Etalon Group Board Meeting Results

17 November 2013

 

The Board of Directors of Etalon Group Limited (“Etalon Group” or the “Company”, LSE ticker: ETLN), one of Russia’s largest and longest-established residential real estate developers, held a meeting at Ogier House, St Julian’s Avenue, St. Peter Port, Guernsey, on 15 November 2013.

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Etalon Group business strategy and management team enhancements

The Board has approved key principles of the business strategy to 2022 and established a working group to elaborate and refine the Company’s strategic options, which will be communicated to the market upon completion.

The Board has also approved the following changes to the Company's leadership:

  • Viacheslav Zarenkov will focus on strategic development as the Chairman and President of Etalon Group;
  • Anton Evdokimov has been appointed CEO and First Vice President of the Company;
  • Boris Svetlichny has been appointed CFO of the Company, and will remain on the Board as an Executive Director.

These changes will take effect from 1 March 2014 in order to ensure a smooth handover by the management team.

Changes to the Board of Directors

Kirill Bagachenko has been appointed to the Board of Directors as an Executive Director, and will focus on Corporate Investments & Investor Relations.

Peter Touzeau has resigned from the Board of Directors as Non-Executive Director in connection with his decision to accept a position outside of the Company.

Management incentive programmes

The Board has approved an updated incentive policy for all of the Company's management that increases the role of Etalon Group's consolidated financial results in determining employee bonuses. As part of this incentive policy, members of the top management team will receive bonuses based on the performance of the Company's GDRs. The Board estimates that the annual value of this five-year programme will not exceed 3% of Etalon Group's annual profit for each corresponding year.

Dividend policy

The Board has approved a dividend policy whereby the Company will pay out in the form of dividends between 15% and 30% of its IFRS net profit adjusted for non-cash items if warranted. Under the policy, the Board is to recommend semi-annual dividend payments within this range, taking into account the funding needs for the Company’s development programme and pre-sales dynamics. This policy will take effect starting with the financial results for the second half of 2013.

Commenting on the results of the Board of Directors meeting, Etalon Group President Viacheslav Zarenkov said: “I am extremely pleased with the tangible progress we have achieved towards making Etalon Group a best-in-class company for investors and shareholders, in addition to our already strong reputation with consumers as Russia’s leading builder of comfort-class housing.

“I have led this Company for over 25 years, since founding it in 1987, and today Etalon Group has matured to a point where our stakeholders will be best served by appointing an experienced CEO to focus on day-to-day management, while I will maintain my influence on decision-making and will be able to concentrate on Etalon’s long-term development in my roles as President and Chairman of the Board of Directors.

“By separating the executive and strategic functions, I will be able to concentrate more on building long term shareholder value, and better-positioned to hold management accountable for successfully implementing the Board’s decisions. I will also be able to take a more active part in Etalon Group’s investor relations and government relations activities.

“Finally, on behalf of Etalon Group I would like to say thank you to Peter Touzeau for the valuable assistance and counsel he has provided to the Company over the last several years as a member of the Board of Directors. His contribution to our development is greatly appreciated and we wish him the best of luck in his next endeavours.”

Incoming Etalon Group CEO Anton Evdokimov said: “The Board has also made two important decisions designed to help build value for our shareholders over the long term. First, with the introduction of a dividend policy we will be able to give back part of the Company’s profits to its owners, while maintaining a balanced financial policy that allows us to take advantage of growth opportunities as they arise. Second, while some members of management are also shareholders, and therefore stand to benefit from the introduction of a dividend policy, the new incentive programmes are equally important, as they motivate all of the team to focus on creating shareholder value in all of our activities by tying potential bonuses to financial results and the long term performance of Etalon Group GDRs.”

Incoming Etalon Group CFO Boris Svetlichny said: “Since joining the Board of Directors I have been highly impressed by the level of professionalism, high standards of corporate governance, and sharp focus on the business displayed by all those whom I have met at Etalon Group. This is an exciting move for me and I am delighted to be joining the management team. Etalon Group has excellent growth potential and I am looking forward to making my own contributions to the further development of the Company.”

Biographical information for new appointments:

Anton Evdokimov

Mr. Evdokimov has 27 years of experience in the construction industry. He joined Etalon in 1998 as a construction project manager, was promoted to Head of Sales and later to the position of CFO. In 2012 Mr. Evdokimov was appointed CEO of the Group’s Russian management company (Management company Etalon CJSC). As Etalon Group’s CFO, Anton managed the IPO process and is well known within the investment community. He studied at the Leningrad Construction Engineering Institute, St. Petersburg State University and the International Banking Institute. He also received an MSc in International finance and an MBA in business strategy from the Open University Business School. Anton is a recipient of the Ministry for Regional Development’s Certificate of Honour.

Boris Svetlichny

Mr. Svetlichny brings over 20 years of international financial and senior management experience to the Company, and has held various senior finance positions at Orange Business Services, VimpelCom and GoldenTelecom (acquired by VimpelCom in 2008) which was a US publicly listed company on the NASDAQ, where Mr. Svetlichny was CFO and Treasurer. Mr. Svetlichny holds an MBA from Carnegie-Mellon University and BBA in Accounting from the University of Massachusetts.

Kirill Bagachenko

Prior to joining Etalon Group, Mr. Bagachenko was a senior equity portfolio manager at TKB BNP Paribas Investment Partners, where he co-managed funds with assets totalling USD 3 billion, investing across all sectors in Russia and the CIS. Kirill Bagachenko was voted one of the top three portfolio managers in Russia in the 2013 Thomson Reuters Extel Survey. His experience includes real estate, equity and fixed income investment funds, as well as pension fund management. Kirill graduated with honours from the St. Petersburg State University of Economics and Finance with a degree in finance and credit, and he currently teaches masters-level courses at his alma mater.

This and 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 20 8123 1328

E: info@etalongroup.com

EM

Sam VanDerlip

T: +44 7554 993 032

T: +7 916 306 6112

E: vanderlip@em-comms.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 more than 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 construction 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 2012, Etalon Group’s portfolio comprised 35 projects, with a total of 3.58 million sqm of unsold net sellable area ("NSA") in the St. Petersburg and Moscow Metropolitan Areas. Jones Lang LaSalle valued this portfolio at USD 2,369 million, a 38% increase in the market value from YE 2011.

For the year ended 31 December 2012, Etalon Group’s new contract sales totalled 316,466 sqm, or RUR 23,739 million. Deliveries in 2012 totalled 363 thousand sqm.

The Company recorded revenues of RUB 26.9 billion and EBITDA of RUB 6.9 billion, with an EBITDA margin of 26% for the year ended 31 December 2012, making it one of the most profitable players in the sector.

Etalon Group’s net cash position at 31 December 2012 was RUB 890 million, leaving it well positioned to fund continued dynamic growth.

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18 November 2013