R.G.I. International Limited Replacement Trading Update (8167G)

TIDMRGI

RNS Number : 8167G

R.G.I. International Limited

12 May 2014

Replacement: In the Trading Update released this morning, RGI International referred to project financing from Sberbank for the second phase of its V Lesu residential development. This figure has been corrected in the CEO's quote. Please see the full replacement announcement below.

Monday 12 May 2014

R.G.I. International Limited

(AIM: RGI)

TRADING UPDATE

R.G.I. International Limited ("RGI" or the "Company"), the AIM listed developer of quality residential properties in Moscow and the surrounding areas, today announces the following update to the market regarding its trading in Q1 2014.

Highlights:

Operational

-- Microgorod <<V Lesu>>:

   -     First revenue recognised as 54 fitted-out apartments delivered to residents 

- Record presales at <<V Lesu>> with contracts concluded on 167 apartments (Q1 2013: 120), ahead of the 162 sales achieved in Q4 2013

- The value of presales contracts was US$40.2m, an increase of 30% from Q1 2013 (US$30.9m), despite a significantly lower Rouble

- The Company recorded US$41.1m cash inflows from pre-sales (not currently recorded as revenue) during the quarter (1Q 2013: US$31.9m)

- Average sale prices continued to increase, reaching an average of 119,900 RUR (approximately US$3,433) per meter, an 8% increase in Rouble terms over 2013 achieved sales prices

- In total, 84% of available square meters in Phase 1 have been pre-sold and 27% of available square meters in Phase 2

   -     Construction is on schedule across the development as are deliveries of Phase 1 apartments 

-- Tsvetnoy Central Market:

   -     Total turnover at the store to 31 March 2014 was RUR 778m  (Q1 2013: RUR 754m) 
   -     RGI's revenues from the store for the period grew by 17% to US$6.6m (1Q 2013: US$5.7m) 

- Tsvetnoy had a net profit from operations for three months was US$0.6m (1Q 2013: net loss US$0.9m)

-- Other projects:

- Launched marketing for Kvazar Office Park, a new six building office park development due to start construction in 2016

-- Financial:

   -     Ended period with US$34.3m in cash and cash equivalents (2013 US$26.4m) 
   -     US$161m in project financing from Sberbank secured in April 2014 for Phase 2 of <<V Lesu>> 
   -     Operating loss narrowed to US$2.5m (1Q 2013: $8.9m) 

Microgorod <<V Lesu>> ("V Lesu")

The Company offers a premium economy residential product at its <<V Lesu>> development. We are pleased to report record sales for the quarter at <<V Lesu>>, with advance sales of 167 apartments versus 120 in Q1 2013 and ahead of the 162 sold in Q4 2013. Sale prices continued to increase, reaching an average of 129,270 RUR (approximately US$3,700) per square meter for Phase 1 and 112,460 RUR (approximately US$3280) for Phase 2, representing 5.4% and 10.7% increases in Rouble terms over 2013 averages.

The Company had US$41.1m cash inflows from pre-sales (not currently recorded as revenue) during the quarter versus US$31.9m during Q1 2013. Of 167 apartments pre-sold during Q1 2014, 71 were from Phase 1, bringing the total sold to date to 1,024 (86%) out of a total of 1,193 first phase apartments. 96 Phase 2 apartments were sold, bringing the total to 377 apartments sold, representing 27% of available square meters in Phase 2.

Construction is on schedule across the development with all Phase I now fully permitted and delivery underway. Building 18 residents began receiving their apartments in March and Building 16 residents in April. Both the school and kindergarten, which are included in Phase 2, are at the fit-out stage. Buildings 11, 12 and 14 are all above ground level and the foundations of Buildings 13 and 15 have been dug.

From an accounting perspective, with the delivery of the first 54 apartments of Phase 1, the Company recorded its first revenue for the <<V Lesu>> Project. For the first quarter, RGI recorded US$10.9m of revenue and US$9.3m of costs of construction. The first apartments, representing approximately 5% of the total sold in Phase I, include some of the apartments sold at the very beginning of pre-sales for the project when prices were significantly lower. As a result, the average revenue for the quarter is 100,300 RUR/m2 versus an average for all of Phase 1 to date of 111,800 RUR/m2 and current Phase 1 prices approaching 130,000 RUR/m2. The Company does not expect to incur any major costs in delivering the remaining apartments. As a result, RGI expects margins to trend higher for Phase 1 deliveries.

Images of the progress being made can be viewed at V Lesu's website, http://www.microgorodvlesu.ru/

Tsvetnoy Central Market ("Tsvetnoy")

 
                              3M 2012   3M 2013   3M 2014 
---------------------------  --------  --------  -------- 
 Turnover RUR m                 604         754       778 
---------------------------  --------  --------  -------- 
 Turnover US$ m                18.8        24.8      22.3 
---------------------------  --------  --------  -------- 
 Footfall million visitors     0.42        0.45      0.56 
---------------------------  --------  --------  -------- 
 

Tsvetnoy Central Market, RGI's iconic department store in Moscow, performed well in the first three months of 2014 despite a decline in Russian retail spending overall. Both footfall and Rouble turnover increased over the same period of 2013, reflecting success in attracting new shoppers into the store; however, turnover in dollar terms was lower due to the weakening Rouble. RGI's revenue, which is a combination of rent, commissions from tenants and own-bought sales, increased 17% over 1Q 2013 to US$6.6 million. Tsvetnoy recorded EBITDA of US$0.6m (Q1 2013: loss of US$0.9m), reflecting not only top line growth, but ongoing attention to cost control.

During the period, Tvestnoy opened a new Home Store on the lower ground level, and hosted almost weekly events to bring shoppers into the store. In a sign that Tsvetnoy is increasingly being recognized for fashion, the Topshop x Adidas Collection launch event for Russia was held at the store, as was a party marking the launch of Estee Lauder's new Pure Color Envy. Tsvetnoy was also chosen for a new Linda Farrow pop-up store and opening event to commemorate the 10(th) anniversary of the brand.

Other Moscow Projects

During the international MIPIM real estate convention held in Cannes in March, RGI announced the marketing launch of a new office park at Kvazar, adjacent to Microgorod <<V Lesu>>. Kvazar has been commissioned to meet the needs of modern-Moscow, a city that is experiencing rapid population growth and modernization. In keeping with Regional Government's initiatives to create new jobs, the Company has identified the Kvazar site as somewhere where new enterprises can be built, in the process offering an attractive life-work balance to the area's growing population. The Kvazar Office Park is an innovative concept, blending office space with the natural environment by using natural materials such as wood, stone, ceramics, glass and copper. The six office buildings envisaged (1,500 sq. metres GBA each) will feature recreational space for workers, including open terraces, balconies and dining areas with kitchens. Construction works are planned for 2016, and the first phase of approximately 11,000 sq. metres is to be commissioned in 2018, with an estimated investment of 1 bln rubles (about US$30m). The project when completed will total 80,000 sq. metres of gross office space.

Finances

Revenue for the period was US$17.7m (1Q 2013: US$5.7m) as US$10.9m was recognized when the first 54 apartments were delivered to residents of Microgorod <<V Lesu>> and the balance coming from Tsvetnoy. Property operating costs were US$6.2m (1Q 2013: US$6.7m), all attributable to Tsvetnoy, and construction costs were US$9.3m. General and administrative expenses declined significantly to $2.1m from $5.5m in 1Q 2013. Marketing costs of US$1.0m (1Q 2013: $1.3m) and US$1.8m depreciation (1Q 2013: US$2.0m) contributed to an operating loss of US$2.4m for the first three months of 2014 (1Q months 2013 loss: US$8.9m).

Total debt decreased from US$186.7m at year end 2013 to US$172.5m at the end of the first quarter 2014 while RGI ended the period with US$34m in cash and cash equivalents. Net assets at book value under IFRS declined from US$394.4m at year-end to US$352.8m, a change of US$41.5m which is largely attributable to changes in the exchange translation reserve.

Commenting, RGI Chief Executive Andrey Nesterenko said:

"This was a record quarter for RGI, both for pre-sales of apartments at Microgorod <<V Lesu>> and for the performance of our Tsvetnoy department store. At <<V Lesu>> we began the year with excellent momentum which has continued as the first residents move in and more people see the project for themselves. We will continue to monitor consumer sentiment but in the meantime we were pleased to secure a project financing line of US$161m in April 2014 for the continued construction of V Lesu, which is progressing to plan. "

Enquiries:

 
 RGI 
  David Wood, Chief Financial Officer 
  Anna Orlova, Head of Marketing 
  and PR                                      [phone] 
 
 Citigate Dewe Rogerson - Financial 
  PR Adviser 
  Tom Baldock 
  Jos Bieneman                           [phone] 
 Shore Capital - Nominated Adviser 
  Stephane Auton 
  Edward Mansfield                       [phone] 
 

About RGI

RGI has been successfully creating new markets in Moscow real estate since 1993. The Company's innovative drive played a key role in the transformation of Moscow's Golden Mile in the 1990s, when new landmark buildings were constructed that set the benchmark for modern living and working spaces in the rapidly changing Russian capital. Today the Company is focused on serving Moscow's growing middle class professionals by building aspirational, design led, residential communities. Its pioneering Microgorod V Lesu project has set new standards for the Moscow residential sector by offering homebuyers a well configured development, with good facilities and apartments finished to a high quality. In addition to its distinctive residential properties, RGI developed, owns and operates Tsvetnoy Central Market, Moscow's first iconic department store on Tsvetnoy Boulevard. The Company is listed on the LSE's AIM market and has significant land holdings in central Moscow.

For more information go to www.rgi-international.com

This information is provided by RNS

The company news service from the London Stock Exchange

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