1 Sep 2014 10:43
PIK GROUP REPORTS 1H 2014 CONSOLIDATED FINANCIAL RESULTS
Moscow, September 1, 2014 - PIK Group (LSE: PIK), ("The Group" or "PIK"), one of Russia's leading residential developers, announced today its unaudited Consolidated Interim Condensed Financial Statements prepared in accordance with IFRS for the six months ended June 30, 2014.
1H 2014 Financial Highlights:
· Total revenue increased by 14.3% to RUB 28.6 billion (1H 2013: RUB 25.0 billion)
· Revenue from sale of apartments rose by 19.9% to RUB 24.9 billion(1H 2013: RUB 20.8 billion)
· Gross profit margin amounted to 26.0% (28.3% in 1H 2013)
· Adjusted EBITDA decreased by 6.6% to RUB 5.9 billion (1H 2013: RUB 6.3 billion); the adjusted EBITDA margin decreased to 20.7% from 25.3% in 1H 2013
· Net profit for the period decreased by 44.3% to RUB 1.5 billion(1H 2013: RUB 2.6 billion)
· Net cash generated from operating activities amounted to RUB 2.5 billion(1H 2013: RUB 4.6 billion)
· Net debt as at June 30, 2014 decreased by RUB 2.4 billion to RUB 15.6 billion (December 31, 2013: RUB 18.0 billion)
· Apartment transfers to customers increased by 5.7% to 276,000 square meters from 261,000 square meters in 1H 2013
2014 Full Year Outlook:
In light of lower than expected residential sales and volumes of 3rd party construction services in 1H 2014, PIK Group is revising its full-year residential sales guidance to 560,000-600,000 square meters and expects corresponding total cash collections of RUB 62-70 billion. In line with the Group's current development plan, the second half of 2014 is expected to bring a reversal of the pre-sales trends seen in 1H 2014.
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Additional documents:
The unaudited Consolidated Interim Condensed Financial Statements prepared in accordance with IFRS for the six months ended June 30, 2014 can be found at
http://pik-group.com/investors/financial-statements/2014/
Conference Call Dial-In Details:
PIK Group's Management will host a web-cast presentation for investors and analysts followed by a Q&A session.
Date: Wednesday, September 3, 2014
Time: 15:00 Moscow / 12:00 London / 7:00 New York
Title: PIK Group 1H 2014 IFRS Results
Conference ID (Russian): 5283322
Conference ID (English): 7515256
Domestic line: +7 (495) 545 0588
UK international tel.: +44 20 7784 1036
WebCast link (Russian):
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2384
WebCast link (English):
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2383
Click on, or paste the following link into your web browser, to view the associated PDF document:
Enquiries:
PIK Group
Investors | Media |
Andrey Machanskis | Natalia Mikhna |
Head of Investor Relations | Public Relations |
Tel: +7 495 505 97 33ext. 1157 / 1315 | Tel: +7 495 505 97 33ext. 1403 |
E-mail: ir@pik.ru | E-mail: pressa@pik.ru |
Discussion of the Group's financial results
PIK Group's revenues in 1H 2014 climbed by 14.3% to RUB 28.6 billion against RUB 25.0 billion in 1H 2013. The increase in revenues was driven primarily by higher apartment transfers to customers and bigger sales of construction materials, partially offset by lower volumes of construction services for 3rd parties. Revenues from apartment sales accounted for 87.0% of total revenues, up from 83.0% in 1H 2013.
Segment revenue
In RUB billion | 1H 2013 | 1H 2014 | Change, % |
Revenue from sale of apartments | 20.8 | 24.9 | 19.9% |
Revenue from construction services | 2.2 | 1.2 | (46.1%) |
Revenue from sale of construction materials and other sales | 2.0 | 2.5 | 24.5% |
Total revenue | 25.0 | 28.6 | 14.3% |
Source: IFRS
PIK Group's core revenues come from the sale of apartments. In 1H 2014, they were 19.9% higher due to an increase in transfers to customers of properties completed in the reporting period and higher implied revenue per square meter of transferred properties, caused by the mix of completed projects and overall sales price growth. Residential completions in the reporting period were within the range of last year at 247,000 square meters (1H 2013: 253,000 square meters).
Implied average revenue per sq m of transferred property (1)
1H 2013 | 1H 2014 | Change, % | |
Revenue from sale of apartments, RUB bn | 20.8 | 24.9 | 19.9% |
Transfers to customers, 000'sq m | 261 | 276 | 5.7% |
Implied average revenue per sq m of transferred property, 000'RUB / sq m | 79.7 | 90.3 | +13.3% |
Note: (1) calculated as revenue from apartment sales divided by transfers to customers
Source: IFRS
Gross profit increased by 4.9% to RUB 7.4 billion from RUB 7.1 billion driven by overall higher revenue which was partially offset by lower gross profit margins in the real estate development segment. The Group's gross profit margin decreased to 26.0% from 28.3% in 1H 2013 mainly on the back of the individual profitability of projects completed during the reporting period and additional recognized land lease costs. The negative impact on the gross profit margin from these factors is expected to subside in 2H 2014.
In 1H 2014, administrative expenses increased by 38.4% to RUB 1.3 billion (1H 2013: RUB 1.0 billion) primarily due to certain reversal of bonus accruals in 1H 2013. Without the effect of bonus accrual reversal, the change in administrative expenses in 1H 2014 was immaterial (+0.8% from 1H 2013). Distribution expenses stayed flat at RUB 0.4 billion.
As a result of the factors described above, the adjusted EBITDA decreased by 6.6% to RUB 5.9 billion from RUB 6.3 billion in 1H 2013, while the adjusted EBITDA margin decreased 4.6 p.p. to 20.7% from 25.3%.
Adjusted EBITDA calculation
1H 2013 | 1H 2014 | |||
RUB mln | RUB mln | |||
Net profit for the period | 2,630 | 1,464 | ||
Depreciation and amortization | 335 | 360 | ||
Interest expense | 2,539 | 1,465 | ||
Interest income and reversal of penalties | (141) | (352) | ||
Income tax expense | 690 | 375 | ||
EBITDA | 6,053 | 3,312 | ||
Adjustments for | ||||
Impairment losses, net | 458 | 2,365 | ||
Impairment losses on financial assets, net | (201) | 53 | ||
Write-off of accounts payable | (141) | 72 | ||
Foreign exchange gains, net | (8) | 36 | ||
Penalties and fines, including reversals | 170 | 76 | ||
Adjusted EBITDA | 6,331 | 5,914 | ||
Adjusted EBITDA margin, % | 25.3% | 20.7% |
Source: IFRS
Due to a significant reduction in gross debt and effective interest rate decline, the Group was able to bring down its interest expense by 42.3% to RUB 1.5 billion from RUB 2.5 billion in 1H 2013.
In 1H 2014, the new management team carried out a comprehensive review of its upcoming development portfolio, resulting in several regional and Moscow-based projects being reclassified as no longer feasible for development. Through the course of the portfolio review and a re-valuation based on the possibility of immediate sale, the Group recognized RUB 2.5 billion in non-cash impairment losses on intangible assets and work in progress.
As a result of the factors described above, profit for the period (net profit) decreased by 44.3% to RUB 1.5 billion from RUB 2.6 billion.
Discussion of Group's financial position, cash flows and liquidity
Net cash from operating activities in 1H 2014 reached RUB 2.5 billion, decreasing from RUB 4.6 billion primarily due to a reduction in cash collections from lower volumes of apartment sales in 1H 2014.
Free cash flow (defined as net cash generated from operating activities, less acquisition of property, plant and equipment, and development rights and other intangible assets) amounted to RUB 1.8 billion in 1H 2014, compared to RUB 3.5 billion in 1H 2013. This stemmed from weaker operating cash flow being offset in part by lower investment into new development projects. PIK Group did not make any significant acquisitions of development rights in 1H 2014.
As at June 30, 2014, the Group had RUB 25.3 billion of gross debt (down from RUB 29.1 billion of gross debt as at December 31, 2013). Net debt as at June 30, 2014 amounted to RUB 15.6 billion, down from RUB 18.0 billion at the end of 2013. During the reporting period, the Group paid down a total of RUB 27.9 billion in debt and took out new loans amounting to RUB 24.3 billion.
Directors' Responsibility Statement
The attached 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 differ from the calculations used by other companies and therefore comparability may be limited. Some of the measures (e.g. EBITDA, adjusted EBITDA, normalized net income, net debt) 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 words such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," or the negative of such words 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.