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HMS Group (HMSG)
HMS Group: 2018 9M IFRS Results
11-Dec-2018 / 11:20 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.
HMS Group announces management statement and financial highlights
for 9 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 nine months ended September
30, 2018.
Financial highlights 9 months 2018:
? Revenue: Rub 31.9 bn (+1% yoy)
? EBITDA[1]: Rub 4.3 bn (-13% yoy), EBITDA margin 13.6%
? Operating profit: Rub 2.7 bn (-21% yoy), operating margin down to 8.5%
? Profit for the period: Rub 1.2 bn (-29% yoy), net income margin down to
3.7%
? Total debt: Rub 19.2 bn (+16% yoy)
? Net debt: Rub 14.8 bn (+16% yoy)
? Net debt-to-EBITDA LTM ratio: 2.40x
Operational highlights 9 months 2018:
? Backlog: Rub 37.9 bn (-9% yoy)
? Order intake: Rub 30.7 bn (-32% yoy)
=--
OPERATING REVIEW
BACKLOG
Backlog[2] decreased by 9 percent to Rub 37.9 billion due to
underperformance of the oil & gas equipment and projects and construction
business segments. The main reason was fewer large oil & gas equipment
contracts signed in the reporting period. The other two business segments
increased based both on the growth of large integrated contracts and
recurring business.
Backlog, Rub mn 2018 9m 2017 9m Change yoy
Industrial pumps 17,450 10,519 66%
Oil & Gas equipment and projects 7,631 22,337 -66%
Compressors 10,146 4,407 130%
Construction 2,677 4,505 -41%
Total 37,904 41,767 -9%
ORDER INTAKE
Order intake[3] decreased to Rub 30.7 billion (-32% yoy). Two of HMS'
business segments declined.
The pumps segment increased to Rub 13.4 billion purely based on the
recurring business.
The oil and gas equipment and projects segment was down to Rub 8.8 billion
because of absence of large contracts signed in the reporting period.
The compressors increased to Rub 8.1 billion mainly because the company
signed more large contracts.
In terms of contracts' mix, the drop was only attributable to fewer large
contracts signed in the reporting period.
Order intake, 2018 9m 2017 9m Change yoy 2018 3Q 2018 2Q Change
Rub mn qoq
Industrial 13,432 12,221 10% 4,988 4,214 18%
pumps
Oil & gas 8,820 23,383 -62% 3,304 2,079 59%
equipment
Compressors 8,072 5,934 36% 3,406 1,672 104%
Construction 391 3,624 -89% 617 27 2188%
Total 30,715 45,163 -32% 12,315 7,992 54%
GROUP PERFORMANCE
Revenue was almost stable, up by a minor 1 percent yoy to Rub 31.9 billion.
EBITDA was down by 13 percent yoy to Rub 4.3 billion. The industrial pumps
and compressors were the main factors that affected the company's EBITDA.
Rub bn 2018 9m 2017 9m Change 2018 3Q 2018 Change qoq
yoy 2Q
Revenue 31,862 31,411 1% 11,519 11,618 -1%
EBITDA 4,319 4,987 -13% 999 2,240 -55%
EBITDA 13.6% 15.9% 8.7% 19.3%
margin
In terms of contracts' type, revenue from the recurring business declined by
11 percent yoy. Large contracts advanced 38 percent yoy. EBITDA from the
recurring business decreased by 50 percent yoy. In contrast, EBITDA
generated by large contracts grew by 26 percent yoy, but didn't manage to
compensate for that decline in the recurring business.
EBITDA margin was down to 13.6% from 15.9% in the comparative period.
Cost of sales, 2018 2017 9m Change Share of Share of
Rub mn 9m yoy 2018 9m 2017 9m
revenue revenue
Cost of sales 23,790 22,931 4% 74.7% 73.0%
Materials and 15,278 15,928 -4% 47.9% 50.7%
components
Labour costs 4,239 3,724 14% 13.3% 11.9%
Construction and 1,197 811 48% 3.8% 2.6%
design and
engineering
services of
subcontractors
Social taxes 1,156 1,044 11% 3.6% 3.3%
Others 1,921 1,423 35% 6.0% 4.5%
Cost of sales grew by 4 percent yoy to Rub 23.8 billion because of increased
labor costs and social taxes (+13% yoy if to sum them up). As a percentage
of revenue, the cost of sales also was up to 75% from 73%.
As a result, gross profit was down to Rub 8.1 billion (-5% yoy) and gross
margin declined to 25.3% vs. 27.0% for 9 months 2017.
Rub mn 2018 2017 9m Change Share of Share of
9m yoy 2018 9m 2017 9m
revenue revenue
Distribution and 1,378 1,299 6% 4.3% 4.1%
transportation
General and 3,876 3,444 13% 12.2% 11.0%
administrative
SG&A expenses 5,253 4,742 11% 16.5% 15.1%
Other operating 117 330 -65% 0.4% 1.0%
expenses
Operating 5,370 5,072 6% 16.9% 16.1%
expenses ex. Cost
of sales
Finance costs 1,186 1,340 -12% 3.7% 4.3%
SG&A expenses[4] increased by 11 percent yoy, and as a share of revenue grew
to 16.5% from 15.1%.
Operating expenses excl. cost of sales grew by 6 percent yoy with a share of
revenue of 16.9% due to growth of labor costs.
Distribution and transportation expenses grew by 6 percent yoy to Rub 1.4
billion, mainly due to growth of labour costs and social taxes. As a share
of revenue, distribution and transportation expenses demonstrated minor
change, to 4.3% from 4.1%.
General and administrative expenses grew by 13 percent yoy to Rub 3.9
billion due to the 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 12.2% due to quarterly volatility of revenue.
Operating profit declined by 21 percent yoy to Rub 2.7 billion from Rub 3.4
billion, and operating margin was down to 8.5%.
Finance costs, Rub mn 2018 9m 2017 9m Change yoy
Finance costs 1,186 1,340 -12%
Interest expenses 1,180 1,338 -12%
Fees for early repayment of loans 5 0 na
Foreign exchange (gain)/loss, net (1) 0 na
Finance lease expenses 2 2 12%
Interest rate, average 8.8% 10.2%
Interest rate Rub, average 8.9% 10.4%
Finance costs decreased by 12 percent yoy, fully due to a decrease in
interest expenses (-12% yoy) because of lower interest rates as a result of
debt portfolio refinancing. Average rates decreased from 10.2% p.a. to 8.8%
p.a.
Profit for the period was down 29 percent yoy to Rub 1.2 billion and its
margin for the period declined to 3.7% vs. 5.3% for the comparative period.
BUSINESS SEGMENTS PERFORMANCE
Industrial pumps[i]
The industrial pumps business segment's revenue decreased by 9 percent yoy
to Rub 11.2 billion from Rub 12.3 billion. EBITDA was down by 43 percent yoy
to Rub 1.2 billion. EBITDA margin declined to 10.7%.
Less profitable contracts, executed in the reporting period, and some forced
increase in wages were the main factors which influenced the segment's
underperformance, among others.
Industrial 2018 9m 2017 9m Change yoy 2018 3Q 2018 2Q Change qoq
pumps, Rub
mn
Revenue 11,198 12,346 -9% 3,864 4,337 -11%
EBITDA 1,198 2,114 -43% 322 523 -38%
EBITDA 10.7% 17.1% 8.3% 12.1%
margin
Oil & Gas equipment and projects (OGEP)[ii]
The OGEP business segment's revenue grew 10 percent yoy to Rub 16.5 billion,
and EBITDA hiked 86 percent yoy to Rub 2.7 billion due to the low base
effect. EBITDA margin increased to 16.5% from 9.7% in the comparative
period.
The recovered performance of Giprotyumenneftegas (GTNG) combined with a
beneficial mix of contracts generated higher than average profitability of
the business segment.
OGEP, Rub mn 2018 9m 2017 9m Change 2018 3Q 2018 Change qoq
yoy 2Q
Revenue 16,512 15,037 10% 5,327 6,074 -12%
EBITDA 2,716 1,460 86% 632 1,257 -50%
EBITDA 16.5% 9.7% 11.9% 20.7%
margin
Compressors[iii]
Revenue declined by 20 percent yoy to Rub 5.3 billion. EBITDA was also down
to Rub 438 million. EBITDA margin decreased to 8.3% that is much less than
16.5% in the comparative 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 an unsteady
recognition of large contracts' revenue this year.
Compressors, 2018 9m 2017 9m Change 2018 3Q 2018 2Q Change
Rub mn yoy qoq
Revenue 5,306 6,650 -20% 1,903 1,523 25%
EBITDA 438 1,096 -60% 102 237 -57%
EBITDA margin 8.3% 16.5% 5.3% 15.6%
Construction[iv]
Construction increased its revenue to Rub 1.3 billion (+181% yoy). But it
generated negative EBITDA.
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