Georgia Capital PLC 1Q20 Trading Update

Georgia Capital PLC ("the Group") has published today its trading update for the first quarter 2020. The trading update announcement together with the supplementary financial information and investor presentation is available on the Group’s website at https://georgiacapital.ge/ir/financial-results. An investor/analyst conference call, organised by the Group, will be held today, on 19 May 2020, at 16:00 UK / 17:00 CET / 11:00 U.S Eastern Time. The duration of the call will be 60 minutes and will consist of a 15-minute update and a 45-minute Q&A session.

Key points

• Strong operating cash flow generation in portfolio companies, up almost three times y-o-y to GEL 92.3 million in 1Q20
• NAV per share down 35.6% in 1Q20 mainly reflecting negative impact of COVID-19 on valuation multiples and GEL depreciation against USD by 14.5%
  • GEL 368 million decrease in the market value of listed assets (-21.0% impact on NAV per share)
  • GEL 137 million negative value creation in private portfolio (-7.8% impact on NAV per share)
  • Foreign exchange loss of GEL 92 million on GCAP net debt (-5.3% impact on NAV per share)
• COVID-19 outlook: limiting capital allocations and optimising opex across GCAP and private portfolio companies

Management Commentary

“Georgia has, so far, managed to effectively deal with the COVID-19 pandemic. The Government of Georgia’s (GoG) steps resulted in the lowest number of confirmed cases and deaths per capita in the region. At the same time, GoG has secured US$ 3 billion in funding from international financial organizations for Georgia’s public and private sectors, which is expected to be more than sufficient to fund the twin deficits. National Bank of Georgia eased capital requirements, introduced a $400 million currency swap facility, sold $120 million to provide FX liquidity and reduced the monetary policy rate by 50bps to 8.5%. International Monetary Fund (IMF) estimates Georgia’s GDP growth to contract by 4% in 2020 and rebound to 4% growth in 2021. Strong pre-COVID-19 macroeconomic fundamentals were reflected in the country’s 1Q20 GDP growth, which was positive at 1.5% y-o-y. The business activity is expected to start gradual recovery from April’s low as GoG has initiated smooth easing of the lockdown restrictions. Georgia plans to open doors for domestic tourism from 15 June and international tourism from 1 July.

Going forward

Looking ahead, we believe that our businesses that are most exposed to a slow re-opening are hospitality, auto service and possibly beer, but the range of possible outcomes remains wide and these uncertainties call us to be very disciplined and attentive to developments across our portfolio. Our portfolio companies are optimising opex expenditures and capital investments with the key focus on preserving cash. Similarly, we have put on hold our capital allocations and expect to make only limited investments until the end of 2020. Having focused on financial discipline well before COVID-19, I believe that our companies entered this crisis well prepared and remain well positioned to emerge stronger. Average maturity of debt across our private portfolio was 4.6 years at 31 March 2020, while the GCAP US$ 300 million Eurobonds mature in 2024. In short, we are focusing on cash accumulation and preservation to prepare for the good investment opportunities which I am confident will arise.”

Conference call detail

This announcement contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals relating to financial position and future operations and development. Although Georgia Capital PLC believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct.

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