HMS Group12 months 2015 IFRS Results Conference call presentation

29 April 2016

Financial results

Business & Outlook

Appendix

2

2015 FY 2014 FY chg, yoy

Revenue 37,296 32,351 15%

Gross profit 11,514 8,840 30%

EBITDA 7,446 5,272 41%

Operating profit 4,525 855 429%

Operating profit adj. 4,909 3,041 61%

Profit /(loss) for the year 1,764 (1,575) n/a

Profit for the year adj. 2,071 611 239%

Total debt 15,884 16,967 -6%

Net debt 12,388 12,432 0%

EBITDA LTM 7,446 5,272 41%

Net debt to EBITDA LTM 1.66 2.36

Gross margin 30.9% 27.3% 355 bps

EBITDA margin 20.0% 16.3% 367 bps

Operating margin 12.1% 2.6% 949 bps

Operating margin adj. 13.2% 9.4% 376 bps

Profit for the year margin 4.7% (4.9%) 960 bps

Profit for the year margin adj. 5.6% 1.9% 366 bps

ROCE 16.9% 11.1% 585 bps

ROE 14.1% (12.5%) 2,657 bps

1,306 1,650 1,968 3,670 5,562 6,101 5,238 5,272 7,446

11.4%

14.1%

16.4%18.0%

21.8%

19.4%

16.2% 16.3%

20.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

EBITDA adj., Rub mn EBITDA margin

11,505 11,668 12,032 20,379 25,515 31,460 32,358 32,351 37,296

2007 2008 2009 2010 2011 2012 2013 2014 2015

Revenue adj., Rub mn

Financial Highlights

Financial highlights, Rub mn Revenue performance, 2007–2015 FY

EBITDA performance, 2007–2015 FY

CAGR 2007-201516%

CAGR 2007-201524%

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 Sibkomlektmontazhnaladka, asset sold in Dec 2013)

Source: Company data, management accounts

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

3

3,356

2,617

490180

14.6%

6.9%

2014 FY 2015 FY

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

2,661

4,183

-255 315

-9.6%

7.5%

2014 FY 2015 FY

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

10,291

15,218

1,9083,246

18.5%21.3%

2014 FY 2015 FY

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

16,89917,925

3,1374,098

18.6% 22.9%

2014 FY 2015 FY

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

Segments overview: 2015 FY results

Revenue +6%EBITDA +31%

Revenue +48%EBITDA +70%

Revenue -22%EBITDA -63%

EPCCompressors

Revenue increase by 6% yoy and reached Rub 17.9 bn

EBITDA increased by 31% yoy with EBITDA margin at 22.9% due to execution of large contracts in the oil & gas equipment business segment (OGE), import substitution, effective costs management, and higher profitability of standard contracts

Revenue grew by 48% yoy and EBITDA was up 70% yoy due to execution of large-scale integrated projects

EBITDA margin increased to 21.3%

Revenue grew by 57% yoy and EBITDA turned positive Rub 315 mn because of increased number and value of contracts for standard equipment, execution of a large OGE contract, combined with the most shipments and revenue recognition in 4Q 2015

EBITDA margin reached 7.5% vs. negative 9.6% last year

EPC continued to show weak financial results in the both construction and project & design sub-segments because of tougher competition and stiffer pricing in the oil & gas engineering and construction market in Russia

Revenue +57%EBITDA n/a

Oil & gas equipmentPumps

4

From 2015 onward, HMS Group will report a total segments’ revenue, incl. external and intersegment revenue, for more consistent demonstration of the performance of each separate segment

Source: Company data

Source: Company data

Customer base development

Revenue contribution by the Top-7 clients Comments

Others 43.8% Gazprom 14.9%

Gazprom 15.1%

Rosneft 17.2%

Transneft 10.8%

Revenue Rub 32,351 mn

Revenue Rub 37,296 mn

Gazprom neft 7.9%

2014 FY

Rosneft 8.8%

Lukoil 6.0%

Gazprom Neft 10.6%

Others 40.5%

Lukoil 4.4%

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

The efforts we have put into developing relationships with

these companies in the last few years have started to pay

off. We have reinforced our presence in the markets for gas

production, transportation and refinery. Two out of three

major contracts successfully carried out in 2015 were with

gas companies, making a significant contribution to the

company’s financial results. We intend to continue our

efforts in this direction

2015 FY

Tatneft 2.9%

Surgutneftegaz 5.7%NOVATEK 2.2%

Surgutneftegaz 2.9%

Transneft 6.5%

5

2015 FY 2014 FY chg, yoyDistribution and transportation expenses 1,378 1,237 11%

% of revenue 3.7% 3.8%Labour costs 542 462 17%

% of revenue 1.5% 1.4%Transport expenses 437 431 1%

% of revenue 1.2% 1.3%Agency services 102 26 286%

% of revenue 0.3% 0.1%Other expenses 298 317 -6%

% of revenue 0.8% 1.0%

Distribution and transportation costs up by 11% yoy, and as a percentage of revenue down to 3.7% from 3.8% last year:

Labour costs increased by 17% yoy

Transport expenses almost stable (+1% yoy)

General and administrative expenses grew by 6% yoy and totaled Rub 4.6 bn mainly because of a 16% yoy growth of labour costs

2015 FY 2014 FY chg, yoyCost of sales 25,783 23,511 10%

% of revenue 69.1% 72.7%Supplies and raw materials 16,520 13,400 23%

% of revenue 44.3% 41.4%Labour costs 5,928 5,677 4%

% of revenue 15.9% 17.5%Depreciation and amortization 1,281 1,264 1%

% of revenue 3.4% 3.9%Other expenses 2,054 3,170 -35%

% of revenue 5.5% 9.8%

Cost analysis

Cost of sales Comments

Distribution & transportation expenses

2015 FY 2014 FY chg, yoyGeneral and administrative expenses 4,603 4,340 6%

% of revenue 12.3% 13.4%Labour costs 3,031 2,616 16%

% of revenue 8.1% 8.1%Audit and consultancy services 210 229 -8%

% of revenue 0.6% 0.7%Taxes and duties 205 180 14%

% of revenue 0.5% 0.6%Other expenses 1,157 1,315 -12%

% of revenue 3.1% 4.1%

General & administrative expenses

Cost of sales grew by 10% yoy to Rub 25.8 bn from Rub 23.5 bn:

Growth of supplies and raw materials by 23% yoy, and their share in revenue increased to 44% from 41%

Since large contracts are more material-intensive but less labor-intensive, the labor costs as a share of revenue decreased to 16% from 18%

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

In absolute figures, SG&A expenses grew by 7% yoy, but in terms of share of revenue decreased to 16% from 17% for 2014. This is a direct consequence of the operating leverage, when revenue is growing faster than expenses

6

1,223

1,4571,482 1,4910.8x

1.0x

2014 FY 2015 FY

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

75 634

5,1986,834

875 89 47

968

8,813

WC2013 FY

WC2014 FY

Inventorieschange

Receivableschange &other adj.

Depositschange

Payableschange &other adj.

WC2015 FY

Cash flow performance, Rub mn 2015 FY 2014 FY Change yoy

Operating cash flow 1,881 960 96%

Investing cash flow -1,431 -1,112 29%

Free cash flow (FCF) 451 -153 n/a

Financing cash flow -1,594 3,031 -153%

Cash and cash equivalents 3,496 4,535 -23%

Comments Working capital 2014-2015 FY

Cash flow performance, Rub mn Capital expenditures2 2014-2015 FY

29% yoy growth of working capital1 was generated by essential capital needs for realization of large contracts. As a share of revenue, working capital increased to 24% vs. 21% last year, still within a normal range of working capital large projects requirement

Despite net working capital increase affected cash flow from operating activities, thanks to a higher revenue, operating cash flow almost doubled compared to last year and reached Rub 1.9 bn

Free cash flow turned positive Rub 0.5 bn because of the higher operating cash inflow though investing cash outflow grew by 29% yoy

Organic capex2 increased by 19% yoy, where the largest share of all HMS’ capital investments (c. Rub 0.6 bn) was channeled to a development of the Localization project in Livny – so, in general, maintenance capex in 2015 was c. 28% lower than in 2014

CAPEX & Working Capital

Source: Company data

Source: Company data

1Working capital formula - see slide 162 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

21%of revenue

2014 FY

24%of revenue

2015 FY16%of revenue

2013 FY

Capex of Localization project

7

2,645

4,604

6,761

1,176 1,038

2016 2017 2018 2019 2020

Debt to be repaid, Rub mn

3,413 4,551 4,288 4,809 12,064 11,102 12,432 12,388

2.08

2.51

1.22

0.87

1.98

2.12 2.36

1.66

2008 2009 2010 2011 2012 2013 2014 2015

Net debt, Rub mn Net debt to EBITDA LTM

Total debt decreased by 6% yoy to Rub 15.9 bn

Net debt stayed flat Rub 12.4 bn

Net Debt-to-EBITDA LTM ratio decreased to 1.66x from 2.36x last year

As of January 1, 2016, HMS’ weighted average interest rate was 11.4% for all loans, including FX-denominated, and 12.5% for Rub-denominated only

Within 2015, HMS Group successfully refinanced Rub 5.9 bn

In 2015, HMS Group signed loan agreements to refinance its credit portfolio and to finance its capital needs worth Rub 13.7 bn

Long-term debt79.9%

Comments

Comfortable repayment schedule

Source: Company data as of 1 April, 2016 (management accounts)

Financial position

Source: Company data as of 1 January, 2016 Source: Company data as of 1 April, 2016

Net debt-to-EBITDA LTM ratio

Short-term debt20.1%

Euro 11.8%

Credit portfolio structure

UniCredit Bank 29.0%

Borrowings in Rub87.8%

Others 0.4%

Sberbank 31.1%

VTB 23.2%

8

Raiffeisenbank 11.2%

FRP 3.1%

Others 2.4%

Source: Company data as of 1 April, 2016 (management accounts)

Financial results

Business & Outlook

Appendix

9

3,807

1,424 1,698

1,316

1,559

3,947

2,168

8,145

11,809

13,963

7,919

13,935

15,592

15,399

34,814 34,705

32,979

2013 FY 2014 FY 2015 FY

Industrial pumps 13,935 15,592 15,399

Oil & gas equipment 11,809 13,963 7,919

Compressors 3,947 2,168 8,145

EPC: Construction 1,316 1,559 -181

EPC: Engineering 3,807 1,424 1,698

Total, where 34,814 34,705 32,979

standard equipment 26,548 26,702 28,301

integrated solutions 8,266 8,003 4,678

2,0861,022 1,121

1,2181,671

581

2,289 2,131

6,915

7,873

12,343 5,716

8,867

11,076

10,075

22,333

28,243

24,409

01-Jan-14 01-Jan-15 01-Jan-16

Industrial pumps 8,867 11,076 10,075

Oil & gas equipment 7,873 12,343 5,716

Compressors 2,289 2,131 6,915

EPC: Construction 1,218 1,671 581

EPC: Engineering 2,086 1,022 1,121

Total, where 22,333 28,243 24,409

standard equipment 13,775 18,081 19,741

integrated solutions 8,557 10,162 4,667

25% -9%

57% -54%

-7% 224%

37% -65%

-51% 10%

26% -14%

31% 9%

19% -54%

Backlog & Order intake

Source: Company data, Management accountsNote: Backlog 01/01/2015 was adjusted by Rub 733 mn, and order intake for 2015 was adjusted by Rub 2.9 bn

Backlog as of 1 Jan 2014-2016 Order intake for 2013-2015 FY

12% -1%

18% -43%

-45% 276%

18% -112%

-63% 19%

0% -5%

1% 6%

-3% -42%

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Contacts

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 RegS: US40425X4079 117,163,427

144A: US40425X3089Ratio 1 GDR : 5 SharesTicker HMSGBloomberg HMSG LIReuters HMSGq.L

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Financial results

Business & Outlook

Appendix

12

Consolidated statement of Financial position at 31 Dec 2015

Note 31 December 2015 31 December 2014

ASSETS

Non-current assets:

Property, plant and equipment 7 14,161,704 14,371,174

Other intangible assets 8 984,280 1,229,009

Goodwill 9 3,466,063 3,300,399

Investments in associates 10 106,040 117,839

Deferred income tax assets 24 380,351 365,063

Other long-term assets 14 43,444 44,755

Investment property 15 244,247 269,534

Restricted cash 23,219 -

Total non-current assets 19,409,348 19,697,773

Current assets:

Inventories 12 6,860,390 5,984,976

Trade and other receivables and other financial assets 13 11,701,492 11,712,382

Current income tax receivable 152,680 156,915

Cash and cash equivalents 11 3,496,420 4,534,953

Restricted cash 2,573 7,588

Total current assets 22,213,555 22,396,814

TOTAL ASSETS 41,622,903 42,094,587

EQUITY AND LIABILITIES

EQUITY

Share capital 23 48,329 48,329

Share premium 23 3,523,535 3,523,535

Treasury shares 23 (213,489) (201,205)

Other reserves (191,585) (191,585)

Currency translation reserve 476,312 430,519

Retained earnings 6,180,042 4,783,043

Equity attributable to the shareholders of the Company 9,823,144 8,392,636

Non-controlling interests 3,325,643 3,550,667

TOTAL EQUITY 13,148,787 11,943,303

LIABILITIES

Non-current liabilities:

Long-term borrowings 16 11,217,538 13,234,507

Deferred income tax liability 24 1,534,031 1,572,440

Pension liability 17 566,475 375,605

Provisions for liabilities and charges 22 132,865 98,366

Other long-term payables 21 133,552 95,205

Total non-current liabilities 13,584,461 15,376,123

Current liabilities:

Trade and other payables 19 8,455,740 9,210,180

Short-term borrowings 16 4,666,626 3,732,401

Provisions for liabilities and charges 22 451,410 306,934

Redemption liability 36 326,759 178,862

Pension liability 17 69,538 69,428

Current income tax payable 142,323 284,700

Other taxes payable 20 777,259 992,656

Total current liabilities 14,889,655 14,775,161

TOTAL LIABILITIES 28,474,116 30,151,284

TOTAL EQUITY AND LIABILITIES 41,622,903 42,094,587

Consolidated statement of Profit or Loss for 2015 FY

Note 2015 2014

Revenue 25 37,296,437 32,350,780

Cost of sales 26 (25,782,590) (23,511,060)

Gross profit 11,513,847 8,839,720

Distribution and transportation expenses 27 (1,377,995) (1,237,028)

General and administrative expenses 28 (4,603,227) (4,339,694)

Other operating expenses, net 29 (623,897) (221,754)

Impairment of property, plant and equipment and investment property 7,15 (383,472) -

Impairment of goodwill 9 - (2,186,331)

Operating profit 4,525,256 854,913

Finance income 30 192,595 220,495

Finance costs 31 (2,086,920) (2,148,085)

Share of results of associates 10 (467) (303)

Profit/(loss) before income tax 2,630,464 (1,072,980)

Income tax expense 24 (866,289) (502,339)

Profit/(loss) for the year 1,764,175 (1,575,319)

Profit/(loss) attributable to:

Shareholders of the Company 1,884,619 (1,595,510)

Non-controlling interests (120,444) 20,191

Profit/(loss) for the year 1,764,175 (1,575,319)

Other comprehensive (loss)/income:

Items that will not be reclassified to profit or loss

Remeasurement of post-employment benefit obligations (158,400) 50,751

Items that may be reclassified subsequently to profit or loss

Currency translation differences 51,868 700,706

Currency translation differences of associates 10 (11,332) (9,281)

Other comprehensive (loss)/income for the year (117,864) 742,176

Total comprehensive income/(loss) for the year 1,646,311 (833,143)

Total comprehensive income/(loss)

attributable to:

Shareholders of the Company 1,817,172 (960,264)

Non-controlling interest (170,861) 127,121

Total comprehensive income/(loss) for the year 1,646,311 (833,143)

Basic and diluted earnings/(loss) per ordinary share for profit

attributable to the ordinary shareholders (RR per share) 23 16.34 (13.83)

Consolidated statement of Cash flows for 2015 FY

Note 2015 2014

Cash flows from operating activities

Profit/(loss) before income tax 2,630,464 (1,072,980)

Adjustments for:

Depreciation and amortisation 26-29 1,491,317 1,481,669

Loss from disposal of property, plant and equipment and intangible

assets 29 9,856 5,767

Finance income 30 (192,595) (220,495)

Finance costs 31 2,086,920 2,148,085

Change in retirement benefits obligations 17 94,507 38,217

Change in warranty provision 26 97,606 35,257

Change in provision for impairment of trade and other receivables

and other financial assets 28 112,237 277,244

Change in provision for obsolete inventories 26 87,289 64,894

Change in provision for legal claims 29 250,023 (29,437)

Impairment of goodwill 9 - 2,186,331

Impairment of property, plant and equipment and investment

property 7,15 383,472 -

Impairment reversal of property, plant and equipment 29 (6,160) (2,524)

Foreign exchange (gain)/ loss, net 29 (72,636) 67,484

Loss/(gain) on revaluation of redemption liability 29 136,392 (119,418)

Net monetary effect on non-operating items - (73,023)

Change in provision for tax risks 28 - 95,691

Share of results of associates 10 467 303

Operating cash flows before working capital changes 7,109,159 4,883,065

Increase in inventories (1,086,345) (536,844)

Decrease/(increase) in trade and other receivables 582,643 (1,740,757)

Decrease in taxes payable (350,009) (4,413)

(Decrease)/increase in accounts payable and accrued liabilities (1,277,293) 565,243

Cash from operations 4,978,155 3,166,294

Income tax paid (1,091,049) (804,573)

Interest paid (1,987,450) (1,402,522)

(Increase)/decrease in restricted cash (18,204) 467

Net cash from operating activities 1,881,452 959,666

Cash flows from investing activities

Repayment of loans advanced 35,515 44,327

Loans advanced (45,870) (36,371)

Proceeds from sale of property, plant and equipment and intangible

assets 22,184 81,640

Interest received 14,082 21,134

Purchase of property, plant and equipment, net of VAT (1,381,062) (1,157,127)

Acquisition of intangible assets (75,687) (65,962)

Net cash used in investing activities (1,430,838) (1,112,359)

Cash flows from financing activities

Repayments of borrowings (10,330,274) (6,610,548)

Proceeds from borrowings 9,127,120 10,091,492

Proceeds from government grant 21 55,000 35,000

Payment for finance lease (2,474) (10,748)

Buy back of issued shares 23 (12,284) -

Dividends paid to non-controlling shareholders of subsidiaries (56,547) (80,697)

Dividends paid to the shareholders of the Company 23 (374,380) (393,323)

Net cash (used in)/from financing activities (1,593,839) 3,031,176

Net (decrease)/increase in cash and cash equivalents (1,143,225) 2,878,483

Effect of exchange rate changes on cash and cash equivalents

and effect of translation to presentation currency 104,692 72,248

Cash and cash equivalents at the beginning of the year 4,534,953 1,584,222

Cash and cash equivalents at the end of the year 3,496,420 4,534,953

Calculations and formulas

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

Operating profit adj. & Profit for the year adj. are deferred as adjusted by impairment of PPE, investment property and goodwill

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

16

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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