Georgia Capital H1 2026 Earnings Report

Georgia Capital EPS Results

• Actual EPS: GBX 668.73
• 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: H1 2026
• Date: 8/4/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 4, 2026
• Conference Call Time: 9:00AM 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 H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: NAV per share increased 13% in Q2, supported by a 22% rise in Lion Finance Group’s share price and strong operating performance from private portfolio companies. NAV per share has delivered a 20% CAGR since inception.
• Positive Sentiment: Aggregate private-portfolio revenue grew 19.1% in Q2 and EBITDA rose 21% in the first half, while operating cash increased 41% in Q2. Pharmacy, healthcare services, and insurance all reported strong revenue and EBITDA growth, with improving margins and cash generation.
• Positive Sentiment: Georgia Capital expects to eliminate holdco debt by August and has reduced private-portfolio leverage to 2.1x EBITDA from 5.0x in 2019. It also launched a GEL 1 billion capital allocation program through 2029, including at least GEL 500 million of buybacks or dividends and potential investments in Georgia and Armenia.
• Negative Sentiment: Insurance earnings were affected by a one-off severe hailstorm claim in Tbilisi; reported P&C pre-tax profit declined 11% in Q2, although management said adjusted profit would have increased 23%. Expected 2026 dividend inflows were also reduced to about GEL 200 million because of the lower stake in Lion Finance Group.

Presentation

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

The Q2 first half 2026. We will turn to our CEOs of our large portfolio companies, Tornike, Giorgi, and Irakli, CEOs of respective Pharmacy, Insurance, and the Healthcare businesses will talk about their results. Giorgi, our CFO, will talk about the valuations of our portfolio companies, he will talk about liquidity and dividend income outlook. As traditionally, I will do a wrap-up followed by a Q&A session. Let me start with the highlights first. As you all know, our Q1 NAV was strong, up 13% to around more than GBP 50. It was driven primarily by the Lion Finance Group share price increase and private portfolio companies' great operating results, which basically recorded almost record-high revenue growth of nearly 20% and we are observing the acceleration of the revenue growth.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

We are also pleased to dispose our Housing business, which basically decreased the leverage on our other portfolio companies significantly. The debt to EBITDA of our other portfolio companies went to nearly 4x-2x. Our deleveraging story continues, I will talk about the leverage later in the presentation because it's one of the important milestones which we are achieving, meaning deleveraging not only the holdco but also portfolio companies. Again, the NCC ratio here, we have a big improvement. It went to negative of nearly 3%. We are getting upgrade, obviously, by the S&P credit rating to BB, which is basically ceiling for us as the sovereign is rated at BB. We are at the same credit rating. Another big milestone which we achieved is completion of the GEL 700 million of capital return program.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

We will be doing the last pieces of retiring the debt of $50 million, which we already called, I think by end of the month, we will have zero debt on our holdco company, as well as we will be completing the last portion of the buybacks. In light of this, we are announcing a new program. We call it capital allocation program, not capital return program. It's a GEL 1 billion, I will talk about later why this name is important for our GEL 1 billion capital allocation program. The new $50 million buyback, we will launch it as soon as we finish the previous buyback program, which we expect in Q4 to start the $50 million buyback and cancellation program. On the next slide, you see a breakdown of our NAV growth.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

You see that Lion Finance share price increase contributed to nearly 9.5% growth, around 4.5% contribution is due to our operating performance. Buybacks and operating expense offsetting each other at 0.3% each point. Liquidity management and FX contributed a little bit negatively of -0.9%. This way, we arrived at 13% growth in the quarter of our NAV. We are very pleased with the operating performance of our private portfolio companies, CEOs will talk about the performance later on. Here is another slide, which we are pleased with as well, as we have achieved a 20% CAGR in NAV per share growth since inception, since 2018.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Last three years is nearly 34%, last five years at 26%. 26% is our aspiration in general to have a CAGR of 26%. Last five years, we've been doing better than in last eight years or so. If we look at the NCC overview, the decrease in NCC ratio mainly was contributed in increasing cash balances as we trimmed some of the Lion Finance Group holding due to our PFIC management. That was a main contributor of leading to the negative territory of NCC ratio. Our firepower has been increased dramatically. NCC ratio development over time. You see we were as high as 42.5% of NCC ratio. Now we are at negative. Our over the cycle target is around 10%, so we are well below the target.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Leverage is important. I talked about that de-leveraging process what we've been undertaking. Not only we are at now this zero leverage at GCAP level, but our portfolio companies, large portfolio companies Sorry, overall private portfolio businesses went down from 5x EBITDA in December 2019 to 2.1x, so it's a significant de-leveraging we have been undertaking in past years. As I said that we are now at investment mode again, with strong cash balance, no leverage at GCAP level, and very low leverage at our portfolio company level. On individual companies, we are seeing here a decrease again. Pharmacy at 0.8x, Healthcare Services is a little bit higher at 3.5x, but it came down from high 5x and insurance is obviously at low level. It got leverage due to the acquisition of the RD, our high-end healthcare insurance company.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Again, the next slide or slide 10, we have a share buyback and cancellation program. 35% of our share capital we retired, which I'm pleased that we've been investing at this pace and at this rate. We have done nearly GEL 300 million of buybacks during this year and bought back nearly 17 million shares repurchased. If you look at the average price, we have been buying at a very low price, thanks to our colleagues. Now, to have a just brief look at GEL 700 million capital return program, you see repurchase of shares. You see a redemption of the GEL 150 million bond. We only have a GEL 28 million of buybacks, is currently ongoing, and that's what we'll be spending in Q3, and buying back more shares.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Now, if you look at the cash balances and cash generation, sorry, the cash generation and cash balance. After the trimming the LFG, we are at GEL 500 cash, and we will need around GEL 200 million to fully retire our debt, and the pro forma will be around GEL 310 million of cash balance. Now let's talk about the interesting part, GEL 1 billion capital allocation program. Here we say the capital allocation program consists not only buybacks, dividends, and de-leveraging, but also the investments. We are guiding that we will be investing over time, and it will be investment in Georgia and Armenia. Out of GEL 1 billion, at least GEL 500,000,000 will be either on buybacks or dividends. It will be a capital repatriation, basically GEL 500,000,000. Another GEL 500,000,000, if we don't invest for some reason, it could happen, we are still committing to do a buyback or dividends there.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

De-leveraging won't happen because we don't have any more de-leveraging. Basically, what we are saying that GEL 1 billion by end of 2029, it will be deployed, either at least buybacks and dividends, and another GEL 500,000,000 in investments. If we don't invest, we'll do a buyback investments. Again, there will be more investments than GEL 500,000,000. That GEL 500,000,000, more than GEL 500,000,000 investments over the next three years may come from the sale of different assets, what we have in portfolio in investing. Mainly this GEL 1 billion of investment we want to fund mainly through the cash balance, what we have, and the cash generation, what we got to make for next three years.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

We will need some money from the sell downs, etc., but basically, the main source of cash will be from cash generation, free cash flow generation at GCAP level, and the current cash balance. Macro is firing on all cylinders again. GDP growth is 7% in Q2. Amazing GDP growth we have in place. We have a current account deficit is also narrowing. If you look at the Q1 last year and Q1 this year, it halved basically. You see huge interventions by National Bank. National Bank of is buying massively dollars. It's like $1.5 billion was bought in Q2. We have achieved $7 billion of reserves, which is unimaginable. It's unbelievable how much foreign currency is generated by the National Bank. On interest rates, we are flat around at headline inflation is 5.8%.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

8.25% is a target, is the monetary policy rate, and core inflation 3.5%. At the rate of growth, what we are going to grow with the economy, I think it's still a good result regarding the inflation. Let's talk about the aggregate results of our portfolio companies, as I said that our CEOs will talk about the individual companies. Q2, 19.1% revenue growth. First half, 16.4% revenue growth. You see the acceleration of the revenue growth. Aggregate EBITDA of Q1, 21% growth. First half, 24% growth in EBITDA. If you look at the next slide 17, we have here a comparison of our revenue growth and quarterly nominal GDP growth. As you see, our revenue growth is accelerating. It was 14%, 13% around and went to 19%.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

The gap between the nominal GDP growth and our revenue growth is increasing, which really speaks high of our CEOs of our portfolio companies, when you can grow faster than the nominal GDP. In Q2, that decoupling was nearly 800 basis points over the nominal GDP growth rate. On the next slide, the cash balances. First of all, operating cash increased by 41% in Q2, and the first half, it was 36%. Year-over-year, cash balance increased by 21%. Very strong cash generation. I'm really pleased that the growth of the net operating cash flow is higher than EBITDA growth rate. It means that cash conversion is more than 100% on aggregate level. Let me pass the stage to our chief pharmacist, Tornike, who is our CEO for Retail Pharmacy business. He used to be a chief brewmaster. Now he was re-qualified to the Pharmacy. Tornike?

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Thank you, Irakli. Hello, everyone. I am pleased to talk and walk you through a brief update on the performance of our Retail Pharmacy business for the second quarter of 2026. Another quarter of strong momentum with the solid results across all key metrics. Let me say a few words regarding our business. We remain the largest player in Georgia's Retail Pharmacy market, holding around 34% market share in organized trade. Retail continues to be our core business, generating around 85% of total revenue. We operate two well-positioned Pharmacy brands, GPC, focused on the high-end segment, and Pharmadepot, serving the mass market. Alongside this, we run two franchise brands, The Body Shop and Alain Afflelou Optiks, and maintain a presence in Armenia and Azerbaijan.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

During the second quarter, we grew our network by six pharmacies, including one in Armenia, mostly through cost-efficient formats requiring limited capital investment. As of June 2026, our network comprises of 464 pharmacies, 14 Body Shop stores, and five Optik stores. On the performance side, our Retail revenue grew by 13.7% year-over-year in second quarter 2026, and 11.1% in first half 2026, driven by same-store revenue growth of 8.5% and 6.5% over the respective periods. Alongside the strong ramp-up from newly opened pharmacies, we have added 34 new pharmacies over the past 12 months. Revenue growth was further supported by 4% increase in the number of bills issued and 9.3% increase in the average bill size, both in second quarter 2026.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

We find this trend encouraging as it reflects healthy consumer demand and strong execution at the store level. Our wholesale business delivered year-over-year revenue growth of 16.5% in second quarter 2026 and 11.6% in first half of 2026, reflecting continued progress on our strategic priorities. This growth was mainly driven by broader product offering across distribution channels and higher revenue from state healthcare programs. At the same time, we continue to deliver consistent gross profit margin improvement year-over-year, reaching 34.1% in second quarter 2026, which is up by 1.4%, and 34% in first half 2026, up by 1.5%, reflecting the initiatives we have undertaken to shift our sales mix towards higher margin products and secure improved supplier terms.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Turning the next slide, let's look how this translated into very strong financial results marked by record high EBITDA and solid balance sheet position. Improved profitability supported by disciplined cost management across the business resulted in an EBITDA of GEL 29.8 million in second quarter, up by 22.3% year-over-year. In first half of 2026, EBITDA grew by 21.4%, reaching GEL 58.9 million. Importantly, this growth was accompanied by robust cash flow generation with EBITDA to cash conversion at 100.9% in first half, which is up by 11.6% year-over-year, and it's comfortably above our 90% target. This reflects better working capital management and highlights the quality of our earnings and operational discipline.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

The combination of EBITDA growth and strong cash generation translated into a solid leverage position with adjusted net debt to LTM EBITDA at 0.8x, which is comfortably below our target level of 1.5x. We also distributed GEL 12 million in dividends during the second quarter. On the final slide, to summarize, first, we are delivering sustained revenue growth supported by same-store revenue growth and strong wholesale performance. Second, we are consistently improving profitability and achieving record earnings through margin expansion and disciplined execution.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Third, we are maintaining a healthy level of leverage supported by strong business performance and solid cash generation, giving us flexibility for future investments and potential shareholder returns. Thank you again for your time. I'm happy to take your questions during Q&A session. Now let me hand over to Irakli Gogia.

[Irakli Gogia, CEO of Healthcare at Georgia Capital]

Hello, everyone. Thank you, Tornike. I'm pleased to share the results of another strong quarter in the Healthcare Services business. Revenue was up 18% year-over-year, while EBITDA grew 25% to GEL 30 million, and the EBITDA margin improved by 1.3 percentage points to 21%. On a last 12 months basis, EBITDA has now passed GEL 100 million for the first time. Leverage also improved net debt to EBITDA declined from 3.7x in March to 3.5x in June 2026. We continued to expand our clinical capabilities and service offerings, both in Tbilisi and in regions. We introduced robotics-assisted surgery, enabling greater precision in complex procedures and strengthening our position in high acuity, higher margin surgical care. Being a minimally invasive approach, it is associated with faster recovery and shorter average lengths of stay.

[Irakli Gogia, CEO of Healthcare at Georgia Capital]

In June, we opened the fully renovated and expanded outpatient department at our largest hospital. It is already contributing to revenue and should further increase outpatient revenue share in the coming quarters. We also expanded TAVI, transcatheter aortic valve implantation, to a second hospital within our network. This minimally invasive alternative to open heart surgery meets growing demand and consolidates our position as country's leader in cardiology. New services were added in underserved regions, including angiology and vascular surgery, full scale urology, and ophthalmic surgery as well. In two regional cities, we merged the newly acquired government hospitals with our existing facilities there. Two hospitals became one upgraded site in each city, reducing duplicated costs and driving efficiency further.

[Irakli Gogia, CEO of Healthcare at Georgia Capital]

Our Polyclinics and Diagnostic segment further expanded its Diagnostic s network footprint, adding six locations this March to reach 20 retail points with further growth planned ahead. Let's turn to our Hospitals business slide, please. Revenue grew by 18% in the Hospitals business. The EBITDA grew by 24% with the margin improving to 19.8%. Operating cash flow reached GEL 19 million, up 17%, with an EBITDA to cash conversion ratio comprising 83% for the quarters. Occupancy rate rose by 2 percentage points year-over-year to 71%, while average lengths of stay shortened from 4.5 days to four days. We are treating more patients and treating them faster.

[Irakli Gogia, CEO of Healthcare at Georgia Capital]

Admissions also grew by 26% across the segment. Moving on to the next slide. Moving to the next slide, we have in our Polyclinics business, admissions increased by 6%. A favorable shift in revenue composition towards higher value services supported revenue growth of 14%. In Diagnostics, we stayed focused on building our retail and B2B, the main profitability drivers for the division. Total revenue grew by 22%. Retail revenue in particular came close to doubling against the same quarter of 2025.

[Irakli Gogia, CEO of Healthcare at Georgia Capital]

On a combined basis, Polyclinics and Diagnostics segment revenue grew by 17%. EBITDA by 27%. With the margin up by 1.9 percentage points to 24.7%. Moving on to our summary slide. To summarize, the second quarter was strong, both on the financial and strategic side. Top-line growth was strong across all segments. EBITDA grew significantly, leverage and margins improved further. We also kept investing where it matters most, in our facilities, our specialists, and the depths of clinical expertise across the network. That concludes my presentation. I will hand over to Giorgi, who will take you through the results of the Insurance business. Thank you.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

Thank you, Irakli. Hello, ladies and gentlemen. I'm going to overview the Insurance business. Just a quick reminder that we divide our business into two main lines. It's the Property and Casualty, and Medical. I will say that we had a record-high Q2. We had a 32% increase in Insurance revenues in Q2, while we had a 30% increase in first half of 2026. Pre-tax profits grew by 13% in Q1. In first half by 36%. Just to make an adjusted profit, just to underline, because we are also adjusting our profit, because we had a one-off big hailstorm in Tbilisi, unfortunately, in Q2, where we had a severe claim for our motor fleet.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

If we adjust it without the claim, we had a 34% increase in Q2 and in first half, it translates into 50% growth, five-zero, for first half of our first half in 2026. Our net premium incomes grew by 37% overall in Q2 2026. I will deep dive into each business line and I will touch the Property and Casualty business. Our Property and Casualty business remains still undisputed leader on the market. We had an 11% increase in revenues in Q2. 12% in first half 2026. The revenue growth was mainly driven by the expansion of our property portfolio. Secondly, by credit life. Lastly, the expansion of our retail and corporate motor policies, coupled with the increase in the corporate Insurance rate. Our pre-tax profit, unadjusted, was down by 11% because of the hailstorm.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

Without the hailstorm, that is considered as a one-off event because we never seen a hailstorm like this before in Tbilisi. The growth was almost 23% in Q2 and 25% in first half 2026 and we paid almost GEL 6 million in dividends in Q2 to our shareholder. That translated into almost GEL 12 million in first half 2026, despite the hailstorm. That's what I want to underline. Our key operating metrics remain still very solid. We've had a 21% increase in net premiums written in our P&C line. Our combined ratios are still including the one-off event at 89%, but without the one-off hailstorm event, it was down by 1.5% and stood at 82%. Our individual insurance grew by 11%, while the written policies grew by 30%. The renewal rates are still something to underline, and it stands at 80% in Q2 2026.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

Moving to health insurance line, I will say that our Medical insurance is entering the period of renaissance. There we have a 50% increase in Q2 in our revenues and 43% growth in first half 2026. While we remain still undisputed leader also in this line of business with 50% market share. Our pre-tax profits grew even more. That's why I am very proud and happy of the teams because the revenues that we are generating is translated in even more growth in terms of the pre-tax profit. In Q2, we saw 53% in growth of the profit, and in first half we are doubling. Our profits doubled, where we saw 100% increase in health insurance. Mainly, the growth in the revenue was driven by the tenders that I announced and said in the beginning of the year.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

They translated into the revenues already, plus the organic growth of our corporate portfolio and mid-teen growth in the Insurance rates. The strategy that we announced a few years ago of the retail and diversification of the medical products in our total composition. On the other hand, our key operating metrics remain very, very strong, that I'm really proud of. As I said, our net premiums grew by 55%, while the combined ratio still stays very healthy at 92%. Mainly, the improvement of the combined ratio reflects the lower expense ratio, as the higher Insurance revenues improve the operating leverage. Our individual Insurance grew by 40%, almost, and the renewal rates throughout the portfolio still remains very strong at 77%.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

To have a small dive into each line of business, our B2C business grows really fast in line with our strategy, announced strategy, and we have 44% increase in premiums in Q2 2026, and we have 60% increase in first half 2026 in terms of the gross written premiums. The introduction of the mandatory inbound travel insurance played a significant role in diversification of the health isurance portfolio, contributing to a healthy revenue streams, plus the healthy profitability and sustainability of our portfolio in terms of the profitability. Our B2B business remains very solid, and we managed to increase our Insurance tariff by double-digit figures. That also affects our profitability and translates into the high double-digit growth in terms of the profitability. As I said, the Medical tenders play the significant role in terms of the growth of the revenue.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

On the other hand, of course, the adjustment and the enhanced underwriting translates into the positive impact and overall loss ratio plus the profitability. That is really something to underline. Lastly, the few things to underline that I would like to underline about our Q2 fantastic figures and performance, I would say, that we remain really strong in terms of the profitability. In Q2, the improving by 23% year-over-year. Our Medical Insurance has entered the phase, I would say, of the renaissance with a strong 53% year-over-year growth in profit, driven by the newly awarded tenders, plus the diversification of the health products in total composition.

[Giorgi Alpaidze, Deputy CEO and CFO at Georgia Capital]

Our total Insurance revenue grew by 32% in Q2, while the pre-tax profit grew by 13%. Despite the hailstorm, it still demonstrates the resilience and the diversification of the portfolio. We paid more than GEL 6 million in dividends in Q2 to our shareholder, to GCAP. That concludes my part, I will pass the word to Giorgi. Thank you very much.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

Thank you, Giorgi. Hello, everyone. I will briefly summarize the impact of these excellent results from our large portfolio companies on our valuations over the next few slides. This is the half year results release, as you know. Every half year, we use independent valuation company, Kroll, which has done the valuations again this time around. As you can see, our portfolio value agreed to GEL 5.4 billion during this first half and the second quarter. Half of the portfolio, about 47%, is our investment in Lion Finance Group, which at the time of this press release was 14.9% in terms of the equity stake. In the private portfolio, the large portfolio companies continue to be the vast majority of our private portfolio. They make up around 40% of the non-public portfolio.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

Here, the Retail Pharmacy Group was valued for the first time about GEL 1 billion, thanks to very strong results that were delivered during the quarter. Healthcare Services and Insurance continue to be the two other large portfolio company businesses that we carry within our valuations. One important thing I would highlight is on the discount rates during the quarter, we saw about 50 basis points reduction within the WACC as a result of the updates that we carry every quarter. This time, we noticed that the equity risk premiums were reduced due to the spreads tightening within this region in the second quarter, primarily. We saw that the discount rates came down, which had a slight impact on the multiples. We will see those on the next slides as they grew.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

Before we go to the next slide, I would also highlight that the other portfolio's percentage reduced down to 10%. That was because the large portfolio emerging and other portfolio didn't grow as much as the rest of the portfolio, partially because we also had a disposal of the Housing business from this group. On the next slide, you see the developments within the multiples. Pharmacy multiple was slightly up to 8.3x, while the Healthcare Services business was also slightly up to 10.4x, and the Insurance was around 10x, 9.9x. Overall, they were slightly up, but still within the ZIP codes where we have seen them over the last 12 months. All this growth was related to the decreases in the discount rates. In terms of the actual portfolio movement, our portfolio grew by GEL 400 million.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

However, there are a few pieces that are important to highlight, maybe starting with the Lion Finance Group. As you know, we sold down the stake within the Lion Finance Group down to 14.9% during the quarter. Even with the sale, the value that was created by Lion Finance Group during the quarter was higher than the sale, so we ended up with our value of the stake in Lion Finance Group growing by GEL 154 million. The bank's share price itself was up by around 22% during the quarter. On the private portfolio side, the growth of GEL 222 million was primarily a product of an excellent value creation, which was around GEL 240 million. That was then slightly offset by the dividends that were paid by the private portfolio companies that impacted their net debt balances.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

We didn't have much change in the other portfolio. We had a few small investments and also the reduction due to the sale of the Housing business. That's how we ended up with our portfolio value of GEL 5.4 billion in the second quarter. This excellent value creation, where the largest value creation came in the Retail Pharmacy business, as you saw earlier, of GEL 120 million+. That was split, about GEL 50 million came organically from the EBITDA growth. Another GEL 12 million was delivered through the dividend payment to Georgia Capital and an excellent operating cash flow conversion. About GEL 62 million was because of the increase in the multiple. Healthcare Services also delivered excellent result, as you saw earlier.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

That was GEL 45 million value creation to us because of the increase in the EBITDA and about GEL 25 million because of the change in the multiple. Similarly, Insurance delivered GEL 16 million growth organically because of the growth in the net income and about GEL 26 million because of the multiple change. That's largely about the valuations. Now moving on to the liquidity of GCAP at the holdco level. As we mentioned earlier in this presentation, we are paying down the remaining $50 million bonds this month. It will be paid down on August 19th, and our size of our bonds will go down to zero this month. That means that the liquidity that we had at the end of June, which was roughly $200 million, will come down to around $124 million when counting in the remaining balance of the existing buybacks as well.

[Giorgi Berishvili, Head of Internal Audit at Georgia Capital]

We had around $11 million left today, but as of the end of the quarter, that was $20 million. We'll have $124 million left once the bonds reach zero and the existing buyback program is over. Lastly, this is the dividend income outlook. Our outlook for this year is we expect around GEL 200 million dividend inflows. One comment that I would like to make is, previously we also guided towards, GEL 200 million, GEL 200 million+. The difference now is that our stake in the bank is lower versus 16.5% that we had before. That's also reducing the dividend inflows that we expect. However, as you saw on the previous slide, we generated GEL 100 million+ from selling the stake in the bank. Our liquidity is still strong. We do expect that our dividends will continue to grow in the coming quarters. That is largely it. For the wrap-up, I will go back to Irakli. Irakli, over to you.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Thank you, Giorgi. To wrap up, NAV per share doing great. Our revenue is accelerating to grow, and it's growing nicely. July was also very strong for all of our portfolio companies. NCC ratio is also at negative territory, so we have a pretty big firepower for investments and buybacks. Disposal of m² Real Estate development business was also good sign to delever the other portfolio companies. Actually, we have a question that whether we sold it above the NAV or not, and we did sell above the NAV. It was a small amount anyway marked in our books. It was marked below $10 million, I think it's $5 million or so, the equity value. We sold above $10 million. Basically leverage was there around gross leverage was around $50 million there.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Basically, we have offloaded $50 million of the leverage. As I mentioned, the S&P they upgraded us to BB, we completed GEL 700 million capital return program, we kickstarted the GEL 1 billion capital allocation program, which we are really looking forward to. In line of this capital allocation program, $50 million for buyback has been already committed. Our repurchase of shares are going well. We want to buy more obviously, as we see a growth rate accelerating for our portfolio companies.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Actually, we are very pleased with the growth rates we are achieving. Anyway, on the outlook, we expect our NAV per share to continue the strong growth as EBITDA generation is very strong. We will maintain the NCC ratio below 10, it's not that difficult. Economy is growing pretty strongly. As you see, our foreign currency inflows are amazing. Our tourist season is booming, and foreign currency is flowing in. Okay, let's move to the Q&A session. We are looking forward to receiving your questions. Please raise your hand to ask the question, or you can type in the question.

[Anano Akhobadze, Head of Investor Relations and Funding at Georgia Capital]

Thanks, Irakli. Dmitry Vlasov has his hand raised. Dmitry, you can join.

[Dmitry Vlasov, Analyst at Wood & Company]

Thank you very much. Thank you very much. Again, congrats on strong set of results and new capital allocation program being announced. I have three questions, if I may. The first one is on Armenia. It is pretty reassuring that you are flagging Armenia as the next potential source of growth. Could you maybe provide a bit more color which industries look the most promising to you? The second question is about the potential dividends, which you also flagged. Could you confirm that unless you start trade at a premium to NAV, you would continue with buybacks and start dividends only potentially if you trade at a premium? The third question is actually on Pharmacy business, and specifically on the wholesale business gross margin. The progress has been very strong, and my question is: what is the potential here for the gross margin expansion? Thank you very much.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Thank you, Dmitry. Let me address the first two questions, and I will ask Tornike to talk about the Pharmacy wholesale business. On Armenian industries, which we are looking the most attractive for us to do a bolt-ons, meaning that, for instance, buy the Pharmacy chain, go into the Healthcare business, capital light side of the Healthcare business in Armenia. We also like Insurance, but we are not urging yet to go to Insurance business. Basically, the industries where we are already in, this is our priority because we know these industries well, and we think that we can manage them better than the industries which we are not present. Regarding the dividends, yeah, roughly that is where we want to be. A NAV premium that would probably trigger the dividend program, kickstart the dividend program. Tornike, do you want to address the wholesale Pharmacy business question?

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Thank you for the question. Let me say that this is all about mix, let me divide into two parts of the mix. First, that we grew the non-med sales, product sales, especially to the Pharmacy accounts. The second is we grew the sales of our strategic portfolio, which has the higher margin definitely than the third-party products.

[Dmitry Vlasov, Analyst at Wood & Company]

Thank you, just if you maybe you could share what the potential margin could be. Could it reach something above 30%, maybe, for this specific business?

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

I don't think it can reach higher than the 30% as a gross profit margin. I believe it can be from 25%-30%.

[Dmitry Vlasov, Analyst at Wood & Company]

Thank you very much.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Up to 30%, I would say.

[Dmitry Vlasov, Analyst at Wood & Company]

Very clear. Thank you.

[Tornike Nikolaishvili, CEO of Retail Pharmacy at Georgia Capital]

Thank you.

[Anano Akhobadze, Head of Investor Relations and Funding at Georgia Capital]

Thanks, Dmitry, for the interesting questions. Next up we have Bryan Maher, who also has some questions. Bryan, you can talk.

[Bryan Maher, Analyst at Keefe, Bruyette & Woods]

Hi, thank you. I've just got two questions, please. The first one's again on the capital allocation program and the investment side of that program. It sounds like bolt-ons in Armenia is the preferred strategy. What would be the single largest acquisition you would consider potentially in dollar terms, or is that something you even think about? The second question is just on the other portfolio you mentioned it's decreased down to 10%, but how do you see this portion of the portfolio evolving towards the year-end and also into next year? Thank you.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Sorry, the last question, can you repeat please? The other portfolio at 10%, what you are saying?

[Bryan Maher, Analyst at Keefe, Bruyette & Woods]

Yes. Yeah. The other portfolio. The emerging portfolio.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Yeah. Basically, Armenia ticket size, hard to say, but I don't think it will be a big ticket size. I don't know. I don't want to speculate. It will not be more than $100 million. It most likely will not be more than $50 million. I don't know. This is somewhere that ticket size. For us, important is to buy market leaders, to buy meaningful businesses with meaningful growth, with meaningful consumer-driven franchise. Basically, that's kind of will be our focus. Ticket size, it will not be more than $100 million for sure. On the other business, how big it's going to be, I don't know. We actually had a question whether we have some things to sell as well in other businesses. There are not much left there. We have some Wine business. Maybe we will sell that one over time. It's capital heavy.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Depends whether we find the buyers or not. I think important point that other businesses have been delevered so significantly that it is only upside what we have there. We de-risked this side of the portfolio a lot over time by selling the Hospitality businesses, some commercial real estates. The real estate development business we sold. We sold some Beer business basically over time. Basically, the other businesses have been significantly de-risked, and the management time and attention has been decreased significantly on that part of the business. It's going to be at 10%, or it's going to be 5%, hard to say, but basically, it's going to be insignificant over time.

[Bryan Maher, Analyst at Keefe, Bruyette & Woods]

Great. Thank you. Can I also just quick ask another question, please, if that's okay? It's just on this-

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Sure. As many as you want.

[Bryan Maher, Analyst at Keefe, Bruyette & Woods]

...I think it was slide 17 of the presentation. It was the large private portfolio revenue growth against nominal GDP. Thought it was a nice slide in the deck. I think it was about 7 percentage point outperformance versus nominal GDP. I'm just interested how you see that evolving or how sustainable you think that is going forward. Thank you.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

I think basically, that really demonstrates the management strengths, what we have in our private portfolio companies. When you can outpace the strong growth of the GDP. Can we grow like 700 basis points, actually 780 basis points. Can we grow 780 basis points faster than the GDP every quarter? Probably not. We want to grow faster, significantly faster than the GDP growth. Let's see. We have another target now. How far can we outpace the nominal GDP growth?

[Bryan Maher, Analyst at Keefe, Bruyette & Woods]

Okay. Yeah, might be easier in the U.K. Thank you.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Yeah, in U.K., there is no problem of that.

[Anano Akhobadze, Head of Investor Relations and Funding at Georgia Capital]

Thank you, Bryan, for the question. We have one question in the question-and-answer panel, which I am going to read. Would it be appropriate to sell down Lion Finance significantly to give plenty of headroom to the ownership holding? That was the question.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

I don't really understand the meaning of ownership holding to give a headroom. Probably, it means that we will have a significantly below the PFIC ratio, probably. Probably, that's what it means. Basically, the Lion Finance Group, for us, is still undervalued. We don't want to sell down more. We are adjusting it that we are comfortable with the PFIC, and now we are below 50%. We are at around 47%. Basically, we don't want to sell more, as we think that the Lion Finance Group prospects are good.

[Anano Akhobadze, Head of Investor Relations and Funding at Georgia Capital]

Thanks, Irakli. These were the questions that we had right now currently but I see that we have one incoming question now. Any update on outlook for the Education business? Is this still a strong contender for extra investment?

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Absolutely. We like that industry, we will be investing in Georgia as well as Armenia, actually. We will look at the opportunities in Armenia, especially international schools. We'll have a look at it. In Georgia, we see one of our strategic focus is Education.

[Anano Akhobadze, Head of Investor Relations and Funding at Georgia Capital]

Thanks a lot. I would like to remind our attendees, if you have any questions, you can type those in in the question-and-answer panel or raise your hands.

[Irakli Gilauri, Chairman and CEO at Georgia Capital]

Seems like all is clear. Thanks, Anano, and thanks to our shareholders for spending time in this holiday season to listen to us. We had, by the way, record attendees. Thanks a lot, and see you soon. Bye-bye. Enjoy the holidays

Participants

Executives

• Irakli Gilauri, Chairman and CEO
• Tornike Nikolaishvili, CEO of Retail Pharmacy
• Irakli Gogia, CEO of Healthcare
• Giorgi Alpaidze, Deputy CEO and CFO
• Giorgi Berishvili, Head of Internal Audit
• Anano Akhobadze, Head of Investor Relations and Funding

Analysts

• Dmitry Vlasov, Analyst at Wood & Company
• Bryan Maher, Analyst at Keefe, Bruyette & Woods