(LONDON, 02 March 2010) - PIK Group (LSE: PIK), Following the publication of figures for 2009 housing completions on February 8, 2010, PIK Group is pleased to provide an update on its business and strategy for the current year.

Throughout 2009 management was engaged in constructive negotiations with its lenders with the aim of extending loan maturities and securing additional working capital. Earlier this year, we reported significant progress in both these objectives and the Group now has a committed facility of RUB12.75bn (equivalent to approx US$425mm) from Sberbank to use as working capital to move the business forward.

Management is now focusing its attention on project execution in the Moscow Metropolitan area and building a long-term business for the future. Looking ahead, we will base our business around the following objectives:

Increase housing completions by focusing on our core market: Moscow Metropolitan area

The financial crisis has reduced competition in our core marketplace of the Moscow Metropolitan area. We estimate that residential housing completions will continue to shrink in 2010 as many developers now lack the financial resources to either deliver existing projects or launch new ones. This is likely to cause a moderate drop in total housing completions by approximately 15%-20% nationwide (2009: 60 million sq, meters).

However PIK Group is well positioned to grow its own development pipeline and overall market share in 2010. Management believes that in the current year the Group will deliver approximately 1 million sq meters of total housing completions (2009: 884,000 sq meters), of which approximately 459,000 square meters (equivalent to approximately 31 residential buildings) will come from sales of own development projects. The remainder will come from third party shares and construction services activity.

Increase sales and marketing efficiency

The Moscow Metropolitan market has the highest margin and the highest share of cash buyers in the market. While mortgage availability remains subdued, PIK is targeting cash buyers with a more flexible and aggressive sales and marketing policy to recover residential sales growth. During the course of this year and into the beginning of next year, we expect mortgage penetration to increase. This expectation is based upon an environment of decreasing interest rates in Russia, where the Central Bank recently again lowered the discount rate by another 25bps, down to 8,5%. As historically approximately 25% of PIK’s retail sales were financed with customer mortgages, a continuation of this trend would have a significant impact upon our sales volumes.

In total, we expect approximately 90% of total housing completions will come from the Moscow Metropolitan area in 2010. We expect PIK own sales to compromise of approximately 47 buildings (2009: 39 buildings), of which 31 will represent new launches and the rest will come from existing buildings under development.

Secure stable revenues from federal and local authority programmes

We will continue with our strategy of supplementing revenues from sales of apartments with income from federal and local authority programmes. Of the total of 1 million square meters of completions referred to above, around 461,000 square meters will be developed through our construction services business activity. In line with our previously announced strategy, a proportion of this activity will come through Ministry of Defence contracts, with 265,000 square meters attributable to the Ministry of Defence housing program in city of Podolsk.

Public sector work of this nature will play an important role for the Group in the coming year, securing stable revenues and enabling us to utilize efficiently capacity at our production facilities constructing prefab buildings.

Maximise value from well invested manufacturing facilities

PIK has manufacturing facilities to carry the business forward following several years of investment in new technology solutions for the mass market housing segment.

Prefabricated panel facilities in Moscow were modernized and in 2008 started using a new construction design, the KOPE-Tower building. This design has strong potential as it enables the construction of buildings with a relatively small footprint, thereby increasing the sellable sq meters per buildable space. The first four KOPE-Tower buildings have been already completed in Moscow and Moscow region (two in 2008, two in 2009), while in 2010 PIK plans to build a further three KOPE-Towers in Moscow  metropolitan area.  At the same time PIK is considering modernizing the standard design P3M building series.

In addition, in 2008 PIK successfully launched its first modernized precast production facility in Kaluga region (Obninsk city). This facility provides more customer-oriented modernized mass market housing with better layouts. In 2009, PIK successfully completed the first building with such technology and in the year ahead we plan to complete an additional two buildings of that type in Obninsk.

Make efficient use of capital resources

Throughout 2009, PIK reduced its overheads and administrative expenses to align the business with the new economic environment. In total the size of its labour force was reduced from 14,000 to 11,000 employees. Approximately, half of that reduction change came through the disposal of the aggregated manufacturing business, PIK-Nerud, with the remainder achieved through labour force optimization. On a monthly basis that gave approximately 50% cost savings on overheads (net of incurred one-off compensation payments).

Outlook

We believe that the mass market housing segment has begun its recovery. Consumer confidence has risen in line with the general improvement in economic sentiment and visible signs of improvement in the residential housing market. Having finalized debt restructuring and reactivated construction sites last year, PIK is now well positioned to take advantage of this trend.

We are comfortable that the development pipeline we have outlined can be delivered should the Russian economy, real estate and credit markets continue their steady recovery in 2010. We believe the execution of such a programme would mean a significant increase in market share for PIK Group.

Commenting Pavel A. Poselonov, CEO of PIK Group said:

“2009 was the most difficult year in PIK’s history. However the Group has maintained its execution capacity at a level where we can benefit from improving market conditions, meet the capital requirements of the business and generate additional value for shareholders’’.