ANNUAL2011 REPORT PIK Group Annual Report 2011 New Level of Development PIK Group at a glance Annual Report 2011 PIK Group 3 PIK Group at a glance RESPONSIBILITY STATEMENT We are a leading residential real estate developer in Russia, with OUR CORE ACTIVITIES ARE: BUSINESS HIGHLIGHTS a particular strategic focus on the Moscow Metropolitan Area. The development of residential Each of the Directors confirms that, to the best of his or real estate properties and sales A LEADING MASS MARKET RESIDENTIAL her knowledge: Our principal activity is the development, construction and sale of completed units. DEVELOPER IN RUSSIA WITH 17 YEAR (a) the financial statements, prepared in accordance of mass-market residential properties in the Russian real estate market. TRACK RECORD 1 with International Financial Reporting Standards and The construction of reinforced concrete panel housing, the requirements of Cypriot Companies Law, Cap. FINANCIAL FIGURES 113, in each case included in this Annual Report, give production and assembly of a true and fair view of the assets, liabilities, financial prefabricated panel residential position and profit and losses of the Company and buildings, including construction Around 10.5% market share1 in Moscow Metropolitan Area the undertakings included in the consolidation taken at our development sites and (MMA)2 in 2011 as a whole; and 46.0 bn RUR 9.4 bn RUR 11.7 bn RUR construction services provided Over 12 mln sqm of net selling area (NSA) completed since (b) the Management Report included in this Annual Revenue in 2011 Gross profit in 2011 EBITDA in 20111 to third parties. inception 88% of project portfolio by value is concentrated in MMA3 Report includes a fair review of the development (2010: 38.1 bn RUR; Л20.7%) (2010: 2.9 bn RUR; Л224.1%) (2010: –2.1 bn RUR; Л557.1%) The production of reinforced and performance of the business and the position concrete panels, window of the Company and the undertakings included in 41.2 46.0 9.4 11.7 38.1 8.7 8.6 frames and other construction the consolidation taken as a whole, together with a INTEGRATED BUSINESS MODEL WITH 33.7 materials. description of the principal risks and uncertainties 2008 2009 2010 SUBSTANTIAL PRODUCTION FACILITIES that they face.” 2011 The servicing and maintenance AND CONSIDERABLE PORTFOLIO OF PROJECTS (3.5) (2.1) 2 This Annual Report has been prepared for the 2.9 of real estate properties shareholders of the Company as a body and no other constructed by us and other persons. The Company, its directors, employees, developers and other activities, agents or advisers do not accept responsibility to any 2008 2009 2010 2011 2008 2009 2010 2011 (28.2) not included in the real estate other person to whom this document is shown or into Source: IFRS accounts Source: IFRS accounts Source: IFRS accounts development, construction and whose hands it may come and any such responsibility industrial segments. #1 in Russia by prefabricated panel facilities or liability is expressly disclaimed. By their nature, the Large/diversified portfolio of projects with 6.9 mln sqm of KEY INDICATORS 3 statements concerning the risks and uncertainties facing unsold NSA valued by CBRE at US$2.7 bln the Company in this Annual Report involve uncertainty Construction services and in-house sales force since future events and circumstances can cause WE BELIEVE results and developments to differ materially from those anticipated. The forward-looking statements contained th sqm th sqm bn RUR WE BELIEVE THAT OUR IMPROVING in this Annual Report reflect knowledge and information 512 510 52.0 FINANCIAL PERFORMANCE 2 3 available at the date of preparation of this Annual Report Transfers to customers in 2011 New sales to customers in 2011 Total cash collections in 2011 INTEGRATED REAL (2010: 434 th sqm; Л18.0%) (2010: 392 th sqm; Л30.1%) (2010: n/a; Л30.3%) 3 and the Company undertakes no obligation to update ESTATE DEVELOPMENT these forwardlooking statements. Further, nothing in this 492 512 520 510 61.8 Annual Report should be construed as a profit forecast. 434 52.0 PROCESS GIVES 378 392 39.9 US AN IMPORTANT Strong sales growth of apartments (510 th sqm in 2011 32.8 ADVANTAGE IN vs. 392 th sqm in 2010) Increased cash collections from pre-sales (RUB52.0 bln 123 OUR INDUSTRY AS in 2011 vs. RUB39.9 bln in 2010) COMPARED TO OUR Recovering profitability (20.4% gross profit margin in 2011) Net income back into the black (RUB4.8 bln in 2011 vs. net loss 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 COMPETITORS of RUB6.0 bln) Source: IFRS accounts Source: Management accounts Source: Management accounts The Board of Directors (1) Calculated as PIK’s share in total residential housing completed (in sqm) in MMA in 2011 excluding PIK Group PLC (1) EBITDA represents total comprehensive income/(loss) before income tax expense, interest income, interest expense including penalties payable and depreciation and amortization individual housing (2) PIK own development projects, PIK share. IFRS accounts (2) Moscow Metropolitan Area (MMA) includes Moscow and the Moscow region April 28, 2011 (3) PIK own development projects, PIK share. Management accounts (3) As of December 31, 2011 2 PIK Group Annual Report 2011 Chairman statement Annual Report 2011 PIK Group 3 IN EARLY 2011, PIK SHARES WERE INCLUDED IN QUOTATION LIST A1 ON MICEX-RTS STOCK EXCHANGE, PLACING PIK AMONG A GROUP OF Chairman’s statement BLUE CHIP RUSSIAN COMPANIES Dear Shareholders, On behalf on the Board of Directors, it is a pleasure to present PIK Group’s Annual Report for 2011. Following a difficult two-year period On corporate governance, significant This shift took place in early September 2011 between 2009-2010 in which the progress has been made in opening and served to recognize PIK Group among Group worked hard to restructure its the Board of Directors to more Russian blue-chip companies. We hope that debts and restart operations, in 2011 Independent Directors and ensuring this step will allow us to increase the liquidity the Group made strong progress the interests of all shareholders are of PIK stock and broaden the range of our with the turnaround of its business. well represented. We also worked potential investors. The year proved productive on many on adopting best practice standards. fronts. Operationally, PIK accelerated In August 2011, PIK instituted a Looking to the future, the Group is well the launch of new projects from code of ethics, which prescribed positioned as a leading residential developer its pipeline, starting up on 41 new basic ethical standards and rules of in one of the fastest growing cities in Europe. sites. This in turn helped drive a conduct, by which Group employees We continue to innovate and the quality of significant pick-up in apartment are expected to abide in the course our product is improving, as evidenced by the sales, which increased by over 30% of performing their duties. recent launch of the new “Flagman” building YoY. Financially, we managed to series. Following a large amount of hard work complete PIK’s debt restructuring We also focused on improving our balance sheet is on a sound footing, we programme by reaching agreement transparency in PIK’s have a good pipeline of projects for 2012, with Nomos-Bank on the extension communications with investors. including outside Moscow and we are of the Group’s last overdue credit During the year we approved beginning again to generate good cash flow. facility for a further 3 year period. regulations concerning disclosure The Group is in a better position than it has The completion of this programme practices and set up the Disclosure been for some time to take advantage of its means that PIK can move forward Committee at Management Board well-known brand and deliver sustainable and on a sounder financial footing and level to ensure compliance with profitable growth. grow the business in the interest of the legal requirements of the all stakeholders. During the year we Russian Federation, the listing We would like to take the opportunity to saw further signs that the Russian requirements of the UK, as well as thank all our stakeholders for their support economy is strengthening and will the Management Board’s resolutions in the past year and look forward to showing be able to underpin sustainable and other internal regulations. further improvements in 2012. growth in consumer demand. Russia continues to outperform most of In addition, we made changes in the developed markets, with GDP other bylaws to be in compliance growth reaching 4.2% last year. with higher standards of the Russian Mortgage penetration also continued Micex-RTS stock exchange for to grow and new mortgages originated inclusion into quotation list A1. by the banks reached an all-time high of RUB766bn, a significant factor for PIK and its clients. Vladislav MAMULKIN Chairman 4 PIK Group Annual Report 2011 Our History Annual Report 2011 PIK Group 5 SINCE 2009 WE HAVE WORKED HARD TO GET OUR OPERATIONS INTO GEAR AGAIN, REGAIN Our History CONSUMER CONFIDENCE AND RESTORE PIK’S REPUTATION Founded in 1994, PIK Group is a leading residential property developer in Russia, where today our brand is well known to a whole generation of homebuyers. “YAROSLAVSKY” DEVELOPMENT, MYTISHI, MOSCOW REGION PREFABRICATED PRODUCTION FACILITY, DSK-3 “THE STAR OF RUSSIA” DEVELOPMENT, KHIMKI, MOSCOW REGION “NOVOKURKINO” DEVELOPMENT, KHIMKI, MOSCOW REGION 1998 2001 2004-2007 2007-2009 2009 2009 2009-2011 For many of our customers, As its name With development and Success in Moscow allowed After many year of growth, To reduce the impact of the In April 2009 The residential housing a PIK apartment has been suggests, PIK, an mortgage finance activities the Group to expand into culminating in the successful economic downturn on our Nafta Moskva market started to recover their first experience of abbreviation of in place, we began our other Russian cities and in 2007 IPO of PIK Group on operations and overcome (the “Nafta in 2009, when demand property ownership and a (“First Mortgage Company”), diversification into large 2004 we began the process the London Stock Exchange, related liquidity constraints, Moskva Group”) became from consumers returned.