ETLN.L Regulatory News (ETLN)

7 April 2020

Etalon Group Reports FY 2019 IFRS Results

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 2019.

FY 2019 Highlights:

· Consolidated revenue increased by 17% year-on-year to RUB 84,330 million for FY 2019 from RUB 72,327 million in FY 2018

· Consolidated gross profit grew by 18% year-on-year to RUB 20,057 million

· Earnings before interest, taxes, depreciation and amortisation (EBITDA) for 2019 amounted to RUB 8,897 million, up 45% year-on-year

· EBITDA before purchase price allocation (pre-PPA EBITDA) increased by RUB 5,741 million to RUB 11,859 million

· Net income for the period amounted to RUB 186 million

· Pre-PPA net income adjusted for one-off acquisition and integration expenses reached RUB 3,110 million

· Operating cash flow less interest paid amounted to RUB 13,336 million

· Net debt as of 31 December 2019 was RUB 21,484 million, with the net debt/pre-PPA EBITDA ratio at 1.8x

Other FY 2019 Highlights:

· Deliveries reached a record high 622 ths sqm of NSA

· The Company achieved record new contract sales in FY 2019 in both volume and monetary terms: 630 ths sqm and RUB 77,627 million

· Cash collections rose by 24% year-on-year to an all-time high RUB 77,713 million

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

"On the back of strong operating results in 2019, Etalon Group was able to increase revenue by 17% year-on-year to an all-time high of RUB 84 billion. We also managed to set a record in terms of gross profit, which grew to RUB 20 billion, or by 18% year-on-year, even compared to our higher restated 2018 results, and gross margin remained unchanged.

"Excluding one-off expenses related to the Leader-Invest acquisition and integration, cost control measures enabled Etalon Group to reduce administrative expenses by RUB 335 million despite significant growth in the size of business. In addition, we reduced other costs considerably, which supported EBITDA growth of 45% year-on-year to RUB 8.9 billion. At the same time, pre-PPA EBITDA showed even stronger growth, amounting to RUB 11.9 billion, which corresponds to an EBITDA margin of 14%.

"While new industry regulations have come into force, a significant portion of our projects have been excluded from the new rules due to the accelerated pace of construction, meaning we can finish building these projects in line with the old rules. This supported a high positive operating cash flow of RUB 13.3 billion in 2019.

"Our 2019 financial results confirm our ability to significantly grow the business and increase revenue while reducing costs. Thanks to our high-quality portfolio of projects in St Petersburg and Moscow, solid sales pipeline and strong financial position, I have full confidence in Etalon Group's ability to navigate the challenging conditions we face in 2020, and I am sure we will emerge ready to continue our dynamic growth as a leader in Russia's residential development market."

Etalon Group CFO Ilya Kosolapov added:

"Despite considerable business growth in 2019, as well as the payout of record dividends, Etalon Group generated positive operating cash flow and managed to maintain a fairly comfortable financial position with a net debt to pre-PPA EBITDA ratio of 1.8x. Furthermore, the Company was able to work with banks to reduce the cost of financing to 9.4%. At the same time, the transition to project financing will make it possible to reduce the cost of financing even further in the very near future.

"I am pleased to say that Etalon Group has not been affected by recent fx volatility, as 100% of our borrowings are denominated in RUB, along with the vast majority of our costs. Regarding potential disruptions related to the COVID-19 outbreak, we finished 2019 with RUB 31 billion in cash, 3.3 million sqm of unsold NSA in our portfolio, and RUB 28 billion in outstanding instalment payments on signed contracts. This means we are relatively comfortable in the current situation in terms of cash position, strong expected cash inflows and the lack of any need to acquire new projects in the immediate future in order to maintain sales volumes."

This and other recent announcements, as well as the complete FY 2019 consolidated IFRS financial statements are available on the Etalon Group website: https://www.etalongroup.com

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

EM Sam 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 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 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 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.