HMS Group Reports Rub 5.2 billion EBITDA for 9 months 2021

HMS Group Reports Rub 5.2 billion EBITDA for 9 months 2021

Moscow, Russia - December 15, 2021 - HMS Hydraulic Machines & Systems Group Plc (the "HMS Group", or the "HMS", or the "Group") (LSE, MOEX: 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 nine months ended September 30, 2021.

Financial highlights 9m 2021:

• Revenue: Rub 41.1 bn (+31% yoy)
• EBITDA[1]: Rub 5.2 bn (+54% yoy), EBITDA margin at 12.6%
• Operating profit: Rub 3.2 bn (+162% yoy)
• Profit for the period: Rub 1.2 bn

• Total debt: Rub 22.6 bn (-1% yoy)
• Net debt: Rub 16.8 bn (+21% yoy)
• Net debt-to-EBITDA LTM ratio: 2.48x

Operational highlights 9m 2021:

• Backlog[2]: Rub 47.3 bn (-16% yoy)
• Order intake[3]: Rub 36.8 bn (-5% yoy)

Forecast FY 2021:

• Revenue: Rub 60.0 bn
• EBITDA: Rub 6.5 bn

HMS GROUP PERFORMANCE

9 months 2021 financial Results

• Order intake was down to Rub 36.8 billion, by 5% yoy, compared with Rub 38.9 billion for 9m 2020, that is within its normal range of volatility.  All business segments grew except the compressors. In terms of contracts type, both recurring business and large contracts were down. 
• Backlog was Rub 47.3 billion, down by 16% yoy, compared with Rub 56.6 billion at the end of 9m 2020, but in the same time the company is working on a number of opportunities in 2022.  In terms of contracts type, both recurring business and large contracts decreased.
• Revenue grew to Rub 41.1 billion by 31% yoy, compared with Rub 31.5 billion for 9m 2020, based on revenue growth in all business segments except the pumps.
• EBITDA was Rub 5.2 billion, up by 54% yoy, implying EBITDA margin of 12.6%.
• Revenue from large contracts grew 118% yoy, while revenue from recurring business was down by a minor 1% yoy.  EBITDA from large contracts increased 150% yoy, and EBITDA from recurring business declined 17% yoy. 
• Profit for the period was Rub 1.2 billion, compared with loss for the period at Rub 224 million for 9m 2020.
• Free cash outflow was Rub 4.5 billion, compared with free cash inflow of Rub 0.9 billion for 9m 2020, due to the higher working capital requirements for execution of large contracts that are within the normal quarterly volatility.

Expenses and Operating profit

• Cost of sales was Rub 32.8 billion, up by 30% yoy, compared with Rub 25.2 billion for 9m 2020, mainly due to the growth in materials and components costs (+39% yoy).

• Gross profit grew to Rub 8.4 billion, by 32% yoy, compared with Rub 6.3 billion for 9m 2020.
• SG&A expenses[5] were up 3% yoy.

Distribution & transportation expenses were down 9% yoy due to lower transportation costs.  As a share of revenue, distribution & transportation expenses declined to 3.0%, compared with 4.3% for 9m 2020.

General & administrative expenses were up to Rub 3.9 billion (+7% yoy) mainly due the growth in labour costs incl. social taxes (+9% yoy). As a share of revenue, general & administrative expenses were down to 9.4%, compared with 11.4% for 9m 2020.  

• Operating profit increased to Rub 3.2 billion (+162% yoy), compared with Rub 1.2 billion for 9m 2020. 

• Finance costs were Rub 1.4 billion, down by 2% yoy, due to a lower level of average total debt within the reporting period, compared with 9m 2020. 
• Average interest rate grew to 8.60% p.a., compared with 8.13% p.a. last year.

BUSINESS SEGMENTS PERFORMANCE

Industrial pumps[i]

• Order intake was Rub 16.5 billion, up by 24% yoy, compared with Rub 13.3 billion for 9m 2020, mainly due to the large nuclear pump contract signed in 2Q 2021.
• Backlog was Rub 21.8 billion, up 10% yoy, compared with Rub 19.7 billion at the end of 9m 2020, based on large contracts.
• Revenue was down to Rub 13.1 billion (-6% yoy), compared with Rub 13.9 billion for 9m 2020.
• EBITDA was down 15% yoy to Rub 1.5 billion, compared with Rub 1.8 billion for 9m 2020, due to less revenue generated by both recurring business and large contracts. EBITDA margin was 11.7%, compared with 13.0% during 9m 2020.

Oil and Gas equipment & projects (OGEP)[ii]

• Order intake grew to Rub 15.4 billion, up by 50% yoy, compared with Rub 10.2 billion during 9m 2020, due to a number of large contracts signed in the reporting period.
• Backlog was Rub 11.7 billion, up by 18% yoy, compared with Rub 9.9 billion at the end of 9m 2020, supported by large contracts.
• Revenue was Rub 13.4 billion, up by 59% yoy, compared with Rub 8.4 billion for 9m 2020, due to large contracts. 
• EBITDA increased to Rub 1.4 billion, up by 380% yoy, compared with Rub 0.3 billion for 9m 2020 due to a larger share of large contracts in the reported period. EBITDA margin was 10.4%, compared with 3.5% for 9m 2020.

Compressors [iii]

• Order intake declined to Rub 3.0 billion, compared with Rub 15.1 billion for 9m 2020, due to less large contracts signed in the reporting period.
• Backlog was Rub 12.9 billion, down by 49% yoy, compared with Rub 25.3 billion at the end of 9m 2020.
• Revenue was Rub 15.3 billion, up by 72% yoy, compared with Rub 8.9 billion for 9m 2020, due to large contracts.
• EBITDA was Rub 2.0 billion, up by 79% yoy, compared with Rub 1.1 billion for 9m 2020. EBITDA margin was up to 13.4%, compared with 12.9% for 9m 2020.

Construction[iv]

• Order intake equaled Rub 2.0 billion. Backlog was down to Rub 0.9 billion.
• Revenue was up to Rub 678 million, compared with Rub 580 million for 9m 2020.  EBITDA was Rub 27 million, compared with Rub (20) million last year.

Working capital and Capital expenditures

• Working capital increased to Rub 13.4 billion (+54% yoy), compared with Rub 8.7 billion at the end of 9m 2020. Working capital changes are within the normal quarterly volatility.
• As a share of revenue LTM, working capital was at 23.9% vs. 18.9% at the end of 9m 2020.
• Maintenance capex was Rub 1.0 billion, down 11% yoy, compared with Rub 1.1 billion for 9m 2020.

DEBT POSITION

• Total debt down 1% yoy to Rub 22.6 billion, compared with Rub 22.8 billion at the end of 9m 2020.
• Net debt was Rub 16.8 billion (+21% yoy), compared with Rub 13.9 billion at the end of 9m 2020. 
• Net debt to EBITDA LTM ratio was 2.48x, down from 2.89x at the end of 9m 2020.

SIGNIFICANT EVENTS AFTER THE REPORTING DATE

DIVIDENDS

• On December 14, 2021, the Board of Directors approved the payment of the interim dividends in respect of 9m 2021 in the amount of Rub 10.70 per one GDR (Rub 2.14 per one ordinary share). The dividends will be paid on December 29, 2021, to shareholders on the HMS' register at close of business (UK time) on December 23, 2021 (the «Record Вate»).

DEBT MANAGEMENT

• In October-December 2021, HMS Group refinanced its Rub 6.1 billion borrowings with maturity in 2021-2022 and shifted their repayments to 2023-2024. The average interest rate grew to 9.69% p.a.

CONTRACTS

• On December 1, 2021, HMS Group announced the signing of Rub 1.4 billion compressor contract to manufacture and deliver equipment in 2023.

BUYBACK PROGRAM

• After the reporting date, no GDRs have been purchased under the buyback program. The company holds 257,960 of its GDRs in treasury (1.1% of its issued share capital).

***

Webcast to discuss 9 months 2021 IFRS results

Date:  Thursday, December 16, 2021

Time:  14.00 (MOSCOW) / 12.00 (London)

HMS Group 9m 2021 IFRS results

Conference passcode: 1088823

To participate in the conference call, please dial in:

Russia Local:   +7 495 646 5137

Russia Toll Free: 8 10 8002 8655011

UK Local:  +44 (0)330 336 9601

UK Toll Free:  0800 279 6877

US Local:  +1 323 701 0160

US Toll Free:  800 289 0741

Live link

https://www.webcast-eqs.com/hmsgroup20211216

Please, dial in 5-10 minutes prior to the scheduled start time.  Pre-registration is available.

We will share materials on HMS' investor website ahead of the call.

Contacts:

Investor Relations, 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 and the Moscow 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

[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.

[2] Backlog - Portfolio of uncompleted orders and contracts

[3] Order intake - Portfolio of contracts and orders signed for a period

[4] Construction and design and engineering services of subcontractors

[5] SG&A expenses - Selling, General and Administrative Expenses, compiled of distribution & transportation expenses plus general & administrative ones

[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.

[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.

[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.

[iv] The construction provides construction works for projects for customers in the oil upstream and midstream, gas upstream.