Etalon Group Reports 1H 2018 IFRS Results

27 September 2018

 

ETALON GROUP PLC (“Etalon Group” or the “Company”), one of Russia’s largest and longest-established development and construction companies, announces its consolidated  IFRS financial statements for the six months ended 30 June 2018.

1H 2018 Financial Highlights:

  • Consolidated revenue reached RUB 24.7 billion
  • Consolidated gross profit declined by 20% year-on-year to RUB 4.9 billion
  • The net loss for the period amounted to RUB 1.2 billion
  • Operating cash flow less interest paid increased by RUB 8.4 billion and amounted to RUB 7.2 billion
  • Net debt declined to just RUB 3.8 billion as of 30 June 2018, from RUB 9.7 billion as of 31 December 2017

Other 1H 2018 Highlights:

  • Etalon Group contracted 263 ths sqm in 1H 2018, the highest in the Group’s history
  • Cash collections reached RUB 27.5 billion in 1H 2018

Commenting on the 1H 2018 financial results, Etalon Group Chairman of the Board of Directors Viacheslav Zarenkov said:

“Etalon Group’s financial performance year-on-year reflected a number of factors related to the Company's transition to the new revenue recognition standard, which involves partial revenue recognition under the previous accounting approach for contracts signed prior to 1 January 2017. As a result, revenue from finished real estate and real estate recognised upon project completion decreased year-on-year, from RUB 17.6 billion to RUB 8.8 billion. At the same time, the amount of revenue from real estate currently under construction and recognised under the new IFRS 15 standard more than doubled, reaching RUB 8.9 billion. We expect that strong new contract sales performance, which is significantly ahead of the guidance we announced at the beginning of this year, combined with the signing of acceptance acts for completed construction works, which normally occurs in the second half of the year and significantly impacts completion rates, by the end of 2018, revenue recognised under the new standard will compensate for the decline in proceeds from sales of finished real estate, as well as revenue subject to recognition under the old rules.

“It is important to note that the gross profit margin of our residential real estate segment in the first half of 2018 remained unchanged year-on-year at 27%. While the 1H 2018 net profit was impacted by one-off non-cash items.

“At the same time, high demand for Etalon Group properties, combined with successful measures to optimise working capital, enabled the Company to report impressive growth in operating cash flow, which amounted to RUB 7.2 billion before interest payments in the first half of 2018. This made it possible to declare a record dividend for 2017, to purchase a new project in the Moskovskiy district of St Petersburg, and to further strengthen the Group's financial position by cutting net debt by more than half, from RUB 9.7 billion at the end of 2017 to RUB 3.8 billion at 30 June 2018. This is especially important ahead of the transition from the pre-sales model to project financing and settlements through escrow accounts starting from 1 July 2019, in accordance with changes in regulation governing the sector.

“We would also like to highlight that, while 1H 2018 new contract sales increased by 27% year-on-year to RUB 27.5 billion, we have seen this growth trend continuing in 3Q 2018, creating a solid basis for the financial results for FY 2018.”

Conference call and webcast

Etalon Group’s management team will discuss the Company’s 1H 2018 financial results together with 3Q 2018 operating performance during a conference call and webcast for investors and analysts scheduled for mid-October 2018. Dial in and webcast details will be provided prior to the call.

The 1H 2018 IFRS Results presentation is available here.

This and other recent announcements are available on the Etalon Group website:<br/>www.etalongroup.com/investors/news/

Etalon Group IR Team

T: +44 20 8123 1328<br/>E: info@etalongroup.com

EM

Sam VanDerlip<br/>T: +44 7554 993 032<br/>T: +7 499 918 3134<br/>E: vanderlip@em-comms.com

 

About Etalon Group

Founded in 1987 by Viacheslav Zarenkov, Etalon Group has become one of Russia's largest development and construction corporations. The Company focuses on middle class residential real estate in the Moscow and St Petersburg metropolitan areas, where it operates through Etalon Invest and Etalon LenSpetsSMU subsidiaries. With a more than 30-year history, Etalon Group has one of the longest and most successful track records in the Russian real estate industry - since its inception, Etalon Group has commissioned 5.8 million sqm.

Etalon Group's strong reputation among consumers supports its pre-sales business model, which helps the Company to minimise external financing needs for on-going projects while maintaining a secure liquidity position: net debt as of 31 December 2017 was RUB 9.7 billion.

The Company is vertically integrated, which helps it to control costs, quality and timing, as well as to demonstrate best-in-class profitability. Etalon Group employs 5 thousand people, and its nationwide sales and marketing network covers 52 Russian cities.

As of 31 December 2017, Etalon Group's assets comprised 38 projects, with a total of 2.82 million sqm of unsold net sellable area, and a construction and maintenance division. Knight Frank valued the Company’s assets at RUB 135,197 million.

For the year ended 31 December 2017, Etalon Group's new contract sales totalled 512 ths sqm, or RUB 50,240 million. Deliveries in 2017 amounted to 423 ths sqm.

The Company recorded revenue of RUB 70.6 billion and EBITDA of RUB 13.2 billion for the year ended 31 December 2017.

Etalon Group’s GDRs have been traded on the Main Market of the London Stock Exchange since 20 April 2011.

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  28 September 2018