HMS Group 3m 2014 IFRS Results Conference call presentation June 2014
Financial results Business & Outlook Appendix 2
HMS Group Financial Highlights Revenue performance, 1Q 2012 – 1Q 2014 Financial highlights 1Q’14 1Q’13 Change 1Q ’ 14 4Q’13 Change 6,080 6,895 -12% Revenue 6,080 9,171 -34% 1,491 1,507 -1% Gross profit 1,491 2,538 -41% 777 700 11% EBITDA¹ 777 1,586 -51% 207 249 -17% Operating profit 207 848 -76% -311 -75 315% Profit ( loss)¹ -311 309 -200% -15% Total debt 1% 12,857 15,195 12,857 12,687 6 715 6 801 8 088 9 856 6 895 7883 8409 9171 6080 -21% Net debt 0% 11,156 14,150 11,156 11,102 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 -2% EBITDA LTM¹ 1% 5,316 5,449 5,316 5,238 Revenue, Rub mn Линейная ( Revenue, Rub mn) EBITDA performance, 1Q 2012 – 1Q 2014 2.10 2.60 -19% Net debt / EBITDA LTM¹ 2.10 2.12 -1% 20,4% 21,4% 24.5% 21.9% 267 bps Gross margin 24.5% 27.7% -315 bps 20,0% 17,8% 18,5% 17,3% 12.8% 10.2% 232 bps EBITDA margin¹ 12.8% 17.3% -451 bps 14,7% 12,8% 3.4% 3.6% -21 bps Operating margin 3.4% 9.2% -584 bps 10,1% -5.1% -1.1% -403bps Profit margin¹ -5.1% 3.4% -858 bps 13.5% 14.4% -90 bps ROCE² 13.5% 13.8% -30 bps 1 346 1 000 1 649 2 106 700 1400 1553 1586 777 -2.4% 0.1% -250 bps ROE -2.4% 2.5% -490 bps 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 *The data excludes SKMN results EBITDA, Rub mn EBITDA margin The data excludes SKMN results due to its disposal in 3Q 2013 1 Hereinafter, read EBITDA as EBITDA adjusted, Net income as Profit for the period / year, EBITDA margin as EBITDA adjusted margin 2 EBIT LTM / average capital employed 3
Financial Highlights: LTM vs Quarterly Revenue quarterly performance, 1Q 2012 – 1Q 2014 EBITDA quarterly performance, 1Q 2012 – 1Q 2014 20,5% 20,0% 19,4% 19,0% 17,8% 17,3% 14,7% 12,8% 10,1% 6 715 6 801 8 088 9 856 6 895 7883 8409 9171 6080 1 346 1 000 1 671 2 262 700 1400 1595 1586 777 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 EBITDA, Rub mn EBITDA margin Revenue, Rub mn Revenue LTM performance, 1Q 2012 – 1Q 2014 EBITDA LTM performance, 1Q 2012 – 1Q 2014 CAGR +1.6% 20,6% 19,4% 18,6% 18,5% 17,3% 16,9% 16,2% 16,2% 16,2% 5 276 4 810 5 221 6 101 5 449 5 854 5 758 5 238 5 316 25 591 25 985 28 068 31 460 31 549 32 722 33 043 32 358 31 543 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 EBITDA LTM, Rub mn EBITDA margin Revenue LTM, Rub mn Линейная ( Revenue LTM, Rub mn) The data excludes SKMN results due to its disposal in December 2013 4
Analysis of Profit Decline Loss for the period bridge Rub-denominated loan between NEM and HMS Finance Rub 110mn Euro-denomianated loan of Neftemash Rub 106mn -309 +45 Other loans Rub 47 mn 207 +12 -263 -311 Operating profit Finance income Interest expenses FX loss Income tax Loss for the period Comments Rub mn 3m2014 3m2013 change The Group’s performance in 1Q 2014 was negatively Gross profit 1 491 1 507 -15 affected by: EBITDA 777 700 77 Growth in depreciation was the key factor behind operating Depreciation -359 -296 -63 profit decline yoy. In 2H 2013, the Group acquired NIITK and Non-monetary items -119 -102 -17 NNGP, which all together contributed Rub 49mn in total Other income and expense -92 -53 -38 depreciation costs Operating Profit 207 249 -42 Increase of finance costs was the key factor behind net profit Finance Income 45 42 3 decline yoy. FX loss in 1Q 2014 amounted to Rub 263mn as a Finance costs -576 -335 -241 result of revaluation of intra-group debts between -309 -345 36 subsidiaries and the Group’s external FX liabilities. Interest expenses Foreign exchange gain/loss -263 10 -273 Income tax 12 -29 42 Loss for the period -311 -75 -236 5
Revenue & EBITDA Contribution by Segments Industrial pumps Oil & gas equipment 1,894 Revenue +5% Revenue -24% 3,477 3,320 EBITDA +28% EBITDA -43% 1,446 15.7% 14.8% 12.1% 11.6% 297 513 401 168 1Q'13 1Q'14 1Q'13 1Q'14 Revenue Pumps, Rub mn EBITDA Pumps, Rub mn Revenue OG equipment, Rub mn EBITDA OG equipment, Rub mn EBITDA margin Pumps, % EBITDA margin OG equipment, % Increase in the segment’s profitability is attributable to larger share of large -scale The decrease in the segment’s performance reflects quarterly volatility of business projects in 1Q 2014 vs 1Q 2013 The recently signed large- scale contract is under research and design stage and hasn’t In the reporting period HMS Group recognized a part of revenue under ESPO, yet supported the segment’s results Turkmenia and Zapolyarye-Purpe large-scale projects Compressors EPC 931 862 Revenue -61% Revenue -7% 751 EBITDA -22% EBITDA +197% 16.7% 294 5.3% -5.9% 144 -54 49 1Q'13 1Q'14 -44 1Q'13 1Q'14 -18.4% Revenue Compressors, Rub mn EBITDA Compressors, Rub mn Revenue EPC, Rub mn EBITDA EPC, Rub mn EBITDA margin EPC, % EBITDA margin Compressors, % Decrease in revenue and EBITDA was a result of quarterly volatility of business as The segment improved its profitability yoy due to strong results in both sub-segments well as contract mix Growth of profitability was related to mix of projects and costs minimization initiatives 6
Customer base development Revenue contribution by Top clients, 1Q’14 vs 1Q’13 Comments 1Q 2013 Well-diversified client base of 4,000-6,000 names, stable growth of revenue coming from small-to-mid clients with annual Rosneft 21% Others 46% purchases below Rub 200 mn Strong and stable base of “Blue - chip” clients, which includes the Transneft 8% largest oil & gas and energy companies in Russia Revenue RUB 6,895mn HMS Group may have different Top-3 customers for each Lukoil 5% period, depending on the particular project mix Surgutneftegaz 9% Gazprom 8% Prevailing installed base in the key segments ensures recurring Gazpromneft 4% business growth 1Q 2014 Rosneft 8% Others 46% Transneft 13% Gasprom 8% During 3m 2014, HMS Group sold products and Revenue RUB 6,080mn services to almost 3,000 unique clients, including Gazpromneft 13% VOIC, trade companies, dealers and individual Surgutneftegaz 4% Lukoil 3% entrepreneurs Turkmenia 6% Source: Company data 7
Cost Analysis Cost of sales Comments 1Q'14 1Q'13 change Cost of sales declined by 15% Cost of sales 4,588 5,389 -15% % of revenue 75.5% 78.2% Main components of cost of sales – supplies and raw Supplies and raw materials 2,274 2,313 -2% % of revenue 37.4% 33.5% materials combined with COGS – accounted for 40% and 43% Labour costs 1,511 1,421 6% of revenue in 1 Q’ 14 and 1 Q’ 13 respectively % of revenue 24.9% 20.6% Cost of goods sold 138 638 -78% Labour costs grew both in absolute numbers and as a % of revenue 2,3% 9,3% percentage of revenue due to acquisition of NIITK and NNGP Other expenses 665 1 016 -35% % of revenue 10,9% 14,7% Distribution & transportation expenses 1Q'14 1Q'13 change Distribution and transportation expenses were up 7% yoy Distribution and transportation expenses 306 285 7% and accounted for 5.0% of the revenue in 1 Q’ 14 % of revenue 5.0% 4.1% Transportation expenses 111 92 21% The share of transportation costs grew from 1.3% to 1.8% of % of revenue 1.8% 1.3% revenue due to execution of Turkmenia project Labour costs 121 113 7% % of revenue 2.0% 1.6% The increase of transportation costs was the major factor Insurance 10 8 25% behind growth of total distribution and transportation % of revenue 0.2% 0.1% expenses Other expenses 64 72 -13% % of revenue 1.0% 1.0% General & administrative expenses 1Q'14 1Q'13 change General and administrative costs declined by 2% yoy comprising General & administrative expenses 905 923 -2% 15% and 13% of revenue in the reporting periods respectively % of revenue 14.9% 13.4% Labour costs 597 624 -4% % of revenue 9.8% 9.1% Labour costs showed a 4% decrease Depreciation & amortization 46 47 -2% % of revenue 0.8% 0.7% Depreciation and amortization, tax and duties and other expenses Taxes and duties 44 43 2% remained almost flat yoy both in absolute and relative numbers % of revenue 0.7% 0.6% Other expenses 218 208 5% % of revenue 3.6% 3.0% 8 Totals may differ as a result of rounding
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