PIK.L Regulatory News (PIK)

PIK GROUP REPORTS 2014 CONSOLIDATED FINANCIAL RESULTS AND PORTFOLIO VALUATION SUMMARY

Moscow, April 2, 2015 - PIK Group (LSE: PIK), ("The Group" or "PIK"), one of the leading Russian residential developers, today announces its audited Consolidated Financial Statements prepared in accordance with IFRS, for the year ended December 31, 2014 and the Valuation Report in respect of the portfolio of its properties.

2014 Financial Highlights:

· Revenue from sale of apartments increased by 1.9% to RUB54.3 billion(2013: RUB53.3 billion). Total revenue decreased by 2.1% to RUB61.3 billion (2013: RUB62.5 billion);

· Gross profit margin amounted to 26.2% (2013: 28.2%). Gross profit margin in the Real Estate Development segment amounted to 27.2% (2013: 28.5%);

· Adjusted EBITDA decreased by 10.8% to RUB12.5 billion (2013: RUB14.0 billion). Adjusted EBITDA margin amounted to 20.4% (2013: 22.4%);

· Net profit for the year amounted to RUB3.8 billion(2013: RUB7.4 billion) primarily due to recognized one-time non-cash impairment losses of RUB5.2 billion;

· Free cash flow increased by 14.3% to RUB9.6 billion (2013: RUB8.4 billion);

· Net debt as of December 31, 2014 decreased by RUB7.8 billion to RUB10.2 billion (2013: RUB18.0 billion);

· Transfers of apartments to customers increased by 6.8% to 644,000 square meters (2013: 603,000 square meters)

2014 Operational Highlights:

· Total cash collections decreased by 17.5% to RUB61.7 billion(2013: RUB 74.8 billion)

· Cash collections from sale of apartments to individuals decreased by 14.7% to RUB 50.6 billion (2013: RUB 59.3 billion)

· Cash collections from low-margin wholesale transactions decreased by 95.5% to RUB 0.2 billion (2013: RUB 3.6 billion)

· New sales contracts to customers decreased by 8.4% to 620 th. square meters(2013: 677 th. square meters)

· Mortgage backed sales totaled a share of 36.2% in 2014 compared to 39.0% in 2013

· PIK's average selling prices in 2014 decreased by 7.5% in Moscow, increased 5.7% in the Moscow region and increased 3.1% in other regions.

2014 Development Portfolio Valuation Summary:

· As of December 31, 2014, total net selling area amounted to approximately 5.2 million square meters (6.9 million as of December 31, 2013), of which 99% is residential

· The market value of the property portfolio decreased 11.9% to RUB83.9 billion (RUB95.2 billion as of December 31, 2013)

· The market value per square meter increased by 18.2% to RUB16.25 thousand.

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Additional documents:

The Audited Consolidated Financial Statements, prepared in accordance with IFRS, for the year ended December 31, 2014 can be found under the following link:

http://pik-group.com/investors/financial-statements/2014/

For additional information please see our Corporate Governance Statement under the following link: http://pik-group.com/corporate-governance/regulatory-documents/documents-being-currently-in-force

Conference Call Dial-In Details:

PIK Group's Management will host a conference call for investors and analysts followed by a Q&A session.

Date: Friday, April 3, 2015

Time: 16:00 Moscow / 14:00 London / 9:00 New York

Title: PIK Group 2014 IFRS Results

Main Conference ID (Russian line): 8862790 

Secondary Conference ID (English line): 5809125

Domestic line: +7 495 213 0978

UK international tel.: +44 20 3427 1909

Enquiries:

PIK Group

Management review of financial condition, results of operations and portfolio of projects for the year ended December 31, 2014

Discussion of operating environment and results

In 2014, PIK Group's new sales to customers decreased by 8.4% to 620,000 square meters. Decrease of new sales compared to 2013 was due to a change in the new projects' launch schedule in 1H 2014, and weaker customer demand in Q2 and Q3 of 2014. The decrease was partially compensated by the increase in the number of new launches and improved demand in 2H 2014. In line with its strategic focus on profitability, the Group had significantly reduced the share of lower-margin wholesale contracts to 0.3% in 2014, compared to 2.8% in 2013. At the same time, the volume of sales to retail customers decreased by 6.1% to 618,000 square meters.

New sales contracts (2012-2014)(1)

Note: (1) including contracted retail and wholesale volumes

Source: Management accounts

In 2014, PIK launched 43 new projects compared to 52 new projects in 2013 with a total sellable area of 645,000 square meters (2013: 606,000 square meters).

Key operational data (2012-2013)

Note : (1) as per revenue recognition policy adopted under IFRS;

(2) PIK share only

Source: (1) - IFRS financial report, (2) - Management accounts.

Transfers of properties to customers under IFRS amounted to 644,000 square meters, up by 6.8% compared to 2013 primarily due to an increase in new retail sales contracts in 2013, which were recognized in 2014.

Housing completions attributed to the Group were down by 3.4% to 563,000 square meters. The decline in completions in 2014 was explained by:

(i) lower investments into acquisition of new development projects in 2009-2012 and natural reduction of the land bank,

(ii) re-evaluation of several high-end development projects and their rescheduling to a later development date,

(iii) increase in the volume of completions attributed to co-investors.

Average net selling prices for PIK properties (based on cash collections data) continued to grow faster that the average market prices. In 2014, selling prices in the majority of regions where PIK is present have once again exceeded the inflation rate. PIK's average selling prices decreased by 7.5% in Moscow, increased 5.7% in the Moscow region and 3.1% in other regions.

Share of mortgage funded retail sales decreased slightly to 36.2% in 2014 compared to 39.0% in 2013, remaining at a historically high rate. The moderate decline was partially triggered by an interest rate hikes by the Central Bank of Russia in 2014.

Share of mortgage funded retail sales

Note: Based on monthly data on retail sales, calculated using apartments only

Source: Management accounts

Discussion of the Group's IFRS financial results

Group revenues in 2014 decreased by 2.1% to RUB 61.3 billion compared to RUB62.5 billion in 2013. The decline was driven by a reduction in the volume of rendered construction services, which was partially compensated by a slight increase in revenues from apartment sales and other services. Revenues from apartment sales accounted for 88.6% of total revenues, increasing from 85.3% in 2013.

Sales revenue by segment

Source: IFRS

PIK Group's core revenues come from the sale of apartments. In 2014, they were 1.9% higher due to an increase in transfers of properties to customers (+6.8%) which was partially compensated by lower implied revenue per square meter of transferred properties due to change in the project mix of recognized projects.

Implied revenue per sq. meter of transferred properties (1)

Note: (1) calculated as revenue from apartment sales divided by transfers to customers

Source: IFRS

Gross profit decreased by 9.6% to RUB16.0 billion from RUB17.7 billion due to lower gross profit margin across all segments. The Group's profit margin decreased to 26.2% from 28.2% in 2013 driven primarily by lower individual profitability of projects recognized in the reported period, investment budget revisions on certain projects caused by additional land lease costs and impairment losses on finished goods and construction materials recognized in the cost of sales.

In 2014, administrative expenses stayed under control and amounted to RUB3.3 billion (2013: RUB3.3 billion). Distribution expenses also did not change materially and amounted to RUB0.94 billion (2013: RUB0.92 billion).

Personnel and social costs, included both in cost of sales and administrative and distribution expenses, demonstrated an aggregate increase of 7.0% to 9.0 billion, generally in line with inflation.

As a result of the above factors, adjusted EBITDA from core activities decreased by 10.8% to RUB12.5 billion from RUB14.0 billion in 2013, whilst adjusted EBITDA margin decreased 2ppt to 20.4% from 22.4%. EBITDA decreased by 44.0% to RUB7.5 billion from RUB13.4 billion in 2013, primarily due to recognized non-cash impairment losses of RUB5.2 billion and same factors which affected adjusted EBITDA.

Adjusted EBITDA reconciliation

Source: IFRS

Due to a significant reduction in gross debt, effective interest rate reduction and positive operational cash flow, the Group was able to reduce its net finance costs by 43.5% to RUB2.1 billion from RUB3.7 billion in 2013.

As a results of the above factors, profit for the period (net profit) decreased by 49.1% to RUB3.8 billion from RUB7.4 billion. The main factors affecting the decrease were the impairment loss of RUB5.2 billion and a decrease in Group's gross profit by RUB1.7 billion.

Discussion of Group's current financial position, cash flows and liquidity

Net cash from operating activities in 2014 reached RUB12.2 billion (2013: RUB12.5 billion). Despite lower Group's gross profit, operating cash flow was maintained at 2013 levels, which was achieved primarily due to lower interest costs.

Free cash flow (defined as net cash generated from operating activities, less acquisition of property, plant & equipment and development rights) amounted to RUB9.6 billion in 2014, compared to RUB8.4 billion in 2013 due to decreased investment into new development rights.

As of December 31, 2014, the Group had RUB24.5 billion of gross debt (down from RUB29.1 billion of gross debt as of December 31, 2013). Net debt as of December 31, 2014 amounted to RUB 10.2 billion, down from RUB18.0 billion at the end of 2013.

Portfolio of projects overview

As of December 31, 2014, the Group's total portfolio of projects had a net sellable area of 5.2 million square meters (2013: 6.9 million).

Key changes to net sellable area in 2014

Source: C&W

The market value of the property portfolio as of December 31, 2014 decreased 11.9% to RUB83.9 billion (2013: RUB95.2 billion).

Market value per square meter increased by 18.2% to RUB16.25 thousand (2013: RUB13.75 thousand) due to a reclassification into land of several project with sizable net sellable area but low absolute valuation.

The Moscow Metropolitan Area (MMA) land bank represented 3.6 million square meters (71% of the total area) with a total market value of RUB78.0 billion (93.0% of land bank's total value). The Group plans to maintain its market leadership in providing modern and affordable housing in the MMA through building out the existing pipeline, while targeting development activities in the most attractive fast-growing regions of Russia.

Portfolio of properties by region

Source: C&W

In total, the Group has a pipeline of 72 development projects at various stages of development. Of these, 25 projects are currently in the course of active development. They represent 3.3 million square meters (64.3% of total area) and have an underlying market value of RUB 53.4 billion (63.7% of total value). The share of completed projects not yet sold amounted to RUB 2.9 billion, or 3.4% of the total project portfolio value.

Portfolio of properties by stages of development

Source: C&W

Directors' Responsibility Statement

The attached Annual Financial Report (Consolidated Financial Statements) and the financial information contained herein, are the responsibility of, and have been approved by, the directors of PIK Group. The directors are responsible for ensuring that management prepares the Financial Report in accordance with the IFRS and the Listing Rules of the Financial Conduct Authority.

Notice to readers

The calculation of certain measures used in this announcement may be different from the calculation used by other companies and therefore comparability may be limited. Some of the measures (e.g. EBITDA, adjusted EBITDA, normalized net income, net debt, free cash flow) are not measures of financial performance under IFRS.

Some of the information in this press release may contain guidance, projections or other forward-looking statements regarding future events or the future financial performance of PIK Group. You can identify forward-looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," or the negative of such terms or other similar expressions. These statements are only predictions and actual events or results may differ materially. PIK Group does not intend to or undertake any obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in PIK Group's projections, guidance or forward-looking statements, including, among others, general economic and market conditions, PIK Group's competitive environment, risks associated with operating in Russia, rapid market change, and other factors specifically related to PIK Group and its operations.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of PIK Group, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of PIK Group.