Trading update

3rd Feb 2012 10:07

HMS Hydraulic Machines & Systems Group plc

(the "Company", and together with its subsidiaries, the "HMS Group")

HMS GROUP FY2011 TRADING UPDATE

Moscow, Russia - HMS Group (LSE: HMSG), the leading pump manufacturer, provider of flow control solutions and engineering works for oil and gas fields in Russia and the CIS, today issues the following trading statement ahead of the announcement of its annual results for the FY 2011, expected to be released at the end of April.

Overall order intake under management accounts amounted to Rub 23.2 bn (USD 750 mn). Although order intake over 2011 contracted by 21% in comparison with the previous year, the Group enjoyed 37% YoY order intake growth, net of a large ESPO-related contract amounted to Rub 12.4 bn that had been signed in the first half of 2010.

As a substitute of the contract coming to a close, the Group managed to conclude a number of agreements for a diversified range of projects with expected revenue of Rub 1-3 bn. Though the most part of the contracts have been signed in the 4Q 2011, we see low seasonality effect, with performance of the customers' project cycle being the core reason for the timing. Together with several contracts that are close to signing, overall backlog comes to the level of the previous year that makes the Group well-positioned to deliver positive results in 2012.

Order Intake (millions of Rub)		2011		2010		?		Q4'11		Q4'10		?
Business segments
Industrial pumps		6,597		19,780		-67%		1,728		2,131		-19%
Excluding the ESPO-related contract		6,597		7,376		-10%
Oil and Gas equipment		7,832		3,897		+101%		4,384		1,026		+327%
EPC, including		7,731		4,003		+93%		4,476		1,498		+199%
Construction		5,478		2,634		+108%		3,831		719		+433%
Project and design		2,252		1,366		+65%		665		778		-15%
Others		1,061		1,636		-54%		404		392		+3%
Total		23,221		29,316		-21%		10,991		5,047		+117%

As a result:

Order Intake (millions of Rub)		H2' 11		H1' 11		H2'10		H1'10
Excluding the ESPO-related contract		15,351		7,870		10,678		6,236
The ESPO-related contract								12,404
Total		15,351		7,870		10,678		18,640

Overview by business segments

Industrial pumps

The industrial pumps business segment designs, engineers, manufactures and supplies a diverse range of pumps and pump-based integrated solutions to customers in the oil and gas, power generation and water utilities sectors in Russia, the CIS and internationally. The business segment's principal products include bare shaft pumps built to standard specifications, customized pumps and integrated solutions.

Order intake in industrial pumps business segment down by 67% YoY due to a high-base effect resulted from the massive ESPO-related contract obtained in 2010. Excluding the contract, order intake contracted by 10% on the back of lower activity in the nuclear and thermal power end-markets. However, pumps for oil refineries, households and metal and mining applications demonstrated positive dynamic over the year. Basically, a large number of contracts with expected revenue less than Rub 30 mn constituted backlog built up by the segment over 2011.

Oil & gas equipment

The oil and gas equipment business segment manufactures, installs and commissions modular pumping stations, automated metering equipment, oil, gas and water processing and preparation units and other equipment and systems for use primarily in oil extraction and transportation. The segment's products are equipment packages and systems installed inside a self-contained, free-standing structure which can be transported on trailers and delivered to and installed on the customer's site as a modular but fully integrated part of the customer's technological process.

Order intake in the oil and gas equipment segment demonstrated impressive growth of 101% YoY and amounted to Rub 7,832 mn versus Rub 3,897 mn in the beginning of 2011. The upturn was primarily driven by several hefty contracts totaled Rub 3.7 bn for a project at an East Siberian oilfield, a delivery of automated group metering units and an equipment delivery for a turnkey project on the Srednebotuobinskoe oilfield. Due to peculiarities of customers' project cycle, the conclusion of these contracts fell on the very end of the year and have been reported by the Group in January, 2012. The other part of the orders was represented by the contracts with expected revenue less than Rub 150 mn per contract.

EPC (Engineering, procurement and construction)

The engineering, procurement and construction (EPC) business segment provide project, design and construction works as well as overall project management, including on a turn-key basis, for customers in the oil and gas upstream, oil and gas transportation and water utilities sectors.

Order intake in the EPC segment rose by 93% from Rub 4,003 mn to 7,731 mn mainly due to significant contracts signed by the Group in the second half of 2011. Orders in the construction sub-segment grew by 108% from Rub 2,634 mn to Rub 5,478 mn while project and design orders up 65% from Rub 1,366 mn to Rub 2,252 mn.

A part of the turnkey project at the Srednebotuobinskoe oilfield, a broad range of engineering services at the major West-Siberian oilfield as well as construction of well-clusters on a gas field in the Yamalo Nenets Autonomous area totaled Rub 4.1 bn were among the largest contracts concluded by the Group over the year. The other part of the orders was represented by the contracts with expected revenue less than Rub 500 mn per contract.

Orders for aftermarket services of all business segments grew by 18% over 2011 from Rub 1,156 mn to Rub 1,364 mn.

***

The HMS Group is the leading pump manufacturer and 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. The 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. The Group reported revenues of RUB 20.6 billion, adjusted EBITDA of RUB 4.4 billion and profit for the period of RUB 3 billion for the nine months ended September 30, 2011. The HMS Group's global depositary receipts ("GDRs") are listed under the symbol "HMSG" on the London Stock Exchange.

For further information, please contact:

Sergey Klinkov Head of IR Tel: +7 (495) 730-66-01, ext. 1302 [email protected]

Nozima Karimova Head of Press Service Tel: +7 (495) 730-66-10 [email protected]

DISCLAIMER

THIS COMMUNICATION DOES NOT CONSTITUTE AN OFFER OF, OR THE SOLICITATION OF AN OFFER TO BUY OR SUBSCRIBE FOR, GDRs OR OTHER SECURITIES TO ANY PERSON IN ANY JURISDICTION TO WHOM OR IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL AND, IN PARTICULAR, IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE RUSSIAN FEDERATION.

THIS ANNOUNCEMENT IS NOT AN OFFER FOR SALE OF ANY SECURITIES IN THE UNITED STATES. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HMS GROUP HAS NOT REGISTERED AND DOES NOT INTEND TO REGISTER ANY PORTION OF ANY OFFERING IN THE UNITED STATES OR TO CONDUCT A PUBLIC OFFERING OF ANY SECURITIES IN THE UNITED STATES.

THIS COMMUNICATION IS ONLY BEING DISTRIBUTED TO AND IS DIRECTED ONLY AT (I) PERSONS WHO ARE OUTSIDE THE UNITED KINGDOM OR (II) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") AND (III) HIGH NET WORTH ENTITIES, AND OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED, FALLING WITHIN ARTICLE 49(2) OF THE ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT ARE ONLY AVAILABLE TO, AND ANY INVITATION, OFFER OR AGREEMENT TO SUBSCRIBE, PURCHASE OR OTHERWISE ACQUIRE SUCH SECURITIES WILL BE ENGAGED IN ONLY WITH, RELEVANT PERSONS. ANY PERSON WHO IS NOT A RELEVANT PERSON SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS.

Copyright Business Wire 2012

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