Company Announcements

19 September 2022

In Wake of M&A Transaction, Etalon Group Achieves Record Net Profit in 1H 2022

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 first half of the year ended 30 June 2022.

1H 2022 financial highlights:

·    Consolidated revenue for 1H 2022 amounted to RUB 32.7 billion.

·    Consolidated gross profit before purchase price allocation (PPA) for the period reached RUB 10.5 billion, while consolidated gross profit amounted to RUB 9.8 billion.

·    Pre-PPA consolidated gross margin was 32%; in the Company's core segment of residential development, it was 35%.

·    Pre-PPA LTM EBITDA amounted to RUB 16.2 billion; LTM EBITDA was RUB 13.8 billion.

·    Net profit for the period increased from RUB 1.3 billion in 1H 2021 to a record RUB 11.7 billion in 1H 2022.

·    Net corporate debt[1] as of 30 June 2022 was RUB 2.5 billion, and the ratio of net corporate debt to pre-PPA LTM EBITDA was 0.15x.

·    Operating cash flow less interest paid, including cash collections in escrow, amounted to RUB 0.3 billion.

·    The amount of funds in escrow reached RUB 77.3 billion.

Commenting on the Company's 1H 2022 financial results, Etalon Group CEO Gennadiy Shcherbina said:

"In implementing our strategy, we have been working hard since the middle of last year to expand our business through both the acquisition of land plots and the inorganic expansion of our portfolio. In May 2022, we completed a profitable deal for the acquisition of YIT Corporation's Russian business. As a result, we were able not only to add 600 ths sqm to our portfolio, expand into new regions and enhance our competencies but also to bolster our earnings in the first half of this year.

"By concluding a transaction on terms that were extremely favourable for us, we achieved a record net profit of RUB 11.7 billion. However, revenue was influenced by market turbulence and decreased year-on-year sales due to a temporary reduction in our real estate supply. The gross margin in our core segment of residential development remained at the target level of 35% despite increases in procurement and logistical costs.

"At the same time, there was a slight change, of only 3%, in administrative and selling expenses. Pre-PPA LTM EBITDA exceeded RUB 16 billion, with a margin of 20%. Adjusted for purchase price, LTM EBITDA amounted to RUB 13.8 billion.

"The current market situation has opened up considerable room for market consolidation on the part of major players. In this environment, we continue to actively expand our portfolio and product range. With our planned fourfold increase in supply compared with 2021, portfolio diversification and work on standardisation, we expect to make our product more affordable while maintaining high margins. We are also open to further inorganic business expansion if the right opportunity comes along. This would enable us to ensure a steady increase in sales and improved financial performance, bringing us closer to achieving our strategic goals to 2024."

Commenting on the Company's financial results for 1H 2022, Etalon Group Chief Financial Officer Ilya Kosolapov added:

"In the first half of the year, even when taking the M&A transaction into account, net corporate debt was only RUB 2.5 billion, compared with RUB 2.6 billion at the end of 2021. The ratio of net corporate debt to adjusted LTM EBITDA as of 30 June of this year was close to zero. Our net cash position on a project basis reached RUB 22 billion; funds in escrow exceeded project debt by 40%. Our strong financial position in a turbulent market enables us to develop an ambitious strategic programme as well as to take advantage of emerging market opportunities for business expansion."

This and other announcements are available on the Etalon Group website:

https://www.etalongroup.com/investor-relations/investor-news/

Contact Information                    

Etalon Group

IR Team

T: +44 (0) 20 8123 1328

E: ir@etalongroup.com

EM

E: etalon@em-comms.com

About Etalon Group

Founded in 1987, Etalon Group is one of the largest development and construction companies in Russia. The Company focuses on middle class residential real estate in the Moscow and St Petersburg metropolitan areas. In 2021, the Company began a regional expansion programme and has already launched new projects in Omsk, the Novosibirsk region as well as Ekaterinburg and Tyumen. With a 35-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 7.9 million sqm of real estate.

Thanks to its integrated business model, Etalon Group is able to create added value for customers and shareholders at every stage of development, from land plot analysis and acquisition to the operation and maintenance of existing properties. Etalon Group employs over 4,600 people, and its nationwide sales and marketing network covers 59 Russian cities.

Etalon Group's assets comprise 27 projects at the design and construction stages, unsold inventory at completed residential complexes and commercial properties, with total unsold NSA of 6.0 mln sqm, as well as a construction and maintenance division. Colliers International valued the Company's total assets at RUB 270 billion as of 31 December 2021.

In 2021, Etalon Group's new contract sales totalled 446 ths sqm, or RUB 84.4 billion. The Company's revenue in 2021 amounted to RUB 87.1 billion, with EBITDA of RUB 17.9 billion.

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