Etalon Group Reports 1Q 2012 Operating Results, Obtains Construction Permit & Launches Sales for Lastochkino Gnezdo

15 April 2012

 

St. Petersburg – Etalon Group Limited (“Etalon Group” or the “Company”), one of Russia’s largest and oldest residential real estate developers, announces its unaudited operating results for the three months ended 31 March 2012 based on management accounts.

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1Q 2012 Highlights:

  • New contracts sales during 1Q 2012 reached 78 thousand sqm and RUR 5.6 billion, a year-on-year (y-o-y) increase of 30% and 34%, respectively
  • Share of mortgage deals reached 10% vs. 6% in 1Q 2011
  • Average down payment increased to 72% vs. 66% in 1Q 2011
  • Share of contracts in the Moscow Metropolitan Area (“MMA”) reached 14%
  • Share of regional sales at a strong 34%
  • Continued robust pre-sale levels for buildings planned for delivery in 1H2012: Orbit 86%, Prestige 51%, Etude 86%*
  • Obtained construction permit and launched sales on Lastochkino Gnezdo project, the second largest project on sale in St. Petersburg with 319 thousands sqm of NSA. The project demonstrated phenomenal sales growth with 22% of the floor space* of the first building contracted at the date of the release.
  • Solid growth in new contract sales expected in 2012, to increase by 25% up to 337 thousands sqm

* For all: excluding parking

1Q Operating Results

 1Q 20121Q 2011Change, %
New sales, sqm77,72659,63830%
New sales, mn RUR5,5664,15834%

Quarterly Summary

 1Q 20112Q 20113Q 20114Q 20111Q 2012
New sales, sqm59,63862,54463,73784,09377,726
New sales, mn RUR4,1583,7814,3366,0315,566
Average price, RUR/sqm69,72160,45368,03071,71871,611

Commenting on the 1Q 2012 results, Etalon Group President Viacheslav Zarenkov said:

“In the first quarter we contracted 78 thousands sqm, demonstrating 30% growth in sqm and 34% in rouble terms, even though we were coming off a strong base in 1Q 2011. While this is a solid result, we are still behind pre-crisis levels, which reached 107 thousands sqm in the first quarter of 2008 in St. Petersburg alone.

“We are pleased that the share of mortgage sales has reached 10%. This is in large part thanks to our ability to offer our customers joint programmes with 17 major domestic and international banks, including Sberbank, VTB Group, Rosbank (Societe Generale), Absolutbank (KBC Group) and Raiffeisen Group. At the same time our exposure and risk to mortgage financing is relatively small, primarily due to our flexible pre-sale installment plans, which are more efficient for our customers.

“The average down payment hit a phenomenal 72% in 1Q 2012, significantly above our target of 50%. This has a positive impact on our working capital and is further evidence of rising consumer confidence in Russia's real estate market.

“The share of MMA contracts reached 14%, and is set to increase further as existing projects and new acquisitions start to develop. Last year MMA reached 30% of total deliveries and 45% of our total land bank.

“The share of regional sales is at a strong 34%, above our 30% target. Regional demand remained resilient even during the crisis, and has served as a solid source of cash generation.

“We had exceptional growth in pre-sale levels during the quarter. For the three projects we plan to deliver in 1H 2012, pre-sales levels have reached the following levels: 86% for the second stage of Orbit, 51% for Prestige and 86% for Etude*.

“Growth has continued to be underpinned by two key factors. We have seen a third successive year of rising consumer confidence, combined with a continued shortage in supply, particularly in the comfort class segment in which we operate. After the crisis, we saw a significant change in consumer preferences towards low-risk, financially strong, reputable names in the real estate market.

“We are constantly working to enhance our transparency. Following official guidance on delivery volumes, this year we are initiating guidance on new contract sales. In 2012, we expect new contract sales to increase by 25% and reach 337 thousand sqm.

“We are very pleased to announce that we have obtained a construction permit and launched sales on Lastochkino Gnezdo. With its sizable 319 thousand sqm, Lastochkino Gnezdo is the second largest project on sale today in St. Petersburg, located within our core geographies of the €˜6-7-8 belts’ around the city centre. This is a flagship project for us, and has already demonstrated phenomenal pre-sales rates, with 22% of the floor space of the first building contracted at the day of the release.

“With our dominant position in the comfort class segment, unique price to quality proposition to our customers and USD 490 million** of expansion capital, Etalon is fully equipped to convert pent-up and rising consumer demand into profit for its shareholders.”

* For all: excluding parking

** At 31 December 2011

Conference call and webcast

<br/>On Monday, 16 April 2012 at 14:00 London time (17:00 Moscow; 09:00 New York), Etalon will host a live conference call and audio webcast to discuss its 1Q 2012 operating results.

Etalon Group President Viacheslav Zarenkov, CFO Anton Evdokimov, Head of Investments Dmitri Boulkhoukov and Head of Strategy and Business Development Alexander Shkuratov will briefly present the 1Q 2012 operating results and answer questions from webcast and conference call participants. The webcast and conference call details are provided below:

Webcast: http://www.media-server.com/m/p/8aeu9ewo

Conference call dial-ins:

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Toll numbers:

London: +44 (0) 20 3003 2666

Moscow: +7 499 272 4337

New York: +1 212 999 6659

Toll free numbers:

Russia: 8 10 8002 1774011 (from Moscow only)

UK: 0808 109 0700

USA: 1 866 966 5335

Conference Call Password: Etalon

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About Etalon Group

Founded in 1987, Etalon Group is one of Russia's largest residential real estate developers. The Company operates in both the St. Petersburg and Moscow Metropolitan Areas.

Etalon Group has a strong portfolio focused on large-scale residential complexes, with a dominant position in the "comfort class" (lower middle class and upper economy class) price segment, providing high quality living at affordable prices. The Company's portfolio comprised 31 projects, as of 31 December 2011, with a total of 3.25 million sqm of unsold net sellable area ("NSA") in the St. Petersburg and Moscow Metropolitan Areas. For the year ended 31 December 2011, 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%.

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

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Etalon Group IR Team

T: +44 (0) 20 8123 1328

E: info@etalongroup.com

M: Communications

Sam VanDerlip

T: +7 495 363 2845

vanderlip@mcomgroup.com

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16 April 2012