Georgia Capital Regulatory News (CGEO)

FINANCIAL PERFORMANCE HIGHLIGHTS (IFRS)[1]

KEY POINTS

Ø NAV per share (GEL) up 7.7% q-o-q to GEL 82.94 (GBP 24.23), reflecting strong value creation across our portfolio companies. NAV per share (GEL) was up 26.5% y-o-y in FY23

Ø Net Capital Commitment (NCC) ratio improved by 0.3 ppts q-o-q to 15.6% as at 31-Dec-23 (a 5.5 ppts improvement y-o-y), despite the launch of the US$ 15 million share buyback programme in 4Q23

Ø GEL 34.2 million dividend income from the portfolio companies in 4Q23, driving FY23 total dividend income to GEL 235.9 million (of which, recurring dividend income of GEL 179.8 million). This compares to total dividend income of GEL 93.9 million in FY22

Ø c.665,000 shares repurchased in 4Q23 (total bought back and cancelled now at c.4.8% of issued capital since Jan-23)

Ø Sale of one of the regional and community hospitals for a total consideration of GEL 34.6 million at 15.2x EV/EBITDA multiple, representing a 43% premium to its pre-disposal valuation

Ø Acquisition of GEL 73 million portfolio of medical insurance contracts together with the strong brand name "Ardi" for a total cash outflow of GEL 27 million, doubling our presence in the medical insurance business

Conference call: An investor/analyst conference call will be held on 22 February 2024, at 13:00 UK / 14:00 CET / 8:00 US Eastern Time. Please register at the Registration Link to attend the event. Further details are available on the Group's webpage.

CHAIRMAN AND CEO'S STATEMENT

Our 4Q23 results demonstrate the significant strategic, operational and financial progress of Georgia Capital, supported by the sustained growth of the Georgian economy.

NAV per share (GEL) was up 7.7% to GEL 82.94 in 4Q23. The NAV per share growth in 4Q23 mainly resulted from the continued increase in BoG's share price, up 7.7% q-o-q in 4Q23, translating into GEL 161.3 million value creation (5.1 ppts positive impact on the NAV per share). Value creation across our private portfolio companies amounted to GEL 61.8 million (1.9 ppts impact), reflecting a robust operating performance of our high-quality, resilient assets combined with movements in implied valuation multiples and foreign currency exchange rates. The NAV per share growth was further supported by our share buyback and cancellation programme (+0.9 ppts impact), partially offset by management platform related costs and net interest expense (-0.5 ppts impact). In GBP terms, the NAV per share growth in 4Q23 was 3.4%, driven by GEL's slight depreciation against GBP during the quarter.

Underlying operating performances across our private portfolio remain strong. The aggregated revenue of our private portfolio companies in 4Q23 totalled GEL 541.8 million (up 7.9% y-o-y), demonstrating decent top-line growth, while the aggregated EBITDA was down by 6.1% y-o-y to GEL 54.4 million, largely reflecting operating expense investments in growth. This performance underscores the resilience of our businesses, as they navigate through the temporary influence of various external factors (including regulatory changes) affecting operations in certain business segments.

Ø The operating performance of our retail (pharmacy) business was strong in 4Q23, and more than offset the impact of several recent healthcare-related regulatory changes (see page 14 for details). The 4Q23 revenue was up 6.9% y-o-y, reflecting increased sales of higher-margin para-pharmacy products and significant expansion of the retail chain (the business added 18 pharmacies and 10 franchise stores in 4Q23), the latter also having an immediate impact on the operating expenses, which translated into a 21.5% y-o-y decrease in EBITDA in 4Q23. We expect these investments to deliver a substantial increase in business results in the short term supported by the gradual increase in customer traffic to recently launched new stores, the ongoing optimisation of the retail chain and the continued growth of the Georgian economy.

Ø Our insurance businesses had a very strong fourth quarter. Revenues were up by 22.5% y-o-y in 4Q23, reflecting positive developments both in the P&C and medical insurance segments. To further capitalise on the emerging opportunities in the insurance sector, in January 2024, our medical insurance business signed a Memorandum of Understanding ("MOU") to acquire a GEL 73 million portfolio of medical insurance contracts and brand name from "Ardi," the third-largest player in the Georgian health insurance market with a 17% market share based on 9M23 net insurance premiums. Upon the successful completion of this transaction, the combined market share of our medical insurance business will make it the largest health insurer in the country. Ardi's portfolio is concentrated in the upscale segment, presenting an opportunity to further diversify our health insurance portfolio and achieve significant financial and strategic synergies. The total cash outflow for this transaction is GEL 27 million, which will be fully financed by funds already available in the medical insurance business, with no cash investment required from GCAP. Following this acquisition, the insurance business will operate under three brand names: Aldagi, Imedi L, and Ardi, all of which will be managed under GCAP.

Ø As previously disclosed, to address challenges and capitalise on opportunities from the recently introduced facility regulation rules in the healthcare sector, as detailed on page 15 of this report, our hospitals business underwent strategic restructuring in 4Q23, following which the business was split into two distinct segments: "Large and Specialty Hospitals" and "Regional and Community Hospitals". The Regional and Community Hospitals now also incorporate the community clinics that were previously managed and presented as part of the clinics and diagnostics business. The 4Q23 revenue of Large and Specialty Hospitals was up by 5.4% y-o-y, reflecting resilient underlying performance at the seven hospitals comprising the business on the back of the diversified range of services they offer, which enabled them to partially offset the impact of the new regulations. These new regulations had a more pronounced impact on our Regional and Community Hospitals (the 4Q23 revenue was down 12.7% y-o-y), as the 27 smaller facilities in this business offer services that are relatively more limited in scope than those of our Large and Specialty Hospitals. Consequently, the combined revenue and EBITDA of the hospitals business were down by 1.4% and 49.0% y-o-y, respectively, in 4Q23. Following the successful implementation of strategic restructuring to align with new regulations, the business is now well-positioned to capitalise on the competitive advantages offered by recent shifts in the healthcare market.

In line with its strategy to divest low-ROIC generating assets, in December 2023, the business signed an agreement to sell one of its regional and community hospitals for a total consideration of GEL 34.6 million, at a 15.2x EV/EBITDA multiple, representing a 43% premium to its pre-disposal valuation. The ROIC of the divested hospital was 3.1%. The proceeds from this transaction were collected in January 2024 and are being utilised for deleveraging the balance sheet of the business.

Ø The performance of our investment-stage businesses was outstanding in 4Q23. An increase in electricity generation in Renewable Energy, strong intakes and a ramp-up of utilisation in Education, along with increased demand for ambulatory services in our Clinics and Diagnostics, all contributed to a 28.0% and 42.0% y-o-y increase in combined revenue and EBITDA respectively, for our investment-stage businesses in the quarter.

NCC ratio decreased to 15.6% in 4Q23. A 0.3 ppts q-o-q improvement in the NCC ratio in 4Q23 was mainly driven by a) a 5.5% growth in total portfolio value, and b) a 7.5% increase in cash and liquid funds balances, which mainly reflects the net impact of GEL 34.2 million dividend income from our portfolio companies, partially offset by GEL 22.5 million (US$ 8.3 million) share buybacks in the quarter under GCAP's US$ 15 million share buyback and cancellation programme. On a y-o-y basis, the progress on the NCC ratio was substantial, down 5.5 ppts, which reflects the record-high GEL 235.9 million dividend inflows in FY23 together with a significant decrease in the gross debt balance.

We continue to deliver on our strategic priorities. Looking back, 2023 was an eventful year for the Group. 1) At the beginning of 2023, our shareholders overwhelmingly approved a proposal to transfer GCAP to an LSE Standard listing, a move we believe is more suited to the Company's size and strategy and will help create greater value for shareholders. 2) We achieved significant deleveraging progress through the successful issuance of a US$ 150 million sustainability-linked bond on the Georgian market. This issuance, combined with GCAP's existing liquid funds, was utilised to fully redeem our US$ 300 million Eurobond. 3) During 2023, we launched two share buyback programmes totalling US$ 25 million, under which 2,135,222 shares (4.8% of the issued capital) have been repurchased to date. 4) Our retail (pharmacy) business completed the buyout of the minority shareholders to increase GCAP's stake to 97.6%. 5) Our hospitality business successfully completed the sale of two operational hotels, two under-construction properties, and a vacant land plot for a total consideration of US$ 38.6 million. The proceeds from these sales were utilised for deleveraging the hospitality business's balance sheet. These transactions marked further substantial progress towards two of our core strategic priorities: to divest, over the next few years, subscale portfolio companies, and to significantly reduce leverage in the Group's balance sheet.

As a result of the robust operational and strategic advancements demonstrated by Georgia Capital in 2023, GCAP's adjusted IFRS net income reached GEL 615.6 million in FY23, a substantial increase from the adjusted IFRS net income of GEL 1.5 million in FY22.

Proposed acquisition of Ameriabank CJSC by Bank of Georgia Group PLC. On 19-Feb-24, Bank of Georgia Group PLC (the "Bank") announced that it has reached an agreement for the proposed acquisition of 100% of Ameriabank CJSC a leading universal bank in Armenia with an attractive franchise (the "Transaction"). The Transaction price is approximately US$ 303.6 million, which will be fully financed by the Bank's surplus capital at an attractive valuation of 0.65x net asset value as at 31 October 2023 and 2.6x P/E 2023. The Transaction - expected to be EPS and RoAE accretive - represents a significant catalyst for the Bank and its shareholders. The Bank intends to keep the targeted pay-out ratio unchanged in the range of 30-50% of annual profits, potentially enabling increased capital distributions for the Bank's shareholders. The Transaction is subject to shareholder and regulatory approvals and is expected to close in 1Q24. Further information about the Transaction can be found on the Bank's website.

Macroeconomic update. Following two consecutive years of double-digit growth, real GDP expanded by 7.5% in 2023. The growth was supported by macroeconomic developments on both the external and domestic sides, with strong foreign currency inflows complementing strong aggregate demand. On the domestic side, strong credit expansion, continued fiscal outlays and strong business sentiment were key contributors to economic activity. The Georgian Lari remains above pre-pandemic levels, compared to the US Dollar, reflecting record-high total FX inflows, increased lending in foreign currency, ample FX liquidity, a strict monetary policy stance, and overall positive economic growth. Annual inflation saw a significant decline in 2023, with the annual average at 2.5%, below the 3% target. In January 2024, headline inflation stood at 0.0%. The National Bank of Georgia (NBG) has started to exit from tightened monetary policy and reduced the reference rate by 200 bps during May 2023 - January 2024 to 9.0%. The external balance sheet is strengthening, marked by a reduction in the current account deficit to 2.6% of GDP in 9M23, a decline in government debt to levels lower than those seen prior to the pandemic, and the attainment of historically high reserves reaching US$ 5.0 billion as of December 2023.

Outlook. The resilient performance of our portfolio companies coupled with our robust balance sheet and capital management drove our outstanding 4Q23 results. We have made strong progress in deleveraging the business towards our medium-term targeted NCC ratio of 15%, while consistently growing NAV per share on the back of capital light and sustainable investments. Looking ahead, as our hospitals and retail (pharmacy) businesses adapt to the evolving regulatory landscape, we anticipate an even more significant opportunity for value creation across our portfolio companies. This outlook is underpinned by the resilience of the Georgian economy and the emerging opportunities presented by the approval of Georgia's candidacy status by the EU in December 2023. I believe that Georgia Capital is extremely well positioned to deliver consistent NAV per share growth over the medium to long term, while also continuing to make significant progress on our key strategic priorities.

Irakli Gilauri, Chairman and CEO

DISCUSSION OF GROUP RESULTS

The discussion below analyses the Group's unaudited net asset value at 31-Dec-23 and its income for the fourth quarter and full year period then ended on an IFRS basis (see "Basis of Presentation" on page 36 below).

Net Asset Value (NAV) Statement

NAV statement summarises the Group's IFRS equity value (which we refer to as Net Asset Value or NAV in the NAV Statement below) at the opening and closing dates for the fourth quarter (30-Sep-23 and 31-Dec-23). The NAV Statement below breaks down NAV into its components and provides a roll forward of the related changes between the reporting periods. For the NAV Statement for the full year of 2023 see page 36.

NAV STATEMENT 4Q23

NAV per share (GEL) was up by 7.7% q-o-q in 4Q23, reflecting a GEL 223.1 million value creation across our portfolio companies with a positive 7.0 ppts impact and share buybacks (+0.9 ppts impact). The NAV per share growth was slightly offset by management platform-related costs and net interest expense (-0.5 ppts impact in total).

Portfolio overview

Total portfolio value increased by GEL 192.7 million (5.5%) to GEL 3.7 billion in 4Q23:

· The value of the listed and observable portfolio increased by GEL 133.6 million (up 10.7%), reflecting the net impact of the continued growth in BoG's share price and GEL 27.7 million dividends paid to GCAP.

· The value of the private portfolio increased by GEL 59.1 million (up 2.7%), driven by a positive GEL 61.8 million value creation, slightly offset by GEL 6.5 million dividends paid to GCAP by our private portfolio companies.

Consequently, as of 31-Dec-23, the listed and observable portfolio value totalled GEL 1.4 billion (37.7% of the total portfolio value), and the private portfolio value amounted to GEL 2.3 billion (62.3% of the total).

1) Value creation

Total portfolio value creation amounted to GEL 223.1 million in 4Q23:

· A GEL 161.3 million value creation from the listed and observable portfolio was attributable to the 7.7% increase in BoG's share price, supported by a 4.2% appreciation of GBP against GEL during the quarter.

· A GEL 61.8 million value creation from private portfolio companies reflects the net effect of:

o  GEL 79.6 million operating-performance related value reduction, as detailed on pages 6-7 below.

o  GEL 141.4 million value creation due to changes in implied valuation multiples in 4Q23, resulting from the strong outlook for our private portfolio companies in the context of the continued resilience of the Georgian economy.

The table below summarises value creation drivers in our businesses in 4Q23:

Valuation overview[13]

In 4Q23, valuation assessments of our large and investment stage portfolio companies were performed by a third-party independent valuation firm, Kroll (formerly known as Duff & Phelps), in line with International Private Equity Valuation ("IPEV") guidelines. The independent valuation assessments, which serve as an input for Georgia Capital's estimate of fair value, were performed by applying a combination of an income approach (DCF) and a market approach (listed peer multiples and, in some cases, precedent transactions). The independent valuations of large and investment stage businesses are performed on a semi-annual basis. In line with our strategy, from time to time we may receive offers from interested buyers for our private portfolio companies, which would be considered in the overall valuation assessment, where appropriate.

The enterprise value and equity value development of our businesses in 4Q23 is summarised in the following table:

Private large portfolio companies (39.1% of total portfolio value)

Retail (Pharmacy) (19.4% of total portfolio value) - the Enterprise Value (EV) of Retail (Pharmacy) was up by 3.7% to GEL 1.0 billion in 4Q23, reflecting the continued strong outlook of the business, driven by a significant expansion and ongoing optimisation of the retail chain (the business added 18 pharmacies and 10 franchise stores in 4Q23) as well as the resilience of the Georgian economy. 4Q23 revenue was up 6.9%, reflecting a) increased sales of higher-margin para-pharmacy products and b) the chain expansion which had a positive impact on the revenue growth, driven by gradually increasing customer traffic in recently launched stores. The expansion also led to an increase in operating expenses (up 19.4% y-o-y in 4Q23) due to increased rent and salary costs. This translated into a 21.5% y-o-y decrease in EBITDA (excl. IFRS 16) in 4Q23. See page 13 for details. Consequently, LTM EBITDA (incl. IFRS 16) was down by 2.8% to GEL 107.6 million in 4Q23. Net debt (incl. IFRS 16) remained largely flat at GEL 322.2 million as at 31-Dec-23. As a result of the chain expansion, increasing revenues and positive outlook for the business, the fair value of GCAP's 97.6% holding increased by 5.1% to GEL 714.0 million in 4Q23. The implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) increased to 9.7x as at 31-Dec-23 (up from 9.1x as of 30-Sep-23).

Hospitals (9.4% of total portfolio value) - The EV of the combined Hospitals, which now also incorporates the community clinics that were previously managed and presented as part of the clinics and diagnostics business, stood at GEL 618.9 million in 4Q23. The revenue of Large and Specialty Hospitals was up by 5.4% y-o-y in 4Q23, reflecting resilient underlying performance at the seven hospitals comprising the business on the back of the diversified range of services they offer, which enabled them to partially offset the impact of the new regulations, as detailed on page 15 of this report. These new regulations had a more pronounced impact on our Regional and Community Hospitals (the 4Q23 revenue was down 12.7% y-o-y), as the 27 smaller facilities in this business offer services that are relatively more limited in scope than those of our Large and Specialty Hospitals. Consequently, the combined revenue and EBITDA (excl. IFRS 16) of the hospitals business were down by 1.4% and 49.0% y-o-y respectively, in 4Q23. In December 2023, the business signed an agreement to sell one of its regional and community hospitals for a total consideration of GEL 34.6 million at 15.2x EV/EBITDA multiple. The proceeds from this transaction were collected in January 2024 and are being utilised for deleveraging the balance sheet of the business. The sale is in line with our strategy to divest low-ROIC generating assets. Taking into account the disposal, LTM EBITDA (incl. IFRS 16) stood at GEL 44.8 million in 4Q23, and the net debt amounted to GEL 241.1 million. As a result, the equity value of Hospitals stood at GEL 344.4 million in 4Q23, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 13.8x at 31-Dec-23.

Insurance (P&C and Medical) (10.3% of total portfolio value) - The insurance business combines: a) P&C Insurance valued at GEL 285.6 million and b) Medical Insurance valued at GEL 92.3 million.

P&C Insurance - Insurance revenue was up by 26.8% y-o-y to GEL 31.2 million in 4Q23, mainly reflecting the growth in the motor and credit life insurance lines. The combined ratio increased by 10.7 ppts y-o-y in 4Q23, attributable to the following factors: a) a 2.3 ppts y-o-y increase in the loss ratio mainly due to the increased cargo and property insurance claims, b) a 4.0 ppts increase in expense ratio driven by increased salary expenses in line with business growth and c) a 4.4 ppts y-o-y increase in FX ratio, reflecting the impact of FX movements on the business operations. Consequently, 4Q23 net income increased by 0.6% y-o-y to GEL 5.8 million. See page 17 for details. Pre-tax LTM net income was down by 3.0% to GEL 22.0 million in 4Q23. The equity value of the P&C insurance business, which also reflects the application of the recently enforced Estonian Taxation Model, was assessed at GEL 285.6 million at 31-Dec-23 (up 6.6% q-o-q), translating into an implied LTM P/E valuation multiple of 13.0x at 31-Dec-23 (up from 11.8x at 30-Sep-23).

Medical Insurance - Insurance revenue increased by 17.5% y-o-y to GEL 24.8 million in 4Q23, reflecting the increase in the price of insurance policies and the number of insured clients primarily in the corporate client segment. The combined ratio was at 92.6% in 4Q23 (down 2.5 ppts y-o-y), mainly resulting from the well-managed loss ratio, down 3.8 ppts y-o-y. Consequently, the net income of the medical insurance business was up by 12.6% y-o-y to GEL 2.2 million in 4Q23. See page 17 for details. Pre-tax LTM net income was up by 5.7% to GEL 8.4 million in 4Q23. As a result, the equity value of the business, which also reflects the application of the Estonian Taxation Model, was assessed at GEL 92.3 million at 31-Dec-23 (up 24.7% q-o-q), translating into the implied LTM P/E valuation multiple of 11.0x at 31-Dec-23 (up from 9.3x at 30-Sep-23).

Private investment stage portfolio companies (15.5% of total portfolio value)

Renewable Energy (7.3% of total portfolio value) - The EV of the business was up 0.3% to US$ 169.6 million in 4Q23 (up 0.8% to GEL 456.2 million in GEL terms, reflecting a slight depreciation of GEL against US$ during the quarter). In US$ terms, 4Q23 revenue and EBITDA were up by 4.7% and 6.6% y-o-y, respectively, reflecting the net impact of a) a 7.8% y-o-y increase in electricity generation in 4Q23, mainly driven by the resumption of operations of two power-generating units of Hydrolea HPPs, which were taken offline during the November 2022 - June 2023 period to enable scheduled rehabilitation works and b) 2.7% y-o-y decrease in the average electricity selling price in 4Q23. Revenue and EBITDA in GEL terms were up 3.2% and 4.7% y-o-y in 4Q23, respectively. See page 20 for details. The pipeline renewable energy projects continued to be measured at an equity investment cost (GEL 56.2 million in aggregate as at 31-Dec-23). Net debt decreased by 1.6% to US$ 70.5 million in 4Q23 (down 1.2% to GEL 189.6 million in GEL terms) due to strong cash flow generation during the quarter. As a result, the equity value of Renewable Energy was assessed at GEL 266.6 million in 4Q23 (up 2.2% q-o-q), (up 1.8% q-o-q to US$ 99.1 million in US$ terms). The blended EV/EBITDA implied valuation multiple of the operational assets stood at 12.6x as at 31-Dec-23, up from 12.5x at 30-Sep-23.

Education (5.2% of total portfolio value) - EV of Education was up by 11.4% to GEL 228.8 million in 4Q23, reflecting the strong operating performance of the business. Revenue in 4Q23 increased by 41.5% y-o-y resulting from a) organic growth through strong intakes and a ramp-up of the utilisation and b) expansion of the business, which coupled with the overall inflation, also led to a 50.0% y-o-y increase in operating expenses. Consequently, EBITDA was up by 26.9% y-o-y in 4Q23. See page 21 for details. LTM EBITDA was up by 10.3% to GEL 13.7 million in 4Q23. Net debt was up by 27.6% q-o-q to GEL 16.5 million in 4Q23, reflecting the CAPEX investments for the expansion projects. As a result, GCAP's stake in the education business was valued at GEL 189.2 million at 31-Dec-23 (up 10.8% q-o-q). This translated into the implied valuation multiple of 16.7x as at 31-Dec-23, up from 16.5x at 30-Sep-23. The forward-looking implied multiple is estimated at 10.5x for the 2024-2025 academic year.

Clinics and Diagnostics (3.0% of total portfolio value) - In 4Q23, the EV of the clinics and diagnostics business was GEL 171.8 million. 4Q23 revenue and EBITDA of the combined clinics and diagnostics business were up by 28.8% and up GEL 2.8 million y-o-y, respectively. This growth reflects the high demand for non-COVID services and the expansion of the business. See page 22 for details. Consequently, the LTM EBITDA (incl. IFRS 16) of the business was GEL 14.7 million and the net debt stood at GEL 58.5 million in 4Q23. As a result, the equity value of the business was assessed at GEL 110.8 million, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 11.7x at 31-Dec-23.

Other businesses (7.7% of total portfolio value) - Of the "other" private portfolio businesses, Auto Service and Beverages (other than wine) are valued based on LTM EV/EBITDA. Wine and Housing Development are valued based on DCF, Hospitality is valued based on NAV. See performance highlights of other businesses on page 24. The portfolio value of other businesses decreased by 4.4% to GEL 284.3 in 4Q23, primarily attributable to the value reduction of our housing development business resulting from the remeasurement of the remaining construction budgets for ongoing residential projects.

Listed and observable portfolio companies (37.7% of total portfolio value)

BOG (33.4% of total portfolio value) - In 3Q23, BoG delivered an annualised ROAE of 30.7% and a 19.0% loan book growth y-o-y (on a constant currency basis, the loan portfolio increased by 17.6% y-o-y). In 4Q23, BoG's share price was up by 7.7% q-o-q to GBP 39.8 at 31-Dec-23, reflecting the strong growth in BoG's earnings. In 4Q23, GCAP received GEL 27.7 million interim dividends (declared in August 2023 and paid in October 2023), representing a 52.3% increase compared to the interim dividends received in 2022. As a result of the developments described above, the market value of GCAP's equity stake in BoG increased by 12.2% to GEL 1,225.8 million. The LTM P/E valuation multiple was at 3.5x at 30-Sep-23 (3.4x at 30-Jun-23). BoG's public announcement of their 4Q23 and FY23 results when published will be available on BoG's website.

Water Utility (4.3% of total portfolio value) - In December 2023, the Georgian National Energy and Water Supply Regulatory Commission ("GNERC"), the independent body that regulates the GCAP's water utility business, approved new tariffs for water supply and sanitation ("WSS") for the 2024-2026 regulatory period. The WSS tariffs for legal entities in Tbilisi increased from GEL 6.5 to GEL 8.8 per cubic meter compared to the previous regulatory period of 2021-2023. WSS tariffs for residential customers remained unchanged. The anticipated changes in WSS tariffs had previously been reflected in the valuation assessment of the water utility business, which was performed based on the application of the put option valuation to GCAP's 20% holding in the business (GCAP has a clear exit path through a put and call structure at pre-agreed EBITDA multiples). Consequently, the fair value of Water Utility remained unchanged at GEL 159.0 million in 4Q23.

2) Investments[15]

In 4Q23, GCAP invested GEL 2.1 million in private portfolio companies.

· GEL 1.6 million was allocated to the education business, predominantly for the expansion of a new campus in the mid-scale segment.

· GEL 0.5 million was invested in the renewable energy business for the development of the pipeline projects.

3) Share buybacks

During 4Q23, 665,222 shares with a total value of US$ 8.3 million (GEL 22.5 million) were bought back under GCAP's US$ 15 million share buyback and cancellation programme announced in October 2023.

4) Dividends[16]

In 4Q23, Georgia Capital collected GEL 34.2 million cash dividends from the portfolio companies, of which:

· GEL 27.7 million interim dividends were received from BoG.

· GEL 6.5 million dividends were collected from P&C Insurance.

FY23 NAV STATEMENT HIGHLIGHTS

NAV per share (GEL) increased by 26.5% in FY23, reflecting a) GEL 680.5 million value creation across our portfolio companies with a positive 24.2 ppts impact, b) share buybacks (+4.1 ppts impact) and c) GEL's appreciation against US$, resulting in a foreign currency gain of GEL 6.5 million on GCAP net debt (+0.2 ppts impact). The NAV per share growth was slightly offset by management platform-related costs and net interest expense with a negative 2.4 ppts impact in total.

Portfolio overview

Total portfolio value increased by GEL 473.3 million (14.8%) in FY23:

· The value of GCAP's holding in BoG was up by GEL 395.4 million, reflecting a robust GEL 549.3 million value creation, partially offset by GEL 153.9 million dividend income from the Bank in FY23.

· The value of the water utility business increased by GEL 4.0 million, reflecting an increase in the put option valuation to GCAP's 20% holding in the business which was attributed in 2Q23.

· The value of the private portfolio increased by GEL 73.9 million in FY23, mainly reflecting the net impact of a) GEL 127.3 million value creation, b) investments of GEL 22.6 million predominantly in the investment stage businesses and c) a decrease of GEL 82.0 million due to dividends paid to GCAP.

1) Value creation

Total portfolio value creation amounted to GEL 680.5 million in FY23.

· A 52.6% increase in BoG's share price, supported by a 5.1% appreciation of GBP against GEL in FY23, led to a GEL 549.3 million value creation.

· GEL 4.0 million value was created in our water utility business in FY23, as described above.

· The value creation in the private portfolio amounted to GEL 127.3 million in FY23, reflecting:

o  GEL 87.6 million operating performance-related increase in the value of our private assets, resulting from the continued strong performance of our private portfolio companies, partially subdued by the performance of the hospitals business, which has been impacted by the recently introduced government regulations as described elsewhere in this report.

o  GEL 39.7 million net impact from changes in implied valuation multiples[18] and foreign currency exchange rates.

The table below summarises value creation drivers in our businesses in FY23:

The enterprise value and equity value development of our businesses in FY23 is summarised in the following table:

2) Investments[23]

In FY23, GCAP invested GEL 22.6 million in private portfolio companies.

· GEL 12.2 million was allocated to the education business, mainly for the acquisition of the new campus in the affordable segment and the development of a new campus in the mid-scale segment.

· GEL 6.2 million was invested in the renewable energy business for the development of the pipeline projects.

· GEL 4.2 million was invested in the auto service business.

3) Share buybacks

During FY23, 2,817,070 shares were bought back for a total consideration of GEL 76.5 million.

· 1,665,222 shares with a total value of US$ 18.3 million (GEL 47.9 million) were bought back under GCAP's share buyback and cancellation programmes during 2023. As of 20-Feb-24, an additional 470,000 shares with the value of GEL 17.2 million (US$ 6.5 million) have been repurchased under the ongoing US$ 15 million share buyback programme in 1Q24.

· 1,151,848 shares were repurchased for the management trust for a total consideration of GEL 28.6 million, fully securing the management trust in the form of unawarded shares for the next three years.

4) Dividends[24]

In FY23, Georgia Capital recorded GEL 235.9 million dividend income from its portfolio companies:

A one-off dividend of GEL 29.4 million from BoG, represents the participation in the Bank's 2022 buybacks in FY23. GEL 26.7 million one-off dividend was collected from the retail (pharmacy) business, following the minority buyout transaction in 3Q23.

Net Capital Commitment (NCC) overview

Below we describe the components of Net Capital Commitment (NCC) as of 31 December 2023, 30 September 2023 and 31 December 2022. NCC represents an aggregated view of all confirmed, agreed and expected capital outflows (including a buffer for contingencies) at both Georgia Capital PLC and JSC Georgia Capital levels.

Cash and liquid funds. Total cash and liquid funds' balance was up by 7.5% q-o-q to GEL 107.9 million (up 7.1% q-o-q to US$ 40.1 million) in 4Q23, mainly reflecting the net effect of dividend inflows and share buybacks during the quarter, as described above. The total cash and liquid funds' balance in FY23 decreased by 73.8%, mostly reflecting the use of funds for redemption of GCAP's Eurobonds in 2023.

Loans issued. Issued loans' balance primarily refers to loans issued to our private portfolio companies and are lent at market terms. The balance was up by GEL 0.3 million in 4Q23, reflecting the interest accrual on the loans issued (down by GEL 17.6 million in FY23, mainly reflecting the loan repayments from the hospitality and auto service businesses).

Gross debt. In US$ terms the balance increased by 2.2% q-o-q in 4Q23, reflecting the interest accrual on the US$ 150 million sustainability-linked bonds. In GEL terms, the balance was up by 2.6% in 4Q23, further reflecting the foreign exchange rate movements. The FY23 gross debt balance in US$ terms was down by 49.3%, representing the full redemption of US$ 300 million GCAP Eurobonds and the issuance of US$ 150 million sustainability-linked bonds in 2023.

Guarantees issued. The balance reflected GCAP's guarantee on the borrowing of the beer business, which was reduced to zero in 2023, leaving no outstanding guarantees.

Planned investments. Planned investments' balance represents expected investments in renewable energy and education businesses over the next 2-3 years. The balance in US$ terms decreased by 1.7% and 11.1% in 4Q23 and FY23, respectively, due to the investments made in these businesses, as described above (the balance in GEL terms was down 1.3% and 11.5% in 4Q23 and FY23, respectively).

Announced buybacks. The balance of the announced buybacks at 31-Dec-23 reflects the unutilised share buybacks under GCAP's US$ 15 million share buyback and cancellation programme.

Contingency/liquidity buffer. The balance reflects the cash and liquid assets in the amount of US$ 50 million, held by GCAP at all times, for contingency/liquidity purposes. The balance remained unchanged in US$ terms as at 31-Dec-23.

As a result of the movements described above, NCC was up by 3.5% q-o-q to GEL 574.5 million (US$ 213.6 million) which, together with the 5.5% increase in the portfolio value translated into a 15.6% NCC ratio as at 31-Dec-23 (down by 0.3 ppts q-o-q).

INCOME STATEMENT (ADJUSTED IFRS / APM)

Net income under IFRS was GEL 213.2 million in 4Q23 (GEL 332.4 million net income in 4Q22) and GEL 608.6 million in FY23 (GEL 12.2 million net loss in FY22). The IFRS income statement is prepared on the Georgia Capital PLC level and the results of all operations of the Georgian holding company JSC Georgia Capital are presented as one line item. As we conduct almost all of our operations through JSC Georgia Capital, through which we hold all of our portfolio companies, the IFRS results provide little transparency on the underlying trends.

Accordingly, to enable a more granular analysis of those trends, the following adjusted income statement presents the Group's results of operations for the period ending December 31 as an aggregation of (i) the results of GCAP (the two holding companies Georgia Capital PLC and JSC Georgia Capital, taken together) and (ii) the fair value change in the value of portfolio companies during the reporting period. For details on the methodology underlying the preparation of the adjusted income statement, please refer to page 96 in Georgia Capital PLC 2022 Annual report.

INCOME STATEMENT (Adjusted IFRS/APM)

The gross operating income stood at GEL 28.2 million in 4Q23 and amounted to GEL 203.1 million in FY23, reflecting robust dividend income, further supported by a decrease in interest expenses due to significant deleveraging progress in 2023.

The components of GCAP's operating expenses are shown in the table below.

GCAP Operating Expenses Components

GCAP management fee expenses starting from 2024 have a self-targeted cap of 0.75% of Georgia Capital's NAV. The LTM management fee expense ratio was 0.80% at 31-Dec-23 (1.02% as of 31-Dec-22).

Total investment return represents the increase (decrease) in the fair value of our portfolio. Total investment return was GEL 189.0 million in 4Q23 and GEL 444.6 million in FY23, mostly reflecting the changes in the value of our portfolio companies. We discuss valuation drivers for our businesses on pages 5-7. The performance of each of our private large and investment stage portfolio companies is discussed on pages 13-24.

GCAP's net foreign currency liability balance amounted to US$ 130 million (GEL 350 million) at 31-Dec-23, up from US$ 129 million (GEL 346 million) at 30-Sep-23. As a result of the movements described above, GCAP's adjusted IFRS net income was GEL 208.3 million in 4Q23 and GEL 615.6 million in FY23.

DISCUSSION OF PORTFOLIO COMPANIES' RESULTS (STAND-ALONE IFRS)

The following sections present the IFRS results and business development extracted from the individual portfolio company's IFRS accounts for large and investment stage entities, where the 2023 portfolio company's accounts and respective IFRS numbers are unaudited. We present key IFRS financial highlights, operating metrics and ratios along with commentary explaining the developments behind the numbers. For the majority of our portfolio companies, the fair value of our equity investment is determined by the application of an income approach (DCF) and a market approach (listed peer multiples and precedent transactions). Under the discounted cash flow (DCF) valuation method, fair value is estimated by deriving the present value of the business using reasonable assumptions of expected future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that quantifies the risk inherent to the business. Under the market approach, listed peer group earnings multiples are applied to the trailing twelve months (LTM) stand-alone IFRS earnings of the relevant business. As such, the stand-alone IFRS results and developments driving the IFRS earnings of our portfolio companies are key drivers of their valuations within GCAP's financial statements. See "Basis of Presentation" on page 36 for more background.

LARGE PORTFOLIO COMPANIES

Discussion of Retail (pharmacy) Business Results

The retail (pharmacy) business, where GCAP owns a 97.6% equity interest, is the largest pharmaceuticals retailer and wholesaler in Georgia, with a 32% market share based on the 2022 revenues. The business consists of a retail pharmacy chain and a wholesale business that sells pharmaceuticals and medical supplies to hospitals and other pharmacies. The business operates a total of 412 pharmacies (of which 397 are in Georgia and 15 in Armenia) and 23 franchise stores (of which, two are in Armenia and four in Azerbaijan).

4Q23 & FY23 performance (GEL '000), Retail (pharmacy)[30]