BGEO reports strong year, explains dividend plans ahead of split

BGEO Group, the investment company that owns the Bank of Georgia, grew profits 8.1% last year as it prepares to split into two in 2018.

Dividends of $39.1m were returned in 2017, including $18.3m in the fourth quarter, with plans for 2018 depending on the outcome of the planned demerger that could see it split into two London-listed groups: a Bank of Georgia banking business and investment company Georgia Capital Group. A shareholder vote to seal the deal is expected in April.

The board said it expects to recommend a regular annual dividend for 2017 totalling roughly 120m Georgian lari (GEL). But if the demerger is successfully implemented, it is intended that Bank of Georgia arm will instead, shortly after the demerger is completed, "declare and pay a dividend in a similar aggregate amount to shareholders then on the record".

"In the event that the demerger is for any reason not completed it is intended, subject to shareholder approval, that the board would implement the payment of this dividend, which would represent a payment of GEL 3.1 per share, payable in British Pounds Sterling at the prevailing rate, a 19.2% increase over the 2016 dividend."

Profits expansion for the group came off the back of strong performance of the Georgian economy, where gross domestic product growth accelerated to 4.7% in the fourth quarter from 4.4% in the third, taking full year growth to 4.8% in 2017 from 2.8% in 2016.

The banking business generated a record fourth quarter profit of 107.1m Georgian lari (GEL) that was up 49.8% year-on-year and up 16.5% on the third quarter. This led to a full year profit of GEL 369.5m that was up 25%.

Banking return on average equity in the final quarter increased by 7.8 percentage points over the year to 27.8%, averaging 25.2% for 2017 as whole, which was an increase of three percentage points.

The loan book grew 17.4% growth, on a constant currency basis, over the year, with 30.6% growth in retail banking.

The investment business grew revenue 74% to GEL 181.4m, with earnings before interest, tax, depreciation and amortisation growing 56% to GEL 106.6m.

Profit from the healthcare business, where BGEO's stake is expected to fall below 50% during the year and so was listed as a discontinued operation in the results, fell 21% to GEL 47.4m.

A $5.0m buyback was also completed during 2017, as part of the existing $50m buyback.