OREANDA-NEWS. HMS Group (LSE: HMSG), the leading pump and compressor manufacturer as well as a 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, today releases the statement regarding its guidance for FY 2015 and FY 2016.

2015 & 2016 GUIDANCE:

In 2016F, revenue is expected to grow by 14% yoy, on average, from Rub 37-37.5 bn to Rub 40-45 bn, due to both large contracts and standard equipment.

EBITDA is expected to decrease from 2015F Rub 7.2-7.5 bn to 2016F Rub 5.2-5.6 bn by 27% yoy on average, and, as a result, EBITDA margin to decline from 20 percent to 13 percent, primarily due to two factors – clients’ capex reduction and the performance of HMS’ compressors business segment.

First factor: HMS’ clients are assumed to reduce their investment capex because of current economic downturn in Russia and low oil & gas prices. This would result in a more aggressive price policy of HMS Group aiming to win contracts, and, therefore, lower profitability of large contracts.

Second factor: In 2015F, HMS’ order intake in the compressors business segment (Kazankompressormash) grew by 276% yoy to Rub 8.1 bn, and its share in the total order intake portfolio increased from 6% in 2014A to 23% in 2015A.

The market share of Kazankompressormash (KKM) in the compressor market is smaller than the share of HMS in the pumps and oil & gas equipment markets, and, as a result, the competition in the compressor market is higher. Therefore, currently compressors contracts have lower profitability in comparison with contracts in other segments where HMS Group operates.

Thus, growth of KKM’s contracts portfolio along with their lower profitability has influenced the lower forecasted EBITDA margin for 2016F.

Kirill Molchanov, CFO and Co-founder of HMS Group, commented, that

“As a whole, 2016 year will not likely be easy for us. However, based on current pipeline of large contracts which are on different preliminary stages as well as on the company’s internal strength, we are more optimistic in the mid-term.”

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.