Speaker #2: For Georgia Capital. So we'll be talking about Q3 and 9-month results. Our kind of timetable is as follows: I'll talk about GCAP results overview, and aggregate portfolio results, then our CEO of our large portfolio companies will talk in greater detail on the performance of their respected portfolio company.
Speaker #2: Our CFO, Georgia Alpiza, will talk about valuation, liquidity, and dividend income outlook, and then in the end I will do a wrap-up and Q&A session as always.
Speaker #2: Very much looking forward to your questions. You can raise your hand or type in the chat. We prefer for you to, for interaction, that you raise your hand and we do the we discuss.
Speaker #2: On slide 3 we have a kind of highlights. You see a great NAB performance. More than 13.6% Q over Q in larry terms. And in pound terms it's even greater, at 15%.
Speaker #2: This is due to the appreciation of the lari. We have a lot of pressure on the lari to appreciate, as we have huge FX inflows into the country.
Speaker #2: And then you see we'll talk about the National Bank Reserve growing. We have a very excellent gross in our private portfolio companies. We have revenue grew 18.5% and EBITDA grew 26.3% year over year.
Speaker #2: The operating cash flow also is growing nicely at 12.3% year over year. We are glad to report that we fully delivered. The hold call has a zero leverage right now.
Speaker #2: As we speak, we also announced the new share buyback program of 50 million dollars. So this is this will bring the 200 million dollars under the new program.
Speaker #2: So we still see undervaluation on GCAP stock. We are trading at more than 25% NAB discount. So we are happy to buy back more GCAP shares.
Speaker #2: We also announced the investment in our healthcare business. We want to capture the lucrative parts of the business where the ROICs are 20% plus.
Speaker #2: And then we want to invest and grow and eventually our long-term vision is to release this company because we think that we will we will diversify further away from the state revenue and increase the share of the private revenue and generate a higher ROIC especially on the back of the great performance by the management.
Speaker #2: We want to invest along with the high performance management what we have and deliver superior return on invested capital. In CC ratio you see we went negative first time in our history we were before negative but basically it's a it's a it's a lowest ever.
Speaker #2: NCC ratio, and we are also continuing the buyback program. In the past 4 months, we bought 1 million shares, so we are happy to continue these buybacks.
Speaker #2: Most pleasing is that nearly 37% of the GCAP share capital has been bought back in past years since inception. We are really disciplined in our capital allocation strategy, and I'm really glad that we have kept this discipline throughout all those years.
Speaker #2: Here is the movement in Q3 of our NAB per share line finance group was obviously the biggest contributor share price rally there. 11.3% 2.4% we have a private portfolio companies contributing buybacks contributing 0.6 operating expense negative 0.2 and liquidity management FX contributed negative 0.2.
Speaker #2: So we ended up with 13.6% Q over Q NAB per share gross. Here on slide 5 we have the CAGR of since inception CAGR of the NAB per share.
Speaker #2: 20.2, 14%. For the inception—since the inception, more than 8 years. We have past 5 years, 27%. Past 3 years, 37%. It’s a phenomenal track record.
Speaker #2: Of the of GCAP performance of NAB you see that in the beginning we were learning how to manage the investment company. We were fine-tuning our investment philosophy and I think that we are on the right track now and we are very laser focused on allocating the capital and how we allocate the capital and how we want to allocate the capital in the future.
Speaker #2: In US dollars and the GBP terms the gross is even higher as larry has been appreciating over these years. Compared to the so-called strong currencies.
Speaker #2: So on the 1 billion capital return program you see that nearly 260 million larry in total either is already committed or is already done.
Speaker #2: And for instance the repurchase and cancellation of the shares or we are on its way of doing it. So therefore we are out of 740 million sorry out of 1 billion larry around quarter is already either done or committed.
Speaker #2: So I'm happy that we are progressing nicely. Let me remind you that the $1 billion Larry program runs until the end of 2029, so it's a long way to go.
Speaker #2: Hopefully we'll do this 1 billion capital allocation program earlier as always. Than the deadline of the end of 2029. On next slide on slide 7 you have a share buyback how it was developing and and you see the strong strong gross in in buybacks.
Speaker #2: We were at we started at 30 around 36 million dollars per annum. Right now we are more than near we will be close to 400 million dollars this year.
Speaker #2: In share buybacks—now here is the NCC ratio. We also restructured the company fully and delivered; you see that we were at the peak, at 42.7% of the NCC ratio.
Speaker #2: We are we are fully levered. Hold call level now we are negative. So we have room for for for stepping up the capital allocations investments in general.
Speaker #2: Here is the macro, which is obviously important in this equation. As you see, the GDP growth is phenomenal. The 7- to 8-month GDP growth was 7.6%.
Speaker #2: Last year was 7.7. Year before was nearly 10. Year before nearly 8. Then 2022 11. So it's a it's a huge gross of GDP per capital.
Speaker #2: What I'm very really pleased that our current account deficit on the back of such a gross is shrinking. So our first half our current account deficit shrank from 5.8% last year 2.5.
Speaker #2: Is it is it a sustainable or we have there are some one-offs but over overall the current account deficit shrinkage is huge. And you see in the in the FX reserves and interventions in Q3 1.3 billion dollars were bought back in Q2 1.6 billion dollars.
Speaker #2: So right now the National Bank reserves are are more than 8 billion dollars which is a all-time high. Now some aggregate results are also encouraging.
Speaker #2: I mean the Q2 we named it at the gross is accelerating. In Q3 we know what we are going to name this quarter. I think it's acceleration doubled or acceleration.
Speaker #2: So the gross is accelerating even in Q3. You see that nine months' EBITDA gross was under 25%. In Q3, EBITDA gross is 26%. Revenue is also growing; Q3 revenue gross rate is higher than the nine months' gross.
Speaker #2: It's 18.5 versus 17.1. So we are accelerating and accelerating. So we are pleased with that obviously. Cash flow is also in a good shape.
Speaker #2: Q3 was not a big conversion. We had a net operating cash flow only 12.3% gross. But over the 9 months cash flow gross is higher than the EBITDA gross number.
Speaker #2: So, we had a 26.7% operating cash flow gross in nine months, versus 24.7%. So, two percentage points higher net operating cash flow gross in the nine months.
Speaker #2: That's also very very important metrics for us what we watch. Georgia will talk about the new slide what we have right now. Distributed capital which is very interesting slide actually.
Speaker #2: It shows us will show you how much cash our portfolio companies are generating which can be earmarked for the distribution. So let's kind of a important new important KPI for our management.
Speaker #2: Here on slide 13, we have the leverage ratios for our portfolio companies. The pharmacy is under its kind of cap of 1.5 times.
Speaker #2: It's a 0.8 times debt to EBITDA. Healthcare services have been decreasing rapidly. The leverage was actually decreasing because EBITDA has been increasing, and that's why the leverage basically was coming down.
Speaker #2: It's close to its three three times target. It's at his 3.4 times. Insurance is obviously negative territory. Its use some leverage to buy the RD.
Speaker #2: But it's it's retiring this debt pretty fast. Now I will let our CEO of our retail pharmacy business Tony Nicolae Giulli to talk about this great results.
Speaker #2: And I will switch off my camera before Tony talks. Go ahead Tony.
Speaker #1: Thank you Jacqueline. And hello everyone. I am pleased to walk you through a brief update on the performance of our retail pharmacy business for the third quarter and nine months of 2026.
Speaker #1: Another quarter of strong momentum with solid results across our key financial and operating metrics. So let me start with a few words about our business.
Speaker #1: In Georgia's retail pharmacy market we hold around 34% market share in organized trade. Based on 2024 figures retail continues to be our core business generating around 85% of total revenue.
Speaker #1: We operate two well-positioned pharmacy brands: GPC, focused on the high-end segment, and Pharma Depots, serving the mass market. Alongside them, we run two franchise brands, The Body Shop and Alan Aflalu Optics, and have a presence in Armenia and Azerbaijan.
Speaker #1: In Q3 2026, we opened 12 new pharmacies—10 in Georgia and two in Armenia—in strategically selected locations, using cost-efficient formats that require limited capital investment.
Speaker #1: As of September 2026, our network comprises 476 pharmacies, 15 Body Shop stores, and six Optics stores. Turning to performance, retail revenue increased by 16% year over year in Q3 and by 13% over 9 months.
Speaker #1: The gross was driven by same store revenue growth of 8.7 and 7.3% over the respective periods which remained high even as we added 38 pharmacies over the past 12 months.
Speaker #1: The successful ramp-up of this new pharmacies also contributed to the strong performance of the retail business. The revenue growth was farther supported by 5% increase in the number of bills issued and 10% increase in average bill size.
Speaker #1: Both in Q3. We see this as an encouraging trend as it reflects resilient consumer demand and solid execution at the store level. In line with our strategic priorities the wholesale business continued to expand delivering revenue growth of 10% year over year in Q3 and 11% in 9 months.
Speaker #1: The growth was mainly driven by an expanded product portfolio across distribution channels in Georgia with gross profit of the distribution business increased by 23% year over year in Q3.
Speaker #1: In addition, we acquired a distributor of premium baby care brands for GEL 6 million in Q3 at an implied EV/EBITDA multiple of 3.5 times.
Speaker #1: Strengthening our position in the mother and baby category and further expanding the wholesale platform. We also continue to expand our presence in Armenia where total revenue increased by 42% year over year reaching gel 10 million in Q3 and growth of 35% to gel 26 million in 9 months 26.
Speaker #1: So this growth was driven by continued network expansion and the strengthening of the retail brand alongside a broader wholesale product offering and higher revenue from state tenders.
Speaker #1: Turning to profitability of the overall business alongside our revenue growth we continue to deliver consistent gross profit margin improvement year over year. Reaching 35.4% in Q3 up by 2% points and 34.5% in 9 months up by 1.7% reflecting the initiatives we have undertaken to shift our sales mix towards higher margin products and to secure improved supplier terms.
Speaker #1: Moving to the next slide let's see how this translated into very strong financial results. Marked by significant EBITDA growth and solid balance sheet position.
Speaker #1: Enhanced profitability translated into 34% year-over-year EBITDA growth in Q3 2026, alongside an EBITDA margin expansion by 1.8% reaching 12.7%. For the nine months of 2026, EBITDA amounted to GEL 93 million, up by 26% year-over-year.
Speaker #1: On the cash side EBITDA to cash conversions to that 63% in Q3 and 87% in 9 months this reflects the strong momentum in our revenue growth which accelerated in the second half of the year as well as our continued investment in building a higher margin portfolio through new product launches and growing share of directly imported products in total sales.
Speaker #1: Together, EBITDA growth and cash generation kept our leverage position comfortable, with adjusted net debt to LTM EBITDA at 0.8 times as of September 26, down from 1.5 times—three times at the end of last year—and well below our target level of 1.5 times.
Speaker #1: We also distributed gel 15 million in dividends in the third quarter bringing the 9 months total to gel 27 million up from 20 million in the same period last year.
Speaker #1: Let me close with the key takeaways on the final slide. So first we are delivering sustained topline growth supported by same store revenue growth and solid wholesale performance.
Speaker #1: Second, we are steadily enhancing profitability and delivering significant gross profit and EBITDA growth through margin expansion and cost systems execution. And third, we are maintaining a prudent level of leverage, supported by robust business performance and cash generation, which gives us flexibility for future investments and potential shareholder returns.
Speaker #1: So thank you all. I look forward to your questions during the Q&A and now I will hand over to Irak Gogiam.
Speaker #2: Thank you Tornike. And good afternoon everyone. I'm pleased to share the results of another strong quarter. Revenue was up 16% while EBITDA grew 22% to gel 26 million and the EBITDA margin improved by 1 percentage point to 19.4%.
Speaker #2: Cash generation was also strong; operating cash flow more than doubled to GEL 25 million, with EBITDA to cash conversion of 95% in Q3. We continue to strengthen our clinical teams and service offerings across the network.
Speaker #2: Our outpatient care once again was a key growth driver this quarter net revenue from outpatient services grew 23% supported by the fully renovated and expanded outpatient department at our largest hospital which we opened in June outpatient services now account 48% of our net revenue slightly up from 46% a year ago.
Speaker #2: We continue to strengthen our clinical teams onboarding new doctors across the network with a particular focus on our in vitro fertilization direction where we are building a strong team of reproductive medicine specialists.
Speaker #2: This quarter we launched our nursing program co-funded by EG which is a key part of how we develop the next generation of medical staff for our network.
Speaker #2: Supporting their professional growth while building a strong pipeline of clinical talent for the long term. Our polyclinics and diagnostic segment opened a new clinic in Tbilisi to meet growing demand bringing the network to 17 clinics with further growth growth planned.
Speaker #2: To capture growth opportunities ahead, we plan to invest GEL 53 million in capital expenditures over the next three years. This investment will be directed at further expanding our outpatient services and scaling up our IVF direction, which is one of the fastest-growing healthcare segments in the country, and we see strong long-term potential in this area.
Speaker #2: Let's turn to our hospitals business life. Revenue grew by 15% and EBITDA by 22% with the margin improving by 1.1 percentage points to 18.8%.
Speaker #2: Growth was supported by the expansion of outpatient services which increased by 23%. Operating cash flow was particularly strong up to 157% to gel 21 million with an EBITDA to cash conversion ratio 103% as state collections started to catch up.
Speaker #2: Moving to the next slide in in our polyclinics business admissions increased by 11% and acceleration from the 6% growth we had in second quarter while revenue and EBITDA grew by 16 and 18% respectively.
Speaker #2: In diagnostics business revenue grew by 25% on the back of 6.5% increase in number of tests performed while EBITDA grew by 36%. This was driven by our continued focus on retail the main profitability driver of this division where revenue rose by an impressive 86%.
Speaker #2: On a combined basis polyclinics and diagnostic segment revenue rose 19% and EBITDA 23% with the margin up by 0.7 percentage points to 20.5%. Moving on to our summary slide we delivered strong topline growth across all segments with significant EBITDA growth and margin expansion.
Speaker #2: Cash generation was particularly strong as well. Looking ahead our planned investment of 53 million gel over the next three years will further strengthen our outpatient and IVF directions alongside the financial results we continue to build the long-term strength of the network adding new services investing in advanced equipment and attracting top specialists.
Speaker #2: That concludes the healthcare side. I will hand over to Georgi who will take you through the results of the insurance business. Thank you.
Speaker #3: Hello, ladies and gentlemen. I will overview the insurance business today. Just a quick update that we divide our business into main directions: it's property and casualty, and medical.
Speaker #3: We had an outstanding Q3 and we are increasing our revenues and profitabilities continuously in Q3 also. So our insurance revenues grew by 30% in Q3 and nine months over nine months it's the same as it was the same growth for 30%.
Speaker #3: Our profits grew by 19% in Q3 and 29% by nine months over nine months. Just a quick reminder that we had a severe hailstorm in Q2 in that affected our PNC ratio.
Speaker #3: So taking it out the growth would be 36% nine months over nine months. Our key operating matrix remained very strong. Our net payments grew by 16% in Q3 and 15% over year over year.
Speaker #3: In PNC we had a renaissance I would say for the medical line. Our we had a 30% increase in Q3 and 58% year over year in our medical insurance.
Speaker #3: Total net payments grew by 23% in Q3 and 40% year over year for the nine months. So let's deep dive into each business line.
Speaker #3: And moving to PNC our PNC line shows an amazing performance we have a market share growth by one point and it reached 36%. Our insurance revenues grew by 12% in Q3 and nine months over nine months grew by 12%.
Speaker #3: Mainly the increase was driven by a few factors. It's the expansion of our retail portfolio and the combin and the motor and then and and the corporate corporate motor portfolio alongside with the higher prices and updated pricing strategy.
Speaker #3: Plus the property plus the increase of the property portfolio revenue driven by expansion of our corporate segment mainly in the corporate plus the increase of the of the of the double digit double digit increase and segmentation in the in in the motor.
Speaker #3: And lastly we had a really good effect in our credit life insurance in Q3. In terms of the profitability we had a 12% growth in Q3 and 8% year over year again excluding the hailstorm in Q2 the nine months growth would have been 20%.
Speaker #3: So we'll look at this as an abnormal event. So we are showing you also the the the profit growth and and and and the matrix without the without the severe hailstorm.
Speaker #3: We paid more than 6 million in dividends in Q3 and 18 almost 18 million in nine months to GCAP. Our key operating matrix remained very strong in and healthy in PNC.
Speaker #3: Our net payments grew by 16% quarter over quarter and 15% year over year for nine months. Our combined ratios remain very strong and healthy at 83%.
Speaker #3: That's in line with our medium-term strategy. And it's 85% year over year. Just to exclude the hailstorm in here also we have an improvement of 1.1% in the combined ratio dragging it out down to 84% 83.8% in nine months.
Speaker #3: We have a very good performance in terms of the insurance. We have 10% growth in number of insurance in Q3 and the same number for the nine months.
Speaker #3: Our number of written policies grew even more by 14% in Q3 and 15% year over year. And we have a highest renewal ratio ever historically at 81.5% in Q3 and 8 more than 80% in in in in nine months.
Speaker #3: Going to medical insurance as I said we have a renaissance in medical insurance. We have a 13% market growth in in medical insurance and our market share in medical insurance reached 46%.
Speaker #3: We had a 48% growth in Q3 in medical insurance and 45% in nine months. Mainly there are a few components. It was one of the component is the are the state tenders that we secured with the updated and updated pricing and higher margins.
Speaker #3: Plus the growth in the retail health insurance that we launched lately and pushing in line with our retail strategy and plus plus the policy pricing double digit policy growth in nine months in through all all all segments of the of the health insurance.
Speaker #3: Going down to the profitability health medical insurance in Q3 showed amazing amazing growth in profitability plus 31% Q3 over Q3 and 68% year over year nine months.
Speaker #3: Key operating matrix remained very strong in terms of the net premiums net premiums in Q3. We had a 30% increase in Q3 and almost 60% in year over year.
Speaker #3: Combined ratios to the still very healthy at 91.7% and still and and it's the same in for the for the whole year for the nine months.
Speaker #3: We have a 2.3 2.3% improvement in combined ratio. This is mainly driven by reflex low loss ratio due to the robust revenue. So it means the same almost same operating cost we are serving more revenue and that's very very rich the momentum.
Speaker #3: Few points about the findings about the medical insurance. About the medical insurance we about the we have a serious growth in the as I said in the retail plus 40% in in in in Q3 and 51% in nine months.
Speaker #3: New mandatory line for the inward travelers was launched that contributes in diversifies our profitability in the medical insurance with the low severity. We have a double digit growth in in terms of the pricing for the ticket size of the corporate health insurance policies and I said we had a with the updated pricing and the update and the writing we have a almost 70 million revenue in terms of the in in our medical portfolio.
Speaker #3: Few things to remember about Q3. From our insurance business we had a robust financial performance with 30% increased Q over Q and 90% growth in terms of the in terms of the profit supported by strong contributions from both insurance lines.
Speaker #3: Our PNC insurance business remains to be still very resilient and prudent to to to in Q3 with the growth of 12% Q over Q while P7 underwriting and and the strong pricing continue to support our strong profitability.
Speaker #3: As I said we are we have we are we are envisaging enormous performance gorgeous performance from our medical insurance line with a 40% increase growth in the health retail insurance revenues contributing to 31% year over year growth in in in in Q3 in terms of the profitability and we paid 1.8 million to in dividends in in Q3 to GCAP that comprises almost 20 million already paid dividends in nine months 2026.
Speaker #3: This is I will end and with with the insurance overview and plus the plus the floor to to Georgia to continue. Thank you very much.
Speaker #1: Thank you, Georgia. Hello, everyone. I will quickly take you through the portfolio evaluations for the third quarter before we look at the new slide, where we present the distributable capital generation by our portfolio companies towards the end.
Speaker #1: So starting with the the breakdown of our portfolio values in the third quarter as you probably know we do valuations in in-house based on the similar.
Speaker #1: Methodology and same principles applied as what our independent third-party valuation company applies every six months. As we perform this valuations for the private portfolio companies you can see the new values here the multiples remain broadly stable.
Speaker #1: We will look at that later. But in general Lion Finance Group had a very strong quarter a remarkable close to 27% growth of the share price.
Speaker #1: That resulted as our shares broadly remained unchanged in in Lion Finance Group in the third quarter. This resulted in the share of the Lion Finance Group growing to 51% of our portfolio value gross portfolio value at the end of the quarter which was slightly up for the from the 47% that we had at the end of the the second quarter.
Speaker #1: Private portfolio companies across the board, including in the emerging and other businesses, remain strong, and they continue to represent around 49% of our portfolio, with the retail pharmacy being the largest private portfolio company within our portfolio.
Speaker #1: On the next slide you see how the valuation multiples have changed during the quarter and they have not materially changed they remained broadly similar to where they were at the end of six months.
Speaker #1: So most of the value creation that happened in the private businesses which you see on the next slide actually came from the growth in the EBITDA and the cash generation that resulted in lower net debts and and the debt pay downs.
Speaker #1: So on the next slide you see how the portfolio value increased during during the quarter. Lion Finance Group generated 657 million Larry valuation gains for us in the quarter of which around 26 was realized in terms of the dividends or in terms of the participation in in in LFG's buybacks.
Speaker #1: On the private side the value creation was 153 million Larry which translates roughly to 5% plus of the private portfolio value. So we generated 5% plus in a single quarter within our private portfolio businesses.
Speaker #1: Most of the value creation came from a very strong set of results that you saw from the retail pharmacy earlier while healthcare services and the insurance also demonstrated strong performance and provided almost equal 35 to 40 million Larry value creation in the quarter.
Speaker #1: At the end we had the portfolio value that was record high of 6.2 billion Larry at the end of the the third quarter. This was you know this summarizes our portfolio changes and you know how our portfolio increased by close to 800 million Larry in the in the third quarter.
Speaker #1: Now as we move to the next slide here you see for each individual business what were the value valuation drivers and as I said earlier it was primarily the growth in the EBITDAs across you know retail pharmacy healthcare services and the insurance businesses they were the key drivers of the the value creation and on top it was the dividend payments or improvements in the net debt.
Speaker #1: So as you saw retail pharmacy business paid us 15 million Larry dividends and the insurance business paid us 8 million Larry. So across the board this this value creation was very sort of tangible and and realized.
Speaker #1: Now we can move to the the liquidity and the debt profile of Georgia Capital and this is the first quarter where we are reporting no debt at the hold call level as we previously announced we paid down our remaining 50 million debt at the end of the during August.
Speaker #1: So at the end of the quarter we had no debt and on this slide you can see our journey from 365 million debt at the end of 2021 down to zero you know within five year period actually less slightly less than a five year period and we continue to have a strong liquidity 111 million dollars of liquid funds at the end of the September and that follows the change from June after we paid that 50 million debt which in fact was closer to 52 with the accrued coupon and the the small premium that we had to pay on the call and also the buybacks close to 50 million buybacks that we did during the quarters.
Speaker #1: We we continue to have a very strong liquidity. Now we can move into the the dividend income outlook. And you know this is an important slide as we go into the next slide here what we you see that in our dividends continue to come in and they continue to be very strong for the nine months we generated 139 million Larry and we continue to expect that for the full year dividends will be you know in 200 million Larry area.
Speaker #1: And one key thing to note here is, as our portfolio companies are paying us dividends, especially in the retail pharmacy and the insurance space. On top of that, they're paying down the debt.
Speaker #1: So to give you a full picture of you know what is the the their capacity to distribute capital on the next slide we present this new slide that provides a you know a power that these businesses have to distribute capital to Georgia Capital in the future.
Speaker #1: So for the first nine months in the retail pharmacy business you see that from the annual cash flow generation post interest expense post you know regular capex how much cash there is left to pay dividends to service debt and to you know complete M&A using their own free cash flow generation.
Speaker #1: So in this case that was 58 million Larry and that was an an increase of 36.36% 36.6% over the last year. What this number also indicates is there is a very strong cash flow generation growth in the business which in the future I mean here with our you know approval part of the cash was used to pay down the debt at the principal debt.
Speaker #1: In the future as this business and the insurance business operate below the set leverage targets from our perspective they are they will be able to pay this dividends to Georgia Capital.
Speaker #1: So with that in mind we wanted to show you the full picture where you can measure this distributable capital across the large portfolio businesses.
Speaker #1: In the insurance we had a similar slightly higher growth of 38% because they continue to have very strong growth momentum that also translates into the cash generation and into the distributable capital generation.
Speaker #1: And within the healthcare services space in 2026, we don't expect them to have distributable capital generation as these businesses are fully reinvesting for growth. This is something that we had communicated in the past. But from next year, we do expect that they will be able to generate small but distributable capital in 2027.
Speaker #1: And overall you can see that you know even though we received you know less dividends from the private portfolio businesses and you know roughly 53 million Larry their ability to pay us the dividends was in fact 88 million Larry.
Speaker #1: And so you know this is the the new metric that we think will be useful for the investors to look at you know going forward.
Speaker #1: We look at this internally but we wanted to share this and bring it to to your attention as well. With that I will hand it over back to Iraqli for the wrap up and yep.
Speaker #2: Thank you Georgia. To wrap up basically NLB is a strong growing stock and operating performance of the companies are accelerating. We fully delivered the hold call.
Speaker #2: We introduced another $50 million buyback program. Total buyback numbers look impressive. We see deleveraging, bringing the NCC ratio to negative territory. The economy is strong.
Speaker #2: So, we expect the operating performance to be strong going forward in the foreseeable future. Let's move to the Q&A session now. Please raise your hand or send your questions through the chat.
Speaker #3: Thank you Iraqli. We have some incoming questions. First we have some participants who have raised their hands. Dimitri Vasov. Wants to have some questions.
Speaker #3: Dimitri you can...
Speaker #4: Thank you very much. Congrats on strong set of results. I have a few questions please. So the first one is on the financial IPO of healthcare business.
Speaker #4: So which operating and financial milestones would you like to achieve before you believe the business will be ready for IPO? Like particularly curious how much deliveraging is needed and which enterprise value you will be comfortable with before doing an IPO.
Speaker #4: That's the first question. The second one is so beyond the potential healthcare IPO which other private businesses are closest or to to exit? And the final one about Armenian pharmacy business.
Speaker #4: So congrats on very strong growth there. And my question is how much of that growth came from existing operations versus network expansion? And also what's the actual potential and in in a way that how consolidated is Armenian pharmacy market?
Speaker #4: How many players are there? How fast does the market grow? I would be very curious to compare it to Georgia. Thank you very much.
Speaker #2: Thank you Dimitri. Last question I'll let Tornika to answer on first two questions. Basically I mean we we just share on on the IPO thing it's too early to say obviously because we just wanted to to flag the exit route which we are considering for the healthcare business because this is in conjunction of the investments.
Speaker #2: So right now we are thinking is on the healthcare is to invest in highly ROIC accretive business because there are a lot of good opportunities in private healthcare sector and diversify away from the government dependency.
Speaker #2: And and and we see that we can grow it. And and the exit route we consider as an IPO in we share the three to five years time but we are looking at close to 100 million of EBITDA mark you know maybe 80 million to 100 million EBITDA mark that's where we would consider the the listing the company.
Speaker #2: So we think that we will achieve is between three to five years. There could be some M&As not only in Georgia but also Armenia and maybe other countries as well what we are looking the opportunities basically.
Speaker #2: On exits for the what we are what exit we consider for the large portfolio companies I mean we we have a trade exit is always a good opportunity but I think that the we are not anywhere close on the on the exiting the insurance or retail business and we are not considering but if the good offer comes we always consider obviously for trade sale so that's a kind of a for us exit is a usual you know it's a bread and butter thing so we will we don't have a plan now to sell either of insurance or pharmacy or healthcare so basically we have a we have a exit route for the healthcare because we are investing now.
Speaker #2: We want to we want to step up investment in in high ROIC businesses in healthcare. That's why we showed you the the exit route what we are considering.
Speaker #2: We shared our thoughts on the exit route. Tornika maybe you will answer a questions about the network expansion in Armenia and opportunities etc. Don't say everything so thank you.
Speaker #2: Thank you for the question. So would say that the if we will split the growth so with the existing infrastructure including the existing outlets including the developments in the wholesale business with a new brands and also including the tenders we won government tenders it is the seven five 75% of the growth and 25% of the growth comes on the it's for the new new new open outlets and new infrastructure including the upflow of new upflow optics store in Armenia.
Speaker #4: The question was also about the market structure and what what your thoughts are on market.
Speaker #2: So, I would say that the market is not matured. We believe that the market will grow, and for us, it's important to scale up in the Armenian market.
Speaker #4: Very good.
Speaker #1: Thank you very much. Very clear. Maybe one quick follow-up on the Armenia pharmacy. Like how profitability compared to Georgian business in terms of like gross margins maybe?
Speaker #2: The gross margin, in our case, is close to Georgia, so I would say that it is around 32% in retail, while we have around 35% in Georgia. This is because our mix is towards parapharmacy, so non-medication. But, in general, the margins on the Armenian market are lower than in the Georgian market.
Speaker #1: Okay. Thank you very much.
Speaker #2: Thank you.
Speaker #4: Maybe because the cost of goods sold is higher in I mean more expensive. Cost of goods sold in Armenia.
Speaker #2: Yes, and the back margin and the power of the brand owners are much stronger than in Georgia.
Speaker #3: Thank you Dimitri for the interesting questions. Next up we have Ben Mehar who has some questions and now Ben you can talk.
Speaker #1: Can you hear me?
Speaker #4: Hey Ben.
Speaker #1: Hi, I'll just go with two questions. The first is on buybacks. Obviously, given the strong share price performance, the ROI on buybacks must be declining.
Speaker #1: So the fact that you're extending does this mean you're struggling to find M&A targets that offer better returns or you're just being patient with the Armenian elections you know now behind us and you've got no more debt to the whole coast should we expect greater activity in this area going forward and are there any sectors that you're particularly optimistic about it sounds like Armenian pharmacies is one obvious one and then my second question is just on the dividend income outlook I think Georgi touched on it on the slide 36 obviously with the net debt to EBITDA a lot of private portfolio at record lows this suggests that the dividend upstreaming potential of the private portfolio is only going to increase from here so maybe it's too early to give you know hard numbers for 2027 dividend income but just any kind of color around potential outlook for that would be useful.
Speaker #1: Thank you.
Speaker #2: Thanks, Ben. About buybacks, basically I think that, you know, we look at the buybacks not only on the discount but also the gross outlook, so discount.
Speaker #2: 25% but gross outlook is like a you know 35% then you we are buying still very cheaply so I think that so that that's kind of a a our approach in buybacks we are not buying bank 25% discount only another thing is that the on the on the investments I understand that everybody you know you know it's exciting to make new investments but for us the discipline is very very important we don't want to we can we guide you where we are looking at in terms of the market etc but I don't want to create the pressure that we have to invest we don't have to invest the beauty of this Georgia Capital structure is not we are not private equity fund which the which has to invest to in order to earn the fees for the managers we don't have to invest and I don't want to create the pressure of investment and everybody is thinking that we if we don't invest we die you know we don't die we are we continue of buying back shares cheaply right now what we are doing we are buying cheaply and if the you know discount if we go into the premium we we may not buy and we may not invest either but we don't we are looking at good opportunities in Georgia in Armenia we are team is working very hard to look at the opportunities but we will not we don't do not want to be under pressure of investing we don't and analysts are creating this pressure and my job is to disseminate the pressure the dividend income going forward Georgi you know please show up on the on the screens but for for us we see a lot of deleveraging of our portfolio companies is happening and dividends will be increased we showed you the dividend capacity distributable capital maybe we need to show that slide again but you we cannot tell you the hard numbers right now but we expect strong gross next year from our private portfolio companies in terms of dividend payments because of deleveraging plus because the healthcare group will be also in in in position position of paying the dividends small one but it will step up Georgi please add.
Speaker #1: Yes, yeah, 100% agreed. So, if you look at that distributable capital slide again, you will see that the large portfolio companies paid GEL 53 million in dividends, and they paid down debt or made M&A acquisitions worth around GEL 35 million.
Speaker #1: So this 35 can easily become dividends paid to Georgia Capital next year or the year after. So we do expect the growth in the dividend inflows this year we expect 200 million larry next year we expect double digit growth in terms of the percentage of of the dividend incoming 2020 7 we will give you more accurate number when we publish the fourth quarter results because we're going through the next year budgets with the portfolio companies at the moment but it will be in excess of 220 million larry for the next year.
Speaker #1: Great. Very helpful. Thank you.
Speaker #2: Thanks Ben.
Speaker #3: Now Miloš has a question. Miloš you can go ahead.
Speaker #1: Yes. Hi. It's Miloš Paps from Edison Group. So congratulations on the strong set of results. I'm not taking my questions. Thank you for taking my questions.
Speaker #1: I would like to start with the cash conversion of the retail pharma and healthcare services business. Let's maybe start with that.
Speaker #2: Pharma and which one? Sorry.
Speaker #1: Healthcare services.
Speaker #2: Healthcare services. Okay.
Speaker #1: Yeah. So so let's maybe start with with retail pharma. Now obviously you highlighted that the cash conversion was somewhat impacted by well the expansion the overall expansion and the the investments in higher margin products.
Speaker #1: So I think the the the cash conversion was closer to 60 sorry what was it? Was it 603 or something around that?
Speaker #2: We're looking at quarter or you're looking nine months?
Speaker #1: Yes. Just just the quarter. 62.5.
Speaker #2: I don't think you should look at the quarter. I mean it's cash monthly. So how does nine months look for you?
Speaker #1: Yeah. Yeah. So nine months of course 87%. So I just wanted to understand if it's if it's a sensible run annual run rate let's say you expect for the business.
Speaker #1: And and a similar question for the healthcare services business right where where of course Q3 cash conversion was pretty strong but this was because of the collection.
Speaker #1: Delayed payments, and there are still some outstanding. So, again, what would be a sensible assumption in terms of the cash conversion on an annual basis? Is it already approaching your midterm target of at least 85%?
Speaker #2: Right. Yeah. Sure. Exactly. Can you hello. Thanks for the question. So in healthcare business the Q3 cash conversion was close to 100% but we think that Q4 will be higher than 100% and generally you may assume that cash conversion plus EBITDA to cash conversion and plus gross it it should be around 100%.
Speaker #2: So if the gross is 15%, then the cash conversion should be 85%. So it's a general assumption going forward.
Speaker #1: Okay. Perfect. Thank you.
Speaker #2: And Tornica maybe you talk about the the pharmacy cash conversion. So thank you for the question. First of all let me agree with the Irakli's comment about the quarter because it doesn't give us the picture for the whole year as we are having some shifts from quarter to quarter mainly in the payments it's the main reason for the quarter three still let me say two things it's a acceleration of growth together with the new launches new brands exclusive brands which are driving mix to the higher gross profit margin and both both let's say things what I have described needs add extra additional investment in working capital but let me give you a understanding for the our expectations of the year 2026 year end it will be around 90% cash conversion.
Speaker #1: Okay, perfect. So clear. And then my final question will be on the expansion CapEx in the healthcare services business, right? So, you said that $10 million will be providable.
Speaker #1: The whole company and 43 million larry by the company itself. Presume I presume based on your comment that you expect some distributable income from from the healthcare services from the next year.
Speaker #1: I presume that most of this expansion capex will be funded by operating cash flow, but do you expect any moderate incremental debt, or should it be covered by operating cash flow?
Speaker #2: Miloš, I think one thing you need to keep in mind is that this is the investment that will happen over three years. So, this is not immediate.
Speaker #2: So this will be phased in over the next three years. And we do expect that there will have sufficient cash on the balance sheet to cover it.
Speaker #2: If they don't then they might temporarily borrow from the lenders. But we think over the three years there will have enough cash generation.
Speaker #1: Excellent. Thank you.
Speaker #2: Thank you. Thanks.
Speaker #3: Thanks, Miloš. And we also have a question coming from Mel Melker Samuelson. You can ask your question.
Speaker #1: Hello good afternoon. And congratulations to another strong set of numbers. First I wanted to ask quickly on the insurance businesses how you think about maybe over the next few years more stabilized or normalized loss and combined ratios in both of the businesses.
Speaker #1: Obviously the the the medical side was was partly impacted by by the mix of of state tenders and and on the P&C side it seems also to be a mix effect with maybe more motor and and property and how you think that sort of mix effect is going to influence the loss and combined ratios on both business lines.
Speaker #2: Yeah. I'll take the question. So thanks for the question. So historically and going forward our appetite is from 8 to 85% in terms of the in terms of the P&C.
Speaker #2: Supported by the by the balanced reinsurance. So we are in in line with our with our with the with our announced medium term combined ratios of 85.
Speaker #2: So going down the road for few years we will be we'll be looking to be in the range of 85 in terms of the in terms of the in terms of the in terms of the P&C.
Speaker #2: As far as for the health insurance we are in we are somewhere in in the 90 92% even though in nine months in in in Q3 we had a a liquidity deterioration in in in medical for the combined in terms of the nine months we had 1.1% improvement.
Speaker #2: So it's in line with the with with our with our budget and it it it stabilized. I don't think that there are big fluctuations going down the road or looking historically for the last five years.
Speaker #1: Okay. Perfect. Thank you very much. And and maybe secondly if I may quickly on the you've now come to to no leverage position. How how do you think about this?
Speaker #1: Are you maybe of course you hinted that you don't want to be pressured to invest but are you considering you know alternative investments or increasing increasing buybacks further or potentially revising revisiting your leverage targets?
Speaker #2: No I think our leverage targets are are good. We are comfortable with 10% NCC ratio. But. We will we will go along. We will we always we have this 1 billion larry program and we will be in next couple of years we will be fulfilling this 1 billion larry program.
Speaker #2: And we see we may need to to raise some debt for the acquisitions we may or may not and we would need to know how to retire this debt.
Speaker #2: So we want to have a flexibility in terms of the the borrowing. We don't want to be fully deliberate all the time. We always we would want to for the acquisitions we may borrow some but go towards the 10% area of of NCC ratio and then we can we we retire that.
Speaker #2: So we that's what how we want to move. There but basically the as I said we have a guidance for you how much capital will be returning over the till the end of 2029.
Speaker #2: This includes the investments this includes the buybacks no no more the leveraging now but basically if yeah let's that's kind of a I think I think our investment philosophy or capital allocation philosophy is is very clear and our track record of being allocating capital in our framework of buying something which is better than the GCAP is very important.
Speaker #2: If we cannot buy better than GCAP we buy GCAP. And so far we buy GCAP. So basically that's that's where we are. Good to think alongside we have a very strong perform operative performance of our private portfolio companies distributor will capital is increasing and will increase significantly over the next year and next years basically.
Speaker #2: So we are in a good position comfortable position to be.
Speaker #1: Great. Thank you.
Speaker #2: Thanks.
Speaker #3: Thanks Melker. So we have two more questions and a question and answer panel from Anton Berg. First one relates to the dividend outlook for 2027 which we covered.
Speaker #3: So I'm going to go to the second one. Can you share can you please share the long-term opportunity for the retail pharma business in Armenia?
Speaker #2: I think we covered that one a little, but Tornika, do you want to talk about that? Basically, for retail pharmacy, we are looking for acquisitions in Armenia, and that's how we want to expand.
Speaker #2: And if not we will be continuing expanding organically we like that market. We think that the market is under penetrated and we want to we want to do more business there for sure.
Speaker #2: Tornika you want to add something?
Speaker #4: I fully agree.
Speaker #2: Yeah. Okay. I think that I don't know any more questions.
Speaker #3: No we do not have any incoming questions. As of now.
