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LSR Group

November 13, 2006

LSR Group resolves placing a bond issue

LSR Group, the major association of enterprises in Russia's construction industry, resolved to place a new bond issue in the near future. The planned scope of the issue is RUB 2 billion.

Bonds of LSR Invest OOO, a subsidiary of LSR Group OAO , which was specially established to raise funding into the Group's enterprises, will be offered to investors. The issue will mature in 3 years. The face value per bond is RUB 1,000.

This is a second bond issue of LSR Group. The first bond issue worth of RUB 1 billion was successfully placed in March 2005.

«The proceeds from bond placement are to be channeled towards restructuring of the Group's credit portfolio (some 75% of the bond issue) and towards funding of our new investment projects (25%)», comments Elena Tumanova, CFO at LSR Group.

Enterprises of LSR Group, including the parent company of the holding LSR Group OAO , will provide security for issue of LSR Invest OOO bonds as surety, for the total of RUB 2,630 million.

The bonds will be placed via public subscription at MICES Stock Exchange ZAO . They will be traded in MICEX Stock Exchange ZAO and OTC market. Arrangers of the issue shall be Vneshtorgbank OAO and Uralsib FC.

LSR Group is the leading player of Russia's construction industry. Its core lines of business are production of construction materials, real estate construction and development.

IAS consolidated statements of LSR Group was certified by KPMG. According to these, LSR Group turnover in 2005 amounted to some RUB 15.6 billion. In the first half of 2006, this parameter amounted to RUB 9.3 billion, which is almost twice as high as in 1H05. EBIT in the first half of the current year came to RUB 721 million, and net profit stood at RUB 500 million. Confer: net profit amounted to RUB 113 million last year.

Operating profit parameters:

Parameter

1H05

1H06

Gross profitability

23.9%

34.1%

EBITDA

12%

18.4%

These parameters show tangible and steady growth of gross profit and EBIT. Profitability parameters in 1H06 soared y-o-y, which is due to significant increase in gross revenues with maintained control over costs. For instance, revenues in 1H06 were up by 97.7% on 1H05; with EBITDA having grown up to 18.4%.

The structure of LSR Group turnover for 1H06, by lines of business

38%

Construction materials

23%

Development

22%

Construction and contracting services

14%

Non-metallic construction materials

3%

Other enterprises

As you can see, a considerable portion of LSR Group business (a bit more than a half) is devoted to production of construction materials; therefore, the Group is susceptible to pricing risks existing on the real estate market.

Company No. 1

in Russia and Northern Europe

  • in gas concrete production

in Russia

  • in ceramic brick production
  • in non-metallic construction materials production

in St. Petersburg

  • in commodity concrete production
  • in luxurious residential premises development
  • in production of reinforced concrete products
  • in construction of large-panel residential premises

Comparison of consolidated statements of LSR Group for 1H06

Parameter

RAS, RUB Mio

IAS, RUB Mio

Net revenues from sales of goods, products, work, services (net of VAT, excises and similar payments)

8,276.9

9,336.5

Profit (loss) from sales

1,324.9

1,116.5

Net profit (retained profit (loss) of the accounting period

897.8

500.3

A difference between RAS and IAS in terms of revenues is largely due to differences in recording revenues under development transactions and the turnkey contract work. The most significant differences in terms of expenses are explained by differences in accounting for depreciation, leasing expenses and administrative expenses in development transactions.

 

 

 

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