Etalon Group Announces Updated Construction Programme

21 November 2012

 

St. Petersburg – Etalon Group Limited (“Etalon Group” or the “Company”), one of Russia’s largest and long-established residential real estate developers, today announces its updated construction programme for the period 2013-2015. The updated deliveries plan is set out below:

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Annual Deliveries Plan

 201320142015
Planned Net Sellable Area ("NSA") Deliveries, ths sqm467582707

Quarterly Delivery Plan

 201220132014
 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q
Planned Net Sellable Area ("NSA") Delveries, ths sqm-107146111-28-4394240211289

As is public knowledge the city administrations in both Moscow and St. Petersburg have changed in the last 18 months. This has led to sector-wide delays in the residential development process and issuance of necessary permits.

In connection with these sector-wide delays, a significant amount of NSA that Etalon Group had expected to transfer to customers in 2012 in the original construction programme is now expected to be transferred to customers in 2013. Similarly, the majority of NSA that Etalon Group expected to transfer to customers in 2013 is now expected to be transferred to customers in 2014. For the same reason the launches of sales of Tsar’s Capital and Etalon City have been moved from late 2012 into 2013.

This shift is not expected to have a material impact on Etalon Group’s expected cash collections for 2012, but is likely to have a modest impact on new contract sales for the year. The Company continues to see strong consumer demand, which is driving contract sales and cash generation performance, having collected c. US$ 575 million from residential pre-sales to date in 2012 (based on unaudited management accounts).

Etalon believes that the situation with issuance of construction-related permits in Moscow and St. Petersburg has now stabilized and is confident in its updated construction programme.

Commenting on the revised construction programme, Etalon Group President Viacheslav Zarenkov said:

“Our updated programme reflects shifts in project timetables related to delays affecting the entire sector. This situation is something that we believe the market has been aware of, and is largely due to the recent changes in both the Moscow and St. Petersburg governments. We believe that this situation has stabilised, and are therefore fully confident that our updated construction programme is measured and achievable.

“We see good performance with the recently-launched sales at Letniy, and we have also received the master plan for the second land plot at Lastochkino Gnezdo in St. Petersburg, enabling us to move ahead with this landmark project as planned.”

Etalon Group CFO Anton Evdokimov added:

“We completed our post-IPO acquisition programme this summer, while maintaining a very strong cash position due to successful pre-sales. This puts us in an excellent position as we review a number of acquisitions both in Moscow and St. Petersburg to further expand our land bank and operations.

“We remain very optimistic about the fundamentals of comfort class residential real estate, which represents a great opportunity for a respected and well financed business like Etalon as demand for our product remains strong and consumers are increasingly ready and able to spend.”

Webcast and Conference Call

Etalon Group will hold a webcast and conference call at 18:00 Moscow time (14:00 London / 09:00 New York) to discuss its updated 2013-2015 construction programme. Management will briefly present the updated programme and then answer questions from analysts and investors. The call will be held in English.

Webcast: http://www.media-server.com/m/p/tkcq9nd2

Conference call dial-ins:

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Toll numbers:

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

Toll free numbers:

Russia: 8 10 8002 4902044 (from Moscow only)<br/>UK: 0808 109 0700<br/>USA: 1 866 966 5335

Conference Call Password: Etalon

Other recent announcements are available on the Etalon Group website: www.etalongroup.com/investors/news/

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Etalon Group IR Team

T: +44 (0) 20 8123 1328 <br/>E: info@etalongroup.com

<br/>M: Communications

Sam VanDerlip <br/>T: +7 495 363 2845<br/>vanderlip@mcomgroup.com

 

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About Etalon Group

History and Overview

Founded in 1987 by Viacheslav Zarenkov, Etalon Group has become one of Russia's largest residential real estate developers. With a 25-year history, the Company has one of the longest and most successful track records in the Russian real estate industry.

Today Etalon Group is a leading player in Russia’s “Golden Triangle” – St Petersburg, Moscow and the greater Moscow area, with a dominant position in the “comfort class” segment. The Company’s strong foothold in these markets is reinforced further by its unique nationwide sales network covering 9 of the 10 wealthiest regions of Russia, and spanning 30 cities in total. The sales network generates up to 30% of Etalon Group’s revenue, and has been an important source of stable demand even throughout the crisis.

Etalon Group is one of the only truly vertically integrated businesses in the Russian real estate sector. The Company does everything from acquiring land to sales and cash collections from its customers, which enables it to maximise margins throughout the value chain, and reduces exposure to cost inflation from external service providers. Etalon Group is a company of scale, with a total of 40 business units that employ over 4,000 people, two strong management companies, five general contractors, 16 subcontractors, a crane company, a brick factory and a nationwide sales network.

Etalon Group’s strong financial position is driven by its effective pre-sales business model. The Company aims to pre-sell 70-90% of all residential space before a building is delivered. It also targets an average down payment of 50%. This allows Etalon Group to finance the construction process using money from customers, as opposed to using the loans or funding from shareholders.

In addition to homebuilding, Etalon Group’s long history and superior quality offering has helped it to become a trusted industrial construction partner for clients like General Motors, Toyota, Ford Motors, Bosch, Siemens, Nissan, Suzuki and Gazprom in northwest Russia.

Since 20 April 2011, Etalon Group Limited has had its GDRs traded on the Main Market of the London Stock Exchange.

Operational and Financial Highlights

As of 31 December 2011, Etalon Group’s portfolio comprised 31 projects, with a total of 3.25 million sqm of unsold net sellable area ("NSA") in the St. Petersburg and Moscow Metropolitan Areas. Jones Lang LaSalle valued this portfolio at USD 1,714 million, a 20% increase in the market value from YE 2010.

For the year ended 31 December 2011, Etalon Group’s new contract sales totalled 270,012 sqm, or RUR 18,306 million. Deliveries in 2011 totalled 328 thousand sqm.

The Company recorded revenues of RUB 22.7 billion (USD 774 million) and EBITDA of RUB 8.2 billion (USD 279 million), with an EBITDA margin of 36% for the year ended 31 December 2011, making it one of the most profitable players in the sector.

Etalon Group’s net cash position at 31 December 2011 was USD 167 million, leaving it well positioned to fund continued dynamic growth.

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22 November 2012