Georgia Capital PLC (CGEO) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen.

[Audio Gap] and then Giorgi will talk about the -- our CFO, who'll talk about portfolio results and liquidity and the dividend income outlook. In the end, I will say goodbye. So let me start with the recent development. Our most important measurement in EBIT per share has grown in the quarter by more than 5%. That's due to the Bank of Georgia's excellent performance, mainly was driven by that. So our NAV per share stands nearly at GEL 77 per share. Our another important measurement, what we follow our NCC ratio. This is our -- basically the leverage ratio this has been down significantly by 8.5 percentage points year-over-year. So it reached our targeted 15%. So it's closer to our target of 15%, is at 15.9%. And over the quarter, it was also down by 1.5 percentage points. So good results on deleveraging. As a result of deleveraging and the pro forma improved performance, we got upgraded by S&P from single B+ to BB-. That's also a good news. Dividend has been a record high. In 9 months, we received more than GEL 200 million in dividends. In the quarter, we received GEL 54 million dividends. I should mention here that recurring dividend is around GEL 146 million for this year for 9 months. What we have received rest is a one-off. Good news is also that we have stepped up our buyback program in lieu of deleveraging and a good performance. We have now $50 million share buyback and cancellation program and that's in line with our capital allocation framework. As we have mentioned, as we will be decreasing the leverage ratios, we'll be increasing the buybacks. So let me go to the next slide. And here, you see gross leverage, you see was decreased from more than $360 million to $150 million. And also importantly, the net debt is down from $146 million to $110 million year-over-year, but it's down by 25%. So that's kind of good progress we had during the year. If you look at the NCC ratio in a greater detail, you'll see here that year ago, we had an NCC ratio of 24.4%, now we are at 15.9%. So nice decrease. We have decrease in net debt as well as the commitments to invest and we have decreased significantly. Now if you look at our NCC ratio over the time, in the past 4 years, it's been down from 42.5% to 15.9%, that's big decrease, big deleveraging basically, and this is on the back of the decreasing debt, increasing cash balance, net cash balance basically and also increasing the value of our portfolio companies. So all in the right place. Looking at the buyback program, what we announced $15 million. Counting unit, we were going to spend $15 million in the next 6 months or so. We are looking at $86 million total buyback since the GCAP inception 5 years ago. So significant buybacks, we have been doing in these 5 years, $86 million and the number of shares, which we will be retiring will be 8.1 million shares. So significant portion of our share count will be retired. Just to jump to our performance of our education business, I just want to draw your attention moving from the -- talking of the NCCs and the share buybacks, basically performance of our education business, which has been doing extremely well. We had the first graders this year. As you know, we have started the education season, and we had 873 first graders, which we have received in the year 1. This is up from 245 first graders, which we received 4 years ago. So it's significant growth. In terms of the capacity, we are out from 2,800 learners, we are up to 7,000 nearly 7,300 learners. And then that's capacity-wise. In terms of the number of learners, we have now, we are more than doubled from 2,500 to nearly 6,000 learners, which we currently have. That gives you a pretty big growth trajectory going forward. CAGR increase in the number of learners is around 23%, and CAGR increase in number of first graders is like 37%. So that's a significant growth, which will be reflected in the coming years. This business is not reflected in one go, basically, but it's -- you can have a pretty well decline cash flows coming into this business. As you saw, the hospital business did not have a great result for a number of reasons. One is the introduction of the new regulations on the ER, which we have been redoing and that gave us the -- that way we could not receive the patients in our patients as usual. But in terms of the performance of the hospitality business, we are not happy, and we are restructuring the way to work. So let me remind you that we have 2 kind of sets of pockets here on the healthcare business. One is the hospitals, which consists of the large and specialty hospitals and the regional hospitals basically. And then we have a clinics and diagnostics, which consists of the community clinics and polyclinics and diagnostics, basically. We are separating larger specialty hospitals from the rest of the hospital business because this is kind of a very different business, and this is mainly driven by the revenue growth and driven by introducing of new business lines and new treatments, and it's basically a revenue game. It's a different game. In terms of the regional hospitals and community clinics, we are putting them together and we have brought a CEO of our competitor, who has been working on regional hospitals and pretty successfully and we'll be -- that business line, regional and community clinics will be spearheaded by the new CEO. And this is more kind of an efficiency gain. So we are servicing efficiently our customers, and less about renovation and revenue growth, more of discipline in terms of the efficiency. In terms of the polyclinics and diagnostics, which will contribute around 20% of all healthcare business. That's where we see the opportunity to grow. And this is another growth pocket where we will be investing and growing our polyclinics footprint. And this way, the management will be more focused on the growth rather than maintaining the services. So hospitals, 6 hospitals, which are large and specialty hospitals are growth-driven -- revenue growth-driven hospitals, and we will have a separate focus by the management team and the polyclinics and diagnostics, will have a separate focus on that and in terms of growing the revenue. And regional and community hospitals will be managed separately as it's a different type of business. In terms of the reporting, we will report the large and specialty hospitals as well as regional and community clinics as 1 business line, and we will be reporting polyclinics and diagnostics separately as a third business line under the investment section of our portfolio company. So in terms of the NAV growth over the time, over the 5 years, CAGR NAV growth will be at 12.3% in terms of the lari terms. In terms of the U.S. dollar is actually a similar CAGR 12.3%, and in sterling is little bit over 13%. So not a great stellar performance, but not bad performance if we consider the 2 crisis what we have in between the war in Ukraine and the COVID crisis basically. In terms of the cash flow, free cash flow generation and development, we're going to have a record free cash flow around $31 million. This is the way we are looking at the cash flow is that cash dividend income minus cash spend on the -- minus interest rate and cash spend on OpEx at GCAP level. So as you may see, that we're going to more than double 2019 number, and we have significant growth there. So 2023 will be marked as a strong turn in to generating cash. Now I will hand over this presentation to Nino, who will talk about the macro development.

Thank you, Irakli. Hello, and welcome, everyone. As per our usual format, I will do brief macroeconomic update on Georgia. So -- and of course, we have a dedicated Q&A session to answer your questions. Before I move and zoom in on Georgia, let me briefly touch on prevailing global market trends. Global growth is slowing compared to last year, 3.5% global growth. So this year, 3% growth is expected, which is lower than historical standards. And so despite the fact that risks are kindly more balanced than it was in the first half of the year due to the resolution of year step saving as well as Swiss and U.S. authorities, quick action to contain financial turbulence, risks for global growth are still here related to the Chinese property markets as well as increasing inflation expectations and strong labor markets and also recent and ongoing geopolitical tensions. So in our region rather than the general pre-COVID, our region benefited from inward migration as well as transit trade and capital reallocation. So these factors were important for Georgia's growth also. As you know, we had 2 years of double-digit growth and after the 2 years of double-digit growth and high base effect, so this year we are still growing quite nicely. So 9 months growth came in 6.8% according to the preliminary estimates despite the fact that we see some moderation, especially in the third quarter. So 9 months growth is still at 6.8%. So we don't have the structural breakdown for the third quarter, but in the first half, so the key sectors contributing to the real GDP growth, we are the trade information technology sector as well as construction, financial intermediation, but there were sectors which contributed negatively including mining, manufacturing and healthcare. So in terms of expenditure side, our net expert was a sole driver for the GDP growth, and we also see some encouraging signs as we see investment to contribute positively in our growth. So on the inflation side, our inflation is below the target since April 2023. So we had the gradual deceleration throughout 2022, along with the exchange rate depreciation, as exchange rate pass-through is significant for our domestic prices. This year, we saw a sharp decline in the headline number on the back of high base effect as well as lower prices on the energy and food components in the international market. Our core inflation is also below 3%. So National Bank of Georgia targets headline number, but core inflation is also below 3% since July. National Bank of Georgia started to exit from tight monetary policy in May. And in cumulative, they did 100 basis points cuts. And if they are less meeting, they decided to keep the rate due to the fact that we have our domestic economy is still strong and we have some -- we might have some potential pressures from the wage growth. There is some geopolitical tensions and a very important factor is interest rate differential, which is narrowing and it keeps emerging market central banks to be more cautious in terms of easing the rate. So on the next slide, we have some kind of we call it kind of new opportunities, which emerged since last year. So last year, we were telling that we have the inward migration, we have this high skilled labor first, and we expected this high skilled labor to affect our IT sector. And so these expectations are reflected in numbers. Share of IT sector significantly increased compared to 2021. And also contribution sort like if you look at the sensor, the IT sector was 1 of the most important contributor in our real GDP growth. Another source, we are capturing this information technology sector is that we see export of services to search. So it is still low compared to the total export of services, but still the trend is quite encouraging. And of course, we are welcoming any sign of diversification including the export of services where tourism has this dominant role. And other opportunities we see on the next slide, which is the Middle Corridor. As you know, in the map, if you look at the map, Georgia is kind of bridge between Europe and Asia and it connects Eastern European countries to land block, Central Asian and Middle East countries. And this historic concept based on this called the always gave significant role to Georgia and late country to be highly integrated in the international market. And this Middle Corridor always -- so the importance of the Middle Corridor even increased after Russia's invasion of Ukraine. And now we're seeing in numbers -- like if you look at our rare exports increased by 89% compared to last year in 9 months and it doubled compared to 2021. And also, the chart is quite interesting despite the number is kind of insignificant, but trend is nice and shows the importance of this Middle Corridor. So revenues from road usage and number of freight vehicles started significantly since Russia's invasion Ukraine. There are some challenges related to the Middle Corridor due to the infrastructure bottlenecks as well as some legislation, but the countries are committed in trying to harmonize the legislation and improve infrastructure in order to get additional opportunities from this corridor. In the next slide, we have a kind of snapshot about our external position. So our external position improved significantly despite the moderation of the growth of the FX inflows, FX inflows remained at elevated levels. So in 9 months, FX inflows coming from export of goods, money transfer, tourist revenues -- so reached some more than exceeded $11 billion, and it is more than almost 80% higher compared to 9 months of last year. And these flows are reflected in our current account also, which continues to improve. In the first half, our current account deficit was 5.3% compared to 8.6% last year. And the key driver for our current account this year is mostly -- we are mostly tourism revenues, our export to start, as I have mentioned, and total export also increased driven by the exports. So we had 12.7% growth in our export in 9 months compared to the 9 months of last year. Exchange rates remain strong, so started to appreciate in mid-2021. And then there was some -- this appreciation interrupted during the Russia's invasion of Ukraine, but then the appreciation trend continued. So since summer, we see some slight depreciation more like flattening of exchange rate and it is mostly related to the global factors like dollars strengthened significantly compared to June. So dollar index is up by 3% compared to June number and I guess, mainly driven by the jump of the 10-year yield and narrowed interest rate differential. In the next slide, we have kind of a sum up of macroeconomic framework. So we had this alleviated FX inflows remained at the level. And so this appropriate timing was used by the monetary and fiscal authorities to rebuild the buffers. Net international results is at historic record high $5.3 billion as of September. And in net terms, National Bank of Georgia bought some USD 1.4 billion for its reserves. For the fiscal policies, our debt is below the pre-pandemic level and projected to decelerate slightly. So the key projection for the fiscal policies that they are intention to reduce the reliance on the FX-denominated debt. So on the gross level, so they want to keep the level -- at this level, but they want to lower the external debt and to replace it by the GEL denominated debt. We could increase the Georgia's resilience towards the external shocks. Overall balance is projected to be 2.8% in 2023, and it is continued to decelerate slowly to 2.1% in 2027. As I have mentioned, National Bank of Georgia also started to ease, but they kept the rate unchanged. So according to their statements, they will continue to exit from tight monetary policy, but their path will be gradual due to the risks around the globe, including the regional tensions as well as increasing cost of funds. So on the next slide, we have kind of a quick summary, key messages. We want to deliver is that despite the high base effect, economic continued to grow nicely. The inflation is below target since April, and it is 0.7% as of September. Our external balance sheet improved, including the reserves -- the record high reserves narrowing current account deficit debt level, which is below pre-pandemic levels and fiscal deficit, which is below 3% and continue to reduce. GEL is also -- there was some flattening in the exchange rate, it is above the pre-pandemic levels and appreciated compared to the same period of last year. And in general, macroeconomic framework is sound. So policy makers use time appropriately to rebuild the buffers and to improve the external balance sheet of the country. So this was a very quick overview from my side. So now I will hand over to Irakli to continue on performance overview. Thanks.

Thanks, Nino. Let me share the presentation. So let me continue with the performance. So basically, we have a -- on the revenue side, we are up nearly 10% on aggregated level at GEL 1.5 billion in 9 months. We are up nearly 7% in the quarter year-over-year. We had a nice performance by the large portfolio companies as well as other companies, actually. They have done pretty well. In terms of the EBITDA, we are up at 4.2% in a 9-month terms on aggregate level and nearly 4% we are up in the quarter. So in terms of the cash flows, cash flows are actually behind compared to last year for 2 reasons. Main reason is gross. So we have in a pharmacy sector where we are growing pretty fast. And that is kind of the primary driver of the decline in our cash flows and cash balance also declined, but we think that it's going to catch up till the year-end because of the -- we'll be collecting more cash as we are preparing for the season. So the Q4 is a pretty high season in retail, and that is kind of 1 of the reflections of this cash flow statement. In terms of the -- and EBIT per share development, you see in the quarter, we basically was mainly driven by the Bank of Georgia by our listed portfolio company. Private portfolio did not grow. It actually declined a little bit due to the hospital performance, our underperformance basically. But first is in line, so we grew by 5% in the quarter. So we are happy with the headline growth. We want to see more private portfolio growth going forward. That's what we expect in Q4 actually. So now let me hand over to Giorgi, who will talk about the portfolio valuation.

Thank you, Irakli. Hello, everyone. I will speak about the valuations in our portfolio companies in the next few slides. So starting with the overview. What you see here is that this quarter, similar to the previous quarters, we updated the valuations, but this time it was done all in-house. We will be using the third-party valuation from again at year-end. As you know, we use them every 6 months. So here, you will see that the valuation-wise, the share of the listed and observable portfolio increased to 36% during the quarter within our overall portfolio. That was largely because Bank of Georgia's share price increased to close to GBP 37 at the end of the quarter. The water utility option value was retained unchanged. We didn't make any changes here. We do expect a complete review -- another review of this valuation at the end of the year when we publish the fourth quarter results on the back of the new tariff period that will kick in from January 1. So the tariffs core water utility will be determined before the end of this year. That will give us a very good visibility into what the EBITDA of this business will be for the next 2 years, and that will be helpful for the valuation. So we will update it in the fourth quarter. As it relates to the private portfolio, what we saw across the Board was some multiples came down, especially in the retail pharmacy hospitals, businesses, and we will walk them through later. But retail pharmacy continues to be our largest private portfolio business, followed by hospitals, and the insurance businesses. Together, they may have about 40% of our portfolio, 15% is in the investment stage businesses, renewable energy, education, clinics and diagnostics and other portfolio actually had a strong quarter, which meant that their share increase from to 8% to 9% in the overall portfolio. On the next slide, we show you how the portfolio valuations change. So this is the gross level, and this excludes any dividend movements as well. So Bank of Georgia added more than GEL 200 million to our overall portfolio value. About GEL 93 million decrease came from the large portfolio companies, largely in the healthcare space, which was hospitals and clinics and diagnostics. And in the investment stage, we also had the small reduction in the education business that I will walk you through later. The other businesses and the renewable energy, they both added about GEL 28 million valuations. In other businesses, this was largely because of the strong performance within beverage business, in particular, beer business and within the auto services as well. So our portfolio at the end of the quarter was about GEL 3.5 billion. Now in terms of the key businesses, we start with the retail pharmacy. Here, you will see that the business had a good quarter, 5% growth in the revenues and about 15.6% growth in the EBITDA on a year-over-year basis in a single quarter. This is very important because given the headwinds that the business has faced this year as the government has come up with the new regulations, capping prices for certain drugs and medicine, the business has managed to diversify actually away from the sales of drugs and also focus on selling the para-pharmacy products. And the share of the para-pharmacy products has been increasing in the overall portfolio. And the second 1 that's also important to highlight is these regulations that the government has come up with has affected the ability of the smaller mom-and-pop type pharmacies to continue operating with the market because they were dependent on buying from the wholesalers, and we also have a wholesale business their drugs to sell in their shops. So we've seen that some of those smaller competitors are getting out of business, which has allowed our business because we're the largest player to actually increase our network. So in a single quarter, you will note that we actually opened 10 new pharmacies in Georgia. We've been also opening pharmacies in Armenia, and we are now up to about 13 pharmacies in Armenia. And we also have additional franchise stores there as well. But in Azerbaijan, we also added 2 more. So we have about 4 pharmacies right now opened in Azerbaijan. The key here also is that the growth in the same-store revenue has come back, so we were positive 3.5% when it comes to the same-store revenue growth in this quarter. And also, the average bill size increased by about 7%. So the pharmacy business, as I said, despite all these challenges, had a very strong quarter. And when we look at the valuations on the next slide, you will see that the enterprise value did actually manage to increase by 2.6% on the back of this strong performance in the third quarter as well. We had a slightly different picture in net debt because of 2 reasons. One, this business paid us dividends. When we talk about the dividends, we will see that they paid us a good amount of dividends in the third quarter, so that affected the net debt. But also because, as Irakli explaining earlier, they stocked up ahead of the forward quarter sales, which we expect will be cashed out during the fourth quarter, so the cash collection will be strong. As a result, the equity value of this business was down by 6% and the adjusted net debt to EBITDA increased from -- to above 2% to 2.3%, but we do expect that this will come down again in the next quarter as the business sells this stocked up inventory products and realizes cash. On the next slide, we have the hospitals business here, which was touched in details earlier. So what this translates into the renovation projects where we had stopped about 12 hospitals. Out of 16 was -- revenue was flattish, but because of the fixed cost associated even during the renovation period, EBITDA was effective and it was down by 12%. Now that all hospitals are back online and running, we do expect that this GEL 9 million EBITDA will improve significantly into the fourth quarter. But this drop also meant that there was a drop in the LTM/EBITDA, and therefore, we adjusted the valuations accordingly. And within the valuations, you see that the enterprise value was down by 5%. In cash collection in this business, actually in cash conversion of the EBITDA was fine during the quarter. However, they had to spend money for the renovations. So overall, net debt was impacted by about 4%. And the bottom line was that the multiple was down in this business to 12.5%, and we have a reduction of about 10% in the equity value. Next is the insurance businesses, which combines P&C and the medical insurance businesses. So this is really a story of -- a combination of 2 stories. So 1 is the business, both medical and the P&C insurances had a very, very strong quarter when it comes to the revenue growth. And this growth actually was diversified across the different product types. It's not concentrated in any single product. It was across different ones. And the growth in both businesses was more than 20% in the revenues, which we see as a recurring growth. What happened on the other side was a rare combination of most events that resulted from the land slide that happened in mountainous region of Georgia, a tragedy that resulted in a loss of life as well, and combined with very abnormal amount of hail storms happening during this quarter in the Cohutta region where we have a lot of wineyards that are insured has resulted in the loss ratio in the P&C business actually being higher than what we have generally seen in this business. So overall, the combined ratio here was about close to 100%. And therefore, we have a drop in the net income in the P&C business in the third quarter, which we think is really associated to this combination of the one-off events that we do not see or foresee repeating in the future in this scale. But the good news, again, is that the growth in the revenues was very strong. If you look at the gross premiums written is also actually even stronger, 31%, which provides insight where the revenue of this business will go into the next year. Medical business also had a strong quarter. So on top of the growth in the revenues, they also had a growth in the net income. It went up by almost 100% when it comes to the net income, we have about GEL 4 million that they generated so far in 9 months, and we do expect that they will continue to have a strong quarter in the fourth quarter as well. So when it comes to the valuations of this business, it was mixed because of the different performances. But overall, in the P&C business, you will see that we have a slight decrease to account for this one-off losses and the equity value of the business was down by about 3% to GEL 268 million. Next, we have the investment-stage businesses. So I'll quickly touch some of them in the renewable energy and this quarter, we actually had all of our hydropower plants and the wind farms operating. So there was not much change in the electricity generation versus last year. It was flattish. Average sale price did increase slightly versus last year by about 4%, and that's because this year, we actually managed to export some of the electricity over to our neighboring country, Turkey, which was positive to the blended sales price. So broadly revenue and the EBITDA, they were; flattish, but the business generated cash in the fourth quarter. So in the third quarter, so in the valuations, that means that we have a decrease in the net debt by about 3%, which was fully reflected in the valuation of this business and the equity value of the business went up by close to $3 million. Now we value this business at $97 million, where $77 million is the operational projects and $21 million is the pipeline projects. Next 1 comes the education. Education business, I won't touch as Irakli explained earlier, we had a very strong growth in the number of learners. So that's about 43% on a year-over-year basis. And despite growing the capacity as well at close to 29%, the capacity utilization increased significantly 81%. The third quarter usually is not very meaningful in this business to look at in terms of the numbers because the business only operated for 2 weeks. This summer break ended on September 15. So the revenue generation only reflects 2 weeks of September, while the costs as we were growing and investing in growth, costs get reflected from first of July. But we do expect that when we report the fourth quarter numbers here, we will have a very strong growth, both in the revenues and the EBITDA in this business and this small decrease that we currently have in the valuation, which is largely because of the impact from the foreign exchange rates in our international premium schools, they charge in dollar terms. And if you look at on an 18-month basis, Lari has depreciated by close to 15% against dollar versus where it was before. That has resulted in a decrease of about 8% in the enterprise value, and that was about 7% decrease in the equity value. We do value this business at 16.5x multiple, but I will highlight that when we look at on a forward-looking basis. So if we take 2023, 2024 school year, so through the end of next June, this multiple on a forward-looking basis is actually around 11%. So as the growth gets captured within the P&L and accumulated in the last 12 months' performance, this multiple will come down significantly. Net debt to EBITDA is lower than our targeted amount here, which is helpful as the business actually continues to grow. Next, we have the clinics and diagnostics. Briefly here, this was the similar story to the hospital, so they were also affected by these new regulations. We do have an increase here in the EBITDA, a significant one, but that was largely driven by 1 event, which was a sale of 1 of the clinics buildings that was on balance sheet. And we recorded about GEL 3 million gain from that sale. But we expect that the cash proceeds that actually were received in the fourth quarter will be used to pay down the debt associated with this business and on the next slide, you will see that as a result of this sale, the net debt to EBITDA is decreasing from more than 7x which was 3 months ago to 4.7x. So it's trending in the right direction, net debt-to-EBITDA, and our target is even lower than 2.5x, but we think this business will be able to get there over the next few quarters. Overall, we had a decrease of 8% in the clinics and diagnostics business, and it's down to slightly less than GEL 100 million now. Now briefly about our liquidity. So following this is the first quarter when we have completed the refinancing of the bonds, the previous euro bonds have been fully paid down, refinanced and completely off the balance sheet, and we are left with $38 million worth of liquidity at the end of the quarter. Last week, we received Bank of Georgia dividends, which was about $10 million. So when we aggregate today we have about $48 million worth of liquidity on our balance sheet, which is, we think it's strong enough for us to announce this $15 million buyback, which we announced today. And lastly, just a little bit about the dividends. So far this quarter, in the third quarter, we collected about GEL 54 million. But when we aggregate on a 9-month basis, the recurring dividend collection has been GEL 146 million, I would highlight that pharmacy here has been a strong provider. It's GEL 24 million that we received from pharmacy as a regular dividends and GEL 27 million is a one-off. So in total, we have received about GEL 51 million from our pharmacy business. We now guide you to an overall recurring dividends at the end of the year, GEL 280 million, and this is about 12% higher than where we saw the dividends -- the higher end of the range of dividends at the end of the last quarter, and additional one-offs are GEL 56 million. So all in, this year, we should be collecting about GEL 236 million dividends. On this note, I'll go back to Irakli for the wrap-up session. Irakli feel free to continue.

Yes. Thank you, Giorgi. I was talking to you in mute microphone. So I had a strong quarter in terms of the NAV per share growth, strong quarter in terms of the deleveraging, strong quarter in terms of the dividend inflows. As a result, we have stepped up the share buyback program. We are not happy with the performance of the hospital business, which we are restructuring, putting in some new management team, and we think that we will turn the corner there as well. Some of the performance is due to the regulatory issues. But overall, I think we need to manage this business differently, and we are focusing on it. So let me finish with this and let's move on the Q&A session.

Thank you, Irakli. [Operator Instructions]. We have a couple of questions in the Q&A now. The first 1 is from Jonathan Curry. The question is in the education business, is it all Georgia nationals? Or does it seek at the higher level to break in awareness from abroad.

Yes. On education business, mainly is Georgian, not even 10% around 5%, there are some foreign and we have international school. So there, we have some foreign learners, but that in terms of number of learners will not be more than 5%, 7%. So mainly is Georgian missions.

Thank you. The next question is from Piyush. Can you highlight any relevant market transaction activity and whether you have had any interest in GCAP's assets?

Well, there is always a interesting GCAP's assets, but today as I cannot talk in details or greater details, but there is a lot of interest in high-quality assets what we have.

Thank you, Irakli. There's a related question from Jonathan. Has there been any progress on disposing of the non-core other businesses?

I mean, we had the divestment of the real estate businesses. You may remember, we have sold a number of hotels. We sold a number of the land clubs, which we had under the hospitality business. So we've been having some progress there. But we may have more progress in coming years basically.

Thank you. I think Fred wants to ask a question. Fred, please go ahead. You can now speak.

Can you hear me?

Yes, we can.

Earlier, you said that about 10% of the education enrollment growth was non-Georgia. Can you kind of expand on that concept and just talk about across your business, how much of the growth that you've seen or the changes you've seen this year are due to the influx of immigrate and new people come to live in Georgia as opposed to Georgian business, which -- and assuming that the latter is more sustainable?

So basically, it is very hard for us to differentiate, to be honest. I mean -- but I do not believe that the growth in our business is coming solely from the foreigners leaving in Georgia or whatever. So basically, I think that 90% of the growth what we have is Georgia driven. Economy is growing. The world is growing. GDP capital is growing. So I think that this -- we have a broadly, you can assume 90% plus growth over we have is Georgia driven. And in education business, as I said, 10% is max what we have with the foreign students. We have probably around 5% of foreign students basically and whereas with Georgia's. And that's kind of across the board. So it's Georgia driven growth or Georgian citizen driven growth. Thank you, Fred. If you don't have any follow-up questions, we can go on to the next one.

No, that answers it. I have other questions, but I'll let other people go first. So this is an unrelated question on partly related question. I can see that you are now near your 15% debt target and you continue to have to be generating free cash flow. Once you get to that 15% target, is the plan still to distribute everything generated above the 15% to shareholders? Or will you consider new investments in Georgia?

No. I mean as long as we have discount what we have and discount is pretty high. So it's very difficult for us to beat investment opportunity what we have in terms of buying GCAP shares. The GCAP shares are the best buy in the country today. So we will focus on that. As long as we have -- if we find the investor opportunity, which is better than the GCAP shares, we will capitalize on that. But I highly doubt, it's almost impossible to find such an beautiful opportunity. So we will be focusing on the GCAP. We announced the buyback. It's not a big buyback program. But our main idea is that to have a 15% over the cycle. Now we are in a economic growth basically. So this year, we are growing -- the country is growing 7% on the back of 10% consequacy growth, right? So basically, I would rather be below 15% when we are growing fast than above 15%. So basically, we will be moving below and we'll be capitalizing on the buybacks as we go along. And obviously, divestment of 1 of our businesses will be a trigger to step up the buyback.

There are a number of questions in the Q&A. The first 1 is from [indiscernible]. How has the competition developed in the education business over this year? Are you seeing competitors emerge?

So basically, so far, the competition we do not have kind of a consolidated competition. So you have a small schools competing with us. There is no large player. We don't see it yet, but we are basically continuing our consolidation of the sector. As you know, we are developing new schools. We are looking to acquire once. We like acquisition more. Obviously, this immediate cash flow. And basically, so far, we don't feel the competition to be invested. Probably, it will come.

Thanks, Irakli. Another question from Steve. How has the number of hospital beds in the country changed due to the new legislation? What percentage of capacity exited the inability to meet the new requirements are you able to increase prices to reflect higher quality of services.

So the prices are regulated on some of unregulated hospitals, we are increasing on the number of hospital beds, we had to give more space per bed in ER, we have less hospital beds than we had before. So that has decreased due to the regulation. There are probably adjustments in terms of the closing down some departments et cetera.

The next question is from Jonathan Curry. Am I correct in understanding that going forward, you expect dividends from the core businesses to be of GBP 54 million against the current market cap of GBP 400 million. And can you give some flavor of how you see future capital distribution debt reduction by big capital investment.

So basically, the GBP 54 million, it does include a one-off basically. The recurring 1 is GEL 145 million.

For the full year, it will be corrected. That's for the 9 months. But for the full year, it's GEL 180 million.

Yes. I guess that's correct, right? Giorgi, you want to put it.

Yes, it's correct. I think what Jonathan said the numbers, that's for the full year.

Going forward, we have reduced debt significantly. So debt reduction is not our top priority basically. The buybacks is our top priority going forward. So basically, I think we had cut pretty significant debt on our balance sheet. We have managed it down. We have refinanced it recently. It's a 5-year debt now of $150 million. So net debt, we are sitting around $110 million even less than $110 million, actually $105 million. So basically, going forward, our focus will be more on the buybacks. And you saw this first announcement, and we'll see how we're going to go about it. But we will be focused on buybacks, as I mentioned.

Thank you. The next question is from Daniel Brown. There has been recent reported is either selling of shares. Do any of the management consider purchasing shares, consider the significant discount to NAV and attractive future prospects for the business.

Yes, I do not see the selling, but probably, as you may know, Daniel, we have a significant conversation on the management team using shares. So really, the management receives any cash. So somebody may have needed the cash, and that's why they sold. So that's all I can say.

Thanks. The next question is from Milosz. Can you give us an update on the pipeline projects in your renewable energy business.

Yes. On the renewable energy business, basically, we have 2 wind projects, we have 2 hydro projects which are in the process. In total, we are looking at nearly 200 megawatts and then we have an early stage point we have around close to 300 megawatts there. So we are working on that basically has -- and all the investments which we are targeting to invest in the wind and hydro are reflected in our NCC ratio, where we have a commitment to invest and Giorgi remind me what is our commitment for the renewable energy investment basically.

We have about $30 million in renewable energy and about $22 million in the education. So overall, about $50 million plus is included in NCC towards these commitments that we have -- we call soft commitments with the capital injections in the future.

Stephen is asking whether the -- we will be canceling on all the shares and it will go towards the management trust. Stephen, all of them will be canceled. Management trust is well funded. So all of these buybacks that we will undertake will be immediately canceled.

The next question is from Harvey. Can you discuss the geopolitical situation? Have you seen the 60 minutes called the quiet invasion about the Russians coming into Georgia? Is it the general view of Georgia such as 60 minutes that the occur -- of Russian is bad or do people appreciate the money and business they bring. What will be the public and the government reaction to a negative sounding report from the EU.

I have not seen the 60 minutes, but I'll watch for sure. Thanks, Harvey, for planning this. I mean I think it's a little bit exaggerated. There was probably in the beginning, we had more inflows and now there's a less inflow, and I think we may have even outflow. So I don't see that drama is there basically even amongst the Georgia basically. There is some talk, obviously, whether it is a quite invasion or it is investment -- bringing in investment. But anyway, I think that overall, I would not dramatize that much the whole thing. The second point on the EU report basically, I think that the local politicians are very loud and clear that I think everybody is expecting Georgia to get the candidacy status. We will wait for the report, which will come out on 8th of November, which is important report. But end of this year, we expect to get the candidacy status. And I think that our position and the ruling party are stating that the candidacy status will be given. So it's been probably talk, which has already happened, and that which give the Georgian politicians -- the EU gave the Georgian politicians reassurance of the candidacy status. So on the language, what will be the kind of preconditions or conditions basically, we'll see on 8th of November.

Thank you. The next question is from Jonathan. Clearly, the government sees the medical and pharmacy areas is right for regulation? Do you believe that you are now going to be in a more stable environment with less changes going forward and being a larger fair versus regulation work for you benefit?

So basically, the regulation works in the end, regulation works in benefit for the large players. That's been before, and that's how it will be basically. I think that what we will see, we'll see a reduction of number of beds, hospital beds, reduction in the competition as more strict regulation will be difficult to follow.

Thanks. The next 1 is from Piyush. Is it possible for any of your IFI partners to buy Jacob shares?

I mean I cannot speak from themselves from this side. But in general, what I believe that the IFIs love to invest in new opportunities, not in the existing kind of opportunity. So I don't believe that IFIs will go in the market and start buying the GCAP shares. But you never know, I mean, I cannot speak for themselves, for IFIs.

Thank you. There are no open questions as of now, if you have any questions, please type them in the Q&A or you can press the resend button.

Since there are no more questions, let me wrap up here. Thanks, everybody, for attending the call. I think that next important thing which is coming up is Georgia candidacy status which we will know in coming week and until the year-end. So thank you very much, and stay tuned for our Q4 results, which I hope will be more exciting than Q3.