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HMS Group announces management statement and financial highlights for 2016 FY

Moscow, Russia – April 27, 2017 – 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 12 months ended December 31, 2016.

Financial highlights 2016 FY:

  • Revenue grew 11 percent yoy to Rub 41.6 billion
  • EBITDA1 declined 14 percent yoy to Rub 6.4 billion, with EBITDA margin down to 15.3 percent
  • Operating profit decreased 20 percent yoy to Rub 3.6 billion, operating margin down to 8.7 percent
  • Profit for the year totalled Rub 1.2 billion, down 32 percent yoy
  • Profit for the year adj.2 declined 26 percent yoy to Rub 1.6 billion
  • Total debt increased 3 percent yoy to Rub 16.3 billion
  • Net debt grew 8 percent yoy to Rub 13.3 billion
  • Net debt-to-EBITDA LTM ratio amounted to 2.10x
  • Return on capital employed LTM (ROCE)3 decreased to 14.0 percent

Operational highlights 2016 FY:

  • Backlog decreased 2 percent yoy to Rub 24.0 billion
  • Order intake increased 23 percent yoy and amounted to Rub 40.6 billion

Artem Molchanov, CEO of HMS Group, commented, that
“The year 2016 was difficult due to tough market conditions, however the company has managed to maintain its revenue growth. This improvement was supported in particular by KKM, that in turn illustrated successful integration of KKM into HMS Group. The oil & gas equipment business segment also demonstrated stable strong results. The pumps business segment fell in the first quarter because of the contracts mix and recovered just partially.

The company has improved its access to capital, both in the public debt market and in the market of bank facilities. At the end of 2016, Fitch assigned a B+ credit rating to the company. In February 2017, we successfully returned to the bond market. In 2017, the key priority of HMS’ debt policy will be the optimization of interest rates, along with the extension of the debt portfolio’s duration.

In the context of all its business components, including production, finance, sales, and the agreed policy of the shareholders, HMS Group has prepared a basis for further development by signing new large contracts with Russian companies, as well as by increasing its export activity. There are great opportunities available on the market, and we are confident that we possess the power and abilities to seize them.

Given the existing possibilities and with a little luck, we believe in the continual growth of HMS Group’s business. Based on the first quarter preliminary results and the portfolio of orders signed, we forecast our revenue of Rub 45-48 billion and EBITDA of Rub 6.2–6.8 billion.”

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1 EBITDA is defined as operating profit/loss from continuing operations adjusted for other operating income/expenses, depreciation and amortisation, 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 Profit for the year adj. for impairment of goodwill and impairment of property, plant and equipment and investment property

3 ROCE is calculated as EBIT LTM divided by (average total debt + average equity), where EBIT is derived as (Gross profit – SG&A expenses – Other operating expenses (net)).

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