DJ HMS Group: 2018 9M IFRS Results
Dow Jones received a payment from EQS/DGAP to publish this press release.
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.
(MORE TO FOLLOW) Dow Jones Newswires
December 11, 2018 03:21 ET (08:21 GMT)
Construction, 2018 9m 2017 9m Change yoy 2018 3Q 2018 2Q Change
Rub mn qoq
Revenue 1,258 447 181% 453 423 7%
EBITDA (160) (120) na 1 (40) na
EBITDA margin -12.7% -26.7% 0.3% -9.4%
FINANCIAL REVIEW
CASH FLOW PERFORMANCE
Working capital increased by 16 percent yoy to Rub 11.3 billion, but kept
its share of revenue in the normal range of 22-25%.
Its growth was fully based on inflows and outflows related to large
contracts.
Working capital & Capex, Rub mn 2018 9m 2017 9m Change yoy
Working capital 11,340 9,775 16%
Working capital / Revenue LTM 25% 23%
Capital expenditures 1,441 1,404 3%
Capital expenditures increased by 3 percent yoy to Rub 1.4 billion.
HMS Group generated a negative operating cash flow of Rub 620 million
compared to a positive cash flow of Rub 3.1 billion last year, due to the
growth of working capital for 9 months 2018. The operating outflow led to a
negative free cash flow[5] of Rub 2.0 billion.
Cash flow performance, Rub mn 2018 9m 2017 9m Change yoy
Net cash (used in)/from operating (620) 3,074 -120%
activities
Net cash used in investing activities (1,374) (1,365) 1%
Free cash flow (FCF) (1,993) 1,709 -217%
Net cash from/(used in) financing 1,678 (973) 272%
activities
Cash & cash equivalents, at the end 4,349 3,727 17%
of the period
DEBT POSITION
Total debt increased by 16 percent yoy to Rub 19.2 billion from Rub 16.5
billion.
Net debt also grew at the same pace to Rub 14.8 billion. As a result, the
Net debt-to-EBITDA LTM ratio was up to 2.40x due to higher net debt and
lower EBITDA LTM.
Level of net debt and its dynamics are correlated to working capital and its
dynamics.
Leverage, Rub mn 2018 9m 2017 9m Change yoy
Total debt 19,177 16,469 16%
Long-term debt 18,191 12,939 41%
Short-term debt 986 3,529 -72%
Net debt 14,828 12,742 16%
Net debt / EBITDA LTM 2.40x 1.91x
SIGNIFICANT EVENTS AFTER THE REPORTING DATE & FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT
As of December 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 October 1, 2018 to and including December 10, 2018,
HMS Group has purchased 66,100 of its global depositary receipts ("GDRs").
As of today, 1,142,987 GDRs (4.88 percent of its issued share capital) were
bought under the Buy-back program.
On December 6, 2018, the Board of Directors approved payment of interim
dividends in respect of 9 months 2018 in the amount of 3.84 rubles per
ordinary share, i.e. 19.20 rubles per one GDR. Dividends will be paid on
January 25, 2019, with record day on January 11, 2019. Ex-dividend date will
start from January 10, 2019.
2018 GUIDANCE
Revenue and EBITDA:
HMS Group expects 2018FY revenue Rub 50-53 billion and EBITDA in the range
of Rub 6.2-6.4 billion.
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 9 MONTHS 2018 IFRS FINANCIAL RESULTS
Date: Tuesday, December 11, 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: +1 929 477 0448
US Toll Free: 800 239 9838
Conference ID: 7885750
Title: HMS Group 9 months 2018 IFRS results
Webcast meeting:
To access the live event, click on the link:
https://webcasts.eqs.com/hmsgroup20181211
Please, dial in 5-10 minutes prior to the scheduled start time.
Pre-registration is available.
We will share materials on HMS' investor website [1] ahead of the webcast.
Contacts:
Investor Relations, ir@hms.ru [2]
***
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.
=---------------------------------------------------------------------------
[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.
[2] According to management accounts
[3] According to management accounts
[4] SG&A expenses = Selling, General and Administrative Expenses =
Distribution and transportation + General and administrative
[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.
=---------------------------------------------------------------------------
[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.
ISIN: US40425X4079
Category Code: QRT
TIDM: HMSG
LEI Code: 254900DDFETNLASV8M53
OAM Categories: 1.3. Payments to governments
2.2. Inside information
3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 6835
EQS News ID: 756381
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=fb222c7071d1e168f09764035d7663e7&application_id=756381&site_id=vwd&application_name=news
2: mailto:ir@hms.ru'subject=Re%20conf%20call
(END) Dow Jones Newswires
December 11, 2018 03:21 ET (08:21 GMT)
© 2018 Dow Jones News
