HMS Group9 months 2015 IFRS Results Conference call presentation

08 December 2015

Financial results

Business & Outlook

Appendix

1,306 1,650 1,968 3,670 5,562 6,101 5,238 5,272 4,632 8,099

11.4%

14.1%

16.4%18.0%

21.8%

19.4%

16.2% 16.3%15.3%

21.4%

2007 2008 2009 2010 2011 2012 2013 2014 9m'14LTM

9m'15LTM

EBITDA adj., Rub mn EBITDA margin

11,505 11,668 12,032 20,379 25,515 31,460 32,358 32,351 30,364 37,760

2007 2008 2009 2010 2011 2012 2013 2014 9m'14LTM

9m'15LTM

Revenue adj., Rub mn

9m 2015 9m 2014 chg, yoy

Revenue 26,642 21,233 25%

Gross profit 8,394 5,601 50%

EBITDA * 5,873 3,046 93%

Operating profit 4,367 1,713 155%

Profit for the period 2,107 257 719%

Total debt 16,755 14,752 14%

Net debt 15,400 13,562 14%

EBITDA LTM 8,099 4,632 75%

Net debt to EBITDA LTM 1.90 2.93

Gross margin 31.5% 26.4% 513 bps

EBITDA margin 22.0% 14.3% 770 bps

Operating margin 16.4% 8.1% 832 bps

Net income margin 7.9% 1.2% 670 bps

ROCE 19.6% 10.4% 926 bps

ROE 15.9% 2.0% 1,385 bps

Financial Highlights

3

Financial highlights, Rub mn Revenue performance, 2007–2015 9m

EBITDA performance, 2007–2015 9m

CAGR 2007-201416%

CAGR 2007-201422%

Source: Company data, management accounts, exclusive of SKMN

Source: Company data, management accounts, exclusive of SKMN (Revenue and EBITDA 2007-2013 data are adjusted for SKMN disposal)

Source: Company data, management accounts

* Hereinafter, read EBITDA as EBITDA adjusted, EBITDA margin as EBITDA adjusted margin

2,3181,979

311170

13.4%

8.6%

9 months 2014 9 months 2015

Revenue EPC, Rub mn EBITDA EPC, Rub mn EBITDA margin EPC, %

1,500 1,426

-252 48

-16.8%

3.4%

9 months 2014 9 months 2015

Revenue Compressors, Rub mn EBITDA Compressors, Rub mn EBITDA margin Compressors, %

6,009

11,902

9632,511

16.0% 21.1%

9 months 2014 9 months 2015

Revenue OG equipment, Rub mn EBITDA OG equipment, Rub mn EBITDA margin OG equipment, %

11,406 11,325

1,8393,057

16.1%

27.0%

9 months 2014 9 months 2015

Revenue Pumps, Rub mn EBITDA Pumps, Rub mn EBITDA margin Pumps, %

Segments overview: 2015 9 months results

4

Revenue -1%EBITDA +66%

Revenue +98%EBITDA +161%

Revenue -15%EBITDA -45%

EPCCompressors

Revenue declined by a minor 1% yoy to Rub 11.3 bn

EBITDA increased by 66% yoy due to several factors: import substitution, FX rates depreciation, large projects’ execution and costs management

EBITDA margin grew to 27.0% that is more than average level

Significant growth in revenue and EBITDA as a result of increased share of integrated solutions

EBITDA margin reached 21.1% vs. 16.0% in the comparative period

Revenue decreased by 5% yoy and EBITDA, in contrary, grew and turned positive primarily thanks to the development of KKM’s contracts base compared to its underutilization in 2014

EBITDA margin is still lower than average, but it became positive 3.4% vs. negative 16.8% last year

EPC demonstrated relatively weak results with revenue down by 15% yoyand EBITDA decline by 45% yoy:

– project and design (EP) showed 29% yoy decrease in revenue and 51% yoy decline in EBITDA because its customers had revised their capex

– construction, in contrast, had 13% yoy growth in revenue, though showed 41% yoy decrease in EBITDA

Source: Company data

Revenue -5%EBITDA n/a

Oil & gas equipmentPumps

Source: Company data

Customer base development

Revenue contribution by the Top-7 clients Comments

Others 46.8% Gazprom 11.4%

Rosneft 17.8%

Gazprom 19.6%

Transneft 11.1%

Revenue Rub 21,233 mn

Revenue Rub 26,642 mn

Gazprom neft 7.2%

9 months 2014

Rosneft 8.3%

5

Lukoil 7.1%

Gazprom Neft 10.2%

Others 36.2%

Transneft 6.9%

Well-diversified client base of 5,000 names, growth of

revenue coming from small-to-mid clients with annual

purchases below Rub 200 mn

Strong and stable base of “Blue-chip” clients, which includes

the largest oil & gas and energy companies in Russia

Prevailing installed base in the key segments ensures

recurring business growth

HMS Group has a certain pool of large customers, but their

composition is different for each period, depending on the

particular project mix

During previous several years, HMS Group has been

actively developing its exposure to gas up- and

midstream projects of Gazprom and other Russian gas

producers through development of product mix and

quality excellence

All 4 HMS Group’s business segments are well-

positioned to benefit from their expected participation

in Gazprom’s “Eastern gas program” as well as in other

gas up- and midstream projects

9 months 2015

Lukoil 3.9%

Surgutneftegaz 5.2%

NOVATEK 2.8%

Surgutneftegaz 3.0%

BP Iraq 2.5%

9m 2015 9m 2014 chg, yoy

Distribution and transportation expenses 943 923 2%

% of revenue 3.5% 4.3%

Labour costs 404 359 13%

% of revenue 1.5% 1.7%

Transportation expenses 304 313 -3%

% of revenue 1.1% 1.5%

Lease expense 54 53 3%

% of revenue 0.2% 0.2%

Other expenses 181 199 -9%

% of revenue 0.7% 0.9%

Distribution and transportation costs up by 2% yoy, and as a percentage of revenue down 3.5% from 4.3% for 9 months 2014:

Labour costs increased by 13% yoy

Transportation expenses decreased by 3% yoy

General and administrative expenses totaled Rub 2,935 mn for 9 months 2015, up 4% yoy, primarily because of 3% yoy growth of labour costs.

9m 2015 9m 2014 chg, yoy

Cost of sales 18,248 15,632 17%

% of revenue 68.5% 73.6%

Supplies and raw materials 9,866 7,425 33%

% of revenue 37.0% 35.0%

Labour costs 4,338 4,228 3%

% of revenue 16.3% 19.9%

Cost of goods sold 2,346 1,402 67%

% of revenue 8.8% 6.6%

Other expenses 1,698 2,578 -34%

% of revenue 6.4% 12.1%

Cost analysis

6

Cost of sales Comments

Distribution & transportation expenses

9m 2015 9m 2014 chg, yoy

General and administrative expenses 2,935 2,825 4%

% of revenue 11.0% 13.3%

Labour costs 1,886 1,825 3%

% of revenue 7.1% 8.6%

Taxes and duties 164 141 16%

% of revenue 0.6% 0.7%

Depreciation and amortisation 133 134 -1%

% of revenue 0.5% 0.6%

Other expenses 752 724 4%

% of revenue 2.8% 3.4%

General & administrative expenses

Cost of sales grew by 17% yoy to Rub 18,248 mn from Rub 15,632 mn, driven by growth of supplies and raw materials

Combined contribution to the cost of sales from its key components -supplies and raw materials and cost of goods sold – accounted for 46% share of revenue for 9 months 2015 compared to 42% last year.

At the same time, share of labor costs in revenue decreased to 16% from 20% in the comparative period because of execution of large contracts in the oil & gas equipment segment, which are more material-intensive and less labor-consuming

Source: Company dataNote: Differences in calculations can occur due to the rounding-off rule

In absolute figures, SG&A expenses grew by 4% yoy, but in terms of share of revenue decreased to 15% from 18% for 9 months 2014, a direct consequence of operating leverage, when revenue is growing and labor costs’ level is relatively stable

891 9421,088 1,118

0.8x 0.8x

9m 2014 9m 2015

Organic capex, Rub mn Depreciation & amortization, Rub mn Capex to D&A ratio, x

6,836 7,492

1,650

3,920

82 913

12,231

WCFY 2014

WC9m 2014

Inventorieschange

Receivableschange &other adj.

Depositschange

Payableschange &other adj.

WC9m 2015

Cash flow performance, Rub mn 9m 2015 9m 2014 Change yoy

Operating cash flow -2,029 -1,259 61%

Investing cash flow -910 -727 25%

Free cash flow (FCF) -2,939 -1,987 48%

Financing cash flow -216 1,588 -114%

Cash and cash equivalents 1,355 1,190 14%

Comments Working capital 9 months 2014-2015

Cash flow performance, Rub mn Capital expenditures2 9 months 2014-2015

Significant 63% yoy growth of working capital1 was generated by capital needs for realization of large contracts in the oil & gas equipment business segment

Net working capital increase affected cash flow from operating activities, which declined to negative Rub 2.0 bn from negative Rub 1.3 bn last year

Free cash outflow dropped to Rub -3.0 bn

Organic capex2 increased by 6% yoy, where the significant share was channeled to a current development of manufacture competences for high capacity oil transfer and refining pumps and nuclear pumps in Russia

CAPEX & Working Capital

Source: Company data

Source: Company data

71Working capital formula - see slide 132 Capex = Organic capex = Purchase of PPE + Purchase of intangible assets

Note: Differences in calculations can occur due to the rounding-off rule

Source: Company data

25%of revenue

9m 2014 LTM

32%of revenue

9m 2015 LTM21%of revenue

2014

Cash1,335

420

5,149

3,621

6,775

3,000

2015 2016 2017 2018

Debt to be repaid, Rub mn Undrawn credit lines w availability more than 12 months

3,413 4,551 4,288 4,809 12,064 11,102 12,432 13,562 15,400

2.08

2.51

1.22

0.87

1.98

2.12 2.36

2.93

1.90

2008 2009 2010 2011 2012 2013 2014 9m'14 9m'15

Net debt, Rub mn Net debt to EBITDA LTM

8

Total debt increased by 14% yoy to Rub 16.8 bn due to required working capital, related to execution of large projects in the oil & gas equipment business segment

Net debt increased by 14% yoy to Rub 15.4 bn

Net Debt-to-EBITDA LTM ratio decreased to 1.9x from 2.9x last year

HMS’ weighted average interest rate was 11.5% for all loans, including FX-denominated, and 12.4% for Rub-denominated only, as of 1 November, 2015

Within the first 11 months of 2015, HMS Group successfully refinanced Rub 5.9 bn

HMS Group signed Rub 4.2 bn loan agreements to refinance a major part of the company’s indebtedness with maturity in 2016

8

Long-term debt67.5%

Comments

Comfortable repayment schedule

Source: Company data as of 1 November, 2015

Financial position

Source: Company data as of 1 October, 2015 Source: Company data as of 1 November, 2015

Maturity payment of Rub 0.6 bn bonds 03

Available liquidity Rub 4.4 bn

Net debt-to-EBITDA LTM ratio

Floating rate15.0%

Fixed rate85.0%

Short-term debt32.5%

Borrowings in Rub87.7%

Euro 11.9%

Others 0.4%

Low currency and maturity risks

Financial results

Business & Outlook

Appendix

2,1991,060 1,381

137

315

0

3,423

1,485

6,893

4,182 10,579

6,195

10,382

11,075

12,399

20,323

24,513

26,867

9m 2013 9m 2014 9m 2015

Industrial pumps 10,382 11,075 12,399

Oil & gas equipment 4,182 10,579 6,195

Compressors 3,423 1,485 6,893

EPC: Construction 137 315 0

EPC: Engineering 2,199 1,060 1,381

Total, where 20,323 24,513 26,867

standard equipment 17,773 18,068 22,370

integrated solutions 2,550 6,445 4,497

2,2421,394 1,148

60815 729

2,258 2,333

7,442 1,234

14,045

7,191

10,755

11,006

9,600

16,549

29,592

26,111

01-Oct-13 01-Oct-14 01-Oct-15

Industrial pumps 10,755 11,006 9,600

Oil & gas equipment 1,234 14,045 7,191

Compressors 2,258 2,333 7,442

EPC: Construction 60 815 729

EPC: Engineering 2,242 1,394 1,148

Total, where 16,549 29,592 26,111

standard equipment 11,619 18,435 19,815

integrated solutions 4,930 11,157 6,296

2% -13%

1038% -49%

3% 219%

-4% -15%

1262% -10%

-38% -18%

59% 7%

127% -44%

Backlog & Order intake

Source: Company data, Management accounts10

Backlog as of 1 Oct 2013-2015 Order intake for the 9 months 2013-2015

7% 12%

153% -41%

-57% 364%

130% n/a

-52% 30%

21% 10%

2% 24%

153% -30%

Contacts

11

Company address:7 Chayanova Str.Moscow 125047Russia

Capital marketsPhone +7 (495) 730-66-01ir@hms.ruhttp://grouphms.com/shareholders_and_investors/

HMS Hydraulic Machines & Systems Group Plc is listed on the London Stock Exchange (Main market, IOB):

Identifier Number Number of shares outstandingISIN US40425X2099 117,163,427Ticker HMSGBloomberg HMSG LIReuters HMSGq.L

Financial results

Business & Outlook

Appendix

Calculations and formulas

13

All figures in millions of Russian Rubles, unless otherwise stated

Management of the Group assesses the performance of operating segments based on a measure of adjusted EBITDA, which is derived from the consolidated financial statements prepared in accordance with IFRS

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 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

EBIT is calculated as Gross profit minus Distribution & transportation expenses minus General & administrative expenses minus Other operating expenses

Total debt is calculated as Long-term borrowings plus Short-term borrowings

Net debt is calculated as Total debt minus Cash & cash equivalents at the end of the period

Working capital is calculated as Inventories plus Trade and other receivables, excluding Short-term loans issued, Bank deposits and Promissorynotes receivable, plus Current income tax receivable minus Trade and other payables minus Short-term provisions for liabilities and charges minus Current income tax payable minus Other taxes payable

ROCE is calculated as EBIT LTM divided by Average Capital Employed (Total debt + Total equity)

ROE is calculated as Total equity period average divided by Profit for the period

Backlog is calculated as the preceding backlog plus new or additional customer orders booked during the reporting period, less amounts of contract value booked as revenue under ‘‘Russian GAAP’’ on an unconsolidated basis under the relevant contracts, plus or minus adjustments made in the judgment of the Group’s management. The Group may also make certain adjustments to bookings to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price terms under contracts or orders, or other factors affecting the amount of potential revenue which the Group believes may be recognized under such contracts. The Group’s backlog estimates are not an indication of potential revenues. Actual revenues and other measures of financial performance under IFRS may differ materially from any estimate of backlog, and changes in backlog between periods may have limited or no correlation to changes in revenue or any other measure of financial performance under IFRS

Notes to the presentation and formulas used for some figures’ calculations

The information contained herein has been prepared using information available to HMS Group (“HMS” or “Group” or

“Company”) at the time of preparation of the presentation. External or other factors may have impacted on the

business of HMS Group and the content of this presentation, since its preparation. In addition all relevant information

about HMS Group may not be included in this presentation. No representation or warranty, expressed or implied, is

made as to the accuracy, completeness or reliability of the information.

Any forward looking information herein has been prepared on the basis of a number of assumptions which may prove

to be incorrect. Forward looking statements, by the nature, involve risk and uncertainty and HMS Group cautions that

actual results may differ materially from those expressed or implied in such statements. Reference should be made to

the most recent Annual Report for a description of the major risk factors. This presentation should not be relied upon

as a recommendation or forecast by HMS Group, which does not undertake an obligation to release any revision to

these statements.

This presentation does not constitute or form part of any advertisement of securities, any offer or invitation to sell or

issue or any solicitation of any offer to purchase or subscribe for, any shares in HMS Group, nor shall it or any part of

it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or

investment decision.

Disclaimer

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