ETLN.L Regulatory News (ETLN)

15 July 2020

Etalon Group 1H and 2Q 2020 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 six months and three months ended 30 June 2020, based on management accounts.

1H 2020 operating highlights

· New contract sales amounted to 220,955 sqm and RUB 29,522 million

· Cash collections reached RUB 31,547 million

· Average price per sqm grew by 11% year-on-year to RUB 133,609

· Average price per sqm of apartments was RUB 162,982, up by 14% year-on-year

· Net corporate debt[1] stood at RUB 23,006 million as of 30 June 2020

1H 2020 operating results

Regional breakdown

2Q 2020 operating highlights

· The number of new contracts was 1,559

· New contract sales amounted to 94,984 sqm and RUB 11,585 million

· Cash collections reached RUB 13,942 million

· Average price per sqm was RUB 121,971

· Average price per sqm of apartments grew by 9% year-on-year to RUB 159,063

2Q 2020 operating results

Regional breakdown

Quarterly operating performance

Mortgage contract developments

Commenting on the 1H and 2Q 2020 operating results, Etalon Group CEO Gennadiy Shcherbina said:

"Despite the anticipated decline in consumer activity amid restrictions related to the COVID-19 pandemic, we have seen a gradual recovery in demand over the course of the last quarter. The value of new contract sales in June 2020 was 78% higher than in May 2020. The share of mortgage sales also increased from 36% in 1Q 2020 to a record high 44% in 2Q 2020. Updates to the subsidised mortgage programme announced in April of this year also played an important role in the growth of sales financed by mortgages. Following an announcement in June that the maximum price for apartments in Moscow and St Petersburg eligible for the programme would be increased to RUB 12 million, more than 85% of our offering can now be purchased with subsidised mortgages.

"Another significant supporting factor for sales in 1H and 2Q 2020 was our ability to rapidly adapt to the new market conditions. During the very first weeks of the lockdown period we quickly launched online real estate sales, assembled teams to support this new service and expanded the capacity of our call centre. Operations at our construction sites in St Petersburg continued uninterrupted. In the Moscow metropolitan area, we were able to return to work on our projects as soon as possible after the temporary ban on construction was lifted, thanks to the flexibility of the monolithic construction technology and the fact that we use our own general contracting and sub-contracting organisations. As a result, all projects planned for delivery in 1H 2020 were completed on time.

"Currently, all restrictions on construction activities have been lifted, all our sales offices are operating, and we see growing interest in Etalon Group's real estate portfolio. We expect that performance in the second half of the year will largely compensate for the decline in Q2 that was due to the COVID-19 pandemic. Key factors supporting this recovery include a decrease in the Central Bank of Russia's key rate to a record low 4.5%, growth in investment demand for real estate following the introduction of taxes on interest-earning bank deposits, as well as the launch of sales for new projects and for new buildings at Etalon Group residential complexes already under construction, which enjoy stable demand. The current environment, in which consumers are risk-averse, is advantageous for large players such as Etalon Group due to our reputation for reliability, brand recognition, stable financial position and a wide range of available projects."

Etalon Group Chief Financial Officer Ilya Kosolapov added:

"Effective debt portfolio management, combined with the temporary ban on construction in Moscow, enabled us to bring gross debt down by RUB 4 billion during 1H 2020, despite changes to payment terms with our customers and lower consumer demand in the second quarter. Cash balances in escrow accounts, which are not reflected in our reporting, exceeded RUB 8 billion during the first six months of 2020. This made it possible to bring interest rates for project financing down to preferential levels of 3%-4%. Furthermore, the lowering of the key rate by the Central Bank of Russia will facilitate further reductions in financing costs on borrowings with floating interest rates, such as the loan for the purchase of Leader-Invest. As of 30 June 2020, the average interest rate on our loan portfolio had fallen to 9.05%, compared to 9.4% on 31 December 2019. We expect the cost of capital to decrease further in the second half of 2020 as a result of the Central Bank of Russia's dovish monetary policy."

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 1H and 2Q 2020 operating results and provide an update on the impact of the COVID-19 situation in Russia. Following the presentation there will be a question and answer session for participants.

Webcast

https://edge.media-server.com/mmc/p/jqjp9wcm

Dial-in numbers:

+44 2071 928338 - Standard International

+44 844 4819 752 - London

+7 495 249 9851 - Moscow

+1 646 741 3167 - New York

Conference ID Code: 3298634

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

Etalon Group IR TeamT: +44 20 8123 1328E: ir@etalongroup.com

EMSam VanDerlipT: +44 207 002 7859E: 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 57 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 comprise 33 projects under development, unsold inventory at completed residential complexes and commercial properties, with total unsold NSA of 3.3 million sqm, as well as a construction and maintenance division. Colliers International valued the Company's total assets at RUB 188 billion as of 31 December 2019.

For the year ended 31 December 2019, Etalon Group's new contract sales totalled 630 ths sqm, or RUB 77.6 billion. Deliveries in 2019 amounted to 622 ths sqm.

The Company recorded a record revenue of RUB 84.3 billion and EBITDA of RUB 8.9 billion for the year ended 31 December 2019.

Etalon Group's GDRs have been traded on the Main Market of the London Stock Exchange since 20 April 2011 and on the Level 1 List of Moscow Exchange since 31 January 2020 under the ticker ETLN.