PIK.L Regulatory News (PIK)

28 Sep 2007 07:06

PIK Group28 September 2007 THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY IN THE UNITED STATES OF AMERICA PIK GROUP ("The Group" or "PIK") ANNOUNCEMENT OF THE UNAUDITED INTERIM FINANCIAL RESULTS FOR THE FIRST SIX MONTHS OF 2007 (LONDON, 28 September 2007) - PIK (LSE: PIK), one of Russia's leadingresidential developers, today announced its interim financial results for thefirst six months of 2007, based upon consolidated management accounts. Financial highlights • Revenues increased by 126% to US$744m (1H06: US$329m); • Gross profit rose by 125% to US$133m (1H06: US$59m); • EBITDA equaled to US$113.8m, (1H06: US$170m, FY06: US$486m), while recurring EBITDA was up by 91% reached US$92.8 m (1H06: US$48.5 m) • Cash collection from customers up 58% to US$611m (1H06:US$386m) • Impressive increase of land bank by 2 m sq. meters since the beginning of 2007 till 28 September 2007 (Jan 1 2007 8.8m unsold sq. meters valued by CB Richard Ellis, an independent appraisal, at US$8.8bn) • Successful listing on June 1 2007 on the London Stock Exchange plc, raising net proceeds for the Group of US$ 895m (total offer size of US$1.93 billion) • Completed and approved residential units up by 44% to 316,000 sq meters (1H06: 219,000 sq meters) of which PIK's own development projects amounted to 263,000 sq. meters (1H06: 154,000 sq meters). • Rapid progress made with stated strategic objectives: - Regional expansion through significant land acquisitions; - Strategic acquisition of Storm Properties to drive penetration of commercial marketplace; - Reduction in cost of debt. Kirill Pisarev, CEO of PIK comments: "We are very pleased to announce today our first set of Half Year Results as alisted company, which show that compared to the same period last year ourrevenues have more than doubled. Meanwhile, we see strong performance in cashcollections from our customers, which have risen by 58% as compared to thecorresponding period of 2006. These results demonstrate that we are maintainingour position as the clear leader in Russian real estate development and willcontinue to implement our growth strategy through expanding our land bank andour presence in the Russian regions." CHAIRMAN'S AND CHIEF EXECUTIVE STATEMENT We are pleased to report our unaudited interim financial results for the firstsix month 2007, which show a significant increase in business activity as tocorresponding period of 2006. Our growth through our increasing presence throughout Russia, our uniqueposition in the Russian residential market, especially on the mass market andour management team's efforts continue to provide us with a sustainablecompetitive advantage in the dynamic Russian residential real estate market. PIK has adopted conservative IFRS accounting principles. These stipulate revenuerecognition when buildings have been sold, completed and accepted. Historically,there is high degree of seasonality in the business, with the majority ofacceptances generally in the second half of the year. This seasonal pattern isreflected in the reported results for the period under review. Balance Sheet Total assets increased by US$1.07bn to US$3.56bn as of 30 June 2007. This wasmainly driven by significantly increased shareholders' equity as a result of theUS$895m proceeds from the Group's initial public offering ('IPO') dated 1 June2007. Compared to 31 December 2006 net debt decreased by US$402m down to US$467m dueto increased cash and equivalents position by US$581m, while total debt was upby US$178m and totalled US$1,091m. It should be noted that before the IPO ofPIK, total debt was over US$1.1bn and that the impact of the debt repaymentprogramme initiated by the Group following the IPO will mainly be recorded inthe subsequent period to this reporting date. Net working capital increased by US$543m to US$1,073m, mainly due to advancesfor various land acquisitions, totalling US$252m and increased constructionvolumes. PP&E increased by US$81m to US$379m, mainly due to the acquisition of two localprefabricated facilities in Kaluga with underlying net book value of US$46.7m. Income Statement PIK recognized revenues for the first six months of 2007 of US$744m, up by 126%as compared to the corresponding period of 2006. 62% of total sales revenue isrepresented by sale of apartments, while the rest comprises constructionservices and miscellaneous sales. The significant increase in revenuerecognition is mainly explained by increased sales volumes in Moscow and higheraverage selling prices. EBITDA for the reporting period was US$113.8m, consisting of the followingcomponents: • US$92.8m from development activities (1H06: US$48.5m); • US$(1.0)m net other loss (1H06: US$56.2m income); • US$13.9m income from sales of development rights (1H06: US$56.6m); • US$1.6m foreign exchange gain (1H06: US$8.7m); • US$(1.9)m IPO related miscellaneous expenses (1H06: nil); • US$8.5m income from sales of investments (1H06: nil); Recurring EBITDA (i.e. adjusted EBITDA by net other income (losses); income fromsales of development rights and investments; foreign exchange differences andIPO miscellaneous expenses), stood at US$92.8m versus US$48.5m in 1H06. Cash Flow Statement Cash collections for the period were up by 60% and amounted to US$611m (1H06:US$386m) due to strong collections of US$325m from Moscow, US$224m from Moscowregion and US$62 from other Russian regions. As compared to the correspondingperiod of 2006, collections were up by approximately 44-47% in Moscow and Moscowregion, while in other Russian regions they increased six-fold. A significantincrease in regional cash collection is the result of the Group's regionaldiversification, undertaken in 2006. Dividend Policy As declared in the IPO Offering Circular, we currently intend to pay dividendsof approximately 10-15% of our IFRS net profit commencing in 2008 based upon thefinancial results of 2007. Key Corporate Highlights We completed and approved 316,000 sq meters of housing (1H06: 219,000 sq meters)of which PIK's own development projects amounted to 263,000 sq. meters (1H06:154,000 sq meters), including the following completions: - New Peredelkino Moscow project (42,000 sq meters); - Okskaya-Volzskaya Moscow project (117,000 sq. meters); - Two projects in Yaroslavl (29,000 sq meters in total); - Two projects in Omsk (19,000 sq meters); Strategic Direction PIK's objective is to maintain its leading position and become the mostrecognised residential developer with a nationwide presence in Russia. We position ourselves as a mass market segment developer, developingprefabricated panel buildings at reasonable costs for customers. We believe thatthis is the market segment which has the strongest growth prospects in thefuture taken into consideration the existing strong fundamentals of the Russianresidential market. Building on our long-established track-record in the industry, we are expandingfurther into the commercial market sector, targeting the best opportunities inthis segment of the market. As a result, in late August 2007, we acquired a50%+1 share interest in Storm Properties, a dynamically growing Russiancommercial developer with an excellent team of dedicated professionals. Currently we intend to sell both our residential and commercial premises;however in the long-term we may retain the commercial premises and lease them tothird parties in order to generate stable, annually recurring income streams. We continue to capitalise on the skills of our highly experienced managementteam and its extensive knowledge of the Russian real estate market. This willenable us to continue executing our current portfolio and expanding our projectpipeline. We see continued opportunities in Moscow and Russia's regions. Currently, exceptfor Moscow and the large number of cities in the Moscow region, where our coreactivities lie, we operate in 11 regional cities (Yaroslavl, Perm, Omsk,Volgograd, Novorossiysk, Kaliningrad, Kaluga, Rostov-on-Don, Taganrog, Krasnodarand Nizhny Novgorod) and plan to further diversify into the regions. Russian Residential Market Update The Russian housing market is characterised by high home ownership, whilehousing supply per capita is just above 20 sq meters and the existing housingstock is of poor quality. Together with the rapid expansion of the mortgagemarket and the underlying favourable macroeconomic situation, these factorsprovide excellent market fundamentals for successful residential real estatedevelopment. According to Rosstat, the Russian Statistics Agency, total construction volumesfor 2006 reached 50.2m sq. meters. For the first six months of 2007, construction volumes continued to growsignificantly by 34.8% and amounted to 21.2m sq. meters, with an expected totalof 60m sq. meters for the whole year. Construction volumes in Moscow maintaineda high level of 2,358m sq. meters (2006: 4.8m sq. meters) and volumes in theMoscow region increased strongly by 41.4% to 2,345m sq. meters for the first sixmonths ended June 30 2007 (2006: 6.4m sq. meters). Outlook PIK believes that the following guidance shall apply for 2007: - 1.4 m sq. meters of total completions for the year (2006: 1.2 m sq. meters); - Dividend payout ratio of 10-15% of IFRS net income for the year commencing in 2008 based upon the financial results of 2007. Over the long-term PIK expects to focus on the following strategic objectives: - Residential mass focus with selective exposure to the commercial sector including the office and retail segment; - Continuing expansion into Russia's growing regions; - Rolling-out the integrated business model into Russia's regions; Given the existing market conditions and the strong performance for the firstsix months of the year 2007, the Group is currently comfortable with marketexpectations for the full year. Enquiries: PIK Group Tel: +7 (495) 291-67-54 Viktor Szalkay szalkayv@pik.ru Investor Relations Citigate Dewe Rogerson Tel: +44 20 7282 2886 David Westover +44 20 7638 9571 Appendix Condensed Consolidated Profit and Loss Statement '000 USD Six month ended Six month ended 30/06/2007 30/06/2006 (unaudited) (unaudited) Revenues 744 479 329 108Cost of sales (611 751) (270 204)Gross profit 132 728 58 904Sales of development rights 13 926 56 646General and distribution expenses (53 088) (22 347)Other income(loss) (1 001) 56 216Results from operating activities 92 565 149 419Net financial income(loss) (12 557) (11 593)Profit before income tax 80 008 137 826Income tax expense (23 142) (36 093)Net profit for the period 56 866 101 733EBITDA 113 834 170 021EBITDA from development activity (recurring EBITDA) 92 820 48 506 Condensed Consolidated Balance Sheet '000 USD 30/06/2007 31/12/2006 (unaudited) (audited) '000 USD '000 USD Property, plant and equipment 378 591 297 558Intangible assets 152 631 155 254Deferred tax assets 2 867 2 284Investments 236 477 210 212Inventory 1 618 281 1 569 560Accounts receivable 551 960 215 461Cash and cash equivalents 624 134 43 070Total assets 3 564 941 2 493 399Total equity 1 336 422 377 155Total debt 1 091 296 912 363Deferred tax liability 197 761 169 442Accounts payable and provisions 939 462 1 034 439Total equity and liabilities 3 564 941 2 493 399 Financial information in this release is unaudited and based upon consolidatedmanagement accounts prepared in accordance with IFRS. The Group's reporting currency is Russian roubles. However, for presentationpurposes, these amounts were converted into US$ using average RR/US$ exchangerate of the Central Bank of Russian Federation (1H07: 27.6178; 1H06: 26.0714)for the income statement and using RR/US$ exchange rate (30 June 2007: 25.8162;31 December 2006: 26.3311) for the balance sheet as of the date of reporting. Some of the information in this press release may contain projections or otherforward-looking statements regarding future events or the future financialperformance of PIK. You can identify forward-looking statements by terms such as"expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may"or "might" the negative of such terms or other similar expressions. Thesestatements are only predictions and actual events or results may differmaterially. PIK does not intend to or undertake any obligation to update thesestatements to reflect events and circumstances occurring after the date hereofor to reflect the occurrence of unanticipated events. Many factors could causethe actual results to differ materially from those contained in PIK'sprojections or forward-looking statements, including, among others, generaleconomic conditions, PIK's competitive environment, risks associated withoperating in Russia, rapid technological and market change, and other factorsspecifically related to PIK and its operations. -END- NOTES TO EDITORS PIK Group Overview Founded in 1994, PIK is one of the leading vertically integrated residentialdevelopers in Russia with over 14,000 employees across the country. Its businessactivities are concentrated in Moscow and the Moscow region with an increasingfootprint in many of Russia's other regions. Its principal activity is thedevelopment, construction and sale of residential properties in large scaledevelopments targeted primarily at the middle income housing market in Russia. PIK's core activities include: • development of residential real estate projects and sales of completed units, including servicing and maintenance of residential real estate developed by PIK and other developers; • production and assembly of concrete panel housing in Moscow as a subcontractor for the Moscow city government; and • production and sale of raw materials and construction materials. The last three years between 2004 and 2006, PIK has completed over 2.5 millionsquare meters of residential housing and over 36,000 residential units inRussia, including over 1.2 million square meters and over 17,000 residentialunits in 2006 alone. June 1, 2007, the Group completed successful listings on the London StockExchange, the RTS and MICEX exchanges in Russia. PIK Group's website address is: www.pik.ru Group Financial Summary Revenue for 2006 rose by 90% and equalled US$ 1,546 million, while EBITDA for2006 amounted to US$ 486 million. Net profit was US$ 298 million in 2006compared to US$ 20 million in 2005. According to CBRE, an independent appraiser, the combined market value of theGroup's properties valued as of January 1, 2007 was $8.8 billion. This information is provided by RNS The company news service from the London Stock Exchange