Etalon Group Reports 4Q2012 Operating Results

20 January 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 December 2012, based on management accounts.

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4Q 2012 Highlights:

  • Post-IPO programme completed in 2012 with additional acquisition of 883 ths sqm of NSA in Moscow Metropolitan Area (MMA) and St. Petersburg
  • Deliveries increased by 11% y-o-y to 363 ths sqm – fully inline with revised construction programme, including further successful expansion in MMA with 83 ths sqm delivered at Emerald Hills project in FY 2012
  • New contract sales in FY 2012 increased 30% y-o-y to RUR 24 bln and 17% to 316 ths sqm, driven by higher share of smaller apartments, generally inline with guidance
  • Total number of contracts in FY 2012 increased 38% y-o-y to 5,797; number of MMA contracts up 104% y-o-y to 1,082
  • Share of mortgages increased to 18% in 4Q 2012, highest level in Etalon Group’s history
  • In 4Q 2012 average down payment was 72%, significantly above the target of 50% envisaged by the business model
  • Transfers to customers decreased by 12% y-o-y to 241 ths sqm of NSA, primarily because 31% of 2012 deliveries were scheduled for 4Q 2012 and significant portion of these are expected be transferred in 1Q 2013
  • Cash collections from residential operations for the year increased to USD 648 mn

4Q Operating Results

 4Q 20124Q 2011Change, %20122011Change, %
New sales, sqm94,48384,09312%316,466270,01217%
New sales, mn RUR7,4156,03123%23,73918,30630%

2H Deliveries

 2H 20122H 2011Change, %20122011Change, %
Delivered, NSA sqm272,573204,04034%363,120328,43511%
Transferred to customers, sqm133,017160,875(17%)240,912274,558(12%)

Mortgage Contract Developments

 4Q 20123Q 20122Q 20121Q 2012
Share of mortgages18%13%10%10%

Quarterly Summary

 4Q 20123Q 20122Q 20121Q 20124Q 2011
New sales, sqm94,48375,10269,15577,72684,093
New sales, mn RUR7,4155,5635,1955,5666,031
Average price, RUR/sqm78,48474,07375,12071,61171,718

Commenting on the 4Q 2012 results, Etalon Group President Viacheslav Zarenkov said:

“We are pleased that we completed our post-IPO acquisition programme in 2012, acquiring two projects in MMA and two in St. Petersburg with a total of 883 ths sqm of NSA. This secures our residential construction operations through 2017. In 2012 we also substantially expanded our presence in the MMA, growing our footprint to 5 sizable, high-quality projects.

“This has been another successful year for the Company with robust sales dynamics: in 2012 the average down payment was at the very high level of 72% and the share of mortgage sales reached 18%, the highest level in Etalon Group’s history. We believe that the 17% y-o-y increase in new sales by sqm and 30% y-o-y increase in new sales rouble terms is inline with our average 25% guidance for the year.

“Cash collections from residential operations were also strong and amounted USD 648 mn (per management accounts). Our balance sheet remains one of the strongest in the industry and means Etalon Group is well positioned for new acquisitions.”

Conference call and webcast

<br/>Today at 14:00 London time (18:00 Moscow; 09:00 New York), Etalon Group will host a conference call and webcast to discuss its operating results for the year 2012.

Etalon Group President Viacheslav Zarenkov, CFO Anton Evdokimov and Head of Investments Dmitri Boulkhoukov will present the FY 2012 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/c6ubrwzy

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

These and other recent announcements are available on the Etalon Group website: http://www.etalongroup.com/investors/news/

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 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.