First half of the year overview for LSR: record profits and poor citizens

Обзор первого полугодия для лср: рекордная прибыль и бедные граждане

LSR (MCX: LSRG) — one of the leading construction companies in the Russian market, concentrated in three regions: St. Petersburg and Leningrad region, Moscow and Moscow region, and also in Yekaterinburg. In addition to design and construction activities, LSR is engaged in the production of building materials at its own production sites.

30 August, the company published consolidated financial statements for the first half of 2021. In it, we observe an increase in net profit in 2,2 times and record revenue. Taking advantage of good market conditions, the holding put into operation record areas in the first half of the year.

But there are two negative points., which are worth paying attention to: a doubling of net debt from January to June of this year and a decrease in the total area under new contracts concluded to a four-year low.

To better understand, what's going on with the business, Let's take a closer look at the dynamics of the main operating and financial indicators.

Disclaimer: if we write, that something has risen or fallen by X%, then by default we mean comparison with the report data for the same period last year, unless otherwise stated.

Market situation and operating indicators

Mortgages in Russia have become more affordable since the second half of last year, what provoked a rapid rise in property prices.

To help the construction industry during the 2020 crisis, the state launched a preferential mortgage lending program. And the Bank of Russia has lowered its key rate to a record low. As a result, Russia ranked fourth in the world in terms of growth in residential property prices.

The situation has changed slightly in 2021. In the summer, preferential mortgages were extended until 2022, but increased the key rate and reduced the maximum loan amount to 3 million rubles, which especially hits the demand in the capital regions, where the value of real estate is much higher, than in the whole country. All these factors negatively affect the demand for real estate. By September of this year, the number of applications accepted and the volume of loans issued on preferential mortgages for new buildings fell to a minimum since the launch of the state program.

I suppose, that from the second half of the year the share of mortgage contracts may decrease, and it will hit the sales of developers, including LSR.

The total area of ​​new contracts fell by 10% - up to 313 thousand square meters, what has become the minimum for the last 4 of the year. That is, from the point of view of natural sales, we can confidently talk about a drop in demand for new real estate.. But real estate prices remain near historic highs, therefore, in monetary terms, the amount of new contracts increased by 24% - up to a record 47 billion rubles.

The total area of ​​the commissioned real estate has reached a record 252 thousand square meters - against 172 thousand square meters in the same period last year..

St. Petersburg remains a key business region, which accounts for 59% sales in kind and 55% sales in monetary terms.

Dynamics of new signed contracts in the first half of the year

total area, thousand m2total amount, billion rubles
201725725
201835834
201936838
202034638
202131347

Structure of new signed contracts

In kindIn monetary terms
St. Petersburg59%55%
Moscow26%38%
Yekaterinburg15%7%

Share of concluded mortgage contracts with LSR

201747%
201854%
201947%
202064%
1п202168%

47%

Commissioned in the first half of the year, thousand m2

2017182
2018102
2019160
2020172
2021252

182

Revenue and profit

Against the background of rising prices for residential real estate, LSR's revenue increased by 14% - up to 54.8 billion rubles - and updated the record. About 80% proceeds were brought by the sale of residential real estate and the provision of construction services. Rest 20% the company received from the sale of building materials and the provision of tower cranes and fleet services. Let me remind you, that in 2020 the holding entered the freight water transportation market through LSR. Basic ".

Cost of sales increased by less than 1% - up to 34.1 billion rubles, while administrative and selling expenses increased by 18% - up to 9 billion rubles, which is associated with an increase in the cost of salaries and social benefits to employees.

As a result, LSR operating profit increased by 71% and reached a record 11.4 billion rubles.

The company's finance income decreased by 16% - up to 1.3 billion rubles - due to a drop in interest income against the background of a decrease in the amount of money on bank deposits. Finance costs decreased by 6% - up to 4.4 billion rubles - due to changes in the reserve for doubtful debts, which have not been repaid on time and which are not secured in the form of a pledge, bank guarantees or sureties. As a result, the company's net financial expenses remained at the level of the previous year and amounted to 3.1 billion rubles..

The total net profit of the construction holding increased by more than 2 times - up to 5.7 billion rubles - and reached a new historical maximum due to the growth in prices for real estate and building materials compared to the first half of last year.

Financial performance of the company for the first half of the year, billion rubles

RevenueOperating profitNet profit
201740,73,11,9
201851,75,63,8
201946,65,81,9
202048,16,72,6
202154,811,45,7

Debts

In the first half of this year, the total debt of LSR increased by a quarter - up to 128.8 billion rubles. At the same time, the holding's net debt doubled - to 34.1 billion rubles - mainly due to a decrease in the amount of money in accounts and their equivalents from 73.8 to 69.1 billion rubles.

The level of debt burden according to the ratio "net debt / EBITDA "since the beginning of the year has increased from 0,61 up to 1.08 ×. Despite the growth of the indicator in the first half of the year, the level of business debt remains low and does not threaten the financial stability of the company.

Debt load, billion rubles

Total debtNet debtNet debt / EBITDA
201772,843,11,17×
201886,130,30,83×
201989,622,81,08×
2020102,616,80,61×
1п2021128,834,11,08×

Dividends

The holding's dividend policy assumes to allocate at least 20% of net profit under IFRS. At the end of 2020, the company paid in total 59 P per share - 50% from net profit.

At the same time, LSR management reported, that the payouts 1 half of 2021 is not planned. In the coming years, the main focus will be on reducing debt burden and business development. I.e, based on the management statement, Investors should not count on generous dividends in the coming years.

Amount of dividends per share

201678 Р
201778 Р
201878 Р
201930 Р
202059 Р

78 Р

What is the bottom line

LSR has demonstrated strong financial results, having updated records in revenue and profit amid rising prices for residential real estate in Russia. The company was very lucky with the state preferential mortgage, but citizens may run out of money, given the rise in prices.

The drop in the total area of ​​new contracts to a four-year low and a reduced operating forecast are already alarming bells. According to the updated data, the number of new contracts may fall by 26%, and in monetary terms - by 4%, compared to 2020. But it is the new contracts with customers that are the main source of the company's future income..

Moreover, LSR plans to abandon interim dividend payments, choosing to invest in development and pay off debts. Among the new directions, in which the holding plans to invest, - development of profitable real estate in Sochi, where there is high competition among hotel complexes and landlords.

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