We are very happy to have you all here. Let me go through the agenda, what we will be talking today. Shako, can you turn this to agenda slides? We will start with the macro update. Nino, our chief economist, will give you the review of what's been happening in terms of macro. Most of you know that macro been doing extremely well. Nino will talk about that. I will talk about the first half performance, and I will talk about as well the valuation and overview. Sorry, you will talk about the valuations then and overview of our portfolio companies. You will talk about liquidity and dividend outlook, and I will do the wrap-up.
Let's start with Nino. Sorry, here are some key highlights before Nino kicks in with her macro presentation. We have NAV per share in Q2 flat, up 0.2%. Actually, if we look at the post Q2 events, where you had a big appreciation of lari continuing to appreciate and Bank of Georgia share price being repriced pretty aggressively, we are actually up 4.4% since the end of the quarter. NAV per share in pound terms is all-time high at GBP 16.8. This is due to the adjustments for Bank of Georgia share price as well as strengthening lari and I guess weakening the pound as well.
At this stage, we are at a record high NAV per share in terms of the sterling. Our another key metrics which we started to observe after our investor day in May this year is our net NCC ratio. What we call is net capital commitment, and that's kind of has also been improving since March. First time we disclosed that ratio, it was 27%. Sorry, it was 28%. End of the Q2 ended up at 27%. However, again, the events after the Q2, namely the Lari appreciation and Bank of Georgia share price growth, this NCC ratio came down to 23.5%, and we are getting closer to our 15% over the cycle target.
Third point, what we have, we have a very strong dividend inflows. We are expecting close to GEL 100 million dividend inflows, and this doesn't count the Bank of Georgia buybacks, which basically is capital return, but we are looking at cash on cash basis, what cash we receive as the investors in Bank of Georgia and other portfolio companies. We are expecting around GEL 100 million inflow in 2022. Also that we are continuing with our buyback program. We had a strong momentum. We bought back around 6% of issued capital and we canceled it. Now outstanding number of shares came down to 45.1 million shares, which we are very happy with.
Let's go to the macro presentation, and then Nino will explain what's happening in Georgia macro.
Hello, everyone. As usual, I will do a brief macroeconomic overview of our country. We will highlight the key trends we believe is interesting and important for you. World is still facing the puzzling economy with lots of uncertainties, as the global economy is grappling with once in a century pandemic and its economic aftershocks. We are also facing the biggest war in Europe since 1945 and a 40-year high inflation and biggest rate hike since 1994 in U.S.
Despite these uncertainties increased the risk of recession and also the noise around the world, Georgian economy is doing amazingly well, as real GDP growth increased by 10.5% according to the preliminary estimates in the first half of 2022, followed by 10.4% growth in 2021. The double-digit growth is mostly driven by domestic and external factors. From the external factors, we should emphasize migration impact as high-skilled labor coming from mainly Russia, Ukraine, and Belarus are aiding our economic activity and FX flows. The migration impact is partially reflected in our remittances and tourism revenue numbers. Remittances are up by 65% in the first half compared to the last year. Export growth was more than 35% in the first half, and July number is expected to be even higher.
Tourism revenues is almost recovered to 2019 levels in May and June. From the domestic side, the credit expansion is worth to mention as the loan growth was at 18.7% as of June if we exclude exchange rate. We observe that activity is quite significant both in business and retail sector, and also activity is quite visible both in national currency and foreign currency loans. From the fiscal side, which also affects the economic activity, despite the moderation of fiscal stance, we still see increasing current and capital expenditure, but of course the revenue side was exceptionally high and we expect fiscal deficit to come down in the coming years.
This was the kind of external and domestic factors which are affecting growth, and we should also mention consumer and business sentiment and negative real rates, which are helping spending and investment decisions. Overall, we expect more than GEL 10 billion to be added to our nominal GDP, and nominal GDP is expected to exceed $70 billion in 2022 in dollar terms. We expect nominal GDP to exceed $25 billion, of course, depending on the exchange rate movement. This exceptional high growth of nominal GDP, both in GEL and USD terms, are driven by double-digit real growth, as well as inflation and significant appreciation of Georgian GEL. On the next slide, we are showing the very favorable trend of our currency. You can see that GEL is at the pre-COVID level now. GEL appreciated by more than 13% against the US dollar this year, despite the fact that the US dollar strengthened on the back of a hawkish Fed, as well as increased uncertain
We believe that this is more income type cash flow rather than transfers, as Russian migrants are transferring their income from Russia to Georgia. We have again this continued robust performance of exports and recovering tourism revenues. These are the key factors from the external side, and we should also mention foreign direct investment which increased more than 4 times in the first quarter of 2022 and exceeded half a billion dollars in the first quarter. From the domestic side, the appreciation was supported by tight monetary policy. National Bank of Georgia started to tighten the rates since March 2021 and increased the rate by 300 basis points.
Economic activity and tight monetary policy, as well as a significant interest rate differential, aided FX lending. FX lending is the one aiding exchange rate appreciation from the domestic side. In the next slide, we have the kind of more details about FX inflows. Net external earnings turned positive in Q2, which is this net external earnings is kind of proxy for our current account. This is the frequent indicators. We are showing trade, money transfers, and tourism revenues. It turned positive. Despite the fact that imports accelerated significantly on the back of economic activity as well as increasing prices on the international market, this accelerated import was quite nicely compensated by rebounding exports, the significant surge of remittances as well as recovering tourism revenue numbers.
You can see in the chart the significant jump of remittances. On average, we were receiving around $200 million remittances on a monthly basis, and it jumped. The surge of remittances is mostly attributable to transfers from Russia, which is related to the Russian migrants who are transferring their income from Russia to Georgia. There are some portion of Georgian immigrants who are trying to take out the capital from Russia. Export and import do have very favorable trend, and there was significant growth numbers, mostly related to the increasing prices. Terms of trade improved significantly, which means that our exporting goods are increasing in prices faster compared to the importing goods.
The improvement in terms of trade helping for exchange rate and current account and economic activity in the short term. As for the tourism revenues, you can see that the tourism revenues almost recovered to 2019 levels, but we do still have significant upside in terms of tourism revenues. Looking at the number of travelers, the number of travelers only recovered to half of the levels we observed in 2019. In the next slide, we are showing the dynamics of inflation. As you know, the inflation is a common headache for the countries around the world. According to the World Bank, 100% of advanced economies are experiencing above the target inflation.
90% of inflation targeting emerging markets and developing economies are experiencing above the target inflation. The drivers for inflation is quite similar for Georgia also. The key drivers was international food and commodity prices on the international markets. Imported inflation was the kind of most significant factor for the development in the first half of 2022.
We see and expect inflation to kind of start to cool down in the second half of 2022 mainly due to the base effect as well as kind of like the lowering prices on the commodities and reducing prices and reducing shipping costs, but we still think that average inflation will be double digits in 2022, and we expect National Bank of Georgia to remain tight until the inflation expectations will be curbed. Monetary policy was quite appropriate. NBG started to tighten from March 2021 and increased the rates to 11%. Now they have added some macroprudential instruments as, according to their estimates.
The GDP gap is positive which means that despite the supply side pressures and imported inflation, due to the fact that we have higher than expected economic growth and significant rebound of economic activity. NBG estimates that gap is positive which means that we do have pressure on inflation from the domestic side. That's why we expect National Bank of Georgia to remain tight for some time. They have also introduced some macroprudential measures in order to curb the inflation expectations. Also due to the fact that we had significant depreciation of GEL, this was quite favorable time for National Bank of Georgia to increase the reserves and even further improve our external balance sheets.
On the direct intervention, National Bank of Georgia bought some $80 million, and through the FX platform they have bought more than $150 million. This of course was quite favorable timing, and they have increased the reserves to $4.1 billion which is 7.3% higher compared to the last year. On the fiscal side, as you know, the, there was significant, so we had expansionary fiscal policy since the pandemic, and as it was expected, fiscal policy start to moderate. We had exceptional increase in our tax revenues on the back of like double-digit growth of our economy.
While the current and capital expenditure increased only single-digit, due to the fact that government is committed to return the fiscal deficit to the fiscal rule bounds, and fiscal deficit is expected to be below 3% in 2023. Due to the fact that we had double-digit growth in 2021, and we have favorable trend of exchange rates, the debt level reduced significantly. It is expected to reduce further, especially on the back of double-digit growth we are observing this year also. Before I end my presentation, I want also to highlight two facts.
Fitch affirmed Georgian rating, the BB with stable outlook, and they highlighted the sound macroeconomic framework as well as rebounding economic activity and improving external balance sheet. IMF approved $280 million standby arrangement, which is currently treated as precautionary measure, but it is very important for Georgia as it further reduce our liquidity risk. This was a very brief overview. Now I will hand over to Irakli to talk about the Q2 and first half performance. Thank you.
Thanks, Nino . We will take questions and you can send us by the chat or you can just raise your hand and ask the questions towards the end. Let me talk about the aggregate portfolio performance. As you see in Q2, we are up in aggregate revenue by nearly 5% and nearly 50% we are up over the Q2 2020. We are also, on first half basis, we are up nearly 9, more than 9% in first half to GEL 905 million, and we are up 36% over the year. Actually the growth is mixed between the large portfolio companies, investment stage and other portfolio companies.
As you can see that other portfolio companies contributed the big growth, as well into their, in the revenue. Going on the next slide, looking at the EBITDA performance, you see the EBITDA is down 20% in Q2, quarter-over-quarter, and 36% is up actually against 2020. The main driver for the EBITDA to be down is threefold. One is the pharmacies, prices are in dollars as we are importing the drugs from abroad. So we had the margin squeeze there because of the lari appreciation. Secondly, hospitals are coming out of the COVID, and we need to kind of get into the optimal capacity level from scratch.
We are doing that, and actually, every month we are improving and the occupancy levels are growing. We are happy with the performance. In Q2, in March, basically we got the contract stopped with the government on COVID side. March, April, May, June, we've been actually loading our hospitals from zero, and some of the hospitals basically from zero occupancy. Now in July and actually in August, we are getting into the optimal level where we were actually pre-COVID times. Here in Q2 you don't see that. The third one is basically our wine business, which has suffered significantly due to the Russia-Ukraine war. We were exporting both in Ukraine.
We were largest exporters actually in Ukraine of wine and also Russia got hit in Q2. However, Q3 is getting, we have a nice turnaround, so we are optimistic about the growth. First half numbers is also you see the same reasoning down 12%, EBITDA GEL 270 million, basically. Up 30% against 2020. If we go to next slide, we have a slide on operating income. You see the operating income in the first half is up 12.2%. Operating, sorry, operating cash flow in Q2 is down around 9%. Also our cash level of our portfolio companies is around $100 million.
Let's go to the next slide. Now NAV per share performance. You see pre-COVID times we were around at GEL 46.8. Now, it's been substantially we have marked it down when COVID hit the streets. Basically then we had a nice growth. You see in Russia-Ukraine war, we also marked it down as we increased our cost of equity when we are valuing our portfolio companies. You see in the end of first half, we ended up with GEL 52.7 per share. Since then, the NAV per share increased around 4.5% on the back of the growth of the Bank of Georgia share price as well as lari appreciation.
Basically mark to market, that's where we are around GEL 55 per share, and it's up nearly more than 17%, comparing the pre-COVID levels. If you go to the next slide, please. If you look at the movement in Q2, what has happened, it was down 5% due to the EBITDA performance what we have showed. Then again, we had a improvement in multiples in Q2 and basically it nearly canceled each other out. Overall, you see that, you know, buybacks contributed positively at 1.5%. And observable portfolio, listed observable portfolio also contributed nearly 1% positively. You see the movement from 52.6 end of March to 52.7 GEL.
As I mentioned before, it has grown further to GEL 55, which is actually 16.8, 16.8 sterling, basically the British pound, which is also a record high. Can we go to the next slide? So here is the performance of the buybacks. You see that we have bought around 2.8 million shares, around 6% of issued capital. You see that we have decreased our share count from nearly 48 million shares we had in the peak end of December 2020 when we issued shares for the acquisition of GHG shares.
Basically we are at 45.1 million issued number of shares, basically. It will be nice to get back to demerger levels where it was below 40 million. Let's go to the next slide, please. Here is the net capital commitment, one of our key strategic priorities to decrease it to towards the 15% level. You see that we went down in March. It was 28.2%. That's the first time when we have published this ratio. You know that, let me remind you that the ratio includes the net debt. It also includes the guarantees, and it also includes the planned investments, what we are planning to make.
All types of capital commitments, what we know today, and plus we are also assigning $50 million of the liquidity buffer to this ratio. Then basically, as you see, the net debt plus the planned investment and the buffer is around $250 million, was $250 million in March 2022. We are dividing that number by portfolio value. In March it was 28.2%, and our target is to go down to 15% to have less leverage. Both direct leverage as a debt, but also commitments, you know, included here in terms of the investments. The 28% went down to 27% in June 2022.
It went further down to 23.5% after the June events. Pro forma June looks very promising at 23.5%, which basically two things contributed here. Guarantees which GCAP has issued in favor of our brewer, it's been decreasing significantly, and we expect in the next 12 months to go to zero as the beer business is performing extremely well. We don't expect to have a guarantee outstanding in the next 12 months if it continues to perform, and we think that it will continue to perform well. That's kind of a change here.
Another change is the portfolio value, which has been increased significantly since Bank of Georgia share price increased, and as well as lari appreciated. You see a portfolio value increased by nearly $100 million after the June 30. That's two factors which influence the lowering the NCC ratio to 23.5%. Now looking at the kind of dynamics where we were. With the December 2019, this ratio was around 42.5%, and you see we are moving down to we have been decreasing significantly over the period of time. You see also that we are not too far away from our target at 15%, which is the throughout the cycle target what we have.
Let me highlight the leverage in our portfolio companies. The pharmacies' leverage didn't change much. It decreased to 1.6x. Hospitals leverage increased a little bit because of the EBITDA hit in Q2, and it's around 2.5x debt to EBITDA. Our target there is to decrease it to 0.5-2. Renewable energy has decreased a little bit to 8x. Education has decreased from 1.4x to 1x, and here in education, as you know, we are investing and we expect to grow both investment and the leverage going forward. Clinics and diagnostics has grown from 2x to 2.8x.
This is again because of the COVID, testing has been stopped as well as outpatient clinics who serve the COVID patients. We are actually rebooting the whole system. On the first half portfolio results and valuation overview, I will hand over to Giorgi, and he is well-placed to walk you through about this through the valuations.
Thank you, Irakli. Hello, everyone. Let me walk you through the valuations. Three things I would highlight on this slide is, as you know, we announced at the investor day that we will be hiring the external valuation firm, the same one that values our large portfolio companies to also value the private investment portfolio stage companies. That has happened at the end of the first half and the external independent valuation firm valued all private portfolio companies and the private investment stage portfolio companies.
When we combine that with the Bank of Georgia that has an observable price on London Stock Exchange and the water utility where we have an agreed exit route through the put call option structure, 90% of our portfolio is now externally valued. I would highlight that as part of the valuations in the first half, more in the second quarter, we saw that the discount rates went up again by 50 basis points to 100 basis points, but we saw that the discount rates also stabilized at the end of the first half. You may recall in the first quarter, discount rates went up by around 200 basis points.
We are also seeing that subsequent to the end of the first half, discount rates actually improved following the stabilization as you saw on the global markets, the share prices have rallied a little bit over the last few weeks. Lastly, I will highlight that this was the first time we actually valued our put and call option structure of our water utility business. The 20% was valued by looking at the exit route in this business, and we will talk about what that valuation translated into. Generally, water utility business had a very strong first half. It was a valuation gain that we recorded in this business.
With that, if we go to the next slide, we'll see that our portfolio value increased by GEL 100 million, approximately during the second quarter. The key contributors here were that when we look at the listed and observable portfolio, it increased by GEL 19 million because of the Bank of Georgia share price increase and the gain that we had in the water utility business revaluation. It then decreased by GEL 23 million because we accrued dividends on Bank of Georgia, given that their ex-dividend date was last day of June. We had around 1.6% decrease in the private portfolio companies because of the negative value creations in the large portfolio companies and in other portfolio companies predominantly.
The growth of 5.5% because of the conversion of the loans that we had issued to our beverages and the real estate businesses that we had discussed and announced at the investor day as well. We finished the quarter with GEL 2.7 billion value of our portfolio. On the next slide, you see how this GEL 2.7 billion is actually spread out, and I'll spend a few minutes on this slide. We have around 23% at the end of the quarter coming out from the listed and the observable businesses, where Bank of Georgia is around GEL 456 million. It was valued at GBP 13 at around the end of June.
Since then, as you know, it has rallied and the price has increased. The option valuation that we applied for the water utility business meant that we recorded around GEL 14 million gain in this business. It went up from GEL 139 million, which we had at the end of first quarter, to GEL 153 million at the end of the first half. When we look at the large portfolio companies, they make up around 51% of our entire portfolio, where the largest business is the retail pharmacy business with GEL 671 million, followed by hospitals at GEL 478 million, and the insurance businesses, both P&C and Medical, at GEL 240 million.
We have the investment stage portfolio businesses that make up around 444 million GEL in total, and it's 16% of our entire portfolio. The other businesses, which are approximately 10% of the overall portfolio. Over the next few slides, we will look at the performance of large and the investment stage portfolio companies and how this performance translated into the various valuations. Retail pharmacy, as it was said earlier, the recalibration of the prices due to the exchange rate depreciation. If we look at year to date, GEL has appreciated actually more than or close to 15%. It's one of the strongest currencies that is observed in emerging markets and the frontier markets.
That meant for a business like retail pharmacy, which is also a dollar-related business in this case, because they import products, and they had to recalibrate their prices. That price recalibration in the second quarter meant that the revenues were slightly down because of this recalibration translating into the price deflation. However, you know, we are seeing the strong momentum in this business and the EBITDA growth that you see here, 11%, that was also impacted by a higher base EBITDA last year because of the existence of the government subsidy on financing the certain income taxes. For the personal income taxes where we had the benefit last year, that was not the case again this year. That meant the slightly lower EBITDA.
However, when we look at the valuations with the, you know, strong momentum and the outlook for this business, not much has changed in terms of the enterprise value. Multiple increased only slightly. Because we bought out the minority shareholders in this business, we bought out 10% already in the first half. Our ownership here went from 67%-77%. That meant that the value of the minority interest went down to 85 by 22%. Accordingly, the net debt increased because the cash left the business. The value of this business was not materially changed from the first quarter. It was GEL 671 million.
In the hospitals, as it was discussed earlier, the termination of the COVID contract with the government in March meant that the second quarter we started with the lower base. April was the lowest base, but we saw then in May and June significant improvements over the previous months. The revenues were down accordingly by 10%, and the EBITDA was down higher at 33%. As it was said earlier, we expect that this business will continue to recover as you know non-COVID hospitals become available for general public and as their utilization rates continue to grow. In terms of the valuations, this meant that the enterprise value went down in this business by around 8%.
However, we had still good operating cash collection in this business. Overall, the equity value was down by 9% to GEL 478 million. Given the drop in the LTM EBITDA, which went down by around GEL 7 million, the EBITDA multiple increased here only slightly from 10.3 to 10.5. In the insurance business, we had extremely strong performance by the P&C insurance business, where we are seeing the growth actually coming from the retail space and the SMEs. The growth of the issued or written premiums in those lines continue to grow. That has been driving the growth of the revenues by double digits.
On the combined basis, when we look at P&C and medical insurance, the growth was 9% in the second quarter. We had also a strong growth in the bottom line. The P&C's bottom line increased also by double digits, but on a combined basis it was the 9% growth. I would highlight that in the P&C business, actually, we had a very strong quarter when it comes to the combined ratio. Our combined ratio was less than 80% in the second quarter, an improvement compared to the previous year. In the valuation, the strong performance, and we present here the P&C valuation, translated into, you know, strong growth as well.
The value, equity value of the P&C business was up by 8%, notwithstanding that during the quarter they paid around 7.5 million GEL dividends to us, to Georgia Capital. Now switching to the investment stage businesses and starting with the renewable energy, which also had a very strong quarter. One, you know, difference that we as a management here look at is we look at the numbers in dollar terms, and I know here we present in laris, but it is a very dollar business. The pricing of the energy sales is determined in dollar terms, and most of the expenses are denominated in dollars. So if we look at this business in dollar terms, actually both revenue and the EBITDA were up.
The decrease in lari terms was because the exchange rate appreciated, so when we compare a year ago, exchange rate was higher. Revenue increased by 2%, and the EBITDA was up by 4.4%. What we are observing in this business generally as well is the average sales prices are growing in Georgia, not only within our business, but also on the market. They are up by double digit when we compare them against last year, and this business also paid us around GEL 4 million dividends in the first half. On the valuation-wise, again, there's this mismatch because of the currency.
Even though enterprise value was down by 1.5%, when we look at this in dollar terms, it was actually up by high single digits. Equity value-wise, which is up by 5% when we look at it in dollar terms, it was a much better performance for this business as it is a dollar-denominated business. Next we have the education business, which had a very strong quarter. You see the revenues were up by close to 29%. We see that the EBITDA was up by 20%. We're also seeing a very strong momentum in this business as they have exited or given the fading COVID impact.
As they are exiting the COVID, we are seeing that the intake for the new classes for the first graders that is starting from September this year is, you know, record high. We are seeing that the number of learners that we're expecting and budgeting is actually being exceeded. That means that when we look at the outlook for this business, we have already added, for example, 2,000 new capacity of learners, you know, last year, that is being filled up as we go. That means that in terms of the valuations, it's adding to strong growth momentum. You know, the value of this business increased.
If we go to the next slide, the value of this business increased by 25%, and that's largely because the strong intakes with actually increased prices are driving the revenue growth. On an LTM basis, while the multiple increased from 12 to 15.3, when we take into account the future earnings, if you look at the forward-looking multiple, it actually decreased from 12 to 11x when it's taking into account these, you know, future revenues that we expect to kick in from the growth of our capacity. If we go to the next slide, the clinics and diagnostics, similar reasons for the revenue decrease.
As you know, the COVID fading away and the termination of the contracts impacted their revenues and the EBITDA, which in terms of the valuation translated into a lower value as well that you see on the next slide here. If we go to the next slide, here. Eight percent enterprise value was down and around nineteen percent decrease in the equity value. The combined multiple went up from 9 to 9.8 on the back of, you know, around 15% decrease in the LTM EBITDA for the combined business. I will now switch to the liquidity and the dividend income outlook. Our liquidity remains very strong.
At the end of the second quarter, we had $234 million worth of liquidity, which is almost equally split between the marketable securities where we invest to generate yield and the cash that's sitting at bank of $123 million. During the first half, we had both Moody's and S&P review Georgia Capital's creditworthiness and the credit rating. Both the rating agencies increased our rating by one notch, and now we have B1 and B+ from S&P, which are comparable ratings if we compared the two rating agencies. Our dividend income outlook remains very strong. Again, this year, we expect between 90-100 million GEL dividends. Uncertain , we have collected, you know, in aggregate, close to GEL 40 million dividends, and in the second half, we expect between GEL 55 million-GEL 66 million dividends to arrive at Georgia Capital. With that, I will hand it back over to Irakli for the wrap up section16.8 GBP
We bought back of the company and we will continue to do so. There will be also the share buybacks for management trust going forward. If you look at the macro outlook, we have a very strong macro with 10%, more than 10% growth in the first half after double-digit growth of last year. Basically base is not low at all. On a high base, we are growing even you know stronger in double digits. Basically, if you look at the nominal GDP of the country, it reached $25 billion where three years or four years ago it was around fifteen to sixteen billion dollars. It's a big growth in nominal GDP in terms of the dollar terms.
We have a very significant value creation potential as GDP is growing. As you see the Q2 was flattish because of the COVID has stopped our kind of, I mean, the discontinuation of the COVID revenues. It stopped the growth and actually declined a little bit. We are getting back to our capacity utilization. It was in hospitals and the polyclinics. We are targeting to have a positive development in Q2 and Q3. Sorry, in Q3 and Q4. Here I will stop and I will move to the Q&A session. Shako, maybe you would give us the Thank you, uncertain
Read out some questions we have.
Just as a reminder, if you have any questions, you can type them in the Q&A panel, or you can press the Raise Hand button. I see we already have James Penn want to ask a question. James, please go ahead.
Yeah. Thanks, guys. You know, congrats on the numbers. I've got two questions. First is on the macro side. Maybe a bit abstract, but obviously a fantastic first half of the year and continuing from the second quarter. You know, a lot of positive developments, I guess, from Russia shutting down. I've read here recently on various news channels that people are worried now that Georgia might be getting used as a way to circumvent the sanctions on Russia. I don't know what you're seeing or how, I guess, Georgia is mitigating those risks. I guess particularly Bank of Georgia might be suspect here. I'd be interested to get your view on that.
The second question is on the buyback program. On the one hand, I know you wanna reduce debt. I guess a lot of that is at the operating company level on the hospitals, on the renewable income. You do have a lot of cash. On the other hand, we're talking about a NAV discount in excess of 60%, and that's still based on a very conservative Bank of Georgia valuation. I'm just wondering why we don't really push the boat out on the buyback program. I know there's liquidity constraints, but there are other options, right?
I'd like to get your thinking on the buyback because I mean, it's a bit ridiculous at the moment, I guess.
Thanks, James. Basically, to start from the first question, I mean, Georgia is making sure that, you know, sanctions are not avoided, and I think it's doing everything, including National Bank and the banks and the government in general. We've been always a very good partner to the West, to U.S. and the EU, and continue so. We don't see a problem there, to be honest. I think there is just talk, but there is no any real evidence of that happening. Actually, I highly doubt it would happen, me personally, because I think that it's kind of a very obvious where Georgia stands. On the second point, I hear you.
I think that we have in excess of 60% discount in valuations. You know, we are doing some buybacks, as you know. I agree with you, maybe it's not enough. We need to balance between the debt at holdco level, what we have. We have, as you know, the gross debt. We have $361 million of the Eurobond what we have issued. Issued the Eurobond, and we have cash offsetting some of it. Our net debt is around $130 million or so.
Basically, we think that this debt, which prevents the shareholders from accessing the cash generation of our portfolio companies, I think that removing it is as effective as buybacks, basically. Because I think that that would remove a big barrier that we have between shareholders and the operating company cash flows. We set ourselves a target of 15% of this net capital commitment to what we have communicated in our investor day, and we are moving towards that. As we move towards that, we would be happy to consider stepping up the buybacks.
Okay. Yeah, okay. You wanna buy back some of that Eurobond or pay some of it down before you increase the buyback or whatever dividend?
Yeah, yeah. Basically, the way we explain to the investors that it basically. When we are below 15%, we would be very bullish on buybacks. As we are away from 50%, like now, we are around 23.5%, we would do tactical buybacks, but we would not be very bullish in doing the big ticket sizes. Basically, as we are decreasing this NCC ratio, we will be increasing the buybacks amount. That's kind of our. It's a kind of volume bottom which we have introduced, which would guide you where our appetite for the buybacks is.
Okay, clear. Okay, thanks very much.
Thanks, James.
Thanks, James. We have several questions in the Q&A. We have a question from Firebird. Russians and Ukrainians who have come to Georgia because of the war are considered adding to the tourist revenues.
Basically, no, it's not considered as a tourist revenue. It's also a very strange way to. Actually, we don't know exactly how the Georgia counts, but we know that they are not counting it as a tourist revenue. Now, when we talk about when Nino talked about the remittances increase, it's not the remittances. It's not like Georgians who work abroad are sending money back. It's actually the Russians who work in Georgia but receive still income in Russia because they are mostly IT specialists who are doing their work out of Georgia, but they receive the income in Russia, and then they remit to Georgia. It's actually, it's not the remittances per se.
It is remittances on the book, but in reality is a service export, what Georgia is doing. Basically, we imported the workforce, which are the IT specialists, and we did not have these IT specialists. As you know, Georgians are not very good in numbers. They are very good in poems and painting the pictures and so on and so on creative stuff. We suddenly have a workforce which is doing the IT development. We imported that workforce, and then they are bringing in the dollar revenue by exporting the services. Now, in numbers, this is anywhere between 65,000-120,000 people.
We don't exactly know how many of those are, but that's kind of a range, what we have. On average, they make, you know, $50,000 a year income. If we count that even 50,000 are doing that, it's a $2.5 billion of income for Georgia, which is very significant. It's like a 10% of our GDP. It's a very significant number. Basically, structure of Georgian economy has changed significantly, and labor force changed significantly. Our potential GDP growth also changed significantly. We don't know exactly, you know, how it is counted, but what we know that we have a huge dollar income is appearing on our balance sheet. Plus logistics income is also will increase. It's increasing.
It will increase as Central Asia is diversifying its export routes through Azerbaijan and Georgia. We see some of the movements there. Anyway, there's a big changes. We are seeing also due to the war, for instance, we now started to export the Heineken beer in seven countries because the Heineken closed down its Heineken operations in Russia. Now they will have the license to export it. There's a lot of changes happening. That changes are gonna be mostly very positive. That's hence the double-digit growth of the economy on top of last year's double-digit growth. Our in-house view is close to 10%, 10% plus growth for this year of Georgian GDP.
Okay, I talked too much on that one. Let's move on to the next.
Thanks, Irakli. So the next question is from Steve Gorelik. He's asking, where are rest of 2022 dividends expected to come from? Is this from operating income generated by subsidiaries or sale of assets? And there is another one. Are you taking into account the expected proceeds from the sale of remaining 20% of water utility? If not, why not?
We count dividends only from operating companies coming as dividends. We don't count dividend income due to the sale of the assets. There's Giorgi, maybe you say more ex-
Yes.
More details how the GEL 100 million is broken down.
Sure. What we expect in the second half, this 55-65 that I highlighted earlier, that will be a combination of, the dividends from GHG, which is hospitals and the pharmacy businesses. Plus it will be from the insurance business, the P&C insurance business, where we expect the second tranche of the dividends. In the first half, they paid GEL 7.5 million. Additionally, Bank of Georgia's interim dividends, that we also expect to come in the second half. That's primarily these four drivers of that, of the dividends that we expect in the second half. I think I can also answer the second part of the question.
That water utility proceeds, Steve, what we look at is in the NCC ratio, the value of the 20% is included already in the denominator. We don't include it as a cash-like item, the 20%, because it's not yet cashed out. We look at it as part of the portfolio. It's included in the portfolio value, and that's how it participates in the NCC ratio calculation.
Thanks, Giorgi. The next question is, which sectors are contributing to the pharmacy's inability to fully pass cost increase related to Lari appreciation?
I think that this appreciation is happening very fast, so we cannot really price that fast. Over time, it will reflect, but not immediately.
Thanks. The next question is from Milos Do you see room for hospitals business to return to the pre-COVID EBITDA margins as the occupancy increases?
Absolutely. We think, maybe even Q4, we would get into the pre-COVID EBITDA margin level. We are Q4 maybe. Next year for sure, we think that we will get there, but I think that we can even get to Q4 to pre-COVID EBITDA margin level.
Thanks. There is a question about the healthcare services. What are your views about recent initiatives, regulation in the sector regarding minimum salaries for hospitals, workers of UHC participating hospitals, and what are you planning to do with Evex bond refinancing this year? Will it be a public offering?
We still on the first side of the question, we still need to see exactly what it is. It's there are a lot of talks on different forms, but we need to understand better. I think it's too early to discuss it. On the second point. Sorry, what was the second question?
The second question was about the Evex bond refinancing and the
Yeah.
First one was about the UHC partner hospital.
Giorgi, maybe you answer it. I don't know the details, but it's a small bond.
Yeah, it's a small bond. Yeah, to the best of my knowledge, it's not a public offering. It will be in a combination of IFIs and the local banks. No, there won't be a public offering to the extent we know.
Thank you. There is another one. Are there any news about the construction of power plants which are in your pipeline? When are they expected to be constructed?
We are, as you may know, expecting the government to sign the PPA. Until then, you know, I think it's very difficult to say when we're gonna construct. Without PPA, we will obviously not construct. We do have in our NCC calculations the committed capital for the construction, but at the same time, we do not have signed PPA to construct it. Let's see. I think that hopefully this year we will have a final decision by the government to sign the PPA and go forward with that.
Thank you. There is actually a comment from Jonathan Cary. Congratulations once again on the delivery by the management team. This is not a question, simply an opinion from a shareholder. As a shareholder, I applaud the buyback program. It's a sensible use of cash, but clearly the market is not currently overly receptive to the action. As such, while I do see it as worth continuing, I do hope that management continue to prioritize developing the existing businesses or indeed adding new operations should the opportunity present. You know your discount for what it's worth. I personally am happy for you to add to the operations bearing this in mind.
Thanks, Jonathan. Appreciate your comment. Any more questions, please raise your hand. Since there are no more questions, let me thank you once again for your commitment and for attending our Investor Day. We hope to see you soon. Here is another Firebird question: Can you discuss CEO transition? We will update you on that. We don't have anything new. Whatever we said in recent press release on the CEO transition, that is pretty much it, and we will update you in due course. We hope to have more news towards the end of the year. However, we are working very hard on all fronts.
We are happy with the management depth that we have and the upcoming senior executives in our team. We'll keep you updated on that. Thank you again and hope to see you soon on the roadshows which are now back on the agenda. Bye-bye.