Our Strategy

Georgia Capital — Strategy

Georgia Capital strategy is based on three key pillars

Georgia

Diversified Resilient Economy

  • Diversified non-commodity reliant economy with consistently high GDP growth across the last decade

Top-ranked in economy environment indices

  • Seventh in "Ease of Doing Business" (2020).
  • Sixth among 45 European countries by Economic Freedom Index (Heritage Foundation, 2020) and #12 internationally.
  • Low corruption and bribery risk (Transparency International, 2019 and Trace International, 2019).

Investment-led GDP growth - 5.0% growth in 2019

  • Development of large public infrastructure programmes backed by multilateral international funding driving potential GDP growth.

Historically low inflation with 3% target set from 2018 by National Bank of Georgia

3-fundamental enablers

Access to capital

  • Only Group of its size and scale focused on investing in and developing businesses in Georgia.
  • Uniquely positioned given the access to capital in a small frontier economy.

Access to management

  • Reputation among talented managers as the – “best group to work for”.
  • Attracted talents have demonstrated solid track record of successful delivery.
  • Proven DNA in turning around companies and growing them efficiently.
  • Platform for entrepreneurs to build institutions (entrepreneurship culture).
    • If we do not have the right people then we do not invest: no matter the attractiveness of the opportunity.

Strong corporate governance

  • Strong Board comprised with mainly of independent directors with extensive international experience.
  • Outstanding track record in institutionalising businesses, creating independently run/managed institutions.
  • Approximately 40 employees at the holding company level.
  • Highly experienced management team in each portfolio company with a strong measure of independence.
  • Aligned shareholders’ and management’s interests by share compensation.
  • High level of transparent reporting.

Capital allocation & Managing portfolio companies

Capital allocation

  • Highly disciplined approach to unlock value through buying, developing and monetising businesses.
  • GCAP develops and grows portfolio companies to equity value of GEL 0.5bln+ and realizes proceeds through exit, as investments mature.
  • Disciplined when investing by buying at reasonable prices.
  • 360-degree analysis to be performed when evaluating capital returns, new investment opportunities or divestments.
  • Exit options are set prior to making an investment decision.
  • Georgia Capital does not have capital commitments or a primary mandate to deploy funds or divest assets within a specific time frame. As such, it focuses on shareholder returns and on opportunities which meet its investment return and growth criteria.

Managing portfolio companies

  • Attracting and developing talent is a top priority.
  • Aligned management style with institutionalised/ noninstitutionalised portfolio companies.
  • Share ownership plans (proxy shares) for portfolio companies’ management.

Two new strategic priorities announced on 2020 Investor Day

Georgia Capital has introduced two new strategic priorities on Investor Day on 12-Nov-20:

Realise the value of one of the large portfolio companies, through a trade sale, over the next 18-24 months

Large portfolio companies (63.9% of total portfolio value at 31-Dec-20) are companies that are close to reaching a GEL 0.5 billion+ equity value. These are growing, market leading, cyclically resistant businesses: Healthcare Services, Retail (pharmacy), Insurance (P&C and Medical) and Water Utility.

Divest the subscale portfolio companies over the next 2-3 years

Subscale portfolio companies (7.4% of total portfolio value at 31-Dec-20) are companies, which the Group currently believes offer less scalable growth potential (“other portfolio companies”). Housing Development, Hospitality and Commercial Real Estate, Beverages, Auto Service and Digital Services businesses are included in the “Other” category.