LSR Group Annual report 20 15 002 LSR Group Annual report 2015
CONTENTS
RESULTS HIGHLIGHTS 004 STATEMENT OF CHAIRMAN OF THE BOARD 006 OF DIRECTORS AND CHIEF EXECUTIVE OFFICER KEY EVENTS 010 GEOGRAPHICAL DEVELOPMENT 016 CORPORATE STRUCTURE 020 MARKET 022 MACROECONOMIC OVERVIEW ST. PETERSBURG AND THE LENINGRAD REGION MOSCOW AND THE MOSCOW REGION YEKATERINBURG
REVIEW OF OPERATING AND FINANCIAL RESULTS 032 REAL ESTATE PORTFOLIO 042 PROJECTS PORTFOLIO 046 CORPORATE GOVERNANCE 058 SHARE CAPITAL 072 DIVIDEND POLICY 074 SOCIAL RESPONSIBILITY 075 EMPLOYEES CHARITY ENVIRONMENTAL PROTECTION
GLOSSARY 082 004 LSR Group Annual report 2015
RESULTS HIGHLIGHTS OPERATIONAL HIGHLIGHTS TRANSFERRED TO CUSTOMERS SHARE OF SALES INVOLVING MORTGAGES REACHED ITS STANDARD LEVEL OF 33%. THOUSAND FINANCIAL RESULTS 754 SQUARE METERS THE AVERAGE SQUARE METER PRICE INCREASED BY 6% WITHIN SIGNED CONTRACTS. 754 th m2 were completed compliant with projects REVENUES REAL ESTATE PORTFOLIO implementation terms 984 TH M2 OF NEW REAL ESTATE WERE INTRODUCED RUB ON THE MARKET. 86,8 BN ( ) RUB 6% NEW SALES CONTRACTS Company revenues reduced by 6% BN to RUB 86,830 m. Revenues were 136 THOUSAND mainly impacted by weaker performances LSR Group real estate portfolio amounted to RUB 136 bn on December 31, 2015 (Knight Frank valuation). For reference, 611 SQUARE METERS of construction materials business, and the cement mill sale. Prices growth compensated some volumes reduction in the Real company value (EV) is RUB 82 bn. Despite the unfavorable market situation, we signed new sales Estate Development sphere. contracts for 611 th m2. Sales dropped by 39% comparing to 2014 which saw a hectic demand for real estate.
EBITDA RUB (14%) REAL ESTATE COMPANY BN PORTFOLIO VALUE 18,6 KEY FINANCIALS EBITDA reduced by 14% comparing to 2014, and amounted to RUB 18,633 m. EBITDA was mainly influenced 2014 2015 Change, % by company’s cement business sale.
Revenue, RUB m 92 347 86 830 (6%) EBITDA, RUB m 21 588 18 633 (14%) PROFIT EBITDA, % 23% 21% - RUB 16% Profit before income tax, RUB m 11 460 13 962 22% 10,6 BN DIVIDEND PAYOUT CHART Profit for the year, RUB m 9 202 10 646 16% Profit for a period grew by 16% comparing to 2014, 15 20 20 40 78 78 RUB Total comprehensive income, RUB m 9 715 10 789 11% and hit a record by amounting to RUB 10,646 m. Spending cuts provided a significant effect on the profit. Earnings per share amounted to RUB 104.6 that corresponds to 16% profitability. 31.12.14 31.12.15 Change, % DIVIDENDS PAID FOR THREE YEARS Equity, RUB m 65 828 67 994 3% Total debt, RUB m 27 367 33 018 21% 78 Net debt, RUB m 2 089 12 584 502% NET DEBT / EBITDA RUB PER ONE ORDINARY SHARE Net debt/ EBITDA 0,1 0,68 - RUB 2010 2011 2012 2013 2014 2015 NET 0,68 EBITDA 12,6 BN DEBT RUB 20 BN 2014 2015 Change, % Company’s net debt increased to RUB 12,584 m. Net debt/EBITDA Earnings per share, RUB 89,78 104,6 17% constituted 0.68 that allows the company to increase the debt load with no limitation, in order to provide business growth. Weighted ON APRIL 5, 2016, LSR GROUP ANNUAL GENERAL MEETING Dividend per share, RUB 78 78 - average interest rate reduced by 0.6%. OF SHAREHOLDERS DECIDED TO PAY OUT DIVIDENDS Share price at year-end, RUB 1 454 676 49% AMOUNTING TO RUB 78 PER ONE ORDINARY SHARE, BASED ON 2015 PERFORMANCE Shares outstanding 103 030 215 103 030 215 - Market capitalization at year-end 2, RUB m 46 776 69 597 49% THUS, THE TOTAL DIVIDENDS AMOUNT TO RUB 8,036,356,770. 2015 figures 2014 figures
1 Based on ordinary share price on MICEX. 2 Based on ordinary share price on MICEX.
Results highlights 006 LSR Group Annual report 2015 STATEMENT OF CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
DEAR SHAREHOLDERS,
The recent year was quite complicated for the LSR Group. The Bank Company’s profit grew by 16% and hit the record of RUB 10.7 bn of Russia took a decision to increase the key rate from 10.5% to due to company’s spending cuts. Earnings per share amounted to 17% in December 2014, therefore, mortgage lending was almost RUB 104.6 that corresponds to 16% profitability in relation to the deteriorated. We would like to remind that about 35% of all our real current price of Group’s shares. estate sales contracts were signed with mortgages involvement in 2014. Moreover, in the beginning of 2015 we faced lack of real estate supply due to hectic demand in the 4th quarter of 2014. / DIVIDENDS / Drastic drop in demand was observed on the new housing market in the first half of the year. During that period, we had to exercise LSR Group Board of Directors decided to remunerate the a lot of efforts to attract customers, to earn their loyalty by investment community for their trust, and thus, to provide RUB 8 performing our obligations for not just 100%, but for 150%, bn to pay out dividends based on 2015 performance. It is the sixth to implement efficient marketing initiatives, to offer the most year, when LSR Group consistently pays out dividends, and manages attractive and high-demand projects. to keep or increase their volume, and we are very proud of this.
For the recent three years, we paid out RUB 20 bn in total as dividends to our shareholders, and it is 30% of company’s current market capitalization. There are just few issuers in Russia who have similar dividend history. WE BELIEVE THAT THE MOST DIFFICULT TIME FOR THE RUSSIAN REAL ESTATE MARKET IS OVER
State subsidy programme to support for mortgage interest, which was implemented in the first half of 2015, was extended till 2017. Inflation reduces, and disposable incomes grow. LSR GROUP IS STILL ONE OF THE LEADING RUSSIAN COMPANIES IN TERMS OF RETURNS ON EQUITY THAT Company holds more competitive position in 2016. Facing economic IS ABOUT 13% NOW instability, both customers and banks prefer large companies with good financial state and reputation. Certainly, we intend to use our advantages to increase sales and shares on main markets. / DEBT / DMITRY GONCHAROV ANDREY MOLCHANOV On December 31, 2015, company’s net debt amounted to RUB CHAIRMAN OF THE BOARD OF DIRECTORS CHIEF EXECUTIVE OFFICER AND CHAIRMAN / FINANCIAL PERFORMANCE / 12,584 m. Net debt/EBITDA indicator was low and constituted OF THE EXECUTIVE COMMITTEE LSR Group financial performance in 2015 involves, on the one hand, 0.68 that allows the company to make new loans on order to grow results of housing sales in the previous years when the market was construction volumes. favorable, and on the other hand, results of construction materials sales during 2015, when the construction market faced recession.
Thus, according to 2015 results, company’s revenues reduced by 6%, and EBITDA reduced by 14% that was mainly caused by weaker performances of construction materials business, and LSR Group cement mill sale. 008 LSR Group Annual report 2015
/ REAL ESTATE DEVELOPMENT / We are proud that the company and its developer projects have been prize-winners at leading professional and industry WHAT IS LSR GROUP IN THE END OF 2015? In 2015, company’s actual total revenues in “Real Estate competitions during the year. In particular, based on the VIII Development and Construction” remained RUB 68,340 m, the level Consumer Trust contest results, the Smolny Quarter housing estate of 2014. EBITDA grew by 15% in this segment, and amounted to was announced the best implemented project in the business class RUB 17,815 m. EBITDA margin was 26%. EBITDA and EBIDTA margin WE HAVE BEEN SUCCESSFUL ON THE REAL ESTATE AND CONSTRUCTION and elite segments in St. Petersburg. ZILART and VIVA, two projects growth was provided by shift to more expensive real estate within MARKETS FOR MORE THAN 20 YEARS. WE GAINED THE PERFECT REPUTATION of LSR Group, were awarded in different nominations of the Urban the portfolio structure for projects under sale. In particular, the OF RELIABLE PARTNER FOR BOTH INDIVIDUAL REAL ESTATE CUSTOMERS Awards 2015 competition. ZILART housing estate was also awarded square meter price in the elite segment grew by 21% in 2015. AND OTHER COMPANIES. at the TREFI competition for being the best project in the business class segment Moscow. LSR Group was also nominated in Real We have been developing the portfolio of the most attractive and Estate and Construction as the Company of the Year; according in-demand projects in all regions of business during the year. In to KAISSA 2015 results, it became the best developer on the St. Our business is large-scale one, with vertical integration of businesses within the Group, diversification by business total, we completed almost 1 m square meters of real estate during Petersburg elite real estate market. The company won 6 prizes in areas and market segments. the year. The beginning of sales within our ZILART project was a different nominations of the Leader of Construction Quality contest, remarkable event on the Moscow market. We would like to remind and got the golden badge as the Reliable Developer of Russia 2015 We do not terminate or delay any of our projects; on the contrary, we fulfill our obligations ahead of schedule. that this project involved construction of 1.5 m m2 of housing at the within the St. Petersburg All-Russian Housing Congress. This is provided by perfect business processes based on vast experience, as well as company’s sustainable former 60 ha site of ZiL plant located in just 5 km from the Kremlin. financial performance that allows us constructing even when we face drops in revenues from shared construction The project involved over 10 well-known Russian and foreign participants. Companies’ activity on the real estate market shall strictly comply with the Federal Law FZ-214. architectural firms. Our joint work provides a new kind of urban space that integrates housing and commercial areas, the Hermitage We constantly introduce new impressive projects on the market in all regions of company operation. There will be Moscow Museum Center, theatres, perfect places for leisure, a lot of projects in 2016. education, and entertainment. In 2015, LSR Group won the bid on LSR GROUP WAS ALSO NOMINATED IN REAL ESTATE AND redevelopment of the southern part of ZiL plant territory. Together CONSTRUCTION AS THE COMPANY OF THE YEAR; ACCORDING Therefore, today, LSR Group is the company that keeps customers’ loyalty even in such difficult period. Introduction with the Joint-Stock Financial Corporation Sistema, we will build TO KAISSA 2015 RESULTS, IT BECAME THE BEST DEVELOPER of our new projects is always a dramatic event on the real estate market. We view the future positively, and we wish 1.5 m m2 of real estate here. Sales within Tri Vetra, Russkiy Dom, ON THE ST. PETERSBURG ELITE REAL ESTATE MARKET. you fruitful works and success in 2016! CINEMA, Bohemia, Moscovskoye Shosse 3 projects in St. Petersburg, ZILART and Flagman projects in Moscow also started in 2015.
/ CONSTRUCTION MATERIALS / In 2015, Construction Materials industry revenues dropped by 23% DMITRY GONCHAROV to RUB 16,242 m. EBITDA amounted to RUB 3,524 m (-33%). EBIDTA PUBLIC JOINT-STOCK COMPANY LSR GROUP margin was 22%. Selling of company’s cement assets provided the CHAIRMAN OF THE BOARD OF DIRECTORS IN TOTAL, WE COMPLETED ALMOST 1 M SQUARE METERS major effect on reduction in revenues and EBITDA. OF REAL ESTATE DURING THE YEAR ANDREY MOLCHANOV Brick-making business performed rather well in the construction PUBLIC JOINT-STOCK COMPANY LSR GROUP CHIEF materials industry. Brick sales increased by 4% as compared with EXECUTIVE OFFICER AND PRESIDENT OF THE BOARD We tried to complete our facilities ahead of time in order to 2014. At the same time, ready-mix concrete and concrete goods support customers’ loyalty to LSR Group. Thus, houses of the sales reduced. This is caused, first, by a drastic drop in the number second construction phase in the Smolny Quarter housing estate of facilities at the first stage of construction with the highest were completed a half of a year ahead of schedule; Radischeva 39 demand for such construction materials. Meanwhile, developers are housing estate and buildings of the Novaya Okhta project and those finishing their existing projects, and this maintains the demand for located at the Yachtennaya Street were completed several months wall materials. Aggregates sales declined due to delays in large- ahead of schedule. scale infrastructural projects implementation in St. Petersburg and Leningrad Region.
Statement 010 LSR Group Annual report 2015
FEBRUARY
LSR Group was included in the list of strategic companies in the residential construction category.
APRIL
LSR Group was awarded in several nomination of the Constructor of the Year 2014 competition.М First clinker brick delivery was performed to Finland. Beginning of exports to the European Union. CUBIC METERS
Russkiy Dom, a new premium-class3 housing estate located in the center of St. Petersburg, was introduced on the market. KEY EVENTS
Tri Vetra housing estate is available for sale in St. Petersburg.
Aeroc plant is 10 years old, AEROC aerated concrete has become the most recognizable brand on the Russian market during this period. By the end of 2014, the total volume of aerated concrete produced had been over 3,000,000 m3.
2015
MARCH
Large-scale cultural project was initiated. Andrey Molchanov and Mikhail Piotrovsky signed the Memorandum of Establishment of the Hermitage Satellite Museum Center in Moscow within the framework of ZILART project.
LSR Group purchased the sand pit in Tosnensky District of Leningrad Region. 012 LSR Group Annual report 2015
JUNE SEPTEMBER LSR Group carried out rebranding; change of the company’s logo . 8 th m2 state-of-the-art office (22 Avtozavodskaya Str.) of LSR Group was opened in Moscow.
Maxim Sokolov, the Minister of Transport of the Russian Federation, and Alexander Drozdenko, the Governor of Leningrad Region, visited LSR Group Concrete Products Plant in Gatchina. LSR Group handed over flats in the Novaya Okhta housing estate to St. Petersburg Government under the government contract. CINEMA mass-market housing estate is available for sale in St. Petersburg.
Flats in the ZILART art-class housing estate in Moscow LSR Group was awarded in Real Estate and Construction are available for sale. nomination of the Company of the Year Award.
Flagman housing estate in JULY Yekaterinburg is available for sale. Aleksandr Vakhmistrov was appointed the President of the Association LSR Group became first in the of Builders of St. Petersburg. TOP-10 Russian Major Developers national raring
2015 2016
MAY Sergei Sobyanin, the Mayor of Moscow, visited LSR AUGUST Group’s integrated home- building factory in Moscow LSR Group won the First Place Diploma «For High Efficiency and studied the peculiarities and Competitiveness in Construction and Construction of the new LSR series houses Materials Industry». LSR Group participated manufacturing process. in preparation for the Victory Day celebration LSR. Real estate – Urals won the diploma «Best Residential in all regions Construction Developer in Sverdlovsk Region 2015» within the of company’s business. Leader in Construction Industry contest.
The Russian Rating Agency of Construction Industry assigned A1 information transparency rating to LSR Group.
Key Events 014 LSR Group Annual report 2015
The company received the OCTOBER Reliable Developer of Russia JANUARY 2015 golden badge at the LSR Group was included in the list of strategic companies St. Petersburg All-Russian Sales started in the in St. Petersburg. Housing Congress Bohemia business class housing estate in Moscow Yekaterinburg Administration considered LSR Group the largest District of St. Petersburg. LSR Group as first in terms developer in the city, according to housing completions results of sales volume in Expert in 2015. 400 rating of construction companies and construction LSR Group demonstrated the new stone 12.35NF materials manufacturers. The company won 6 prizes in different nominations of the annual at the Domestic Construction Materials 2016 in Moscow. professional contest Leader of Construction Quality.
ZILART housing estate was also awarded by the TREFI competition Sales started in the jury as the best project in business class segment in Moscow. Moskovskoye Shosse 3 business class house. First in RAEX Housing Developers Ranking 2014 (RA Expert) FEBRUARY for its performance indicators in 2014. Expert Jury of the II City Planning Competition organized by the Ministry of Construction, Housing and Utilities awarded two LSR Group facilities: ZILART DECEMBER art-class housing estate in Moscow and Novaya Okhta project in St. Petersburg.
The company was awarded in The Best Developer on the The new building of the Moscow School of Economics St. Petersburg Elite Real Estate Market nomination of KAISSA 2015. constructed by LSR Group was opened.
Russkiy Dom was nominated as the Best Premium-Class Housing Estate in St. Petersburg
ZILART and Hermitage Moscow LSR Group was awarded in Information Policy of the Year nomination Museum Center of contemporary of the Interregional award Year's Results of the Urals and Siberia-2015. art were represented in Moscow. LSR Group launched sales in LUCHI ZILART was awarded in the Best Architecture and Urban Planning housing estate in Moscow Solution for the Comfort-Class House nomination within the III Annual Exhibition-Competition of the Moscow City Committee for Architecture and Urban Planning (Award of the Moscow Architectural council). LSR Group won the bid for redevelopment of the southern part of automotive plant named after I.A. Likhachev (ZiL) in Moscow.
2016
MARCH NOVEMBER The Civilization housing estate in St. Petersburg is available for sale. 824 th m2 of real estate will be constructed at 60 hectares. New LSR Group sales office was opened at Nevsky Avenue.
LSR. Real Estate – North-West and LSR. Construction – North-West Andrew Molchanov was elected the president became winners in The Best Construction Site contest. of NOSTROI at the XI All-Russian Congress of Self-Regulated Organizations. New Project of the Year (ZILART housing estate) and Comfort Class Housing Estate in St. Petersburg (VIVA housing estate) awards. LSR Group was first in the list of the most reliable developers in Moscow Region. Delovoy Peterburg newspaper included Aleksandr Vakhmistrov and Dimtry Hodkevich in the rating of the best top-managers of St. Petersburg and Leningrad Region. Flats in Lots 3 and 6 of ZILART art class housing Vladimir Kirnitsky was awarded in the Manager of the Year estate are available for sale in Moscow. nomination, of the Man of the Year Award.
Key Events 016 LSR Group Annual report 2015
POPULATION: St. Petersburg – 5.2 m people Lenigrad region – 1.8 m people
AVERAGE NOMINAL SALARY: St. Petersburg – 42.4 th RUB Leningrad region – 32.6 th RUB
ST. PETERSBURG AND THE LENINGRAD REGION ARE OUR HOME MARKET WHERE GEOGRAPHICAL DEVELOPMENT THE MAIN PART OF OUR BUSINESS IS CONCENTRATED TODAY
In St. Petersburg and the Leningrad region we are engaged in real estate development and construction in all segments from mass market to elite real estate. We produce aggregates (sand, crushed granite) and building materials (bricks, reinforced concrete, ready-mix concrete, aerated concrete), provide tower crane rental LSR GROUP BUSINESS IS CONCENTRATED services. Our business units are the leaders IN THE LARGEST REGIONS in most of our key markets in St. Petersburg and the Leningrad region. OF THE RUSSIAN FEDERATION:
ST. PETERSBURG AND LENINGRAD REGION MOSCOW ST. PETERSBURG AND THE LENINGRAD REGION UNIT CAPACITY NUMBER OF PLANTS / AND MOSCOW REGION REMAINING RESERVES
YEKATERINBURG Reinforced concrete th m3 570 2 AND SVERDLOVSK REGION Ready-mix concrete th m3 1 947 7 Bricks m units 380 3 Aerated concrete th m3 380 1 Total population of these regions is 30 m people, Crushed granite th m3 8 064 575 m m3 and the level of economic development is much Sand th m3 21 607 233 m m3 higher than that in other regions. Tower cranes units 156 - M Pre-fabricated construction th m3 500 - 30 PEOPLE 018 LSR Group Annual report 2015
POPULATION: Yekaterinburg – 1.5 m people Sverdlovsk Region – 4.3 m people
AVERAGE NOMINAL SALARY: Yekaterinburg –40.4 th RUB Sverdlovsk Region – 31 th RUB
YEKATERINBURG IS THE INDUSTRIAL, POPULATION: TRADE AND CULTURAL CENTRE UNITS CAPACITY Moscow – 12.3 m people YEKATERINBURG OF THE URALS REGION Moscow region – 7.3 m people It is the fourth largest city of Russia and one of the largest real estate markets in the country. Pre-fabricated construction th m2 200 That is why we continue to develop our business in Yekaterinburg. Apart from real estate AVERAGE NOMINAL SALARY: development business we are engaged Moscow – 62.1 th RUB in pre-fabricated construction in Yekaterinburg. Moscow region – 40.2 th RUB
THE LOCAL MARKET FOR REAL ESTATE AND BUILDING MATERIALS IS THE LARGEST IN RUSSIA. THAT IS WHY IT IS CONSIDERED A PRIORITY DIRECTION FOR THE COMPANY’S GEOGRAPHIC EXPANSION.
We set up our real estate development business in Moscow in 2001. We also run a pre-fabricated factory in the region and produce bricks, as well as provide tower cranes rental services.
IN UKRAINE WE FOCUS ON DEVELOPING LEADERSHIP IN THE MARKET FOR AERATED CONCRETE
Currently we operate two production facilities in Kiev region – Berezan and Obukhov plants. We are the largest producer of aerated concrete in Ukraine. MOSCOW AND THE MOSCOW REGION UNIT CAPACITY NUMBER OF PLANTS UKRAINE UNIT CAPACITY NUMBER OF PLANTS
Bricks m units 70 1 Aerated concrete th m3 970 2 Tower cranes units 63 - Pre-fabricated construction th m2 250 -
WE SET UP OUR BUSINESS IN MUNICH, GERMANY IN 2003. OUR BUSINESS UNIT IS ENGAGED IN REAL ESTATE DEVELOPMENT PROJECTS IN GERMANY AND SUPERVISES OUR CONTRACTS WITH FOREIGN PRODUCERS OF CONSTRUCTION MACHINERY AND EQUIPMENT
Geographical development 020 LSR Group Annual report 2015
BUILDING REAL ESTATE CONSTRUCTION MATERIALS CORPORATE STRUCTURE LSR. Real Estate — LSR. Construction — LSR. Aggregates and North-West North-West Readymix Concrete — North-West
BUSINESS UNITS OF LSR GROUP ARE FORMED ACCORDING LSR. Real Estate — Moscow LSR. Construction — Moscow TO THE PRODUCT PRINCIPLE, FOR EXAMPLE, LSR. CONSTRUCTION, LSR. Bricks LSR. REAL ESTATE, LSR. BRICKS LSR. Real Estate — Urals LSR. Construction — Urals The management company performs administrative functions and consists of LSR. Reinforced Concrete — the departments of HR, IT, finance, accounting, legal matters, investor and public North-West relations, procurement and logistics. LSR. Europe LSR. Project Management
LSR. Tower Cranes 022 LSR Group Annual report 2015
Disposable incomes decline, foreign policy and economic instability, MACROECONOMIC REVIEW ruble devaluation, lower loans availability forced the population to shift from consuming to saving behavior Economic stagnation in the Russian Federation in 2014 transformed into a full-scale crisis in 2015. According to the annual results, the GDP reduced by 3.7%, fixed investment reduced by 8.4%, scope of IN 2015, SAVING RATE AMOUNTED TO 15.4% WHICH IS works in Construction industry reduced by 7%, and the retail trade THE MAXIMUM FIGURE FOR THE RECENT 5 YEARS turnover reduced by 10%.
The nature of the crisis is structural, and it is caused by Disposable incomes decline, foreign policy and economic instability, fundamental problems linked to limited diversification of the ruble devaluation, lower loans availability forced the population Russian economy and its dependence on the international economic to shift from consuming to saving behavior. In 2015, saving rate situation, as well as to efficiency of Russian economic institutions. amounted to 15.4% which is the maximum figure for the recent 5 years. Meanwhile, the share of incomes spent for goods purchasing and paying for services reduced from 75.3% to 71.2 % in 2015. ECONOMIC STAGNATION IN THE RUSSIAN FEDERATION During the year, Russian denied to make purchases which could - IN 2014 TRANSFORMED INTO A FULL SCALE CRISIS IN 2015 have been postponed that immediately affected turnover dynamics in trade and services, as well as on the real estate market. In 2015, oil prices were almost twice as low as in 2014. According The last year was the worst year for retail trade in the last 40 to the Ministry of Economic Development of the Russian Federation, years. Retail trade turnover reduced by 10% as compared to 2014. Urals average price was USD 51.2/barrel in 2015, while it was USD VCIOM polls carried out in autumn 2015 showed that a half of 97.6/barrel in 2014. 29% of Russians who had planned to acquire real estate decided to postpone such plans. According to the Rosreestr, the number of Low energy resources prices and capital outflow from Russia caused registered construction participation agreements dropped by 25% MARKET further ruble devaluation. In particular, US dollar to Russian ruble during the year. exchange rate increased by 30% in 2015, and it was RUB 72.93 to USD on January 2015, and EUR to Russian ruble exchange rate grew by 16.5% and constituted RUB 79.64 to EUR. The ruble value of the HALF OF 29% OF RUSSIANS WHO HAD PLANNED dual-currency basket increased by 23% and amounted to RUB 75.95. TO ACQUIRE REAL ESTATE DECIDED TO POSTPONE For reference, Russian ruble depreciated by 72% against USD, and by SUCH PLANS 52% against EUR. The value of the dual-currency basket increased by 61% in 2014. Ruble was supported by high volumes of sold currency earnings by Russian exporters, and by the Bank of Russia practice to According to the Rosreestr, the number of registered construction provide foreign currency to credit organizations on repayable basis. participation agreements dropped by 25% during the year. First, the Bank of Russia increased the key rate to 17% in the end Escalation of the key rate in the end of 2014 almost deteriorated of 2014, but in the first quarter of 2015, based on reduced inflation the mortgage lending in the beginning of 2015. In the first quarter risks, the Bank of Russia reduced the key rate to 11.5%, and then of 2015, mainly the deals involving loans approved in the end of to 11% in August that was twice as high as in the beginning of 2014 were concluded. State subsidy programme to support for 2014. The real wages of enterprises workers declined by 9.5% and mortgage interest for housing purchase in new buildings improved disposable incomes declined by 4% in 2015. the situation. From March to December 2015, the programme implementation provided for 40% of demand for mortgage and financed 10.6 m m2 of housing that is 21% of commissioned flats BASED ON REDUCED INFLATION RISKS, THE BANK OF area in apartment buildings. RUSSIA REDUCED THE KEY RATE TO 11.5%, AND THEN TO 11% IN AUGUS T
2014 2015 USD/RUB Exchange rate 72,93 +30%
EUR/RUB Exchange rate 79,64 +16,5% Bicurrency basket 75,95 +23% 97,6 51,2 USD/BARREL USD/BARREL 0 20 40 60 80
DYNAMICS OF KEY ECONOMIC INDICATORS AVERAGE URALS OIL PRICE IN 2015 (RUB) FOR THE YEAR 024 LSR Group Annual report 2015
In total, 700 thousand mortgages for RUB 1.15 trillion were lent in Meanwhile, the volume of completed housing in these regions ST. PETERSBURG AND LENINGRAD REGION IS OUR HOME MARKET 2015. Thus, mortgage lending market reached the level of 2012. reduced during the year: by 14.6% in Moscow Region, by 7.6% in SAINT PETERSBURG WHERE A HUGE PART OF OUR BUSINESS AND 70% OF OUR REAL ESTATE Obviously, mortgage remains the key factor of demand for housing. St. Petersburg, by 2.9% in Krasnodar Krai. Housing completions in PORTFOLIO IS CONCENTRATED The share of construction participation agreements involving Moscow increased by 15.8% in 2015. AND LENINGRAD REGION mortgage lending hit the record of 36% in the 4 quarter of 2015. For reference, it was 24% in 2014. Works performed in Construction industry reduced by 7% according to annual results, which means investment drop in construction THE SHARE OF CONSTRUCTION PARTICIPATION industry in 2015. Reduction in the new projects number impacted AGREEMENTS INVOLVING MORTGAGE LENDING HIT construction materials market, where turnover drastically dropped St. Petersburg and Leningrad region is our home market where a huge part of our THE RECORD OF 36% IN THE 4 QUARTER OF 2015 in 2015. In particular, concrete production in Russia reduced by business and 70% of our real estate portfolio is concentrated. St. Petersburg is 10%, brick production reduced by 8%, reinforced concrete products the second largest city in Russia. According to official statistics, there are over 5.2 1,169 th apartments with the combined area of 83.8 m m2 were production reduced by 19%. m residents. St. Petersburg is the largest educational, trade, and industrial center constructed in Russia in 2015, which is 99.5% of 2014 indicator. in the country, and the largest port, thus, it attracts significant migration influx. The largest volume of construction was provided in Moscow Region According to official data, migration has provided 400 th people population (10.1% of the total completions), Krasnodar Krai (5.5%), Moscow growth in the recent 10 years. St. Petersburg population has been growing based (4.6%), and St. Petersburg (3.6%). on the natural increase for the recent several years.
St. Petersburg is one of country's largest real estate markets. Over 2.5 m m2 of housing have constructed here per annum in recent years. According to Petrostat, 52.2 th apartments with the combined area of 3 m m2 were constructed in St. Petersburg in 2015. The volume of housing construction decreased by 7.1% as compared to 2014. The main completions volume of 34% of the total completions is located in Vyborgsky, Primorsky, Moscovsky Districts. 582 m2 of housing per 1000 residents were completed in the city.
The market indicates the trend towards decentralization of the new housing market which implies the increased construction activity in the outskirts or even outside the city. In 2015, the amount of completed housing in Leningrad Region KEY MACROECONOMIC INDICATORS was over 2 m m2 for the first time. 39.8 th apartments with the combined area of FOR THE PERIOD 2010-2014 2.3 m m2 were constructed last year. Housing construction volumes were up 30%, comparing to 2014. Vsevolozhsky District hit the record of housing completions with 1.3 m m2 constructed. 1.3 th m2 per 1000 residents were completed in Indicator 2010 2011 2012 2013 2014 2015 Leningrad Region. The main housing volume is being constructed nearby the city, within 15 km from the Ring Road. GDP, annual growth rate 4,5 4,3 3,4 1,3 0,6 (3,7) Real disposable income, annual growth rate 5,9 0,4 4,6 4 (1) (4) CPI, Dec/Dec 8,8 6,1 6,6 6,5 11,4 12,9 Fixed investments, annual growth rate 6,0 8,3 6,6 (0,2) (2,5) (8,4) Average URALS oil price, USD/barrel 78,2 109,3 110,5 107,9 97,6 51,2 COMPLETED HOUSING IN ST. PETERSBURG, M M2 RUB/USD exchange rate, as of the end of period 30,48 32,2 30,4 32,7 56,3 72,93
3,0 2,5 2,0 1,5 1,0 0,5 2,3 2,4 2,6 3,2 2,6 2,7 2,7 2,6 2,6 3,3 3,0 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
COMPLETED HOUSING IN LENINGRAD REGION, M M2
3,0 2,5 2,0 1,5 1,0 0,5 0,5 0,7 0,8 0,9 1,0 1,0 1,1 1,1 1,3 1,6 2,3 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Market. St. Petersburg and the Leningrad region 026 LSR Group Annual report 2015
Space deficit in the city makes developers to consider potential It introduced over 700 th m2 of housing on the market in 2015. 21733 Number of loans redevelopment of city industrial areas. The so-called “grey belt” of In particular, new sales were launched in such business class and 21733 Value of loans, RUB m 2 22963 St. Petersburg is about 13.6% of the total city area. Almost half of elite segment housing estates as Tri Vetra (56.4 th m ), Bohemia (22 21733 the historical center territory is occupied by industrial enterprises, th m2), and Russkiy Dom (56.3 th m2). New buildings within ongoing 21733 70% of which are worn. Today, there are dozens of industrial projects were also introduced on the market, including Novaya 14 sites redevelopment projects. In particular, LSR group continues Okhta, Sofia, Kalina-Park, Yuzhnaya Aquatoriya, Shuvalovsky, 18589 17431 12 16546 construction at the area of former Electric plant on the Medikov Europe City. 15892 Avenue, and constructs Sofia housing estate at the territory of 15298 14632 10 12638 13673 former Keramika plant. In the beginning of 2016, Civilization project 12762 2 was introduced on the market; this project involves 824 m of PRIMORSKY, NEVSKY, AND VYBORGSKY DISTRICTS HOLD 8 11512 housing construction at the former industrial site on Oktyabrskaya LEADING POSITIONS IN TERMS OF NEW SUPPLY 9218 7135 6 6577 Embankment. 5957 5289 3903 5666 4191 4 3983 3361 According to the Petersburg Real Estate Consulting Center, over Demand for housing in Russia is based on a range of fundamental 2763 2464 2203 3535 2 3090 3248 3403 13 m m of housing was under construction1 in St. Petersburg in factors including low housing per capita indicator, and miserable 2 the year-end of 2015. 11.4 m m2 of it is mass-market segment and condition of existing housing stock in the city. 1.4 m m2 is business class housing. About 7.7 m m2 of mass-market 0 segment2 is under construction in Leningrad Region. According The housing stock of St. Petersburg includes more than 2 m I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV to experts evaluation, over a half of housing is constructed within apartments with a total area of 120 m m2, less than 24 m2 per capita. territories integrated development projects. In this regard St. Petersburg is far behind the average European level. 2012 2013 2014 2015 2012 2013 2014 2015 According to Petrostat, the city population shall reach 5.7 m by 2031. Strategy 2030 implemented by St. Petersburg Government intends MORTGAGE LENDING IN ST. PETERSBURG MORTGAGE LENDING IN THE LENINGRAD REGION OVER A HALF OF HOUSING IS CONSTRUCTED WITHIN to increase housing per capita indicator to 35 m2 per capita by 2030. TERRITORIES INTEGRATED DEVELOPMENT PROJECTS About 70 m m2 of housing shall be built in St. Petersburg to reach this figure. One of St. Petersburg burning problems is a significant number of Housing sales on the new housing market were affected by decline In 2015, 4.6 m m2 of housing were introduced on the market of St. According to the city’s Department of Inventory and Real Estate communal apartments shared by several households. That is why in disposable incomes, economic insecurity, thus, by population Petersburg and suburban Leningrad Region. Completions volume Appraisal (GUION), there are more than 8 m m2 of obsolete housing the city is called Russian “communal capital”. There were about 85 th shift to saving behavior, by non-availability of mortgage lending in was down 19.6% comparing to 2014. This includes launched sales of in St. Petersburg, another 0.5 m m2 are in critical condition. Each fifth communal apartments in St. Petersburg in 2015. The Resettlement the beginning of 2015 before implementation of the state subsidy 2.9 m m2 in St. Petersburg, and launched sales of 1.6 m2 in Leningrad building in the city was built before 1917 and they account for 15% of Communal Apartments in St. Petersburg target programme has programme to support for mortgage interest. Region. Mass market segment in the urban area constitutes 89% of of the existing stock. Most of the obsolete buildings are located in provided resettlement of 31 th communal apartments from 2008. total supply. Business class segment share is about 9%. Primorsky, the Central, Vasileostrovsky and Admiralteisky districts. Thus, about 68 th families improved their housing conditions. According to Petersburg Real Estate, 3.78 m m2 were sold in 2015. Nevsky, and Vyborgsky Districts hold leading positions in terms However, the programme is still slowly implemented, especially Sales reduced by 26.7% as compared to 2014 when hectic demand of new supply. There share amounts to 38% of the total housing considering government funding cuts from almost RUB 10 bn in for housing was observed. 2.31 m m2 were sold in the city, and 1.47 introduced on St. Petersburg market. LSR Group became the leader 2014 to RUB 3 bn in 2015 and 2016. In total, it is planned to improve m m2 were sold in the suburban area of Leningrad Region. Over 93% in terms of housing introduction on the market. housing conditions for 84 th families from 2008 to 2016. of housing sales were in the mass-market segment.
Mortgage remains the key driver of demand on the new housing Prices on St. Petersburg new housing market were growing during market in St. Petersburg and Leningrad Region. The region is third 2015. However, reduced demand held them within the inflation in Russia in mortgage lending volumes (after Moscow and Moscow rate. In particular, square meter price in areas convenient for Region), and it is second in Russia in mortgage lending volume per living increased by 1.5% in mass-market segment and constituted capita indicator (after Tyumen Region). 33.23 th loans worth RUB RUB 104.5 th; it was 3.6% up in the business-class segment and 68.7 bn were lent in St. Petersburg in 2015. 27.3 % decline in loans constituted RUB 165 th; and it was 11.9% up in the elite segment took place comparing to 2014. 9.1 loans worth RUB 16.24 bn were and constituted RUB 325 th. Elite real estate in administratively provided in Leningrad Region that is 28% less than in 2014. dependent districts faced major growth of 31.6%.
HOUSING INTRODUCTION ON ST. PETERSBURG HOUSING SALES VOLUME IN ST. PETERSBURG AND LENINGRAD REGION MARKETS, TH M2 AND LENINGRAD REGION, M M2
I quarter 2014 1456 1310
II quarter 2014 1250 1100 325,1 290,6
III quarter 2014 1381 1090 231,1 244,3 230,0 211,1 200,4 IV quarter 2014 1596 1660 185,5 159,1 164,8 I quarter 2015 891 800 132,4 130,0 144,5 122,9 112,6 95,1 92,2 66,7 II quarter 2015 1300 800 102,9 104,5 83,7 84,7 92,1 70,2 69,8 76,3 III quarter 2015 1236 1020 54,4 Elite Business-class IV quarter 2015 1141 1160 Mass-market 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 400 800 1200 0 400 800 1200 1600 PRICES FOR NEW HOUSING IN ST. PETERSBURG, RUB TH/M2
Market. St. Petersburg and the Leningrad region 028 LSR Group Annual report 2015
MOSCOW MOSCOW IS THE LARGEST CITY NOT ONLY IN RUSSIA, BUT ALSO IN Number of loans EUROPE. ACCORDING TO OFFICIAL STATISTICS, CAPITAL’S POPULATION Value of loans, RUB m IS 12.3 M RESIDENTS. 7.3 M PEOPLE LIVE IN MOSCOW REGION AND MOSCOW REGION 48850 46629 46605 48294
40104 40042 18 38143 39688 34237 38508 33470 36213 15 34427 27650 27424 26405 For the recent decade, Moscow population grew by 11%, mainly, because 28315 24600 12 27634 23123 26251 of migration. The city has the highest salary levels in the country: in January 26520 23161 24067 to November 2015 average monthly salary was RUB 75.7 th. The official 23708 17152 21649 9 21740 19485 unemployment rate is just 0.6%. Thus, Moscow is the largest financial, trade, 18424 16752 industrial, and educational center that attracts migrants from all parts of Russia 13546 6 and CIS-countries. The capital saw natural population growth in the recent years. According to official forecasts, Moscow population will grow to 13.7 m by 2030. 3 Such intensive growth will force the city to increase construction rates. Housing per capita indicator is just 19.7 m2 in Moscow. Moscow is far behind European 0 capitals in terms of this indicator. I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV Moscow and the Moscow region representthe largest real estate market in Russia. 2012 2013 2014 2015 2012 2013 2014 2015 During the last 10 years more than 10 m m2 of housing were commissioned in 2 the region per annum. 3.9 m m of housing were constructed in Moscow in 2015, MORTGAGE LENDING IN MOSCOW MORTGAGE LENDING IN THE MOSCOW REGION which is 16% higher than in 2014. 8.5 m m2 of housing was constructed in Moscow Region, which is 3% higher than in a previous year.
Today, the supply in the Moscow region is the highest in history. According to IRN-Consulting, over 7 m m2 of housing are under sale on the market. Growing economic crisis significantly affected Moscow real estate In 2015, prices for housing in Old Moscow changed for the first time For reference, supply was 4 to 5 m m2 in 2011-2013. Projects providing over market development. Meanwhile, no market meltdown was faced in the recent years. Square meter price reached its maximum of RUB 1 m m2 were introduced on the market in 2015, while major part of them was because of high fundamental demand for housing, and implemented 240.3 th in February 2015, and by the end of the year, it stopped at being prepared in 2012-2013. Developers have significant obligations before state programme to support for mortgage interest. According RUB 207.4 th. Price was 10% down comparing to December 2014. the city authorities in terms of investment contracts related to industrial areas to Rosreestr, number of registered construction participation New Moscow and nearby areas of Moscow showed slight growth of redevelopment projects. Thus, supply volumes will not begin to stabilize agreements dropped by significant 18.4% compared to 2014. supply price. In December 2015, square meter price in New Moscow prior 2017. However, the decline was less than 8% comparing to 2013. was RUB 99.3 th, and square meter price in nearby areas of Moscow was RUB 78.6 th. State subsidy programme to support for mortgage interest played the main role in the mass-market segment. Moscow and Moscow Region hold 18% of the total amount of lent mortgages in Russia. In particular, 30 th loans worth RUB 111 bn were lent in Moscow. The number of loans was 35% down and loans total amount was 36% down comparing to 2014. 38 th loans worth RUB 98 bn were HOUSING COMPLETIONS IN MOSCOW, M M2 provided in Moscow Region. 32 % drop in the number of loans and 35% drop in loans total amount took place comparing to 2014. 6,0 5,0 4,0 3,0 240 000 2,0 1,0 220 000 4,6 4,8 4,8 3,3 2,7 1,8 1,8 3,0 3,1 3,3 3,9 0,0 200 000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 180 000
2 HOUSING COMPLETIONS IN MOSCOW REGION, M M 160 000 9,0 140 000 8,0 120 000 7,0 6,0 100 000 5,0 80 000 4,0 Old Moscow 3,0 60 000 New Moscow 2,0 Moscow region 1,0 2012 2013 2014 2015 5,3 6,5 7,8 7,9 8,5 7,9 8,2 6,6 6,9 8,3 8,5 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 HOUSING PRICES ON THE NEW HOUSING MARKET IN MOSCOW AND MOSCOW REGION , TH RUB/M2
Market. Moscow and the Moscow region 030 LSR Group Annual report 2015
YEKATERINBURG YEKATERINBURG IS THE THIRD LARGEST CITY IN RUSSIA. THE 1400 POPULATION OF THE CITY IS 1.5 M RESIDENTS. THE NUMBER OF 1200 RESIDENTS OF THE URALS CAPITAL INCREASES DUE TO BOTH NATURAL GROWTH AND MIGRATION 1000 800 Housing completions, total 600 Including mullti- 400 family houses 200 Yekaterinburg is a large industrial, transport, and educational center with 0 minimum unemployment rate (0.7%) and high wages (RUB 40.4 th per month in 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 January to September 2015), thus, its population increased by 112 th people for the recent 10 years. HOUSING COMPLETIONS IN YEKATERINBURG, TH M2
Yekaterinburg is one of the largest real estate market in the country. 1,194 th m2 of housing, with 1,037 th m2 in apartment houses, were constructed in 2015. Volumes of new homes construction increased by 15% comparing to 2014. 42 developers completed housing construction in 2015. During the year, our business unit “LSR. Real estate – Urals” completed 135 th m2 of housing and became the leader in this respect, for it provided 13% of the total number of completions. 16585
2 According to the Ural Chamber of Real Estate, 2.3 m m were under construction 14133 in Yekaterinburg in the end of 2015, which is 15% lower than in 2014. 13441 2 Construction of about 700 th m of housing began in the city in 2015. This is 11734 12799 11783 almost twice as little as in 2014. Increase of frozen construction sites, as well as 11318 reduction in construction rates at many construction sites were caused by decline 10 10823 in investment development. It is expected that the impact of supply reduction on 8606 9324 9405 8706 the market will be remarkable in 2017. 8 6368 6 7545 Demand for housing in Yekaterinburg was impacted by a range of negative 6872 6991 factors in 2015. Economic instability and insecurity, drop in disposable incomes 4 force some of potential customers to postpone their plans to buy new housing. 2 Unfavorable situation on the existing housing market resulted in increased terms of housing exposition that also affected plans of those who desired to improve 0 Number of loans their living conditions. I II III IV I II III IV I II III IV I II III IV Value of loans, RUB m 2012 2013 2014 2015 Escalation of mortgage interest rates in the end of 2014 before the implementation of state programme to support for mortgage interest provided a significant impact on the new housing market. According to the Central Bank, MORTGAGE LENDING IN SVERDLOVSK REGION 21.3 th mortgages worth RUB 34.4 bn were lent in Sverdlovsk Region during the year. 28 % drop in the number of loans and 34% in their total amount took place comparing to 2014. Average weighted rate increased from 12.45% to 13.52% during the year. Mortgage lending remains a key factor that influences demand for housing under construction. According to the Ural Chamber of Real Estate, 50% of concluded deals involve mortgages in Yekaterinburg. Today we face the maximum dependence of developers on the mortgage lending market. Developers tend to shift from housing cooperative scheme to 214-FZ, in order to get access to the state subsidy programme to support for mortgage interest. 70 Excessive supply facing drop in consumer demand, and price-based competition with the existing housing market caused decline in sales on the new housing 65 market. According to the Ural Chamber of Real Estate evaluation, demand is down by 41% comparing to hectic 2014. Less than 17 th apartments were sold 60 in Yekaterinburg in 2015. 55 During the first half of 2015 prices continued to grow on Yekaterinburg new housing market. Price per square meter had become over RUB 68 th by the end of summer, and remained on the same level till the end of the year. Just 50 in December 2015, it was down to RUB 67.5 th that is 2% higher than in 2014. Current prices are maintained by structural changes on the market, in particular, 45 by a large share of almost completed project against reduction of startups, as well as by disappearing of cheap supply at the city periphery. 2008 2009 2010 2011 2012 2013 2014 2015
HOUSING PRICE ON THE NEW HOUSING MARKET, TH RUB/M2
Market. Yekaterinburg 032 LSR Group Annual report 2015
KEY FINANCIALS (RUB M)
2014 2015 Change, %
Revenue, 92 347 86 830 (6%) EBITDA 21 588 18 633 (14%) EBITDA, % 23% 21% - Operating profit 17 492 13 763 (21%) Operating profit, % 19% 16% - REVIEW OF OPERATING Total comprehensive income for the period 9 202 10 646 16% Operating cash flow 22 250 (8 331) -
AND FINANCIAL RESULTS 2014 2015 Change, %
Depreciation and amortisation 3 678 2 998 (18%) Capitalised capital expenditure 1 677 3 140 87%
31.12.14 31.12.15 Change, % REVENUES M RUB LSR Group revenue amounted to RUB 86,830 m Total debt 27 367 33 018 21% (-6%) in 2015. Net debt 2 089 12 584 502% Net debt / EBITDA 0,1 0,68 -
GROSS PROFIT 86 830 Gross profit amounted to RUB 26,097 m in 2015 26 097 CONSOLIDATED INCOME STATEMENT (RUB M) COMMERCIAL AND ADMINISTRATIVE EXPENSES 2014 2015 Change, % Commercial expenses grew by 7% to RUB 5,189 m. Administrative expenses grew by 4% to RUB 7,023 m. 5 189 Revenue 92 347 86 830 (6%) 7 023 Cost of sales (66 298) (60 734) (8%) EBITDA AND OPERATIONAL PROFIT Gross profit 26 050 26 097 - EBITDA was 14% down and amounted to RUB 18,633 m. EBITDA margin was 21%. Operating profit dropped by 21% to RUB 13,763 m. Distribution expenses (4 858) (5 189) 7% Operating margin was 16%. 18 633 Administrative expenses (6 771) (7 023) 4% 13 763 Other income and expenses 3 071 (122) - FINANCE COSTS Operating profit 17 492 13 763 (21%) Company’s net finance income constituted RUB 200 m. Finance income 1 020 2 634 158% 200 Finance costs (7 051) (2 434) (65%) OTHER INCOME AND EXPENSES Income tax expenses were RUB 3,317 m in 2016. Statutory income tax Profit before income tax 11 460 13 962 22% rate is 20%, effective tax rate is 24%. 3 317 Income tax expense (2 258) (3 317) 47% Profit for the year 9 202 10 646 16% PROFIT FOR THE PERIOD Foreign currency translation differences for foreign operations 513 143 (72%) According to 2015 results, the profit was RUB 10,646 m (+16%). 10 646 Total comprehensive income for the year 9 715 10 789 11% Earnings per share (RUB) 89,78 104,6 17% EBITDA 21 588 18 633 (14%) EBITDA, % 23% 21% -
Review of operating and financial results 034 LSR Group Annual report 2015
CASH FLOWS AND LIQUIDITY
CONSOLIDATED CASH FLOW STATEMENT ⊲ Cash flow from operations before income taxes and interest paid was equal 2014 2015 RUB m to RUB -1,500 m. AS OF 31 DECEMBER 2015, THE CASH BALANCE WAS ⊲ Interest payments amounted to RUB 3,162 m. Net Income 9 202 10 646 The income tax expense paid was RUB 3,668 m. Depreciation & amortisation 3 678 2 998 ⊲ RUB Net finance costs 6 031 (200) ⊲ The cash inflow from investing was equal to RUB 6,588 m. The cash outflow M from financing activities was equal to RUB 3,250 m. 20 434 Other, net (234) 5 167
Operating profit before changes in working capital and provisions 18 678 18 611
Change in Inventories (30 846) (15 749)
Change in Trade and Other Receivables (7 923) (108)
Change in Trade and Other Payables 47 636 (3 485)
Increase / decrease in provisions 1 465 (770)
Cash flow from operations before income taxes and interest paid 29 010 (1 500)
Income Taxes Paid (2 580) (3 668) DEBT
Interest Paid (4 180) (3 162)
Cash flow from (utilised by) operating activities 22 250 (8 331) DEBT STRUCTURE
Capital Expenditures (1 360) (3 305) RUB m 31.12.2014 31.12.2015 96% Disposals 227 5 235 Bank and other loans 24 140 31 710 Other (719) 4 659 Bond issues 3 017 1 154 3,5% 0,5% Bank and other loans Cash flow from (utilised by) investing activities (1 853) 6 588 Lease liability 211 154 DEBT STRUCTURE Bond issues Total debt 27 367 33 018 Debt issued (repaid) 2 920 4 786 Finance lease liability Less cash and cash equivalents 25 278 20 434 Dividends paid (4 084) (8 036) Net debt 2 089 12 584 Cash flow from (utilised by) financing activities (1 165) (3 250)
Net change in cash 19 232 (4 993)
Cash at beginning of period 5 899 25 278
Exchange rate fluctuations 146 149 CREDIT RATINGS Cash at end of period 25 278 20 434 ⊲ As of December 31, 2015, the company’s total debt increased by 21%, compared to December 31, 2014, Rating agency Grade Outlook up to RUB 33,018 m.
MOODY'S B2 stable ⊲ Net debt was equal to RUB 15,584 m. The net debt / EBITDA ratio was 0.68. FITCH B stable RAEX А+ stable
Review of operating and financial results 036 LSR Group Annual report 2015
REAL ESTATE DEVELOPMENT AND CONSTRUCTION
IN 2015, THE SALES REVENUE OF REAL ESTATE DEVELOPMENT AND CONSTRUCTION DIVISION WAS RUB 68,340 M, DOWN 1% AGAINST 2014 RESULTS. EBITDA INCREASED BY 15% TO RUB 17,815 M. EBITDA MARGIN WAS 26% / REAL ESTATE DEVELOPMENT / / REAL ESTATE IN MOSCOW / In 2015, in all regions of our operations we entered into new In 2015, we entered into new contracts for the sale of 125 th m2 contracts for the sale of 611 th m2 (-39%). The total value of net sellable area, down 14% on our sales in 2014. The total value of the contracts for the sale of real estate was RUB 54.9 bn, down of the signed contracts was RUB 12.6 bn (-3%). REAL ESTATE DEVELOPMENT 2 2014 2015 Change, % 36% against 2014. In 2014, we completed 754 th m of net sellable area (-5%). In 2015, we completed 90 th m2 (-59%) of net sellable area in New Domodedovo project. The deliveries recognised in the company’s Completed (th m2) 790 754 (5%) The deliveries recognized in the company’s real estate develop- revenue for 2015 amounted to 96 th m2 (-54%). 2 Real Estate St. Petersburg 446 538 21% ment revenue for 2015 amounted to 722 th m (-7%), including the net sellable area completed within the reported period and The sales revenue was RUB 5,844 m and EBITDA loss was Elite Real Estate 83 93 12% pre-sold/sold either within the reported period or in previous years RUB 69 m. Mass Market Real Estate 363 445 23% along with the net sellable area completed in previous years but sold within the reported period. Real Estate Moscow 217 90 (59%) / REAL ESTATE IN YEKATERINBURG / Real Estate Urals 127 127 - The sales revenue was RUB 61,210 m and EBITDA increased In Yekaterinburg, we entered into new contracts for the sale of 101 by 23% to RUB 15,418 m. EBITDA margin was 25%. 2 New contract sales (th m2) 1 008 611 (39%) th m of net sellable area (-37%). The total value of the contracts signed in 2014 was RUB 6 bn (-35%). Real Estate St. Petersburg 704 385 (45%) Elite Real Estate 89 37 (58%) / REAL ESTATE IN ST. PETERSBURG / In 2015, we completed 127 th m2 of net sellablearea (+2%) In 2015, in St. Petersburg, we entered into new contracts in Michurinsky, Zhiloy Dom po ul. Novgorodtsevoy, Khrustalniye Mass Market Real Estate 614 348 (43%) for the sale of 285 th m2 of net sellable area (-35%). The total value Klyuchi, Rassvetniy and Serebryanaya podkova projects. The to retail customers 519 324 (38%) of the contracts was RUB 36.3 bn (-42%). In 2015, we completed deliveries recognised in the company’s revenue for 2015 amounted 2 2 under contracts with the government 95 23 (75%) 538 th m of net sellable area (+21%). The deliveries recognized to 109 th m (-20%). in the company’s revenue for 2015 amounted to 517 th m2 (+19%). Real Estate Moscow 145 125 (14%) The sales revenue decreased by 16% to RUB 6,597 m and EBITDA Real Estate Urals 159 101 (37%) In the elite segment, we entered into new contracts for the sale of amounted to RUB 1,416 m. EBITDA margin increased to 21%. 37 th m2 of net sellable area (-58%).The total value of the contracts Revenue (RUB M) 60 985 61 210 - was RUB 8 bn (-49%). In 2015, we completed 93 th m2 of net Real Estate St. Petersburg 39 446 48 107 22% sellable area (+12%) in Smolny Park, Europe City, Radischeva 39 and Dom na Dvoryanskoy projects. The deliveries recognised in the Real Estate Moscow 12 270 5 844 (52%) company’s revenue for 2015 amounted to 89 th m2 (+26%). Real Estate Urals 7 832 6 597 (16%) In the mass market segment, we entered into new contracts EBITDA (RUB M) 12 580 15 418 23% for the sale of 348 th m2 (-43%). The total value of the contracts Real Estate St. Petersburg 9 930 13 986 41% was RUB 28.3 bn (-40%). In 2015, we completed 445 th m2 of net Real Estate Moscow 1 113 (69) - sellablearea (+23%) in Novaya Okhta, Yuzhnaya Aquatoriya, VIVA and Sophia projects. The deliveries recognised in the company’s Real Estate Urals 1 383 1 416 2% revenue for 2015 amounted to 428 th m2 (+17%). EBITDA, % 21% 25% - The sales revenue increased by 22% to RUB 48,107 m and EBITDA Real Estate St. Petersburg 25% 29% - increased by 41% to RUB 13,986 m. EBITDA margin was 29%. Real Estate Moscow 9% - - Real Estate Urals 18% 21% - Operating profit (RUB M) 12 118 13 561 12% Real Estate St. Petersburg 9 653 12 222 27% Real Estate Moscow 986 (154) - Real Estate Urals 1 380 1 413 2% Operating profit, % 20% 22% - Real Estate St. Petersburg 24% 25% - Real Estate Moscow 8% - - Real Estate Urals 18% 21% -
Review of operating and financial results 038 LSR Group Annual report 2015
CONSTRUCTION
2014 2015 Change, %
Transferred to customers, th m2 994 874 (12%) St. Petersburg 586 554 (5%) Moscow* 262 179 (32%) Yekaterinburg* 147 140 (4%) / CONSTRUCTION / Revenue (RUB M) 25 560 32 928 29% In 2015, our subsidiaries in St. Petersburg, Moscow and Yekaterinburg transferred to the customers 874 th m2 of prefab St. Petersburg 16 591 21 441 29% buildings (-12%). incl. revenue frominter-group sales 15 137 19 477 29% Moscow 5 401 7 134 32% In 2014, the sales revenue of our Construction division was incl. revenue frominter-group sales 3 588 4 778 33% RUB 32,928 m, up 29% against 2014. EBITDA increased by 31% Yekaterinburg 3 569 4 397 23% to RUB 2,759 m. EBITDA margin was 8%.
incl. revenue frominter-group sales 2 462 3 716 51% In St. Petersburg the revenue of our prefab factory increased by EBITDA (RUB M) 2 109 2 759 31% 29%, up to RUB 21,441 m. EBITDA increased by 46%, up to RUB 2,490 m. EBITDA margin was 12%. In the Moscow region our St. Petersburg 1 699 2 490 46% revenue was RUB 7,134 m (+32%) and EBITDA loss was RUB 214 m. Moscow 166 (214) - In Yekaterinburg our revenue increased by 23%, up to RUB 4,397 m. EBITDA amounted to RUB 487 m (+100%). EBITDA margin was 11%. Yekaterinburg 243 487 100%
EBITDA, % 8% 8% - / PROJECT MANAGEMENT / St. Petersburg 10% 12% - The sales revenue decreased by 61% to RUB 907 m and EBITDA Moscow 3% - - was RUB 11 m. EBITDA margin was -1%. Yekaterinburg 7% 11% - Operating profit (RUB M) 1 432 1 987 39% / TOWER CRANES / St. Petersburg 1 272 1 988 56% The sales revenue was RUB 1,427 m (-8%) and EBITDA Moscow 90 (308) - was RUB 425 m. EBITDA margin was 30%. Yekaterinburg 70 311 344% Operating profit, % 6% 6% - St. Petersburg 8% 9% - Moscow 2% - - Yekaterinburg 2% 7% -
* Sales figures in Yekaterinburg and Moscow include both transfer of completed panel housing to the customers and sales of reinforced concrete for panel construction.
Review of operating and financial results 040 LSR Group Annual report 2015
BUILDING MATERIALS
Sales volume 2014 2015 Change, %
3 Crushed granite (th m ) 7 270 5 374 (26%) / CONSTRUCTION MATERIALS / Sand (th m3) 8 396 8 144 (3%) Revenues in Construction Materials industry dropped by 23% Ready-mix concrete (th m3) 1 119 1 027 (8%) to RUB 16,242 m in 2015. EBITDA was RUB 3,524 m (-33%). Reinforced concrete (th m3) 319 283 (11%) EBITDA margin was 22%. Cement (th tones) 1 531 - - Brics (m units) 334 348 4% / CRUSHED GRANITE / Aerated concrete (th m3) 1 355 1 304 (4%) In 2015, our crushed granite sales were 5.4 m m3 (-26%). Revenue (RUB M) 21 098 16 242 (23%) The sales revenue decreased by 34% to RUB 2,612 m and EBITDA decreased Crushed granite 3 980 2 612 (34%) by 55% to RUB 487 m. EBITDA margin was 19%. Sand 2 197 1 943 (12%) Ready-mix concrete 3 333 3 085 (7%) Reinforced concrete 2 508 3 135 25% / SAND / 3 Cement 3 759 - Sand sales in 2015 were 8.1 m m (–3%).
Brics 3 176 3 435 8% The sales revenue decreased by 12% to RUB 1,943 m and EBITDA Aerated concrete 2 907 2 905 - decreased by 32% to RUB 498 m. EBITDA margin was 26%. EBITDA (RUB M) 5 245 3 524 (33%) / READY-MIX CONCRETE / Crushed granite 1 075 487 (55%) In 2015, ready-mix concrete sales were 1 m m3, down 8% against 2014. Sand 727 498 (32%) Ready-mix concrete 36 75 107% The sales revenue decreased by 7% to RUB 3,085 m and EBITDA Reinforced concrete (14) 570 - increased by 107% to RUB 75 m. EBITDA margin was 2%. Cement 1 377 -
Brics 1 045 1 224 17% / REINFORCED CONCRETE / Aerated concrete 979 781 (20%) In 2015, we sold 283 th m3 of reinforced concrete items, down 11% EBITDA, % 25% 22% - against our sales in 2014. Crushed granite 27% 19% - The sales revenue increased by 25% to RUB 3,135 m and EBITDA Sand 33% 26% - was RUB 570 m. EBITDA margin was 18%. Ready-mix concrete 1% 2% - Reinforced concrete - 18% - / BRICKS / Cement 37% - - In 2015, our bricks sales amounted to 348 m units, up 4% on our Brics 33% 36% - sales in 2014. Aerated concrete 34% 27% - Operating profit (RUB M) 2 719 1 676 (38%) The sales revenue increased by 8% to RUB 3,435 m and EBITDA Crushed granite 803 237 (70%) increased by 17% to RUB 1,224 m. EBITDA margin increased to 36%. Sand 576 350 (39%) Ready-mix concrete (94) (29) - Reinforced concrete (281) 275 - / AERATED CONCRETE / 3 Cement 663 - Aerated concrete sales amounted to 1.3 m m in 2015 (-4%). Brics 276 371 34% The sales revenue was RUB 2,905 m and EBITDA decreased by 20% Aerated concrete 825 643 (22%) to RUB 781 m. EBITDA margin was 27%. Operating profit, % 13% 10% - Crushed granite 20% 9% - Sand 26% 18% - Ready-mix concrete - - - Reinforced concrete - 9% - Cement 18% - - Brics 9% 11% - Aerated concrete 28% 22% -
Review of operating and financial results 042 LSR Group Annual report 2015
/ VALUATION OF REAL ESTATE PORTFOLIO / REAL ESTATE DEVELOPMENT PROJECTS The market value of our holdings in our real estate portfolio amounted to RUB 136,038 m as of December 31, OF LSR GROUP ARE LOCATED IN 2015. The valuation of our real estate portfolio was undertaken by Kright Frank as an independent external ST. PETERSBURG, THE LENINGRAD REGION, appraiser. MOSCOW, THE MOSCOW REGION AND YEKATERINBURG / BREAKDOWN OF REAL ESTATE PORTFOLIO BY SEGMENT / Our real estate portfolio is wellbalanced across the various property segments which allows us to work with different groups of customers.
In terms of net sellable area, mass market residential real estate, which is always characterised by higher volume of demand, accounts for major part of our portfolio (incl. land plots held for future development). TH M3 9 298 The portfolio also includes residential elite (or high-end) and business class development projects, gated communities and office developments. These segments account for a smaller part of the portfolio in terms of sellable area however they account for a more substantial part of market value due to higher prices per square meter compared to mass market properties.
Net sellable area, Market value, Segment % % th m2 RUB M
Mass market 5 028 54,1% 60 646 45% Elite 65 0,7% 11 224 8% Business class 1 178 12,7% 40 909 30% Offices 42 0,4% 8 738 6% Operating offices* 25 0,3% 4 028 3% Held for future development 2 960 31,8% 10 493 8% REAL ESTATE TOTAL 9 298 100% 136 038 100% PORTFOLIO * Including operating offices with a total net lettable area of 25 th m2, utilized by LSR Group subsidiaries.
AS OF DECEMBER 31, 2015, THE NET SELLABLE AREA OF THE PROJECTS 2 IN OUR PORTFOLIO IS EQUAL TO 9,298 TH M Mass Market Elite The real estate portfolio of LSR Group includes projects NET SELLABLE AREA, Business class MARKET VALUE, in the residential elite class, business class and mass market property, TH M2 Offices RUB M gated communities and commercial property segments. Operating offices Held for future development
Real estate portfolio 044 LSR Group Annual report 2015
ST. PETERSBURG
MOSCOW
2 6% NET SELLABLE AREA, TH M 69% 25%
YEKATERINBURG
/ BREAKDOWN OF PROPERTY PORTFOLIO BY STAGE OF DEVELOPMENT / As of December 31, 2015 our real estate portfolio includes 2,723 th m2 of net sellable area at the construction stage and 1,474 th m2 at the design stage.
We also have 42 th m2 of the completed properties and operating offices with a total net lettable area of 25 th m2 , utilized by LSR Group subsidiaries. 5,034 th m2 of net sellable area are at the stage of concept / BREAKDOWN OF PROPERTY PORTFOLIO BY REGION / development. Most of our properties – approximately 69% of the portfolio by area and 55% by value – are located in our home market in St. Petersburg. Share of projects in Moscow in our portfolio was 25% in terms of sellable area and 41% in terms of market value.
Net sellable area, Market value, Stage of development % % th m2 RUB M Net sellable area, Market value, Region % % th m2 RUB M
Concept development 5 034 54,1% 27 728 20%
Designing 1 474 15,9% 19 586 14% St. Petersburg 6 411 69% 74 135 55% Construction 2 723 29,3% 71 908 53% Moscow 2 295 25% 55 938 41% Completed 42 0,5% 12 787 9% Yekaterinburg 593 6% 5 964 4% Operating offices* 25 0,3% 4 028 3% TOTAL 9 298 100% 136 038 100% TOTAL 9 298 100% 136 038 100%
* Including operating offices with a total net lettable area of 25 th m2, utilized by LSR Group subsidiaries.
ST. PETERSBURG
MOSCOW
4% MARKET VALUE, RUB M 55% 41%
YEKATERINBURG
Real estate portfolio 046 LSR Group Annual report 2015 56,3 PROJECTS PORTFOLIO RUSSKIY DOM TH M2
ELITE REAL ESTATE
11,6 VERONA TH M2 73,2 SMOLNY PARK TH M2 5,9 KOVENSKIY TH M2
DOM NA DVORYANSKOY RADISCHEVA 39 6,4 20,9 TH M2 TH M2 048 LSR Group Annual report 2015
TRI VETRA BUSINESS CLASS RESIDENTIAL 56,4 TH M2 84,3 EUROPA CITY TH M2
22,0 BOHEMIA TH M2
9,6 VIVA TH M2
Projects portfolio 050 LSR Group Annual report 2015
MASS MARKET RESIDENTIAL 823,5 CIVILIZATION TH M2
93,6 VIVA TH M2 SOPHIA 423,6 313,0 TH M2 SHUVALOVSKIY TH M2
88,7 ZAPOVEDNAYA TH M2 YUZHNAYA AQUATORIYA 318,3 TH M2
KALINA PARK 342,7 NOVAYA OKHTA TH M2 780,5 TH M2
Projects portfolio 052 LSR Group Annual report 2015
BUSINESS CLASS RESIDENTIAL 9 7 9 ,1 TH M2
ZILART 1 025 AEROPORT RZHEVKA TH M2
LENINGRADSKOE 57,5 SHOSSE TH M2
RUCH’I 211,4 27,3 GRUNVALD TH M2 TH M2
ТЫС. КВ.МЕТРОВ KVARTET 109,6 TH M2 DONSKOY OLIMP 45,9 KOSMONAVTOV 85,5 2 TH M2 TH M
Projects portfolio 054 LSR Group Annual report 2015
MASS MARKET RESIDENTIAL
LUCHI 476,4 TH M2
NOVOE DOMODEDOVO 318,3 TH M2 280,8 IBITSA 1 4 7,5 TH M2 TH M2 NAKHABINO YASNOYE PODOLSK-ERINO 358,8 TH M2
Projects portfolio 056 LSR Group Annual report 2015
REAL ESTATE
71,5 FLAGMAN TH M2 1 4 3 , 4 2 KHRUSTALNIYE RASSVETNIY TH M KLYUCHI 217,2 TH M2
SHEFSKAYA 20,1 TH M2 99,6 251 MICHURINSKIY AKADEMICHESKY TH M2 TH M2
10,4 RASTOCHNAYA TH M2
Projects portfolio 058 LSR Group Annual report 2015
CORPORATE GOVERNANCE STRUCTURE*
GENERAL MEETING INDEPENDENT AUDITORS OF SHAREHOLDERS
AUDIT COMMITTEE STRATEGY AND INVESTMENT BOARD OF DIRECTORS HUMAN RESOURCES AND COMMITTEE COMPENSATIONS COMMITTEE
EXECUTIVE COMMITTEE
CHIEF EXECUTIVE OFFICER
MANAGEMENT
* The report provides information on the composition of the company’s management bodies as of December 31, 2015
CORPORATE 01 / GENERAL MEETING OF SHAREHOLDERS 03 / EXECUTIVE COMMITTEE The General Meeting of Shareholders is the supreme authority The Executive Committee makes decisions on the most important of LSR Group. The General Meeting of Shareholders is convened issues related to the company’s current business activities, imple- by the Board of Directors at least once a year. In 2015, the company ments the company’s financial and business policy and advises GOVERNANCE held one General Meeting of Shareholders. on the company’s strategy.
The Executive Committee acts in compliance with the company’s 02 / BOARD OF DIRECTORS Charter and Regulations on the Executive Committee, and is autho- The Board of Directors is responsible for general management rised to approve operating decisions related to business activities IN OUR CORPORATE GOVERNANCE, WE COMPLY WITH of the company, defines the company’s development strategy and of LSR Group save for the matters referred to the competence RUSSIAN LEGISLATION ON CORPORATE GOVERNANCE, exercises control of its financial and business operations. of the General Meeting of Shareholders and the Board of Directors RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE, by law. The Board of Directors determines the number of members, AS WELL AS INTERNATIONAL REQUIREMENTS ON PUBLIC The Board of Directors acts in compliance with the company’s election procedures and early termination of powers of the Exec- COMPANIES LISTED ON LONDON STOCK EXCHANGE Charter and Regulations on the Board of Directors and is autho- utive Committee’s members. rised to approve decisions related to all aspects of the company’s business, save for the matters referred to the competence of the Decisions of the Executive Committee are adopted by a simple General Meeting of Shareholders by law. majority. Each member of the Executive Committee has one vote. The Chairman of the Executive Committee appoints meetings of the The members of the Board of Directors are elected by the General Executive Committee as and when required, but at least once Meeting of Shareholders for a term up to the next annual General a month. Meetings of the Executive Committee may be convened CORPORATE GOVERNANCE STRUCTURE Meeting. When members of the Board are elected by the extraor- at the initiative of the Chairman of the Executive Committee or dinary General Meeting of Shareholders their authority remains one of the members of the Executive Committee, as well as upon The corporate governance system of LSR Group consists of several valid until the next annual General Meeting of Shareholders. Any request of the Board of Directors, the Internal Audit Commission management bodies including: shareholder of LSR Group holding at least 2% of the company’s and the auditor. ⊲ General Meeting of Shareholders; voting shares may nominate a candidate for the Board of Directors. ⊲ Board of Directors; Activities of the Executive Committee are headed by the Chief ⊲ Executive Committee; Decisions of the Board of Directors are adopted by a simple majority Executive Officer, who is the Chairman of the Executive Committee ⊲ Chief Executive Officer. unless otherwise provided by law, the company’s Charter and Regu- by virtue of his position. lations on the Board of Directors. Each member of the Board of Directors has one vote. 04 / CHIEF EXECUTIVE OFFICER The Chairman of the Board of Directors convenes meetings In accordance with the Charter of LSR Group, the Chief Executive of the Board of Directors in accordance with a previously agreed Officer exercises the powers of sole executive body. The Chief Exec- timetable. Extraordinary meetings of the Board of Directors may utive Officer carries out day-to-day management of the company be convened by the Chairman of the Board of Directors at his/ except for the matters referred to the competence of the General her initiative, as well as upon the request of any member of the Meeting of Shareholders, Board of Directors and the Executive Board of Directors, the Executive Committee, Chief Executive Committee. Andrey Molchanov is OJSC LSR Group Chief Officer, the Internal Audit Commission or the auditors of LSR Group, Executive Officer. Committees of the Board of Directors, and also any shareholder with at least 10% of the company’s voting shares. On December 25, 2015, securities purchase agreement was signed, thus, changing the ownership percentage of shares from 0% to 57.56%. 060 LSR Group Annual report 2015
05 / INTERNAL AUDIT SERVICE 06 / INDEPENDENT AUDITOR In order to enhance the efficiency of control over the company’s In accordance with the existing legislation, the General Meeting financial and business operations, the Internal Audit Service was of Shareholders approves an independent auditor to audit the BIOGRAPHIES OF THE MEMBERS established in 2007. company’s financial statements on an annual basis.
The Internal Audit Service should assess compliance of the CJSC Audit-Servis was approved to audit RAS-based financial financial and business operations of LSR Group, its business units, statements of LSR Group. CJSC KPMG was approved to audit the OF THE BOARD OF DIRECTORS subsidiaries and associated companies to the interests of LSR company’s IFRS-based statements. Group, secure the company’s assets, evaluate risks and develop risks mitigation measures.
In 1994, he was invited to the Committee for Construction ALEKSANDR of St. Petersburg to administer interaction between the city’s authorities and private investors. At the same time he was VAKHMISTROV appointed CEO of the state institution Board of Investments of St. Petersburg Administration Construction Department.
MEMBER OF THE BOARD In 1996– 2000, he was CEO of the state institution Centre OF DIRECTORS of Bank Loans.
Member of the Board of Directors In 2000– 2003 – Chairman of the Construction Committee since June 2014. of St. Petersburg Administration and Vice Governor of St. Petersburg. In 2003–2009 – member of the Government Born in 1954. of St. Petersburg, Vice Governor of St. Petersburg responsible for construction and reconstruction of real estate, road building, In 1981 he graduated from Leningrad Railway Engineers Institute architecture and urban planning, and land policy of St. Petersburg COMPOSITION OF THE BOARD OF DIRECTORS* with a degree in Industrial Construction and Civil Engineering. for construction purposes.
In 2000 he graduated from St. Petersburg University of the RF In 2009–2010 – Vice Governor of St. Petersburg and Head of Name Position in the board Independent Audit Human resources Strategy Ministry of the Interior with a degree in Law. Doctor of Economics. St. Petersburg Governor Administration. of directors Committee and compensations and investment Professor of St. Petersburg State University of Architecture and committee committee Construction and St. Petersburg State Polytechnic University. First In 2010–2013, he was CEO of LLC LSR-Stroy (subsidiary of Vice President, member of the Board of the National Construction LSR Group). He was OJSC LSR Group CEO and Chairman of the Union (NOSTROY). Honored Builder of Russia. Merited Builder of Executive Committee in 2010-2015. He was also the JSC LSR Chief the Russian Federation. Two official commendations of Russia’s Executive Officer in the same period of time. He has been First Member of the Board Aleksandr Vakhmistrov No of Directors President, and Science and Technology Awards of the Russian Deputy in OJSC LSR Group from 2015. Government. Awarded the Order for Merit to the Fatherland, Chairman of the Member of the Dmitri Gontcharov No 4th degree, Order of Friendship, Order of Honor, Order of In July 2015, he was elected President of the Association of Builders Board of Directors Committee Alexander Nevsky. of St. Petersburg Member of the Board Member of the Chairman of the Member of the Oleg Gontcharov Yes of Directors Committee Committee Committee In 1975–1994, Aleksandr Vakhmistrov worked for various On 06.04.2015, his share in the company changed from 0% Member of the Board Chairman of the Member of the Member of the construction industry companies holding positions from that of to 0.012% under the securities purchase and sale contract signed Aleksei Makhnev Yes of Directors Committee Committee Committee a specialist to CEO. He was Head of Construction Department No. as part of a long-term managers motivation programme. 339 of LPSMO Glavzapstroy, Production Director of the Soviet- Member of the Board Chairman of the Andrey Molchanov No Finnish joint venture engineering firm Lentek, CEO of the Soviet- of Directors Committee Finnish joint venture construction company FILCO. Member of the Board Member of the Member of the Member of the Saydam Salaheddin Yes of Directors Committee Committee Committee Member of the Board Leonid Sorokko No of Directors Member of the Board In 1997– 2003 – Commercial Director of Sales Department, CIS and Elena Tumanova No of Directors DMITRI Eastern Europe Region, Information and Communication Networks Member of the Board Division of Siemens AG. Olga Sheikina No GONTCHAROV of Directors In 1996–1997 – worked at the Audit and Tax Consulting Department of BBMS Treuhand GmbH. * The following members of the Board were elected by the annual Meeting of Shareholders on April 7, 2015 CHAIRMAN OF THE BOARD OF DIRECTORS In 2009–2010 – member of the Executive Committee of Aeroc International AS, Estonia. Member of the Board of Directors since June 2007 Since 2003 up to date – Managing Director, LSR Europe GmbH (Munich). In April 2015, he was appointed the Chairman of the Born in 1970. Board of Directors.
Graduated from Ludwig- Maximilians-Universität (Munich) with In 2015, he held no shares of the company. a degree in Economics in 1996.
Corporate governance 062 LSR Group Annual report 2015
OLEG GONCHAROV SAIDAM LEONID SOROKKO ELENA SALAKHEDDIN TUMANOVA MEMBER OF THE BOARD MEMBER OF THE BOARD OF DIRECTORS OF DIRECTORS MEMBER OF THE BOARD MEMBER OF THE BOARD Independent director OF DIRECTORS Member of the Board of Directors OF DIRECTORS till January 2016 since April 2015 Member of the Board of Directors Independent Director Member of the Board of Directors since April 2015 Member of the Board of Directors since February 2008 since April 2015 Born in 1954. Born in 1967. Born in 1971. Born in 1958. In 1976 graduated from Leningrad Institute of Civil Engineering Graduated from Kuban State University in 1992. Graduated from King’s College, the University of London, in 1992. with a degree in Industrial and Graduated from Leningrad Shipbuilding Institute in 1981, from Civil construction. St. Petersburg State University of Economics and Finance in 1995, In 1994 - 2007 he occupied various executive positions in large- Managing Director of Credit Swiss in 1998 – 2011. and from International Banking Institute and Stockholm University scale companies. Managing Director of Renaissance Capital in 2011 – 2012. Leonid Sorokko started his career in 1976. He worked for Business School in 2007. She has a degree of Master of Economics Director for Investor Relations of CJSC Tander (Magnit retail Advisor of Renaissance Construction in 2013 – 2015. various construction companies holding positions ranging from and additional qualification – Master of Business Administration. network) in 2007 – 2012. Deputy Chief Executive Officer for Human Independent Non-Executive Director of Mirland Development from construction site foreman to CEO. Honoured Builder of Russia. In 2005 – awarded a medal In Resources of CJSC Tander (Magnit retail network) from 2012 to 2013. In 2007–2009, he was the Head of the Department for Construction Commemoration of the 300th Anniversary of St. Petersburg. June 2015. Director of Corporate Culture Development Department Independent Non-Executive Director of CJSC Cinema Park from of Russia's Defense Ministry and Advisor to the Minister of Defense of CJSC Tander (Magnit retail network) from July to December 2015. 2014. of Russia. In 1993–2000 – held a number of senior positions at financial He has been the Member of the Board of Directors of Magnit Regional Director of Jones Lang LaSalle from 2015. Since November 2013 – Deputy CEO of LSR Group. Since January departments of the group’s companies. Non-State Pension Fund since 2014. 2016 – Deputy Director for Construction of LSR Group. In 2000–2011 – Chief Financial Officer of LSR Group. He has been the LSR Group Deputy Chief Executive Officer for Mr. Salakheddin held no shares of the Company during In 2008 he was awarded the Order of Honour. In 2011–2013, she was Сhief Operating Officer of LSR Group. Personnel Policy since January 2016. the reported period. From July 2013 to June 2014 – Advisor to the Chairman of the Board Mr. Sorokko held no shares of the Company during of Directors of OJSC LSR Group. Mr. Goncharov held no shares of the Company during the reported period. In 2009–2013, she was auditor of LLC Professional audit. the reported period. In 2015, her share in the company remained unchanged and was 0,13%. ANDREY ALEXEY MAKHNEV MOLCHANOV MEMBER OF THE BOARD OF DIRECTORS MEMBER OF THE BOARD Olga Sheikina has been working for LSR Group and its OF DIRECTORS Independent Director OLGA SHEIKINA subsidiaries since its foundation in 1993. Member of the Board of Directors In 2002 - 2008 Head of the administration group. Member of the Board of Directors since April 2015 Since 2008 till present she is Head of LSR Group Moscow Office, since April 2013 Born in 1976. MEMBER OF THE BOARD Head of the Administration of the Board of Directors of OJSC LSR Born in 1971. OF DIRECTORS Group and also CEO of OJSC MTO Arkhproekt (subsidiary Graduated from St. Petersburg State University of Economics and of LSR Group). Since October 2015 - Deputy CEO for Human In 1993, he graduated from the Faculty of Economics, St. Petersburg Finance in 1998. PhD in Economics. Member of the Board of Directors Resources and organizational development of LSR Group. State University. In 1998, he graduated from the Russian Academy since June 2010 Since January 2016 - Head of LSR Group Moscow Office. of Public Administration with a degree in State and Municipal In 2000-2009, he worked in large companies in the banking sector, On 01.04.2015, her share in the company changed from 0.13% Administration. Doctor of Economics. rose through the ranks from senior manager to the executive Born in 1960. director. to 0.14% under the securities purchase and sale contract signed as part of a long-term managers motivation programme. He has been the PJSC LSR Group Chief Executive Officer and the Managing Director, the Head of the Directorate for Consumer Sector She graduated from G. V. Plekhanov Leningrad State Mining Chairman of the Executive Committee since May 2015. In 1993, and Retail of the Global Investment Banking Department of CJSC Institute in 1983, and she completed her training in the joint Andrey Molchanov founded LSR Group and headed the company VTB Capital in 2009 – 2013. programme “Management” provided by the Cross-Industry Institute till 2007. In 2007, he was appointed Assistant to Russia’s Minister He has been the Member of the board of directors of OJSC Magnit of Management Professional Training and Further Training of of Healthcare and Social Development. In 2008, he was elected as from 2009. St. Petersburg State University of Economics and Finance and the Senator of the Leningrad Region in the Council of Federation He has been the Head of the Directorate for Consumer Sector, UNIVERSITE PIERRE MENDES (Grenoble, France). of the Federal Assembly of the Russian Federation. April 2013 - Retail, and Real Estate, of the Corporate Investment Department April 2015 - Chairman of the Board of Directors LSR Group. He has of JSC VTB Capital from 2013. been the Member of RAZVITIYE, LLC Board of Directors since 2015. A member of the Civic chamber of the Russian Fedearion from Mr. Makhnev held no shares of the Company during Leningradsky region. Vice-President and member of the Board of the reported period. Builders' Association of Russia. Honorary builder of Russia. In 2012, he was awarded the Medal of the Order For Merit to the Fatherland, 2nd class. During the reported year, Ilgiz Valitov, Yury Kudimov, Yury Osipov, and Sergey Skaterschikov were Members of the Board of Directors, On 25.12.2015, his share in the company changed from 0% but they were not Members of the Board of Directors by the end to 57.56% under the securities purchase and sale contract. of the reported year.
Corporate governance 064 LSR Group Annual report 2015 COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS ARE CONSULTATIVE AND ADVISORY ANDREY MOLCHANOV IS THE CHIEF EXECUTIVE OFFICER AND THE BODIES INTENDED FOR HANDLING PARTICULARLY IMPORTANT AREAS OF THE CHAIRMAN OF THE EXECUTIVE COMMITTEE OF LSR GROUP COMPANY’S BUSINESS. THEIR ACTIVITY IS GOVERNED BY THE REGULATIONS ON THE COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY. THE COMMITTEES MEET SEPARATELY FROM THE BOARD OF DIRECTORS
Committee members are elected by the Board of Directors. According to the listing rules, only an independent director may chair the Audit Committee, as well as the Human resources and compensations Committee. The Chief Executive Officer and members of the Executive Committee may not be members of the audit committee, or the CHIEF EXECUTIVE OFFICER human resources and compensations committee. Decisions are taken by a majority of votes of committee members attending the meeting. Each committee member has one vote. Information on the responsibilities and composition of Board of Directors committees, as of December 31, 2015, is presented below.
Born in 1971. / AUDIT COMMITTEE / ANDREY In 1993, he graduated from the Faculty of Economics, St. Petersburg The Audit Committee is responsible for preparing recommendations to the Board of Directors on exercising control State University. In 1998, he graduated from the Russian Academy over the financial and business operations of the company. The Audit Committee provides assessment of nominees MOLCHANOV of Public Administration with a degree in State and Municipal to be appointed as independent auditors of LSR Group, analyses auditor’s opinions, checks the effectiveness Administration. Doctor of Economics. CEO and the Chairman of of internal control procedures, and draws up proposals for their improvement. The Audit Committee supervises the the Executive Committee of LSR Group since May, 2015. In 1993, preparation of financial statements, the completeness and accuracy of tax, accounting and managerial reporting. CHIEF EXECUTIVE OFFICER Andrey Molchanov founded LSR Group and headed the company In 2015, the Audit Committee of the Board of Directors held 6 meetings. till 2007. In 2007, he was appointed Assistant to Russia’s Minister of AUDIT COMMITTEE: Healthcare and Social Development. In 2008, he was elected as the ⊲ Oleg Goncharov, Senator of the Leningrad Region in the Council of Federation of the ⊲ Aleksei Makhnev - Chairman of the Committee, CEO and the Chairman of the Executive Committee of LSR Group Federal Assembly of the Russian Federation. ⊲ Saydam Salaheddin. since May, 2015. April 2013 - April 2015 - Chairman of the Board of Directors Member of the Board of Directors since April 2013. LSR Group. He has been the Member of RAZVITIYE, LLC Board of Directors since 2015. Member of the Civic chamber of the Russian / HUMAN RESOURCES AND COMPENSATIONS COMMITTEE / Fedearion from Leningradsky region. Vice-President and member The Human Resources and Compensations Committee provides recommendations to the Board of Directors relating of the Board of Builders Association of Russia. Honorary builder of to the material terms and conditions of employment contracts with members of the Board of Directors, Executive Russia. Honorary Builder of Russia. In 2012 was awarded the Order Committee, CEO and senior management, and also to the compensation of members of the Executive Committee, for Merit to the Fatherland, the 2nd degree. CEO and senior management, and develops the criteria for remuneration of the members of the Board of Directors. The responsibilities of the Human Resources and Compensations Committee also include development of the HR On 25.12.2015, his share in the company changed from 0% policy and regulation of the remuneration and incentive schemes of company employees. to 57.56% under the securities purchase and sale contract. In 2015, the Human Resources and Compensations Committee held 5 meetings. HUMAN RESOURCES AND COMPENSATIONS COMMITTEE: ⊲ Oleg Goncharov - Chairman of the Committee, ⊲ Aleksei Makhnev, ⊲ Saydam Salaheddin.
/ STRATEGY AND INVESTMENT COMMITTEE / The Strategy and Investment Committee assists the Board of Directors in its responsibilities relating to the corporate strategy including the control of the strategy development and implementation, analysis and approval of acquisitions and business sale transactions, approval and follow-up of major investment projects, and investment budget allocation. In 2015, the Strategy and Investment Committee held 3 meetings STRATEGY AND INVESTMENT COMMITTEE: ⊲ Dmitry Goncharov, ⊲ Oleg Goncharov, ⊲ Aleksei Makhnev, ⊲ Andrey Molchanov- Chairman of the Committee, ⊲ Saydam Salaheddin.
Corporate governance 066 LSR Group Annual report 2015
In 1994, he was invited to the Committee for Construction ALEKSANDR of St. Petersburg to administer interaction between the city’s EXECUTIVE COMMITTEE VAKHMISTROV authorities and private investors. At the same time he was appointed CEO of the state institution Board of Investments of St. Petersburg Administration Construction Department.
MEMBERS OF THE EXECUTIVE COMMITTEE: MEMBER OF THE EXECUTIVE In 1996– 2000, he was CEO of the state institution Centre COMMITTEE of Bank Loans.
Member of the Executive In 2000– 2003 – Chairman of the Construction Committee Committee since 2010 of St. Petersburg Administration and Vice Governor of St. Peters- Member of the Board of Directors burg. In 2003–2009 – member of the Government of St. Petersburg, since June 2014 Vice Governor of St. Petersburg responsible for construction and reconstruction of real estate, road building, architecture and Born in 1954. DENIS BABAKOV SERGEY BEGOULEV urban planning, and land policy of St. Petersburg for construction purposes. In 1981 he graduated from Leningrad Railway Engineers Institute
with a degree in Industrial Construction and Civil Engineering. In 2009–2010 – Vice Governor of St. Petersburg and Head MEMBER OF THE EXECUTIVE MEMBER OF THE EXECUTIVE of St. Petersburg Governor Administration. COMMITTEE COMMITTEE In 2000 he graduated from St. Petersburg University of the RF Ministry of the Interior with a degree in Law. Doctor of Economics. In 2010–2013, he was CEO of LLC LSR-Stroy (subsidiary Member of the Executive Member of the Executive Professor of St. Petersburg State University of Architecture and of LSR Group). Committee since September 2015 Committee since September 2013 Construction and St. Petersburg State Polytechnic University. First Vice President, member of the Board of the National Construction In 2010 – 2015, he held the position of CEO and Chairman of the Union (NOSTROY). Honored Builder of Russia. Merited Builder Born in 1977. Executive Committee of PJSC LSR Group. In the same period, he was of the Russian Federation. Two official commendations of Russia’s Dborn in 1974. CEO of LLC LSR. Since 2015 up to date – First Deputy CEO, PJSC President, and Science and Technology Awards of the Russian He graduated from St. Petersburg State University of Economics LSR Group. Government. Awarded the Order for Merit to the Fatherland, 4th and Finance, Faculty of Economics and Management, degree in He graduated from St. Petersburg University of Economics and degree, Order of Friendship, Order of Honor, Order of Alexander Management, in 1999. He has two diplomas: DEUG (2-iemeannee) Finances in 1996. Since July 2015, he has been elected as President of the Association Nevsky. and License of Pierre Mendes France University (Grenoble, France) of Builders of St. Petersburg. in Economics and Management. In 2011, he had professional After the graduation from St. Petersburg State University of In 1975–1994, Aleksandr Vakhmistrov worked for various construc retraining at St. Petersburg Polytechnic University in Construction Economics and Finance, he dealt with financial management in IT On 06.04.2015, his share in the company changed from 0% tion industry companies holding positions from that of a specialist of Buildings and Structures. He was trained in MBA programme sphere in Flavia, LLC. He began working in LSR in 1999. In 1999 to 0.012 % under the securities purchase and sale contract signed to CEO. He was Head of Construction Department No. 339 Finances Management at International Management Institute of St – 2005, he was the Deputy Head of Economic Service, the Deputy as part of a long-term managers motivation programme. of LPSMO Glavzapstroy, Production Director of the Soviet-Finnish Petersburg in 2013. Director General for Commerce, and the Director General of NPO Keramika (LSR Group Enterprise). He headed CJSC Pobeda LSR from joint venture engineering firm Lentek, CEO of the Soviet-Finnish joint venture construction company FILCO. He started his career as the economist in 2001 in JSC SKV SPB 2005 to 2012. He was the Director General of OOO LSR. Cement-S3 (LSR Group enterprise), he was team leader at the Planning and in 2012-2013. From July to December 2013, he managed the unit Economy Department. He was promoted to OOO PSG LSR, where LSR. Walling Materials North-West. LSR Group Deputy Director he held position of the Advisor of Vice-President for Economic General, manager of the unit LSR. Walling Materials North-West Affairs. He had been heading the Directorate for Projects from December 2013. He has been managing LSR. Walling Materials Management in JSC SKV SPB since 2004. Since 2011, he had business unit from January 2016. been heading the Directorate for Planning and Investment that involved the Planning and Economy Department and the Contracts On 07.04.2015, his share in the company changed from 0.04% to In 2000–2002 she gave civil right lectures at St. Petersburg State Department of the corporation. He was appointed the Commercial 0.051% under the securities purchase and sale contract signed as GALINA University of Engineering and Economics. Director of the unit LSR. Real Estate – North-West in November part of a long-term managers motivation programme. Galina Volchetskaya joined LSR Group in April 2011. She was 2001. He has been Deputy Director General for Real Estate Sales of VOLCHETSKAYA appointed Deputy Chief Legal Officer. LSR Group, and the Director General of OOO LSR. Real Estate since On 18.08.2015, his share in the company changed from 0.051% In 2013, she became Deputy Chief Operating Officer. October 2015. He has been Director for Real Estate Sales of LSR to 0.053% under the securities purchase and sale contract. Since July 2013 – Deputy Chairman of the Executive Committee, Group since January 2016. MEMBER OF THE EXECUTIVE Executive Director. COMMITTEE In 2010, she was awarded the Certificate of Merit of the President Mr. Babakov held no shares of the Company during of the Russian Federation. the reported period. Member of the Executive Committee since 2013 On 08.04.2015, her share in the company changed from 0% to 0.007 % under the securities purchase and sale contract signed as part of a long-term managers motivation programme. Born in 1967.
Graduated from the Faculty of Law of Leningrad State University named after A.A. Zhdanov in 1989. PhD in Law.
In 1989-1991, Galina Volchetskaya was a Legal Counsel at USSR State Logistics Committee (Leningrad territorial directorate). In 1992–1994, she worked for a private law company , in 1994– 2011 – in the system of State Registrations of Rights for Realty.
Corporate governance 068 LSR Group Annual report 2015
In 2010, was appointed Chairman of the Committee for Transport After graduation, he spent four years working in the Ministry of BORIS MURASHOV Infrastructure Development in St. Petersburg. ANDREY NIKITIN Foreign Affairs of Russia as Economic Attaché at the Russian In 2012– 2013, he was Assistant to the Minister of Regional Embassy in Kuwait. In 2005–2006 – Head of Asset Management Development. In 2013 he was appointed Deputy Chief Officer Department, Petro-Canada. In 2006–2008 – analyst of Analytical MEMBER OF THE EXECUTIVE of Federal Agency for Construction. Housing Maintenance and MEMBER OF THE EXECUTIVE Research Division, URALSIB Capital LLC. In 2008–2012 – Vice COMMITTEE Utilities. COMMITTEE President, Analytical Research Division; Director, Large-Scale Since November 2013 – Deputy CEO of LSR Group. Customers Services Division of CJSC BANK CREDIT SUISSE. In Member of the Executive Since 2014 has been CEO of LLC LSR-Stroy (subsidiary Member of the Executive 2012–2015 – Director of Equities Management Division, Corporate Committee since 2013 of LSR Group). Committee since December 2015 and Investment Banking Unit, JSC Alfa-Bank. Since November 2015 Since January 2016 - Deputy CEO for Project Management, up to date – Chief Financial Officer of LSR Group. LSR Group. Born in 1957. Over the reported period, he held no shares of the company. Honored Builder of Russia. Honorary Transport Worker of Russia. Born in 1977. In 1980, graduated from Moscow Institute of Railway Engineers In 1997, was awarded the international prize for the construction with a degree in Bridges and Tunnels. In 2004, he graduated from of a business center in Eisenstadt (Austria). In 1999, he graduated from Lomonosov Moscow State University the Northwest Academy of Public Service with a degree in Finance In 2004, 2010 and 2012, was awarded the Diplomas by the with a degree in International Economics. In 2005, he completed and Credit. Governor of St. Petersburg. the MBA programme in Schulich School of Business (Canada), In 2009, was awarded the badge In Commemoration of the 200th specialising in Finance and Strategic Management. In 1974–1994, worked in various construction companies, holding Anniversary of the Department of Marine and Land Transport. positions from specialist to Head of a major construction company. He was engaged in various construction projects in Russia, Latvia, In 2015, he held no shares of the company. Estonia, Turkmenistan and Austria. Since February 2011 he was Managing Director of LLC GDSK. In 2001–2009, he held senior positions in the Federal institution DMITRY In September 2011, he was appointed Managing Director, Real Department for Construction of the Ring Road of St. Petersburg Estate – North-West. of the Federal Road Agency. KHODKEVICH In 2011– 2013 – he was also CEO of OJSC Stroykorporatsiya. In 2006 he was appointed CEO of the institution. Since December 2013 up to date – Deputy CEO, Managing Director In 2009, he headed St. Petersburg Committee for Improvement of LSR. Real Estate – North-West. Since January 2016 – Managing and Roads. MEMBER OF THE EXECUTIVE Director of LSR. Real Estate – North-West. COMMITTEE Awarded the Honorary Certificate of the Vice Governor of Member of the Executive St. Petersburg, Honorary Certificate of the Chairman of State Committee since 2011 Committee of Russian Federation for Construction and Housing He joined LSR Group in 2000. He started as an economist in Maintenance and Utilities for longterm efficient work and personal IVAN ROMANOV OJSC Construction Corporation Renaissance of St. Petersburg, contribution to the development of the construction industry. Born in 1970. later – Head of Economic Planning Department, in 2001 – Deputy CEO, in 2002– 2007 – CEO, after that – Managing Director of the On 03.04.2015, his share in the company changed from 0% to Graduated from Leningrad Higher Military Engineering and Corporation. 0.016% under the securities purchase and sale contract signed MEMBER OF THE EXECUTIVE Construction School named after Army General A. Komarovsky with Since 2007 – Managing Director of CJSC Mosstroyrekonstruktsiya as part of a long-term managers motivation programme. COMMITTEE a degree in Construction and Operation of Buildings and Structures (the company’s real estate development business unit in Moscow). in 1992. Member of the Executive Since 2009 he was Head of LSR. Moscow. Since 2011 – Managing Director, member of the Executive Committee. Committee since 2013 In 1999, Dmitry Khodkevich became Deputy CEO of OJSC Construc- In 2012, he worked for the Government of the Moscow Region. tion Corporation Renaissance of St. Petersburg. In 2000, he was In April 2013, he was appointed Managing Director, Moscow. appointed Deputy CEO for Construction and in 2006 – Director Born in 1973. In 2014 – 2015 – Director of LLC LSR. Object-M (LSR Group for Construction. enterprise). Since 2015, he has been CEO of LLC MSR-Butovo, In 1994, he graduated from Leningrad Industrial College of Building CEO and member of the Board of Directors of LLC RAZVITIE Materials and Elements with a degree in Industrial and Civil (LSR Group enterprise). Construction. He continued his education at St. Petersburg State Technical University and in 1998 he graduated from the Faculty of On 22.01.2015, his share in the company changed from 0.066% Leonid Sorokko started his career in 1976 – he worked for various Economics and Management. In 2001, he studied at St. Petersburg to 0.063% under the securities purchase and sale contract. LEONID SOROKKO construction companies holding positions ranging from specialist to International Management Institute (IMISP), Project Management On 06.04.2015, his share in the company changed from 0.063% CEO of a huge construction enterprise. programme, and also at St. Petersburg State University, Financial to 0.067% under the securities purchase and sale contract signed as In 2007–2009 – Head of the Department for Construction of Management programme. part of a long-term managers motivation programme. MEMBER OF THE EXECUTIVE Russia's Defense Ministry and Advisor to the Minister of Defense On 17.06.2015, his share in the company changed from 0.067% of Russia. In 1994–1998, Ivan Romanov worked as a real property appraiser COMMITTEE to 0.057% under the securities purchase and sale contract. Since November 2013 – Deputy CEO of LSR Group. in Dom Plus real estate agency, St. Petersburg. In 1998, he was On 25.09.2015, his share in the company changed from 0.057% Member of the Executive Since January 2016 – Deputy CEO for Construction of LSR Group. invited as a real estate development analyst to the World Bank’s to 0.053% under the securities purchase and sale contract. project Reconstruction of the historical centre of St. Petersburg. Committee since 2015 In 2008 he was awarded the Order of Honour by Presidential In 2000– 2001, he was a member of the Investment Appraisal Decree. Board of the Russian Federation State Committee for Construction, Architectural and Housing Policy. Born in 1954. In 2015, he held no shares of the company.
In 1976 graduated from Leningrad Institute of Civil Engineering with a degree in Industrial and Civil construction.
Corporate governance 070 LSR Group Annual report 2015
He has more than 12 years of experience in real estate VALERI ZABELIN development management. In 1989 - 1998 - Executive representative in JSC "Mezhdunarodnaya Kniga" in Latin and North America. MEMBER OF THE EXECUTIVE In 2006 - 2012 - Development Director, LSR.Real Estate - Moscow. COMMITTEE Since 2012 - Managing Director, LSR.Real Estate - Moscow.
Member of the Executive On 10.04.2015, his share in the company changed from 0% Since 2011, he was Managing Director of LSR Aggregates & Committee since 2015 to 0.004% under the securities purchase and sale contract signed VASILY Ready-mix Concrete – North-West. as part of a long-term managers motivation programme. In July 2013, he was appointed Deputy CEO, Managing Director of KOSTRITSA LSR. Aggregates & Ready-mix Concrete – North- West and LSR. Cement – North-West. Born in 1964. Since January 2016 - Deputy CEO, Building Materials, LSR Group. MEMBER OF THE EXECUTIVE In 1986 he graduated from Moscow State institute of International COMMITTEE Awarded the Honorary Certificate of Russia’s Ministry of Regional Relations, majoring in International Relations & Economics. Development and the Badge of Merit of Priozersky district. Honored Member of the Executive citizen of Kuznechnoe, Leningrad region. Awarded the Medal of Committee since 2011 St. Seraphim of Sarov, 2nd degree. Vasily Kostritsa is a Member of the Legislative Assembly of the Leningrad region, Deputy Chairman of the Commission for Natural Resources Management YURI ILYIN In 2007–2010 worked as Deputy CEO, and later – CEO of CJSC A Born in 1964. and Environmental Protection, member of the Commission for Plus Estate (subsidiary of LSR Group). Construction, Transport, Communication and Roads. Member of In June 2010 was appointed Deputy Director of Investor Relations In 1986 graduated from Leningrad Institute of Marine Transport, a People’s Front of Russia. Representative of United Russia party in of LSR Group, in May 2011 – Director of Investor Relations. degree in Economics and Management of Marine Transport. PhD in the Legislative Assembly. Honored Builder of Russia. MEMBER OF THE EXECUTIVE In May 2012 he became Director of Investor Relations and Economics. Honored Builder of Russia. Awarded a decoration «For a Contribution to the Development of COMMITTEE Corporate Communications. the Leningrad Region». July 2013 - 2015 - Director, Investor Relations of LSR Group. Since 1992 he held various positions at North-West River Shipping. Member of the Executive Director of Investor and Public Relations of LSR Group from January From 1997 he was CEO of LLC Stroy- Granit SPb. In 1999 he was On 01.04.2015, his share in the company changed from 0.21% Committee since 2013 to September 2015. Deputy CEO for Marketing, Communications, appointed CEO of LLC Baltnerud. to 0.22% under the securities purchase and sale contract signed and Investor Relations of LSR Group from October 2015. Chief as part of a long-term managers motivation programme. Commercial Officer of LSR Group from January 2016. In 1997, he became member of the Board of Directors of OJSC Granit-Kuznechnoye, then, in 2002, was appointed CEO, in 2005 – Born in 1977. On 08.04.2015, his share in the company changed from 0% Managing Director. to 0.004% under the securities purchase and sale contract signed In 2000 graduated from St. Petersburg State University and as part of a long-term managers motivation programme. Stockholm University, School of Business, МВА.
Yuri Ilyin joined LSR Group in 2005. In 2005–2006 he was Advisor to First Vice President of LSR Group. In 2006–2007 – Head of Commercial Real Estate of OJSC Construction Corporation Renaissance of St. Petersburg (subsidiary of LSR Group). In 2004, he began his career in LSR Group as Head of Economic DMITRY Planning Department. In 2008, was appointed Deputy Chief Financial Officer, Head of Treasury Department. Since May 2011 he KUTUZOV is Chief Financial Officer of LSR Group. He has been in the position of the First Deputy CFO at LSR Group His professional career evolved from the position of a foreman to starting from December 2015. VLADIMIR the chief in the construction sector companies. In March 2000, he was elected to the Regional Duma of the Sverdlovsk Region MEMBER OF THE EXECUTIVE KRITSKY COMMITTEE Awarded the Honorary Certificate of the Vice Governor of St. Legislative Assembly. Petersburg for great professional achievements and perfect and Member of the Executive dedicated work in construction as of 2011. From 2004 to 2012 – Deputy Head of Yekaterinburg for Capital Committee since 2012 MEMBER OF THE EXECUTIVE Construction and Land Use. From 2012 to 2013 – Director of the On 06.04.2015, his share in the company changed from 0% COMMITTEE Urals branch of LLC LSR. Since 2013 up to date, he has held the Born in 1976. to 0.007% under the securities purchase and sale contract signed position of the Managing Director of LSR. Real Estate – Urals. as part of a long-term managers motivation programme Member of the Executive In 2013, he was elected to the Yekaterinburg City Duma where he Committee since May 2015 headed the Committee for Town Planning and Land Management. In 1999, graduated from St. Petersburg State University of Finance and Economics, a degree in Economics. Born in 1959. On 03.04.2015, his share in the company changed from 0% In 2005, graduated from St. Petersburg International Management to 0.004% under the securities purchase and sale contract signed Institute (IMISP), Business Finance program. Education: Ural State Polytechnic Institute (now Ural Federal as part of a long-term managers motivation programme. University), Faculty of Construction, degree in Industrial and Civil Engineering. The Ural Academy of State Service, degree in Law.
During reporting period Vinnik Lev, Loginov Vladimir, Falaleev Kliment were Members of the Board of Directors, but they were not Members of the Board of Directors by the end of the reported year.
Corporate governance 072 LSR Group Annual report 2015
As a result of the secondary public offering, the total number PUBLIC OFFERINGS of shares increased up to 103,030,215 shares. SHARE CAPITAL OF COMPANY’S SHARES As of December 31, 2015, the ordinary shares of LSR Group are In November 2007, LSR Group carried out an initial public offering. included into the quotation list of the First level of MICEX stock The offering volume was 10,643,618 ordinary shares in the form exchange under the ticker LSRG. of ordinary shares and global depositary receipts. LSR Group’s global depositary receipts are traded under the ticker The offering price was USD 72.50 per share and USD 14.50 per symbol LSRG on the Main Market of London Stock Exchange (LSE). global depositary receipt. As a result, LSR Group raised USD 588 m Each depositary receipt represents 1/5 of an ordinary share (a ratio (adjusted for the IPO costs). The IPO of LSR Group became one of 5 GDRs : 1 Ordinary Share). of the largest public offerings implemented by a construction AS OF DECEMBER 31, 2015 sector company in Russia. The GDR programme is implemented and supported under Regu- THE SHARE CAPITAL lation S and Rule 144A. Deutsche Bank Trust Company Americas OF OJSC LSR GROUP WAS On April 30, 2010, LSR Group carried out a secondary public acts as depositary and the functions of custodian bank are perfor- offering. A total of 9,366,383 ordinary shares in the form of global med by Deutsche Bank Ltd. Moscow. 25 757 553,75 depositary receipts were placed under interna- tional offer. The net RUBLES proceeds after deducting all the offering expenses were USD 385 m.
THE SHARE CAPITAL CONSISTS OF ORDINARY SHARES, EACH WITH A NOMINAL VALUE 103 030 215 OF RUB 0.25 SHARE PRICE PERFORMANCE
SHARE PRICE PERFORMANCE IN 2015 ORDINARY SHARES ON MICEX, RUB Source: www.micex.ru
Maximum price 752,00 SHAREHOLDERS STRUCTURE TRADING VOLUME, RUB Minimum price 406,00 As of December 31, 2015, 32% of the share capital of LSR Group was in free float. End-year price 675,50 2 900 968 763 SHARE CAPITAL The key shareholder of LSR Group – Andrey Molchanov – was holding 61% of the shares, the company’s management – 5% and LLC LSR – 2% of the share capital. 0 200 400 600
SHARE PRICE PERFORMANCE IN 2015 Free float The company’s management GDRS ON LONDON STOCK EXCHANGE Source: Bloomberg Andrey Molchanov LLC LSR
Maximum price 2,87 TRADING VOLUME, USD Minimum price 1,38 INFORMATION ON ORDINARY ORDINARY SHARES ON MICEX STOCK EXCHANGE: Stock exchange: CJSC MICEX Stock Exchange End-year price 2,00 137 634 337 SHARES AND GDRS Ticker: LSRG State registration number: 1-01-55234-Е 0 0,5 1,0 1,5 2,0 2,5 3,0 The company’s shares are traded both on domestic and State registration date: 28.09.2006 international stock markets. In particular, the company’s ordinary ISIN for ordinary shares: RU000A0JPFP0 shares and bonds are traded on the Russian stock market, the company’s global depositary receipts (GDRs) are traded on DEPOSITARY’S CONTACTS RUSSIAN REGISTRAR’S CONTACTS London Stock Exchange (GDR). GDRS ON LONDON STOCK EXCHANGE: DEUTSCHE BANK TRUST COMPANY AMERICAS AO «Nezavisimaya registratoorskaya comaniya» Stock exchange: London Stock Exchange London +4 4 207 547 6500 (license №045-13954-000001) Ticker: LSRG New York +1 212 250 9100 Address: 8 Ivana Franco Street, 121108 Moscow Regulation S GDR Moscow +7 495 797 52 09 Phone: +7 495 926 81 60 CUSIP: 50218G206, ISIN: US50218G2066, Common Code: 032415202 Correspondence address: Deutsche Bank Trust Company Americas Rule 144A GDR Depositary Receipts, 60 Wall Street New York NY 10005-2836 Address of St. Petersburg subsidiary of AO «Nezavisimaya CUSIP: 50218G107, ISIN: US50218G1076, Common Code: 032415334 Address in Russia: 82 Building 2, Sadovnicheskaya Street, registratoorskaya comaniya» 115035, Moscow, Depositary Receipts Registrator: 6 Belovodsky Pereulok, 194044 St. Petersburg Phone: +7 812 401 63 12.
Share capital 074 LSR Group Annual report 2015 DIVIDEND POLICY SOCIAL RESPONSIBILITY
THE DIVIDEND POLICY OF LSR GROUP IS DEVELOPED IN ACCORDANCE WITH THE EXISTING RUSSIAN LEGISLATION, THE COMPANY’S CHARTER LSR GROUP’S MISSION, AS ONE OF THE LARGEST AND INTERNAL REGULATIONS OF LSR GROUP CONSTRUCTION COMPANIES IN THE COUNTRY, IS TO PROVIDE PEOPLE WITH A BASIC NECESSITY – HOUSING, OR A SPACE FOR EVERYDAY LIFE, COMMUNICATION, ART, DEVELOPMENT, AND PRESERVATION OF FAMILY TRADITIONS AND VALUES
⊲ In 2014, the Board of Directors of LSR Group adopted ⊲ Prior to 2011, LSR Group did not pay out dividends. The company’s profit a new version of the dividend policy, which is available on was reinvested into business development. the company’s website. In 2012, after analyzing the company’s capital structure, the Board ⊲ The recommended amount of dividend payments of Directors recommended that the Shareholders Meeting should consider is determined by the Board of Directors based on returning surplus capital to our shareholders in the form of dividends the company’s annual financial results and, as a rule, to be paid based on the results of the 2011 fiscal year. LSR GROUP’S SOCIAL MISSION PRIORITY AREAS OF LSR GROUP constitutes at least 20% of the consolidated net profit AND RESPONSIBILITY EXTERNAL SOCIAL PROGRAMMES as per IFRS. The company operates so that people residing in cities and ⊲ Children and the future. towns could fulfil their dream of living in a high-quality modern ⊲ Restoration and preservation of the country’s cultural heritage. house. And it makes sure that these buildings make people’s life ⊲ Regional development in our key markets. comfortable for many years. ⊲ Healthy lifestyle promotion. Our social policy is underpinned by a special philosophy: business ⊲ Support of veterans, disabled people, various vulnerable must operate not only for profit, but also for the benefit of the social groups. society. It is essential for us to create new values not only through dividends for shareholders, but also through benefits for the The main principles of development and implementation of LSR country and its people. This is why we view social responsibility as Group external social programmes are as follows: one of our key priorities and take consistent steps to implement it - targeted character: assistance is rendered to specific organisations through social and charitable programmes. or people in need; So far LSR Group has come to a stage when it is able to maintain - respect towards people and social traditions of the regions; supreme values and invest in the areas where common good - link of social programmes with strategic priorities of the main area is generated. of work and corporate culture values; - efficient and transparent social programmes management; - regard for concerned parties’ opinion; - personnel involvement. The company initiates activities in the area DIVIDEND PER SHARE of corporate social responsibility and involves its employees On april 5, 2016, LSR Group annual general meeting of in solving socially relevant problems; 15 20 20 40 78 78 RUB shareholders decided to pay out dividends amounting - regular audit and perfection of social programmes. to RUB 78 per one ordinary share, based on 2015 performance. Thus, the total dividends amount to RUB 8,036,356,770 that is 75% of company's profit in 2015. DIVIDENDS We take modern approaches to our charitable programmes. PAID FOR THREE % The company allocates both financial and non-financial resources YEARS For the years 2013-2015, LSR Group will have paid our in order to render assistance, including monetary funds and RUB 20 bn, or 30% of current market capitalization, in total 13 construction materials; consulting services for non-for-profit as dividends to shareholders. DIVIDEND YIELD organisations, and philanthropic activities led by the company’s employees.
2010 2011 2012 2013 2014 2015 RUB 20 BN
Dividend policy 076 LSR Group Annual report 2015
SOCIAL PROGRAMMES OF LSR GROUP AIM TO PROVIDE EVERY CHILD WITH CHILDREN AND THE FUTURE WHAT THEY VITALLY NEED FOR A FULL AND HAPPY CHILDHOOD: A LOVING FAMILY AND A SAFE DEVELOPMENTAL ENVIRONMENT
/ ANGELS WITH BROKEN WINGS PROJECT CARRIED OUT / SUPPORT FOR THE WORK OF THE NORTH-WEST / RESTORATION AND PRESERVATION OF THE COUNTRY’S / INVOLVEMENT IN SPORTS PROMOTION / IN ASSOCIATION WITH PARENTS’ BRIDGE PUBLIC CHARITY ORPHANS FUND DETI ZHDUT / CULTURAL HERITAGE / In 2015, LSR Group provided support to the hockey team LSR FOUNDATION / In 2015, LSR Group in association with the North-West Orphans In 2015, LSR Group traditionally took part in various projects Griffins, Eparchy’s football team and other sportsmen in various One of the most significant and effective charitable projects carried Fund Deti Zhdut continued another programme targeted at focused on the promotion of national culture and preservation tournaments. out by LSR Group is its long-term cooperation with Parents’ Bridge assisting the adoption of orphans as well as maintaining and of artistic and historical treasures. The company allocated the Foundation which helps children without parental care to find new developing the interactive web portal детиждут.рф. The portal necessary construction materials and contributed funds to the families. This cooperation started in 2004 as a programme jointly contains complete, reliable and constantly updated information restoration/construction St. Fyodor’s Cathedral in Pushkin, buildings / REGIONAL DEVELOPMENT IN OUR KEY MARKETS / implemented by the foundation and LSR Group employees in order about orphans living in orphanages of the North-Western District of Solovetsky Monastery, spiritual and educational centre in In parallel with their contribution as major employers and to support families willing to adopt orphans. of Russia. Since the project was started, 2293 children have already Lodeynoye Pole, Cathedral of Our Lady of Tikhvin in St. Petersburg, taxpayers, LSR Group’s enterprises are actively involved in tackling found a family. In 2015, several guardianship departments in St. and buildings of the Chernigov Patriarchal Metochion in Moscow. priority issues in terms of developing the regions where they In total, 155 children have already found new parents as part of Petersburg had new websites launched. The company also took part in the organisation of exhibitions at operate by allocating funds for the support of social and charitable the Angels with Broken Wings programme. Funds are allocated for the State Hermitage Museum, the work of the Russian Historical programmes and taking part in sites improvement, construction and the targeted financial support of the adopted children and foster Society, archaeological excavations in Staraya Ladoga as well as in reconstruction of important social facilities. children, individual work of psychologists and social educators / MUSIC FROM A TO Z PROJECT AT THE GRAND CONCERT the projects related to cinematography. supporting adoptive families and prevention of repeated child HALL OKTYABRSKY / In 2015, we transferred substantial funds to the budgets of the abandonment. In 2015, Parents’ Bridge Foundation, jointly with LSR In 2015, several charitable concerts for children were given at the Moreover, with support of LSR Group, the Charity Fund of St. regions of the company’s presence for development of social Group, continued to fulfil its official authority to train people willing Grand Concert Hall Oktyabrsky, St. Petersburg, with support from Sergius of Radonezh for Spiritual Heritage Preservation continued infrastructure. LSR Group provided financial assistance for a to adopt a child left without parental care as part of the School for LSR Group. They were a huge success with the young audience, implementing a whole range of projects and programmes. In large-scale programme dealing with the purchase of the necessary Foster Parents. In 2015, 42 children were sent to such families. prompting their positive feedback. Children from low-income and particular, the roof of St. Nicholas Church in Arkhangelsk was equipment and renovation of children’s preschool institutions, large families were invited to listen to popular songs, opera arias, repaired, and a primer for Orthodox children and an album The comprehensive schools, sports facilities, culture and health care symphonic music as well as to watch folk dances and take part Images of Russian Saints in the Collection of the Historical Museum institutions in the Leningrad Region. were published. / JOINT PROJECT WITH ARTERIA CENTRE / in exciting contests. Children of LSR Group employees were also among the guests Arteria Centre for Collective Art Work has been functioning since December 2013 as a social project financed by LSR Group. It brings together children with disabilities and orphans who take / MAMA RYADOM PROJECT IN COOPERATION WITH THE FUND part in artistic activities jointly with children without disabilities DETI ZHDUT / who live in families. The studies primarily intend to give disabled children more ample opportunities to socialise and get involved In 2015, LSR Group and Deti Zhdut Fund continued working on their in the system of social relations as well as to broaden their social joint Mama Ryadom Project aimed at young mothers who found networks. themselves in a difficult situation. The key mission of the project is to prevent orphanhood, namely keep the child within a family, teach In the academic year 2014–2015, more than 100 children took mothers new knowledge and skills for successful socialisation for a course at the centre. In 2015, LSR Group provided the school with the children’s benefit. a spacious and comfortable space at the housing estate Rezidentsia na Suvorovskom in the very heart of St. Petersburg for free. Apart In the House for Mothers, women and their babies are provided from arts, the centre also offers classes in music, literature, and with accommodation in a comfortable and fully equipped English. Moreover, a child magazine My is published with support of apartment, assistance of psychologists, lawyers, and social workers. LSR Group and distributed in orphanages, hospitals and among the The fund’s employees guide young mothers in learning how to children of the company’s employees. tackle everyday household issues, plan their budget, raise and teach their children. Over 2015, the total of 11 mothers and 11 children resided in this shelter.
Social responsibility 078 LSR Group Annual report 2015
The project is aimed and improving social skills of the students, as SOCIAL SECURITY well as raising awareness of related issues in the society. The company’s social policy is based on the efficient labour OUR PEOPLE Special attention is paid to professional schools training specialists management and social security of our people. It fully complies for the construction industry. For such students we provide factory with the existing labourregulations including those related to visits and internship programmes. social benefits and social security ofall categories of employees. Greatat tention is paid to the employees’welfare, including catering, provision of work clothing, emergency medical aid, in-house OUR TASK IS TO CREATE OPPORTUNITIES FOR OUR medical stations and health care arrangements with local medical DEVELOPMENT institutions, annual employee employee vaccination, transfers to EMPLOYEES TO UNLOCK THEIR POTENTIAL ANDFULFILL outlying work locations. Our employees are also provided with In 2015, LSR Group centralised Personnel Evaluation and THEIR PROFESSIONAL AMBITIONS ASPART OF THE health resort treatment benefits. Development Centre continued to implement a programme aimed COMPANY’S DEVELOPMENT STRATEGY at training the company’s management pool. As part of a corporate In 2015, we continued the programme to increase availability of training system, 49 employees undertook a programme called «Tools housing for our employees. During the reported year 137 employees of Efficient Work» designed for promising employees who may soon acquired apartments in our real estate development projects at a become managers. Eight line managers successfully completed a corporative discount. long-term corporate Competent Manager programme. Moreover, LSR Group employees implemented a programme Business Erudite which HR POLICY MOTIVATION PROGRAMMES combines three courses of study: Corporate Finance and Economics, Marketing Management, and Data Analysis and EXCEL Modelling. 50 IN 2015, WE SPENT MORE THAN RUB 250 M TO OUR The main principle of our HR policy is that our people are the stra- Our subsidiaries use contemporary motivation techniques aimed people completed this programme. SOCIAL PROGRAMMES INCLUDING THE MONETARY tegic resource of the company. at improving personnel efficiency and encouraging personal SUBSIDIES TO OUR EMPLOYEES WORTH RUB 20 M involvement in the company's goals. The incentive programmes Two heads of LSR Group subdivisions successfully completed The company’s corporate HR policy is based on the unified principles for top managers answering the company’s annualand medium-term training in the Presidential programme at the Faculty of Economics, of recruitment, training, social support, motivation and remu- goals are being successfully implemented. St. Petersburg State University. In 2015, 489 children were born in the families of our employees, neration of our employees in order to implement the company’s including 182 second children and 36 third children,which shows business goals more efficiently. We guarantee our employees stable income and timely payment A Professional Assessment Centre makes part of our Personnel that our people feel confident about their future. of competitivesalaries. In 2015, the company's payroll was more than Evaluation and Development Centre providing testing in different By creating favourable working conditions, maintaining decent RUB 9 bn.The average monthly salary was RUB 44,995. construction areas. Based on this testing, it issues qualification salaries and improving professional skills of our people we ensure certificates which allow employees to perform certain types of work. high efficiency and supreme quality of our productsand services Moreover, LSR Group enterprises continue to operate training which are the drivers of our future achievements. GROWING WITH LSR centres aimed at meeting their demand for qualified professionals. In 2015, around 2700 workers underwent training or had their skills In 2015, our project Growing with LSR was in the active phase. upgraded in such centres and in external companies. The projectis aimed at boosting the awareness of LSR Group’s brand, making the profession of a builder more popular, strengthening GENERAL INFORMATION ON corporate traditions, promoting family values, increasing the IN 2015, THE TOTAL OF MORE THAN 4000 EMPLOYEES involvement and loyalty of our employees. The target audience UNDERWENT TRAINING. IN THE SAME YEAR, EXPENSES EMPLOYEES includes the employees of LSR Group and their children, our clients ON ALL THE TRAINING PROGRAMMES EXCEEDED and partners and their children, participants of the company’s charity RUB 20 M LSR Group is one of Russia’s largest employers. As of the end of programmes and students. 2015, we employed more than 15.5 th people. Most of them are working in our business units in the North-western Federal District. The project was carried out in all regions of our presence and In 2015, the practice of the annual Development award aimed at 25% are working in other regions of presence – the Moscow region, included cultural and educational events for children, excursions development and implementation of promising business ideas and Yekaterinburg and Ukraine. to our production facilities and real estate development projects. innovations was continued. In total, 85 applications for improvement In 2015, only in the Leningrad region the company built were submitted in 2015, with 50 proposals approved by the business Blue-collar workers account for 70% of our personnel. The average 8 kindergartens for 1,435 children. employment period is more than 5 years. The average age of our entities managers for detailed analysis and further application in employees is 41. production. 44 projects reached the final stage of the competition. In 2014 – 2015, the total economic effect resulting from the We also use non-financial motivation techniques, including the The project also implies charity andvolunteer activities aimed implemented projects, as evidenced by financial reports, exceeded corporate awards of LSR Group. In 2015, 324 employees of LSR Group at supporting orphanages and educational institutions. 70% were given corporate awards including 7 employees given the highest RUB 46.5 m. corporate award – the golden badge Best in LSR. In particular, project with art-school «Arteria», for children with special development needs. LSR Group was organizing creative The achievements of our employee shave been acknowledged with contests for employees' children and children from the school. various government and industry awards. In 2015, 255 employees As a result of this collaboration, the school and LSR Group released of LSR Group were awarded for their achievements in construction, three issues of a children's magazine. 75% building materials industry and contribution to the development 15 500 of the construction sector. EMPLOYEES
25% North-western Federal District employees Other regions of presence employees Blue-collar workers
Social responsibility 080 LSR Group Annual report 2015
Enterprises regularly hold ecological audit reviews. This helps to collect comprehensive information and ensure compliance of their SEEKING TO TAKE THE LEADING POSITION IN THE INDUSTRY activities to environmental legislation. IN TERMS OF ENVIRONMENTAL MANAGEMENT, LSR GROUP All Enterprises within LSR Group, own relevant approval APPLIES ENVIRONMENTAL MANAGEMENT SYSTEMS BASED documentation, that is required for production activities. ON THE BEST WORLD PRACTICES
/ IMPLEMENTATION OF ENVIRONMENTAL PROTECTION Business unit LSR. Bricks – North-West also organised several ENVIRONMENTAL PROGRAMMES/ scheduled activities. At Aeroc gas and concrete plant sorbent and filtering elements of the treatment facilities were replaced (for In 2015, all the enterprises in LSR Group were performing preventing waste water contamination); new filtration units were scheduled environmental activities. Development of new installed at the receiving silos of the concrete mixing plants (for PROTECTION technologies, introduction of environmentally safe solutions, prevention of excess emissions into the atmosphere). At the brick reduction of fuel consumption and pollutant emissions form an plant, regular sewerage treatment was performed (for preventing integral part of LSR Group environmental policy. waste water contamination of soil and water facilities), and the Throughout the year, business unit LSR. Construction – North-West supply ventilation air conditioner was replaced (for preventing undertook a range of environmentally friendly actions. All the atmospheric air and working area air pollution). construction sites were provided with environmental production control; waste was taken from the sites to licensed landfills and On the premises of LSR. Reinforced Concrete – recycling facilities. Deratisation and disinsection was performed on North-West business unit scheduled inspection of dust and all the construction sites in order to improve sanitary and hygienic gas collecting units efficiency was performed, noise level was conditions. measured, atmospheric air laboratory tests on the borders of the set sanitary protection zones were made, and laboratory tests of waste waters and drinking water were run. DEVELOPMENT OF NEW TECHNOLOGIES, INTRODUCTION OF ENVIRONMENTALLY SAFE SOLUTIONS, REDUCTION OF FUEL CONSUMPTION AND POLLUTANT EMISSIONS FORM APART FROM CURRENT ENVIRONMENTAL ACTIVITIES, AN INTEGRAL PART OF LSR GROUP ENVIRONMENTAL LSR. AGGREGATES AND READYMIX CONCRETE BUSINESS POLICY UNIT FOLLOWED THE TRADITIONAL PRACTICE OF RELEASING FISH INTO THE LAKE LADOGA BASIN
In 2015, systematic work with personnel was performed in order to raise their environmental awareness and develop their Efforts were made against air pollution (Industrial environmental environmental competence. For instance, in June 2015, LSR. monitoring, development of guidance on maximum concentration We recognise the importance of protecting the environment and take Construction-Moscow employees took a course in the programmes levels of air poluttants, sanitary-protective zone). this into account by introducing cutting-edge technologies, upgrading Provision of Environmental Safety by Managers and Employees our equipment, slashing industrial waste and emissions, making and Environmental Safety in the Treatment of Hazardous Waste. products that comply with international environmental standards, Moreover, in November 2015, LSR Group and LLC Eco-Express and reducing energy consumption. organised environmental production control of compliance with the maximum allowable emissions limits and checking of gas treatment facilities efficiency. The results showed that all the technological and ventilation equipment is in good working order and works well while fully complying with the approved standards. 082 LSR Group Annual report 2015 GLOSSARY
/ EBITDA / Equals to operating profit plus amortization of intangible assets and depreciation of property, plant and equipment less change in fair value of investment property.
/ EBITDA MARGIN / Is calculated by dividing EBITDA by revenue
/ TOTAL DEBT / Is calculated as the sum of non-current loans and borrowings, current loans and borrowings and bank overdraft.
/ NET DEBT / Is calculated as total debt minus cash and cash equivalents. Total debt / EBITDA and Net debt / EBITDA ratios are calculated on annualised basis.
EBITDA and EBITDA margin are not defined in the International Financial Reporting Standards and should therefore be regarded only as supplementary information.
The financial items in this report are rounded to whole numbers in RUB m while percentage changes in the financial items are calculated using data in RUB th.
/ NET SELLABLE AREA / LSR Group Includes the area of apartments, offices and other areas designated for sale, including the area of balconies which is adjusted using the appropriate ratio. Net sellable area, gross buildable area and other parameters of real estate Annual report development projects (especially those of them which are at the initial stages of development) can change during their design and construction. LSR Group 36, Kazanskaya Street, St. Petersburg, 190031, Russia / PERCENTAGE OF PROJECT COMPLETION / Tel: +7 (812) 458-81-43 The list of the development projects presented in this report includes only the projects with unsold (or partly Fax: +7 (812) 312-13-81 unsold) premises as of December 31, of the reporting year. Certain large-scale development projects are made up e-mail: [email protected] of several phases. This report only contains information on those phases of development projects which include www.lsrgroup.ru unsold areas at December 31, of the reporting year.
/ MARKET SHARE / Market share represents the percentage of an industry or market's total sales that is earned by a particular company over a specified time period.
Glossary