Etalon Group Reports 1Q 2019 Operating Results

17 April 2019

Etalon Group Reports 1Q 2019 Operating Results

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 ended 31 March 2019, based on management accounts.

1Q 2019 operating highlights

· The number of new contracts increased by 35% year-on-year to 3,470

· New contract sales amounted to 167,954 sqm and RUB 19,952 million, representing year-on-year growth of 25% and 47%, respectively

· Cash collections increased by 85% year-on-year to RUB 23,632 million

· Average price per sqm was RUB 140,036, up by 23% year-on-year

· Average down payment increased by 4 p.p. year-on-year and amounted to 85%

1Q 2019 operating results

Regional breakdown

Etalon Group stand-alone 1Q 2019 operating results

Leader-Invest stand-alone 1Q 2019 operating results

Mortgage contract developments

Commenting on the 1Q 2019 operating results, Etalon Group CEO Gennadiy Shcherbina said:

"Etalon Group has reported yet another set of record operating results in the first quarter of 2019. The number of new contracts, including the contribution from Leader-Invest, increased by 35% year-on-year to 3,470. New contract sales in cash and volume terms also set new first-quarter records, rising by 47% and 25% year-on-year to RUB 20 billion and 168 ths sqm, respectively.

"The Moscow Metropolitan Area made a significant contribution to our 1Q 2019 sales performance, with new contract sales rising by 83% year-on-year from RUB 6.3 billion in 1Q 2018 to RUB 11.6 billion in 1Q 2019. While Moscow sales were comparable to St Petersburg in volume terms, the average price per sqm in Moscow rose by 27% year-on-year. This fast increase was supported by prices at our comfort-class projects, where organic price growth was ahead of inflation, as well as the contribution from more expensive Leader-Invest projects, where the average price per sqm is RUB 203 thousand.

"Leader-Invest sales also increased year-on-year, despite the fact that its projects were only integrated into Etalon Group's sales network in the last week of March 2019. Leader-Invest signed 320 new contracts in 1Q 2019, up by 19% year-on-year. New contract sales amounted to 16 ths sqm and RUB 2.7 billion in volume and cash terms, respectively. While this is a solid result for business- and premium-class projects, we aim to significantly improve this performance once Leader-Invest's projects are fully integrated into Etalon Group's portfolio and are sold under the Etalon Group brand."

Etalon Group CFO Kirill Bagachenko commented:

"Etalon Group's strong sales performance and record-setting average down payment of 85% enabled us to report record cash collections of RUB 23.6 billion in 1Q 2019. Combined with the Company's strong cash position at the end of 2018, this puts Etalon Group's net debt at the comfortable level of RUB 4.5 billion as of 31 March 2019, which we achieved despite the acquisition of a controlling stake in Leader-Invest for RUB 15.2 billion in February 2019. Our ability to maintain such a low level of net debt shows that we have been able to further increase free cash flow generation compared to 2018. This strong financial position ahead of the transition to new regulation starting from 1 July 2019 gives Etalon Group significant resilience, which we plan to strengthen further over the next quarter."

Conference call and webcast

The Company will host a conference call for investors and analysts today at 15:00 London time (17:00 Moscow; 10:00 New York).

On the call, the Etalon Group management team will present the Company's 1Q 2019 operating results, FY 2018 IFRS financial results, and provide an update on the integration process of Leader-Invest. Following the presentation there will be a question and answer session for participants.

Webcast

https://edge.media-server.com/m6/p/rej6jb3o

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: 3134249

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

Etalon Group IR Team

T: +44 20 8123 1328

E: [email protected]

EM

Sam VanDerlip

T: +44 7554 993 032

T: +7 499 918 3134

E: [email protected]

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.