Etalon Reports 1Q 2013 Operating Results, Board of Directors Change

14 April 2013

 

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 2013 based on management accounts.

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1Q 2013 Operating Highlights:

  • Despite the high base of 1Q 2012, new contracts sales during 1Q 2013 were 73 thousand sqm and RUR 5.9 billion, a year-on-year (y-o-y) decline of 5% in sqm and an increase of 6% in RUR;
  • Number of new contracts increased by 9% y-o-y to 1,454 in 1Q 2013;
  • Average prices increased 13% y-o-y to RUR 81 thousand per sqm in 1Q 2013;

Results primarily driven by two factors:

  • Changing units mix, with the share of studio, one and two room flats with a higher price per sqm increasing from 57% in 1Q 2012 to 73% in 1Q 2013;
  • High base effect: sales at Orbit peaked in 1Q 2012, and sales at Jubilee Estate were also at a local maximum in the first three months of 2012;
  • Share of Moscow Metropolitan Area (MMA) contracts in 1Q 2013 new sales was 22%, up from 14% in 1Q 2012;
  • The share of mortgage contracts increased to 18% for 1Q 2013;
  • Average down payment was 68% vs. 72% in 1Q 2012, but still significantly above the average of 50% envisaged by the Company’s business model.

1Q 2013 Operating Results

 1Q 20131Q 2012Change, %
New sales, sqm73,48177,726(5%)
New sales, mn RUR5,9235,5666%
Number of contacts1,4541,3389%
Average price, RUR/sqm80,60671,61113%

Sales by Region

 1Q 2013 sqm1Q 2013 share, %
New sales MMA15,87622%
New sales SPMA57,60578%

Mortgage Contract Developments

 1Q 20134Q 20123Q 20122Q 20121Q 2012
Share of mortgages18%18%13%10%10%

Quarterly Summary

 1Q 20134Q 20123Q 20122Q 20121Q 2012
New sales, sqm73,48194,48375,10269,15577,726
New sales, mn RUR5,9237,4155,5635,1955,566
Average price, RUR/sqm80,60678,48474,07375,12071,611

Corporate Governance Update

Etalon Group has invited a third Independent Director, Boris Svetlichniy, to join its board of directors. Mr. Svetlichniy brings to the Company 20 years of international financial and senior management experience and has held various senior finance positions at Orange Business Services, VimpelCom and GoldenTelecom. Mr. Svetlichny holds MBA from Carnegie-Mellon University and BBA in Accounting from the University of Massachusetts. Alexander Shkuratov has stepped down from his positions on the Board of Directors and as Advisor to the Chairman, and he will be leaving the Company.

Etalon Group is committed to improving its corporate governance, which it views as an important element of sustainable shareholder value creation. The Company has enlisted Prism Cosec, one of the leading company secretarial and corporate governance practitioners, to help further improve its corporate governance practices going forward.

Commenting on the 1Q 2013 operating results, Etalon Group President Vyacheslav Zarenkov said:

“The first quarter of 2012 set a high base due to peaks in sales at Jubilee Estate and Orbit. Despite this, we are pleased to have increased the number of contracts by 9% in 1Q 2013.

“We are seeing a change in the unit mix, with the average apartment size decreasing from 64 sqm to 52 sqm in 1Q 2013, which has naturally increased the average price per square metre by 13%.

“The share of MMA in our NCS is 22%, representing a high quality geography mix, and the share mortgage sales are at a historical high of 18%."

“We are happy to welcome Boris Svetlichny to our Board as the third independent director. Boris is a good addition to our team and will bring on board extensive financial and management experience from international public companies. We have also enlisted Prism Cosec to help us further improve our corporate governance and control systems .”

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 31 March 2013.

Etalon Group President Viacheslav Zarenkov, CFO Anton Evdokimov and Head of Investments Dmitri Boulkhoukov will present the 1Q 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/rm6n3t6x

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 (0) 20 8123 1328

E: info@etalongroup.com

M: Communications

Sam VanDerlip

T: +44 (0) 20 7920 2356

vanderlip@mcomgroup.com

Tom Blackwell

T: +7 495 363 2841

Blackwell@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 especially throughout the last 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 primarily 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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15 April 2013