Press releases – 2010

Chagala doubles EBITDA and trebles operating profits on 2009 revenue growth of 15%; $32.4 million in total revenues for 2009

20 Apr 2010

Chagala Group Limited's 2009 Financial Performance Highlights:

• Revenue increased 15% to $32.4m (2008: $28.1m)
• EBITDA nearly doubled to $ 14.2m (2008: $7.3m)
• Operating Profit more than trebled to $10.5m (2008: $ 3.4m)
• Net Profit soared twelve-fold to $7.2m (2008: $0.6m)
• Net Assets maintained at $160.5m (2008: $161.4m) despite 25% KZT devaluation
• Net Cash from Operating Activities grew to $8.1m (2008: $2.6m)

Almaty – Chagala Group Limited (symbol: CHGG) released today its 2009 annual results showing that the company increased revenue 15% due to operational improvements on existing operations and from the launch of new facilities in key markets. The Group also controlled costs and development expenses in spite of delays to select projects, and maintained continuity in its project development strategy. As a result, EBITDA was $14.2 million, double that of 2008, Operating Profit was $10.5 million, three times 2008 Operating Profit. Net profit increase 12-fold to $7.2 million in 2009.

Chagala Chairman Mark Lockwood noted: "Our strong performance in a year of extraordinary financial turmoil should come as no surprise. While Chagala functions as a real estate developer and operator, when it comes to assessing our prospects for success, we are more accurately characterized as an oil & gas service provider. With our focus on properties that secure long-term leases from the oil & gas sector, 2009 demonstrated the strength of that relationship as we fared well in spite of the prevailing financial crisis."

The Group's operations generated significant free cash flow, alleviating the need for additional external financing which has been scarce and expensive in Kazakhstan throughout the financial crisis. Financing availability for near-term projects through revenue generation and existing financing facilities remains strong.

On the operational front, the Group completed the construction and launched three new facilities in Aksai, Atyrau and Bautino, and the apartment hotels in Aktau and Uralsk were nearing completion at the close of the period, for launch in early 2010. The Group maintained near capacity occupancy and realized rental rate increases for existing office and apartment facilities in Atyrau and accommodations in Bautino. New facilities were launched including an accommodations facility in Aksai, the third phase expansion of the hotel in Bautino and a sports complex in Atyrau.

Chagala continued development of several projects scheduled for completion in 2010 and 2011. Additional hotel and serviced apartments in Uralsk and Aktau neared completion at the close of 2009. Work also progressed on the second phase of the camp style facility in Aksai, a 160-bed new camp facility in Bautino and 110 new apartments in Atyrau.

In February 2009, there was an approximately 25% devaluation of the Kazakh Tenge (KZT) against major currencies. Because the Group's revenues are mainly US$ denominated, while a major part of the costs are KZT denominated, the impact on operating profit was positive. However, the devaluation had a negative impact on the value of the Group's assets. Assets are booked and valued in KZT, the functional currency of the Group, and then translated into US$ at the end of each financial reporting period. The value of the Group's assets in KZT increased significantly, but devaluation reversed the gain in US$ terms. However, with the addition of new properties to the Group's real estate portfolio, the total asset value in US$ terms was nearly equal to the prior year.

Tim Abson, CEO of Chagala, commented that "We believe that the coming period of development will present more clarity regarding future demand for our services. This will lower the risk of our investments, but will likely bring additional competition as well. We believe that our current pipeline of projects and our early positioning, as well as our reputation for quality and efficiency, will give us a competitive advantage".

Management will discuss the financial results in a teleconference call on 20 April, 2010 at 3pm in Almaty (10am in London). Interested parties are invited to join the conference as indicated below, and to download and review the Group's complete Annual Report and Management Discussion & Analysis (MD&A) at www.chagalagroup.com. The financial statements alone are appended to this press release.

Using the below dial-in numbers, conference participants must specify conference ID# 69140358.
UK toll-free number* – 08 08 234 8428
UK toll number – +44 203 107 0237
*FOR CALLERS WITHIN UK ONLY; callers outside the UK must use a toll number

Chagala is a service company focused on providing long and short term accommodation solutions to domestic and international oil and gas companies developing Kazakhstan's largest hydrocarbon discoveries. Chagala capitalizes on the oil and gas investment being made in Kazakhstan by owning and operating hotels, guest houses, serviced apartments, remote site facilities, restaurants and offices serving the industry.

The full press release in PDF format