Etalon Group Reports FY 2019 Operating Results

20 January 2020

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 twelve months and three months ended 31 December 2019, based on management accounts.

FY 2019 operating highlights

  • Deliveries reached a record high 622 ths sqm of NSA
  • The number of new contracts amounted to 12,040
  • New contract sales amounted to 630,399 sqm
  • New contract sales in monetary terms increased by 13% year-on-year to RUB 77,627 million
  • Cash collections rose by 24% year-on-year to RUB 77,713 million
  • Average price per sqm rose by 13% year-on-year to RUB 123,140
  • Average price per sqm of apartments grew by 20% year-on-year to RUB 148,729

FY 2019 operating results

 20192018Change, %
New sales, sqm630,399627,9960%
New sales, mln RUB77,62768,73113%
Number of contracts12,04012,312(2%)
Cash collections, mln RUB77,71362,78524%
Average price, RUB/sqm123,140109,44513%
Average price (apartments), RUB/sqm148,729124,11320%
Deliveries, sqm621,867479,33930%

Regional breakdown

 20192018Change, %
Moscow metropolitan area
New sales, sqm302,560303,334(0%)
New sales, mln RUB43,18034,26626%
Number of contracts5,6195,976(6%)
Cash collections, mln RUB45,65631,10347%
Average price, RUB/sqm142,717112,96526%
Average price (apartments), RUB/sqm169,154129,90030%
Deliveries, sqm353,129225,79856%
St Petersburg
New sales, sqm327,839324,6631%
New sales, mln RUB34,44734,465(0%)
Number of contracts6,4216,3361%
Cash collections, mln RUB32,05731,6821%
Average price, RUB/sqm105,073106,156(1%)
Average price (apartments), RUB/sqm129,078119,0468%
Deliveries, sqm268,738253,5416%

4Q 2019 operating highlights

  • The number of new contracts reached 2,931
  • New contract sales amounted to 171,530 sqm and RUB 21,795 million
  • Cash collections amounted to RUB 18,791 million
  • Average price per sqm was RUB 127,060, up by 10% year-on-year
  • Average price per sqm of apartments grew by 19% year-on-year to RUB 156,271
  • Average down payment remained at a high level and amounted to 83%

4Q 2019 operating results

 4Q 20194Q 2018Change, %
New sales, sqm171,530211,356(19%)
New sales, mln RUB21,79524,446(11%)
Number of contracts2,9314,245(31%)
Cash collections, mln RUB18,79120,303(7%)
Average price, RUB/sqm127,060115,66010%
Average price (apartments), RUB/sqm156,271131,33119%
Deliveries, sqm308,294423,069(27%)

Quarterly operating performance

 4Q 20193Q 20192Q 20191Q 20194Q 2018
New sales, sqm171,530136,658154,257167,954211,356
New sales, mln RUB21,79517,09818,78219,95224,446
Number of contracts2,9312,5793,0603,4704,245
Cash collections, mln RUB18,79116,11419,17723,63220,303
Average price, RUB/sqm127,060125,118121,759118,796115,660
Average price (apartments), RUB/sqm156,271153,394146,524140,036131,331
Deliveries, sqm308,29467,230211,80534,539423,069

Regional breakdown

 4Q 20194Q 2018Change, %
Moscow metropolitan area
New sales, sqm70,084106,694(34%)
New sales, mln RUB10,65112,800(17%)
Number of contracts1,1672,158(46%)
Cash collections, mln RUB9,88810,908(9%)
Average price, RUB/sqm151,971119,97227%
Average price (apartments), RUB/sqm196,420138,08142%
Deliveries, sqm102,482225,798(55%)
St Petersburg
New sales, sqm101,445104,662(3%)
New sales, mln RUB11,14411,645(4%)
Number of contracts1,7642,087(15%)
Cash collections, mln RUB8,9039,396(5%)
Average price, RUB/sqm109,850111,265(1%)
Average price (apartments), RUB/sqm130,579124,8105%
Deliveries, sqm205,812197,2714%

Mortgage contract developments

 4Q 20193Q 20192Q 20191Q 20194Q 2018
Share of mortgages35%36%36%37%41%

Commenting on the FY 2019 operating results, Etalon Group CEO Gennadiy Shcherbina said:

“Despite the anticipated slowdown in housing sales in the second half of 2019, which was driven by front-loaded demand in late 2018 and early 2019 ahead of the introduction of new industry regulations, Etalon Group once again delivered record sales results for FY 2019. While our FY 2019 sales volume of 630 ths sqm was in line with last year’s result, a significant year-on-year increase in price per sqm enabled Etalon Group to increase NCS in monetary terms to RUB 78 billion, which nearly coincides with the guidance we announced at the beginning of the year. At the same time, we exceeded our target for cash collections, which reached RUB 78 billion. Thanks to our balanced approach to pricing, we managed not only to achieve these targets but also to maintain sufficient levels of property at advanced stages of completion that will not fall under the new regulations and that can be sold in 2020 at even more attractive prices, which should provide good support for Etalon Group’s profitability and cash flows.

“Looking at 4Q 2019, putting aside the high base for comparison, we sold 172 ths sqm of NSA worth RUB 22 billion, which is our strongest quarterly result in 2019, and the second highest quarterly result ever achieved by Etalon Group after our best-ever 4Q 2018. This strong performance indicates a fast recovery in housing demand amid a record decline in mortgage rates, and it gives us confidence in our ability to achieve even more impressive results in 2020.

“In 2019, Etalon Group completed the acquisition of Leader-Invest, consolidated 100% of the ZIL-Yug project and paid record dividends in the amount of RUB 3.6 billion while maintaining its net debt to LTM EBITDA ratio at a comfortable level of 1.98x, which was possible thanks to our strong cash collections performance during the year. At the same time, we are confident that Etalon Group will further strengthen its financial position in the years ahead thanks to our inventory of available and ready for sale real estate and projects excluded from the requirements of Russia’s new industry regulations.”

Conference call and webcast

Etalon Group will host a conference call for investors and analysts today at 14:00 London time (17:00 Moscow; 09:00 New York).

On the call, the Etalon Group management team will present the FY and 4Q 2019 operating results, followed by a question and answer session for participants.

Webcast

https://edge.media-server.com/mmc/p/eg5mprat

Dial-in numbers:

+44 2071 928000 – Standard International
+44 844 571 8892 – London
+7 495 249 9849 – Moscow
+1 631 510 7495 – New York

Conference ID Code: 4018298

This and other recent announcements are available on the Etalon Group website: https://www.etalongroup.com/investor-relations/investor-news/

Etalon Group IR Team

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

EM

Sam VanDerlip
T: +44 207 002 7859
E: vanderlip@em-comms.com

About Etalon Group

Founded in 1987, Etalon Group is one of Russia’s largest development and construction companies. The Company focuses on middle class residential real estate in the Moscow and St Petersburg metropolitan areas. 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 foundation, Etalon Group has commissioned 7 million sqm of real estate.

The Company is vertically integrated, which helps it to control costs, quality and timing, as well as maintain best-in-class profitability. Etalon Group employs over 5,000 people, and its nationwide sales and marketing network covers 58 Russian cities.

In 2019, Etalon Group acquired and consolidated 100% in Leader-Invest, one of Moscow’s largest residential developers by size of land bank and number of projects currently available for sale.

Etalon Group’s total assets, including the aforementioned consolidation and 100% ownership of ZIL-Yug project, comprise 53 projects under development, completed residential and commercial properties, as well as a construction and maintenance division, with total unsold NSA of 4.0 million sqm. Knight Frank valued the Company’s total assets at RUB 206,071 million as of 31 December 2018.

For the year ended 31 December 2019, Etalon Group’s new contract sales totalled 630 ths sqm, or RUB 77,627 million. Deliveries in 2019 amounted to 622 ths sqm.

The Company recorded revenue of RUB 72.3 billion and EBITDA of RUB 5.7 billion for the year ended 31 December 2018.

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