Georgia Capital PLC (CGEO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the First Half 2020 Analyst Investor Call. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, the 20th of August 2020. I would now like to hand the conference over to your speaker today, Irakli Gilauri. Please go ahead.

Thank you. Thank you, everybody, for attending our call. Today here with me will be speaking Giorgi Alpaidze, our CFO; and Nick Gamkrelidze, CEO of GHG. We have distributed the presentation for this call. And let me go through this presentation. On Page 3, you'll see our key takeaways for this quarter. Quarter was very interesting for us. It started pretty weak with the lockdown -- due to the lockdown, but we had a very sharp rebound. So I think one key takeaway is that the revenue all across our portfolio companies are rebounding. In June, July, we had 11% and 7% growth in revenue year-over-year. And this trend continues. That's kind of a -- it's a very extremely positive, unexpected for me personally, but it's been -- our portfolio companies has been performing extremely well. Second key takeaway is that our cash flow -- cash flows of our portfolio companies are also very strong. There's a good cash flow generation. And our strategy to grow and preserve the cash is working well. In first half, we had a cash -- operating cash increase by 96% to GEL 180 million. And we had a stronger cash flow generation continuing even after the Q2. Also, the third point -- the third key takeaway, what we have is that we continue -- even during the pandemic times, we continue to deliver on our strategic priorities. We have concluded the GHG share exchange offer. And the current -- and our portfolio -- private portfolio is more than 80% of our total portfolio, which was our strategic priority and goal. We -- our subsidiary, our portfolio company, the GGU, issued the green bond, $250 million that underscores our competitive advantage of having access to -- superior access to capital even during the pandemic period. And the third strategic priorities, which we continue to deliver is the divestments. And we have managed yesterday to sign the agreement to divest one of our hospitals, which is kind of one of the lowest growing hospitals, which was in our strategic priority to cash out from it. And we have divested at a very favorable valuation of nearly 13x in EBITDA. We collected $12 million in cash -- or we'll be collecting as we are expecting the regulatory approval. So let me go -- let me update you on the COVID situation on Slide 5 in our presentation. You see that Georgia is doing extremely well in dealing with the pandemic situation. We have -- I mean personally, if you look at ourselves and our portfolio companies, we are out from the lockdown nearly 3 months now. All our offices are open, and we are up and running. Restaurants, the retail shops especially are open, and people are traveling within the country, and they are having holidays on seaside and mountains, et cetera. So basically, Georgia is open as internal economy is open. It's only close for the tourists. So basically, the Georgian economy past 2 months or so -- or 2 months, yes, 2 months ago, we would say that it's back to normal other than the tourist, basically. You see the number of cases are negligible and the number of kind of -- we have a good recovery and we have a very low test rate of, I think, it's less than 1%. So the COVID dealing of the government was extremely well handled. We are extremely pleased and it has reflected in the economy. And so this was not a health care policy, what the government did. They also did a very good job for rebounding the economy. On Slide 6, you see the investment, which the government has [indiscernible]. The -- in total, around $3 billion of funding has been raised. And the government has comfortably financed this budget deficit with funding, which was attracted by the -- from the [indiscernible] organizations. In terms of the -- on Page 7, you see the rebound in different metrics. You see remittance is up in June and July by 18% and 22%, which was very surprising, but it's been down nearly 40% in April. But it's now -- it's gross trajectory we see. Related to the [indiscernible] in June was minus 6% versus minus 25% in April. So it's also up. Exports are also rebounding and import rebounding as well. The -- if you look at the lari, in lari terms, we have a -- in the region, lari is basically the strongest currency if you compare from the beginning of the year, and the GDP, as you see, is coming back. We had that 16.6% decline in April, but GDP of the country in June, it was minus 7.7%. We expect this to go with [ inside 5 ] within -- in spring at least, and it may even go further to closer to 0 in Q4 as economy -- as internal economy is doing well. On Page 8, you see unemployment rates. We expect that unemployment would rise further, but because the economy was reopened very fast, I mean, basically, we are on a very hard lockdown for 2 months. I mean 2 months, it was no cars, no car movements, people weren't allowed to go out, et cetera. So it was like 2 months, extremely harsh lockdown. But then again, it was easing of the economy -- of the lockdowns, I mean actually, economy is opened. And therefore, unemployment rate only suffered by 0.9%. So if you -- year-over-year, basically, the unemployment increased from 11.4% to -- from 11.4% a year ago to 12.3%. So that's -- I think, that rapid -- rapidly opening up the economy helped very well. The physical sales is also doing extremely well. Albeit the government is collecting taxes as expected, and government's balance sheet is extremely strong. Now what's happening on our side on Page 10. You see a liquidity of Georgia Capital, it's been very strong. We have around GEL 280 million of cash. And our portfolio companies have a similar amount of cash buffer accumulated in the beginning of the year, the cash of our portfolio company stood at GEL 180 million. And as of the end of June, it increased by GEL 100 million. That's due to the 2 things: one is that operating performance of our portfolio companies, operating cash flow increased by 96% to GEL 179 million; but also that we have stopped the CapEx and investments, and that's obviously helped combined with the operating expense [indiscernible] the operating expenses. They were down by 17%. And aggregate development CapEx also is down by 72%. So it's kind of a -- this is -- these numbers are in line with our strategy, what we have deployed during the COVID times. On Page 11, you'll see aggregate revenue -- monthly revenue of our portfolio companies. As you see, the March revenue reached to monthly revenue reached GEL 135 million, which was decreased by 27% in April to GEL 98 million, but it had rebounded strongly by 48% to GEL 146 million in July. So as you see that aggregate revenue of our portfolio companies in April and May suffered by 16.7% and 12.8% decrease. And then the June and July was rebound, as I mentioned, 11% and 7%, respectively. So we are on a positive trajectory. Now looking at the revenues by company, basically. You see on Page 12, GHG's revenues, which have rebounded nicely, basically, June and July, it grew by 6% and 5%, respectively. And April and May, it was declined 19.4% and 15.2%. So the GHG is back to its normal operating performance. Nick will talk in greater detail about GHG. So I will stop on this slide and move on to Page 13, which is basically our Water Utility company. With Water Utility company, what we see, we see rebounding the revenues going very well from April of loss of GEL 7.6 million, it went to GEL 12.5 million in July, but year-over-year, it's still a decline of 5.5%, but this is due to the Water Utility basically doing the reading of previous month revenues. So basically, we will see revenues coming in August as we see in July because July numbers have basically June sales. So that's how this kind of readings work on this situation. The decline we had in electricity sales in Water Utility, and this is due to the water inflows were extremely low, but we are hoping for the rain to come and to have more water and generate more revenue in the second half of the year. So the decline of the revenues of electricity sales was due to this low inflow of the Water Utility. It's not related to the COVID virus spreading in the mountains of Georgia. So in terms of the housing development, we see impressive growth in revenues. The June and July, revenues grew by 70% to 43% after the decline in May by 8%. The government's program works extremely well. Our program relates to the mortgages and also to the health -- to the real estate developers. And July sales were a record high in every sense, in terms of number of the apartments we sold ever in the history and square number for -- in any given month, basically, or number of -- or square meters sold or cash sales. In every sense, we have an all-time record in the sale of the housing stock. P&C also is doing extremely well, with gross premiums written up 40% in June and 46% in July. Profitability-wise, Giorgi will talk about the profitability of P&C is doing extremely well. In terms of the renewable energy business, it seems like the pandemic didn't do anything to this business. It's just growing and growing. So we had April is 19%; and May is 70%, 7-0. Basically in June 20 -- 30%; July, 19%. And we have also had an increase in average price of the energy. It went by 22%, 27% and 14% in May, June, July. And these are the months which are -- we are doing the merchant sales. So the sales outside the PPA agreement. And that is doing well as the demand for energy is increasing. Education business has been stable. It's been flattish in this pandemic period. In general, the education business is basically the very stable -- very, very stable in delivering this revenue. Now on Page 15, you see beverages business, wine and beer. Beer is very much like the energy business. It didn't see the virus coming and they've been selling well. So we had all months. We have a double-digit growth in revenue. And the beer continues to grow further. The brewery is working on almost on a full capacity now. In terms of the wine, wine suffered in April and May as Georgians drinks wine in restaurants, not at home. They drink more beer at home. So then in July, rebound was good, 18%, 19%, 32%, and August is also is doing extremely, extremely well. On auto services, it suffered because as I said that the cars were not allowed to move around. But -- so PTI suffered quite dramatically in April, May and June, but July, we had a nice rebound of 25% growth in revenue. And the auto services is basically -- even though people did not move with the car, but they still bought the car. So we cannot explain what's happening there. So the sale in revenue is up 28% in April, and then it's not even a percentage with the [indiscernible] on 2.6x, 6x and 5x. In terms of the commercial real estate. Commercial real estate has been doing also very well, on Page 16. As I said, with no one opening up the economy rapidly when retail shops are open within 2 months. After hard lockdown to -- hard to open up, it works well. So we have a good collection -- cash collection rates on the commercial real estate. And also revenues are rebounding after we gave a 3-month holidays with some of the discounts to our tenants. Now we have -- these holidays are expiring, and we will -- we are seeing the increase in cash flows. So on Page 17, brings us to the cash flows. And we saw cash growth across the board. We have a first half operating cash, as I mentioned, went up 96%. And in Q2, it went up by 57.7%. So we have -- we are extremely strong, extremely pleased with the performance of our portfolio companies' revenues, cash generation and operating expense and CapEx card. Our management did an extremely good job and well done to them. On Page 19, you see a valuation, which is a very theoretical exercise, but we still do it to feel good. So we have a -- end of the March, we had our total portfolio was GEL 1.8 billion, it went pretty much flattish, around 1.5% increase we had in the Q1. The key drivers were really 4 different companies. In private portfolio, we have marked down the hospitality and commercial real estate as we should have -- we saw that the borders have not opened. Therefore, we were extremely conservative, and we marked it down heavily. We also did a small markdown in housing business because we stopped tapping new projects as we have a big -- as we've been conservative. And we have quite a big pile of stock right now of the housing. So the -- on positive side, we had a renewable energy and education business is revolving up. That was last year's acquisitions, which we are -- we did with our methodology, and Giorgi will talk about this methodology and how we are valuing up and down companies later on. On Page 20, we see a NAV per share development. The year started is GEL 46.8 per share, and we are now at GEL 31.6. Meanwhile, in Q1, we lost 35.6% in EBIT per share to GEL 30. And then we rebound it back to nearly GEL 32. So that's kind of -- we are up 5% NAV per share in Q2. Now I will turn to Nick to talk about the GHG's performance -- GHG's good performance, and then I will take over. Then Giorgi will talk about the rest of the companies and then I'll wrap up.

Thank you, Irakli, and good afternoon, everybody. I'll focus today on several things. First, the COVID impact. Secondly, on the -- generally on the country. Secondly, the impact, it has done on our business. And later, we can also talk about the divestment, which Irakli has mentioned at the beginning of the call. So firstly, at the country level, you know that Georgia's response to the virus was very rapid with strict containment measures proving to be critical. We, as a company, from the early days has expressed the full support to the government of Georgia in fight against the pandemic across all segments of our businesses. So we allocated 6 of our hospitals potentially for the heavy outbreak. Although good thing is that the country needed only 2 of them. So 2 of our hospitals have been occupied as fever centers and COVID hospitals across Q2. And the 4 of them were not needed because of the impact was much less than we anticipated. Also, our pharmacies, we -- if you have seen from the balance sheet, we have stocked up a little bit in the pharmacies for the potential bad times. And luckily, the bad times have not come as well. So now all our hospitals are back to the business as usual. In terms of the impact of the pandemic on the business, we can see it from the Slide 22 and 23. In the health care services business, the most significant impact was a meaningful reduction of the patient footfall, both in the hospitals as well as in the polyclinics due to the general lockdown as well as the postponement and cancellation of the elective procedures during the lockdown. It led to the utilization levels falling, basically hopping both in hospitals and clinics. But in June, we started to see the gradual pickup in line with the reopening of the economy, and recovery trend has continued across July and August, with revenues back to similar levels and slightly up than last year. Overall, the health care services maintained the good EBITDA for the first half with the EBITDA margin of almost 18%. Although in June, the EBITDA margin has rebounded back to the -- close to 25%. We have also focused on generating positive free cash flow across all business lines. And our EBITDA-to-cash conversion was pretty nice. And we delivered significant free cash flow year-over-year, which is leading to reducing of our net debt by 10% in the hospital business and by 15% across the GHG group year-over-year. In pharmacy and distribution business has been more resilient throughout the pandemic as our pharmacies remained open even during the heavy lockdown. And as a result, we delivered 8% increase in the revenues year-over-year. And the business posted around 9% increase in EBITDA, excluding IFRS 16 impact and pretty nice margin of 10.5%. And cash conversion was also very strong, close to 100%. In medical insurance business, the main impact during the pandemic period was the reduction of the loss ratios, which led to the increase of our EBITDA from GEL 1.8 million to GEL 3 million in the first half of 2020. These are the challenging times, but the group has ensured that each business continues to deliver strong operational performance and resilience. So on Slide 22, summarized this business impact and shows the impact of the overall -- on the overall GHG level, which underpins the robustness of our revenue performance with the revenues have been flat year-over-year despite very kind of a heavy April and May, together with a strong operating cash flow and EBITDA to cash conversion. So operating cash flow was up significantly by 63%. And free cash flow more than doubled year-over-year. And this allowed us to decrease our net debt position significantly, as I mentioned earlier. That is pretty much it.

Thank you, Nick. Giorgi?

Thank you, Irakli. Hello, everyone. Over the next few slides, I will talk about the valuations of our portfolio companies. So starting from Slide 24 with Water Utility business. Let me highlight that we continue to consistently apply the EV/EBITDA valuation methodology that we have previously developed. So if we look at the performance in the first half, the last 12 months, EBITDA of the business was down by GEL 10 million, which was primarily attributable to GEL 5 million of that to the water consumption by legal entities and another GEL 5 million to decrease in energy revenues driven by decreasing electricity generation due to the lower water inflows at Zhinvali reservoir. However, we are seeing the stabilization of consumption by legal entities in June as Irakli mentioned earlier, which has continued going to July. In terms of the valuation, EBITDA multiple increased from 8.8% at year-end to 9.8% at June 30. And this is a trend that actually we have seen and we observed across the peer group that we use for the valuation during the first half of 2020. Net debt in the business increased also, but mostly due to the foreign exchange impact, and it was at GEL 390 million as of June 30. Overall, as a result of the change in multiple, lower EBITDA and increase in net debt, the equity fair value was GEL 439 million, which is what you see in our NAV statement as of June 30, 2020. Moving on to the next business, which is the housing development on Page 25. As you know, we value this business using this year's methodology, which we continued to apply consistently in the first half. The business itself had a very strong cash flow generation during the first half. The revenues were GEL 34 million in the first half, which was more than double of the 2019 first half results. The business also sold more than 20,000 square meters across its current projects in the first half, and that has resulted in very strong operating cash flow generation of almost GEL 25 million. That was up from a negative GEL 17 million in the first half of 2019. In terms of the valuation, the business is now valued at GEL 23 million, which has decreased from year-end, largely due to 2 factors: one, because of the increased discount rates; and also because of the removal of some projects from the pipeline that has affected the future cash flow. So overall, we had a GEL 22 million value decrease in this business during the first half of 2020. Moving on to the P&C insurance business. They had also a very strong performance, and it should be highlighted that the profitability was largely unaffected by the pandemic. The last 12-month net income in the business remained flat. And while the first half combined ratio and the loss ratio were almost flat, it should be noted that the second quarter loss ratio was actually down by 5 percentage points year-over-year, and then the combined ratio was down by 10 percentage points. And all this was because of the low claims volumes are dealing with the pandemic as people stayed home during the lockdowns. In terms of the valuation, the multiple decreased here from 9x P/E that we used at year-end to 8x P/E, and that has led to about GEL 18 million valuation decrease in the first half. And this is the trend that we observed across the peer group where the multiples have also decreased. Moving on to the next business, which is renewable energy on Page 27 of our presentation. You will see that the revenues and the EBITDA in this business grew significantly in the first half of '20. And that's because in the first half of '19, we only had a few months of the operation of Mestiachala, while in 2020, we had 3 hydro power plants that were operational, including Hydrolea and the Qartli Windfarm that we acquired end of last year. The performance across the group was quite strong, and they continued to deliver very strong revenue and operating cash flows. And obviously, their profitability was unaffected by the pandemic because they continue to generate electricity and generate revenues from the PPA agreement. In terms of the valuation, this was the first time we valued Hydrolea and the Qartli Windfarm, and we used the run rate EBITDA. So the methodology was EV/EBITDA multiple, but we do the sum of the parts valuation and value each hydro and the wind farm separately. Multiples deals range from 9x to 10.5x. And as a result, we had about GEL 33 million valuation increase in the renewable energy business. And on top of that, Qartli Windfarm paid about GEL 5 million dividend to Georgia Capital. And if we aggregate the 2, the overall value creation was about GEL 38 million from this business in the first half 2020 for Georgia Capital. Moving on to the Hospitality & Commercial Real Estate business, which is on Page 2020 (sic) [ Page 28 ]. Obviously, leasing hospitality was most impacted by the pandemic, its revenues were also materially affected. As you can see from the slide, we performed the valuation of this business and valued individual assets as well. So overall, the valuation led to about GEL 110 million valuation decrease in the first half. If we split that across hospitality and the commercial businesses, GEL 78 million of that was attributable to the hospitality business, largely due to the markdown of the 2 existing operational hotels and the markdowns of 5 construction hotels as a result of the negative outlook on the tourists. In terms of the commercial real estate portfolio, there's a markdown of GEL 14 million, largely driven by the increased yield required for the office spaces, and that was reflected in the first half financial statements. In light of the COVID-19 outbreak, operations at the existing 2 hotels were suspended since mid-March. However, they are leased to the government and are used by the government for the quarantine purposes. In terms of the beverages, we -- as you know, we combined here wine and beer businesses. And COVID-19 had an impact on the wine business profitability, primarily during April and May, as you saw in the previous slide, but the business continued to rebound in June and remained resilient in July as well. We saw that the wine revenues were -- fell by 12% in the first half of 2020, reflecting largely local sales decline in the lower average selling prices on the export markets, which was primarily due to the product mix shift to the lower priced -- the wines. However, the trend has reversed and rebounded from July, and we're now seeing the stabilization in average selling prices already. In terms of the valuation, we continue to apply EV/EBITDA multiple, which decreased from 10x to 8.3x in the first half and led to about GEL 24 million valuation decrease. In beer space, we saw the strong results on a monthly basis that they deliver, which has continued into July. And we continued in terms of the valuation to apply the revenue multiple, which continues to be at 2.2x, in line with its peer group where we have also seeing a similar trend. Education, which is Slide 30. We performed valuation here for the first time. We used EV/EBITDA methodology here as well. And then the overall multiple used for the valuation was at 12.5x, which actually represents a slightly discounted multiple against the peer group that was selected for valuing this business. This evaluation resulted in about GEL 24 million gain from valuation in the education business space, which was also supported by strong operating performance in the operating cash flow generation during the first half, as the businesses adjusted to the lockdown and moved to the online remote teaching in the first half. As you may know, Georgia is expected to resume teaching from the -- from schools' in-person teaching from mid-September. Last, I will talk about on Slide 31 about the auto services business. So the auto services business was, as you saw earlier, negatively impacted by the lockdown in April as the cars were no longer moving in the country. However, as soon as the lockdown measures were lifted, the business saw increased traffic. And the auto services business in the first half actually had GEL 16 million revenue, which is about 3x higher than in the first half of 2019. We continue to value PTI business, which is the periodic inspection business using EV/EBITDA methodology, and we applied 9.8x multiple here, which is down from 10.4 at year-end and in line with how the peer group is valued and was valued as of June 30 across the board. I would highlight that in July, the business continued to see very strong recovery. And actually, the number of car checks was up by about 20% in July, and the revenue was up by 25% to GEL 1.10 million in July. With that, I will hand it over back to Irakli.

Thank you, Giorgi. Let's talk about the key developments which actually I talked in the beginning that now we did -- on Page 33, we issued our subsidization of GEL 250 million of bond. It was very good transaction. And we have taken GHG private. And I think most importantly, I mean, here, we talked about these valuations, which is basically our pen and paper, Excel spreadsheet, et cetera. It's not -- but this is a sale on Page 35, there's no Excel exercise. But cash, $12 million sold 40% of HTMC. It is 13x in EBITDA. And we think that this kind of reflects the value of our portfolio. And to end the portfolio of hospitals basically. And in the end, on Page 37, I want to finish with the -- with highlighting the resilience of our portfolio of companies. Really, when you own the Georgia Capital, you own the countercyclical businesses. And that's Water Utility, insurance P%C, renewable energy, the health care, education, beverages is countercyclical, apparently, alcohol helps to link to the bad times. And we saw also the housing, which we have observed was performed extremely well and also services in commercial real estate and digital growth did extremely well during the pandemic and rebounding. Obviously, hospitality suffer the most, and we are reviewing the feature of the hospitality, how we're going to go about it. But at the moment, we have paused. And I would like to congratulate our management for the great job done. That's it, and let's move for the Q&A. Operator?

[Operator Instructions] Your first question comes from [ Alex Ayub ].

Really congrats for these very good results especially in these very hard times. I have 2 questions. One about the cash at the holding level. So you have around $50 million, GGU raised $250 million. Do you expect some of that to go to the holdco? And also, do you expect how much intercompany loans do you expect to be repaid? And how much cash do you think you will have at the holdco toward year-end or in the next 12 months? So the first one. And the second one is about LTV. Where do you see your LTV currently? And how is that going to change with the consolidation of GGU over GHG of the health care business? Will you apply the EV/EBITDA multiple there? And do you think the LTV will benefit from it? Can you just tell us how you're going to deal with that integration?

So basically -- thanks for the questions. Basically, on the cash accumulation, we will have some repayment of the loans from our portfolio companies coming in. It's already came in some and some will come. I think that the -- I think going forward, the cash pile, we expect to increase as we will see dividends flow to continue some of our portfolio companies. We have seen also the good results of Bank of Georgia. So let's see how the dividends policy is going to -- when the Bank of Georgia will resume the dividends, but it seems like it would be as early as 2021. We will see what happens. But basically, we see a very strong cash flow generation across the board.

Okay. Now is this about the GGU Bond? Like do you expect some of these proceeds to come to the holdco?

Yes.

The real company loans?

There are a number of loans. And there are -- I don't know exactly how much, but $18 million to $20 million, I think, around.

Yes. Yes, of $19 million that will be, Alexander, reflected in the third quarter financials, obviously, because the bond happened in July, right?

In terms of the LTV, we expect to come down to the around 40%, below 40%. GHG valuation hasn't been done yet. I mean the -- when the GHG was trading before taking private around 5x EBITDA, we sold the hospital at 13x. I mean, I don't want to give a kind of where we going to end up in the valuations. It's a third-party valuation -- valuator is doing the GHG valuation, and we'll see what we're going to do. But for me, it's very important, not the -- what the valuations we're going to do and how we're going to calculate, but how much people pay the price for. And we have seen a pretty good price paid for the assets.

Your next question comes from the line of David Shapiro.

Congratulations on the good quarter, managing through the tough time. A few questions, maybe starting on health care. Could you provide a little more detail as to which hospital was sold? Why was a minority interest sold? And perhaps, is there going to be a pursuit of more of these select hospital sales? That would be my first question.

Nick maybe will...

Hi David, and so if you remember from the last year on the Investor Day, GHG Investor Day, we declared that we will be looking selectively at our assets and the assets which are kind of performing poorly in terms of the ROIC, which is our -- one of our primary metrics. So we'll be kind of considering whether to sell them or kind of a reshape. And so this was one of the largest asset in our hospitals portfolio, where we're holding 50% and the other 50% was held by the previous owner and current view of the hospitals, then we had less control over the hospital and the hospital was generating 3.5% ROIC. So it was on top of our list of the disposal. And we managed to sell the 40% now to the largest teaching university in Georgia, which is kind of a planning to use it as a teaching platform. And the 10%, we are planning to sell to the existing shareholders a bit later, I guess. About the question whether we are going to sell any other assets? We are looking selectively. Again, we don't have in the portfolio such poor performing and this kind of size asset anymore, but we will be again selective. So if we good deal. We may consider it, why not?

Okay. And then the cash conversion for the first half was, obviously, I would assume unsustainably high. What drove the very high cash conversion in the hospital unit?

Say it again. I didn't get the question on cash conversion.

The cash conversion percentage is -- seems to be exceptionally high for the first half. I'm wondering what drove that.

So basically, if you remember in that Q4 of the last year, we were kind of -- we disclosed that the government have kind of -- because they were running over the budget. They have extended the payments a little bit in November and December. So they basically catches up with that. They paid -- they're sitting in a well, in a kind of a cycle, whatever is under our contract right now. And they catch up with around 1-month payment, also basically pushed on the pharma side, on the cash collection, mainly, and that was the main reason. So yes, we don't expect such a high conversion going forward. But again, so we will be, I think, in line with expectations on the cash conversion going forward. I mean, we should not expect again 200% conversion number.

But we should expect more on that.

Okay. Very good. And then moving on to the utility. Is there any progress on the new tariff rates? Or where those are going to shake out?

That's the December issue basically. We have filed for the tariffs, and we expect in December, we should have a commission to the room on the tariff. So that's kind of -- before that, we will not know anything.

Okay. So maybe more clarity on the fourth quarter results?

Yes.

Okay. Also, I guess on the -- on your overall liquidity, and there's 2 big debt pieces, I guess, that are coming due. You got the 92 million commercial and the 120 million housing development. How are those shaping up? Or what are the thoughts on those pieces?

So basically, I think that the cash generation, both on the commercial real estate and housing is very strong. So that counts the end of the 2021 and end of 2022. So that's kind of a -- so we think that we will -- how partially we pay or partially roll over. So we'll see how it goes. But I think it's too early to talk about on the cash right now.

Okay. But I mean, at the current time, you don't foresee difficulty in rolling over a chunk of that?

I think both commercial real estate and the housing development is doing extremely well, and you saw the numbers.

Okay. And then just from a high level, if we think about where you consider your main investment areas going forward at this point. I mean, I know you're trying to get through this period. But if stability continues to return to the market and confidence rebuilds, where do you see as your primary investment areas in your current portfolio? And what do you see as maybe primary areas of interest of disposal at this point?

I think there's 2 areas where we -- which we like to deploy investments. As things return back to normal, that would be in education, which has shown a very big resilience, high margin and compared to low CapEx needs. And basically, education now, especially not online education, but physical education is being appreciated more now. And we think that demand will grow even further for the private education with good infrastructure. So that's what we think that the education is going to be one of our hopefully big success story going forward. And second one is energy. And energy has performed extremely well. We saw numbers for our energy business. And basically, that's kind of the 2 areas where we would like to -- what we want to own more, let's put that way. And in terms of the disposal, I mean, I don't want to jump ahead, but we'll see how things will go, but hospitality business is not something, which probably is -- which could end up on the top of our list. But basically, now it's not an appropriate time to do that. But over time, probably, that's where we've got to end up. But -- and our portfolio will be fully countercyclical basically. It will be a very defensive portfolio of partners. And that would be kind of a well, a good place to be, I think.

[Operator Instructions] At this time, there are no further telephone questions. Please continue.

Thank you, everyone, for attending our call, and we hope to see us. Here is one more call, actually.

Your next question comes from the line of [ Byron Miller ].

Congrats again on the very strong results. I assume to ask the share price, the [ management ] continues to move further away from each other. And do you think this prevent any sort of back end opportunities? And on the other hand, do you see there's any fixed cost in the last 2 sectors?

I apologize, but the line is really bad. I couldn't hear you. Can you please repeat?

Sorry. Can you hear me clearly now?

Yes.

I just want to talk about increase.

The discount on the NAV, you are asking how to fix it. I guess you have the answer. You need to buy more beers. Thank you. We have another question also.

Your next question comes from the line of [ Brad Rebitski ].

Hello. I wanted to ask if -- now that you have the Georgia health care cash flow coming in, is that something that you plan to use sort of exclusively at the holding company level? Like, how much of that will you bring up to the holding company level? And how much will you keep at the company? And then once you have that cash flow coming up to the holding company level, does that make it more likely that you start buying back shares again? Or is share buybacks sort of a low priority at this stage?

Basically, we have considered buyback pretty intensively back and forth. But at this stage, we said that, okay, let's see -- I mean, we have a nice rebound. We want to see more track record obviously down to continue. And then that will make capital allocation decisions. Right now, as we said in March, basically, we are not allocating capital much and we don't want to be -- we put all the CapEx investments, projects that are on hold. Until we get more clarity, you are accumulating cash. You saw we grew our cash pile on portfolio company level at GEL 100 million. It doesn't matter where it sits, it sits on our portfolio company or sits with that. So basically, we are -- we continue to accumulate the cash, and we will make an appropriate decision as we see things progressing. No more questions, I guess. Thank you, everybody, for participating in our call. And I would like to once again thank you for your support. And I want to thank our management, employees for a great work done during the pandemic period.

That does conclude the conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.