ETALON GROUP PLC (“Etalon Group” or the “Company”), one of Russia’s largest and longest-established development and construction companies, announces the publication of its audited consolidated IFRS financial statements for the full year ended 31 December 2018.
FY 2018 Highlights:
- The Company achieved record new contract sales in FY 2018 in both volume and monetary terms: 628 ths sqm and RUB 68,731 million, up by 23% and 37% year-on-year, respectively
- Consolidated IFRS revenue increased by 2% year-on-year to RUB 72,327 million
- Consolidated gross profit declined by 19% year-on-year to RUB 14,492 million
- Earnings before interest, taxes, depreciation and amortisation (EBITDA) for 2018 amounted to RUB 5,682 million, down by 62% year-on-year
- Net income for the period amounted to RUB 37 million
- Working capital was optimised by 25% year-on-year to RUB 46,546 million
- Operating cash flow less interest paid increased by RUB 14,722 million year-on-year and amounted to RUB 17,403 million
- Free cash flow reached RUB 14,627 million
- Etalon Group had a net cash position of RUB 2,154 million as of 31 December 2018
2H 2018 Highlights:
- Consolidated IFRS revenue increased by 14% year-on-year to RUB 47,628 million
- EBITDA for the period amounted to RUB 5,976 million
- Net income for the period amounted to RUB 1,200 million
Commenting on the FY 2018 financial results, Etalon Group CEO Gennadiy Shcherbina said:
“We achieved record sales performance on the eve of the transition to a new regulatory framework for our industry. This contributed to all-time high revenue recognition of RUB 72 billion for FY 2018. While the Company is performing well and we are very optimistic about the future, implementing residential development projects requires us to fulfil certain obligations related to installing municipal and social infrastructure. We have taken a conservative approach to accruing costs in 2018 for planned social and other infrastructure in order to minimise the effect that recognising these costs could have on our net income in future years, when new regulations will be in effect and maintaining financial performance that is comfortably in line with covenants will be a high priority.
“Furthermore, Etalon Group’s gross profit in FY 2018 was impacted by the recognition of a significant part of the costs related to installation of utilities and other infrastructure required for large-scale development projects like Galactica and Silver Fountain. The recognition of these costs now, however, will have a positive impact on profitability in future periods.
“Looking ahead, we are very optimistic about Etalon Group’s potential to deliver value for its shareholders. We are among the best-positioned to meet the demanding requirements of Russia’s new regulatory framework for residential developers, we have recently completed the acquisition of the controlling stake of Leader Invest, making Etalon a top-2 developer in Moscow, and we have been successful in recent years at adapting our product to meet the changing demands of our customers for comfort- and business-class housing in Moscow and St Petersburg.”
Etalon Group CFO Kirill Bagachenko added:
“Thanks to the high level of cash collections and effective management of our residential development projects in FY 2018, we were able to significantly optimise working capital levels and generate almost RUB 15 billion in free cash flow for the year. As a result, Etalon Group finished 2018 with a net cash position of RUB 2.2 billion, compared to net debt of RUB 9.7 billion as of 31 December 2017.
“This very strong financial position meant that we were able to complete one of the largest M&A transactions in Russia’s development sector in recent years, while also maintaining a good base for future dividend payments. Taking into account the non-cash nature of several of the factors impacting our P&L in 2018, Etalon Group’s management will recommend that the Board of Directors consider a final dividend for 2018 in an amount not less than the final dividend for 2017.”
Conference call and webcast
Etalon Group’s management team will discuss the Company’s FY 2018 financial results together with 1Q 2019 operating performance during a conference call and webcast for investors and analysts that will be scheduled for mid-April 2019. Dial in and webcast details will be provided prior to the call.
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
T: +44 7554 993 032
T: +7 499 918 3134
About Etalon Group
Founded in 1987, 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 6.3 million sqm.
Etalon Group's traditionally conservative approach managing its financial position, solid cash generation and strict working capital management have enabled the company to maintain a secure liquidity position: net cash as of 31 December 2018 was RUB 2.2 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 58 Russian cities.
As of 30 June 2018, Etalon Group's assets comprised 39 projects and a construction and maintenance division, with a total of 2.73 million sqm of unsold net sellable area. Knight Frank valued the Company’s assets at RUB 132,487 million.
For the year ended 31 December 2018, Etalon Group's new contract sales totalled 628 ths sqm, or RUB 68,731 million. Deliveries in 2018 amounted to 479 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.
In February 2019 Etalon Group acquired 51% of the shares of Leader-Invest, one of Moscow’s largest residential developers in terms of land bank and number of projects currently available for sale. Leader-Invest’s primary focus is on infill development projects and integrated development of large-scale mixed use projects in the comfort-, business- and premium-class segments. Leader-Invest's portfolio includes 31 projects under construction or at the design stage, unsold inventory at eight completed residential complexes, and commercial real estate, with a total NSA of 1.3 million sqm. As of 1 October 2018, Colliers International valued Leader-Invest's portfolio at RUB 66,645 million.
As a result of the acquisition of Leader-Invest, Etalon Group will become the largest residential developer in Moscow in terms of number of projects offered to the market, and the second-largest in terms of sales and construction volumes. In St Petersburg the Company will maintain its position among the market leaders. Etalon Group plans to complete the full integration of Leader-Invest by the end of 3Q 2019.