Standard & Poor's Upgrades LenSpetsSMU Rating to B+

30 July 2013

Etalon Group Limited (“Etalon Group” or the “Company”, LSE ticker: ETLN), one of Russia’s largest and long established residential real estate developers, announces that Standard & Poor’s has upgraded the long term credit rating of Etalon Group subsidiary LenSpetsSMU from B to B+ with a stable outlook.  The LenSpetsSMU short term credit rating was confirmed at B and the national scale rating was increased from ruA to ruA+.

Standard & Poor’s noted that the rating action reflects an improvement in LenSpetsSMU’s capital structure due to lower levels of foreign currency and short-term borrowings, partly through a RUB 5 billion placement of Series 02 rouble bonds in December 2012.

LenSpetsSMU’s liquidity was classified as “adequate” according to Standard & Poor’s formal criteria.  The rating agency expects that the company’s liquidity sources to meet needs by more than 1.2x in the next 12 months.

LenSpetsSMU’s Series 02 bond ratings were also upgraded from B to B+ (international scale) and from ruA to ruA+ (national scale); the recovery rating was confirmed at 4.

Etalon Group CFO Anton Evdokimov said:

“Etalon Group welcomes the credit rating upgrade for our subsidiary LenSpetsSMU. The upgrade was expected and fair, as it reflects the high credit quality and financial stability of the Etalon subsidiary. We will continue to work hard to strengthen LenSpetsSMU’s position. We are truly pleased that LenSpetsSMU has become the first construction company in Russia to obtain a B+ credit rating from any international rating agency.”

Other recent announcements are available on the Etalon Group website:

Etalon Group IR Team

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Tom Blackwell
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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 2012, Etalon Group’s portfolio comprised 35 projects, with a total of 3.58 million sqm of unsold net sellable area ("NSA") in the St. Petersburg and Moscow Metropolitan Areas. Jones Lang LaSalle valued this portfolio at USD 2,369 million, a 38% increase in the market value from YE 2011.

For the year ended 31 December 2012, Etalon Group’s new contract sales totalled 316,466 sqm, or RUR 23,739 million. Deliveries in 2012 totalled 363 thousand sqm.

The Company recorded revenues of RUB 26.9 billion and EBITDA of RUB 6.9 billion, with an EBITDA margin of 26% for the year ended 31 December 2012, making it one of the most profitable players in the sector.

Etalon Group’s net cash position at 31 December 2012 was RUB 890 million, leaving it well positioned to fund continued dynamic growth.