ANNUAL REPORT
‘15
HMS GROUP IN 2015
HMS GROUP IN 2015
HMS Group is a major pump and compressor equipment
producer and provider of flow control solutions and
related services for oil and gas, nuclear and thermal power
generation, utilities and water supply in Russia and the CIS
countries as well as one of the leading manufacturers of
skid mounted modular oilfield equipment. We are a dynamic
engineering company with successful practice in design,
installation and construction and the commissioning of
complex oil and gas production and water facilities.
You can find more information
on our web site:
WWW.GROUPHMS.COM
02
HMS GROUP | ANNUAL REPORT 2015
REVENUE
37,296
RUB MN
+15%
EBITDA
7,446
RUB MN
+41%
PROFIT FOR THE YEAR
1,764
RUB MN
n/a
Highlights
(page 06)
Map of operations
(page 12-13)
Market trends
(page 30-32)
CONTENTS
OVERVIEW
Who we are
Highlights
Chairman’s and CEO statements
Map of operations
Investment theses
Strategy
History
Business model
2014 in context
MARKETS IN 2015
Macroeconomic development
Market trends:
Oil industry
Power generation and water utilities
PERFORMANCE IN 2015
Operating performance
Financial performance
HMS key projects
R&D development
Corporate social responsibility
GOVERNANCE
BoD and its committees
Risk management and internal
control
HMS GDRs
ADDITIONAL INFORMATION
Shareholder’s info and Disclaimer
04
04
06
08
12
14
16
18
22
24
28
28
30
32
34
34
41
44
46
50
52
52
56
60
62
62
03
ANNUAL REPORT 2015 | HMS GROUP OVERVIEW
WHO WE ARE
HMS Group is a major pump and compressor
equipment producer and provider of flow control
solutions and related services for oil and gas,
nuclear and thermal power generation, utilities
and water supply in Russia and the CIS countries
as well as one of the leading manufacturers of skid
mounted modular oilfield equipment.
DIVISIONS OF OPERATIONS
4
EMPLOYEES
15 THOUSANDS
We are a dynamic engineering
company with successful practice in
design, installation and construction
and the commissioning of complex
oil and gas production and water
facilities.
HMS Group is a vertically integrated
holding with a modern corporate
management system in which the
functions of the manufacturing
companies’ shareholders and that
of business administration are
traditionally separated.
Our parent holding company is HMS
HYDRAULIC MACHINES & SYSTEMS
GROUP PLC (the Republic of Cyprus),
which issued securities in the form
of Global Depositary Receipts at the
London Stock Exchange in February
2011.
The company operates through four
divisions which employ around 16
thousand people in Russia, Ukraine,
Belarus and overseas.
INDUSTRIAL PUMPS
Revenue
Rub 17,925 mn
EBITDA margin
Employees
23%
9.2 th
The industrial pumps business
segment is our oldest division. It
designs, engineers, manufactures
and supplies a diverse range of pumps
and pump-based integrated solutions
to customers in oil and gas, power
generation and water utilities sectors
in Russia, the CIS and internationally.
It also provides aftermarket
maintenance, repair services
and other support for its products.
Core products and services for:
• Trunk pipelines;
• Oil refineries;
• Nuclear and Thermal power;
• Water injection;
• Water utilities;
• General industrial pumps.
04
HMS GROUP | ANNUAL REPORT 2015
WHO WE ARE HIGHLIGHTS
OIL & GAS EQUIPMENT
COMPRESSORS
ENGINEERING,
PROCUREMENT AND
CONSTRUCTION (EPC)
Revenue
Rub 15,218 mn
Revenue
Rub 4,183 mn
Revenue
Rub 2,617 mn
EBITDA margin
21%
EBITDA margin
8%
EBITDA margin
Employees
1.9 th
Employees
2.3 th
Employees
7%
1.6 th
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
used primarily for oil extraction
and transportation.
Core products and services:
• Oil pumping stations and pump
stations for water injection;
• Oil & gas and water processing
units;
• High-precision and automated
metering units;
• Tanks, reservoirs and vessels;
• Oil development equipment.
The compressor business segment
was established after the acquisition
of the leading Russian compressor
producer Kazancompressormash
(KKM) in July 2012. In 2013, it was
bolstered by the acquisition of NIITK,
a research & design institute providing
compressor technologies. The division
designs, engineers, manufactures
and supplies a diverse range of
compressors and compressor-based
solutions to customers in oil and gas,
metals and mining and other core
industries in Russia.
The engineering, procurement and
construction (EPC) business segment
provides design and engineering
services, project management and
construction work for projects
for customers in oil upstream and
midstream, gas upstream and water
utilities sectors.
Core products and services:
• Oil and gas projects focused
on design and planning;
• Oilfield surface infrastructure
and pipeline construction.
Core products and services for:
• Oil and gas production;
• Oil and gas transportation;
• Gas processing;
• Oil refineries;
• Oil and gas chemistry;
• Refrigeration applications
for various industries.
ANNUAL REPORT 2015 | HMS GROUP
05
OVERVIEW
WHO WE ARE HIGHLIGHTS CHAIRMAN’S AND CEO STATEMENTS
HIGHLIGHTS
HMS Group is a dynamically growing diverse corporation that combines leading
machine-building (рumps, compressors, oil & gas equipment), engineering and
construction companies. Our markets are oil & gas, nuclear and thermal power
generation, water supply & utilities, metallurgy, etc.
Name
Backlog
Order intake
Revenue
EBITDA, adj.
Net debt
EPS
Dividend per share
ROCE
UNIT
Rub mn
Rub mn
Rub mn
Rub mn
Rub mn
Rub
Rub
%
2015 FY
2014 FY
Change yoy
24,409
32,979
37,296
7,446
12,388
16.34
3.25
16.9%
28,243
34,705
32,351
5,272
12,432
-13.83
-
11.1%
-14%
-5%
+15%
+41%
0%
-
-
585 bps
06
HMS GROUP | ANNUAL REPORT 2015 WHO WE ARE HIGHLIGHTS CHAIRMAN’S AND CEO STATEMENTS
REVENUE
EBITDA
TOTAL DEBT
37,296RUB MN
7,446RUB MN
15,884RUB MN
+15%
‘15
‘14
‘13
+41%
37,296
32,351
32,358
‘15
‘14
‘13
-6%
‘15
‘14
‘13
7,446
5,272
5,238
15,884
16,967
12,687
NET DEBT
BACKLOG
ORDER INTAKE
12,388RUB MN
24,409RUB MN
32,979RUB MN
0%
‘15
‘14
‘13
-14%
‘15
‘14
‘13
12,388
12,432
11,102
-5%
‘15
‘14
‘13
24,409
28,243
22,333
32,979
34,705
34,814
07
ANNUAL REPORT 2015 | HMS GROUP OVERVIEW
CHAIRMAN’S STATEMENT
Meeting Challenges
Head-On
08
HMS GROUP | ANNUAL REPORT 2015 HIGHLIGHTS CHAIRMAN’S & CEO STATEMENTS MAP OF OPERATIONS
Dear Shareholders,
2015 was a successful year for
HMS Group, despite imposition
of international sanctions and
intensifying recession in Russia
with the GDP decreasing by 3.7%.
The EBITDA reached its all-time
high, which was proof of the sound
development and growth strategy of
HMS Group.
This success was attributable to
a combination of factors: stable
growth in revenue from standard
equipment, effective performance
of large contracts signed with
our main clients, and an import
substitution process. Thanks to these
factors, all HMS Group’s machine-
building segments demonstrated
financial results in line with the
budget or better. The exception is
the EPC business segment, which is
experiencing a reduction in clients’
Capex that hasn’t been compensated
by import substitution.
Large contracts in the pumps business
segment in 2011-2014 gave place
to large contracts in the oil and gas
equipment business segment in 2014-
2015. Based on the current trends
in the order intake in the compressors
business segment, the year 2016
could turn out to be a successful one
for this segment.
We recognise that 2016 is likely to
be even more challenging than 2015.
Falling oil prices, high interest rates
on new bank loans, depreciation of
the ruble and high volatility of its rate
- are all the factors that constantly
shape Russia’s economic landscape.
However, for the last 25 years we
have survived a number of crises
every time getting stronger; and
despite the current economic
downturn, we are ready to further
expand our business. HMS Group
continues its project to localise
production of heavy pumps for oil
extraction, transportation and refining,
the nuclear power generation industry
in Nezhnevartovsk and Livny, as well
as a modernisation process in Kazan.
It is hard to forecast as yet how many
large contracts we will be signing
this year and to say whether we will
be able to outperform the results of
2015. However, I am certain that our
team, the market position and the
production potential will enable us to
continue proper development of HMS
Group, with well-balanced attention
to the interests of our stakeholders:
shareholders, employees, creditors,
authorities, and government bodies.
Yours faithfully,
Nikolai N. Yamburenko
09
ANNUAL REPORT 2015 | HMS GROUP
OVERVIEW
CEO STATEMENT
“
I am proud to announce that the year 2015 has
been a successful one for HMS Group in terms of
revenue and EBITDA, despite a decrease in Russia’s
GDP, volatility of the ruble, international sanctions,
low oil prices, high interest rates, and other negative
factors affecting business in Russia.
10
HMS GROUP | ANNUAL REPORT 2015 HIGHLIGHTS CHAIRMAN’S & CEO STATEMENTS MAP OF OPERATIONS
In the Orel region, HMS Group
is continuing to develop a so-called
“The Localization Project” intended to
domestically produce high-capacity oil
refining and transport pumps, nuclear
pumps, worth 2.6 billion rubles.
We are thankful to the Ministry of
Industry and Trade of the Russian
Federation for supporting this project
in the form of a five-year loan worth
500 million rubles, from the Fund of
Industry Development of the Russian
Federation, at a 5 percent interest
rate.
Yet the year 2016 promises to be
a tougher year than 2015. The total
value of large contracts this year has
been less than last year. In 2015,
we managed to keep the weighted
average interest rate at 10.4 %, but
we expect it to increase in 2016
due to new more expensive loans.
In 2015, we almost avoided raising
wages, but this year we will have to
raise them. It is our understanding
that this year we will not receive any
additional revenue from the import
substitution process.
The Company plans to continue
its revenue growth from both large-
scale projects and standard products.
However, increasing competition
amidst economic uncertainty, low oil
prices, decreases or postponements
of key customers’ capital investments
may lead to a decrease in profitability
of the Group’s major projects, and
might increase the risk of a slight
decline in EBITDA. Yet. at the same
time, based on our current portfolio
of large-scale projects to be developed
in the near future, we feel optimistic
about the years to come in 2017-
2018.
Yours faithfully,
Artem Molchanov
We demonstrated a stable increase
in standard production as well as
in new large projects.
I am particularly pleased to point
out that the efforts we have put
into developing relationships with
Russian major gas 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.
In particular I would like to draw your
attention to the export activity of
HMS Group. In 2015 foreign currency
revenue accounted for 10% of the
total ruble revenue, which was not
due to the depreciation of the ruble,
but largely the result of the Group’s
long-term efforts over the years, that
made the development of exports
one of its top priorities.
Despite the challenging conditions in
the financial markets, we successfully
refinanced our loans, as well as
received new limits with Sberbank,
VTB Bank, and UniCredit Bank,
in addition we decreased the net
debt-to-EBITDA down to 1.66x. We
succeeded in keeping the net debt
in absolute terms at the level of the
previous year of 12.4 billion rubles.
11
ANNUAL REPORT 2015 | HMS GROUP OVERVIEW
MAP OF OPERATIONS
HMS LIVGIDROMASH
PROMBURVOD
Location: Livny, Orel region
Founded in 1947
A member of HMS Group since 2003
Products: pumps for oil processing,
petrochemical, shipbuilding, power
generation, water, utilities and environment,
agriculture
Website: http://www.hms-pumps.com
LIVNYNASOS
Location: Livny, Orel region
Founded in 1970
A member of HMS Group since 2006
Products: submersible centrifugal ECV-
type pumps for municipal, industrial, rural
and household water supply as well as for
irrigation and groundwater control
Location: Minsk, Belarus
Founded in 1927
A member of HMS Group since 2007
Products: electric driven submersible pumps
for water supply, utilities and environment.
Website: http://www.promburvod.com
BOBRUISK MACHINE
BUILDING PLANT
Location: Bobruisk, Belarus
Founded in 1898
A member of HMS Group since 2011
Products: pumps for oil refining,
petrochemical, steel and mining, power, pulp
and paper, construction, as well as for water
and water waste and sewage in municipal,
agricultural and industrial water supply
systems.
Website: http://www.livnasos.ru
Website: http://www.bmbpump.by
NASOSENERGOMASH (NEM)
HYDROMASHSERVICE
Location: Sumy, Ukraine
Founded in 1949
Location: Moscow
Founded in 1993
A member of HMS Group since 2004
Associated trading company of HMS Group
Products: pumps and units, compressors
and units, oilfield, measuring and modular
equipment
Services: commissions, installation
supervising, repair, service maintenance
and equipment upgrade
Website: http://www.hms.biz
GERMANY
Goessnitz
VNIIAEN
Location: Sumi, Ukraine
Founded in 1951
Associate of HMS Group (47%) since 2007
Description: development of pumping
equipment for large complexes of nuclear
and thermal power engineering; projects of
oil, chemical, sugar and food industries, oil
pipeline transportation and maintenance
of pressure in oil pools, water supply and
irrigation; at civil engineering and mining
works, in underground systems, agglomerate-
and-ironmaking and steel industries,
sewerage system and cattle-breeding
complexes, municipal and public utilities etc.
Website: http://www.vniiaen.sumy.ua/en
ROSTOVSKIY
VODOKANALPROEKT
Location: Rostov-on-Don, Rostov region
Founded in 1932
A member of HMS Group since 2009
Description: institute with focus on water
supply and waste water and sewage systems
and related hydro-technical facilities design.
DIMITROVGRADKHIMMASH
Website: http://rvkp.ru
Location: Dimitrovgrad, Ulyanovsk region
Founded in 1931
A member of HMS Group since 2011
Products: pumps for chemical processing
and oil and gas, vessel equipment, chemical
equipment, spare parts for gas pumping
stations
Website: http://www.himmash.net
TOMSKGAZSTROY (TGS)
Location: Tomsk, Tomsk region
Founded in 1968
A member of HMS Group since 2007
Products: linear objects construction,
reconstruction and overhaul such as oil
pipelines, gas pipelines, product pipelines,
water pipelines, condensate pipelines
and power transmission lines.
Website: http://www.tgs.tomsk.ru
Products: pumps for oil and gas: midstream,
upstream; thermal and nuclear power, water
supply and utilities.
APOLLO GOESSNITZ GMBH
Location: Goessnitz, Germany
Founded in 1863
A member of HMS Group since 2012
Products: process and standard pumps
and systems, system engineering - projecting,
design and manufacture of plants for liquid
fuels, process plants, plants for water supply,
automation systems and electrical
Apollo is certified according to ISO 9001
by Lloyd’s Register Quality Assurance
Website: http://www.apollo-goessnitz.de
12
HMS GROUP | ANNUAL REPORT 2015
CHAIRMAN’S & CEO STATEMENTS MAP OF OPERATIONS INVESTMENT THESES
RUSSIA
Nizhnevartovsk
Moscow
Tyumen
Kazan
Dimitrovgrad
Minsk
BELARUS
Bobruisk
Livny
Sumi
UKRAINE
Rostov-on-Don
Tomsk
INDUSTRIAL PUMPS
OIL & GAS EQUIPMENT
COMPRESSORS
EPC
NIZHNEVARTOVSKREM-
SERVICE
Location: Nizhnevartovsk
Founded in 1998
A member of HMS Group since 2006
Services: pumping, drilling and other oilfield
equipment repair, maintenance and upgrade.
Website: http://www.nv-rs.ru
SIBNEFTEMASH
Location: Tyumen
Founded in 1976
A member of HMS Group since 2011
Description: special oilfield equipment
development, design and manufacture for
oil exploration intensification and efficiency;
current and work over repairs, isolation works
and fracturing.
Website: http://www.sibneftemash.ru/en
Products: controlling devices and systems
development and manufacture for oil and
gas, power generation, water, heat and gas
supply.
Website: http://sibna.ru/eng/main
HMS NEFTEMASH
Location: Tyumen
Founded in 1965
NIITURBOKOMPRESSOR N.A.
V.B.SHNEPPA (NIITK)
Location: Kazan
Founded in 1957
A member of HMS Group since 2013
Description: a major scientific and research
and production center in Russia to develop
centrifugal, screw, rotary and scroll
compressors.
A member of HMS Group since 2005
Website: http://www.niitk-kazan.ru/eng
Products: modular equipment for oil
and gas, including cluster pumping stations
and equipment for water injection systems;
group automatic measuring units for oil well
gauging metering; stations for hydraulic
drives of submersible well pumps and
underground oil extraction equipment;
oil pumping stations etc.
Website: http://www.hms-neftemash.ru/en
GIPROTYUMENNEFTEGAZ
(GTNG)
KAZANCOMPRESSORMASH
(KKM)
Location: Kazan
Founded in 1951
A member of HMS Group since 2012
Products: centrifugal, screw compressors
and systems for air and various gases;
compressor stations; refrigerators.
Website: http://www.compressormash.ru/en
SIBNEFTEAVTOMATIKA
(SIBNA)
Location: Tyumen
Founded in 1964
Location: Tyumen
Founded in 1986
A member of HMS Group since 2008
A member of HMS Group since 2010
Description: the leading Russian R&D center
with integrated oilfield designing for oil
and gas.
Website: http://www.gtng.ru/en
ANNUAL REPORT 2015 | HMS GROUP
13
OVERVIEW
INVESTMENT THESES
1
LEADING MARKET POSITIONS IN ALMOST ALL SEGMENTS
WHERE WE ARE PRESENTED
The largest installed base in Russia supports a stable and resilient flow
of orders for the replacement, upgrading, modernisation and maintenance
of operating equipment, while advanced R&D capabilities allow us
to offer customers high value-added integrated solutions, which are
associated with higher margin, large contracts and offer aftermarket
opportunities.
2
UNIQUE R&D BASE GIVES US THE ABILITY TO PROVIDE
HIGH-MARGIN INTEGRATED SOLUTIONS
One of our core strengths is a strong focus on R&D, which allows us
to provide complex integrated solutions. HMS Group combines leading
pump R&D centers, including design centers and research institutes
at production facilities, independent research and development centers
at our HQ, and in the production regions of Russia and the CIS, as well
as a center for innovative technologies complying with API standards
in Germany.
3
WELL-ESTABLISHED CUSTOMER BASE AND STRONG RELATIONS
WITH RUSSIAN OIL & GAS MAJORS, PETROCHEMICAL AND
POWER GENERATION COMPANIES
We have a well-diversified client base of more than 6,000 customers,
including numerous subsidiaries of Russia’s largest oil and gas,
petrochemical and energy companies.
14
HMS GROUP | ANNUAL REPORT 2015
MAP OF OPERATIONS INVESTMENT THESES STRATEGY
4
HISTORY OF RESILIENT FINANCIAL GROWTH
Founded in 1993 as a pump trading and servicing company, HMS has
grown organically and by pursuing an active M&A policy that has seen
the successful completion of over 20 acquisitions aimed at either adding
products to the portfolio, or expanding into adjacent business areas. As
part of this strategy, HMS Group has consolidated a number of leading
pumps and equipment manufacturers in the former Soviet Union since
2003, and has formed a leading industrial group with revenue
of 37.3 billion rubles in 2015.
5
DEDICATED MANAGEMENT TEAM COMPRISED OF FOUNDERS
AND SHAREHOLDERS
HMS Group’s growth is driven by a strong management team with
a proven track record that has demonstrated its ability to deliver organic
growth and make value-added acquisitions. The management team
includes the founders of the Group, with HMS being a core business
for its largest shareholders.
ANNUAL REPORT 2015 | HMS GROUP
15
OVERVIEW
STRATEGY
N
T I O
A
H
OLLAB O R A
S
C
M
IN
R E H O L D ER’S RETU
N
R
N
S
O
V
A
T
I
O
N
K E T L EADERS
H
I
P
R
A
OPTIMISATION
& SYNERGIES
M
A
RKET L E A D E
H IP
S
R
O
P
E
R
A
T
I
O
N
A
S
S
N
R
U
L
E
X
C
H
AREHOLDE R ’ S R E T
ELLENCE
C O R P O
Y
T
NSIBILI
T E R ESPO
A
R
COLLABORATION
OPERATIONAL
EXCELLENCE
INNOVATION
We work closely with our
customers and suppliers
across all business segments.
These partnerships allow
us to better understand our
existing markets and to meet
the current needs of our
clients as well as anticipate
those of the future.
We constantly seek to
improve the equipment
we manufacture and
solutions we offer as well
as to develop our sales and
marketing effectiveness.
A commitment to self-
improvement leads to higher
margins and returns.
We develop new products
and technologies to provide
our clients with competitive
engineering solutions. Our
commitment to innovation
promotes our market
leadership and enables us
to enter adjacent markets.
CORPORATE
RESPONSIBILITY
We strictly comply with
safety standards, follow
a code of ethics in respect
to all stakeholders and
target a lowering of the
environmental impact
of our operations.
16
HMS GROUP | ANNUAL REPORT 2015
INVESTMENT THESES STRATEGY HISTORY
OBJECTIVE
STRATEGY
Creating long-term value for our shareholders by achieving
sustainable, profitable growth in our key strategic markets.
HMS Group operates and targets the further strengthening
of its position in three key markets that have encouraging
outlooks and positive fundamentals —industrial pumps, oil
and gas equipment and compressors. We intend to benefit
from anticipated growing demand for our core equipment
in the oil and gas, water utilities and power generation
industries. Through the effective supply of standard and
customised products and integrated solutions, HMS aims
to achieve the status of preferred partner for its clients.
The Group seeks to deliver sustainable organic growth
supplemented by selective acquisitions. The successful
integration of acquired assets will allow HMS Group to
capture synergistic opportunities and realise expected
benefits. While continuing to improve operational
performance, the Group will seek to develop new
customer-oriented value-added products and services.
ANNUAL REPORT 2015 | HMS GROUP
17
OVERVIEW
HISTORY
18
1993
German Tsoy, Artem Molchanov and Kirill Molchanov
founded the original pump trading and servicing
company. The Company expanded its operations and
client base to become a leading distributor of pumps
and pumping equipment in Russia and the CIS.
2005
HMS Group became a leading
manufacturer of high capacity customized
pumps through the acquisition of
Nasosenergomash (NEM, located in
Ukraine), one of the major companies in
the nuclear and thermal power generation
industries and trunk oil pipelines in the CIS.
2006
HMS Group became a leading
manufacturer of submersible
borehole pumps for water through
the acquisition of Livnynasos, one of
the largest producers of submersible
electric water pumps in the CIS. The
Company also acquired operational
control over Tomskgazstroy (TGS), a
provider of construction services for
oil and gas pipelines. The Company
expanded its maintenance and repair
business through the acquisition of
Nizhnevartovskremservice (NRS).
HMS GROUP | ANNUAL REPORT 2015 STRATEGY HISTORY BUSINESS MODEL
1995
HMS Group launched a pump skid assembly business in
Russia and CIS countries. Hydromashservice became one
of the leading enterprises specializing in the delivery of
pumping equipment for oil and gas complexes, power
and water industry and housing utilities.
2004
HMS Group enhanced its oil and
gas equipment offerings through the
acquisition of Neftemash (currently -
HMS Neftemash), one of the largest
Russian producers of oil & gas
equipment for surface oilfield sites.
2003
HMS Group began to manufacture
pumps after the acquisition of
Livgidromash (currently — HMS
Livgidromash), one of the largest
manufacturers of industrial pumps
in the CIS.
2007
HMS Group entered the EPC market through the
acquisition of Sibkomplektmontazhnaladka (SKMN), a
provider of integrated EPC services for the development
and construction of oilfield infrastructure. The Company
also acquired a minority stake in Dimitrovgradhimmash
(DGHM), a manufacturer of pumps and vessel equipment,
with an option to purchase a controlling stake in 2012,
and increased its R&D capabilities through the acquisition
of a 49% stake in VNIIAEN, an R&D centre and the only
one of its kind in the CIS which specializes in pumping
equipment for the nuclear power generation and oil
transportation industries.
CONTINUE ON THE NEXT PAGE
19
ANNUAL REPORT 2015 | HMS GROUP OVERVIEW
HISTORY
2012
HMS Group entered the
promising new gas projects
market with the acquisition
of the leading Russian
industrial compressor producer
Kazancompressormash (KKM).
Pursuing the enhancement of
its pumps product portfolio, the
Group completed the acquisition
of the German manufacturer
of high-end specialized pumps,
Apollo Goessnitz GmbH (Apollo),
which strengthened its market
position in industries with a need
for technologically-demanding
integrated solutions.
20
2008
HMS Group increased its presence in the water utility, power generation and
modular equipment sectors through the acquisitions of Promburvod, the largest
producer of electric submersible water pumps in Belarus, and NPO Hydromash,
a manufacturer of pumps for the thermal power generation and oil and gas
industries that has subsequently been joined to NEM and Rostov Vodokanalproekt
(RVKP), a leading project and design facility for the water utility sector.
2011
HMS Group went public in February 2011, placing
37.2% of its stock on the London Stock Exchange
via GDRs. As a key consolidator in the domestic
pumping industry, HMS completed 3 acquisitions
(Sibneftemash, Bobruisk Machine Building Plant
and exercised the option to acquire its next stake
in Dimitrovgradkhimmash (DGHM)), seeking
opportunities to increase its presence in existing
and adjacent markets.
2013
HMS Group made a disposal of SKMN
to make the Group’s business model
more effective, release resources,
involved in the EPC business, and use
them for the active development of
the core business.
HMS GROUP | ANNUAL REPORT 2015 STRATEGY HISTORY BUSINESS MODEL
2009
HMS Group continued to enhance its position in the
water utility, power generation and oil and gas sectors
through the acquisition of Sibnefteavtomatika (SibNA),
a manufacturer of high-precision measuring equipment
for the oil and gas, power generation and water utility
sectors. The Company participated in the flagship
project of the Vankor oilfield development and the
Baltic Pipeline System construction project.
2010
HMS Group enhanced its design and R&D capabilities and its position in
the EPC market through the acquisition of 51% of the voting shares of
Gyprotumenneftegas (GTNG), a leading independent Russian R&D centre
focused on the design of the surface infrastructure of oil and gas fields. The
Group participated in the ESPO-1 pipeline expansion project and the construction
of the ESPO-2 pipeline. The Company commenced a large-scale production
of pumps for use in nuclear power generation.
2015
The best year
for HMS Group in
terms of revenue
and EBITDA.
21
ANNUAL REPORT 2015 | HMS GROUP OVERVIEW
BUSINESS MODEL
Customer focus is the leading principal for HMS Group. All our businesses —
from product development to after-sales services — are tailored to solve our
customers’ challenges. The deep understanding of our customers and markets,
the ability to engineer products to meet customers’ specific needs and our
strong expertise in manufacturing helps us secure further mutually beneficial
partnerships.
1
2
RESEARCH & DEVELOPMENT
MANUFACTURING
Continuous research and development play an essential
role in the sustained success of HMS Group. We view
R&D as the cornerstone for achieving technological
leadership in the markets where we operate. Turning the
technical requirements of our customers into innovatively
engineered products strengthens our competitive position
and helps to increase our commercial success.
Manufacturing is the core activity of HMS Group.
We have built our leading industrial group through
a number of acquisitions of the best producers of pumps,
compressors and oil and gas equipment in Russia and the
CIS. At present 16 plants operate under the HMS brand,
most of which are considered flagship enterprises in their
regions.
We continuously update our production facilities and
technological processes to offer modern and competitive
equipment for our clients. In our manufacturing process,
we primarily focus on the energy efficiency, robustness,
reliability and cost of our products.
HMS Group manufactures both standard and customised
equipment. We purposefully target the segment of high
margin products tailored for specific customer needs and
based on our in-house R&D design, which secures our
future sales growth. Our commitment to high quality,
our solid track record and our strong expertise make HMS
the partner of choice for participating in complex and
challenging projects in the oil and gas, energy and water
utilities markets.
HMS operates a wide corporate R&D network. It includes:
5 leading R&D centres in Russia and the CIS; 3 leading
project and design institutes dedicated to strengthening
our core competencies in oilfield design (GTNG), water
facilities (RVKP) and compressor equipment (NIITK);
and one foreign innovative technology centre - complying
with offshore and oil refinery API standards (Apollo). The
Group coordinates the whole innovation cycle through
its headquarter in Moscow.
Our research and development activities are primarily
directed at improving existing products and services, the
design of products to meet specific customer needs and
the development of new products, solutions and services.
Our highly qualified and experienced R&D team, combined
with sophisticated computer technologies, enables us
to create reliable, energy-effective, efficient pumping
and compressor equipment which conforms to the
requirements of Russian and foreign customers within
tight schedules.
22
HMS GROUP | ANNUAL REPORT 2015
HISTORY BUSINESS MODEL 2015 IN CONTEXT
3
4
MARKETING AND SALES
AFTER-SALES SERVICES
In the majority of cases, the Group is awarded contracts
following participation in tenders. The Group builds and
maintains customer relationships at the board level, senior
manager level and local level. The negotiation of large-
scale projects typically involves the Group’s directors,
senior managers, senior R&D personnel, technical
specialists, and their counterparts at the customer’s
head office. R&D personnel support the sales process
by providing input at each stage.
Customised and modular equipment is sold directly to the
customers. Contract terms vary depending on a number
of factors, including client industry, size of the order and
the scope of types of equipment.
Standard pumps are sold mainly through an extensive
trading network of dealers and distributors accounting
for over 100 partner companies across Russia. The central
sales office, Hydromashservice, is located in Moscow.
There are also 11 branches and representatives offices
in Russia and the CIS and 3 outside of the CIS — in Milan,
Dubai and Baghdad.
Equipment sales are made by professionals with strong
practical knowledge and the ambition to offer the best
solution for the customer’s specific application.
We have a well-diversified client base of around 6,000
names. A significant share of the Group’s revenue comes
from “Blue-chip” clients, which include the largest O&G
and energy companies in Russia. A stable revenue growth
comes from small-to-medium-sized clients with annual
purchases below 200 million rubles.
The improvement of our sales process and further
extension of the effective distribution system are
the priorities for HMS Group.
When customers enter into a partnership with
HMS Group, their experience is not limited to the mere
procurement of industrial equipment. We also provide
a wide range of after-sales services, which include:
• energy audit and optimization of energy efficiency
of pumping and compressing systems;
• warranty and post-warranty maintenance;
• supply of spare parts, equipment repairs and upgrades;
• consulting and training.
We run over 20 service centres in Russia and the CIS
and are seeking to further extend this network.
In addition to carrying out the energy efficiency
optimisation of pumping / compressing systems, our team
of product managers and engineers selects tailored pumps
and compressors for every type of hydro / gas technical
system. Our team works in close collaboration with the
client and provides necessary consulting services in order
to identify and prioritize all the factors which influence
equipment selection and secure the most efficient
operations of pumping and compressor system.
HMS Group provides further training programmes
and technical consulting services for the client’s operating
personnel to enable the correct, failure-free and energy-
efficient use of supplied equipment and to increase the
professional qualifications of personnel.
We are currently developing a programme to expand
our maintenance services to cover all types of supplied
equipment.
HMS Group is anticipating a growing demand for after-
market services in the oil and gas, energy and utilities
sectors in Russia and the CIS in line with global long-term
industry trends.
ANNUAL REPORT 2015 | HMS GROUP
23
OVERVIEW
2015 IN CONTEXT
January
HMS Group made a partial prior
redemption of its Ruble bonds series
02 for 1.9 billion rubles, excluding
accumulated coupon interest, at 100%
par value. 3 billion rubles bonds with
a 10.75% coupon rate were issued
in February 2012 and matured in
February 2015. Raiffeisenbank acted
as purchase agent.
HMS Group successfully completed
user acceptance testing of two oil
booster pump units manufactured for
Transneft. The units will be installed
in the Yuzhny-Balyk line operations
dispatcher station to provide mainline
oil pumps with oil charge.
February
HMS Group made the final
redemption of its Ruble bonds
series 02.
Kazancompressormash produced
and delivered four compressor units
to NOVATEK. Two low-pressure
compressor units 6GC2-384/4-49
and two high-pressure compressor
units 4GC2-65/18-101 were
delivered by NIITK and are intended
for compression of stripped associated
petroleum gas.
Kazancompressormash produced
and delivered three modular screw
compressor units, intended for
compression and supply of fuel gas to
the gas turbines of the Shinginskaya
GTPP (Gazprom Neft).
HMS Group will deliver three new
generation series DeSum pump units
and a feed pump APE 580-185-5 for
a steam turbine reconstruction project
of at the Omsk TPP-3 (TGK-11).
24
HMS GROUP | ANNUAL REPORT 2015
HMS Group produced and delivered
8 pumps for the Rumaila oil field (BP
Iraq NV). The multistage centrifugal
pumps CNS 500-1900-5 with
500m3/h capacity and 1,900m
pressure head have up-to-date
diffusers with improved hydraulic
properties and low vibration values.
Application of the new mechanical
seals and plate couplings increases
the pumps reliability and simplifies
their maintenance and repair. The
pumps will be installed at the cluster
pumping stations to provide water
supply for the injection systems.
More than 40 units of CNS centrifugal
water injection pumps, manufactured
by HMS Group, have been
successfully operated at the Rumaila
oil field over the years.
March
Compressors made by
Kazancompressormash, were put
into operation at the Bubnovka and
Ekaterinovka compressor stations
(Gazprom). Reconstruction of the
compressor stations is a part of
Gazprom’s project to expand the
Urengoy – Novopskov gas pipeline
within the Southern Corridor gas
pipeline system construction project.
HMS Neftemash organized
production of the Mera-MP metering
unit based on the NetOil&Gas
multiphase flow meter.
HMS Livgidromash produced and
delivered 4 mobile pump units for the
3rd block of the Rostovskaya NPP
(Rosenergoatom), that are intended
for water supply in emergency
situations for maintenance of
additional heat removal. The mobile
pump unit is an independent pump
station in a warm mounted shop,
completed with a diesel engine,
a generator unit and all necessary
environmental support systems.
April
HMS Group will produce and deliver
ten blocks for gas separation and
reduction to be installed on the
South Kemachi oil & gas condensate
field (Uzbekistan. A fuel and buffer
gas separation block is intended for
natural gas removal of solids and
condensed moisture. A gas reduction
block is intended for expansion of
fuel, start, buffer and blowdown gas
to a required level.
HMS Group produced and delivered
9 condensate pump units for the
2nd stage construction of the
Blagoveschenskaya TPP (RusHydro).
The plant is a part of an investment
programme of RusHydro for
construction of four new generating
facilities in the Far East of Russia.
May
Under the agreement with CNEIC,
Nasosenergomash delivered six
centrifugal pump units for the 3rd
block of the Tianwan Nuclear Power
Station, which are intended for
pumping of intermediate cooling
water. Altogether, HMS Group will
produce and deliver 36 pump units
for the plant’s safety systems on
the 3rd and the 4th blocks.
June
A centrifugal compressor
station, manufactured by
Kazancompressormash and intended
for compression of dry hydrocarbon
gas, was commissioned at LUKOIL-
Permnefteorgsintez. The compressor
station was equipped with a
4MW engine and delivered to the
installation site as ready-to-use.
HMS Group Shareholders Annual
General Meeting was held on June
19, 2015. The shareholders approved
the Company’s annual report for 2014
and the consolidated and stand-alone
financial statements of the Group for
2014, a composition of the Board of
Directors, appointed Deloitte Limited,
Cyprus as the Group’s auditors, while
the Group’s Directors had been
authorized to agree on the auditor’s
remuneration, and approved the
Buyback program of the company
with respect to global depositary
receipts.
July
HMS Group made a partial purchase
of its Ruble bonds series 03 for
2.3 billion rubles, excluding
accumulated coupon interest,
at 97.75% par value. That was the
prior redemption of 3.0 billion ruble
bonds, with a 10.10% coupon rate,
issued in February 2013 and matured
in February 2018 with an offer in
February 2016.
HMS Neftemash and Gazprom Neft
Novy Port negotiated a contract for
elaboration of design documentation,
fabrication and procurement of
skid-modular process equipment for
construction of comprehensive gas
treatment unit at the Novoportovskoe
oil & gas condensate field, a
prefabricated fuel gas treatment
module will be supplied at the field.
The gas treatment module will consist
of two isolated modules (process and
control sections) being fully equipped
with required engineering systems.
Its commissioning will enable
Gazprom Neft to utilize up to 95%
of associated petroleum gas at
the Novoportovskoe oil and gas
condensate field.
BUSINESS MODEL 2015 IN CONTEXT
August
Kazancompressormash will
manufacture and deliver four
compressor systems for a project at
a booster compressor station on the
Samburgskoe oil & gas condensate
field (ARCTICGAS). These compressor
systems include centrifugal gas
compressors 43GC-163/18-108
with capacity 198,336 nm³/h and
discharge pressure 10.6 MPa (106
bar). The compressor equipment will
be produced under a contract with
Kazan Motorbuilding Production
Organization (KMPO) and is designed
to operate as a part of GPA-16 Volga
gas compression system providing
supply of purified crude compressed
gas to the complex gas treatment
plant for low-temperature separation
process.
HMS Group supplied a retrofitted
pumping unit for transfer of
chemically active liquids to
Nevinnomysskiy Azot (EuroChem).
The unit based on horizontal
centrifugal section pump HBE-M
with 630m3/h capacity and 390m
head was designed for a scheduled
replacement of the previous HBE
chemical pump.
ANNUAL REPORT 2015 | HMS GROUP
25
OVERVIEW
2015 IN CONTEXT
(CONTINUE)
September
Kazancompressormash won the
3rd place in the nomination “Pump-
and-Compressor Equipment” in the
rating of efficient manufacturers of
equipment for retrofit of oil & gas
processing plants which was issued by
the Ministry of Industry and Trade in
order to provide information support
for the market of oil & gas equipment
to increase its transparency.
Totally, 34 oil & gas companies
were questioned, and
Kazancompressormash became
the only compressor manufacturer
included on the list of winners.
HMS Group signed a 3.5 billion rubles
contract for delivery and installation
of 5 high-pressure compressor units,
intended for compression of
separated associated gas.
HMS Group participated in the 11th
International Water and Wastewater
Exhibition of Iran (WATEX 2015)
where it presented a wide range
of state-of-the-art equipment and
services for the water & utilities
industry including brand new
pumping solutions – HMS DeLium
double suction pumps and HMS
Ciris borehole submersible pumps
manufactured in accordance with
international standards (ISO, API,
DIN, AISI, ANSI, NEMA).
October
HMS Neftemash signed a contract
to supply a block cluster pumping
station for the Srednebotuobinsk oil
& gas condensate field. The station
is intended for water injection into
productive layers during formation
26
HMS GROUP | ANNUAL REPORT 2015
independent examination of different
types of measuring equipment made
in Russia and abroad.
HMS Group has manufactured
and delivered 2 modular pumping
station for the Olimpiadinsky mining
and refining plant (Polyus Gold).
The return water pumping station
with a total capacity 1,500m3/h
and 180m head is equipped with a
new series DeLium double suction
pump, characterized by high energy
efficiency and low NPSH. Hydraulics
of pumps were engineered using
contemporary computer modeling
techniques, which ensures higher
parameters of operation reliability.
of pressure maintenance operations
and is equipped with five CNS type
centrifugal multistage pumps with
240 m3/h capacity and 1422m
pressure head. The station consists
of highly prefabricated process and
electrical skid modules for short
transportation and installation time.
An automatic control system ensures
operation of the equipment without
continuous presence of personnel.
November
Kazancompressormash produced
and delivered 3 centrifugal
compressor units intended for a
gas booster station at the Yurkharov
oil & gas condensate field.
Rosstandard certificated a new
testing facility constructed at
HMS Neftemash, which is the
largest metrological test flow facility
in Russia. The stand allows to test
and make metrological calibration of
volumeters and all types of oil & gas
metering units as well as to make
HMS Group signed another contract
to supply a number of pumping units
for the 1st and the 2nd power units
of the Belarusian nuclear power plant
(Ostrovets, Grodno Area) currently
under construction. The sophisticated
ACNA series pumping units with up
to 2,000m3/h capacity and 40m
pressure head are intended for
intermediate cooling system circuit
and certified for Class 2 safety and
the 1st seismic classification. The
Group has already been implementing
a number of contracts for
manufacture, supply and installation
supervision of the pumping
equipment for the main and auxiliary
systems of the Belarusian NPP.
Deсember
HMS Livgidromash signed a 500
million rubles loan agreement with the
Fund of Industrial Development of the
Russian Federation for realization of
a project to localize the production
of high-end pumps intended for
oil refining and transportation, nuclear
power generation industry.
HMS Group delivered pumping
equipment to the Severnaya CHPP
in Saint Petersburg (TGK-1). The ASE
type pumping units with 2,500m3/h
rated capacity and 180m head are
intended for pumping of DH system
water. The pumps are characterized
by reliability due to main components
made of robust alloy materials as well
as decreased net positive suction
head and up to 86% efficiency.
A compressor system, manufactured
by Kazancompressormash, has been
put into operation at the Syzran Oil
Refinery (Rosneft). The compressor
system based on 5GC2-216/14-26
centrifugal compressor with 216m3/
min capacity and 26 bar discharge
pressure is intended for compression
of hydrogen-bearing gas and operates
as a part of catalytic reforming
unit. The system runs on nitrogen
(regeneration mode) and hydrogen-
bearing gas (main mode) providing
the required capacity and discharge
pressure parameters for the process
system. The compressor system
is characterized by stability in the
conditions of hydrogen content
alternations within the range 75-98%
of the working gas, which is achieved
by means of application of steam
turbine.
BUSINESS MODEL 2015 IN CONTEXT
ANNUAL REPORT 2015 | HMS GROUP
27
MARKETS IN 2015
MACROECONOMIC
DEVELOPMENT
In 2015 the global economy growth rate remained low with emerging
markets growth slowing for the fifth consecutive year. Global performance
was determined by three key developments, all having taken root
in the preceding years.
• Low prices for oil, metals and
other commodities. The oil price
has been fluctuating from a
range of US$ 45-65 per barrel
plummeting by January 2016
to just US$ 30 per barrel, which
is the lowest price in the last
12 years.
• The Chinese economy has
demonstrated a gradual
slowdown with an adjustment
of domestic economic activity
away from investment and
manufacturing towards
consumption and services.
• A combination of gradual
tightening of monetary policy
in the USA with monetary easing
in the Eurozone and Japan.
This is in addition to concerns
about emerging market growth
prospects that have led to
declining FDI capital flows and
further depreciation of currencies
in several emerging markets.
Global economic growth in 2015
has decreased by 0.3% to a level of
3.1% due to the slowdown in growth
of developing countries. Growth in
most of the advanced economies has
increased. Manufacturing activities
and trade globally remained weak.
In Russia the year was marked
by strengthening of the ongoing
economic crisis and further worsening
of the investment climate. The causes
of the crisis have remained unchanged
since the previous year:
• Low level and high volatility of oil
prices (oil, gas and oil products
still represent more than 55%
of Russian exports).
• The continuing international
sanctions on the Russian financial,
oil production, and military
machinery industries, with a
reciprocal embargo on food
imports from the EU and USA.
• The strengthening of economic
stagnation due to the exhaustion
of growth potential of the previous
economic model of 2000-2013
(which was based on continuous
growth in oil products, low cost
of energy, raw materials and
labour, availability of relatively
cheap financing sources, and
initially low saturation level
in consumer markets).
28
HMS GROUP | ANNUAL REPORT 2015
The Russian economy stayed in
recession, shrinking by 3.7% in 2015
(compared to 0.7% growth in the
previous year). The economy has not
shown any signs of rapid recovery
and quarter-by-quarter decline
amounted to -1.2%, -1.3%, -0.6%
and -2.3% correspondingly in Q1, Q2,
Q3 and Q4.
The Russian rouble continued to
depreciate, dropping by 30% to US$
and by 11% to EUR (RUB/US$: from
56.24 to 72.88; RUB/EUR: from
72.08 to 79.95). The current account
of national balance of payments has
strengthened slightly from US$ 58.4
billion in 2014 to US$ 65.8 billion
in 2015, mainly due to the sharp
decrease in capital outflow from
Russia from US$ 153 billion in 2014
to US$ 57 billion in 2015. At the same
time, the balance of trade of goods
and services has decreased from
US$ 190 to US$ 46 billion due to the
drop in prices for export commodities
and contracted internal demand for
imported goods.
MACROECONOMIC DEVELOPMENT MARKET TRENDS: OIL INDUSTRY POWER GENERATION & WATER UTILITIES
As capital outflow has been slowing
down and pressure on the rouble
easing, the Bank of Russia has
consistently been decreasing the key
interest rate, which is used to provide
liquidity in roubles to all Russian
commercial banks and via them to
other sectors of the economy. The
interest rate was decreased several
times from 17.0% in December 2014
down to 11.0% in August 2015
and remained at this level up to the
end of the year. This measure has
contributed to some stabilisation of
the cost of financing for all Russian
companies and private individuals.
Nevertheless, the interest rate
remained very high (compared to pre-
crisis levels) and, also considering the
recession in the economy, the overall
corporate demand for financing has
decreased substantially. The total sum
of credit issued by banks to corporate
borrowers has decreased by 11% in
comparison to 2014, from 232 trillion
rubles to 207 trillion rubles. The
structure of the overall credit portfolio
has shifted from short-term loans to
long-term credit, resulting in a 9%
increase in the national corporate
debt load from 26.8 trillion rubles in
December 2014 to 29.3 trillion rubles
in December 2015.
Recession in the real sector has
been reflected on the Russian stock
market, where the RTS index (based
on market capitalisation in US$) has
failed to show any sustainable positive
trend, despite its high volatility
throughout the year; by the end of
the year it was at the same 750 points
as it was in January 2015. At the
same time, the MICEX index (based
on market capitalisation in rubles)
has increased from 1,450 points in
January to 1,750 points in December
(a 22% increase).
Inflation (Consumer Price Index) in
Russia has increased slightly in 2015
to an even higher level of 12.9% (in
2014 it was 11.4%) due to the lagged
effects of both ongoing devaluation
of the rouble and the Russian
embargo on the import of food
products from the EU. At the same
time, the Industrial Goods Producers
Price Index has increased by only
10.7%, which reflects the recession
in the local economy.
Real wages in Russia have decreased
by an average of 9.5%, while the real
disposable income of the population
has decreased by 6.3%. The nominal
unemployment rate has increased
slightly from 5.3% in December 2014
to 5.8% in December 2015.
Real domestic consumption in
Russia decreased by 7.9% in 2015
(compared to the 0.6% growth of
the previous year). Investment in fixed
assets has decreased by 8.4% and
constituted ~18% of GDP.
Russia experienced a 3.4% decline
in industrial output in 2015 (1.7%
growth in 2014). Minor growth
(+0.3%) was observed only in the
raw materials extraction sector,
while manufacturing has decreased
by 5.4%. Positive dynamics were
demonstrated only in the Chemicals,
FMCG and Oil products production
sectors. Production of industrial
equipment and machinery was among
the worst performing industries,
with a decline of 11.1% for the year.
Energy, gas and water production,
and transportation decreased by
1.6%. The profitability of the absolute
majority of producers of industrial
products has further declined across
all industrial segments.
ANNUAL REPORT 2015 | HMS GROUP
29
MARKETS IN 2015
MARKET TRENDS
(OIL INDUSTRY)
165.4
MIDSTREAM
OIL PRODUCTION IN RUSSIA
millions of tons
534.0
‘15
‘14
‘13
RUSSIAN WELL-STOCK
units
174.4
‘15
‘14
‘13
534.0
526.7
523.3
174.4
168.3
PRODUCTION DRILLING RATE
thousands of km
21.8
21.8
20.7
21.7
‘15
‘14
‘13
30
UPSTREAM
Russia has the largest oil and gas
reserves in the world and is the
world’s second largest oil producer
with a 13% share of total global oil
output. The upstream oil industry is
the backbone of the economy and is
one of the main sources of investment
resources, which impacts Russia’s
international payments and exchange
rate.
According to Russia’s Ministry of
Energy, oil output in Russia in 2015
reached 534.0 million tons (+1.4%
yoy). This increase was maintained
by the development of new oil
production centres in Eastern Siberia
and the start of major crude oil
exports to Asia, primarily to the
People’s Republic of China where
demand for Russian oil is increasing.
With over 74 thousand kilometres
of oil pipeline and more than 500
installed pump stations; Russia has
the largest oil pipeline system in the
world. The existing trunk pipeline
system transports over 90% of the
crude oil produced in Russia.
Transneft, the only oil pipeline
operator in Russia, has increased
its oil exports by 7.4% year-on-year
to 229.6 million tons in 2015.
The existing pipeline system is
currently expanding through the
following projects:
• Reconstruction of main pipeline
projects TON-1 and TON-2 for
high-sulphur oil transportation;
• The North pipeline;
• The South pipeline.
Transneft’s total capital expenditure
is estimated at 333.4 billion rubles
in 2015.
DOWNSTREAM
There are 40 oil refineries in Russia
with a total crude oil distillation
capacity of 5.5 million b/d. Rosneft,
the leading Russian oil company,
is the largest refinery operator and
owns nine major refineries in Russia.
LUKOIL is the second-largest refinery
operator in Russia and has four major
refineries.
In Russia, many refineries are old
and do not manufacture their main
products – light oil products with a
high level of refining depth such as
petrol and diesel – at a high quality
level. Previous tax changes have
encouraged companies with modest
success to invest in the modernisation
of refineries to produce more high-
value products such as diesel and
gasoline. Tax changes introduced in
2015 will stimulate refineries to more
intensively modernise their production
facilities.
Growth in the oil refinery industry
is likely to be driven by several new
projects:
Isomerisation process units:
• The Zapolyarye-Purpe main
• Kuybyshevsky Refinery (Rosneft);
pipeline;
• Ryazan Oil Refinery Company
• The Kuyumba-Taishet main
(Rosneft);
pipeline;
• Gazpromneftekhim Salavat
• Expansion of the ESPO (East
(Gazprom).
Siberia - Pacific Ocean) pipeline
system;
HMS GROUP | ANNUAL REPORT 2015
MACROECONOMIC DEVELOPMENT MARKET TRENDS: OIL INDUSTRY POWER GENERATION & WATER UTILITIES
Alkylation process units:
• NizhegorodNOS (LUKOIL);
• Angarsk Petrochemical company
(Rosneft).
Diesel hydrotreating process units:
• PermNOS (LUKOIL);
• Antipinsk Refinery (Rosneft).
Reforming process units:
• Kuybyshevsky Refinery (Rosneft);
• Novokuybyshevsky Refinery
(Rosneft);
• Syzran Refinery (Rosneft).
Catcracked gasoline hydrotreating
process units:
• NizhegorodNOS (LUKOIL).
GAS PIPELINE PROJECTS
Gazprom is a single owner of
virtually all natural gas pipelines in
Russia. In 2015, Russian natural gas
transportation system included more
than 170 thousand of kilometers
of high-pressure pipelines with 250
compressor stations (3,825 gas-
pumping units) and 26 underground
natural gas storage facilities. The most
part of Russian natural gas pipelines
was constructed during the Soviet era,
and about 75% of the system
is 20 years old. Since the late
2000s, Gazprom has built new
major pipelines for natural gas
transportation from new gas fields,
including fields in Yamal and Eastern
Siberia, and new export routes,
including exports to China, along with
pipelines to Europe to avoid Ukraine.
The Unified Gas Supply (UGS) system
includes domestic pipelines and the
domestic part of export pipelines
in European Russia, but it does not
include pipelines in Eastern Russia.
In 2007, the Russian government
delegated Gazprom to establish an
Eastern Gas Program (EGP) to expand
gas infrastructure in Eastern Siberia
and Russian Far East. The backbone
of the EGP is the “Power of Siberia”
pipeline, currently under construction.
The “Power of Siberia” will run
nearly 4,000 kilometers through five
Russian entities: the Irkutsk Region,
the Republic of Sakha (Yakutia), the
Amur Region, the Jewish Autonomous
Region and the Khabarovsk Territory
and will have an annual capacity of
38 billion cubic meters of gas.
Gazprom has approved a US$ 33
billion investment program for 2015.
CRUDE OIL PROCESSING
BY DOMESTIC REFINERIES
millions of tons
282.4
‘15
‘14
‘13
282.4
288.9
274.5
Pipeline
Gryazovets-Vyborg
UGSS Expansion
Bovanenkovo-Ukhta,
second line
Ukhta-Tozok, first
and second lines
Power of Siberia
Volume
bcm
Length
km
Compressors
MW
Construction
9.4
63.0
216
2,506
25
2014-2017
1,516
2014-2017
60.0
1,915
1,108
2014-2017
90.0
2,343
1,430
2014-2017
61.0
3,056
1,330
2015-2018
31
ANNUAL REPORT 2015 | HMS GROUP MARKETS IN 2015
MARKET TRENDS
(POWER GENERATION)
Russia remains one of the largest
electricity producers in the world,
behind only China, the USA, Japan
and India. Strong electricity demand
is driven by the relatively low energy
efficiency of national industries.
Therefore, this strong demand is
linked to the challenges affecting
the limited and ageing energy
producing capacity, and explains
the massive investment programs
of power generating companies
and the permanent growth of tariffs.
Russian plants have an efficiency
ratio of 37% compared to 41% for
developed economies. This difference
dictates the need for equipment
upgrades by all major-power
generating companies in Russia. This
is also the reason why the technical
modernisation and reconstruction of
existing power stations is a primary
goal for the Russian thermal power
sector, in addition to the start-up
of additional modern generating
capacities.
In 2015, electricity output in Russia
increased by 2.1% year–on-year
and reached 1,084 billion kW/h.
Total investments grew by 3%
year-on-year in 2015 and reached
390 billion rubles.
Russia’s power complex includes
approximately 600 power plants, each
with an individual capacity of over
5 MW. In 2015, the total capacity
of Russian power plants amounted
to 253.3 GW and exceeded the 2014
level by 3.9 GW. The growth was
driven by construction of new power
facilities and modernisation of existing
infrastructure.
The power industry has the following
capacity components: thermal (68%),
hydraulic (21%) and nuclear (11%)
plants. The long-term outlook of the
Russian power industry is determined
in the “General Scheme of Energy
Development for the Period till 2020”.
THERMAL POWER PLANTS
In 2015, Russia’s overall thermal
power plant installed capacity was
172.4 GW, up 2% year-on-year
compared to 2014. The infrastructure
in the thermal power sector is quite
outdated, with almost 55% of the
installed capacities being more than
30 years old. The main thermal power
stations in Russia use organic fuels
such as gas or coal.
32
NUCLEAR POWER PLANTS
Russia has full-cycle technology for
the nuclear industry from extraction
of uranium ore to electric power
generation. Currently, Rosenergoatom
operates 34 nuclear power units with
an overall installed capacity of 26 GW.
They account for 18.6% of domestic
electricity generation. The share of
nuclear generation in the energy of the
European part of Russia is 30% and
in the North-West part of Russia the
figure is 37%.
There is currently a process of
large-scale nuclear power plant
construction in Russia. The following
construction projects are underway:
the Novovoronezhskaya NPP Phase II,
the Leningradskaya NPP Phase II,
the Baltic NPP, and the world’s first
floating nuclear co-generation plant
named “Akademik Lomonosov”.
In 2015, the fourth reactor was
completed at the Beloyarsk NPP (the
physical start-up of the BN-800). In
addition to Russia, Rosenergoatom
is constructing nuclear power plants
abroad, namely the Kudankulam NPP
POWER GENERATION
1,100
1,050
1,000
950
900
850
300
250
200
150
100
50
0
-50
‘13
‘14
‘15
Power generation in Russia, bn kW/h
Total capacity of power plants in Russia, GW
Change in generation capacities in Russia, GW
in India, the Bushehr NPP in Iran, the
Ostrovets NPP in Belarus, the Ninh
Thuan NPP-1 in Vietnam, a nuclear
power station in Jordan, a nuclear power
station in Armenia, and the Tianwan NPP
the Second Stage in China.
Most of the 34 nuclear operating
reactors in Russia are ageing: 80% of
capacity has 20-40 year maturity. This
has led to development of a large-scale
investment programme by the state
operator Rosatom.
In 2015, electricity output grew by 8.1%
year-on-year and reached 195.2 billion
kW/h.
The estimated investments in nuclear
power increased 9% year-on-year in
2015 and reached 350 billion rubles.
HMS GROUP | ANNUAL REPORT 2015 MACROECONOMIC DEVELOPMENT MARKET TRENDS: OIL INDUSTRY POWER GENERATION & WATER UTILITIES
MARKET TRENDS
(WATER)
Water consumption in Russia
is showing stable and positive
dynamics, along with a steady growth
of tariffs and an inflow of private
investments into the sector.
Development of the water
management complex “Program of
the Russian Federation in 2012-2020”
aims to increase coverage of water
and wastewater services in Russian
regions, with a goal to reach 95%
safe water supply coverage and 87%
wastewater collection and treatment
by 2020. According to the Program,
48 reservoirs and hydroelectric
facilities will be constructed and
reconstructed at existing multipurpose
water reservoirs. The construction
and rehabilitation of infrastructure
will contribute to creating new
opportunities for equipment suppliers
and engineering firms as well as
construction companies. Emerging
interest in advanced solutions, such
as membrane systems, ultraviolet
and ozone treatment, is creating
good development prospects for
the market’s participants.
A large number of water supply
systems require modernisation due
to the low capacity of centralised
water supply systems, which is
impeding the development of
localities. The share of old pipes
in some cities is over 60%.
Capital expenditure on water
and wastewater infrastructure
is forecasted to grow from
US$ 2.3 billion in 2015 to
US$ 2.7 billion in 2020.
Today the problems of water supply
and wastewater treatment are
addressed within the framework of
the “Special-Purpose Federal Housing
Program”, special-purpose federal
programs for territorial development,
and programs for development of
the republics in the south of Russia,
the Far East, the Trans-Baikal and the
Kaliningrad regions. The programs
consist of activities for construction
and reconstruction of water supply
facilities, sanitation systems, and
wastewater treatment plants.
33
ANNUAL REPORT 2015 | HMS GROUP PERFORMANCE IN 2015
OPERATING PERFOMANCE
Backlog and order intake
Backlog1 of HMS Group by the end of 2015 decreased to Rub 24,409 million, down 14% yoy mainly due to a 54% yoy de-
cline in the large contracts portfolio.
As regards standard equipment, the backlog grew by 9% yoy from Rub 18,081 million to Rub 19,741 million. Swings in the
backlog for large contracts are incidental to a normal volatility of the portfolio and depend on large contracts signed, a client’s
production cycle, etc.
Backlog, Rub mn
Industrial pumps
Oil & Gas equipment
Compressors
EPC
Construction
Project and design
Total
2015 FY
10,075
5,716
6,915
1,702
581
1,121
24,409
2014 FY
11,076
12,343
2,131
2,693
1,671
1,022
28,243
Change yoy
-9%
-54%
224%
-37%
-65%
10%
-14%
In the pump business segment the backlog declined by 9% yoy to Rub 10,075 million due to fewer contracts signed for
standard equipment.
The oil & gas equipment business segment’s backlog declined to Rub 5,716 million, because of ongoing recognition of
revenues from the Group’s large contracts in the oil & gas equipment business segment. However, the backlog for standard oil
& gas equipment increased by 76% yoy.
The compressors business segment grew more than threefold and reached Rub 6,915 million not only because of a large con-
tract signed in the 3rd quarter, but also thanks to an explosive growth in small- and middle-size orders (+83% yoy).
The EPC segment’s backlog was down by 37% yoy to Rub 1,702 million due to negative performance of the construction
sub-segment.
1 Backlog is calculated under management accounts 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, including adjustments in compliance with IFRS. 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.
Note: Backlog for 2014 was adjusted for Rub 733 mn, and order intake for 2015 was adjusted by Rub 2.9 bn
34
HMS GROUP | ANNUAL REPORT 2015 OPERATING PERFORMANCE FINANCIAL PERFORMANCE
Order intake2 for FY 2015 decreased to Rub 32,979 million, down 5% yoy compared to FY 2014 mainly because fewer large-
scale orders were received in 2015. In addition, an almost 50% drop in the EPC segment affected the whole order intake. The
volume of large contracts signed declined by 42% yoy, and, in contrast, the number of standard equipment orders increased by
6% yoy.
Order intake, Rub mn
Industrial pumps
Oil & Gas equipment
Compressors
EPC
Construction
Engineering
Total
GROUP PERFORMANCE
2015 FY
15,399
7,919
8,145
1,517
-181
1,698
32,979
2014 FY
15,592
13,963
2,168
2,983
1,559
1,424
34,705
Change yoy
-1%
-43%
276%
-49%
n/a
19%
-5%
Revenue reached Rub 37,296 million, 15% yoy higher than Rub 32,351 million the year before.
EBITDA grew by 41% yoy to Rub 7,446 million. As the result, EBITDA margin for the full year reached 20.0% versus 16.3% for
the comparative period.
Rub mn
Revenue
EBITDA
EBITDA margin
2015 FY
37,296
7,446
20.0%
2014 FY
32,351
5,272
16.3%
Change yoy
15%
41%
-
The main reason for the higher revenue and EBITDA for the full year 2015 is the execution of large contracts on the back of
slow but stable growing revenue and EBITDA from standard production.
Export sales of the Group amounted to Rub 3,819 million (10% share of HMS’ revenue).
2 Under management accounts, signed contracts during the reporting period.
35
ANNUAL REPORT 2015 | HMS GROUP
PERFORMANCE IN 2015
OPERATING PERFOMANCE
(CONTINUE)
Cost of sales, Rub mn
2015 FY
2014 FY
Change yoy
Share of
revenue 2015
Share of
revenue 2014
Total cost of sales
Supplies and raw materials
Labour costs
Construction & design and engineering
services of subcontractors
Depreciation and amortization
Others
25,783
16,520
5,928
1,135
1,281
919
23,511
13,400
5,677
1,763
1,264
1,407
10%
23%
4%
-36%
1%
-35%
69.1%
44.3%
15.9%
3.0%
3.4%
2.5%
72.7%
41.4%
17.5%
5.4%
3.9%
4.4%
Cost of sales grew by 10% yoy to Rub 25,783 million from Rub 23,511 million. The growth was mainly due to a 23% yoy
increase in the costs of supplies and raw materials, which accounted for 44% share of the revenue compared to 41% last
year. This significant growth was the result of execution of large contracts in the oil & gas business segment, which are more
material-intensive.
Since large contracts are more material-intensive but less labor-intensive, the labor costs demonstrated only a slight increase,
but as a share of revenue they decreased to 16% from 18% in the comparative period.
Operating expenses,
Rub mn
Distribution and transportation
General and administrative
Other operating expenses
Total operating expenses
Finance costs
2015 FY
2014 FY
Change yoy
Share of
revenue 2015
Share of
revenue 2014
1,378
4,603
624
6,605
2,087
1,237
4,340
222
5,798
2,148
11%
6%
181%
14%
-3%
3.7%
12.3%
1.7%
17.7%
5.6%
3.8%
13.4%
0.7%
17.9%
6.6%
Distribution and transportation expenses increased by 11% yoy to Rub 1,378 million rubles. As a percentage of revenue the
figure went down to 3.7% from 3.8% for the full year 2014.
General and administrative expenses totaled Rub 4,603 million for FY 2015, up 6% yoy because of a 16% yoy growth of
labour costs due to an increase in compensation to employees combined with a change in the base for statutory social
insurance contributions (SICs). From 2015 onwards all payments to employees are included in the base for SICS. Limits for
some SIC bases were raised and limits for some SICs were scrapped. Despite the increase of labour costs in absolute terms,
general and administrative expenses, as a share of revenue, declined to 12% compared to 13% for the FY 2014.
In absolute figures, SG&A expenses3 grew by 7% yoy, but in terms of share of revenue they decreased to 16% from 17% for
2014. This is a direct consequence of the operating leverage, when revenue is growing faster than expenses.
3 SG&A expenses = Distribution and transportation expenses + General and administrative expenses
36
HMS GROUP | ANNUAL REPORT 2015 OPERATING PERFORMANCE FINANCIAL PERFORMANCE
Total operating expenses4 grew by 14% yoy to Rub 6,605 million from Rub 5,798 million, but as a percentage of revenue they
declined to 17.7% from 17.9% in the comparative period.
Operating profit increased more than five-fold and reached Rub 4,525 million versus Rub 855 million in the previous year.
Operating margin grew to 12.1% from 2.6% for the FY 2014.
In 2014, the Group recognized Rub 2,186 million impairment of goodwill, which reflected geopolitical risks and
worsened economic conditions in Russia. And in 2015, HMS recognized impairment of property, plant and equipment of
Giprotyumenneftegaz and Bobruisk Machine Building Plant in total amount of Rub 364 million, and impairment of investment
property of Rub 19 million (Rub 383 in total).
If adjusted, the Group’s operating profit increased by 61% yoy to Rub 4,909 million with operating margin adj. at 13.2% versus
9.4% last year.
Operating profit reconciliation,
Rub mn
Operating profit
Impairment of property, plant and equipment
and investment property
Impairment of goodwill
Operating profit, adj.
Operating margin, adj.
2015 FY
2014 FY
Change yoy
4,525
383
0
4,909
13.2%
855
0
2,186
3,041
9.4%
429%
-
-
61%
-
Finance costs decreased by 3% yoy, where interest expenses for 12 months 2015 were 28% yoy higher and reached Rub
1,804 million while foreign exchange loss went down by 52% yoy to Rub 343 million from Rub 720 million in the previous
year.
Interest expenses’ growth is the result of the average debt burden5 growth (Rub 16.4 billion for the FY 2015 vs. Rub 14.8
billion for the FY 2014) combined with an increase in the average interest rate6:
• 10.7% for 2015 vs. 9.8% for 2014 for all loans, including FX-denominated,
• 11.7% for 2015 vs. 10.6% for 2014 correspondingly for Rub-denominated loans.
HMS Group undertook major efforts to keep interest rates at a manageable level.
4 Total operating expenses = Distribution and transportation expenses + General and administrative expenses + Other operating expenses (net)
5 Total debt average FY 2015 is derived as (Total debt 31.12.2014 + Total debt 31.12.2015)/2, and total debt average FY 2014 is derived as (Total debt 31.12.2013 + Total debt
31.12.2014)/2.
6 Herein, average interest rate for 2015 is derived as (weighted average interest rate on 01.01.2015 + weighted average interest rate on 01.01.2016)/2, and average interest rate for 2014 is
derived as (weighted average interest rate on 01.01.2014 + weighted average interest rate on 01.01.2015)/2.
37
ANNUAL REPORT 2015 | HMS GROUP PERFORMANCE IN 2015
OPERATING PERFOMANCE
(CONTINUE)
Profit for the period reached Rub 1,764 million versus loss for the period of Rub 1,575 million in the previous year. If adjusted
for one-off impairments, profit for the year adjusted increased by 239% yoy to Rub 2,071 million from Rub 611 million, and
profit for the year margin adjusted was 5.6% this year versus 1.9% last year.
Net income reconciliation,
Rub mn
Profit / (Loss) for the year
Impairment of property, plant and equipment
and investment property (net of tax 20%)
Impairment of goodwill
Profit for the year, adj.
Profit for the year margin, adj.
SEGMENT PERFORMANCE
2015 FY
1,764
307
0
2,071
5.6%
2014 FY
-1,575
0
2,186
611
1.9%
Change yoy
n/a
-
-
239%
-
The reportable operating segments derive their revenue primarily from the manufacture and sale of industrial pumps, oil
and gas equipment, compressors, oil and gas construction and the other products and services. From 2015 onwards, HMS
Group will report a total segment’s revenue, which includes external revenue and intersegment revenue, for more consistent
demonstration of the performance of each segment.
Industrial pumps Business Segment
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 customized pumps and integrated solution as well as
standard pumps; it also provides aftermarket maintenance and repair services and other support for its products.
Industrial pumps, Rub mn
Revenue
EBITDA
EBITDA margin
2015 FY
17,925
4,098
22.9%
2014 FY
16,899
3,137
18.6%
Change yoy
6%
31%
-
The industrial pumps business segment’s revenue grew to Rub 17,925 million from Rub 16,899 million (+6% yoy). EBITDA
increased by 31% yoy to Rub 4,098 million due to several factors: input of large-scale contracts in the oil & gas equipment
business segment, import substitution, and costs optimization along with NEM’s costs depreciation because of deprecation
of the Ukrainian hryvnia against the Russian ruble. EBITDA margin grew up to 22.9% not only because of execution of large
contracts, which are more profitable, but also because of growth of the average margin of standard pumps production.
38
HMS GROUP | ANNUAL REPORT 2015 OPERATING PERFORMANCE FINANCIAL PERFORMANCE
Oil & Gas equipment Business Segment
The oil & 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 core 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.
Oil & Gas equipment, Rub mn
Revenue
EBITDA
EBITDA margin
2015 FY
15,218
3,246
21.3%
2014 FY
10,291
1,908
18.5%
Change yoy
48%
70%
-
The oil & gas equipment business segment continued to deliver outstanding results due to signed contracts for delivery of
integrated solutions both in terms of revenue and EBITDA. Revenue increased by 48% yoy to Rub 15,218 million, EBITDA
was up 70% yoy and reached Rub 3,246 million with EBITDA margin growing to 21.3% from 18.5% last year.
Compressors Business Segment
The compressors business segment designs, engineers, manufactures and supplies a diverse range of compressors and
compressor-based solutions, including compressor units and compressor stations, to customers in the oil and gas, metals and
mining and other basic industries in Russia. The business segment’s main products include standard compressors, customized
compressors and compressor-based integrated solutions.
Compressors, Rub mn
Revenue
EBITDA
EBITDA margin
2015 FY
4,183
315
7.5%
2014 FY
Change yoy
2,661
-255
-9.6%
57%
n/a
-
Revenue grew by 57% yoy to Rub 4,183 million. EBITDA turned positive Rub 315 million in comparison to negative Rub 255
million last year. The improving results of the compressors business segment are explained by increased number and value of
contracts for standard equipment combined with execution of a large contract in the oil & gas equipment business segment.
In addition, the most shipments and revenue recognition was completed in the 4th quarter of 2015. EBITDA margin reached
7.5% versus negative 9.6% last year.
39
ANNUAL REPORT 2015 | HMS GROUP PERFORMANCE IN 2015
OPERATING PERFOMANCE
(CONTINUE)
Engineering, Procurement and Construction (EPC) Business Segment
The engineering, procurement and construction (EPC) business segment provides design and engineering services, project
management and construction works for projects for customers in the oil & gas upstream and midstream.
EPC, Rub mn
Revenue EPC
Project and design
Construction
EBITDA EPC
Project and design
Construction
EBITDA margin EPC
Project and design
Construction
2015 FY
2014 FY
Change yoy
2,617
1,593
1,024
180
132
48
6.9%
8.3%
4.7%
3,356
2,266
1,089
490
279
211
14.6%
12.3%
19.3%
-22%
-30%
-6%
-63%
-53%
-77%
-
-
-
The EPC business segment’s results continued to weaken compared to FY 2014 with revenue down to Rub 2,617 million
(-22% yoy) and EBITDA decreasing by 63% yoy to Rub 180 million.
In general, the EPC segment is experiencing tougher competition and stiffer pricing in the oil & gas engineering and
construction market, which influenced the segment’s financial results. As a result, the EPC margin went down to 6.9% from
14.6% in the period of comparison.
40
HMS GROUP | ANNUAL REPORT 2015 OPERATING PERFORMANCE FINANCIAL PERFORMANCE
FINANCIAL PERFOMANCE
Cash flow performance
Cash flow performance, Rub mn
2015 FY
2014 FY
Change yoy
Net cash (used in)/from operating activities
Net cash used in investing activities
Free cash flow (FCF)
Net cash (used in)/from financing activities
Cash & cash equivalents
1,881
-1,431
451
-1,594
3,496
960
-1,112
-153
3,031
4,535
96%
29%
-395%
-153%
-23%
Working capital7 grew by 29% yoy to Rub 8,813 million from Rub 6,834 million last year, primarily due to realization of large
contracts. As a share of revenue, working capital increased to 24% compared to 21% last year, still within a normal range of
working capital requirements when executing large and technically sophisticated projects.
Capital expenditures for the FY 2015 grew by 19% yoy to Rub 1,457 million from Rub 1,223 million for the FY 2014. HMS
Group is close to completion of the 1st stage of its ambitious project, a so-called “The Localization Project”, to develop
manufacture competences for high-capacity oil refining and transport pumps and nuclear pumps in Livny, the Orel region.
The largest share of current capital expenditures (c.44%) was channelled to this investment project. Excluding this localization
capex, the general maintenance capex decreased by c. 28% yoy compared to the last year.
In December 2015, the company signed a loan agreement with the Fund of Industrial Development (the Ministry of Industry
and Trade of the Russian Federation). The Fund provided HMS Group with a 5-year special-purpose loan worth Rub 500
million at an interest rate of 5% to invest in The Localization Project.
Investing cash outflow increased by 29% yoy to Rub 1,431 million because of the growing capital expenditures. Despite this
fact, free cash flow turned positive Rub 451 million versus outflow of Rub 153 million last year because of higher margins in
2015.
Debt and Liquidity position
Debt & Liquidity, Rub mn
Total debt
Long-term debt
Short-term debt
Cash & cash equivalents
Net debt
Net debt / EBITDA LTM
2015 FY
15,884
11,218
4,667
3,496
12,388
1,66
2014 FY
Change yoy
16,967
13,235
3,732
4,535
12,432
2,36
-6%
-15%
25%
-23%
0%
-
Total debt of HMS Group declined by 6% yoy to Rub 15,884 million, and Net debt was almost flat at Rub 12,388 million with
a slight decrease in absolute figures. Reduction in total debt was attributable to payments received under both contracts under
execution and newly signed contracts at the end of 2015.
Because of EBITDA’s growth along with the constant level of net debt, Net debt-to-EBITDA LTM ratio decreased to 1.66x
from 2.36x.
4 Working capital = Inventories + Trade and other receivables (excluding Short-term loans issued, Bank deposits and Promissory notes receivable) + Current income tax receivable - Trade and other
payables - Short-term provisions for liabilities and charges - Current income tax payable - Other taxes payable
41
ANNUAL REPORT 2015 | HMS GROUP
PERFORMANCE IN 2015
FINANCIAL PERFOMANCE
(CONTINUE)
On January 1, 2016, the weighted average interest rate was 11.4% vs. 10.0% on January 1, 2015, for all loans, including
FX-denominated, owing to new credit lines obtained at higher rates, though lower than average prevailing interest rates. The
weighted average interest rate for Rub-denominated loans only increased to 12.5% from 10.9% as of January 1, 2015.
Dividends and HMS GDRS
On December 7, 2015, the Board of Directors approved the payment of interim dividends of Rub 3.25 per ordinary shares,
amounting to total dividends of Rub 381 million, as a compensation for lack of dividends for 2014 due to the strong and
better than expected financial results for 9 months 2015 and expectations for the full year. The dividends were paid on
December 30, 2015.
On June 19, 2015, the Board of Directors approved a buyback program of the company with respect to global depositary
receipts. The buyback period was set for 1 year from June 19, 2015, until June 19, 2016. According to the program, the
company can repurchase from the market maximum 5% of the subscribed capital of HMS Group, including previously acquired
and held at present GDRs (Treasury shares).
as of June 19, 2015
Subscribed capital of HMS Group (ordinary shares)
Maximum number of GDRs to be purchased
Treasury shares (GDRs)
Number of GDRs, HMS can purchase
under the Buyback program
Number of
securities
117,163,427
5,858,171
1,819,444
4,038,727
% share in the
capital
Number of securities after
GDRs’ ratio change
100
5
1.55
3.45
-
1,171,634
363,889
807,745
Securities should be repurchased at the prevailing market price at the date of such purchase and may not exceed 5% of the
average market price for all market trades within 5 days prior to the acquisition. All purchases are carried out by the Company
with the assistance of Renaissance Capital. The Buyback program will end as soon as the total amount of acquired securities
has reached the maximum amount specified or, if earlier, on June 19, 2016.
As of today, HMS Group repurchased 553,332 GDRs (2.36% of HMS’ subscribed capital) and there are 618,302 GDRs left the
company can buy under the program.
as of April 28, 2016
Subscribed capital of HMS Group (ordinary shares)
Maximum number of GDRs to be purchased
Treasury shares (GDRs)
Number of GDRs, HMS can purchase
under the Buyback program
Number of
securities
117,163,427
5,858,171
2,766,660
3,091,511
% share in the
capital
Number GDRs
100
5.00
2.36
2.64
-
1,171,634
553,332
618,302
42
HMS GROUP | ANNUAL REPORT 2015 OPERATING PERFORMANCE FINANCIAL PERFORMANCE
SIGNIFICANT EVENTS AFTER THE REPORTING DATE & FINANCIAL MANAGEMENT
Financial management
On February 2, 2016, HMS Group completed an early full redemption of its Ruble 3bn bonds series 03 with a 10.10% coupon
rate with maturity in February 2018. Currently, HMS Group doesn’t have any Ruble corporate bonds outstanding.
Within the full year of 2015, HMS Group refinanced Rub 5.9 billion. In general, throughout the year, HMS Group signed loan
agreements to refinance its credit portfolio and to finance its capital needs worth Rub 13.7 billion.
At the beginning of this year, HMS Group increased its uncommitted revolving credit line with VTB Bank from Rub 4.5 billion
to Rub 10.0 billion.
Depositary program
In February 2016, the ratio of HMS’ depositary receipts program was changed from 1:1 to 1:5. According to the “new” ratio,
1 depositary receipt became equal to 5 ordinary shares, and on February 8, 2016, HMS Group’s shareholders received 1
“new” GDR for every 5 “old” GDRs. Only whole depositary receipts were distributed and, in effecting this, “old” receipts were
rounded down, fractional receipts were sold on the market and the cash proceeds were distributed to the depositary receipts’
holders. The issued number of ordinary shares and their nominal value stayed unchanged.
Also, under a new deposit agreement with BNY Mellon, the annual depositary fee became equal to US$ 0.01 per “new” GDR
instead of US$ 0.03 per “old” GDR, implying a 15-fold decrease in such fees.
After the reverse split, issued number of GDRs equals 9,600,800, where 8,728,000 depositary receipts are outstanding and
872,800 - “green-shoe’ ones.
Large contracts
In February 2016, HMS signed a Rub 2.8 billion contract to produce a boosting compressor station, based on 3 centrifu-
gal-type compressor units with gas-turbine engines and intended for compression of low-pressure associated gas. The station
will be manufactured by Kazancompressormash and installed at an oil & gas condensate field in West Siberia, by the end of
2016.
In March 2016, HMS Neftemash signed a number of contracts for delivery and installation of technologically integrated solu-
tions for two Siberian gas fields, worth Rub 3.1 billion. These solutions will be intended for pumping of natural gas liquids and
pumping of oil, wash-down water and rust preventive chemical. These contracts are a follow-up to another project, recently
completed successfully.
Incentive program
On March 23, 2016, the Board of Directors decided to establish a long-term incentive program for the key executives to
align the objectives of the shareholders and the executives, to retain and motivate the key executives in the form of a stock
ownership program with GDRs’ vesting linked to HMS’ performance. GDRs for this program will come from GDRs owned and
bought by the company, so this program will not dilute ownership of existing shareholders. As the basic scenario, the pro-
gram’s fund would be equal to 5% of HMS’ share capital in the form of GDRs, subject to 100% of the KPIs (Profit for the year
attributable to the shareholders of the company and EBITDA).
43
ANNUAL REPORT 2015 | HMS GROUP PERFORMANCE IN 2015
HMS KEY PROJECTS
PROJECTS ON TRACK
In the 1st half of 2014, HMS Group
signed a contract for more than
6 billion rubles with one of the
Russian oil & gas majors to deliver
oil & gas equipment as part of a
large-scale project, the “Liquid
Hydrocarbon Project”, which
is planned to be completed in 2016.
In December 2013, the company
signed a 5.7 billion rubles contract
to supply an integrated solution for
a major Siberian gas field. According
to the contract, HMS will design,
manufacture, deliver, supervise and
test the complex technological facility,
including compressors, pumps, tanks
and vessels, filters, coolers and other
components. The project is planned
to be completed in 2016.
44
HMS GROUP | ANNUAL REPORT 2015
Centrifugal compressor 4GC2-75/30-83 GTU with gas-turbine engine
Testing of centrifugal compressor
FINANCIAL PERFORMANCE HMS KEY PROJECTS R&D DEVELOPMENT
NEW PROJECTS
In September 2015, HMS Group
signed a 3.5 billion rubles contract
to deliver 5 high-pressure compressor
units, intended for compression
of separated associated gas. All
units will be manufactured by
Kazancompressormash and installed
at an oil and gas condensate deposit,
located in the Ural region of Russia.
NEW PROJECTS AFTER
THE REPORTING DATE
In February 2016, the company
signed a 2.8 billion ruble contract
to produce a boosting compressor
station. The station, based on 3
centrifugal-type compressor units
with gas-turbine engines and intended
for compression of low-pressure
associated gas, will be manufactured
by Kazancompressormash and
installed at an oil and gas condensate
deposit, located in the West Siberia.
The project is to be completed by
the end of 2016.
A month later, HMS signed a
number of contracts for delivery
and installation of technologically
integrated solutions for two Siberian
gas fields, worth 3.1 billion rubles.
The company will deliver complex
solutions for pumping of natural gas
liquids and pumping of oil, wash-
down water and rust preventive
chemical. All units will be delivered
by HMS Neftemash. These contracts
are a follow-up to another project
successfully completed recently.
Modular cluster pump station for
“Buzachi Operating Ltd”, Kazakhstan
System for measuring volume
and quality of crude oil for the
oil & gas production department
«Sorochinskneft» (Rosneft)
Compressor station with liquid-ring compressor for Rosneft
ANNUAL REPORT 2015 | HMS GROUP
45
PERFORMANCE IN 2015
R&D DEVELOPMENT
HMS Group is continuously strengthening its research and development
capabilities and the Company`s strategy is aimed at establishing the best
Research & Development in Russia and the CIS. Our investments are dedicated
to strengthening our core competencies in industrial pumps, oil & gas
equipment and compressor technologies, and in developing solutions
for the oil and gas industry and water utilities.
In 2015, HMS continued the
process of the localization of heavy
pumps and pumping equipment
manufacturing at HMS Livgidromash
and Nizhnevartovskremservice,
in close cooperation with
Nasosenergomash (Ukraine); the
company completed the 1st stage in
Q1 2016. Within the framework of
the project, the company constructed
a new production unit and a new
transformer substation.
The new test complex built will
become the only one of its kind in
Russia, enabling the testing of the
pumping units installed in the oil
pipelines of Transneft and Rosatom’s
nuclear power plants. It consists of all
necessary main and support systems
to conduct operational testing of the
heavy centrifugal pumping units.
Following an increasing customer
demand for multiphase flow metering
units and in order to enhance the
expertise in the development of
this type of equipment, HMS Group
completed the construction of
the largest and the most hi-end
multiphase metrological test flow
facility in Russia, which will allow the
testing and metrological calibration of
up-to-date multiphase metering units.
The Federal Agency on Technical
Regulating and Metrology of the
Russian Federation (Rosstandard)
46
HMS GROUP | ANNUAL REPORT 2015
certificated the facility and approved
it as the working standard of flow rate
unit of liquid-gas mixtures.
Representatives of the world largest
metering unit producers – Siemens,
ABB, Honeywell, Schneider Electric,
Weatherford and Emerson – took part
in a formal opening ceremony which
was held in March, 2016.
HMS Group conducted several trial
tests of a new well testing mobile
unit, MERA-MR, to develop new
competences in heavy oil reservoirs
and oil wells with high viscosity fluids.
Multiphase metrological test flow
facility
Centrifugal double suction pump type
series DeLium
HMS KEY PROJECTS R&D DEVELOPMENT SOCIAL RESPONSIBILITY
Debits measuring tests were
successfully performed at the East –
Messoyakha and Russkoye fields with
high–viscosity oils (up to 1.000 cSt) in
2014. In 2015, HMS Group produced
and delivered unique metering units
to operate at the R. Trebs & A. Titov
Fields (Bashneft). These units were
specially projected for transportation
by different means of transport:
helicopter, truck transport or sledge
drag.
HMS Group started production of
a new NetOil&Gas multiphase flow
meter, which is the key metering
assembly of MERA-MR metering unit
made by HMS Neftemash since 2014.
Over the short period of time, this
product became the most perspective
system for measurement of oil
production rate at oil wells, including
high viscous oil ones. The NetOil&Gas
flow meter is based on continuous
recording of oil production rate and
is designed on the base of Foxboro
coriolis meter, pressure detectors,
temperature detectors, moisture
meters and a calculator. The flow
meter uses mathematical analyses
of artificial neural networks for finding
multiphase flow meter parameters
without pre-separation.
Also, there was a dehydration unit
for oil associated gas produced and
delivered under the Chashkino gas
compressor station project (LUKOIL).
The unit was designed for reduction
of the water dew point of oil
associated gas to a temperature not
higher than -15ºC by an absorption
method of gas dehydration, which
provides efficient and continuous
plant operation. Application of plate
heat exchangers instead of shell and
tube ones allows reduction of the
unit’s overall dimensions
HMS Group successfully completed at
the Mendeleev super-computer model
simulation of bed process, which
occurs at injection of binary mixtures
agent for thermal-gas-chemical
formation treatment to enhance
oil recovery.
The company signed a state contract
with the Ministry of Science of
Technology of the Russian Federation
to carry out a complex project
to develop the technology of
thermochemical fracturing instead
of the foreign technology of hydraulic
fracturing with proppant gel.
HMS Group manufactured a new
type of centrifugal compressor units
for oil & gas producing wells, that is
intended for complex variable-load
operations with parallel pressure
cases. Also, a new type of centrifugal
compressor unit 3GC2-75/30-83
GTU with an integrated lubrication
system of centrifugal compressor
and driving gas turbine unit has been
developed, produced and supplied to
a client already.
HMS Group developed a method
of oil degassing and dehydration
and equipment, which can be used
on oil deposits, among other things,
at a booster pump station equipped
with multiphase pumps. The product
allows improving of the efficiency of
oil-gas-water mixture preparation for
transportation due to enhancement
of efficiency of oil-water separation.
Before the separation, the mixture
is heated by additional gas pumped
by a multiphase pump, that has
a temperature not lower than the
mixture has. Some part of the gas
separated from the mixture, can
be reused as umped gas.
Mobile metering unit MERA-MR
NetOil&Gas multiphase flow meter
HMS Group continues to strengthen
its expertise in equipment designed
according to international standards.
In 2015, Apollo implemented a
number of new developments.
Besides a couple of new pump
types and systems, a number of new
hydraulics and additional pump sizes
was completed.
ANNUAL REPORT 2015 | HMS GROUP
47
PERFORMANCE IN 2015
R&D DEVELOPMENT
Pos.
Event type (new development, successful
testing, development of new equipment)
Date of test /
commissioning
Additional information
KRHA-200/550
• Single stage pump (type OH2 acc. to API610)
• Designed as heavy duty process pump
01/2015 • New pump size within the existing pump series KRHA
• New set of patterns for impeller and volute casing
• Successfully tested at Apollo test field
02/2015 • New pump size within the existing pump series KRHL
Includes a complete range of different hydraulic parts
•
• New set of patterns for impellers, pump casing, diffusor and
casing cover
• Successfully tested at Apollo test field
• The range of the type series KRHL extended to even lower
capacities
02/2015 • New pump size within the existing pump series KRH
• New set of patterns for impeller and volute casing
• Successfully tested at Apollo test field
• The extend of the type series has a special importance for
applications within Offshore, Oil & Gas and Power plant
business
06/2014 • A new pump series based on API610 BB2 2-stage pump
• Development was focused on the expansion of the existing
pump performance range up to higher discharge heads with a
single-casing pump to meet a wide number of applications with
a competitive solution
• Complete new design and a new set of patterns for hydraulic
parts like impeller, volute casing and casing cover
12/2015 • New pump size within existing pump series ZPRA and ZPR
• New set of patterns for impeller and volute casing
• Successfully tested at the Apollo test field
• Special importance for applications within Offshore, Oil & Gas
and Power plant business
1
2
3
KRHL-25/250
• Single stage pump (type OH2 acc. to API610)
• Low Flow High Head design
• With semi open impeller
• Complete range of different hydraulics
including new sets of hydraulic parts
KRH-40A/280
• Single stage, radial split, volute casing pump
(type OH2 acc. to API610)
• Designed as heavy duty process pump
KGR-80/400
• Horizontal, 2-stage, single suction, between
bearing pump (type BB2 acc. to API610)
4
• Designed as heavy duty process pump
6
ZPRA-300/600
• Horizontal, single stage, double suction,
between bearing pump (type BB2 acc. to
API610)
• Designed as heavy duty process pump
• Special design with side suction nozzle
ZPR-100/400
• Horizontal, single stage, double suction,
between bearing pump (type BB2 acc. to
API610)
• Designed as heavy duty process pump
• Special design with side suction nozzle
48
HMS GROUP | ANNUAL REPORT 2015
HMS KEY PROJECTS R&D DEVELOPMENT SOCIAL RESPONSIBILITY
KRHA-350/550
• Single stage, radial split, volute casing pump
(type OH2 acc. to API610)
7
• Designed as heavy duty process pump for a
09/2015 • New pump size within existing pump series KRHA
• New set of patterns for impeller and volute casing
• Successfully tested at Apollo test field
• Special importance for applications within Offshore, Oil & Gas
offshore application
and Power plant business
• All pumps were delivered acc. DNV Category 1 including
complete design review
KRH-40C/350
• Single stage, radial split, volute casing pump
8
(type OH2 acc. to API610)
• Designed as heavy duty process pump for
09/2015 • New pump size within existing pump series KRH
• New set of patterns for impeller and volute casing
• Successfully tested at Apollo test field
• Special importance for applications within Offshore, Oil & Gas
offshore application
and Power plant business
TGC-100C/4
• High pressure BB5 pump acc. to API610;
back-to-back design;
• Water injection pump for offshore application
FPSO
9
KRH-40/280
• Single stage, radial split, volute casing pump
10
(type OH2 acc. to API610)
• Designed as heavy duty process pump
09/2015 • Skid weight approx. 15.000 kg
• Complete skid with pump, motor and noise enclosure
• Successfully tested as complete skid at Apollo test field
• 4-hour mechanical run test witnessed by the customer.
• Complete new set of patterns for hydraulic parts like impellers,
diffusers and Barrel
• All pumps were delivered acc. DNV Category 1 including
complete design review
09/2015 • New pump size within existing pump series KRH
• New set of patterns for impeller and volute casing
• Successfully tested at Apollo test field
• Special importance for applications within Offshore, Oil & Gas
and Power plant business
HMS Group’s current operating
portfolio of 246 patents, 46
registered trademarks and 26
registered computer programs
reflects our commitment to research
& development.
In 2015, HMS Group continues
complex protection of its exclusive
rights to its products in line with
differentiation of goods and services
to acquire the right of exclusive use
in the market. The company received
exclusive rights on 19 intellectual
property assets: 13 invention and
utility model patents, 3 registrations
of application software, and 3
trademark registrations. The patented
technologies are intended for work
enhancement of units to measure
oil flowrate, a separating assembly
for a stand to test functioning of
these units, centrifugal pumps and
compressors and their components,
and improvement of a conditioning
process of oil-gas-water blend for
transport.
ANNUAL REPORT 2015 | HMS GROUP
49
PERFORMANCE IN 2015
SOCIAL RESPONSIBILITY
HMS Group fully recognises its responsibility to all of its stakeholders and
communicates with them on a regular basis. The Group has a long and solid
record of commitment to our people, contributing to social development and
improvements in the quality of life across local communities in the regions
where we operate.
PEOPLE FIRST!
Employing over 15,000 people and
being one of the major employers in
cities where our facilities are located,
we carry enormous responsibilities.
We believe that employees are one
of the core assets of HMS Group,
and that we can only be successful
and sustainable by attracting and
retaining the best people, encouraging
and developing them to achieve
their full potential. In 2015, we
continued investment in staff training
and education, focussing mainly on
accounting and functional education,
including development of managerial
competencies of the company’s
officers (MBA/EMBA programs), and
English language teaching. Training
and development are managed locally
in order to address both the needs of
the facility and those of the employee.
About 140 trainings and courses were
held in Moscow alone.
In 2015, HMS Group continued
its planned recruitment to open
positions. As at 31 December 2015,
the company employed more than
15,000 people, although this was
less than in 2014 due to a planned
optimization.
Safety is one of our priorities and
the company improves its health
and safety standards on a regular
basis. There are courses and trainings
on occupational safety, fire and the
environment held at all production
sites throughout the year. The entities
also hold regular, routine medical
check-ups for employees working
in hazardous production areas.
We promote and encourage a healthy
lifestyle because not only does it help
to maintain a productive and positive
workplace, but it is also the right
thing to do. In 2015, HMS Group
held a number of family and sporting
competitions and other events
that over the years have become
a tradition in the corporate life
of HMS Group subsidiaries.
ENVIRONMENT
Efficient use of natural resources is
one of HMS Group’s main priorities.
The Group systematically implements
environmental and energy-saving
technologies at its production
sites, even though in general the
environmental impact of HMS Group
subsidiaries is low.
50
HMS GROUP | ANNUAL REPORT 2015
We not only continue to work on
developing and selling energy-efficient
product and service solutions, but also
all of our businesses focus on efficient
consumption of fuel, paper, water,
electricity and heating.
HMS Group conducts activities on
a regular basis to offset environmental
impacts, including waste management,
analysis and control of water quality
on industrial sites, environmental
emission compliance, and industrial
environmental monitoring.
R&D DEVELOPMENT SOCIAL RESPONSIBILITY
CHARITY
In 2015, HMS Group continued its
long-standing tradition of investing
in the future by developing local
community projects. The company
believes that charity initiatives and
the creation of jobs and business
opportunities strengthen local
economies and support community
development projects.
HMS Group sponsored various
projects that support healthy lifestyles
and education for children and youth,
culture and arts.
In Kazan, HMS Group continued
its sponsorship of the Ice-Hockey
Federation and the Judo Federation
in the field of youth sports
development.
The company pays extra attention
to children from low-income and
vulnerable families, orphanages
and health care institutions. In Livny,
HMS Group supports a number
of schools, kindergartens, regional
hospitals and orphanages.
In Tyumen, the company provided
support to the Regional Medical
Society, the Tyumen Regional
Fund for Judo and continued its
commitment to sponsorship of
Boarding School #66. In Moscow,
HMS Group continued to support
the Preobrazhensk Cadet Corps.
Average headcount as at December 31, 2015
Industrial pumps
Oil & gas equipment
Compressors
EPC
Other
Total
2007
8,480
2,148
0
2008
8,395
2,135
0
2009
7,344
2,126
0
2010
7,197
2,132
2011
8,522
2,482
0
0
2,070
2,410
3,157
3,269
3,175
188
188
215
241
247
2012
8,958
2,463
2,373
3,725
295
2013
8,931
2,396
2,271
3,014
303
2014
9,199
1,862
2,509
1,747
295
2015
9,152
1,924
2,276
1,600
284
12,886
13,128
12,842
12,839
14,426
17,814
16,913
15,613
15,236
ANNUAL REPORT 2015 | HMS GROUP
51
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
1
2
3
4
5
52
HMS Group’s corporate governance
practices are designed to ensure that
the interests of all its stakeholders
are given due consideration.
Although the Company is not
a subject to any mandatory
corporate governance code in
its home jurisdiction of Cyprus,
nor required to observe the UK
Corporate Governance Code, it
has implemented various corporate
governance measures. These
include the appointment of two
independent non-executive Directors
to its Board of Directors and the
establishment of an Audit Committee
and a Remuneration Committee.
Each of these Committees of the
Board of Directors is chaired by an
independent, non-executive Director.
HMS Group continues to review its
corporate governance policies in line
with international best practice.
6
7
THE BOARD OF DIRECTORS
AND PERFORMANCE
General Overview
The Board of Directors consists of
seven (7) members, three (3) of whom
are Executive Directors. During the
year ending 31 December 2015, new
Terms of Reference of the Board
of Directors and Managing Director
(CEO) were approved by the Board
of Directors.
1. MR. NIKOLAI N. YAMBURENKO
Chairman of the Board of Directors,
Non-Executive Director, Chair of the
Strategy and Investments Committee
Mr. Yamburenko was appointed as a member
of the Board of Directors in October 2010.
He has been a non-executive member of
the Board of Directors since 10 July 2014,
when he was appointed Chair of the Board
of Directors. Mr. Yamburenko previously held
the position of Head of the Industrial Pumps
Business Unit from 2005. Prior to joining
the Group, Mr. Yamburenko was the CEO
of HMS Livgidromash, which
is now part of the Group. Mr. Yamburenko
has more than 30 years of industry
experience. He graduated from the faculty
of radio electronics of the Moscow Aviation
Institute named after S. Ordzhonikidze, where
he gained a degree in radio electronics.
Executive Directors
2. MR. ARTEM V. MOLCHANOV
Member of the Board of Directors,
Managing Director (CEO)
As one of the founders of the Group,
Mr. Molchanov has held various executive
positions within HMS Group since its
establishment in 1993. Mr. Molchanov
HMS GROUP | ANNUAL REPORT 2015
BOD AND ITS COMMITTEES LITIGATIONS INVOLVING THE COMPANY
became the President of HMS Group in 2008
and was appointed as an executive member
of the Board of Directors in October 2010.
Mr. Molchanov has more than 20 years
of industry experience. He graduated
from the Plekhanov Russian Academy of
Economics (currently Plekhanov Russian
University of Economics), where he gained
a degree in industrial economics.
3. MR. KIRILL V. MOLCHANOV
Member of the Board of Directors
As one of the founders of the Group,
Mr. Molchanov has held various executive
positions within HMS Group since its
establishment in 1993. Mr. Molchanov
was appointed as an executive member
of the Board of Directors in October
2010 and has served as Vice President
of HMS Group since 2008. Mr. Molchanov
has 20 years of industry experience.
He graduated from the Bauman Moscow
Higher Technical School (currently the
Bauman Moscow State Technical University)
with a degree in electromechanical
engineering. He graduated from the Judge
Business School, University of Cambridge
with an executive MBA degree.
4. MR. YURY N. SKRYNNIK
Member of the Board of Directors
Mr. Skrynnik was appointed as an executive
member of the Board of Directors in October
2010. He is currently the Head of the
Compressor Business Segment, a position
he has held since its establishment in 2012.
Previously, Mr. Skrynnik held the position
of Director for Strategic Marketing. Prior
to joining HMS Group, he served as the Chief
Representative of JSC “Sumy Frunze NPO”
(Ukraine) in Russia from 1999 to 2008. Mr.
Skrynnik worked as Director of the Innovative
Technical Subdivision of “Machines,
Equipment, Technologies, Products
and Services” Ltd. from 1992 to 1999.
He served as a scientific research officer
at the Moscow Institute of Chemical
Machinery (currently the Moscow State
University of Environmental Engineering)
from 1986 to 1988. Mr. Skrynnik has more
than 20 years of science and management
experience. He graduated from the Sumy
branch of the Kharkiv Polytechnic Institute
with a degree in mechanical engineering in
1983. He was awarded a PhD in engineering
science from the Moscow Institute
of Chemical Machinery (currently the
Moscow State University of Environmental
Engineering) in 1988. Mr. Skrynnik is the
author of more than 50 scientific publications
and creator of 20 inventions.
Non-executive
Directors
5. MR. PHILIPPE DELPAL
Member of the Board of Directors,
Chair of the Audit Committee
Mr. Delpal was appointed as an independent
non-executive member of the Board of
Directors in December 2010 and is Chair
of the Audit Committee. Mr. Delpal has
had a career in banking, most recently as
chairman of BNP Paribas Vostok in Moscow.
He is now an Operational Partner for
Financial Services in Baring Vostok Capital
Partners, one of the largest private equity
firms in Russia. He is also currently serving
as a non-executive director for Tinkoff Credit
System Holding (LSE listed), Orient Express
Bank OJSC (Russia), Blackrock Emerging
Europe PlC (London, LSE listed investment
trust), and Komercijalna Banka AD (Serbia).
Prior to that, Mr. Delpal founded Cetelem
Russia in 2006 and served as its CEO from
2006 until 2010. Mr. Delpal was CEO of
Rusfinance Bank (Société Générale Group)
from 2004 to 2006. In addition, Mr. Delpal
has over eight years of experience as an
auditor at Société Générale. He graduated
from the Telecom Paris University with
a degree in IT, Telecoms and Economics.
He has been living in Russia since 2004.
6. MR. ANDREAS S. PETROU
Member of the Board of Directors
Mr. Petrou was appointed as a non-executive
member of the Board of Directors in June
2010. From 1989 to 1998, Mr. Petrou served
as a member of the Board of The Cyprus
Tourism Development Public Company Ltd,
representing the interests of the Government
of the Republic of Cyprus. From 1987 to
1990, Mr. Petrou served as the General
Secretary of Cyprus Dairy Organisation.
In 1986, Mr. Petrou established his own law
firm. He is an honours graduate of the Law
School of Democrious University of Thrace.
Mr. Petrou has been a member of the Cyprus
Bar Association since 1985.
7. MR. GARY S. YAMAMOTO
Member of the Board of Directors,
Chair of the Remuneration
Committee
Mr. Yamamoto was appointed as an
independent non-executive member
of the Board of Directors and Chair of the
Remuneration Committee in December 2010.
Prior to joining the Group, he served as Chief
Executive Officer at Borets International
in 2009. Mr. Yamamoto has served as the
President of Yamamoto Consulting since
2008. He served as a member of the Board
of Directors at Radius Servis from 2007 to
2008. Prior to this, Mr. Yamamoto enjoyed
a 20-year career with Schlumberger Limited
and, from 2003 to 2008, served as Vice
President of Schlumberger Russia.
Mr. Yamamoto has more than 20 years
of management experience. He graduated
from the University of California, Berkeley,
with a degree in engineering in 1988. Mr.
Yamamoto is a member of the Society of
Petroleum Engineers and the Independent
Directors Association.
53
ANNUAL REPORT 2015 | HMS GROUP CORPORATE GOVERNANCE
BOARD OF DIRECTORS
(CONTINUE)
PRINCIPAL ACTIVITIES OF THE
BOARD OF DIRECTORS IN 2015
The Board of Directors held four
ordinary meetings in 2015, all of
which occurred in Limassol, Cyprus.
During the course of the year, the
Board of Directors continued working
on the development of the Company’s
mid-term and long-term financial
and business strategy, including
investment plans, M&A activities,
budgeting, long-term incentive plan
for the management of the Company,
and general corporate development.
Throughout the year, the Board of
Directors focused on the improvement
of the Company’s internal control and
risk management systems.
At its meetings the Board of Directors
reviewed other issues connected with
the activities of the Company that are
within its remit, including the approval
of corporate reports.
THE BOARD OF DIRECTORS
COMMITTEES
There are three Committees of the
Board of Directors: the Audit Committee,
the Remuneration Committee, and the
Strategy and Investments Committee.
A brief description of the main activities
of these Committees in 2015 is set out
below.
Audit Committee
General Overview
The Audit Committee comprises two
independent Directors and is expected
to meet three to four times per year.
Currently, the Audit Committee is
chaired by Mr. Philippe Delpal; the
other member is Mr. Gary S. Yamamoto.
The Audit Committee is responsible for
considering, amongst other matters:
(i) the integrity of the Group’s financial
statements, including its annual and
interim financial statements; (ii) the
54
effectiveness of the Group’s internal
controls and risk management systems;
(iii) auditors’ reports on the Group;
and (iv) the terms of appointment and
remuneration of the auditors of
the Group.
The Audit Committee supervises,
monitors, and advises the Board of
Directors on risk management, control
systems, and the implementation
of the codes of conduct. The Audit
Committee also supervises the
Group’s submission of financial
information, a number of other
audit-related issues, and assesses
the efficiency of the work of
the Chair of the Board of Directors.
Activities in 2015
Three meetings of the Audit
Committee were held in 2015. The
main issues that the Audit Committee
oversaw during the year were the
preliminary review of IFRS financial
statements (including goodwill
impairment at the end of 2015) and
internal control and risk management
(including the audit plan).
The Audit Committee also supervised the
internal and external audit procedures,
and the implementation of the annual
tax strategy within the course of the
year. The Audit Committee also made
recommendations to the Board of
Directors with regards to internal
control efficiency and interim dividend
distribution.
Remuneration Committee
General Overview
The Remuneration Committee
comprises three Directors and is
expected to meet at least once per
year. Currently, the Remuneration
Committee is chaired by Mr. Gary S.
Yamamoto; its other members are
Mr. Nikolay Yamburenko and Mr.
Philippe Delpal. The Remuneration
Committee is responsible for, amongst
other matters, determining and
reviewing the Group’s remuneration
policies. The remuneration of
independent Directors is a matter
for the Chair of the Board of Directors
and the Executive Directors. No
Director or manager may be involved
in any decisions regarding their own
remuneration.
Activities in 2015
Three meetings of the Remuneration
Committee were held in 2015.
The main matters reviewed by the
Remuneration Committee were the
terms of the CEO’s contract and
the Group’s Long-Term Incentive
Program. Ernst & Young were engaged
to develop the Long-Term Incentive
Program in line with international
best practice.
The Remuneration Committee
adopted decisions and made
recommendations to the Board
of Directors regarding the CEO’s
contract and the Long-Term Incentive
Program, in accordance with
international best practice.
External Audit of Financial
Statements
Every year the Company/Group
appoints an external auditor who
is responsible for the auditing and
inspection of the consolidated
financial statements of the Company/
Group in compliance with IFRS. The
external auditor also prepares reviews
of the consolidated interim financial
information of the Company/Group in
compliance with IFRS requirements.
The external auditor of the Company/
Group is selected from leading audit
firms after a thorough review of their
respective proposals. Following the
review, the Audit Committee gives
its recommendations to the Board
of Directors regarding the candidacy
of the external auditor and the level
of the auditor’s compensation, and
HMS GROUP | ANNUAL REPORT 2015 LITIGATIONS INVOLVING THE COMPANY RISK MANAGEMENT & INTRNAL CONTROL
LITIGATIONS INVOLVING
THE COMPANY
advises the Board of Directors on other
terms and conditions of the contract
with the auditor. In 2015, based on
the recommendation of the Audit
Committee, the Board of Directors
selected Deloitte (Cyprus) to conduct
the audit of the financial statements
of the Company/Group for the year
ending 31 December 2014, and
Deloitte remains in the office for
the 2015 audit.
Strategy and Investments Committee
General Overview
The Strategy and Investments
Committee comprises three directors,
one of whom is independent. The
Committee is expected to meet at
least once each year. Currently, the
Strategy and Investments Committee
is chaired by Mr. Nikolay Yamburenko
and the other members are Mr. Gary
Yamamoto and Mr. Yury Skrynnik.
The Strategy and Investments
Committee is responsible for
considering, amongst other matters:
(i) strategic business combinations; (ii)
acquisitions, mergers, disposals and
similar strategic transactions involving
the Company; and (iii) fundamental
investments of the Company.
Activities in 2015
One meeting of the Strategy and
Investments Committee was held
in 2015. The main matter reviewed
by the Committee was the Group
Strategy up to 2020.
Director’s Compensation
Total compensation of the Chairman
of the Board was Euro 270,115
for the year ended 31 December
2015. Total compensation of the
independent Directors, as set out in
the Group’s consolidated statement of
profit or loss and other comprehensive
income, was Euro 225,000 for the
year ended 31 December 2015.
Grigorishin Litigation. In February
2014, the Company was served
in Cyprus with an interim order
of the District Court of Nicosia (the
“Order”). The Order was obtained
by Konstantin Grigorishin and certain
other plaintiffs against a number of
defendants, including the Company,
certain of its shareholders and
directors, and Bank of New York
(Nominees) Limited. Among other
things, the Order froze property
of most of the defendants, including
the Company, but excluding Bank
of New York (Nominees) Limited
and two other defendants, for
an amount up to EUR 400 million.
In April 2014, following prior written
and oral submissions against the
Order by the Company and several
other defendants, the District Court
of Nicosia discharged the Order in full,
including in respect of the Company
and its shareholders and directors.
As far as the Company is aware,
since then the plaintiffs have taken
no substantive steps to proceed with
their claim against the Company or
its directors.
The Company strongly rejects the
plaintiffs’ claims and allegations
against the Company as groundless.
The Company will continue to defend
vigorously its position in these
pending legal proceedings.
Tsoy Litigation. In late June 2014,
the Company’s shareholder, German
Tsoy, and his holding company, Acura
Global Limited (BVI), launched an
action in the District Court of Nicosia
against a number of defendants,
including certain other shareholders
and directors of the Company. The
plaintiffs have initiated this litigation
purportedly as a derivative action
seeking damages “for the benefit of”
of the Company “and/or” its majority
shareholder, H.M.S. Technologies
Limited. As such, no claims have been
asserted directly against the Company
by the plaintiffs.
The plaintiffs also applied to the
Court for interim measures including
an application for a freezing order (the
“Application”) against the defendants,
but not the Company. The Company
and certain of its shareholders and
directors opposed the Application.
In late March 2015, following prior
written submissions against the
Application, the plaintiffs withdrew
the Application, but not the main
action itself.
In late September 2015, the plaintiffs
submitted the statement of claim in
this on-going litigation. The Company
carefully reviewed this statement of
claim, with assistance from its Cyprus
and international counsel. On its face,
the statement of claim does not raise
any new material allegations or claims
compared to prior submissions by the
plaintiffs in relation to their withdrawn
Application.
Previously, the Company’s non-
defendant directors, namely, Messrs.
Philippe Delpal, Gary S. Yamamoto,
Andreas S. Petrou and Nikolai N.
Yamburenko, who make up the
majority of the Company’s Board
of Directors, carefully considered
the plaintiffs’ claims and allegations,
obtained legal advice from the
Company’s lawyers, and unanimously
concluded that the plaintiffs’
allegations are entirely meritless.
The Company’s non-defendant
directors will continue to defend
vigorously the Company’s position
in this on-going litigation.
In late April 2016, the Company and
certain other defendants submitted
their statements of defence in this on-
going litigation.
55
ANNUAL REPORT 2015 | HMS GROUP CORPORATE GOVERNANCE
RISK MANAGEMENT
& INTERNAL CONTROL
Internal control and risk management
monitoring is performed through
internal and external assurance
providers, which include:
• Financial statement audits
performed by external auditors.
Discussion by the Audit
Committee of the results of the
audit, including a review of the
financial performance, any changes
to disclosure, a subsequent events
review, important accounting
matters and other internal control
matters.
• Review and formal approval of the
financial results by the CEO, CFO,
Audit Committee and the Board.
• Board and sub-committee approval
and monitoring of operating,
financial and other plans.
• Consolidation and verification
•
of correct identification and proper
assessment of critical business
risks. The Audit Committee
reviews changes to the risk profiles
together with progress on actions
for key risks on a regular basis.
Internal audit function. The Head
of Internal Audit functionally
reports to the Audit Committee
and administratively to the
First Deputy CEO. The internal
audit department performs its
activities in accordance with
an audit plan and incorporates
review of material controls,
including financial, compliance and
operational controls. The results of
each audit are discussed in detail
with the companies and business
units concerned and action plans
are agreed upon.
Setting of risk-appetite
Oversight
Board
Implementation
and oversight
Executive
management
Audit
Committee
Policy implementation
and identification
of improvements
Operational
management
Internal
audit
OVERVIEW
The Group is exposed to various
risks and uncertainties that may have
undesirable financial or reputational
implications. In order to minimize the
negative impact of such risks and to
benefit from available opportunities,
a risk management and internal
control system has been integrated
into the Group’s operations. The
overall objective of this system is to
obtain reasonable assurance that the
Group’s goals and objectives will be
achieved.
The main principle in the design
and maintenance of such systems
is that the expected benefits should
outweigh the associated costs.
KEY FEATURES OF THE GROUP’S
INTERNAL CONTROL SYSTEM
OVER FINANCIAL REPORTING
The Group uses a formal risk
management program across its
companies; there is an ongoing
process for identifying, evaluating
and managing the significant risks
faced by the company. Risks are
classified according to their likelihood
and significance; different strategies
are used to manage identified risks.
This process is regularly reviewed
by the Board in accordance with
applicable guidance.
The Board is responsible for the
Group’s system of internal control
and for reviewing its effectiveness.
This system is designed to manage
rather than eliminate the risk of failure
to achieve business objectives and
can only provide reasonable and not
absolute assurance against material
misstatement or loss.
56
HMS GROUP | ANNUAL REPORT 2015
LITIGATIONS INVOLVING THE COMPANY RISK MANAGEMENT & INTERNAL CONTROL HMS GDR
CONTINUOUS IMPROVEMENT
HMS Group’s goal is to continuously
improve its governance and risk
management sub-systems.
We assess the findings of audits and
internal investigations and use them
to adjust our internal processes and
procedures.
The key features of the risk
management process include:
• The gathering and analysis of
information related to internal
and external factors which can
negatively impact the achievement
of the Group’s objectives;
• The identification of the possible
level of negative impact of
various events on operational
and financial results in accordance
with applicable risk-assessment
methods;
• Setting appropriate risk-tolerance
levels;
• Ranking risks according to their
significance and probability;
• Making appropriate decisions
to manage identified risks;
• Actively monitoring the steps
taken to control the most
significant risks.
PRINCIPAL RISKS AND UNCERTAINTIES
The relationship between the main categories of the risks we encounter and how they affect our strategy is shown
in the table below.
Risk\Strategy
Enhancing
margins
Driving
growth
Generating
cash
Maximising
returns
Securing
customers
Securing
longterm
suppliers
Global politician and economic
risks
Sales
Project execution risks
Human Capital
Acquisitions and disposals
Fraud and corruption risks
Technology
Legislation and regulations
Product liability and litigation
Financial risks
ANNUAL REPORT 2015 | HMS GROUP
57
CORPORATE GOVERNANCE
RISK MANAGEMENT
& INTERNAL CONTROL (CONTINUE)
Sales
Human Capital
The Group’s business depends on
the levels of capital investment and
maintenance expenditures by the
Group’s customers, which in turn
are affected by numerous factors,
including the state of the Russian
economy and those of other nations,
fluctuations in the price of oil, taxation
of the Russian oil and gas industry,
availability and cost of financing, and
state investment and other support
for the Group’s customers or in state-
sponsored infrastructure projects.
The Group’s business depends on
the award of contracts and renewals
and extensions of existing contracts;
moreover, the Group relies on a
limited number of key customers and
contracts and may incur losses due to
unfavourable terms of contracts with
certain large customers.
Project execution risks
Since the Group’s contracts are
typically on a fixed-price basis, there
are risks associated with cost overruns
(especially in the EPC segment).
The Group seeks to mitigate these
risks through its efforts to improve
profitability and cost control, in
part relying on volume growth and
an increasing share of high-margin
integrated solutions services.
The ability to achieve the Group’s
strategic goals highly depends on our
most important asset — our people.
We develop and remunerate our
employees using leading HR practices.
In line with Group’s growth strategy,
we aim to attract talented employees
from the market and continuously
improve our recruitment methods.
The success of the Group’s businesses
depends heavily on the continued
service of its key senior managers.
These individuals possess industry-
specific skills in the areas of sales
and marketing, engineering and
manufacturing that are critical to the
growth and operation of the Group’s
businesses. While the Group has
entered into employment contracts
with its senior managers, the
retention of their services cannot be
guaranteed. The Group is not insured
against damages that may be incurred
in the case of loss or dismissal of its
key specialists or managers. Moreover,
the Group may be unable to attract
and retain qualified personnel to
succeed such managers. If the Group
suffers an extended interruption
in its services due to the loss of
one or more such managers, its
business, financial condition, results
of operations, prospects may be
adversely and materially affected.
Below is a summary of the principal
risks facing the Group’s business.
The Group also faces other risks both
known and unknown; some of them
apply to similar companies operating
in both the Russian and international
markets.
Global political and economic risks
The Group may be exposed to various
political, economic and other risks
not only in the countries where it
has primary production facilities
(Russia, Ukraine, Belarus, Germany)
but also in jurisdictions where the
Group has other interests (e.g. EPC
projects in the Middle East and
Central Asia). The Group has not to
date been significantly affected by
the recent developments in Ukraine
but, in the event of a deterioration of
that country’s situation, the Group’s
operations in Ukraine (including
export of production to Russia which
is significant part of the Group’s
integrated solutions), as well as its
financial position, could be affected,
and the extent of this impact is
difficult to predict.
The introduction of new regulations
or the imposition of trade barriers or
international sanctions could disrupt
the Group’s business activities or
impact on the Group’s customers,
suppliers or other parties with which
it does business. In some instances,
this could have an adverse, material
effect on the Group’s financial
position and prospects.
58
HMS GROUP | ANNUAL REPORT 2015
LITIGATIONS INVOLVING THE COMPANY RISK MANAGEMENT & INTERNAL CONTROL HMS GDR
The Group has implemented
procedures to ensure that all
employees are aware of the
requirements of the Group’s
anticorruption policies, with a
particular focus on those roles
most exposed to the risk of breach.
Legislation and regulations
Recent Russian government
initiatives which are currently under
consideration are likely to include,
inter alia, significant amendments
to tax law governing operations
with entities incorporated in offshore
jurisdictions. As a company with
a majority of its operating assets
located in Russia, HMS Group
recognizes that these developments
may have significant implications for
its business and development plans.
HMS Group continues to monitor
these developments.
Acquisitions
The Group cannot be certain that the
anticipated cash flows, synergies and
cost savings from acquisitions or other
transactions will materialize or reach
expected levels. Inefficient integration
of the newly acquired businesses
poses a risk to the Group’s operations.
Any failure to integrate the operations
of the Group’s companies successfully
could adversely affect the Group’s
business and financial condition and
the results of operations.
Since its formation in 1993, the
Group has completed a number of
acquisitions involving the purchase of
industrial pumps, modular equipment
manufacturing and EPC services
companies and the Group expects
to make additional acquisitions in
the future. The integration of these
and future acquisitions into the
Group’s operations poses significant
management, administrative and
financial challenges.
The integration process may result
in unforeseen difficulties and could
require significant time and attention
from management that would
otherwise be directed at developing
the Group’s existing business.
Fraud and corruption risks
Fraud and corruption are pervasive
and inherent risks of all business
operations. There is always some
potential for fraud and other
dishonest activity at all levels of
a business, from that of a factory
worker to senior management.
Efficient operations and optimal use
of resources depends on our ability
to prevent occurrences of fraud and
corruption at all levels within the
Group.
HMS Group promotes ethical
behaviour among its employees
and maintains dedicated violation
reporting channels to raise concerns
within the Group through an ethics
hotline available 24/7. The Group’s
internal audit and/or security
department perform investigations
into alleged fraud and misconduct
cases. If necessary, the results of
such investigations are provided to
the CEO, the Board, the management
and Audit Committee, as necessary.
As the Group operates in a number
of jurisdictions around the world, the
Board and senior management also
put a strong emphasis on corporate
compliance with applicable regulation,
including anti-bribery and anti-
corruption legislation, such as
the UK Bribery Act.
ANNUAL REPORT 2015 | HMS GROUP
59
CORPORATE GOVERNANCE
HMS GDR
As of December 31, 2015, HMS
Hydraulic Machines & Systems
Group Plc had an issued share capital
of Euro 1,171,634.27 divided into
117,163,427 ordinary shares with
par value of Euro 0.01 per share,
and these shares are not traded.
In February 2011, the company
signed a depositary agreement with
The Bank of New York Mellon (BNY
Mellon), under which the issue of
Global Depositary receipts (GDRs)
for HMS Group shares was initiated.
As of December 31, 2015, the total
number of GDRs issued in exchange
for shares of HMS Group amounted
to 48,004,000 GDRs or approximately
41% of the Company’s issued share
capital.
Since February 8, 2016, the ratio
of the company’s GDRs program was
changed:
• Old ratio: 1 GDR equals
1 Ordinary share
• New ratio: 1 GDR equals
5 Ordinary shares
For every 5 GDRs held by holders,
they received 1 “new” GDR in return.
The issued number of ordinary shares
and their nominal value remained
unchanged. After the reverse split,
issued number of GDRs equals
9,600,800, where outstanding are
8,728,000 depositary receipts and
872,800 - “green-shoe” ones.
According to the terms of the
amended deposit agreement with
BNY Mellon, the annual depositary
fee will equal US$ 0.01 per “new”
GDR instead of the current US$ 0.03
per “old” GDR, implying a fifteen-fold
decrease in such fees.
60
HMS GROUP | ANNUAL REPORT 2015
Information on HMS Group Plc GDRs:
5.00$
4.50$
4.00$
3.50$
3.00$
2.50$
2.00$
1.50$
1.00$
0.50$
0.00$
Jan
Feb Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov Dec
Major shareholders of HMS Group as of December 31, 2015
Free float
Vladimir Lukyanenko
German Tsoy
Management
Treasuries
26.6%
27.4%
19.8%
24.4%
1.9%
RISK MANAGEMENT & INTERNAL CONTROL HMS GDR
2011
2012
2013
2014
2015
1Q 2015
2Q 2015
3Q 2015
4Q 2015
Min
19.90
19.50
10.50
1.30
1.30
1.78
1.68
1.85
Max
At the end of the period
41.21
29.90
21.15
12.50
3.05
4.50
3.20
3.75
22.05
21.10
12.50
1.30
1.85
3.20
1.85
2.76
ANNUAL REPORT 2015 | HMS GROUP
61
SHAREHOLDER’S INFO & DISCLAIMER
SHAREHOLDER’S INFO
& DISCLAIMER
HMS Hydraulic Machines & Systems Group Plc
Public
December 31
LSE
Artem Molchanov
Kirill Molchanov
HMSG
RegS: 40425X407
144A: 40425X308
London Stock Exchange
RegS: US40425X4079
144A: US40425X3089
1:5
Feb 11, 2011
CY0104230913
BNY Melon
Russia
OilEquip.,Serv.&Dist
Information:
Company Name
Company Type
Fiscal Year-End
Disclosure
Managing Director (CEO)
First Deputy CEO (CFO)
HMS Group Plc GDR Details:
Ticker
CUSIP
Exchange
ISIN
Ratio, GDR : common shares
Effective Date
Underlying ISIN
Depositary bank
Country
Industry
62
HMS GROUP | ANNUAL REPORT 2015
General Contacts
HMS Group
Investor Relations
Address: 7 Chayanova str. 125047 Moscow, Russia,
Tel: +7 495 730 6601
Fax: +7 495 730 6602
Email: ir@hms.ru
www.grouphms.com
GDRs Holders’ Contacts
Contacts for inquiries regarding:
• advise of a change of name and/or address;
• report lost/stolen GDR share certificates or the non-receipt
of a dividend check;
• request an election form for the scrip dividend program;
• request forms to transfer GDRs;
• report the death of a registered holder of GDR shares;
• request a duplicate account statement;
• have dividends electronically deposited to your bank
account;
• consolidate similar account registrations;
• request general information about your shareholder
• account, etc
The Bank of New York Mellon
BNY Mellon Shareowner Services
PO Box 358516
Address: Pittsburgh, PA 15252-8516, USA
Tel: +1 888 737 2377 (USA only)
Tel: +1 201 680 6825 (International)
Email: shrrelations@bnymellon.com
Website: www.bnymellon.com
DISCLAIMER
This document contains forward-looking statements that reflect management’s current views with respect to future events.
Such statements are subject to risks and uncertainties that are beyond HMS Group’s ability to control or estimate precisely,
such as future market and economic conditions, the behavior of other market participants, the ability to successfully
integrate acquired businesses and achieve anticipated synergies and the actions of government regulators. If any of these
or other risks and uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual
results may be materially different from those expressed or implied by such statements. HMS Group does not intend or
assume any obligation to update any forward-looking statements to reflect events or circumstances after the date of these
materials.
This annual report does not constitute an invitation to invest in HMS Group GDRs. Any decisions you make in reliance
on this information are solely your responsibility. The information is given as of the dates specified, and we undertake no
obligation to update it save as required by applicable law. HMS Group accepts no responsibility for any information on
other websites that may be accessed from the company’s website by hyperlinks
ANNUAL REPORT 2015 | HMS GROUP
63