Georgia Capital PLC (CGEO) Earnings Call Transcript & Summary

[Audio Gap] We have a lot of news, but we have news in the format as well, we will be presenting our quarterly statements. So as usual, I will present on the key developments and the high-level performance of our portfolio companies. However, our large portfolio company CEOs will be presenting their respective businesses. This is to increase the prominence of our 3 large portfolio companies, that's a pharmacy. So Tornike Nikolaishvili, the CEO, will present the pharmacy results and the key operating data. Irakli Gogia, our CEO for our healthcare Services, will report also on the performance of this division; and CEO of Insurance, Giorgi Baratashvili will report about results of insurance companies. So we will not have -- we will have a very short overview of macro. And so we have reduced the portion of the macro in our presentation, and we increased the more -- we talk more about the details of the performance of larger portfolio companies. So then Giorgi Alpaidze, our CFO, will talk about the valuation and the liquidity. And in the end, I will do a wrap-up, and this will be followed by the Q&A session. And you can obviously ask the Q&A, not only to me and Giorgi, but also CEOs of our portfolio companies regarding the performance of their respective businesses. So let's start with the highlights. A lot of good news. We have the NAV per share increased by 17.7% in Q2. That's one of the largest quarterly increases in NAV per share recorded in the GCAP history. The EBITDA and revenue of our private portfolio companies also grew very strongly, 14% revenue and nearly 29% EBITDA in Q2. So the strong performance of our portfolio companies continue and their strong operating performance is basically is one of the key targets for us and key milestones to achieve. Another good news we have is that we have completed our put option, and we have collected the $17.4 million cash in July 2025 from the sale of the Water Utility, 20% of the Water Utility company. So that's kind of a move in the right direction. I want to thank our partners, Aqualia for a great partnership. We enjoyed being partners with Aqualia a lot, and we expect to continue as an adviser for the Aqualia going forward in Georgia Capital, obviously. The NCC ratio target, we are decreasing from 15% to 10%. This is in line with our deleveraging strategy. As you know, that at GCAP level, we want to -- in the medium to long run to have a 0 debt. We don't like to have a debt on GCAP level. So therefore, we are reducing the NCC ratio target. And most likely next move will be moving towards 5% or we may have a hard cut on the 10% NCC that will be between 0% to 10% level. But right now, throughout the cycle, it's at 10%, so we can overshoot a little bit 10% and undershoot depending where we are in the cycle basically. Another good news is that we are completing the GEL 300 million buyback program, which we have announced a year and 3 months ago. According to this program, we should have been done. We had another 1.5 years to go to fulfill this target, but we are actually completing the buyback of the GEL 300 million actually probably this month or maybe next month, next month is probably the latest. So that's another good news from us. And obviously, as we are completing this GEL 300 million buyback, we are introducing new GEL 700 million capital return program, which will end in 2027. That's our target. Hopefully, we will do earlier than the end of 2027, like we did with GEL 300 million, but let's see. And I will talk about this later on in greater detail. And in total, we are nearly 30% of the GCAP's bought back shares, which is around more than 14 million shares we bought back in our history of 7 years. I think that's a big track record from the young investment company, how committed we are in investing in ourselves. We've been lucky and unlucky at the same time, but we are lucky that we are buying it cheaply at a big discount, unlucky that we have because we have a big discount. But anyway, so we've been taking the opportunity of the big discount, and we've been buying back shares, and we continue to buy back shares. And as you know, that we will be announcing this capital return policy and other buyback program, which I will talk about later. So some key highlights on the Water Utility. We have -- when we disposed end of 2021, stake in Water Utility company, the value of 20% was $40 million according to valuation back then. So basically, the value increased by 56% over this period of time. So we collected $70.4 million. So in total, our investment looks like that we made 3.8x money in terms and IRR of 25% on this investment. So not a bad track record on this investment so far. So actually, we complete one of the big exits in GCAP history which I think is a pretty good track record. Regarding the -- just briefly on the GEL 300 million capital return program, only GEL 20 million is left, which we have committed already, and it's in the market, and we are doing the daily buybacks basically here, and we are expecting to complete soon. Regarding this GEL 700 million capital return program, which we are launching until end of 2027, GEL 300 million consists of the 3 pillars. One is that share buybacks would count into account in this GEL 700 million buyback program, also dividends and also repaying deleverage. So regarding the dividends, we will not be introducing dividends as long as we have a high discount on the NAV. And therefore, it will be only focused right now for the share buybacks. But we expect that till 2027, we will -- the discount will be fixed, so we may move into the dividend. So that's why we have a dividend also included in this program. So we are starting with the $50 million buyback program, which we are announcing, which is under this GEL 700 million capital return program. And another $50 million will be -- at least $50 million we will be repaying in September, actually prepaying our bond because we have a call option on our bond and we can exercise partially this call option, and we will be exercising at least $50 million of bond buyback basically. So $100 million out of GEL 700 million capital return program is already clear for our investors, and we will be announcing the further capital returns, which we will announce going forward. Now regarding the passive foreign investment company situation. And before I talk about this in details, basically, I want to give you just high-level background what it means. So basically, under the U.S. revenue service, if the investor is invested in passive investment fund and they need to pay a tax on unrealized capital gains. So it's not -- so we do not want to become passive foreign investment company by no ways. There's no chance we want to be that passive investment company. And therefore, we are -- we will be undertaking some corrections on our balance sheet not to become one. So what -- how it calculates basically? So we take the balance sheet value of our assets of our private companies. We add the passive investments like the Bank of Georgia stake we have and the cash what we have. And this cash and the -- I'm talking about high level going into details here. So basically, the -- if this passive cash and -- it counts -- also counted also Water Utility company and the Bank of Georgia together, if they are more than 50% of the total assets then we are qualified as PFIC. So we were back in 2021, we were -- it was only 26% of passive investments in our assets, and now that increased to 45%. This is mainly due to the rally in Bank of Georgia share price, but also the reason is that we undertook the capital-light investment approach. Also, we sold the capital-heavy assets like companies like water, for instance, or brewery also capital heavy. So that reduced the asset base of our private companies. But at the same time, the Bank of Georgia share price rallied heavily, and that's contributed to the increase. So we are managing this process of keeping it under 50%. So we made a correction in our shareholding in Bank of Georgia recently, and we decreased it to 18.1%. That's where we are right now. We will target probably just below 18%. That's where we feel comfortable. The calculation is done every year or year-end 31st of December each year. So basically, we are positioning for that date. Right now, we feel pretty comfortable to be under 18% that we will not become a PFIC. So therefore, that's where we are, and that's a correction what we made in our Bank of Georgia shareholding to keep us away from the -- from becoming the passive foreign investment company. On the next slide, on Slide 8, we have a highlight on the economic developments in Georgia. First half 2025, 8.3% GDP growth. The economy is doing extremely well. We are also in a very good position in foreign currency inflows. It's at $6.9 billion in the first half versus $6.4 billion last year. This resulted in a big buying of the dollars by the National Bank of Georgia. In the first half, in total, more than $900 million of foreign currency has been bought by the National Bank of Georgia. So it's $100 million in Q1 and $780 million in Q2. So nearly $900 million of foreign currency have been bought by the National Bank of Georgia. So the total reserves are at $4.7 billion. So very good developments, recent developments. And this is happening on the back of the tourists, strong tourists remittances, et cetera. So a good position to be a country regarding the foreign currency inflows. On the inflation, we had a little bit uptick, 4.3%. We don't expect interest rates to increase on the back of that because of a small uptick. And I think that this foreign currency buying is also one of the reason of this inflation uptick. But it's -- I think it's a small one. So that's kind of -- we are not worried too much about this. NAV per share overview, let me talk about the contributors of the NAV per share growth. The largest one is obviously the listed and observable and Water Utility passive investment side of growth of the NAV, 15.3%. Private was nearly 3%. Multiple changes, we are decreasing multiples overall on all our private investments and it was 0.5% negative. The emerging and other portfolio companies, it was 0.3% negative. Buybacks contributed positive 1.1%. Operating expenses minus 0.2% and liquidity and other kind of assets minus 0.6%. So 17.7% growth in the quarter in NAV per share. But if we do a mark-to-market now for 5th of August, then it's actually the growth is 22.4%. So very high growth in NAV per share. Now in terms of track record, we have a, I think that's a very good track record in 3 and 5 years. So 30% plus NAV per share growth next -- last 3 years and last 5 years. Since inception in December 2018, we are up CAGR of NAV per share growth is 17.4%. The slide which I love the most is the share buybacks. At the demerger, our number of share was 39.4 million shares. And now we are -- first time we are below this level at 36.5 million shares. We picked nearly 48 million shares in 2020. And now we are fully bought back that and even more. And so basically, I'm very happy that we are our number of shares is below the demerger level -- demerger times, which is in 2018, May 2018, basically when there was 39.4 million shares. Now let's talk about the aggregate portfolio results. So if we talk about aggregated portfolio results, we have a situation like that. Revenue up 14.4% in Q2, first half, 17.6%, great performance by the team, and they'll talk about this in their respective presentations and the great performance across all large businesses basically. Aggregate EBITDA went up 29% in Q2. Overall in first half, 36.5 another stellar performance, as I understand, and CEOs will talk about that. As I understand, we -- this growth -- strong growth continues in July and August. So we should expect strong Q3 as well. Regarding cash flow, that's one of the metrics we watch closely. Cash is up 45% year-over-year in Q2, 35.5% year-over-year first half. We, as an investment company for us, it's very important what kind of cash -- what is the cash generation for our portfolio companies. EBITDA is good, good target, but it's not good enough target. For us, cash is the key target and cash is the king, as we say. Cash balance also at good levels in our portfolio companies. Now let me give you some update on deleveraging. The NCC ratio, which is one of the key metrics we watch closely, has been decreased significantly over the years. You may know that the peak was 42% of our NCC ratio at the time of the demerger basically. But now it's at 7%, and we are very mindful of keeping this ratio down. And as we said that we have a new target of 10% throughout the cycle. So on Page 19, you see this development, and you see the 7% level against the 10% of new target what we have. And 10%, as I mentioned, is throughout the cycle. So in bad times, we may be over the 10% in good times, below 10%. So that's where we are right now. And that's actually this level why it allows us to step up the buybacks the way we are stepping up. Now let me hand over the presentation to Tornike Nikolaishvili, who is the CEO of our Retail Pharmacy business, and he will talk about the great performance of this business line.

Thank you, Irakli. Good day, everyone. I'm pleased to share a brief business overview and update on the performance of our retail pharmacy business for the second quarter and the first half of 2025. Our business consists of 3 main directions: retail, wholesale business and international operations. Retail business is our core, generating around 75% of our revenue. Wholesale business is our biggest focus for growth. And in international, honestly saying we are at the start-up mode, believing to expand further in the region. So we have a unique and positive category structure in retail pharmacy, having around 50% share of non-medication versus med category. Why it's positive? Because Parapharmacy category characterized by higher margins and no price regulation risks. We continue to be the largest player in the retail pharmacy market in Georgia with around 36% market share in organized trade, operating under 2 well-positioned brands, GPC, which targets the high-end segment and Pharmadepot serving the mass market. We also operate 2 franchise brands, the Body Shop and Alain Afflelou Optics and are active in Armenia and Azerbaijan. As of June 2025, we operate 430 pharmacies, including 15 in Armenia. We expanded our network by 14 pharmacies added in quarter 2 and most of them in cost-efficient formats that require limited capital injection. On the next slide, let me discuss more business operating performance of the business. So in terms of performance, our retail revenue grew by 5.4% and 6.4% in the first half and second quarter, respectively, supported by same-store growth of 4.7% and 6.6% in quarter 2. This was despite the exit from our textile retail business, which slightly affected headline growth. We are encouraged by this trend as it reflects healthy consumer demand and solid in-store execution. On the wholesale side, revenue grew by almost 26% as we extended distribution of our strategic brands beyond our own retail chain. This has helped diversify and strengthen our overall performance. We also saw an increase in average bill size. It's up by 10% year-over-year. It's mainly due to mix. And finally, gross profit margins improved to 32.7% in quarter 2, driven by, again, sales mix and improved supplier terms. On the next slide, I'll more concentrate on financial performance. So EBITDA grew by 38.3% in the first half, and we reached record high GEL 48.5 million, while EBITDA margin improved to 10.8%. And in quarter 2 alone, EBITDA grew by 24.6%. Cash conversion from EBITDA was slightly lower at 63.8% in quarter 2, mainly due to growth acceleration and changing mix towards wholesale business. Also, we have a time shift -- time difference in the collection of receivables. So we believe at the end of the year, we will reach 90% plus, which is our target. So from a financial balance sheet position standpoint, we remain cautious and disciplined. Our adjusted net debt to LTM EBITDA stands at 1.4x, which is below our target of 1.5x. We expect to improve it further. We also distributed GEL 10 million in dividends during the quarter, reflecting confidence in our cash flow and overall financial health. So let me summarize on the next slide. So we have maintained solid revenue momentum, especially with same-store sales growth and strong wholesale results. Profitability has improved, supported by gross profit margin improvement and prudent cost discipline. Leverage remains at a healthy level so giving us flexibility for future investments and shareholder returns. Let me mention that we also have a strong performance in July and August so far. So let me thank you again for your time. I'm happy to take your questions during Q&A session, and let me hand over to Giorgi Baratashvili. Thank you.

Thank you, Tornike. Ladies and gentlemen, today, I'm going to present the insurance business, and I will let you deep dive into the details of our business. A short overview, we run insurance business, and we divide it into 2 main directions as we call 2 main business lines. The first is the P&C, property and casualty that is run under the name of Aldagi and medical insurance that is run under the brands of Imedi L and Ardi. I would say that we had an outperformance, record high performance in Q2 through both lines. And in the coming slides, I will deep dive into both lines separately. But talking in total, our insurance revenues grew by 27% and the pretax profits grew by 24%. In terms of the first half, we had an amazing 42% increase in insurance revenues and 24% increase in pretax profit. We had also an outstanding performance in terms of the operating data. And in terms of the net premiums written, the total premiums grew by 19%. 17% was from P&C line and 22% came from the medical insurance. On the next slide, I will overview the P&C business separately. And we had a really major development in P&C line, world's leading rating agency and best upgraded our P&C business by 1 notch. And by this upgrade, Aldagi became the first company in Georgia with an investment grading that I'm really proud of, and I want to really congratulate our team. Just to make a few comments from B fair, our financial strength was upgraded to B+ good and the long-term credit issuer rating has been upgraded to BB fair to BBB, BBB-. By this upgrade, as I have mentioned, we became the company with an investment gradating in Georgia. The rating agency has underlined that we have -- we keep the strongest balance sheet on their scale that is supported by the prudent capital and a very disciplined underwriting, leading to the healthy portfolios that have translated then into the that is translated into the high ROEs, respectively. Insurance revenues, as I mentioned, are really remarkable. They grew by 22% in Q1. In Q2, the main increase was -- came from the expansion of our retail motor portfolio that is in line with our strategy to increase our retail presence in the market and the life insurance that also increased in Q2 2025. Our profit -- pretax profit increased even more, leading to 27% increase that was translated into record high ROE of 36%. In total, we paid a GEL 5.3 million dividends to GCAP in Q2 that makes and in total Q1 -- in the first half that comprised GEL 11.1 million. As I said, we had also -- on the other hand, we had an amazing operating performance, and I would like to touch a few of them. Key, as I said, the key metrics in the insurance are the net premiums written were up by 17%. We had a really, really good improvement in our combined ratio that went down by 4 points, reflecting a revised tailored segmentation made in corporate segment and eliminating a few big loss-making clients that led to 84.5% combined ratio for P&C, and this is really unique, and that's in line with our strategy to keep it in line of 85%. Our individual insurers grew by 13% and the number of policies even more by 15% and we recorded a record high renewal rate for our retail business, 76.3%. Now moving to the health insurance. The health insurance business has recorded also record high Q2 that we have never seen before. We had a 32% increase in revenues in our health insurance, and we are envisaging a really good performance in both business units, Ardi as well as Imedi L. The main increase came from the organic growth. The second big factor was the increase of the ticket size of the policies. And the third was the acquisition of Ardi that we acquired in last year, second half of the Q2 last year that also contributed to the revenue increase. Our pretax profits are growing also that is eventually translated to the record high ROEs. And to touch the numbers, we had an 18% increase in revenues -- in profits that is translated to also record high ROEs of 32.6%. We paid GEL 1.5 million dividends to GCAP from our medical insurance direction that made almost GEL 3 million in the first half 2025. A few words about the key operating metrics. Net premiums written grew by 22%. We had a slight increase in combined ratio that was due to, as I mentioned, we acquired Ardi in the second half of Q2 and the full period was not reflected. That is due to the low base. But adjusted for this, the normalized combined ratio is mainly broadly the same year-over-year. So it's in line with our expectations. Going to the number of individuals, we are also in line with our strategy. We want to decrease the presence in the state tenders and we -- and to increase the direct insurance quantity. So that reflects -- the figures reflect the above mentioned. And we decreased our presence in the state tenders by 30% in terms of the number of insurers that was grew, and that was partially offset by the direct insurance of the corporate and the retail by 12.8%. Key operating highlights for Ardi and Imedi L. As I have mentioned, we are running 2 brands there. The Imedi L has recorded a 17% increase -- and we are really paying attention to our operational excellence and the service. So what we did in Q2 was that we launched the new regulation that all claims that are submitted via online are settled within 24 hours. And that I would say are 95% of our claims. So 95% of our claims that are submitted online via portal or the app are settled within 24 hours. We are in line with our strategy of digitalization. And in Q2, Imedi L has launched a new application that gave the opportunity to decrease the occupancy of our call center from 70% to 30%. And we'll have some more initiatives coming in terms of the digitalization in Q3. So the main focus will be also in coming quarters will be service, excellence in service and diversified provider -- medical provider database. On the other hand, Ardi continues to be the shining star in terms of the -- in its class. They have also recorded a 10% increase and managed to increase their premiums by 10%, offering the highest ticket size on their health insurance services and making them the market leader in their -- and the best-in-class in their peer providers of the medical insurance service. Constant quality and diversification in different offerings, premium offerings of health insurance gives the status of Ardi to be the best-in-class. As I said -- as I said, we will -- we have a really good June and July -- I mean, July and August, and we are expecting even better figures in Q3. And a few considerations to remember and a few important developments in insurance business. The first and the one that I'm really proud of, Aldagi became our P&C company, Aldagi became the first company in Georgia with the investment grading and the reputable rating agency has underlined the strength of the balance sheet and the healthy portfolios that are managed through the prudent underwriting practices and the disciplined underwriting that is translated to highest ROEs that we produce constantly and have a track record of it. Both of our health insurance providers managed to increase their rates and tariffs, and that's on the back of the improved services and the back-office efficiency. And we have the highest rates in both insurance lines in P&C and business, respectively, 76% and 85%. That's a record high renewal rate for the insurance business and that underlines the resilience and the customer loyalty of our customers. So that's it, and I will take questions at the end. Thank you very much, and I will pass the floor to Irakli Gogia, the CEO of our Healthcare business.

Thank you. Hello, everyone. I'm Irakli Gogia, CEO of the Healthcare Services business. And today, I will walk you through our latest results. We delivered double-digit revenue growth in the second quarter. Our EBITDA grew by 36% with EBITDA margin reaching 20%. Notably, combined EBITDA growth over the past consecutive quarters comprised 51%. Besides, over the past 12 months, net debt-to-EBITDA decreased from 5.1x to 3.9x. In the beginning of -- next slide, please. In the beginning of 2024, we identified 5 strategic pillars to concentrate our efforts on, which are outpatient development, clinical quality improvement, nursing competency improvement, utilization and efficiency improvement and asset allocation. Outpatient direction is a major focus area for us due to its strategic advantages such as negative working capital need, ability to apply inflation, less dependency on state funding, high profit margins and high ROICs. Our efforts have delivered notable results. The share of outpatient services in total revenues of large and specialty hospitals increased from 33% to 37% in second quarter only. We plan to apply AI capabilities in radiology, diagnostics and consultations to further enhance our position as a leader in outpatient services. Our flagship hospital and diagnostics business are both JCI accredited, while all other hospitals within our network hold internationally recognized accreditation. We reorganized clinical quality boards, which resulted in substantial improvement in clinical quality. As a result, demand for our hospital services has increased significantly. Some of our hospitals has had negative reputation among patients. We clipped the trends through notable improvements in clinical quality and safety. Now one of these hospitals has the least infections in the country and others are very preferred destinations for our clients. Over the past quarter, we have attracted 11 doctors contributing circa GEL 10 million annual revenues. On the nursing competence side, we opened 6 training centers financed through external donations across Georgia that enabled us to increase our group's nursing capabilities and quality as well. We will continue to invest in this direction going forward. In terms of utilization and efficiency improvements, we increased the bed occupancy rate by more than 6 percentage points compared to second quarter 2024, while simultaneously increasing the number of beds by 94. Our revenues increased by 18% during the second quarter, while our expenses increased by 14%, translating to 3.8% positive operating leverage, resulting in EBITDA margin increase by 250 basis points to circa 20%. On the asset reallocation, we are constantly identifying alternative opportunities for efficient usage of our properties, beds and hospitals. Based on this, we have downsized several departments in order to enlarge the operation direction. In addition, we disposed of some unused and low ROIC generating assets. Next slide, please. In our hospital business in the second quarter 2024, we delivered revenue growth of 17% and EBITDA growth of 34%. Generally, operating cash flows are much stronger in the second half of the year. This is caused by considerably lower working capital need during that period. In second Q '25, we had an EBITDA to cash conversion of 88%, which is historically the highest for this period. It was a result of the improvement in the working capital to revenue ratio from 25% to 21.5% in second Q 2025. Next slide, please. In our polyclinics business, number of admissions increased by 11%. And in Diagnostics business, number of tests performed increased by 15%, which resulted in revenue growth of 27% and EBITDA growth of 47%. In Diagnostics business, we still operate at below 50% capacity and intend to increase our utilization significantly going forward. That concludes my presentation, and let me hand over to Giorgi Alpaidze.

Thank you, Irakli. Hello, everyone. Let me quickly walk you through the valuations of the excellent portfolio performances that were just presented by the CEOs. So starting with the overall view at the semiannually, we do the independent valuation reviews of our portfolio valuation. So again, in June, this was done by Kroll, the independent third party who does this every 6 months. So based on these valuations, to summarize, about 50% of our portfolio was at the Lion Finance Group and then the rest was within our private portfolio companies where the largest business continued to be retail pharmacy, followed by health care services and insurance. Emerging and other businesses continue to be in the low teen range. And in this case, it was 12%, slightly down from 14% in the previous quarter. Moving on to the next slide, you will see we wanted to show you how the multiples have evolved over the past 12 months. And here, you can see that in terms of the retail pharmacy, the multiple has now stabilized at around 8.2x EBITDA. In the insurance, we're looking at slightly less than 10x, and that's where the multiples have stabilized. In the health care services, we saw the multiples come down slightly again this time to 9.9x, but we think this is more or less the area where it will continue to stabilize. Now key thing has been in this quarter that -- and for the first time over the last 18 months, we actually saw that discount rates have come down as part of the independent valuation report, and that was largely driven by the tighter credit spreads that were observed in the second quarter. So from business to business, they differ, but we saw about 50 to 100 bps improvements within our [ WACs ]. Now as we go through individually -- actually, on the next slide, we will see the portfolio value development. The one change here has been that as we exercised our put option in the Water Utility for a 20% stake, we moved that away from the portfolio. It was classified as a receivable at the end of the second quarter, and we received all the cash on July 29 last month. So in terms of the portfolio movements, the largest gain was from Lion Finance Group that contributed more than GEL 0.5 billion to our portfolio. And then the private portfolio companies increased by GEL 76 million, where the largest valuation gains came from retail pharmacy of GEL 42 million, insurance close to GEL 30 million and Healthcare Services about GEL 20 million. Our portfolio finished the quarter at a record high, GEL 4.5 billion. Now in terms of very quickly of the each individual business and where the values came from. The biggest drivers of the value creation continue to be EBITDA growth that we observed across all our large portfolio companies. In retail pharmacy, we had GEL 42 million value creation, the increase in the enterprise value. There was about GEL 9 million decrease in net debt, but largely because of the dividends that were paid by this business. As Tornike presented earlier, the adjusted net debt to EBITDA continued to improve here, and now it's less than 1.5 targeted level at 1.4. In the insurance, here also the growth in the operating performance delivered about GEL 28 million operating performance growth which when combined with the dividends received was the total valuation gains for GCAP of around GEL 35 million. Leverage here also continued to come down, which is now at 0.4x, and this is the leverage that we took for the acquisition of Ardi. Next and last business is the health care services, which also delivered GEL 40 million growth in the enterprise value that was slightly offset by the growth in the net debt. But overall, GEL 20 million plus value creation from this business on the back of the continued improvement in net debt to EBITDA, which is now at 3.9x, way down than 5.4x that we had there last year. This is all about valuations. Now briefly about the liquidity. We continue to have a strong liquidity. So when we count in the $70 million that were received in July as part of the 20% Water Utility sale, we now have more than $125 million worth of liquidity. And that's a significant improvement from previous periods. And our gross debt is $150 million. So net debt as of today, it's less than $25 million. Now briefly about the outlook for the dividend flows. So in terms of the dividends, we continue to expect again GEL 180 million, but you can see that all but GEL 75 million dividends have been received up until now. This also includes the dividends from Bank of Georgia Lion Finance Group that were received in July as well. So the GEL 75 million, we now expect to be comprised of Bank of Georgia interim dividends plus the dividends from private portfolio businesses spread across pharmacy, insurance, auto services and the renewable energy. One key thing to highlight before I finish is even though the outlook for the dividend income is similar to the last year, on a per share basis, given our continued buybacks of our shares, it has grown approximately 14%. So this combined buybacks with the strong operating performance, which is our value growth story, as you know, has been contributing to this very strong dividend flows. So with that, I'll hand it over to Irakli for the wrap-up and conclusion of today's presentation.

Thank you, Giorgi. Let me wrap up. Strong NAV growth, NCC ratio improvements, a very strong operating performance, big cash pile after the sale of the 20% of Water Utility. Buyback program is GEL 300 million buyback program is ending 1.5 years or 1.4 months before the deadline, which I'm extremely, extremely happy about this development. And then we have overall more than 40 million shares bought back in GCAP's lifetime, nearly 30% of the -- our share issuance. Launch of the -- in terms of the outlook, GEL 700 million capital return program, including the deleveraging share buybacks and dividends, delivering our value growth will continue through the NAV per share growth and EBITDA growth, obviously. And our new NCC ratio is 10% and throughout the cycle. So we have a very strong economic outlook. So we are pretty bullish on the future of the GCAP and Georgian economy. So let's move to the Q&A session.

Let's start with taking live questions. We have Dimitri he wants to ask a question.

Congrats on strong second quarter results. I have 3 questions, please. So the first one is on the performance of your major private assets. So it was very strong in the first half of 2025. And I was wondering if you see any upcoming risks for your major private assets in the second half of 2025, which we should be aware of? The second question is whether you expect any M&A in the second half of 2025 for your major private assets, maybe something similar to what you did with insurance last year. And the last question is a general one. Like once your discount to NAV comes down and you will look into the new investment opportunities, do you have an industry in mind which you would like to invest in?

Let me start from the end. In terms of the industries, we don't like to talk about it openly what we are targeting, what we have some industry select. But overall, we like asset-light because GCAP, in our experience, asset-heavy industries consume cash, and we may need cash for the buybacks if the share price is weak. So therefore, we think that the asset-heavy industries is not appropriate for the GCAP being basically the listed investment closed-end investment fund. So for that structure, the way the GCAP is organized, I think that asset-heavy industries are not good for us. As discount shrinks, obviously, investment opportunities will come, and we will realize them. One thing which we are very open about investment into the industry is education. So we are increasing in education, our presence. We are investing organically as well as through M&A, and you should expect that happening over time. To move the other question about the outlook for our operating companies, overall operating performance in the first half was great. Second half, we expect also good operating performance. Macro is strong. Foreign currency flow is strong. So basically, I don't see a reason why second half should not be strong operating performance for our portfolio companies. And then there was a third question, sorry, can you remind me?

About M&As, I guess.

Potential M&A. Yes, I mean, we -- right now, I mean, we cannot -- we usually don't talk about it. We cannot talk about it. But your guidance is -- your guidance is basically our share price, less discount we have on the NAV per share percentage-wise or NAV discount, more appetite we have for the investment in terms of the M&A. And also, we are looking at -- we are always looking at opportunities to divest some of our asset-heavy businesses.

I'll take a question from Harvey, and then I'll read out the questions that came through the Q&A.

Yes. Congratulations on a really good quarter. And I want to thank you for getting ahead of the PFIC issue, like it shows real investor caring, which a lot of -- I've seen holding companies that ignore it completely and create real problems. I have a question about the wholesale and the pharmacies. Can you describe a little bit more what is that business? What is the expected scope of it? It mentions in the presentation that it may affect your actual retail. I wasn't quite clear on how it can affect your own retail sales. So if you could explain that a little more.

Sure, sure. Just Harvey, just to comment on PFIC, as I said, we are very much committed to not become PFIC. So we will -- we are actually -- it's part of our kind of main target. So we will keep an eye on it, and we'll update you as we go. Regarding the wholesale, I think Tornike is in a better position to talk about it. It's Tornike's strategy to expand in wholesale in the region, especially. So Tornike, maybe you talk about this.

Let me say a few words about the structure of our wholesale business. That was the first part of the question, I believe. That's we are selling to the [ pharma key accounts ] so-called, which are the big players, our competitors, in fact. Second part is that we are selling to the independent small pharmacies, traditional trade pharmacies, let's say. And the third part is the special projects, which are the government tenders and hospital channel and so on and so forth. So this is a 3 part. What I have mentioned is that we had a brand which we were selling exclusively into our own pharmacies. But for our strategic brands, we opened the gate, in fact, and we started selling them into other key accounts and other outlets in order to develop that brand, develop that brand availability and also grow sales. And you can see in the wholesale growth is really huge. It was something like 27%. And so that strategy gave us results. And also, there is no sense to close the brands into your own retail because anyhow, world is global and our competitors were also getting products and different products via apparel import. That's another part. Do I answer your question?

What are the -- how broad do you expect this business? You said it's regional. Can you become a distributor and how many other countries, how many -- what is the potential size of the distribution business?

Okay. I got the point. So that's an international part. We put it in the pie chart in the international part. For the international, let me, first of all, underline the region, what we believe it's a region for us. This is South Caucasus and Central Asian -- post-COVID Central Asian countries, so-called Stan Markets. So a total population for them is 96 million. And now we have already contracts for new territories, commercial contracts for the new territories for the Med and also in the parapharmacy and some negotiations are ongoing. I can't -- for the moment, I can't underline the exact number and the exact figures where we're going to reach, but this -- we believe it's a big potential, and we are working on that direction.

I think here, important part for us is that basically the -- we take the -- some of the brands, which we cover them for the region. And basically, in a way, we act as interpreters between the foreign multinational companies and the locals and the foreign international companies would rather give us the ownership of the brand for their brand for the region and they enter the region through us and enter directly. And I think that we want to realize that. Also, the trading comes through us, logistics comes through us. So basically, there is no extra cost by selling their products through us in wholesale to the Stans and the Caucasus countries. So we are focusing on that to expand the international wholesale business in both the parapharmacy and pharmacy and basically learn better the international markets for us to have a foothold for future expansion when we -- when our discount narrows and we will be able to invest.

I'll take a question from John and then move to the Q&A questions.

Congrats on the results, quite impressive. So I have 2 questions, one for the pharmacy business. 115 pharmacies in Georgia, I mean, it looks quite crowded. I mean, do you have any idea of what's the white space? How much you can grow here if that store expansion is potentially is limited? What's the next leg of growth for this business? Is it Armenia? Is it the wholesale international, as you mentioned just recently? And the second one is on the health care business, quite an impressive occupancy rate improvement. And the business has been on an upward trend in the past 3 quarters, if I recall correctly, or 4 quarters. So maybe you can help us understand how you did improve this occupancy rate that much in the first half and talk about a bit on the -- going forward, how do you see the business in terms of deleveraging and the margin recovery? Where do you see its margin leveling off in the next quarters or years, yes?