REG-HMS Group HMS Group: 6M 2019 IFRS Results
25/09/2019 16:10
============
HMS Group (HMSG)
HMS Group: 6M 2019 IFRS Results
25-Sep-2019 / 18:05 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 Reports 2Q 2019 Profit of Rub 321 million
Moscow, Russia - September 25, 2019 - HMS Group Plc (the "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 the six months ended
June 30, 2019.
Financial highlights 6 months 2019:
• Revenue: Rub 23.4 bn (+15% yoy)
• EBITDA 1 1 : Rub 2.0 bn (-41% yoy), EBITDA margin at 8.3%
• Operating profit: Rub 607 mn (-70% yoy)
• Profit (loss) for the period: Rub (173) mn
• Total debt: Rub 20.0 bn (+8% yoy)
• Net debt: Rub 15.6 bn (+15% yoy)
• Net debt-to-EBITDA LTM ratio: 2.97x
Operational highlights 6 months 2019:
• Backlog: Rub 43.4 bn (+35% yoy)
• Order intake: Rub 24.5 bn (+33% yoy)
GROUP PERFORMANCE
Results
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Orders 24,541 18,401 33% 13,054 11,487 14%
Backlog 43,412 32,215 35%
Revenue 23,419 20,343 15% 14,565 8,854 65%
EBITDA 1,953 3,319 -41% 1,452 501 190%
EBITDA margin 8.3% 16.3% 10.0% 5.7%
(Loss)/Profit for (173) 961 na 321 (494) na
the period
Free cash flow (1,918) (1,483) na 864 (853) na
ROCE 8.3% 14.8% 8.3% 10.8%
Order intake grew by 33% to Rub 24.5 billion based on growth in all
business segments. In terms of contracts type, both recurring business and
large contracts contributed to this growth.
Backlog of HMS Group grew to Rub 43.4 billion by 35% compared with Rub
32.2 billion last year, driven by all business segments except
construction. In terms of contracts type, the growth was based on the
recurring business and large integrated contracts also.
Revenue grew to Rub 23.4 billion, up by 15%, compared with Rub 20.3
billion for 6m 2018. Compressors and pumps contributed to this growth.
EBITDA was down by 41% yoy to Rub 1.9 billion mainly due to negative
results of oil & gas equipment segment.
Revenue from recurring business was up by 45% yoy. Large projects'
revenue decreased by 17% yoy. EBITDA from recurring business declined 6%
yoy and large projects contracted by 54% yoy.
EBITDA margin equaled 8.3%.
Depreciation & amortization was Rub 1.1 billion, up 28% yoy, compared with
Rub 866 million for 6m 2018 due to acquired assets in 2018-2019.
Profit for 2Q 2019 at Rub 321 million didn't compensate loss in 1Q 2019,
and loss for the period equaled Rub 173 million, compared with profit for
the period of Rub 961 million for 6m 2018.
Free cash flow decreased to Rub (1.9) billion from Rub (1.5) billion for
6m 2018 because of Rub 700 million acquisition made in Feb 2019.
ROCE decreased because of lower operating profit for the last twelve
months and higher average capital employed.
Expenses and Operating profit
Change Share of Share of 6m
in millions of Rub 6m 2019 6m 2018 yoy 6m 2019 2018
revenue revenue
Cost of sales 2 2 18,985 14,664 29% 81.1% 72.1%
Materials and components 12,815 8,650 48% 54.7% 42.5%
Labour costs incl Social 3,433 3,539 -3% 14.7% 17.4%
taxes
Depreciation and amortization 941 747 26% 4.0% 3.7%
Construction and design and
engineering services of 917 732 25% 3.9% 3.6%
subcontractors
Others 878 996 -12% 3.7% 4.9%
Cost of sales was Rub 19.0 billion, up 29% yoy, compared with Rub 14.7
billion for 6m 2018, because, on the one hand, HMS portfolio consists of
less profitable contracts than last year, and on the other hand, large
contracts under execution have higher share of outsourced components in
cost of sales (compressor contracts). Materials and components (+48%
yoy), required for manufacturing, almost fully attributed to this growth.
Gross profit was down 22% yoy to Rub 4.4 billion, compared with Rub 5.7
billion for 6m 2018.
in millions of Rub 6m 2019 6m 2018 Change yoy Share of 6m Share of 6m
2019 revenue 2018 revenue
Distribution and 951 933 2% 4.1% 4.6%
transportation
General and 2,753 2,585 6% 11.8% 12.7%
administrative
SG&A expenses 3,704 3,519 5% 15.8% 17.3%
Other operating 122 104 18% 0.5% 0.5%
expenses
Operating expenses 3,827 3,623 6% 16.3% 17.8%
ex. Cost of sales
Operating loss/profit 607 2,056 -70% 2.6% 10.1%
Finance costs 838 772 9% 3.6% 3.8%
Distribution and transportation expenses were Rub 951 million, up 2% yoy,
compared with Rub 933 million for 6m 2018, mainly due to an increase in
transportation expenses (+3% yoy). As a share of revenue, distribution
and transportation expenses was down to 4.1% compared with 4.6% last year.
General and administrative expenses were Rub 2.8 billion, up 6% yoy,
compared with Rub 2.6 billion last year, mainly due to higher labour costs
incl. social taxes (+6% yoy). In contrary, as a share of revenue, general
and administrative expenses decreased to 11.8% from 12.7% for 6m 2018.
SG&A expenses 3 3 grew to Rub 3.7 billion, up 5% yoy. But as a share of
revenue, they declined to 15.8% from 17.3%.
Operating profit was down to Rub 607 million, compared with Rub 2.1
billion last year (-70% yoy).
in millions of Rub 6m 2019 6m 2018 Change yoy
Finance costs 838 772 9%
Interest expenses 827 767 8%
Interest rate, average 8.8% 8.8%
Interest rate Rub, average 8.9% 8.9%
Finance costs were Rub 838 million, up by 9% yoy, compared with Rub 772
million for 6m 2018. The main factor was an increase of interest expenses
(+8% yoy) due to a higher total debt level. Average rates stood unchanged
at 8.8% p.a.
BUSINESS SEGMENTS PERFORMANCE
Industrial pumps 4 i
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 qoq
Orders 10,572 8,444 25% 5,011 5,561 -10%
Backlog 19,398 15,744 23% 19,398 19,303 0%
Revenue 7,980 7,334 9% 4,739 3,241 46%
EBITDA 1,068 876 22% 793 275 188%
EBITDA margin 13.4% 11.9% 16.7% 8.5%
Order intake of industrial pumps grew by 25% yoy based on both recurring
business and large contracts.
Backlog grew by 23% yoy to Rub 19.4 billion only because of increase in
recurring orders received.
Revenue was Rub 8.0 billion, up 9% yoy, compared with Rub 7.3 billion for
6m 2018. EBITDA increased to Rub 1.1 billion, by 22% yoy, from Rub 876
million due to both recurring business and large contracts. EBITDA margin
recovered to 13.4%.
Oil and Gas equipment & projects (OGEP) 5 ii
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Orders 6,686 5,516 21% 3,679 3,008 22%
Backlog 7,550 4,594 64% 7,550 7,265 4%
Revenue 5,934 11,185 -47% 3,528 2,406 47%
EBITDA (250) 2,084 na (120) (130) na
EBITDA margin -4.2% 18.6% -3.4% -5.4%
Order intake increased to Rub 6.7 billion from Rub 5.5 billion, fully due
to recurring contracts. In 1H 2018, there were no large contracts signed,
and order intake was fully composed of recurring orders.
Backlog was up to Rub 7.6 billion from Rub 4.6 billion, also based on
recurring contracts.
Revenue was down 47% yoy to Rub 5.9 billion, compared with Rub 11.2
billion for 6m 2018. EBITDA and EBITDA margin turned negative due to the
lack of large contracts under execution combined with a mix of recurring
contracts, that had margins lower than usual.
Compressors 6 iii
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Orders 7,177 4,666 54% 4,278 2,900 48%
Backlog 14,854 8,614 72% 14,854 16,880 -12%
Revenue 8,938 3,403 163% 6,006 2,932 105%
EBITDA 835 336 148% 458 377 21%
EBITDA margin 9.3% 9.9% 7.6% 12.9%
Order intake was up 54% yoy to Rub 7.2 billion, compared with Rub 4.7
billion, mainly due to large contracts signed.
Backlog gained 72% yoy to Rub 14.9 billion compared with Rub 8.6 billion
last year.
Revenue demonstrated a significant 163% yoy growth to Rub 8.9 billion,
based both on recurring business and large contracts. EBITDA grew 148% yoy
to Rub 835 million. EBITDA margin declined to 9.3% compared with 9.9% for
6m 2018 due to outpacing growth of revenue.
Construction 7 iv
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Orders 105 (226) na 87 18 374%
Backlog 1,610 3,263 -51% 1,610 1,899 -15%
Revenue 695 806 -14% 359 336 7%
EBITDA 15 (161) na 4 11 -61%
EBITDA margin 2.2% -20.0% 1.2% 3.3%
Order intake equaled Rub 105 million. Backlog declined to Rub 1.6 billion,
compared with Rub 3.3 billion last year, due to execution of two large
contracts signed in 2017-2018.
Revenue was Rub 695 million, down 14% yoy, from Rub 806 million for 6m
2018. EBITDA was positive Rub 15 million, compared with negative EBITDA
of Rub (161) million last year.
Working capital and Capital expenditures
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Working capital 9,508 9,990 -5% 9,530 8,843 8%
Working capital / 17% 23% 17% 17%
Revenue LTM
Capex 800 792 1% 293 506 -42%
Acquisition 670 - - 670
Working capital was Rub 9.5 billion, down by 5% yoy, due to its
optimization. As a share of revenue, working capital declined to 17% from
23% in the comparing period.
Capital expenditures were Rub 800 million, up by a minor 1% yoy, compared
with Rub 792 million last year. In February 2019, HMS acquired a group of
companies engaged in manufacturing of oil and gas equipment, located in
Tumen, for a total consideration of Rub 700 million, paid by cash. Outflow
of cash and cash equivalents on acquisition was Rub 670 million.
DEBT POSITION
in millions of Rub 6m 2019 6m 2018 Change yoy 2Q 2019 1Q 2019 Change qoq
Total debt 19,988 18,462 8% 19,988 18,933 6%
Net debt 15,628 13,549 15% 15,628 14,738 6%
Net debt / EBITDA 2.97 1.93 2.97 2.44
LTM
Total debt increased to Rub 20.0 billion compared with Rub 18.5 billion
for 6m 2018. Net debt was Rub 15.6 billion, up by 15% yoy, compared with
Rub 13.5 billion for 6m 2018. The main reason of debt increase was growth
in capital expenditures due to investment programs, that were approved and
initiated in 2017-2018.
Net debt to EBITDA LTM ratio increased to 2.97x compared with 1.93x last
year, though within bank covenants.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE & FINANCIAL MANAGEMENT
CREDIT RATINGS
In July 2019, Fitch Ratings affirms JSC HMS Group's Foreign- and
Local-Currency Issuer Default Ratings (IDR)s of "B+", the outlook
"Stable".
LARGE CONTRACTS
In September 2019, HMS announced signature of a number of large contracts:
• Rub 2.3 billion compressor contract to engineer and procure gas
transportation units for an oil & gas condensate field in Russia;
• Rub 1.0 billion contracts to engineer and procure oil & gas equipment;
• Rub 1.9 billion contracts to engineer and procure nuclear pumps and
pump-based solutions;
• Eur 16 million contract to engineer and procure compressors for an oil
processing plant.
In August 2019, HMS announced signing of two large compressors contracts,
worth Rub 4.7 billion in total.
DEBT REFINANCING
In September 2019, the Group refinanced a number of credits worth a total
Rub 5 billion with payment due in 2020-2021, shifting repayment dates to
the 2022 year. Average interest rate was decreased to 8.7% pa.
***
WEBCAST TO DISCUSS 6 MONTHS 2019 IFRS FINANCIAL RESULTS
Date: Thursday, September 26, 2019
Time: 1.00 PM (MOSCOW) / 11.00 AM (London)
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 9315
Russia Toll Free: 8 800 500 9863
UK Local: +44 207 194 3759
UK Toll Free: 0800 376 6183
US Local: +1 646 722 4916
US Toll Free: +1 844 286 0643
Conference ID: 66412315#
Title: HMS Group 6 months 2019 IFRS results
Webcast meeting:
To access the live event, click on the link:
8 https://webcasts.eqs.com/hmsgroup20190926
Please, dial in 5-10 minutes prior to the scheduled start time.
Pre-registration is available.
We will share materials on 9 HMS' investor website ahead of the webcast.
Contacts:
Investor Relations, 10 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.
LEI: 254900DDFETNLASV8M53
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11 1 EBITDA is defined as operating profit/(loss) 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 acquisition, defined benefits scheme
expense and provisions (including provision for obsolete inventory, ECL
allowance and provision for impairment of trade and other receivables and
other financial assets, 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.
12 2 Herein, materials & components, labour costs and social taxes,
construction & design were additionally derived from Change in work in
progress and finished goods, thereby do not coincide with the note in the
financial statement
13 3 SG&A expenses = Selling, General and Administrative Expenses =
Distribution and transportation + General and administrative
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14 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.
15 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.
16 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.
17 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.: 21295
EQS News ID: 879927
End of Announcement EQS News Service
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