Hello, everybody. Thanks for joining our Q1 results call. Let me outline our agenda for today, and then we will move to Q&A after we do the presentations. So the presentation is we'll start with the key developments, and I'll talk about that. Macroeconomic update for Georgia will be done by our Chief Economist, Nino Vakhvakhishvili. Q1 performance overview will be done by me, as well as, and then we will have Giorgi Alpaidze, our CFO, talking about the valuations of our portfolio company, liquidity outlook, and dividend outlook. In the end, we'll do a wrap-up, and as I mentioned, we will do the Q&A session after that. So, in terms of key developments, we have a record high NAV per share, which reached GEL 90, which is up 8.6% Q-over-Q, and this is driven by mainly by BOG's outstanding performance.
However, we had a very good result for our portfolio companies. We had our EBITDA year-over-year grew by 17.3%. This is aggregate EBITDA of our portfolio companies. Revenue grew nearly 9% during this QoQ. So happy with the performance. The another point, the key development, is that our NCC ratio continued to decline, as a result of the portfolio growth. It's now below 15%. I think that's the first time in our history. We also did very well in terms of repurchasing the shares. We nearly bought back half a million shares in Q1, which is, and then in total we have a strong track record of buybacks.
Nearly 8 million shares we bought in the lifetime of GCap, which is around six years we are, our history is a six-year history, and that basically showed us it gives you a good demonstration how committed we are in the buybacks. So in total we, we spend nearly $90 million in buybacks, which is around 16.5% of our issued share capital. So we will continue to do the buybacks in line with our capital allocation strategy. In Q1 we also had a strong dividend inflows for the Q1 results. For the Q1 is, you know, it's not very active in terms of dividends. So nearly GEL 14 million in dividends we received in Q1. Let me ask Nino to talk about the macroeconomic update, and then I will talk about the Q1 performance.
Thank you, Irakli. Hello everyone, and thank you for joining our webinar today. As usual, I will do a very quick macroeconomic update of Georgia, and we will answer your question during our Q&A session if you have any. The Georgian economy continued to expand, and in the first quarter so you remember we had this two-year period of double-digit growth, and we had this high single-digit 7.5% growth last year. According to the preliminary estimates, the first Q1 growth came at 7.8%, which is above the expectations. Also if you look at the overall economy, like in nominal GDP in U.S. dollar, almost nearly doubling over the three-year span.
IFI s after the revisions done by Geostat of our national accounts, so IFIs started to revise our outlook upward, while the medium-term outlook is remaining the same as Georgia is one of the top performer in terms of GDP growth and is expected to be so in the medium term. On the inflation side, we had the sharp disinflation during 2023, and according to the latest number, headline inflation is 0.5%, versus the 3% inflation target, and the National Bank of Georgia started exiting from tightened monetary policy last year and it continues to do so. And the latest number for the financing rate is 8.25%, so the National Bank of Georgia did the 125 basis point cut during the first quarter. On the next slide we are showing the significant improvement in our external balance sheet in terms of current accounts.
So we had current account deficit narrowed significantly last year, so after widening during the COVID times. And we often say that current account deficit is we are not worried about current account deficit whenever it is financed by the foreign direct investments, and so even during last two years foreign direct investments even exceeded the current account deficit. In 2022 current account the negative trade balance was partially financed mostly by the transfers, while last year it was mainly driven by the service sector, when tourism revenues as well as IT services contributed positively to the narrowing of current account deficit. There were lots of questions regarding the Russian FX inflows, so we see FX inflows to moderate, and we see that the share of Russia in total FX inflows to return to pre-war levels.
In terms of total inflows, we see some moderation in the first quarter, but last year it was the exceptional year, so excluding last year FX inflows is still very strong and stays at historic highs if we exclude last year's first quarter. These strong FX inflows, as well as the strong economic activity and the strong FX liquidity led the currency to be quite stable, so we had sharp appreciation, and after that from the second half of last year, the Georgian Lari remains quite stable. On the next slide we are showing also unemployment, which is again at its historic low at 15.3% as of the first quarter of 2023, and the strong labor market supports also domestic economic activity.
And it is interesting also to see that, so we are looking at the first quarter growth so last year and, in 2022 we were telling that, this growth is driven by external and internal factors, and mostly the external factors were the significant contributors to the growth as, we had, like, tremendous surging FX inflows. And this year we are seeing that, FX inflows are moderating, but we see domestic component to be quite strong. Like, we see loan growth to be at 20%, if we include exchange rate and if we exclude exchange rate is 70%, and we see also fiscal expenditure to be higher compared to last year. So domestic component of the growth is contributing significantly to our economic growth.
On the next slide, we kind of want to show the summary of the policy stance, and we think that policy stance is appropriate. So this surging FX inflows was appropriately used by the monetary and fiscal authorities to build the buffers, and we are seeing significant deleveraging of our external balance sheet, like, the reserves are increasing, current account deficit narrowing, debt is falling, and so current account deficit is narrowing. So if you look at the reserves, reserves are slightly lower compared to the year-end, and it is driven by the reduced reserve requirement for the attracted funds in foreign currency, in terms of options and interventions. So, despite the moderation of FX inflows, we see there is a significant FX liquidity, and it is also visible in this chart.
In the first chart, like, the National Bank of Georgia bought more than $200 million during the first quarter of 2024. As I have mentioned, the National Bank of Georgia continued to ease the policy, and they reduced the rate by 125 basis points as inflation remains close to 0%. On the fiscal side we see debt level to reduce sharply, and it is mostly in main so it is fully driven by the accelerating GDP growth as well as significant appreciation of exchange rate. So several words about the debt structure.
Despite the fact that 75% above more than 70% of the debt is external public debt, so the structure is good as we have, like, more than 50% of this external public debt is in fixed interest rate, which is very attractive during this time when there is a surging interest rate around the world, and weighted average interest rate for the public debt portfolio is 3.4%. So I guess it is the last slide for this quick macro update. Just several messages from us. The GDP is continued to be strong. Inflation is below 3%. We might see some pickup, but we expect average inflation to be close to target this year. We have robust external balance sheet with improving reserves, narrowing current account deficit, and reducing debt levels.
All of these led exchange rate to be quite stable, and in general policy stance which we think is appropriate for these current economic conditions. Thank you, and I will hand over to Irakli for to continue the presentation.
Thank you, Nino. Let me start with our aggregate performance of our portfolio companies. So we had a strong quarter in terms of the revenue development. We were nearly 9% up in Q1, year-over-year. Also, if you look at the Q1 last 12 months 2024 compared to Q1 last 12 months of 2023, we were also nearly 9.5% up in terms of the revenue. The EBITDA performance was even stronger. In Q1 we had a 17.3% EBITDA growth, and in last 12 months terms we had a 6% EBITDA growth. In terms of the operating cash flow we are up 31% in Q1. Last 12 months we are down, but in full year we expect very, very strong net operating cash flow results for 2024.
We expect more than 50% growth of the net operating cash flow in 2024. Also the cash balances are moderately down, but that's due to the growth of our funding the growth of our portfolio companies. And in terms of share development, you see that the listed and observable portfolio was biggest contributor, around 9.6%. The rest was little deflatish. The private portfolio was, as I said, up 70% in EBITDA terms, but in terms of the value creation in the hospitals and pharmacies were low, due to the in pharmacies we are growing our revenue and gross profit, and therefore the and we are investing for this growth. And EBITDA has not grown actually declined because of the investing in the growth. That's one reason.
Another one is that the hospitals have turned the corner, but as you see that in the second half of 2023 hospitals were performing quite weakly. Performance was quite weak, sorry. And in Q1 we turned the corner, and we are very confident that hospitals will perform extremely well in 2024 compared to 2023. So that private portfolio performance in terms of the NAV gross contribution should improve especially from the second half of the year. Now if you look at the NAV per share growth over time so over the inception of Georgia Capital its CAGR is 14.5%, and it's been increasing recently due to the accelerated growth in terms of the NAV per share formation. And we had a Q1 as you see we have a 8.6% NAV per share growth.
So, we are pleased with the CAGR, not happy with that. We want, we are targeting obviously higher 20%+, but we are on the right trajectory, and we hope that we achieve our longer-term objective of having a 20%+ NAV per share growth. In terms of the share buybacks, I mentioned about this, but you see a development how much we were buying each year, how much we were spending each year, the capital in terms of the buying shares, and you see also the share count how it has been decreasing over the period. As you saw, as you know in 2020 we did the acquisition of the GHG, Georgia Healthcare Group, with the Georgia Capital shares, and that is the result of the spike in the number of shares.
So that's, however, in total as I mentioned nearly 8 million shares we bought back during this period, which is around 16.5% of our issued share capital. Now in terms of the leveraging you see the decreasing trend. Year-over-year we had a strong decrease, nearly 5 percentage point decrease in NCC ratio. Now we stand at 14.8%. This is on the back of the portfolio value growth as well as debt declining from $152 million a year ago to $121 million. So we are on a right trajectory, and we continue our deleveraging story. And here is more, kind of, illustrative how this leverage ratio has been decreasing.
Now, you see a cash flow free cash flow formation which has been increased quite considerably, and that gives us the optimism for continued share buybacks which we will announce in due course. Now let me give the stage to our CFO Giorgi Alpaidze to talk about the portfolio company results and valuation.
Thank you, Irakli. Hello everyone. I will speak about the valuation work that we did in the first quarter. So as you know, during the first quarter we usually deploy the internal valuation method, so we haven't engaged a third party this time, but we rolled forward the similar valuation methodology that we used in the previous quarter that was done by Duff & Phelps, the third-party valuation firm. So you can see on this chart the overall overview of what changed. Broadly, on a big picture basis, we continue to apply similar methodologies as before. The multiples have largely remained the same as in at the end of the year last year or decreased slightly. I will walk you through each and every, you know, large end investment stage portfolio company how the valuations changed.
However, given the growth in the Bank of Georgia share price, in the first quarter the Bank of Georgia and together the listed and observable investments reached 43% of our overall portfolio. Large portfolio companies were 35%, and the investment stage was 15% while the other businesses were now down to 7%. Bank of Georgia continues to be our largest portfolio investment followed by the retail pharmacy which is our largest private portfolio investment and makes up about 17% of the full portfolio. In terms of the portfolio developments that you see on the next slide, here, you can see that during the quarter, you know, Bank of Georgia added more than GEL 300 million value to our portfolio, and the portfolio reached close to GEL 4 billion value at the end of the first quarter.
Given the recent performance of Bank of Georgia share price as well, now we can say we are above GEL 4 billion also. In terms of the value creation, we had education, clinics, and diagnostics, and the other business and insurance positively contribute to the value creation in the first quarter while retail pharmacy and the hospitals were negative contributors to the overall performance of our P&L in the first quarter. Now if we go through each and every business and we start with the performance of the retail pharmacy business, several key things here. As we now have the increased branch network from the end of fourth quarter, you may remember we added 40 stores in one single quarter. We are now seeing the benefits of that translate into the higher retail income.
So the income from retail was up by close to 9% in the first quarter. Wholesale income was down, but that was also a combination of the several smaller mom-and-pop stores closing during the quarter. We also saw that in the first quarter the same store revenue growth was positive for this business. It was up, you know, slightly up 0.6%, but it actually recovered from the negative, you know, same store revenue growth in the first quarter of last year. The number of bills issued increased. Average bill size also increased in this business, and we are seeing that we have now kept, and, you know, balanced the operating expense growth that came with, you know, the salary increases and the rent increases as a result of the increased network.
EBITDA was down as you see 24%, but the state of the business that we see now we would expect that this business will start recovering from this, you know, lower base in the first quarter, and from second quarter and beyond it should be recovering in terms of the EBITDA and delivering strong results. You can see in the valuations that on the next slide that because of this drop in the EBITDA our enterprise value here decreased by GEL 22 million. The cash conversion was strong which resulted in the net debt to EBITDA decreasing by GEL 2.6 million. So net net we had about GEL 20 million negative contribution to the equity value. The multiple remained the same here at 9.7x, and the net debt to EBITDA increased but only slightly to 2.3x.
Next is the hospitals business, and here, you know, the number of regulations that were adopted last year business has now started to, you know, digest these regulations, and it has translated into the growth in the revenues. The numbers that you see on this chart that shows 1.5% growth, but they're not necessarily comparable because last year we had the Batumi Hospital which, you know, we sold at the end of last year. So if we, you know, retrospectively update these numbers we should be looking at, you know, more than 7% growth in the revenues on a like-for-like basis, while in the EBITDA which is down by 13%, and that is way lower than the decrease that we had in the fourth quarter which was close to 50%.
Now in, instead of 13% we would have a, the EBITDA being down by 8% if we normalize this EBITDA on the Batumi Hospital sale as well. Otherwise we also see strong results in the, you know, in the growth of the occupancy rates in both large and specialty hospitals and in the regional hospitals. And additionally we continue to diversify our revenue sources, and in the first quarter, our reliance on the government, you know, revenues also decreased by about 3% compared to the previous quarters which is, you know, very positive development for this business. On the next slide you see that in terms of the valuations here the drop in the EBITDA also meant that the enterprise value decreased by about GEL 12 million.
We also had the negative cash conversion, so some of the receivables actually were delayed into the second quarter, so therefore the net debt here increased by GEL 18 million. In total we had a GEL 30 million negative value creation. The implied LTM EV/EBITDA remained the same, and net debt to EBITDA increased because we had a decrease in the EBITDA on the LTM basis. Next we have the insurance business. So here now we combine both P&C and the medical insurance. Both businesses did well on a top-line basis, so the overall growth was 19%, and then the growth in the P&C business itself was actually more than 20% as we continued to grow our portfolio of the diversified portfolio of the auto insurance, property insurance, agriculture insurance, corporate insurance, and etc.
On the P&L basis, P&C insurance increased by 11%, however the medical insurance income decreased slightly, and that was a result of, you know, February and March being very heavy in terms of the, you know, various viruses circulating in the country that resulted in the higher loss ratio for the business. However this higher number of viruses were actually pretty positive for the polyclinics and the diagnostics business in addition to the hospitals, and we will see that later in the slides. I would highlight that, you know, broadly the combined ratio remained largely well-controlled within the P&C insurance business. In the medical it was slightly elevated, but generally within our expectations. In terms of the valuation, here the implied multiple across both businesses if we go to the next slide we will see that Shako Bukia, can we go to the next slide? Yes, here.
We will see that because of the small increase in the net income we had a growth in the equity value of GEL 6 million, however this business paid us dividends of GEL 5 million, so as a result the overall performance on an equity value basis was flat. We have no leverage in this business, and the multiple remained the same. The next we have the investment stage businesses, starting with the renewable energy business. So key highlight here is all hydros and the wind farms were operational in the first quarter. Unlike the first quarter of last year when we had one small hydro stopped for renovation works, so as a result we had a recovery in the electricity generation of 46% and a similar recovery in the revenues that you see in the dollar terms.
EBITDA was also up close to 100% because all the growth went to the bottom line, and here, the selling price average selling price was flat over last year. The cash that was generated was used together with the cash that we had on hand to buy back and cancel $5.1 million worth of bonds which decreased the aggregate size of the bonds of this business from $80 million to $75 million. So now their leverage is lower which you can see on the next slide where we discussed the valuations, and we didn't have any material changes here. But the leverage went down from 6.8x to 6.4x in this quarter, and you know we have a target of six times, and the leverage is trending towards less than six times in the coming quarters. Next we have the education business.
So in the education business, we continue to see, you know, strong results. Given the strong index that we had in the fourth the third and fourth quarter last year we have recorded about 33% growth in the revenues in lari terms. I want to highlight here an important factor that the premium school that we own which is the British Georgian Academy charges, the, learners in dollar, terms, so any currency movements actually impact, the lari revenues there. And over the last two years we had a strong appreciation of lari as you know, so that impacted negatively the lari revenues. If you look at it on a constant currency basis the revenue would be up actually by 40% instead of, 33%, and if you look at EBITDA which is up by 10% on a constant currency basis it is actually up by close to 28%.
So overall in dollar terms the business grew in much better terms than in lari terms. Key things I would highlight here is that we have reached 81% total capacity utilization on the enlarged basis, so when we count in all the campuses, all the extensions of the existing campuses that we added, and we currently have close to 6,000 learners in our capacities, you know, more than 7,000 learners, and we're looking to add more capacity for the upcoming September 2024-2025 school year. This, you know, great performance translated into the higher valuations for this business as you can see here, and overall the value of this business increased by GEL 13 million, most of which came from the growth in the EBITDA. Net debt was also, you know, positive here which meant that it decreased by GEL 4 million that also added to the valuation.
Multiple decreased towards 16.2. You know that we also look at the forward-looking multiple here which if we look at one year forward, so on a 2024-2025 academic year, then we have, you know, this forward-looking multiple coming down to 11. So the 16.2 becomes 11 on a one-year forward-looking basis. And net debt to EBITDA and leverage is pretty strong in this business which is about 1.2x. The next business that we have is the clinics and diagnostics that has, you know, benefited in February and March, from the higher admission rates, in the country. You see here that the admissions in clinics decreased by 16%, and the total tests performed by diagnostics business was also up by 19%.
Overall that meant that the revenue in this business went up by 25%, and the EBITDA obviously went up even higher, and it was about 83% higher up than last year, and it reached GEL 3.6 million in the quarter. So good performance here, gross profit margins, EBITDA margins also improved, you know, on an overall basis. You know that we try to open up one or two new clinics every year, and we continue to be on track for the, for this year as well. In terms of the valuations this also, meant that, you know, we had, you know, EBITDA growing and generating about, close to GEL 6 million value creation. Net debt also decreased here that generated GEL 4 million, so overall we had GEL 10 million equity value creation across the both businesses.
Across both the multiple, decreased from 12x, close to 12x, to 10.6x, and so did the, the leverage which is now very close to our targeted leverage of 2.5x. Next, we have the liquidity. You know, we continue to have strong liquidity. Now that we have, you know, decreased our bond size from $300 million to $150 million, we're comfortable with the leverage between $20 million-$30 million. We had $26 million, and the decrease from the first quarter was, mostly due to the, buybacks that we did and the payment of the coupon, on our $150 million bonds. Last but not least, we have the dividend income outlook.
So this quarter was very important because we accrued dividends from the beverage, the beer business, which was the first time we ever received dividends from beer business given their strong performance, their very strong operating cash conversion. They were able to pay us GEL 5 million in the first quarter. We also received dividends from the P&C insurance, and we participated in the Bank of Georgia buybacks as we normally do. So in total we collected GEL 14 million. Our guidance for 2024 dividend income inflows remains unchanged. We still expect between GEL 180 million-GEL 190 million dividend inflows from our businesses in 2024. With that, back to Irakli for the wrap-up.
Thank you, Giorgi. So as, as I mentioned in the very beginning we have a strong NAV development. We have a strong EBITDA growth momentum, especially for large portfolio companies. Our outlook is pretty positive.
The leveraging continues. We delivered on our share buybacks, and dividend inflow is coming into the GCap pretty steadily, and will continue to do so. Our outlook for the economy is strong. We expect strong economic growth, and prospects are positive. Now let's move to the Q&A session.
Thank you, Irakli. Before we start the Q&A, just a quick reminder. If you have any questions, you can type your questions in the Q&A panel below, or you can press the raise hand button and ask live questions. We have several similar questions on the geopolitics, such as this one. How do you see the geopolitical situation of Georgia? What impact can it have on the recent protests on the company?
So, basically, I see five or six questions very similar about the local politics and geopolitics, so I'll try to address it to all the questions in one. So, basically, the track record of Georgia has been that we always had some disagreements in the society, but in the end we moved forward stronger. So, I hope that this time will be the same, as the track record shows. We see the government say that they are going to move towards the EU, same the opposition. It seems like, you know, they have a different path through. But, I think that in the end the society agrees, and we move forward, towards next step of our EU integration which is the opening the talks.
Meanwhile we have a street protest regarding the law, and we hope that this also will be resolved in due course, as always does.
Thanks, Irakli. The next question is from James Bannon. What is your view of the exchange rate as foreign inflows moderate?
Nino, maybe you'll.
Yeah, I will address that question. So thank you for the question. So, first of all, when we are talking about the exchange rate, so there are different drivers. So the FX inflows is one of the drivers. Another drivers for to form the currencies, for example, demand and supply on GEL and demand and supply on the U.S. dollar.
So what we saw in the previous year, so at first in 2022 the appreciation came from the surging FX inflows, and last year it was especially from the second half of the last year it was mostly driven by the increasing loans in foreign currency. So the second part was the main component for the currency. So what we see now is that despite the fact that FX inflows are moderated we see that there is a significant FX liquidity in the country, and it is also visible in the interventions. So the National Bank of Georgia bought $200 million in the first quarter when these FX inflows moderated, so it means that there is a significant FX liquidity. So, despite the FX inflow moderation we don't expect any significant changes.
So we are, we are talking about the macro factors, so we, we don't see any significant macro factors which will affect the currency fluctuation this year and in the medium term.
Thank you. The next question is on the education business. So in the education business the utilization improved dramatically but profitability declined. Why is that? You would expect the opposite. This is the question from James Bannon.
Yeah, I can answer that one.
So James said partially because of the FX comment that I made earlier, but it is also because when we ramp up and we add so, you know, so much in terms of the OpEx and the learners and the teachers and the admin costs, you know, initially it all flows within the, you know, lower margins, but as we ramp up even further all that income flows into the bottom line directly because you don't have much more additional expenses. Those are the two main reasons. We have a strong outlook there.
And another one is basically we opened two new schools which occupancy rates are low which is dragging the whole performance down. So even though the occupancy overall increased but increased occupancy on the back of the schools which already had a high occupancy.
But there are two new schools which have a very low occupancy, and that is basically dragging the operating performance. But we are, you know, we have a strong outlook there, so, and we will be ramping up the occupancy of newly opened schools.
Thank you. The next question is from John Yan. What's the update on the compulsory third-party liability insurance, and how is the reinsurance business coming along?
So the government approved the bill which is basically that the compulsory insurance will kick in from the 1st of January 2026, and we expect this to be approved by the Parliament before the year-end. So basically now at least we have a certainty.
Outlook is, you know, we expect we hoped from 1st of January 2025, but it seems like it's going to be, you know, postponed for one year, but with the certainty that now we have some indication from the government approving this, approving this bill.
Thank you. How big would you be comfortable with Bank of Georgia becoming as a proportion of the portfolio? That's the next question.
We are running very concentrated portfolio in general. I mean, so basically the, for us the absolute value and relative values are important. That's what we are looking at. So, it's. We don't look at the as a proportion of the portfolio.
Would you have any color on domestic saving flows and potential implications for possible exits on the private book if you would consider exiting to the domestic market?
You see, the capital formation itself is becoming pretty strong in the country, and we see a strong deposit growth, strong savings. The pension fund, the local pension fund is growing its assets pretty fast. So I don't exclude, probably it's not—I mean, you see that the bond market, local bond market is actually pretty well operational. We placed $150 million of bonds, of which more than 50% was rented to retail hands. So that's kind of the positive over it, but I doubt that in short term we can do the equity placement, but maybe in a medium- to long-term would be possible to do an exit of the local market.
Thank you. The next question is from Anton Berg. Thanks for the call. Do you have an update on the sale of any portfolio companies?
Also with regards to buyback capital allocations, will it come from the year's dividends, or can you increase leverage in any portfolio companies?
Basically, on the sale we cannot really give you an update. It's kind of private discussions, but sale of the portfolio company. But on the buybacks we will do the buybacks, and one of the things is that we are expecting strong dividends coming into the end of the Q2 and Q3. So this year we will do the buybacks from the cash flows which are generating. This is in line with our past track record of doing the buybacks.
The next question is from John Yan. For other businesses are you looking into selling them, or you may grow some of them?
Mainly selling, but there could be some opportunities to grow to sell. So basically the, but the idea of it is to sell basically the other businesses.
Thank you. I think there are no open questions, as of now. Maybe we can wait a couple of minutes.
Thank you everybody. We have no more questions. Thanks, and stay tuned, and we are obviously as always open to your questions if you have some bilateral inquiries. Appreciate your time, and see you soon. Thank you to call. Bye-bye.
Goodbye.