Etalon Reports 2Q 2013 Operating Results

08 July 2013

 

St. Petersburg – Etalon Group Limited (“Etalon Group” or the “Company”), one of Russia’s largest and longest established residential real estate developers, announces its unaudited operating results for the three months ended 30 June 2013 based on management accounts.

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2Q 2013 Operating Highlights:

  • New contract sales amounted to 80 thousand sqm and RUB 6.75 billion, year-on-year increases of 16% and 30%, respectively;
  • Average prices increased 12% year-on-year to RUB 84 thousand per sqm for 2Q 2013;
  • The average down payment in 2Q 2013 remained at a high level of 71%;
  • The number of new contracts increased by 25% y-o-y to 1,548;
  • The Moscow Metropolitan Area (MMA) accounted for a 19% share of new contracts in the second quarter;
  • The share of mortgage contracts in 2Q 2013 was 23%;
  • Etalon Group launched sales at the Tsar’s Capital and Galant projects, both of which are seeing strong demand;
  • The Company continues to expand its regional sales network, which accounts for around 30% of Etalon Group’s sales, with the opening of a new representative office in Vladivostok;
  • In 2Q 2013, a 28 ths sqm building at the Emerald Hills project was completed, in line with the construction programme. A total of 467 ths sqm are to be completed in 2013 under the construction programme, which represents a 29% year-on-year increase from 2012;
  • Transfers to customers in the first half of 2013 increased by 45% vs. 1H 2012.

2Q 2013 Operating Results

 2Q 20132Q 2012Change, %1H 20131H 2012Change, %
New sales, sqm80,04269,15516%153,523146,8815%
New sales, mn RUB6,7465,19530%12,66910,76018%
Number of contracts1,5481,23525%3,0022,57317%
Average price, RUB/sqm84,28675,12012%82,52473,25713%

 Mortgage Contract Developments

 2Q 20131Q 20134Q 20123Q 20122Q 2012
Share of mortgages23%18%18%13%10%

1H 2013 Deliveries

 1H 20131H 2013 plan2013plan
Delivered, NSA sqm28,20128,000467,000

 

1H 2013 Transfers to Customers

 1H 20131H 2012Change, %
Transferred to customers, sqm156,567107,89545%

 

Quarterly Summary

 2Q 20131Q 20134Q 20123Q 20122Q 2012
New sales, sqm80,04273,48194,48375,10269,155
New sales, mn RUB6,7465,9237,4155,5635,195
Average price, RUB/sqm84,28680,60678,48474,07375,120
 

 

Commenting on the 2Q 2013 operating results, Etalon Group President Viacheslav Zarenkov said:

“We increased sales by 16% year-on-year in the second quarter, reaching 80 ths sqm. Our strong reputation enables us to increase sales volumes as we prepare and launch new projects that we have acquired over the past several years.

“So far this year we have launched sales at Tsar’s Capital and Galant, both of which are located in very appealing regions of St. Petersburg and have been highly anticipated by the market. Together with the projects launched last year, they offer an excellent choice of apartments for customers, and we expect to see continued growth in sales volumes going forward.

“Thanks to the launch of new projects in higher price categories and the availability of a wide assortment of smaller apartments, which are subject to the greatest demand, we are seeing increases in the number of new contracts, the volume of new sales and average prices per sqm.

“By expanding our partnerships with banks we have also seen the share of mortgage contracts increase to 23%.

“In line with previously announced expectations, a significant part of NSA delivered in 4Q 2012 was transferred to customers in 1H 2013. The 45% year-on-year increase in transfers to customers in 1H 2013 provides a strong basis for revenue and profit growth for the period.

“In line with our updated construction programme, we completed a new 28 ths sqm building during the second quarter of 2013. The majority of construction due to be completed this year is planned for the fourth quarter, and we expect a 29% year-on-year increase in deliveries for 2013 vs. 2012. Construction of all the buildings due for completion this year is currently fully in line with plans, as can be seen from the visual update published in early July.

“We continue to prepare to launch several new projects. We are confident that, despite volatile financial markets, the fundamental factors driving demand in St. Petersburg and the Moscow Metropolitan Area remain favourable. Etalon Group’s financial position is stable and we continue to be well positioned for further growth.”

Conference call and webcast

Etalon Group will host a conference call and webcast today at 14:00 London time (17:00 Moscow; 09:00 New York) to discuss its operating results for the three months ended 30 June 2013.

Etalon Group President Viacheslav Zarenkov, CFO Anton Evdokimov and Head of IFRS reporting Pavel Golovachev will present the 2Q 2013 operating results, followed by a question and answer session for conference call participants.

The dial-in and online viewing details are below:

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Webcast-Link:

http://www.media-server.com/m/p/pj6xxbmp

Toll numbers:

+44 (0) 20 3003 2666 – London

+7 499 272 4337 – Moscow

+1 646 843 4608 – New York

Toll free numbers:

8 10 8002 4902044 – Russia (from Moscow only)

0808 109 0700 – UK

1 866 966 5335 – USA

Conference Call Password: Etalon

Etalon Group IR Team

T: +44 20 8123 1328

E: info@etalongroup.com

M: Communications

Sam VanDerlip

T: +44 7554 993 032

E: 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 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 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 RUB 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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9 July 2013