hms group financial results...webcast presentation capital markets 19 june 2019 1 3 months 2019 ifrs...

Webcast presentation

Capital Markets

19 June 2019 1

3 months 2019 IFRS results

Financial results

43.4

52.7

20.8

8.9 8.7 8.96.9 6.0

2.30.5 1.1 0.5

15.8%

11.5% 11.1%

5.7%

12.4%

5.7%

3m 2018

LTM

3m 2019

LTM

4Q 2018 1Q 2019 3m 2018 3m 2019

Revenue, Rub bn EBITDA, Rub bn

EBITDA margin, %

Source: Company data, IFRS accounts 3

Revenue & EBITDA performance

Financial results

Financial highlights

in millions of Rub 3m 2019 3m 2018 chg, yoy

Revenue 8,854 8,726 1%

EBITDA 501 1,080 -54%

Gross profit 1,589 2,178 -27%

Operating loss/profit -238 430 Na

Loss/profit for the period -495 19 Na

EBITDA margin 5.7% 12.4% -671 bps

Gross margin 17.9% 25.0% -701 bps

Operating margin -2.7% 4.9% Na

Net loss/income margin -5.6% 0.2% Na

Total debt 18,845 17,140 10%

Net debt 14,650 14,842 -1%

EBITDA LTM 6,042 6,871 -12%

Net debt to EBITDA LTM 2.42 2.16


Revenue up 8% yoy to Rub 3.2 bn

EBITDA and EBITDA margin down due to a larger share of recurring business, which has lower margins compared with large integrated contracts

Revenue and EBITDA down due to the lack of large contracts under execution combined with an unfavorable mix of recurring contracts with low margins

Industrial pumps

Compressors

Oil and gas equipment & projects

Revenue up 56% yoy to Rub 2.9 bn and EBITDA was Rub 377 mn due to large contracts

EBITDA margin 12.9%, higher than for 3 months 2018, due to a larger share of large contracts in the reporting period

Revenue down 12% yoy and EBITDA turned positive

Construction (TGS)

Financial results

Segments overview

5,111

2,406828

(130)

16.2%

-5.4%3m 2018 3m 2019

Revenue OGE, Rub bn EBITDA OGE, Rub bn

EBITDA margin, %

Revenue -53% yoy

EBITDA na

1,880

2,932

99 377

5.3%

12.9%

3m 2018 3m 2019

Revenue compressors, Rub bn EBITDA compressors, Rub bn

EBITDA margin, %

Revenue +56% yoy

EBITDA +279% yoy382 336

(122) 11

-31.8%

3.3%

3m 2018 3m 2019

Revenue TGS, Rub bn EBITDA TGS, Rub bn

EBITDA margin, %

Revenue -12% yoy

EBITDA na

2,997 3,241

353 275

11.8%

8.5%

3m 2018 3m 2019

Revenue Pumps, Rub bn EBITDA Pumps, Rub bn

EBITDA margin, %

Revenue +8% yoy

EBITDA -22% yoy

in millions of Rub 1Q 2019 1Q 2018 chg, yoy

Distribution and transportation expenses 436 460 -5%

% of revenue 4.9% 5.3%

Labour costs & Social taxes 186 175 6%


Transportation expenses 105 114 -8%


Entertaining costs and business trip expenses 16 7 150%


Other expenses 129 165 -21%



Cost of sales 7,265 6,548 11%

% of revenue 82.1% 75.0%

Materials and components 3,931 3,337 18%

% of revenue 44.4% 38.2%

Labour costs & Social taxes 1,534 1,651 -7%

% of revenue 17.3% 18.9%

Depreciation & amortization 464 365 27%


Subcontractors (Construction, design and other services) 363 312 16%


Other expenses 973 882 10%

% of revenue 11.0% 10.1%


Cost of sales 7,265 6,548 11%

% of revenue 82.1% 75.0%

Materials and components 4,371 3,672 19%

% of revenue 49.4% 42.1%

Labour costs & Social taxes 1,687 1,735 -3%

% of revenue 19.1% 19.9%

Depreciation & amortization 464 365 27%


Subcontractors (Construction, design and other services) 378 317 19%





Cost of sales

General and administrative

Cost of sales up 11% yoy to Rub 7.3 bn from Rub 6.5 bn

General & administrative costs grew by 6% yoy to Rub 1.3 bn

Financial results

Expenses

Materials and components up 19% yoy

Depreciation & amortization up 27% yoy

Labour costs & social taxes down 3% yoy

Due to increase in labor costs & social expenses by 8% yoy

Distribution and transportation

Distribution & transportation costs down 5% yoy

Due to decrease in transportation expenses of 8% yoy


General and administrative expenses 1,302 1,227 6%

% of revenue 14.7% 14.1%

Labour costs & Social taxes 861 799 8%


Bank services 83 59 42%


Depreciation and amortisation 75 56 34%




* Herein, Materials & components, Labour costs and Social taxes, Construction, design and

engineering and other services of subcontractors were additionally derived from Change in

work in progress and finished goods, thereby do not coincide with the note in the financial

statement

8,8139,962

7,820

11,535

9,130 8,843

23.6% 24.0%

17.6%

26.6%

17.4% 16.8%

2015 FY 2016 FY 2017 FY 3m 2018 2018 FY 3m 2019

Working capital, Rub mn WC / Revenue LTM, %

Source: Company data, IFRS accounts

334506428

548

0.8x0.9x

3m 2018 3m 2019

Capex, Rub mn D&A, Rub mn Capex to D&A ratio

6

Working capital

Cash flows performance

Capex and D&A ratio

In February 2019, HMS Neftemash JSC, acquired a

group of companies engaged in manufacturing of oil

and gas equipment, located in Tumen, for a total

consideration of Rub 700 mn, paid by cash. Outflow of

cash and cash equivalents on acquisition was Rub 669

mn

Comments

Financial results

Cash flows

WC: Rub 8.8 bn

-23% yoyCapex: Rub 506 mn, +52%

D&A: Rub 548 mn, +28%

in millions of Rub 3m 2019 3m 2018 Chg, yoy

Operating cash flow (68) (2,648) na

Investing cash flow (1,160) (258) na

Free cash flow (FCF) (1,228) (2,906) na

Financing cash flow (853) 574 na

Cash and cash equivalents 4,195 2,298 83%

9.81%

8.95% 8.80% 8.75% 8.72% 8.76% 8.77%

9.93%

9.07% 8.94% 8.90% 8.91% 8.91% 8.92%

01.01.18 01.04.18 01.07.18 01.10.18 01.01.19 01.04.19

HMS Debt average interest rate

HMS Rub-denominated debt average interest rate

11.1 12.4 12.4 13.3 11.4 13.1 14.8 14.6

2.122.36

1.66

2.10

1.67

1.97 2.162.42

2013 2014 2015 2016 2017 2018 3m 2018 3m 2019

Net debt, Rub bn Net debt-to-EBITDA LTM ratio, x

Source: Company data, IFRS accounts, management accounts

* FID – Fund of Industrial development of the Russian Federation, the

** Herein, total debt includes only bank creadits and loans, and doesn’t include finance lease

7

Leverage

Debt portfolio structure by banks, 01.06.2019

Debt repayment schedule, 01.06.2019

3m 2019 Total debt increased to Rub 18.8 bn (+10% yoy)

3m 2019 Net debt down to Rub 14.6 bn (-1% yoy)

3m 2019 Net Debt-to-EBITDA LTM ratio up to 2.42x

Long-term debt: 94% of total debt portfolio

Borrowings in Rub: 97% of total debt portfolio

Comments

Financial results

Debt

Net debt: Rub 14.6 bn

-1% yoy

439

4,644

11,215

3,221

2019 2020 2021 2022 2023

Debt to be repaid as of 01.06.2019, Rub mn

Total debt**: Rub 19.5 bn

29.4%

26.1%15.4%

15.0%

9.6%

2.0% 2.5%

VTB Bank | 29.4%

Sberbank | 26.1%

RUB Bonds | 15.4%

Raiffeisenbank | 15%

UniCredit Bank | 9.6%

FID* | 2%

Others | 2.5%

Business & Outlook

9

Backlog Order intake

Business & Outlook

Backlog and Order intake for 3 months 2019

15,699 19,303

13,655 7,265

7,777 16,880

3,736

1,899 40,865

45,347

3m 2018 3m 2019

Pumps OGEP Compressors Construction

4,229 5,561

3,436 3,008

2,995 2,900

(253)

18 10,408

11,487

3m 2018 3m 2019

Pumps OGEP Compressors Construction

Pumps up 31% yoy to Rub 5.6 bn

Oil & gas equipment down 12% yoy to Rub 3.0 bn

Compressors down 3% yoy to Rub 2.9 bn

TGS added Rub 18 mn to its orders portfolio

Pumps up 23% yoy to Rub 19.3 bn

Oil & gas equipment down 47% yoy to Rub 7.3 bn

Compressors up 117% yoy to Rub 16.9 bn

TGS down 49% yoy to Rub 1.9 bn

Order intake grew by 10% yoy to Rub 11.5 bnBacklog grew by 11% yoy to Rub 45.3 bn

Source: Company data, management accounts

in billions of Rub 3m 2018 Chg 3m 2019

Total Backlog, where 40.9 11% 45.3

Large integrated projects 15.9 -6% 15.0

Recurring business 24.9 22% 30.3

in billions of Rub 3m 2018 Chg 3m 2019

Total Order intake, where 10.4 10% 11.5

Large integrated projects 2.8 -100% 0.0

Recurring business 7.6 51% 11.5

10

Top-7 clients for 3m 2018 Top-7 clients for 3m 2019 Revenue by products

Business & Outlook

HMS revenue structure

NOVATEK became one of the main

clients alongside Gazprom, Rosneft and

Gazprom neft

In terms of products type, revenue

increased due to recurring business

A stable number of clients generates

revenue from both large contracts and

recurring business

A stable number of large clients

generates revenue from both large

contracts and recurring business

Around 6 thousand of other clients

create a “safety cushion” with recurring

business

35.1%

14.8%

5.7%4.4%

3.2%

2.8%

0.9%

33.1%

Gazprom | 35.1%

Rosneft | 14.8%

Gazprom neft | 5.7%

Slavneft | 4.4%

Transneft | 3.2%

Lukoil | 2.8%

Tatneft | 0.9%

Others | 33.1%

23.2%

7.7%

6.2%

5.9%5.3%

3.9%3.7%

44.1%

Gazprom | 23.2%

Rosneft | 7.7%

Novatek | 6.2%

Gazprom neft | 5.9%

KMPO | 5.3%

Lukoil | 3.9%

Honeywell | 3.7%

Others | 44.1%

2.7

5.0

5.1

2.6

0.3 0.5 0.7 0.7

8.7 8.9

3m 2018 3m 2019

Project & construction

Export sales

Large integrated contracts (machine-building)

Recurring business (machine-building, domestic sales)

Source: Company data, management accounts

Capital markets

7 Chayanova str., Moscow 125047, Russia

+7 (495) 730-66-01

[email protected]

grouphms.com/shareholders_and_investors/

11

HMS Hydraulic Machines & Systems Group Plc is listed on the London Stock Exchange (Main market, IOB)

Number of shares outstanding: 117,163,427

ISIN RegS: US40425X4079

144A: US40425X3089

Ratio 1 GDR : 5 Shares

Ticker HMSG

Bloomberg HMSG LI

Reuters HMSGq.L

grouphms.com/shareholders_and_investors/

12

Disclaimer

The information contained herein has been prepared using information available to HMS Group (“HMS” or “Group”

or “Company”) at the time of preparation of the presentation. External or other factors may have impacted on the

business of HMS Group and the content of this presentation, since its preparation. In addition all relevant information

about HMS Group may not be included in this presentation. No representation or warranty, expressed or implied, is

made as to the accuracy, completeness or reliability of the information.

Any forward looking information herein has been prepared on the basis of a number of assumptions which may

prove to be incorrect. Forward looking statements, by the nature, involve risk and uncertainty and HMS Group

cautions that actual results may differ materially from those expressed or implied in such statements. Reference

should be made to the most recent Annual Report for a description of the major risk factors. This presentation should

not be relied upon as a recommendation or forecast by HMS Group, which does not undertake an obligation to

release any revision to these statements.

This presentation does not constitute or form part of any advertisement of securities, any offer or invitation to sell or

issue or any solicitation of any offer to purchase or subscribe for, any shares in HMS Group, nor shall it or any part of it

nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or

investment decision.

13

Notes to the presentation and formulas used for

some figures’ calculations

All figures in millions of Russian Rubles, unless otherwise stated

Management of the Group assesses the performance of operating segments based on a measure of adjusted EBITDA, which

is derived from the consolidated financial statements prepared in accordance with IFRS

EBITDA is defined as operating profit/loss from continuing operations adjusted for other operating income/expenses,

depreciation and amortisation, impairment of assets, excess of fair value of net assets acquired over the cost of acquisition,

defined benefits scheme expense and provisions (including provision for obsolete inventory, provision for impairment of

accounts receivable, unused vacation allowance, warranty provision, provision for legal claims, tax provision and other

provisions). This measurement basis, therefore, excludes the effects of a number of non-recurring income and expenses on

the results of the operating segments

EBIT is calculated as Gross profit minus Distribution & transportation expenses minus General & administrative expenses minus

Other operating expenses

Total debt is calculated as Long-term borrowings plus Short-term borrowings

Net debt is calculated as Total debt minus Cash & cash equivalents at the end of the period

ROCE is calculated as EBIT LTM divided by Average Capital Employed (Total debt + Total equity)

ROE is calculated as Total equity period average divided by Profit for the period

Operating profit adj. & Profit for the year adj. are deferred as adjusted by impairment of PPE, investment property and

goodwill

Capex = Organic capex = Purchase of PPE + Purchase of intangible assets

Backlog is calculated as the preceding backlog plus new or additional customer orders booked during the reporting period,

less amounts of contract value booked as revenue under ‘‘Russian GAAP’’ on an unconsolidated basis under the relevant

contracts, plus or minus adjustments made in the judgment of the Group’s management. The Group may also make certain

adjustments to bookings to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price

terms under contracts or orders, or other factors affecting the amount of potential revenue which the Group believes may be

recognized under such contracts. The Group’s backlog estimates are not an indication of potential revenues. Actual

revenues and other measures of financial performance under IFRS may differ materially from any estimate of backlog, and

changes in backlog between periods may have limited or no correlation to changes in revenue or any other measure of

financial performance under IFRS

hms group financial results...webcast presentation capital markets 19 june 2019 1 3 months 2019 ifrs...

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