REG-HMS Group HMS Group: 6M 2018 IFRS Results
01/10/2018 16:05
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HMS Group (HMSG)
HMS Group: 6M 2018 IFRS Results
01-Oct-2018 / 18:00 MSK
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
EQS Group.
The issuer is solely responsible for the content of this announcement.
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HMS Group announces management statement and financial highlights
for 6 months 2018
HMS HYDRAULIC MACHINES & SYSTEMS GROUP PLC (the "HMS Group", "Group")
(LSE: HMSG), the leading pump, oil & gas equipment and compressor
manufacturer and provider of flow control solutions and related services
in Russia and the CIS, today announces its financial results for six
months ended June 30, 2018.
Financial highlights 6 months 2018:
▪ Revenue: Rub 20.3 bn (-5% yoy)
▪ EBITDA 1 1 : Rub 3.3 bn (+6% yoy), EBITDA margin 16.3%
▪ Operating profit: Rub 2.1 bn (+4% yoy), operating margin up
to 10.1%
▪ Profit for the period: Rub 961 mn (+16% yoy), net income
margin 4.7%
▪ Total debt: Rub 18.5 bn (+15% yoy)
▪ Net debt: Rub 13.5 bn (0% yoy)
▪ Net debt-to-EBITDA LTM ratio: 1.93x
Operational highlights 6 months 2018:
▪ Backlog: Rub 37.3 bn (-5% yoy)
▪ Order intake: Rub 18.4 bn (-43% yoy)
OPERATING REVIEW
BACKLOG
Backlog 2 2 didn't change much in comparison to the last year (-5% yoy)
but decreased vs. the beginning of 2018. The underperformance of the oil
& gas equipment and projects business segment was due to fewer large
contracts signed in the reporting period. All other business segments
grew based both on large integrated contracts and recurring business.
Backlog, Rub mn 2018 6m 2017 6m Change yoy
Industrial pumps 15,744 11,128 41%
Oil & Gas equipment and projects 9,682 21,610 -55%
Compressors 8,614 5,652 52%
Construction 3,263 849 284%
Total 37,303 39,239 -5%
ORDER INTAKE
Order intake 3 3 decreased Rub 18.4 billion (-43% yoy). All business
segments of HMS declined.
The pumps segment decreased to Rub 8.4 billion due to recurring business.
The oil and gas equipment and projects segment was down to Rub 5.5 billion
because of absence of large contracts signed in the reporting period. The
compressors declined to Rub 4.7 billion because of a decline in large
contracts though recurring business grew.
In terms of contracts' mix, the drop was mainly attributable to fewer
large contracts signed in the reporting period.
Order intake, Rub mn 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Industrial pumps 8,444 8,686 -3% 4,214 4,229 0%
Oil & gas equipment 5,516 17,989 -69% 2,079 3,436 -39%
Compressors 4,666 5,059 -8% 1,672 2,995 -44%
Construction (226) 404 -156% 27 (253) -111%
Total 18,401 32,138 -43% 7,992 10,408 -23%
GROUP PERFORMANCE
Revenue decreased by 5 percent yoy to Rub 20.3 billion.
EBITDA was up by 6 percent yoy to Rub 3.3 billion. The oil & gas
equipment and projects segment was the main contributor to the company's
EBITDA growth.
Rub bn 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Revenue 20,343 21,349 -5% 11,618 8,726 33%
EBITDA 3,319 3,138 6% 2,240 1,080 107%
EBITDA margin 16.3% 14.7% 19.3% 12.4%
In terms of contracts' type, revenue from the recurring business declined
by 20 percent yoy. Large contracts advanced 39 percent yoy. EBITDA from
the recurring business decreased by 49 percent yoy, but EBITDA, generated
by large contracts, compensated for that decline.
As a result, EBITDA margin grew to 16.3% from 14.7% in the comparative
period.
Change Share of Share of
Cost of sales, Rub mn 2018 6m 2017 6m yoy 2018 6m 2017 6m
revenue revenue
Cost of sales 14,664 15,961 -8% 72.1% 74.8%
Materials and components 9,049 11,372 -20% 44.5% 53.3%
Labour costs 2,852 2,491 14% 14.0% 11.7%
Construction and design and
engineering services of 751 456 65% 3.7% 2.1%
subcontractors
Depreciation and amortization 747 641 17% 3.7% 3.0%
Others 1,266 1,001 27% 6.2% 4.7%
Cost of sales was 8 percent yoy down to Rub 14.7 billion because of less
materials and components required (-20% yoy) due to the change in the
product mix. As a percentage of revenue, the cost of sales also
decreased, from 75% to 72%.
As a result, gross profit grew to Rub 5.7 billion (+5% yoy) and gross
margin reached 27.9% vs. 25.2% for 6 month 2017.
Share of Share of
Rub mn 2018 6m 2017 6m Change yoy 2018 6m 2017 6m
revenue revenue
Distribution and 933 899 4% 4.6% 4.2%
transportation
General and administrative 2,585 2,359 10% 12.7% 11.1%
SG&A expenses 3,519 3,258 8% 17.3% 15.3%
Other operating expenses 104 152 -32% 0.5% 0.7%
Operating expenses ex. Cost 3,623 3,410 6% 17.8% 16.0%
of sales
Finance costs 772 930 -17% 3.8% 4.4%
SG&A expenses 4 4 increased by 8 percent yoy, and as a share of revenue
grew to 17.3% from 15.3%.
Operating expenses excl. cost of sales grew by 6 percent yoy with a share
of revenue of 17.8% due to growth of labor costs.
Distribution and transportation expenses grew by 4 percent yoy to almost
Rub 1.0 billion, mainly due to growth of labour costs and social taxes.
As a share of revenue, distribution and transportation expenses
demonstrated minor change, to 4.6% from 4.2%.
General and administrative expenses grew by 10 percent yoy to Rub 2.6
billion due to combined growth of labour costs and social taxes. This
growth was mainly attributable to the long-term incentive program and
increased salaries. As a share of revenue, general and administrative
expenses grew to 12.7% due to quarterly volatility of revenue.
Operating profit increased by 4 percent yoy to Rub 2.1 billion from Rub
2.0 billion, and operating margin was up to 10.1%.
Finance costs, Rub mn 2018 6m 2017 6m Change yoy
Finance costs 772 930 -17%
Interest expenses 767 930 -17%
Fees for early repayment of loans 5 0 na
Foreign exchange loss, net (2) (1) 246%
Finance lease expenses 1 1 -10%
Interest rate, average 8.8% 10.8%
Interest rate Rub, average 8.9% 10.9%
Finance costs decreased by 17 percent yoy, fully due to a decrease in
interest expenses (-17% yoy) due to lower interest rates as a result of
debt portfolio refinancing. Average rates decreased from 10.8% p.a. to
8.8% p.a.
Profit for the period was up 16 percent yoy to Rub 1.0 billion and profit
margin for the period increased to 4.7%.
BUSINESS SEGMENTS PERFORMANCE
Industrial pumps 5 i
The industrial pumps business segment's revenue decreased by 8 percent yoy
to Rub 7.3 billion from Rub 7.9 billion. EBITDA was down by 32 percent
yoy to Rub 876 million. EBITDA margin declined to 11.9%.
Several factors influenced the segment's underperformance, including less
profitable contracts executed in the reporting period and some forced
increase in wages.
Industrial pumps, 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Rub mn
Revenue 7,334 7,928 -8% 4,337 2,997 45%
EBITDA 876 1,282 -32% 523 353 48%
EBITDA margin 11.9% 16.2% 12.1% 11.8%
Oil & Gas equipment and projects (OGEP) 6 ii
The OGEP business segment's revenue grew 7 percent yoy to Rub 11.2
billion, and EBITDA hiked to Rub 2.1 billion due to the low base effect.
EBITDA margin increased to 18.6% from 6.2% in the comparative period.
A beneficial mix of contracts combined with a recovered performance of
Giprotyumenneftegas (GTNG) led to this higher-than-average profitability
of the business segment.
OGEP, Rub mn 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Revenue 11,185 10,423 7% 6,074 5,111 19%
EBITDA 2,084 650 221% 1,257 828 52%
EBITDA margin 18.6% 6.2% 20.7% 16.2%
Compressors 7 iii
Revenue declined by 34 percent yoy to Rub 3.4 billion. EBITDA was also
down to Rub 336 million. EBITDA margin decreased to 9.9% that is much
less than 18.1% in the compared period.
The decline in the segment's profitability was due to the high-base effect
last year (execution of a number of high-margin large contracts and
one-off economies emerged during their execution) combined with unsteady
recognition of large contracts' revenue this year.
Compressors, Rub mn 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Revenue 3,403 5,188 -34% 1,523 1,880 -19%
EBITDA 336 938 -64% 237 99 138%
EBITDA margin 9.9% 18.1% 15.6% 5.3%
Construction 8 iv
Though construction more than doubled its revenue to Rub 806 million, its
profitability is in negative territory.
Construction, Rub mn 2018 6m 2017 6m Change yoy 2018 2Q 2018 1Q Change qoq
Revenue 806 283 185% 423 382 11%
EBITDA (161) (90) 79% (40) -122 -67%
EBITDA margin -20.0% -32.0% -9.4% -31.8%
FINANCIAL REVIEW
CASH FLOW PERFORMANCE
Working capital stood stable at Rub 10.0 billion, keeping its share of
revenue in the normal range of 22-25%.
It grew compared to an unusually low level of working capital at the
beginning of 2018 (Rub 8.2 bn) and declined in comparison to April 1, 2018
(Rub 11.5 bn). The reason for such fluctuations was inflows and outflows
related to large contracts.
Working capital & Capex, Rub mn 2018 6m 2017 6m Change yoy
Working capital 9,990 10,008 0%
Working capital / Revenue LTM 23% 24%
Capital expenditures 792 764 4%
Capital expenditures increased by 4 percent yoy to Rub 792 million.
HMS Group generated a negative operating cash flow of Rub 749 million
compared to a positive cash flow of Rub 1.7 billion last year, due to the
growth of working capital for 6 months 2018 vs. almost stable level of
working capital for 6 months 2017. That led to a negative free cash
flow 9 5 of Rub 1.5 billion.
Cash flow performance, Rub mn 2018 6m 2017 6m Change yoy
Net cash (used in)/from operating activities (749) 1,675 -145%
Net cash used in investing activities (735) (739) -1%
Free cash flow (FCF) (1,483) 937 -258%
Net cash from/(used in) financing activities 1,750 (1,506) -216%
Cash & cash equivalents, at the end of the 4,913 2,434 102%
period
DEBT POSITION
Total debt increased by 15 percent yoy to Rub 18.5 billion from Rub 16.0
billion.
Net debt was almost unchanged at Rub 13.5 billion. The Net debt-to-EBITDA
LTM ratio decreased to 1.93x due to the large EBITDA.
Level of net debt and its dynamics are correlated to working capital and
its dynamics.
Leverage, Rub mn 2018 6m 2017 6m Change yoy
Total debt 18,462 16,018 15%
Long-term debt 17,245 14,905 16%
Short-term debt 1,217 1,113 9%
Net debt 13,549 13,584 0%
Net debt / EBITDA LTM 1.93x 2.07x
SIGNIFICANT EVENTS AFTER THE REPORTING DATE & FINANCIAL MANAGEMENT
Recently, HMS Group announced the signing of a Rub 1.8 billion contract to
deliver a compressor-based equipment for a gas booster station at an oil
and gas condensate field in Russia. The project will be completed in
2021.
FINANCIAL MANAGEMENT
As of September 1, 2018, average interest rate decreased to 8.7% compared
to 9.8% at the beginning of 2018.
DIVIDENDS AND HMS GDRS
During the period from June 7, 2018 to and including October 1, 2018, HMS
Group hasn't purchased any of its global depositary receipts ("GDRs"). As
of today, HMS Group has purchased 1,076,887 GDRs (4.60 percent of its
issued share capital).
2018 GUIDANCE
Revenue and EBITDA:
HMS Group expects 2018FY revenue to grow year-on-year to Rub 47-53
billion. At the same time, the company forecasts lower EBITDA (Rub
6.2-6.4 bn) and profitability.
The pumps business segment will demonstrate better results in the 2nd half
of 2018. The oil & gas equipment and projects business segment will be
the main driver of the Group's FY2018 performance though with lower
profitability in the period remaining. The compressor business segment is
also expected to show significantly better results in the 2nd half of
2018.
Finance costs:
The company doesn't expect a further decrease in interest expenses due to
the fact that the process of interest rates' decrease has stopped in
Russia.
***
WEBCAST TO DISCUSS 6 MONTHS 2018 IFRS FINANCIAL RESULTS
Date: Tuesday, October 2, 2018
Time: 5.00 PM (MOSCOW) / 3.00 PM (London) / 10.00 AM (NY)
Speaker:
Inna Kelekhsaeva - Deputy Head of Capital markets
Q&A session:
Kirill Molchanov - First Deputy General Director and Co-Founder
Alexander Rybin - Head of Capital markets
To participate in the conference call, please dial in:
Russia Local: +7 495 646 9190
UK Local: +44 (0)330 336 9411
UK Toll Free: 0800 279 7204
US Local: +1 646 828 8193
US Toll Free: 800 394 8218
Conference ID: 2357237
Title: HMS Group 6 months 2018 IFRS results
Webcast meeting:
To access the live event, click on the link:
https://webcasts.eqs.com/hmsgroup20181002
Please, dial in 5-10 minutes prior to the scheduled start time.
Pre-registration is available.
We will share materials on 10 HMS' investor website ahead of the webcast.
Contacts:
Investor Relations, 11 ir@hms.ru
***
HMS Group is the leading pump and compressor manufacturer, as well as
provider of flow control solutions and related services to the oil and
gas, nuclear and thermal power generation and water utilities sectors in
Russia and the CIS. HMS Group's products are mission-critical elements of
projects across a diverse range of industries. It has participated in a
number of large-scale infrastructure projects in Russia, including
providing pumps and modular equipment to the Vankor oil field and pumping
stations on recent trunk pipelines projects linking Russia's core oil
producing areas to export ports on the Pacific Ocean and Baltic Sea. HMS
Group's global depositary receipts ("GDRs") are listed under the symbol
"HMSG" on the London Stock Exchange.
Press Release Information Accuracy Disclaimer
Information published in press releases was accurate at the time of
publication but may be superseded by subsequent releases or other
information.
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12 1 EBITDA is defined as operating profit/loss from continuing
operations adjusted for other operating income/expenses, depreciation and
amortisation, amortisation of government grants, impairment of assets,
excess of fair value of net assets acquired over the cost of the
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.
13 2 According to management accounts
14 3 According to management accounts
15 4 SG&A expenses = Selling, General and Administrative Expenses =
Distribution and transportation + General and administrative
16 5 Free cash flow (FCF) = Net cash from operating activities
(operating cash flow) + Net cash used in investing activities (investing
cash flow), represents the cash that a company is able to generate after
laying out the money required to maintain or expand its assets base.
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17 i The industrial pumps business segment designs, engineers,
manufactures and supplies a diverse range of pumps and pump-based
integrated solutions to customers in the oil and gas, power generation and
water utilities sectors in Russia, the CIS and internationally. The
business segment's principal products include customized pumps and
integrated solutions as well as pumps built to standard specifications; it
also provides aftermarket maintenance and repair services and other
support for its products.
18 ii The oil and gas equipment and projects business segment
manufactures, installs and commissions modular pumping stations, automated
metering equipment, oil, gas and water processing and preparation units
and other equipment and systems for use primarily in oil extraction and
transportation. The segment's core products are equipment packages and
systems installed inside a self-contained, free-standing structure which
can be transported on trailers and delivered to and installed on the
customer's site as a modular but fully integrated part of the customer's
technological process.
19 iii The compressors business segment designs, engineers,
manufactures and supplies a diverse range of compressors and
compressor-based solutions, including compressor units and compressor
stations, to customers in the oil and gas, metals and mining and other
basic industries in Russia. The business segment's principal products
include customized compressors, series-produced compressors built to
standard specifications, and compressor-based integrated solutions.
20 iv The construction provides construction works for projects for
customers in the oil upstream and midstream, gas upstream.
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ISIN: US40425X4079
Category Code: IR
TIDM: HMSG
LEI Code: 254900DDFETNLASV8M53
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 6107
EQS News ID: 729235
End of Announcement EQS News Service
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