Etalon Group 2Q and 1H 2018 Operating Results

16 July 2018

ETALON GROUP PLC (“Etalon Group” or the “Company”), one of Russia’s largest and longest-established development and construction companies, announces its unaudited operating results for the three months and six months ended 30 June 2018, based on management accounts.

2Q 2018 operating highlights

  • New contract sales amounted to RUB 13,882 million and 128,468 sqm, representing year-on-year growth of 22% and 5%, respectively
  • The number of new contracts increased by 9% year-on-year to 2,532
  • Cash collections rose by 58% year-on-year to RUB 14,694 million
  • Average price per sqm grew by 17% year-on-year to RUB 108,055
  • Average down payment improved by six percentage points year-on-year to a record level of 85%

2Q 2018 operating results

 2Q 20182Q 2017Change, %
New sales, sqm128,468 122,4275%
New sales, mln RUB13,88211,34622%
Number of contracts2,5322,3219%
Average price, RUB/sqm108,05592,67617%
Average price (apartments), RUB/sqm120,589109,39010%
Cash collections, mln RUB14,6949,28358%

Quarterly operating performance

 2Q 20181Q 20184Q 2017 3Q 2017 2Q 2017
New sales, sqm128,468134,075162,109 113,979 122,427
New sales, mln RUB13,88213,60516,67611,97011,346
Number of contracts2,5322,5733,1822,3312,321
Average price, RUB/sqm108,055101,474102,869105,01592,676
Average price (apartments), RUB/sqm120,589114,297115,806114,582109,390
Cash collections, mln RUB14,69412,77814,71712,4339,283

Mortgage contract developments 

    2Q 20181Q 20184Q 20173Q 20172Q 2017
Share of mortgages42%40%41%35%33%

1H 2018 operating highlights

  • New contract sales increased by 27% year-on-year to RUB 27,487 million and by 11% year-on-year to 262,543 sqm
  • The number of contracts grew by 16% year-on-year and amounted to 5,105
  • 1H 2018 cash collections rose by 45% year-on-year to RUB 27,471 million
  • Net debt decreased to RUB 3.8 billion as of 30 June 2018

1H 2018 operating results

 1H 20181H 2017Change, %
New sales, sqm262,543236,07311%
New sales, mln RUB27,48721,59427%
Number of contracts5,1054,40316%
Cash collections, mln RUB27,47118,99745%

Commenting on the operating results, Etalon Group Chairman of the Board of Directors Viacheslav Zarenkov said: 

“Etalon Group delivered impressive results across all key performance measures in the first half of 2018. The 5,105 new contracts signed with customers in the first six months of the year represent a 16% year-on-year increase and set a Company record. New contract sales in monetary terms and in sqm rose by 27% and 11% year-on-year to RUB 27.5 billion and 263 ths sqm, respectively. This constitutes 48% of our full year 2018 targets, whereas typically the first half brings slightly over 40% of our full year result.

“The growth in cash collections for the period clearly demonstrates the success of our strategy and the effectiveness of Etalon Group’s management team. For the first time in its more than 30-year history, Etalon Group collected RUB 27.5 billion in the first half of the year. This represents 52% of our annual cash collections target as we head into the traditionally-stronger second half of the year.

“This solid performance gives us every confidence in our ability to achieve our 2018 targets. Furthermore, I believe that we stand to benefit considerably from changes to regulations governing the residential development sector. As a well-capitalised developer with a long track record, we are prepared to significantly strengthen our market position as smaller and weaker players are forced out.”

Etalon Group CEO Dmitry Kashinskiy commented:

“Etalon Group delivered very strong results in the second quarter, with 22% year-on-year growth in contract sales to RUB 13.9 billion. We also saw solid like-for-like price growth for nearly all projects in our portfolio, helping to bring the average price per sqm up by 17% year-on-year.

“At the same time, the growing accessibility of mortgage financing enabled us to further increase the share of mortgage contracts to 42% of new contracts in 2Q 2018. This helped to bring Etalon Group’s average down payment to a record-high 85%. Combined with successful efforts to assist existing customers in refinancing instalment plans with mortgages, our cash collections performance was excellent, increasing by a tremendous 58% year-on-year to RUB 14.7 billion in 2Q 2018.

“We also prioritised securing project documentation for our current project portfolio: with construction permits now in place for 80% of our ongoing projects, we expect a smooth transition now that amendments to the regulation have come into force.

“Etalon Group is in an excellent position to benefit from new market conditions, and is ready to further increase its market share in its core regions, and to provide a good return on investment for the Company’s shareholders.”

Etalon Group CFO Kirill Bagachenko added:

“As a result of significant year-on-year growth in cash collections for 1H 2018, Etalon Group’s already-strong financial position has improved even further. Driven by significant positive free cash flow during the first half of the year, net debt declined from RUB 9.7 billion as of 31 December 2017 to RUB 3.8 billion as of 30 June 2018, based on management accounts. This decrease of RUB 5.9 billion brought the net debt/EBITDA ratio down to a very comfortable level of 0.3x.”

Conference call and webcast

Etalon Group will host a conference call for investors and analysts today at 14:00 London time (16:00 Moscow; 09:00 New York).

On the call, the Etalon Group management team will present the Company's 2Q and 1H 2018 operating results, followed by a question and answer session for participants.


Webcast
https://edge.media-server.com/m6/p/2v3txxz7

Dial-in numbers:
+44 (0)330 336 9411 – London
+7 495 646 9190 – Moscow
+1 929-477-0448 – New York

Conference ID Code: 4288681

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

Etalon Group IR Team

T: +44 20 8123 1328
E: info@etalongroup.com

EM

Sam VanDerlip
T: +44 7554 993 032
T: +7 499 918 3134
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 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.

 


 

  17 July 2018