in the first quarter. The strong growth translated into very strong EBIT valuation gains. So we had about BRL47 million valuation gains here where most of it came from the growth in the EBITDA.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

We had a net debt that was largely flat during the quarter. However, two positive dynamics that you can observe also on this slide is the multiple came down from close to 14 times, which was largely because the EBITDA that we were using for valuation back then was much lower than the run rate. Now, the EBITDA has increased and we are looking at 10.5 times multiple. And net debt to EBITDA also came down from close to six at the beginning of the quarter to 4.8 times. And we do expect that this will continue to improve throughout the year in 2025.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Now briefly about the liquidity that we see at Georgia Capital. So our liquidity was about $100,000,000 at the beginning of this year, end of last year. That was because we received the dividends in the fourth quarter, but also because of the sale of the beer and distribution business where we received $63,000,000 Our leverage continues to be $150,000,000 local dollar bonds, which mature in 2028. The next slide shows where we stand in terms of the dividend inflows. So our dividends on a year over year basis were flat.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

However, given the strong amount of buybacks that we have done, when we look at dividend per share basis. On a dividend per share basis, dividends were up by 6%. So the dividends that we received on each share that we have outstanding, it was up by 6%. We do expect, that the dividends for the next year will be at least at the similar level where they were in 2024. We will update you on this as we go through, but we have a strong momentum within our private portfolio companies that we expect will translate into the increased dividend inflows for us this year.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

And we will update you in the coming quarters. But we do have a very strong cash flow outlook on a free cash flow level as well. I don't know if you saw, but there was a report published by Deutsche Nummies today, which also highlighted the strong cash flow momentum that we have within the next few years. It's a good report, worth the read as well. I guess with that, I'll go back to you directly for the wrap up sessions.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Thank you, Georgi. I mean, just to wrap up, basically, very strong NRE growth, strong operating income growth, NCC declining, buybacks continuing. So outlook economic outlook is also very strong for us. We believe that the economy will grow 5% plus this year. We had a very strong January in terms of the macro growth and in terms of our portfolio companies as well.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So we are it's, we are becoming very optimistic in the outlook for of our portfolio company, cash flow generation for 2025. So now let's move to the Q and A session and see what you have to ask. Please.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you, Irakli. Maybe before we start the Q and A, a kind reminder to our audience that if you have any questions, you can press the raise and button and ask the live question. This would be our preferred option, which ensures better engagement or you could type your questions into the Q and A chat. We have a question from Chan. Chan, please go ahead.

[Can Demir, EMEA Financials Analyst at Wood & Company]

Yes. Thank you very much for the presentation and congrats on the very strong results. Couple of questions. One, holding levels, you have now $100,000,000 cash, $150,000,000 bonds. How do you plan to use that $100,000,000 cash?

[Can Demir, EMEA Financials Analyst at Wood & Company]

Maybe you can break down in terms of shareholder return investments and then maybe buying back some of your bonds? And then the second question is on dividends. Is it possible to give some breakdowns of this year's expected dividends by company, if possible? If not, that's okay. And the third question is on hospital and pharmacy outlook.

[Can Demir, EMEA Financials Analyst at Wood & Company]

There has been a very strong recovery in the hospital business in revenues and EBITDA. Can you just talk about broadly about 2025? Georg, you mentioned about the first quarter EBITDA growth, but if you can give us some more color on the hospital and the pharmacy business overall, what do you expect in the revenues and EBITDA for the full year, that will be very good as well, and thank you very much.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Thanks, John. So basically, the the in terms of the capital allocation of $100,000,000 cash we have, is basically we will be doing the buybacks. We'll be doing the debt pay downs. It's very difficult to break it down now, and we will be doing some investments. But most likely, we will be doing the, the most of the cash will be used for the the buybacks and the debt pay down.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So we will expect probably at least $50,000,000 of debt to be retired this year. There will be some buybacks coming obviously, and then there will be some investment. But it's very hard to say pin down the exact numbers. But as I said, our target leverage to bring down this year is around $50,000,000 that we'll be targeting to at least to bring down our debt. As I mentioned, we don't like the debt at local company level, and we think that we should carry zero debt at Holdco in a medium run.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So that's what we're targeting. We don't want to make a sudden moves on taking out whole debt as we will have opportunities for the buybacks and investments, and we don't want to miss that opportunities. Therefore, we will not be making a a a big pay down debt pay downs. On the, on the second question, Giacor, remind me.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

It was about the dividend breakdown for Yes.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Dividend breakdown. Georg, you want to talk about it? Can we break down dividends?

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

We can, Chen, but, I think it would be better if we do that after the first quarter because we still need to see, for example, the dividend inflows that we expect from Venco, Georgia. They're publishing or the Lion Finance Group, they're publishing the results tomorrow. So we would have a bit better visibility in that, which is why we didn't give you a precise number. We said 180,000,000 plus. But one thing that we know from the private portfolio side is we do expect the growth in the retail pharmacy dividends.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So last year, they paid us R10 million. This year, we think it could be approaching R30 million. We also expect that the insurance business, both P and C and the medical insurance business will continue to increase the dividends that they paid us last year. And another dividend payer that you saw, the small dividends last year was the auto services business. We do expect that the auto services dividends will pick up strongly from the levels that you saw, last year.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So it will be high single digits, probably from 1,000,000 lari that we had last year. And, you know, it will be a growth, across the board, on the dividends, but I think we can give you more detailed ones after the first quarter.

[Can Demir, EMEA Financials Analyst at Wood & Company]

Yes. Makes sense. Thank you.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

And then the last question you had about the other businesses, right? So, I mean, it's hard to give you the full year projections right now, but what we can see is you should have a double digit EBITDA growth in both retail pharmacy and the hospitals businesses. And probably the growth in the hospitals will be higher between 1520%, but that all depends how the how everything goes locally. But what we look at right now, the January was very strong across all portfolio companies. And from the February's perspective that we're seeing, it's also a very strong performance.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

I mean, we don't know the January macro data as Nino was saying, but it could be, when it comes out, at the end of this week, it could be a a very strong macro for the Georgia country itself. And that has a very direct implications on our portfolio company's performance as you can imagine. Does that answer your question?

[Can Demir, EMEA Financials Analyst at Wood & Company]

Yeah. Yeah. Makes sense. And is it fair to say that diversity is over for the hospital business? And do you think deleveraging happens when EBITDA goes up as well?

[Can Demir, EMEA Financials Analyst at Wood & Company]

But do you think the growth stat can come down as well once EBITDA reaches a higher level?

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Worst is over. What we're seeing is that the recovery continues and we the best is yet to come for that business. We think it will continue to grow. There will be better EBITDA margins that you see going forward. Directly, did you want to add I

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

think that, you know, a couple of things is that, one, a very important point is that our occupancy level is still low. Is below 70%. It can easily be at 90%, so we have a room to grow. The other one is regulatory changes, which has been happening last year is over, and we had to close down some parts of the hospitals to meet these regulatory requirements. So mainly, this whole thing is done, and I think that we are in a very good position to capture the growth of the demand.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So basically, I think that the twenty twenty four twenty twenty three and partially first half of twenty twenty four was EBITDA was artificially declined because of the regulatory changes we are going through and we had to close some of the parts of the hospitals. Now all of them are up and running and operating very well. Plus we have changed the management significantly, management restructuring we have done in that business. So we are on front foot there. We have a very strong outpatient also growing, out of pocket growing.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

We have a medical insurance. We bought the company that which helps us to grow the insurance part of our revenue. So we have a very we are in a very good position in terms of the hospital business. So we are pretty optimistic. We see we cannot give you a exact guidance for the hospitals, but what we can give you that we will be, we will not we will be growing pretty solid, I mean, in the Q1 for sure and beyond in 2025 solid, I call it, probably 20% plus we should deliver into the EBITDA growth maybe more, but that's where we are.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So after the strong growth we had.

[Can Demir, EMEA Financials Analyst at Wood & Company]

And lastly Fantastic. Yeah. Thank you very much, and congrats again on the results.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. Thanks, John. We have a live question from Neil O'Connor. Neil, please go ahead.

[Analyst]

Is that working now? Yes. Yes. Fantastic. Congratulations on a great set of results.

[Analyst]

You'd mentioned in the past trying to move away from more capital intensive businesses and I think at the time you highlighted renewable energy. What's your thinking on that at the moment?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Yeah. Basically, we are committed towards moving away from capital intensive businesses and we'll be doing so. We have been looking for the partnerships there and we will continue to do so. And once we find the optimal way to realize the value, we will. But we need to we are not in a rush.

[Analyst]

Clearly, there's a lot of cash generation in the business at the moment to finance that growth.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

It generates nice cash, a nice yield. So we will and it generates dollar cash flow because you may know that all the PPAs which we have signed are in dollars. So it's a dollar business effectively.

[Analyst]

Fantastic. Thank you very much.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thanks. Thank you, Nael. Maybe related to this question, I will take the question from John Jan. With the subsea interconnect across the Black Sea plant, do you see more outside interest in the sector? Are you talking to anyone about the potential partnership?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Yeah. That's what I mentioned. Basically, we are talking about pollution partnerships, and we'll see how it will go. We are open, but at the same time, we have our appetite. Let's put it away.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. And the next question, does the company plan to exercise the option to sell the remaining 20% to Aqualia in 2025?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

I mean, we cannot, you know, I think overall, we did say about the capital intensive business. We don't wanna stay, but we don't want to talk about right now because we cannot in a way. So but you will be updated as soon as we make a decision. We have not make a decision on that yet.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. The next question is from Thomas Perez. I think you already addressed this one during the presentation. But from the holding company perspective, do you expect to use the cash proceeds from the disposal of the beer? How do you expect to use the proceeds?

[Shako Bukia, Head of IR & Funding at Georgia Capital]

And will you assist holding cost to deleverage the dividends or buybacks?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So basically, we are, I mean, as you saw, we came up with this $25,000,000 of buyback program, which is expiring in maybe a couple of weeks. I don't know how maybe three, four weeks it will expire. We are, we also mentioned that we like to deliver at least $50,000,000 this year, so it will be used for that as well. We want to make some investments. So the investments we are we want to make to start some of the in education business, we want to invest in growth of our footprint of the schools.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So we have a kind of a plan for the deployment of the cash, but I think the good thing is that we are generating a lot of cash. So it's not only we divest, but we also operating performance of our portfolio companies pretty strong. We have done a lot of deleverage as well. I think we should show that as in our I mean, our results shows that of our portfolio company deleveraging. And, I think some of them are are are ready to step up in in providing dividends.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So we will need to have a more better plan on showing you how we intend to distribute the capital and allocate the capital actually, not distribute, allocate the capital.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. The next question is from John Yan. At the portfolio company level, ROIC is the metric to evaluate reinvestment. What is the hurdle rate for reinvestment? And how do you incentivize portfolio company managers to optimize ROIC?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Basically, the ROICs, it depends which portfolio company we look at. In general, basically, they need to when when when the portfolio companies are reinvesting, they need to we need to understand it's been it is sign off from from GCAP, all the reinvestments. So basically, we need to understand whether this money is good for the checkup share buyback or it's better to invest, in the in in the projects, they are targeting. So so it depends on the in in which industry they are and where are the multiples in that industry. So it varies, from, I don't know, ROIC of, you know, 16% to ROIC of, 26 plus.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So, that's kind of where the maybe range you I mean, maybe I'm missing maybe I'm mistaken one or two percentage, but basically, we have a pretty scientific approach to that. So if you have a, for instance, the renewable energy reinvestment, usually you would look at the dollar, yields because it has a dollar income. If you look at the schools, you will need a higher way higher ROIC to invest because it has a lot of income. So, basically, it depends where we are, where we are investing in which sector.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thanks. The next question is from Robert Godfrey. A few years ago, you shared some targets around management, central costs related to assets. Could you share any progress? And your current thoughts on this, what is current rate of employee share issuance for 2024?

[Shako Bukia, Head of IR & Funding at Georgia Capital]

And how do you see this progressing?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So basically, we had Georgi, maybe you answered this question on the targets.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Yes. We had said that, the operating cost at the GCAP level will be 75 bps of our NAV. And last year, we reported 73 bps. So we are already in line and, you know, we will continue to be, you know, with within the target, that we said before. Keep in mind that the buybacks that we're doing, obviously, are decreasing the NAV.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So that adds, into that equation, but we will continue to be inside 75. On your other point, which was about the share issuance, we don't issue new shares. So what we do is we buy shares for the employee and the executive trust. And we have bought shares that are sufficient for us, we think, through the end of at least 2027. And all these shares were bought, by the way, at an average price of £7, even less than £7.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

So we don't have to issue new shares. It's the shares are being awarded, from the trust that was previously funded.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. I guess, for now we don't have any open questions. Maybe let's wait a couple of minutes. Okay. We have a follow-up question from John.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Jan, please go ahead.

[Can Demir, EMEA Financials Analyst at Wood & Company]

Yeah. Thank you. Just a follow-up on the planned investments. Erakdi, you mentioned that you also evaluating some investments in education. It has been a growing business for you.

[Can Demir, EMEA Financials Analyst at Wood & Company]

In your NCC table in page 15, you also have planned investment in the renewable energy. Just want to check if this is still something considered or is it, it's not high priority right now?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

It is considered. And as you said, it's not a high priority. We have some commitments. So now we put it in NCC because there is a commitment. But basically, as I said, it is an attractive business, but it's not in line with our, less capital intensive investments.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

That commitment was before we announced our, capital light investment strategy. That's why we have it. It's like a little bit legacy one. So basically, that's where we are. But we will update you on that part as well as we go.

[Can Demir, EMEA Financials Analyst at Wood & Company]

Okay. Understood. Thank you.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thanks, Chen. I will now take the question from Nael. Nael, please go ahead.

[Analyst]

Yeah. Thanks. So, yeah, great set of results, but your share is still trading at about a 53%, fifty four % discount. Maybe this this isn't the right question to ask you, but why do you think that might be? And and and and how can that gap close?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

I think, I mean, basically, you are absolutely right. I'm not the right person to answer this question. But to be honest, I don't know why it is we will continue delivering results. We'll do our job. We'll continue delivering our promise to do buybacks once this, the gap is big, especially when you have such a big NAV per share.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

But I think after delivering the results and delivering on the buybacks and capital returns, I hope that investors will step up and that they will take the opportunity of cheap shares.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

And it's 50%, by the way. It has come down. So it's not 53%. It used to be 60 And, you know, it's in it's in a much much better shape. Obviously, not great, but it's in a much better shape than where it was before.

[Analyst]

Cool. Still lots of upside from here, though.

[Can Demir, EMEA Financials Analyst at Wood & Company]

Sure. Sure.

[Giorgi Alpaidze, Chief Financial Officer & Deputy CEO at Georgia Capital]

Of course. Feel free to buy.

[Analyst]

Thank

[Analyst]

you.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thanks. The next question from the Q and A, a few years ago, the company said it's going to explore the reinsurance market in the region. Can you please give us an update on that?

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

Unfortunately, we don't have our CEO for insurance business here. But basically, we've been doing some, we are we have created a department that we're doing been doing some reinsurance business. One of the growth of that you have there, you have in the results, it's not a big portion yet, but we are very much focusing to grow this pie. And I think that next growth where we are thinking is to come from the reinsurance in the region. We did get a rating, and we need to step up one notch on our rating to grow it even further.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So that's where we are on that on the reinsurance business.

[Shako Bukia, Head of IR & Funding at Georgia Capital]

Thank you. We don't have any open questions for now.

[Irakli Gilauri, Chairman & CEO at Georgia Capital]

So it seems like that we don't have more questions, or maybe we wait a couple of minutes if there is some. No more questions. Thank you, everybody, for attending our call. We appreciate a lot spending time with us, and we are very much looking forward to update you our Q1 numbers. Thanks and enjoy the day.

Participants

Executives

• Irakli Gilauri, Chairman & CEO
• Nino Vakhvakhishvili, Chief Economist
• Giorgi Alpaidze, Chief Financial Officer & Deputy CEO
• Shako Bukia, Head of IR & Funding

Analysts

• Can Demir, EMEA Financials Analyst at Wood & Company
• Analyst