Lsr · RUS:LSRG
Lsr — Investor Day (2016)
40 slides from Lsr's investor day presentation, 2016
Slide 1: Capital Markets Day 2016
Capital Markets Day 2016
Slide 2: Agenda
Agenda 14:00 Registration 15:00 Leadership Andrey Molchanov, CEO Investment Case Andrey Nikitin, CFO Real Estate Development & Eugeny Yatsyshin, First Deputy CEO Construction Building Materials Sergey Begoulev, Managing Director of LSR.Wall Materials Centralized Sales & Procurement Yuri Ilyin, CCO H
Slide 3: Leadership
LEADERSHIP Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 3
Slide 4: Leadership
Leadership • We are Russia’s largest home builder by volume with 2,2mn m² under construction • We have built 500 houses in 23 years of operations Real Estate • Since IPO, we sold 4,2 mn m2 of new housing Development • We built 500 th m2 of elite housing in St. Petersburg and occupy a 44% market shar
Slide 5: Who We Are
Who We Are • Leading Russian real estate developer, construction company and building materials producer • Builder of mass-market, business-class & elite housing with 23-year history and strong brand awareness • Operating in Russia’s three largest cities: Moscow, St. Petersburg and Ekaterinburg • Po
Slide 6: Business Structure
Business Structure • We have 13 business units with a total staff of 15,500 employees • We operate in 3 countries, including Russia, Ukraine (aerated concrete) and Germany (real estate development) • We do full cycle of design, production and construction of mass-market projects Real Estate and Cons
Slide 7: Investment Case
INVESTMENT CASE Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 7
Slide 8: Investment Case
Investment Case • LSR Group’s investment case is founded on a solid foundation of macro, industry and company specific drivers • The Russian economy has bottomed, inflation is falling and savings are at an all time high, supporting housing demand • Tougher lending conditions and stricter legislation
Slide 9: Investment Strategy
Investment Strategy • The new investment strategy focuses on forecastable, continuous growth of earnings and free cash flow • One of the key priorities is achieving alignment of motivation between management and shareholders Net income Priorities: 1. Quasi-fixed returns: • Bi-annual dividend payouts
Slide 10: Business Alignment with Financial Strategy
Business Alignment with Financial Strategy Finance will be driving business renewal through: • Enhanced corporate/business efficiency • Portfolio rebalancing • Non-core asset sale Quasi fixed income story with a growth profile Smoothed schedule of completions Strategic landbank expansion Constant pr
Slide 11: Working Capital Strategy
Working Capital Strategy ROIC is expected to be continuously increased through comprehensive system of working capital management: • Synchronization of construction, transfers and cash inflows • Smoothed schedule of completions • Acceleration of the turnover of advances paid Sales of Sales of comple
Slide 12: Strategic Development of Finance Function
Strategic Development of Finance Function • Integral part of management team focused on value/wealth creation • Focused on decision • Identifies opportunities and support provides critical information and • Provides sound financial analysis to make superior • Focused on analysis for making operating
Slide 13: Recent Changes
Recent Changes 1 • Majority shareholder steps in as CEO 2 • Strategic acquisitions of large-scale projects in Moscow 3 • Development of new management motivation program 4 • Development of new architecture of value-added and organizational structure 5 • Consolidation of centralized sales and procure
Slide 14: New Organizational Structure
New Organizational Structure • New structure combines functional and regional competences • The structure takes into account local market specifics and allows for synergy across functions and products • Clear areas of responsibilities produce highly quantifiable results • Favors business scalability
Slide 15: Board of Directors
Board of Directors Alexander Vakhmistrov Dmitri Gontcharov Andrey Molchanov Chairman Deputy Chairman First Deputy CEO CEO, Managing Director Chairman of the LSR Europe GmbH Executive Committee Olga Sheikina Vasily Kostritsa Eugeny Yatsyshin Head of LSR Group Deputy CEO First Deputy CEO Moscow Office
Slide 16: Executive Committee
Executive Committee Andrey Molchanov CEO, Chairman of the Executive Committee Evgeny Yatsyshin Vasily Kostritsa Leonid Sorokko Andrey Nikitin Yuri Ilyin Galina Volchetskaya Tatyana Chernysheva First Deputy CEO Deputy CEO Deputy CEO CFO CCO Executive Director Deputy CEO Real Estate Building Materials
Slide 17: New Investor Relations Strategy
New Investor Relations Strategy The new Investor Relations strategy will focus on building long-term GARP and value investor base through: • Better disclosures and guidance • Greater access to top-management • New sources of shareholder return Proactive transparent Performance communication Investme
Slide 18: 1H 2016 Operating & Financial Results Highlights
1H 2016 Operating & Financial Results Highlights • Revenue increased by 10% y/y, up to RUB 31,62 bn • EBITDA decreased by 22% y/y, down to RUB 4,49 bn Financial • EBITDA margin decreased to 14% from 1H 2015 highlights • Profit for the period was RUB 1,1 bn (-72% y/y) • Net debt/EBITDA ratio reached
Slide 19: 1H 2016 Results: Real Estate Development
1H 2016 Results: Real Estate Development • Revenue increased by 9% y/y 1H16 Results • Completions volume increased by 58% y/y up to 206 th m2 Overview • EBITDA decreased by 32% y/y and EBITDA margin dropped to 20% from 31% • St.Petersburg: revenue amounted to RUB 13,48 bn (-14% y/y). EBITDA margin s
Slide 20: 1H 2016 Results: Construction
1H 2016 Results: Construction • Revenue from construction decreased by 12% y/y 1H16 Results • Our construction business transferred to customers 484 th m2 (+5% y/y) of panel housing Overview • EBITDA decreased by 37% y/y. EBITDA margin was 6% • Saint-Petersburg: revenue decreased by 15% y/y to RUB 7
Slide 21: 1H 2016 Results: Building Materials
1H 2016 Results: Building Materials Product breakdown 1H16 Results Overview Ready-Mix Concrete and Aggregates Bricks and Aerated Concrete Reinforced Concrete • EBITDA increased by 31% • Performance drivers: M-11 • Performance drivers: • Bricks sales were down 15% highway contracts weaker demand, int
Slide 22: Debt Maturity Profile
Debt Maturity Profile • Gross debt increased up to RUB 43,96 bn* in H1 2016 • The average interest rate decreased to 11,7% by end June 2016 from 11,97% in end March 2016 • Company intends to refinance short-term debt • Company has no foreign debt exposure • Net Debt/EBITDA reached 1,09x as at 30 Jun
Slide 23: Real Estate Development & Construction
REAL ESTATE DEVELOPMENT & CONSTRUCTION Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 23
Slide 24: Strategy
Strategy • Real estate has been put at the core of our business structure and became the main source of growth • We have shifted added value generation towards real estate, and construction is now working at minimal margin • We aim at adding individually designed buildings to our mass market offerin
Slide 25: Real Estate Portfolio Breakdown
Real Estate Portfolio Breakdown • We have the largest high quality landbank in Russia among real estate developers, concentrated in three largest cities in Russia • We plan to turn all land plots into high added value projects • Our portfolio consisted of 9.3 mn m² as of Dec. 31, 2015 and was valued
Slide 26: Key Competences
Key Competences • We have 42 projects in pipeline in St.Petersburg, Moscow, Ekaterinburg and Munich • Our current landbank is enough to last us 15 years and is nearly fully paid for • Above 90% of our new contract sales are done before the project completion St. Petersburg Moscow Net unsold area, m²
Slide 27: Key Projects
Key Projects ZIL (ZILART + ZIL South) • Largest brownfield redevelopment project in Moscow • Attractively located along the Moscow River just 5km and 3 metro Land plot – 65 ha stops from the Kremlin and Red Square. Total NSA – 1,500 th m2 Start of pre-sales – Sep 2015 • Unique high-end project with
Slide 28: Recent Changes & Outlook
Recent Changes & Outlook Recent changes: • We have started developing projects as single urban areas with comprehensive infrastructure which improve the quality of living and status of the district • We implement leading solutions in indoor and outdoor quality • We employ leading architects and choo
Slide 29: Building Materials
BUILDING MATERIALS Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 29
Slide 30: Strategy
Strategy • As a market leader with unrivaled access to infrastructure and resource base, we expect to comfortably maintain dominant positions • We consider building materials segment a source of predictable revenue inflows and high EBITDA margins of up to 35% • Our production facilities are fully mo
Slide 31: Key Competences
Key Competences • We are trend setters and market makers in every building materials’ market of operation • We operate one the largest brick factories in Europe and export our bricks to Germany, Finland, Kazakhstan • We boast the most innovative products in our brick and aerated concrete product lin
Slide 32: Recent Changes & Outlook
Recent Changes & Outlook Recent changes: • We have started gradual disposal of selected assets, with cement factory in 2015 • We decided on geographical expansion of our brick sales through nationwide deliveries and new dealership contracts • We will be expanding our aerated concrete production foll
Slide 33: Centralized Sales & Procurement
CENTRALIZED SALES & PROCUREMENT Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 33
Slide 34: Strategy
Strategy • Sales and procurement are now centralized and managed within one functional commercial division Sales: • Sales targets are defined by financial strategy and are focused on delivering stable forecastable growth • Development and sales function are closely intertwined to ensure revenue maxi
Slide 35: Key Competences
Key Competences • With presence in 3 largest cities and all market segments, we can cater to the most diverse customer needs • Our sales network reaches out to all key regions in Russia • Our homes are in demand across the country, with 40% of sales coming from non-locals • Customers can purchase a
Slide 36: Human Resources & Organizational Development
HUMAN RESOURCES & ORGANIZATIONAL DEVELOPMENT Real Estate & Leadership Investment Case Construction Building Materials Sales & Procurement HR & OD 36
Slide 37: Strategy
Strategy Enhancing business efficiency through organizational efficiency and HR function excellence: • Regularly revisiting organizational and governance model: • Functional vs. regional, centralization vs. decentralization aiming headcount and costs optimization and increased productivity • Q3-Q4 2
Slide 38: Motivation System
Motivation System Key changes: • Long-term motivation program (LTMP) is ready to be launched in 2017 • Transitional motivation program has been in place for 2016 (with certain elements of LTMP such as focus on net income, bonus pools structure etc.) Key goals of the new program: • Alignment of manag
Slide 39: Q&A Session
Q&A SESSION 39 39
Slide 40: Disclaimer
Disclaimer By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to the bound by the following limitations: This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an o