Etalon Group Reports 41% Increase in IFRS Net Profit for 1H 2011

12 October 2011

 

St. Petersburg – Etalon Group Limited (LSE: ETLN) one of Russia’s largest residential real estate developers, today <br/>announces its auditor-reviewed IFRS consolidated financial statements for the first half of 2011.

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1H 2011 Financial Highlights:

  • Revenue grew on higher sales, increasing 9% year-on-year (y-o-y) to USD 330 million from USD 302 million in 1H 2010. 
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) reached USD 124 million, up 25% from USD 99 million in 1H 2010; EBITDA margin increased to 38% from 34% in 1H 2010.
  • Net profit for 1H 2011 increased 41% y-o-y to USD 96 million.
  • Financing from the IPO contributed to a more than 10-fold increase in cash and cash equivalents, which equalled USD 602 million at the end of the reporting period.
  • Etalon Group had a net cash position of USD 271 million at 30 June 2011, and gross debt of USD 331 million with maturities spread evenly between 2011 and 2015. 

1H 2011 Operating Highlights:

  • 1H 2011 new sales were 122.2 ths sqm, up 41% from 1H 2010.
  • Delivered net sellable area (NSA) volume increased by 113% y-o-y during the six-month period to 124.4 ths sqm.
  • RUB 14 billion construction services agreement signed with ExpoForum to build a major congress and exhibition centre in St. Petersburg’s Shushary town.

Update on Acquisitions:

  • 3 new acquisitions completed since IPO: Rechnoy project in the Nevsky district of St. Petersburg, and projects on Pulkovskoye Shosse in St. Petersburg and Dmitrovskoye Shosse in Moscow. These new projects have a total of 518 ths sqm of NSA and represent 40% of the Company’s planned acquisitions at the time of the IPO. 

  • Acquisition of new projects financed primarily from the Group’s operating cash flow, leaving IPO funding largely intact.

  • Strong pipeline of projects currently undergoing due diligence: 5 in the Moscow metropolitan area and 13 in the St. Petersburg metropolitan 
    area.

Project    

Status

Pulkovskoe Shosse in
St. Petersburg

Mass-market residential neighbourhood project in the Moskovskiy district of St. Petersburg, acquired in June 2011, has been increased from the original 50,000 sqm to 63,000 sqm.

Dmitrovskoe Shosse in
Moscow

Mass-market residential project acquired in June 2011 has been increased from the original 220,000 sqm to 350,000 sqm, representing 130,000 of unplanned NSA.

Rechnoy project in
the Nevsky district in
St. Petersburg

Multi-storey residential complex with total NSA of c. 105,000 sqm acquired in 3Q 2011. Good transport accessibility.

Etalon Group President Viacheslav Zarenkov said: “Our dominant position in the comfort class segment in Russia, combined with our nation-wide sales network, enabled us to achieve both robust revenue growth and a strong EBITDA margin.

“In the first half of 2011 we acquired high-quality projects and, more importantly, improved the economics of these projects post-acquisition by enlarging the original NSA.

<br/>“We saw significant increases in contract sales in 1H 2011 and in subsequent months. Sales were driven by a general market recovery and, particularly in our case, by a change in consumer preference towards low-risk, reputable developers. We believe only a small portion of current sales are due to investment purchases: instead, pent up demand is driving sales as many households are not willing to postpone apartment purchases for another two years. We see on a micro level that both households and companies are in much better shape than during the <br/>crisis of 2008.

<br/>“Our 1H 2011 income statement to a significant extent reflects the realities of the crisis period of 2008-2009. We had strong contract sales in 1H 2011, which we expect to be reflected in our 2012-13 financial statements due to our conservative revenue recognition policies.

<br/>“We are proud to have been invited to build ExpoForum, an extremely important project for the city of St Petersburg. This is another testament to our track record of delivering quality to our customers and partners, and our reputation and credibility that come from 25 successful years in the business.

<br/>“Structural changes in the competitive landscape as a result of the crisis made the acquisition of high-quality projects more feasible, while also enabling better deal structures with deferred and in kind payments.

<br/>“Our IPO proceeds and cash flow generated from our operating activity amount to more than USD 600 million. This positions Etalon well to acquire more high-quality projects and to create additional value for our shareholders.”

Conference call and webcast:

Etalon Group management will hold a conference call and webcast for analysts and investors on Thursday, 13 October 2011 at 17:00 Moscow / 14:00 London / 09:00 New York.

Dial-in and online viewing details are below:

Webcast: www.media-server.com/m/p/95dpkahd

Conference call toll numbers:<br/>London: +44 (0) 20 3003 2666 <br/>Moscow: +7 499 272 4337 <br/>New York: +1 646 843 4608

Conference call toll free numbers: <br/>Russia: 8 10 8002 1774011 <br/>UK: 0808 109 0700 <br/>USA: 1 866 966 5335

Conference call password: Etalon Group

Results presentation and financial statements

The 1H 2011 IFRS condensed consolidated financial statements are available on the Etalon Group website.

Etalon Group IR Team

T: +44 (0) 20 8123 1328

E: info@etalongroup.com

M: Communications

Sam VanDerlip

T: +7 916 306 6112

vanderlip@mcomgroup.com

Elena Shuliveystrova

T: +7 916 615 4008

shuliveystrova@mcomgroup.com

About Etalon Group

Etalon Group is one of Russia’s largest residential real estate developers. Since its inception in 1987, the Company has built a leading position in the St. Petersburg Metropolitan Area, where it has recorded an 11% average annual market share of total residential completions in the private sector (excluding individual constructions) between 2000 and 2010. It also has a growing presence in the Moscow Metropolitan Area market.

Etalon Group has a strong portfolio focused on large-scale residential complexes, targeting the lower middle class and upper economy class price segments, providing high quality living at affordable prices. The Company’s portfolio comprised 28 projects, as of 31 December 2010, with a total of 3.13 million sqm of unsold net sellable area (“NSA”) in the St. Petersburg and Moscow Metropolitan Areas. For the year ended December 31 2010, the Company recorded revenues of RUB 20.3 billion (USD 669 Million) and EBITDA of RUB 6.9 billion (USD 227 Million), with an EBITDA margin of 34%.

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13 October 2011