Annual Report
2020
Stand by
to move forward
2
2
HMS GROUP
HMS GROUP
Annual Report 2020
Annual Report 2020
3
About
HMS
# 1 producer of pumps and oil and gas equipment
as well as one of the leading compressor producers
in Russia and the CIS
Business platform and core expertise are established
and provide a strong base future growth
Key industries: oil & gas, nuclear and thermal power
generation, petrochemistry and wastewater industry
You can find more information on our website:
grouphms.com/shareholders_and_investors/
See our Online Report ar2020.grouphms.com
RUB46,476mn
RUB4,947mn
Revenue in 2020
EBITDA in 2020
10% yoy 3% CAGR 2016–2020
3% yoy 6% CAGR 2016–2020
2020
9
2019
8
2018
7
2017
6
2016
46,476
51,413
52,619
44,422
41,582
2020
2019
8
2018
7
2017
6
2016
4,947
4,824
6,621
6,839
6,369
RUB22,175mn
Total Debt in 2020
RUB11,814mn
Net Debt in 2020
9% yoy 9% CAGR 2016–2020
18% yoy 3% CAGR 2016–2020
Contents
4 Overview
6 Who We Are
10 Chairman Statement
11 Ceo Statement
12
14 Our History
16 Our Strategy
18 HMS Business Mode
Investment Thesis
2020
9
2019
8
2018
7
2017
6
2016
22,175
24,321
19,458
16,336
15,884
2020
9
2019
8
2018
7
2017
6
2016
11,814
14,369
13,163
20 HMS Markets
& Macroeconomics
20 Macroeconomic Environment
11,422
22 Market Trends
13,347
26 HMS Performance
RUB53,851mn
RUB54,205mn
Backlog in 2020
Order Intake in 2020
20% yoy 22% CAGR 2016–2020
4% yoy 7% CAGR 2016–2020
2020
9
2019
8
2018
7
2017
2016
53,851
44,693
42,634
44,155
24,035
2020
9
2019
8
2018
7
2017
6
2016
54,205
52,196
55,891
58,948
59
40,624
26 Operational Overview
28 Financial Overview
32 2020 Calendar of Events
35 HMS Key Projects, Development
& Innovations
39 Corporate Social Responsibility
44 Corporate Governance
46 Board of Directors
50 Risk Management
& Internal Control
56 HMS Global Depository
Receipts
Information for Shareholders
and Disclaimer
RUB(8.50)
EPS in 2020
na
2020
(8.50)
2019
2018
2017
2016
(0.84)
15.10
16.32
10.53
RUB21.25*
Dividend per 1 GDR in 2020
25% yoy
2020
9
2019
8
2018
7
2017
6
2016
21.25
17.05
49.05
59.75
42.65
61 Additional information
61 Vocabulary, Calculations
and Formulas
* Subject to the approval at the AGM on June 24, 2021
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
4
HMS GROUP
Annual Report 2020
5
Overview
12
manufacturing facilities
in Russia, CIS countries and Germany
6
R&D centres,
including one of the largest pump-testing
facilities in Europe
~6,000
well-diversified client base
~13,000
employees
The company produces both serial and/or
standard models (recurring business) and
customized configurations (large integrated
projects). The execution of large projects
includes implementation of the crucial
project’s work as well as large-scale projects’
turnkey execution, from project and design to
commissioning and launching. Revenue from
recurring business contributes c. 75-80% on
average .
1 7
1 6
1 1
1
2
8
1 0
9
7
6
5
4
3
1 5
1 8
1 4
1 3
1 2
1 9
Industrial pumps
Oil & gas equipment and projects
Compressors
Construction
Headoffice & trade company
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 6
HMS GROUP
Annual Report 2020
7
Who We Are
HMS Group is one
of the largest privately-
owned machine-
building companies
in Russia and the CIS.
The company is specialized in production
of industrial machinery based around
pumps, compressors as well as oil & gas
equipment, including state-of-the-art and
highly sophisticated solutions. HMS Group
is the only machine-building company from
Russia listed on the London Stock Exchange.
The parent holding company is HMS
HYDRAULIC MACHINES & SYSTEMS GROUP PLC
(the Republic of Cyprus). It listed its securities in
the form of Global Depositary Receipts at the
London Stock Exchange on February 14, 2011.
The company was established as a small trading
company in 1993. Today, HMS is the company
with a sustainable place in the market and loyal
high-profile customers, such as Gazprom, Rosneft,
NOVATEK, Transneft, Gazprom Neft, Rosatom, LUKoil,
BP, ENI, and others.
25%
26%
36%
30%
30%
Revenue structure by industries,
%
13%
2%
6%
8%
9%
30%
The company produces both serial and/
or standard models (recurring business)
and customized configurations (large
integrated projects). The execution of large
projects includes implementation of the
crucial project’s work as well as large-scale
projects’ turnkey execution, from project
and design to commissioning and launching.
Revenue from recurring business
contributes 74% on average.
12%
Oil extraction
Gas extraction
Gas transportation
Petrochemicals
Water supply
Power generation
Oil transportation
Others
20%
30%
20%
12%
9%
8%
6%
2%
13%
A well-diversified client base includes
“blue-chip” clients, i.e. the largest oil & gas
companies in Russia and the CIS. Our clients
operate through numerous contracts in
different subsidiaries, which take independent
purchasing decisions. A significant portion
of HMS’ revenue is generated by the oil & gas
industry, from downstream to upstream.
Revenue structure by client,
%
19.4%
36.5%
HMS is a dynamic engineering company with
successful practice in the design, installation,
construction and commissioning of complex
oil and gas production and water facilities.
It is a vertically integrated holding company
with a modern corporate management
system wherein the functions of the
manufacturing companies’ shareholders
and that of its business administration are
traditionally separated.
1.7%
2.6%
3.5%
6.7%
7.1%
Gazprom
Gazprom neft
Rosneft
Novatek
Rosatom
Lukoil
Surgutneftegaz
Others
19.4%
19.4%
19.4%
7.1%
6.7%
3.5%
2.6%
1.7%
36.5%
75%
74%
70% 70%
64%
2015
2016
2017
2018
2020
Revenue from recurring business
Revenue from large integrated projects
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
8
HMS GROUP
Annual Report 2020
9
Who We Are
Continued
INDUSTRIAL PUMPS
OIL AND GAS EQUIPMENT AND PROJECTS
COMPRESSORS
CONSTRUCTION
This is the oldest business segment,
responsible for the project and design,
engineering, manufacturing and supply of
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 countries and
across the globe. It also provides aftermarket
maintenance, repair services and other
support for its products.
The oil & gas equipment business segment
manufactures, installs and commissions
modular pumping stations, automated
metering equipment, and oil, gas and water
processing and preparation units, as well
as other equipment and systems, that
are primarily used for the extraction and
transportation of oil.
15%
EBITDA
margin
43%
2%
EBITDA
margin
23%
Сontribution
in consolidated revenue
Сontribution
in consolidated revenue
59%
Сontribution
in EBITDA
5%
Сontribution
in EBITDA
Industrial
Pumps
Compressors
The division is responsible for project and
design, engineering, manufacture, and supply
of a diverse range of compressors and
compressor-based solutions to customers in
the oil and gas, metals and mining and other
core industries in Russia.
The fourth operating segment consists of
only one facility, Tomskgazstroy. It focuses
on the main and infield pipelines and oil and
gas-condensate fields, facilities construction
and overhaul.
13%
EBITDA
margin
(9)%
EBITDA
margin
Oil and Gas
Equipment
and Projects
Construction
32%
Сontribution
in consolidated revenue
2%
Сontribution
in consolidated revenue
39%
Сontribution
in EBITDA
(1)%
Сontribution
in EBITDA
CORE PRODUCTS AND SERVICES:
CORE PRODUCTS AND SERVICES:
CORE PRODUCTS AND SERVICES:
CORE PRODUCTS AND SERVICES:
— Oil refineries
— Nuclear and Thermal power
— Water utilities
— Water injection
— Trunk pipelines
— General industrial pumps
— 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
— Oil & gas production
— Oil & gas transportation
— Gas processing
— Oil refineries
— Oil & gas chemistry
— Refrigeration applications for various
industries
— Construction, reconstruction and overhaul
of the linear objects, e.g. namely oil
pipelines, gas pipelines, product pipelines,
water pipelines, condensate pipelines and
power transmission lines.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 10
HMS GROUP
Annual Report 2020
11
Chairman Statement
CEO Statement
I can state the fact, with a huge sense
of relief, that we have passed 2020
almost without losses
In spring 2020, as soon as alarm news about the COVID-19 pandemic
started to spread, HMS froze manufacturing operations for several
weeks, whereby we analyzed and developed appropriate security
measures. HMS procured individual protective equipment, sanitizers,
organized temperature screening at entrance checkpoints of our
production facilities and offices. Huge work on organization of trouble-
free operations of the majority of our office personnel in the remote
mode was carried out.
And I can state the fact, with a huge sense of relief, that we have
passed this tough time almost without losses.
HMS Group ended the 2020 year with order intake at Rub 54.2 billion.
Though revenue was down to Rub 46.5 billion, EBITDA grew
to Rub 4.9 billion thanks to the optimization program implemented
in the 2nd half of 2019.
Our EBITDA margin grew to 10.6% despite weak results of the
oil & gas equipment business segment.
A development team, consisted of representatives
of Gazprom and HMS Group, was rewarded with
the Russian Federation Government Prize in Science
and Engineering for development and implementation
of a modular compressor unit, intended for boosting of gas
pressure in gas-collecting systems of oil and gas condensate
fields.
HMS Group successfully launched a new type
of a compressor — a flash gas compressor — for the 4th
stage of the Yamal LNG project (NOVATEK). That was
the first solution of that kind, made in Russia, and made
fully of equipment made in Russia.
We signed the large Rub 7.5 billion contract
for the delivery of equipment for the
helium concentrate membrane recovery
unit. The contract was follow-up, owing
to a successful realization of the first one,
unique and the first of this kind in Russia
project on development and manufacture
of such a unit. The unit, developed and made
by HMS, allows to extract helium concentrate —
the strategically valuable element — directly from
produced natural gas.
We also take part in a range of interesting projects,
and plan to further advance our competences in realization
of high-scale projects.
We see the growing
opportunities on the market
and believe that we have
strength and skills to seize
them
The 2020 was the extraordinary year, year of the
pandemic. The worst pandemic in a century has cost over
hundred thousand and millions lives. It continues to adjust
behaviors and trends, which most probably will transform
the post-COVID-19 world.
The COVID-19 pandemic has frozen economic activity for a while
as countries imposed tight restrictions on movement to halt
the spread of the virus. Trade restrictions and supply chain disruptions
have affected execution of a number of contracts, postponed a launch
of anticipated tenders and projects, etc. Quarantine restrictions
were introduced, factories were put on lockdown for weeks, and the
pandemic and efforts to halt it resulted in an unprecedented collapse
in oil demand and a crash in oil prices.
In our view, the company have passed successfully this crisis, though
2020 was tough for HMS. We have faced impact of several factors which
affected financial results of HMS Group. It included weak results of the
oil & gas business segment due to a temporary decrease in demand
on production in the oil extraction.
We believe that tried in 2019 and continued in 2020 the programs
of business optimization and cost-cutting clearly demonstrated their
effectiveness, because our EBITDA grew 3% YoY, in comparison
with 2019.
Today, our backlog grew by 20% YoY, compared with 2019, due to both
compressors and oil & gas equipment. A wave of deferred demand
came back to the previous level after the most quarantine restrictions
in summer 2020 were removed, though we haven’t managed
to compensate the first six months losses by the end of the year.
The successfully completed investment project to localize heavy
pumps, including for petrochemicals and nuclear power, in 2020
continued to deliver growth of orders for the products produced.
Also, we have developed and launched production of a new range
of pump sizes. Currently, we work on a large more than Rub 2 billion
follow-up contract to deliver pumps to a foreign nuclear power station
to be signed in the nearest future.
We ended the 2020 year with an acceptable level of debt.
Net debt-to-EBITDA LTM ratio was down to 2.4x, which is lower than
bank and internally-set covenants.
In tough environment, HMS Group successfully placed two bond
issues, refinanced and prolonged current credit lines that minimized
2021-year repayment and maintained a solid cash cushion.
We see the growing opportunities on the market and believe that
we have strength and skills to seize them.
Yours faithfully,
Nikolay Yamburenko
Yours faithfully,
Artem Molchanov
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
12
HMS GROUP
Annual Report 2020
13
Investment Thesis
Business platform and core expertise are stablished
and provide a strong base for future growth
Mature Business Platform
Targets
Factors of Business Sustainability:
—
—
—
—
HMS Group has acquired main production and project capacities
The company has “know-how” production documentation
and certificates
The company has established long-term relations with
its clients
HMS Group has decided to exit the construction segment
and significantly reduced its exposure to construction
—
—
—
Growth of export to the CIS and far abroad
National project “Ecology of Russia”: These are new markets,
supported by state financing and with limited competition,
where HMS has already experience and competences
HMS expects further development in the field of LNG
Achievements in the past
few years
—
—
—
—
—
—
HMS has entered into a market of gas transportation units
for Gazprom. There is growth of revenue from cooperation
with Gazprom not only in the field of compressors but of gas
transportation units
The Group has two new large clients — strategic cooperation
with Gazprom neft and NOVATEK
Revenue grows from nuclear pumps and oil processing pumps
Revenue from construction reduces
HMS has entered into the LNG market (compressors, pumps,
special equipment)
The company has completed a pilot “green” project (BOSK)
1.
2.
3.
Delivery of Mission-critical equipment
—
—
HMS’ equipment is crucial to clients. It is
installed at the final stage of construction
projects and is difficult to replace
The project cost is affordable within clients’
project budgets: equipment accounts for less
than 2-3% of the total project CAPEX. As a result,
clients do not postpone their purchases
Leader in both large projects and standard
production segments
—
—
HMS is the established top player in large-scale
projects (with a “blue-chip” client base)
The company enjoys sustainable, recurring
business from standard pumps and compressors
with over six thousand clients
4.
5.
Well-diversified quality client base
—
—
—
Over 6,000 small and medium clients generate
on average 70-80% of revenue
The blue-chip client base covers nearly all
Russia’s oil and gas major players
Our largest clients operate through numerous
contracts in different subsidiaries, taking
independent purchasing decisions and offering
numerous points of entry
Low capex needs and flexible dividend policy
—
—
—
HMS Group is a fully invested business with
modest maintenance capital expenditure needs
at c. Rub 1-1.5 billion
All major acquisitions have already been
completed
There are no strict dividend commitments,
which allows us to minimize payments in a harsh
market environment
Management focuses on maintaining a moderate
debt position
—
—
—
—
The target level of Net debt-to-EBITDA LTM
ratio is 2.5 despite any extraordinary events and
M&As. When the ratio exceeds the 2.5x level,
imposition of step-by-step constrains on dividend
size is started
Debt is naturally hedged as HMS follows
a strategy of a match in revenues, costs and debt
currency structures — ca. 98% of debt is Russian
ruble denominated
Short-term debt remains at low levels
and is actively managed
Conservative budgeting of debt level
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
14
HMS GROUP
Annual Report 2020
15
Our History
27 years: from a start-up to the industry leader
Growth of market share on traditional
HMS’ markets, entry into new markets
Foundation and bearing on the largest base
of installed equipment in Russia
2004—2007
The company acquired its key production
facilities: Neftemash (Tyumen),
Nasosenergomash (Sumy), and Livnynasos
(Orel region, Central Russia)
1993—1998
Three founders (German Tsoy,
Artem Molchanov, and Kirill Molchanov)
established the trading company
Hydromashservice and brought together
a core team of three founders and five sales
managers
Hydromashservice actively increased sales
in Russia and the CIS and built relations
with key clients (primarily with companies in
water utilities and metals & mining sectors)
1999—2003
Hydromashservice demonstrated boosting
growth of the client base, expanded relations
with the largest oil & gas and energy
companies and gained leading positions
in the pumps market in Russia and the CIS
The company gained experience in large
commercial projects and humanitarian
programs outside of Russia (such as the
UN Oil-for-Food Programme)
The largest Russian pump manufacturer,
Livgidromash, joined Hydromashservice
in 2003
2007—2008
The investment industrial group Hydraulic
Machines & Systems was established as
an industrial holding (since 2008 —
HMS Hydraulic Machines & Systems Group Plc)
HMS Group continued to develop long-term
relations with its key customers
The company successfully implemented its
first large projects in specialist pumps for
nuclear power plants in India (Kudankulam)
and China (Tianwan)
The shareholders established HMS Group
Management Company LLC. The extended
management team was formed to achieve
new ambitious goals
2009—2013
The Board of Directors approved the strategy
for accelerated growth for 2009-2015 with
a focus on M&A and complex solutions
HMS Group acquired Giprotyumenneftegaz,
the leading project and design institute for
oil and gas fields, as well as new production
assets: Sibneftemash, Dimitrovgradhimmash,
Bobruisk Machinery Plant, and Apollo
Goessnitz, and entered the market of
equipment for oil refining and petrochemistry
HMS Group ran a successful IPO on the
London Stock Exchange in 2011
The company gained access to the
compressor market via acquisition of
the alliance: Kazankompressormash —
NIIturbokompressor, the largest
manufacturer of compressor equipment in
Russia and the CIS
HMS Group became the provider of key
technological units for large projects in oil
extraction and transport: Vankor oilfield, the
system of export pipelines BPS-2, ESPO-1,
ESPO-2, Zapolarye-Purpe, Purpe-Samotlor
and many others
The Group introduced a new line of pumps
for oil trunk pipelines (NM, NPV, and NOU
series) and mastered production of large-
scale technological modules, as well as
tanks, vessels and heat exchangers
2014—2020
HMS Group increased its expertise in design
and manufacturing of equipment for natural
and associated gas extraction and treatment
on the base of Giprotyumenneftegaz and
Neftemash
The company (Kazankompressormash)
started sales of complete gas compression
systems for booster compressor stations
and gas trunkline compressor stations of
Gazprom
Livgidromash plant expanded its engineering
and manufacturing capabilities. The new
mechanical treatment shop and the new
unique testing unit were built
The Group implemented a large-scale
investment programme covering all
production units, renewed and expanded the
product portfolio, and developed new product
lines for pumps, compressors, measuring
and other equipment for oil & gas
HMS Group supplied technological units for
large scale gas projects, including:
—
—
—
Technological equipment for ROSPAN
INTERNATIONAL (East-Urengoyskoye
field, Rosneft)
Equipment for the extraction,
transportation and processing of liquid
hydrocarbons (Nadym-Pur-Taz region,
Gazprom)
Helium concentrate membrane
separation unit (Chayandinskoye field,
Gazprom), and other projects
The top management developed the new
strategy for sustainable growth with a focus
on operational efficiency and leadership in
the market of technological units for large-
scale investment projects as well as entry
into the new markets, i.e. gas transportation
units and LNG-equipment
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 16
HMS GROUP
Annual Report 2020
17
Strategy
Vision
HMS Group is one of the leading Russian machine-
building companies with focus on industrial
pumps and compressors, modular technological
units, and also a provider of integrated
solutions for various industries, such as oil &
gas, petrochemistry, energy generation, metals
and mining, water and wastewater utilities.
We consider our customer benefits to be our highest
priority: building long-term relations with clients
has always been a key priority for HMS Group. All
our business processes, from R&D to quality control
and from manufacturing to sales and aftersales
service are geared to provide our clients with high-
end products and the most efficient solutions.
Strategic Goals
and Priorities
Organic growth
Our objective is to maintain our leadership
across all the Company’s business
segments: Industrial Pumps, Industrial
Compressors, Oil & Gas Equipment
and Projects.
On the one hand, we expand traditional
client base by developing new products
and more sophisticated solutions. High level
of capital investments ensures improvement
and modernization of our production sites.
On the other hand, HMS Group successfully
broadens its client base not only in Russia
and the CIS, but also in Europe, the Middle
East and Asia.
We also look into options to enter new
market segments if we find them promising.
Corporate
Responsibility
HMS Group follows ethical principles
with regard to all its stakeholders.
We strictly comply with health and safety
international standards in order to lower
the environmental impact of our operations.
We carry out charity activities and offer
support to charitable foundations for children
and the disabled. In 2020, we continued
to provide support to a number of charity
funds, schools, and civic and sport
organisations in the regions of our business
activities.
Business efficiency
HMS Group concentrates on profitability
and further development in order to create
value for shareholders. We implement
systematic approach to increase the efficiency
of our business, from standalone plants up
to the entire Group.
Our technical expertise and proven
experience in delivery of technological units
allows us to participate in high-margin
large projects. We intend to strengthen
partnerships with industry leaders to take
part in multiple large-scale projects across
a number of industries.
The Company continues to develop its
standard and engineered product lines;
the majority of our products are already
among the best in their classes and we will
expand our product portfolio further in order
to maintain the profitability of our recurring
business.
We consider different forms of strategic
partnership (joint ventures, consortia,
license agreements) with leading machinery
and engineering companies, both Russian
and international. Thus, we will be able
to offer new, more sophisticated products
and solutions to our customers.
Sustainable development
Reliable and up-to-date business processes
are crucial for the Company’s sustainable
growth.
In the face of a rapidly changing
environment, we work on maintaining
an effective organisation, management
and corporate culture. The Company
strengthens its competences in marketing,
engineering and R&D.
We have a team of highly devoted
professionals in all business functions
and are dedicated to the development
of our personnel: HMS Group has a multi-
level system of training for its employees.
We focus on the culture of innovation
and change by developing incentives
to ensure that each employee contributes
to the Company’s success.
After 26 years in business, HMS Group
is a full-cycle machine-building company
that has achieved a leading position among
Russian players. The Company follows best
practices and international standards in R&D,
manufacturing and quality management
in order to meet the growing requirements
of the market. We actively participate in the
government-supported process of import
substitution, which allows us to broaden our
product portfolio and attract a large number
of new clients.
Facing new challenges, we continue
to implement the latest and most efficient
IT systems, from specialised software
for R&D to ERP and IT security solutions.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
18
HMS GROUP
Annual Report 2020
OVERVIEW
MARKETS
PERFORMANCE
GOVERNANCE
ADDITIONAL INFORMATION
19
Business Model
HMS Group’s business consists of three product-oriented
business units: Industrial Pumps, Compressors, Oil & Gas
Equipment and Projects. All of them imply production
of standard products (recurring operations), as well
as delivery of complex solutions and technological
units for our clients.
HMS’ main customers are large and medium-sized industrial
companies and infrastructure facilities. We also approach end
customers that belong to small business through our certified
dealers, as well as independent trading companies.
Our expertise in engineering is a basis for expanding
relations with oil & gas and energy companies,
metals and mining industry, water
and wastewater utilities.
HMS business comprises the whole value
chain: research & development, procurement
and manufacturing, as well as after-sales
service and delivery of spare parts across all
our business units. We can outsource certain
components and technologies for HMS
integrated solutions from specialized external
suppliers as well.
Our main competence is research
& development in a broad range of rotating
equipment. We develop new products
and offer state-of-the-art solutions
to maintain our clients’ benefits.
We also have broad expertise in project
design and EP/EPC projects for oil & gas
sector, water and wastewater utilities. HMS’
expertise in engineering allows us to design
efficient solutions that meet the highest
customer requirements.
Value
Marketing & sales
Research & development
Procurement & manufacturing
After-sales service
across all of its business units
The Group’s production facilities consist
of 12 plants in Russia, Ukraine, Belarus
and Germany. We benefit from cooperation
between our plants to optimize production
lead-time and costs.
The Company continues its large-scale
capital expenditures program to develop
production capacities and retain the highest
level of quality. The recent investments
increased our manufacturing capabilities
in centrifugal pumps and centrifugal
compressors as well as oil & gas equipment,
enabled us to produce high-quality steel
casting up to 9 tons.
Our marketing function strengthens
and promotes the HMS brand in both
conventional and prospective markets.
As part of our marketing strategy, we
regularly demonstrate new products
and solutions to our customers at leading
trade exhibitions in Russia and abroad.
HMS Group aims to increase and strengthen
its relations with leading Russian
and international companies in oil & gas
upstream and downstream, nuclear
and conventional energy, metals and mining,
water and wastewater utilities.
20
HMS GROUP
Annual Report 2020
21
Markets &
Macroeconomic Environment in 2020
In 2020 the world economy experienced an unprecedented
shock caused by COVID-19 pandemics which led to numerous
lockdowns, slow-down of consumer and business activity and
as a result had a negative impact on the prices of natural
resources: oil, natural gas, coal
The global GDP decreased by 3.3% in 2020, the largest decline since
2009 (−0.1%). The advanced economies became the main contributors
to the decline: the US GDP decreased by 3.5%, the German one —
by 4.9%, the French one — by 8.2% and the British one — by 9.9%.
At the same time the Chinese GDP grew by 2.3%, still a significant
slow-down compared to 5.8% in 2019.
(3.0)%
The Russian
GDP
4.25%
CBR
key rate
By the end of 2020, consumer inflation in Russia (the Consumer
Price Index) increased to the level of 4.9% (3% in the previous year).
Industrial Producers Price Index reached 3.6% by the end of 2020.
The average unemployment rate in 2020 reached 5.8% compared
to 4.6% in 2019.
As a result of unfavorable macroeconomic conditions, the Russian
economy declined by 3.0% in 2020. The largest decline was observed
in tourism (−55.4%), air transportation (−46.8%), food and lodging
industry (−24.5%), production of vehicles (−16.3%). At the same time
some sectors managed to demonstrate growth: manufacturing of drugs
and pharmaceutical products increased by 22.2%, production of furniture
grew by 8.0%, financial and insurance business — by 7.3%, production
of machinery and equipment (excluding transports) — by 6.1%.
In the beginning of March 2020 OPEC+ agreement was suspended
which resulted in a rapid decline of oil prices to the level of US$
16 per barrel (Europe Brent Spot Price) by the end of March. The next
agreement was signed only on in April. Oil prices reached the level
of US$ 40 per barrel by the beginning of June, never growing higher
than US$ 52 per barrel in December.
Following decrease of oil prices Russian ruble also showed negative
dynamics: the exchange rate of Russian ruble to US dollar fell from
Rub 66 at the beginning of March to 78 at the end of the month,
Euro — from Rub 74 to 88. The average US$/Rub exchange rate
amounted to 72 rubles in 2020, Euro/Rub — to Rub 83.
The current account surplus declined to the level of US$ 33.9 billion
in 2020 (compared to US$ 64.8 billion in 2019). Total exports amounted
to US$ 379.1 billion, while total imports reached US$ 304.7 billion.
Exports of crude oil declined to US$ 72.4 billion (−41% compared
to 2019), exports of natural gas declined to US$ 25.2 billion
(−40% compared to 2020).
6.1%
production of machinery
and equipment growth
4.9%
consumer inflation in Russia
Rub33.9bn
Russia’s account
surplus
US$467.9bn
Total external debt of Russia
The Central Bank of Russia decreased the key rate 4 times in 2020
(from 6.25% at the beginning of the year to 4.25% in July) to support
the economic activity on the back of halting production and trade
in 2Q 2020, and to make the loans more available for both business
and households.
Consequently, the total corporate debt (excluding international debt)
reached Rub 46.7 trillion (+12% YoY) at the end of 2020, and loans
to individuals grew up to the level of Rub 21.6 trillion (+13% YoY).
As the result of low key rate banks also lowered deposit rates,
so households and businesses were stimulated to switch to financial
instruments, such as corporate bonds and stocks, etc. Thereby the
MOEX Russia index (counted in rubles) grew to 3,289 index points
at the end of 2020 (+8% compared to the end of 2019). At the same
time RTS Index (counted in US dollars) declined to 1,387 points (−10%)
during 2020.
The Russian Budget showed a shortage of Rub 4.1 trillion, equal
to 3.8% of the GDP. Budget revenue decreased by 7.3%, while spending
grew by 25.3% compared to 2019. Total external debt of Russia
(both government and corporate) decreased by 4.8%, to the level
of US$ 467.9 billion).
Macroeconomics
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 22
HMS GROUP
Annual Report 2020
23
Market trends
Several new oilfields were put into
operation, such as Erginskiy license area
and Severo-Danylovskoye oilfield (Rosneft),
Komandirshorskaya group of fields (Lukoil),
oil rims of Chayandinskoye field (Gazprom
Neft). A number of large oilfields are expected
to be launched in the next few years, including
Lodochnoye and Severo-Komsomolskoye
fields (Rosneft), and Grayfer field (Lukoil).
The major gas company in Russia, Gazprom,
accounted for 65% of gas production in Russia
in 2020. The second largest producer, NOVATEK,
produced 11% of all natural gas volume.
Natural gas extraction in Russia reduced from
737.7 to 692.9 bcm (—6% YoY), the average
export prices decreased to US$ 127/mcm,
with the most significant decline to US$ 98/
mcm observed in 2Q 2020.
Gazprom has plans to launch a number of new
large gas fields, including Kharasaveyskoye
and Kovyktinskoye (currently in pilot
production), while Rosneft plans to start
works on Kharampur field (gas formations).
Crude oil production in Russia
(including gas condensate)
and Urals oil price dynamics
526.7 533.6 547.3 546.7 555.9 561.2 512.7
Oil and gas industry
Upstream
Russian oil industry consists of several
vertically integrated companies. Five of them
account for 3/4 of the country’s oil production
and refining, and a number of smaller
companies, typically comprising one
or several oilfields. About half of produced oil
is processed at the country’s refineries, while
the other half is exported.
The oil extraction declined from 561.2 to 512.7
million tons of product in 2020 (—8.6% YoY),
as a result of lower demand for energy caused
by COVID-19 and limitations set by the new
OPEC+ agreement. Average Urals oil price
decreased from US$ 64/barrel in 2019
to US$ 42/barrel in 2020.
During the year, the country’s operating well
stock decreased by 1.0% to 178,712 units
(including 6,957 new wells). The total drilling
volume declined by 1.7% to 28 million meters.
Top 5 oil producers
in Russia in 2020
25.0%
5.0%
7.0%
38.0%
11.0%
14.0%
Natural and petroleum
associated gas production
in Russia and average export
price of gas
641,9 635,5 640,2 691,1 725,4 737,7 692,9
89,5
94,1
635,9
643,6
85,4
605,7
94.7
598.2
72,5
78,6
83,3
569,4
556,9 556,9
314
225
223
189
157
181
127
2014
2015
2016
2017
2018
2019
2020
Associated gas production in Russia, bcm
Natural gas production in Russia, bcm
Export gas price, USD/ tcm
Rosneft
Lukoil
Surgutneftegaz
Gazprom Neft
Tatneft
Others
38.0%
14.0%
11.0%
7.0%
5.0%
25.0%
98
51
53
42
70
64
42
2014
2015
2016
2017
2018
2019
2020
Crude oil Production in Russia, mln t
Oil price, USD/barrel (Urals)
512.7mln t
Crude oil Production in Russia
9.2% yoy
Midstream
As Russian oil fields and gas fields are
widespread across the country, Russia
has one of the largest oil and gas pipeline
networks in the world, which has significantly
expanded during the last ten years.
Transneft is the major operator of the Russian
oil trunk pipeline system (50.8 thousand km),
and oil-product trunk pipeline system
(16.4 thousand km) with over than 500 of oil
pump stations.
The total length of the Russian gas
transportation system is over 170 thousand km,
comprising over 250 gas compressor stations.
The main operator of gas pipelines is Gazprom.
In 2020, the company started construction
of the Khovykta-Chayanda pipeline (a part
of the Power of Siberia pipeline). The main
prospective projects for the next years
is the construction of the Power of Siberia-2
(from the Yamal Peninsula to China),
Bovanenkovo-Ukhta-3 and Ukhta—Torzhok
pipelines.
Downstream
The total number of large oil refineries in Russia
is 35, and together with smaller refineries
they processed 270 million tons of crude oil
in 2020 (total capacity is over 315 million
tons), a decrease by 5.4% compared to 2019.
Rosneft, the leading Russian oil company,
is the largest refinery operator with twelve
major refineries. LUKOIL, with four major
refineries, is the second-largest refineries
operator, Gazprom Neft operates 2 refineries.
The production of all main petroleum
products declined in 2020: gasoline — by 4.5%
to 38.4 million tons, diesel oil — by 0.4%
to 78.0 million tons, and fuel oil — by 11.1%
to 40.8 million tons.
A number of further projects
on the modernisation of oil refineries, as well
as new construction are planned on the horizon
until 2025, including Slavneft advanced oil
refining complex, Moscow refinery advanced
oil refining complex (Gazprom Neft), further
development of Taneco Refining and
petrochemical plants complex (Tatneft).
Russian gas-processing industry is represented
by 33 plants, which processed 77.8 bcm
of natural gas and petroleum associated
gas in 2020 (—3.9% YoY), including 7 largest
plants which processed 3/4 of all gas volume.
A new Amur GPP is currently under
construction, it should be the largest GPP
in the world with 42 bcm of gas per year
design processing capacity.
LNG production is one of the fast-growing
segments in Russian energy market.
The volume of LNG produced in Russia reached
30.5 million tons compared to 29.5 million
tons processed in the previous year (+3.5%).
The largest operating LNG plants are
Sakhalin-2 (consortium led by Gazprom)
and Yamal LNG (NOVATEK). Examples
of prospective LNG plants include Arctic LNG-2
(NOVATEK, currently under construction)
and the complex for processing ethane-
containing gas and LNG production in Leningrad
region (Gazprom and RusGazDobycha).
A large number of small-scale LNG plants are
expected to be built in the next years as well.
The main trend in the oil and gas markets
is that the major companies tend to limit their
investments in upstream, while the importance
of downstream (including LNG and gas
processing projects) grows.
84%
The depth of processing increased by 1%
to the level of 84% in 2020.
processing depth in Russia
in 2020
Primary oil processing volume
and processing depth in Russia
289
283
281
280
287
285
270
79%
81% 83%
83% 84%
72%
74%
2014
2015
2016
2017
2018
2019
2020
Primary oil processing in Russia, mln t
Processing depth, percent
Top-5 oil producers
in Russia in 2020
31.0%
31.0%
5.0%
7.0%
15.0%
11.0%
Rosneft
Gazprom Neft
Lukoil
Surgutneftegaz
Slavneft
Others
31.0%
11.0%
15.0%
7.0%
5.0%
31.0%
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
24
HMS GROUP
Annual Report 2020
25
Market trends
Continue
Power generation
Total number of large power plants in Russia
(with installed capacity higher than 5 MW
each) is 880. The structure of the installed
capacity of the United Power System
remained practically unchanged in 2020:
thermal power plants accounted for 67%
of installed capacity, hydro power plants —
20%, and nuclear power plants — 12%.
251.0GW
Total capacity of power plants in 2020
240
243
244
247
250
252
251
Total installed capacity and electricity output of the United
Power System by types of power plants in 2020
Installed capacity
Electricity output
2014
2015
2016
2017
2018
2019
2020
1.0%
12.0%
20.0%
0.3%
21.0%
67.0%
20.0%
59.0%
Thermal
Hydro
Nuclear
Renewable
67.0%
20.0%
12.0%
1.0%
Thermal
Hydro
Nuclear
Renewable
59.0%
20.0%
21.0%
0.3%
In 2020, Russia decreased its electricity
output from 1,096 to 1,063 billion kWh
(–3% YoY). Total installed capacity of Russian
power system decreased by 1 GW, as 3.3 GW
of inefficient and outdated equipment was
decommissioned, and 1.9 GW of new capacity
was put into operation in 2020, including
Voronezh PP (220 MW), Primorskaya PP
in Kaliningrad region (195 MW), and a solar
power plant in Adygea region (150 MW).
Total capacity of power plants, GW
Power generation in Russia, bn kWh
Total investments in the energy industry
remained practically unchanged in 2020,
at the level of Rub 801.6 billion.
The Russian United Power System
Development Program (by the Ministry
of Energy of Russia) implies that up to 15 GW
of new capacity will be commissioned in
2020–2026. The largest projects include new
units at Leningradskaya NPP (2,300 MW),
Kurskaya NPP (1,200 MW), Zainskaya PP
in Tatarstan (850 MW), and Udarnaya PP
in Krasnodar region (500 MW).
The State Atomic Energy Corporation,
ROSATOM, is running a number of new
projects abroad as well, including Rooppur
NPP (Bangladesh) and new units of
Kudankulam NPP (India).
Total installed capacity and
electricity output in Russia
1,072
1,092
1,096
1,047
1,074
1,049
1,063
Metals and mining
Water utilities
Mining industry in Russia is highly
concentrated and consists of large companies
with full production cycle from ore mining
to production of metal products with high
value added.
Year 2020 was marked by the continued
growth of tariffs (for instance, tariffs for cold
water supply increased by 3.9% in 2020,
hot water supply — by 4.3%, and sewage —
by 4.8%).
Total investments in water utilities and
wastes utilization in Russia demonstrated
a significant increase from Rub 174.0 billion
to Rub 207.7 billion (+19.4%). Examples
of large investment projects implemented
during 2020 include construction of a water
treatment plant at the Omsk refinery and
reconstruction of a water treatment facility
in Kazan.
In 2020, the implementation of the Ecology
national project (consisting of 11 federal
projects) that will ensure large modernization
of water facilities all over the country
continued. Almost all budget planned for
2020 (Rub 65 billion) was performed.
Extraction of coal decreased from
442.8 million tons to 402.1 million tons
in 2020 (—9.2%). Overall investments in coal
extraction declined by 33.9% in 2020
(Rub 129.6 billion).
Extraction of iron ore increased from 97.5
to 100.0 tons (+2.6%), while steel production
remained unchanged in 2020 (73.6 million
tons), and cast iron production showed
a slight increase from 51.2 million tons
to 52.0 million tons (+1.5%). Investments
in metal ores extraction increased
by 1.6% (Rub 299.6 billion), and in metals
production — by 8.5% (Rub 378.6 billion).
Russian metal and mining companies
(EVRAZ, Severstal, Mechel, Metalloinvest,
Rusal, Nornickel and others) are running
long-term programs on development of new
mines and construction of new production
units (coke batteries, new furnaces, etc.) that
will ensure high level of investments in the
industry for the next years.
Rub207.7bn
Total investments in water utilities
and wastes utilization in 2020
19.4% yoy
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 26
26
HMS GROUP
HMS GROUP
Annual Report 2020
Annual Report 2020
27
Performance
Operational Overview
In 2020, the company signed a range of large contracts, mainly
in the compressors business segment
Order intake grew to Rub 54.2 billion by 4%
YoY, compared with Rub 52.2 billion in 2019.
The compressors business segment was the main
contributor to this growth. In terms of contracts type,
recurring business was the driver of the growth
(+11% YoY), that compensated less large orders
signed in the reported period (−10% YoY).
Order intake, Rub bn
Industrial pumps
Oil & gas equipment
Compressors
Construction
Total
2020
17,773
13,568
22,617
247
22,792
11,887
17,363
155
54,205
52,196
2019
Change yoy
4Q 2020
3Q 2020 Change qoq
-22%
14%
30%
60%
4%
4,429
3,331
7,511
32
5,329
3,514
10,512
5
15,304
19,359
-17%
-5%
-29%
521%
-21%
Backlog, Rub mn
Industrial pumps
Oil & Gas equipment and projects
Compressors
Construction
Total
2020
18,227
9,318
24,765
1,541
19,572
7,426
16,067
1,628
53,851
44,693
2019
Change yoy
4Q 2020
3Q 2020
Change qoq
−7%
25%
54%
−5%
20%
18,227
9,318
24,765
1,541
19,749
9,916
25,264
1,652
53,851
56,580
−8%
−6%
−2%
−7%
−5%
Backlog reached Rub 53.9 billion, up by 20% YoY, compared with Rub 44.7 billion last year, based
on the compressors and the oil & gas equipment business segments. In terms of contracts type, recurring
business grew by 32% YoY and large contracts was up 30% YoY, compared with 2019.
PUMPS
OIL & GAS EQUIPMENT
COMPRESSORS
Order intake declined by 22% YoY
to Rub 17.8 billion, compared with
Rub 22.8 billion for 2019, due to less
regular orders received and no large
contracts signed. Backlog was
down by 7% YoY to Rub 18.2 billion,
compared with Rub 19.6 billion
in 2019. Demand for pumps was
impacted by the COVID-19 pandemic.
Order intake grew to Rub 13.6 billion,
by 14% YoY, compared with Rub
11.9 billion in 2019, due to large
contracts. Backlog was up by 25%
YoY to Rub 9.3 billion, compared
with Rub 7.4 billion for 2019,
due to both large contracts
and regular business.
Order intake grew by 30% YoY
to Rub 22.6 billion, compared with
Rub 17.4 billion in 2019. Backlog
increased to Rub 24.8 billion,
compared with Rub 16.1 billion
in 2019. Both recurring business
and large contracts grew.
RUB54.2bln
Order intake in 2020
4% yoy
9 %
large contracts order
intake growth in 2020
in 2020
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 28
HMS GROUP
Annual Report 2020
29
Financial Overview
Revenue was Rub 46.5 billion, down by 10%
yoy, compared with Rub 51.4 billion for 2019,
because of less revenue generated by the
oil & gas equipment and the compressors
business segments.
EBITDA, in contrast, was up to Rub 4.9 billion,
by 3%, due to increased margins of pumps
and compressors contracts. EBITDA margin
grew to 10.6%, compared with 9.4% for 2019.
Consolidated revenue from recurring
business declined by 9% yoy, and revenue
from large projects was down by 11% yoy.
EBITDA from recurring business declined
by 12% yoy, and, in contrast, EBITDA from
large contracts increased by 26% yoy.
Loss for the period was Rub 816 million,
compared with profit for the period
at Rub 151 million for 2019. Included
in this loss is an impairment of goodwill
of Rub 425 million, recognized on acquisition
of TMCP in the beginning of 2019.
The goodwill was impaired as a result
of not meeting targeted synergies with HMS
Neftemash in executing large contracts,
due to the COVID-19 pandemic and general
situation on the oil and gas market. Loss for
the 2020 year adj1. was Rub 265 million.
Free cash inflow was Rub 3.0 billion,
compared with Rub 23 million in 2019, despite
lower revenue, due to the implemented cost-
optimization program.
FY 2020 financial results
in millions of Rub
Revenue
EBITDA
EBITDA margin
(Loss)/Profit for the period adj.
Impairment of goodwill (note 9)
Impairment of previously recognised
deferred tax assets (n.22)
(Loss)/Profit for the period
Free cash inflow
2020
2019
Change
yoy
4Q 2020
3Q 2020
46,476
51,413
-10%
15,000
11,978
Change
qoq
25%
25%
4,947
10.6%
(265)
(426)
(126)
(816)
2,958
4,824
9.4%
151
151
23
3%
1,576
1,264
10.5%
10.6%
na
(41)
90
na
(426)
(126)
(593)
2,074
na
na
90
2,397
na
-13%
Expenses and Operating Profit
Cost of sales was down by 11% yoy
to Rub 37.1 billion, compared with
Rub 41.8 billion for 2019, due to lower
materials and components costs and labour
expenses. Materials and components
declined 15% yoy because of lower revenue.
Labour costs were down by 2% yoy due
to the cost-cutting program program.
in millions of Rub
2020
2019
Change
yoy
Share of 2020
revenue
Share of 2019
revenue
Cost of sales
37,071
41,804
Materials and components
23,760
27,957
Labour costs incl Social taxes
Depreciation and amortization
Construction and design2
6,906
2,122
2,557
7,060
1,954
2,467
-11%
-15%
-2%
9%
4%
Others
1,726
2,365
-27%
79.8%
51.1%
14.9%
4.6%
5.5%
3.7%
81.3%
54.4%
13.7%
3.8%
4.8%
4.6%
Gross profit declined to Rub 9.4 billion, by 2%
yoy, compared with Rub 9.6 billion for 2019.
SG&A expenses3 declined by 2% yoy due
to decrease in general & administrative
expenses. Distribution & transportation
expenses were up by 1% yoy, mainly due
to higher transportation expenses and labour
costs. General & administrative expenses
declined to Rub 5.2 billion by 3% yoy,
compared with 2019, mainly due decrease
in labour costs and business trips expenses.
Operating profit was down to Rub 1.3 billion
by 35% yoy, compared with Rub 2.1 billion
in 2019.
Finance costs increased to Rub 1.9 billion
by 8% yoy, compared with Rub 1.8 billion
in 2019. The main reason was the 5%
increase in interest expenses due
to the higher level of average debt within
2020, compared with 2019.
Average interest rates decreased to 8.00%
p.a., compared with 8.57% p.a. last year.
in millions of Rub
2020
2019
Change
yoy
Share of 2020
revenue
Share of 2019
revenue
Gross profit
Distribution & transportation
General & administrative
SG&A expenses
9,405
9,609
1,986
5,243
1,961
5,395
7,228
7,356
-2%
1%
-3%
-2%
Other operating expenses
412
196
111%
Operating expenses ex. Cost of sales
7,641
7,552
1%
Operating profit
Finance costs
1,338
2,057
-35%
1,926
1,785
8%
20.2%
4.3%
11.3%
15.6%
0.9%
16.4%
2.9%
4.1%
18.7%
3.8%
10.5%
14.3%
0.4%
14.7%
4.0%
3.5%
in millions of Rub
2020
2019
SG&A expenses
Finance costs
Interest expenses
Interest rate, average
Interest rate Rub, average
7,228
7,356
1,926
1,848
8.00%
8.12%
1,785
1,764
8.57%
8.69%
Change
yoy
-2%
8%
5%
1 Loss for the period adj. — is the reported Loss for the period, excluding the effects of goodwill impairment and impairment of previously recognized deferred tax asset
2 Construction and design and engineering services of subcontractors
3 SG&A expenses — Selling, General and Administrative Expenses, compiled of distribution & transportation expenses plus general & administrative ones
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
30
HMS GROUP
Annual Report 2020
31
Financial Overview
Continued
Business Segments
Performance
Industrial pumps1
Oil and Gas Equipment
and Projects (OGEP)2
Revenue grew to Rub 20.3 billion by 2% yoy, based on the recurring
business. EBITDA was up to Rub 2.9 billion, by 13% yoy, compared
with Rub 2.6 billion in 2019, due to a larger share of regular orders
with higher profitability. EBITDA margin was 14.5%, compared with
13.1% in 2019.
Revenue declined to Rub 11.3 billion, by 14% yoy, compared with
Rub 13.2 billion in 2019. EBITDA was down to Rub 241 million,
compared with Rub 430 million in 2019. The main reasons were
the COVID-19 pandemic and postponement of projects for 2021.
in millions of Rub
2020
2019 Change
yoy
Revenue
EBITDA
20,256
19,770
2,931
2,599
2%
13%
4Q
2020
6,311
1,116
3Q
2020
Change
qoq
in millions of Rub
2020
2019 Change
yoy
4Q
2020
3Q
2020
Change
qoq
5,657
797
12%
40%
Revenue
EBITDA
11,284
13,160
-14%
2,890
3,241
-11%
241
430
-44%
(49)
47
-204%
EBITDA margin
14.5%
13.1%
17.7%
14.1%
EBITDA margin
2.1%
3.3%
-1.7%
1.4%
Compressors3
Construction4
Revenue was down by 16% yoy to Rub 14.9 billion, compared with
Rub 17.9 billion, due to less revenue generated by recurring business.
Revenue was down to Rub 718 million, compared with Rub 1.4 billion
in 2019. EBITDA was Rub (63) million, compared with Rub (29) million
last year.
EBITDA grew by 25% yoy to Rub 1.9 billion, compared with
Rub 1.5 billion in 2019, due to higher margins generated by large
contracts. EBITDA margin was up to 13.0%, compared with 8.6% in 2019.
in millions of Rub
2020
2019 Change
yoy
4Q
2020
3Q
2020
Change
qoq
in millions of Rub
2020
2019 Change
yoy
4Q
2020
3Q
2020
Change
qoq
Revenue
EBITDA
14,947
17,884
1,939
1,546
-16%
25%
6,080
3,075
796
489
98%
63%
Revenue
EBITDA
718
1,394
-49%
138
174
(63)
(29)
117%
(43)
(59)
-21%
-27%
EBITDA margin
13.0%
8.6%
13.1%
15.9%
EBITDA margin
-8.8%
-2.1%
-31.2%
-34.0%
Working Capital
and Capital Expenditures
Working Capital and Capital Expenditures
Working capital declined to Rub 6.8 billion, by 24% yoy, compared with
Rub 8.8 billion in 2019. As a share of revenue, working capital declined
to 14.5% which is a very low ratio. It was a result of tough anti-crisis
measures initiated by the company.
Maintenance capex was down to Rub 1.4 billion, by 12% yoy, compared
with Rub 1.6 billion in 2019.
in millions of Rub
2020
2019 Change
yoy
4Q
2020
3Q
2020
Change
qoq
Working capital
6,752
8,846
-24%
6,752
8,715
-23%
Working capital /
Revenue LTM
14.5%
17.2%
14.5%
18.9%
Capex
Acquisition
1,392
1,571
-11%
0
670
250
0
399
0
-37%
Debt Position
Total debt declined by 9% yoy to Rub 22.2 billion, compared with Rub
24.3 billion in 2019. Net debt was down to Rub 11.8 billion, by 18% yoy,
compared with Rub 14.4 billion in 2019.
Net debt to EBITDA LTM ratio decreased to 2.39x, compared
in millions of Rub
2020
2019 Change
yoy
4Q
2020
3Q
2020
Change
qoq
Total debt
Net debt
Net debt /
EBITDA LTM
22,175
24,321
-9%
22,175
22,832
11,814
14,369
-18%
11,814
13,897
-3%
-15%
2.39
2.98
2.39
2.89
1 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
solutions as well as pumps built to standard specifications; it also provides aftermarket
maintenance and repair services and other support for its products.
2 The oil and gas equipment and projects 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 th+e customer’s site as
a modular but fully integrated part of the customer’s technological process.
Significant Events
after the Reporting Date
& Financial Management
Large Contracts
After the reporting date, in April 2021, the company announced
the signature of a Rub 7.5 billion contract to design and manufacture
oil & gas equipment for one of the largest gas fields in Russia.
The contract is for manufacture, delivery and installation of membrane
modules and elements, turbocompressor units for an interstage
compressor station and gas transportation units for a gas booster
station as part of a helium concentrate membrane recovery unit.
This is a follow-up contract HMS Group has secured with this client.
The first one was announced in 2017 in a Rub 10.2 billion contract,
and that was the first project of that kind in Russia.
Buyback Program
After the reporting date, HMS Group repurchased 176,000 GDRs under
its buyback program.
Dividends
The Board of Directors at the meeting on April 21, 2021, recommended
payment of a final dividends in respect of FY 2020 in the amount of
Rub 4.25 per one ordinary share (Rub 21.25 per one GDR). The dividends
are subject to the approval at the AGM on June 24, 2021. Subject to such
approval, the Dividends may be paid on July 1, 2021 to shareholders
on the Company’s register at close of business (UK time) on June 18,
2021 (the “Record Date”).
MOEX listing
Also, the Board of Directors approved the listing of the Group’s GDRs
as a Foreign Issuer on the Moscow Exchange. The Company’s GDRs
will continue trading on the Main Market of the London Stock Exchange.
Trading of HMS Group’s GDRs on the Moscow Exchange is expected
to commence in the second quarter of 2021, subject to approval
by the Moscow Exchange.
3 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 principal products include
customized compressors, series-produced compressors built to standard specifications,
and compressor-based integrated solutions.
4 The construction provides construction works for projects for customers in the oil
upstream and midstream, gas upstream.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
32
HMS GROUP
Annual Report 2020
33
2020 Calendar of Events
January
May
—
—
—
—
—
—
HMS Group implements an investment
project on the foundry re-equipment
at Kazankompressormash facility to
create a modern foundry complex on its
base. The new complex will enable the
company to produce the castings of a
wide range of alloys, including the steel
ones of a large size.
Apollo Goessnitz GmbH participated in
the Egypt Petroleum Show in February
11–13, 2020 in the Egypt International
Exhibition Center (Cairo). At the
exhibition, Apollo Goessnitz presented
solutions for oil & gas upstream and
downstream applications.
March
—
The centrifugal compressor
package underwent integrated
tests at TANECO’s Oil Refining
and Petrochemical Complex in
Nizhnekamsk. The compressor package
is based on a 3GC2-39/106-132
vertically split centrifugal compressor
with a capacity of 153,500 Nm³/h and
a discharge pressure of 132 bar. The
equipment is intended for compression
of hydrogen-bearing gas in heavy coker
gas oil hydrotreatment process.
HMS’ Executive Directors and PDMRs
acquired an interest over the Company’s
GDRs following the grant of awards
under the Company’s Long Term
Incentive Plan («LTIP») for the 2017
award year. Total amount of GDRs paid
to the LTIP participants was 270,810,
which is equal to 1.16 percent of HMS’
share capital. For more details, visit link
https://grouphms.com/press_center/
press_releases/8817/.
HMS signed Rub 1.4 billion contract
to engineer and manufacture skids,
vessels and a refrigerant compressor.
The oil & gas equipment will be
delivered in 2020–2021 and installed at
the client’s facility in southeast Siberia.
HMS Group signed a framework
contract to conduct design and
exploration works at an oil & gas
field, located in Russia. The estimated
duration of works is 5 years and the
maximum total amount of the contract
may not exceed Rub 5.7 billion.
HMS signed a contract to manufacture
automated group metering units for
Mangistaumunaigas (the Republic of
Kazakhstan). Previously, such units
had been supplied to the Kalamkas
and Zhetybay fields developed by
Mangistaumunaigas. Since the
beginning of 2020, the Group has
concluded contracts for supply of 31
automated group metering units for
Kazakhstan oil companies.
—
The company signed a contract to
manufacture and delivery automated
metering units (for groups of wells)
to RITEKBeloyarskneft, a territorial
production company, to be operated
at the Sredny Nazym oil field. The
metering units will be equipped with
multi-stream switching manifolds
with cases made of wear-resistant
materials. It allows reducing corrosive
and erosive wear of switching manifold
parts, and, thus, extending the service
life of the whole metering unit.
June
—
—
—
HMS’ Executive Directors and
PDMRs acquired an interest over the
Company’s GDRs following the grant
of awards under the Company’s Long
Term Incentive Plan («LTIP») for the
2017 award year. Total amount of
GDRs paid to the LTIP participants was
73,857, which is equal to 0.30 percent of
HMS’ share capital. For more details,
visit link https://grouphms.com/press_
center/press_releases/8822/.
The company signed a contract
to design and deliver automated
group metering unit for Production
Association “Belorusneft”. It will be the
first metering unit produced by HMS
Neftemash, which will be designed
considering the specific oil production
conditions of the Belarusian oilfields
and the Republic of Belarus regulatory
requirements.
HMS managers acquired 20,446
HMS Group’s GDRS using their own
funds.
July
August
Fitch Ratings affirmed JSC HMS Group’s
Foreign- and Local-Currency Issuer
Default Ratings (IDR)s of “B+”, the outlook
“Stable”. The full text of Fitch’s press
release is available on the agency’s
website https://www.fitchratings.com/
research/corporate-finance/fitch-
affirms-jsc-hms-group-idr-at-b-outlook-
stable-24-07-2020.
Under the project “Bobruysk TPP-2
Repowering. Replacement of boiler feed
pump No. 3 and installation of adjustable
speed drive”, HMS Group manufactured
and delivered a motor pump unit. The
unit is equipped with hydrodynamic
coupling made by VOITH Turbo.
—
Two compressor packages were put
into pilot operation under the project
for development of the oil part of
the Yaro-Yakhinskoye oil and gas
condensate field (Arcticgas). 34GC2-
138/7-117 GTU compressor packages
with 125,640 Nm³/h capacity and 117
bar discharge pressure were designed
to compress a mixture of APG and de-
ethanization gas operating as part of a
gas compression system (GCS).
—
—
Low and high-pressure casings are
mounted in parallel on a common skid
together with a twin-shaft gearbox and
are completed with a 16MW NK-16STD
gas turbine engine manufactured
by KMPO. Such arrangement made
it possible to reduce the overall
dimensions of the GCS, including
its container, as well as to facilitate
the installation and maintenance
process of the compressor flow paths.
The equipment was delivered to the
customer as ready-to-operate modules.
The implementation of this project was
another successful example of a long-
term strategic partnership between
HMS Group and KMPO.
—
—
—
—
—
—
HMS signed a Rub 4.5 billion contract
to engineer and manufacture gas
compression units. The equipment will
be delivered and installed at a client’s
gas booster station in 2021.
HMS Group signed a Rub 3.8 billion
contract within a long-term framework
agreement to manufacture mobile
compressor units. The framework
agreement was signed in 2019.
The equipment will be delivered
at the client’s site by the end of 2021.
HMS managers acquired 23,100
HMS Group’s GDRs using their own
funds.
HMS Group repurchased 5,554 of
its global depositary receipts. Since
the start of the program, the Company
has repurchased 1,209,836 GDRs in
total representing 5.16 percent of its
issued share capital.
The complete gas compression system
was put into commercial operation at
Vostochno-Messoyakhskoye oil and gas
condensate field. The gas compression
system based on 53GC2-384/4-141
GTU high-performance compressor
system with a parallel arrangement
of casings was designed to compress
associated petroleum gas as a part
of the compressor station under
construction at the field.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
34
HMS GROUP
Annual Report 2020
35
2020 Calendar of Events
Continued
HMS Key Projects, Development
& Innovations
September
November
Export Activities
Research and Development
—
HMS Group signed a Rub 3.2 billion
contract to engineer and manufacture
gas transportation units to be installed
at a client’s oil & gas condensate field,
located in Russia. The equipment will
be delivered by the end of 2021.
December
—
—
—
HMS Group signed a Rub 1.3 billion
contract to engineer and manufacture
pumping stations. The equipment will
be delivered in 2021.
The company manufactured and
delivered a number of high-efficiency
pumps of NM 1250-260-2.1 (KZ) at
the main pump stations “Pavlodar”,
“Ekibastuz’’, “Stepnoye” (Kaztransoil)
under its modernization program.
The Group‘s Executive Directors and
PDMRs acquired an interest over the
Company’s Global depositary receipts
following the grant of awards under
the Company’s Long Term Incentive
Plan («LTIP») for the 2018 award year.
The total amount of GDRs paid to the
LTIP participants was 331,562, which is
equal to 1.41 percent of the Company’s
share capital.
More information can be found via link
https://grouphms.com/press_center/
press_releases/8941/.
—
—
—
One of HMS managers acquired 99,208
HMS Group’s GDRS using his own
funds.
HMS Group refinanced Rub 5.1 billion
in 3Q 2020 and shifted debt repayments
from 2021 to 2022–2023.
HMS Group signed a Rub 1.9 billion
contract to engineer and manufacture
gas transportation units. The
equipment will be delivered by the end
of 2021.
HMS Group manufactured and
delivered two gas compression
systems to operate as a part of
the booster compressor station
at Novoportovskoye oil and gas
condensate field. The compressor
systems are based on a single-section
five-stage 6GC2-380/36-101 GTU
centrifugal compressor with a vertically
split casing, 319.38 m3/min capacity
and 9.8 MPa discharge pressure. The
systems are equipped with the dry
gas seals, oil sleeve bearings, and a
common lubrication system for motor
and compressor, and were supplied in
the hangar-type enclosures with 32 MW
Siemens SGT-700 gas turbine drives
and all utility systems.
October
—
HMS Group manufactured and
delivered a number of new-generation
pumps, including oil pumps, booster
pumps and condensate pumps, to the
Azerbaijan thermal power station.
Export sales revenue of HMS Group outside
the FSU was US$ 51 million including
international nuclear power plants projects,
less than a year before but still showing
stability despite the COVID-19 pandemic.
At the same time, the current export sales
backlog is equal to US$ 56 million with new
promising projects coming.
2020 has shown a significant breakthrough
in Egyptian water market and a tremendous
work has been done to bring HMS
compressors to the international markets.
HMS Group follows best practices and international standards in R&D, manufacturing
and quality management in order to meet the growing requirements on the market. We
actively participate in the government-initiated process of import substitution, which allows us
to broaden our product portfolio and attract a large number of clients.
PUMPS
HMS Group set up a serial production
of HMS Control SIDUS stations, intended
for (simultaneous) control of two submersible
or semi-submersible pumps applied in the
wastewater disposal, water supply, heat
supply, etc.
This station’s control system is cascaded,
in response to control signals. Both
discrete signals provided by float fluid
level switches, electrocontact manometers,
electrode level sensors, and analog signals
provided by hydrostatic and ultrasonic level
transmitters can be used for the process
control.
The stations are designed in two
specifications — with direct-on-line start
and with an each-pump-softstarter.
HMS Group continued expansion of the
standard series of pumps manufactured
for thermal power generation and other
industries.
Oil pumps 12KM-type and electric pump
units, based on them, are intended
for transfer of turbine-oil with temperature
+25–60°C or other oils with close
physicochemical characteristics. These
pumps are used in the centralized lubrication
systems of turbo-pump units.
Nasosenergomash, the Ukrainian subsidiary
of HMS Group, successfully tested the newly
designed API 610 main centrifugal pumps
for oil transport through trunk pipelines.
USD 51 mln
Export sales revenue
in 2020, outside the FSU
USD 54 mln
Export sales backlog in 2020
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
36
HMS GROUP
Annual Report 2020
37
HMS Key Projects, Development
& Innovations
Continued
The AMG-250N/2×410-308/CN (BB3
according to API 610) pumps with
a horizontal housing connector and multi-
stage multi-bearing were specially designed
and manufactured in accordance with
technical requirements of the customer,
JSC Ukrtransnafta, with nominal parameters
of 1,250m3/h feed and 365m pressure.
HMS Group designed and manufactured
double-sided pumps D 500-1050 “in hot
design” (3,500m3/h-140m) intended for use
in heating networks. These D-series pumps
do not require forced lubrication, are
equipped with mechanical seals and operate
as a part of units with a variable frequency
drive.
In 2020, the 13-stage pump units with
a horizontal housing connector type AMG
100L according to the API 610 standard were
designed and manufactured. The designed
pump unit has no analogues in this design
among manufacturers of pumping equipment
in Eastern Europe and the countries
of the former CIS (the main parameters:
Q=180m3/h, N=1,180m, n=3,000rpm,
and NPSHR=4m). The basic element of the
pump is a high-tech casting of the casing,
the manufacturing accuracy of which ensures
high efficiency and preset parameters of the
flow part.
OIL & GAS EQUIPMENT
Thermo-Chemical Binary Mixture
Technology (TCBXT)
In 2020, HMS Group continued works
on promoting and commercialization of the
new technology in subsoil users, but several
factors affected works volume and timing.
Commitment of Russia in the OPEC+ group
to a record downward adjustment of its
overall crude oil production by 1.9 mb/d
made Russian VIOCs suspend crude oil
production at almost all oilfields in Russia.
The agreement led to crude oil production
cut, freezing of investment plans, including
among others implementation of new
methods of bottomhole formation zone
treatment and enhanced oil recovery
(EOR). As the developed technology
and equipment were the ones classified as
methods of bottomhole treatment and EOR,
planned works were suspended, canceled or
postponed for an indefinite period.
The COVID-19 pandemic complicated
planning and carrying out of works at oil
wells of almost all oil & gas producers
in Russia. Subsoil users canceled, postponed
or freeze such kind of works, because access
of their personnel to oil wells had been
limited.
Despite all restrictions and limitations,
HMS Group managed to continue works
on the technology, including laboratory
testing and experiments on examination
of binary textures’ energy datum
and optimization of the chemicals’
formulations.
In the period from October to December 2020,
HMS Group conducted 6 successful testing
at Tatneft and 1 testing at Gazprom neft.
Today, the company is in the process
of assessment of completed works,
analysis of received results and preparation
of documentation. HMS Group expects to sign
a number of agreements for wells’ treatment
with other subsoil users.
Mobile Secondary Reference Metrology
Complex
In 2020, HMS successfully completed
an investment project to develop
the Intelligent Mobile Secondary Reference
Metrology Complex, which online calibrates
metering units, without interruption
of hydrocarbons’ extraction, thus lowering
costs of extraction.
In October 2020, the prototype of the Complex
completed the overall field trials at 8 wells
on Slavneft’s deposits.
The results of mobile oil analyzers at wells
with light separation of oil-gas-water
mixtures in assessment of the volumetric
water cut, the density of oil, water
and liquids, as well as the mass water cut
was similar to the inground chemical analysis
laboratories’ ones.
The developed Mobile Secondary Reference
Metrology Complex calibrates an operating
fleet of cluster metering units without
interruption of oil extraction. And it allows
decreasing costs, associated with necessity
to renew metering units fleets not subject
to calibration as per current verification
scheme.
unique system
of the rodless oil extraction
mechanism at low-yield reservoirs
Hydromechanical drive for sucker rod
pumping units
The main advantages of the hydromechanical
drive developed by HMS Group are:
—
—
—
—
—
—
—
—
no need to redevelop an oil-well for an
offered technology;
release of sucker-rod-pumping-unit
foundation land, improvement of the
environmental security of surface
management (elimination of oil product
leaks through seals and stuffing-box
seals of a rod);
reduction in metal consumption during
replacement of the obsolete rocker-
machines fleet;
the no-sucker-rod enables mechanical
dewaxing of a lift;
increase in pumps’ volumetric
efficiency, improvement of oil recovery
efficiency, decreased level of power
consumption;
option to use downhole-to-surface
telemetry with online output to a
dispatcher console with controllability
of the main well measures (pressure,
temperature, etc.);
conversion of wells from periodic
to constant duty;
operation of wells with high content
of aromatic hydrocarbons, gas
and solids.
In 2020, HMS Neftemash successfully
completed the first stage of test operations
of the unique system of the rodless oil
extraction mechanism at low-yield reservoirs
in Volga-Urals oil and gas province.
The developed technical solution decreases
costs of oil extraction at poor wells, making
it possible to withdrawn from traditional
beam units.
COMPRESSORS
In 2020, HMS Group successfully launched
a new type of compressor units — a flash gas
compressor — for the 4th stage of the Yamal
LNG Project (NOVATEK). That was the first
of its kind solution, made in Russia and fully
on the base of the equipment made in Russia.
All elements were designed and produced
in accordance with the API standards.
The new patented system maintains
day capacity up to 8m3 and is intended
for installment in wells with up to 2,000m
depth. The suggested system maintains up
to 65% efficiency factor with a significantly
lower energy intensity (2.5–3.5 kW),
compared with traditional oil production
systems (25–30kW).
HMS Group developed and successfully
launched manufacturing of gas compressor
units with 32MW capacity driven by the
Siemens SGT-700 gas turbine driver. These
units will be installed as a part of a booster
compressor station at the Novoportovskoye
oil & gas condensate field (Gazpromneft)
and placed in operation by the end of 2021.
In line with a testing plan, one of wells
was equipped with a system, based on the
unique hydromechanical gearbox, intended
for a special sucker rod pumping units,
and which was designed and manufactured
by HMS Group. The first test successfully
proved the system’s operational condition
and its effectiveness.
HMS Group is the first and the only company
in the world, which brought into prototype
testing the roadless oil extraction system at a
field under actual usage conditions.
32 MV
new gas compressor capacity
driven by the Siemens SGT-700
gas turbine driver
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
38
HMS GROUP
Annual Report 2020
39
HMS Key Projects, Development
& Innovations
Continued
Corporate Social Responsibility
LEGAL PROTECTION
OF INTELLECTUAL PROPERTY
MODERNISATION
As an innovative company, HMS Group
continues to protect the exclusive rights
to its products and the individualisation
of the goods produced and services that are
provided.
Foundry
In 2020, Kazankompressormash (Compressor
business segment) completed an investment
project on the foundry re-equipment to create
the modern foundry complex on its base.
Currently, HMS operates more than
350 objects of intellectual property in its
portfolio, including 270 patents, 31 registered
computer programmes, and 54 registered
trademarks.
In 2020, the company received 10 patents
for new technological solutions.
The company filed application
for a patent on the advanced design
of the Hydromechanical Drive for Sucker Rod
Pumping Units. Also, HMS initiated process
of patenting the Thermo-Chemical Binary
Mixture Technology in China and Kazakhstan
for its further promotion abroad.
The foundry complex is intended, primarily,
for production of large-size castings and is
capable of simultaneous smelting up
to 17 tons of liquid metal to produce high-
quality steel castings with weight up to 9 tons
and cast iron castings with a weight up
to 13 tons.
The modernization expanded the range
of sizes and materials and enhance quality
and accuracy of production the castings
of a wide range of alloys, including the steel
ones of a large size.
The smelting complex of four heat-treating
furnaces with a total capacity up to 90 tons
was put into pilot operation also. The heat-
treating complex allows heat treatment
of castings, forgings, assemblies and other
large-sized parts with an in-process
temperature range 550 to 1200°C.
10 patents
for new technological solutions
in 2020
350
objects of intellectual property
in HMS Group portfolio,
including
90 tonnes
smelting complex
of four heat-treating furnaces,
with an in-process temperature range
270 patents
550 – 1200 ° C.
Primary Areas of Social Policy
Social development policy and provision
of adequate living standards and normal working
and life conditions for HMS employees.
The company has developed and implemented collective agreements, in-house policies
and acts, which reflect social welfare issues, benefits, compensations and guarantees
to the employees, including:
—
—
—
—
—
hardship-duty pays;
preservation of average earnings after
transfer to easier work;
pecuniary aid in the event of death;
pecuniary aid for medical treatment,
and purchase of expensive
pharmaceutical drugs;
bonus payments to veterans;
— maternity coverage on monthly basis;
—
additional holidays in case of significant
events, and for continuous service with
the company;
pecuniary aid to non-working veterans,
including for public holidays;
events to support young people.
—
—
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 40
HMS GROUP
Annual Report 2020
41
Corporate Social Responsibility
Continued
Safety and Health
HMS Group believes that achieving
its strategic goals and maintaining its
competitive advantages require systematic
management of labor health protection
and prevention of industrial injury
and professional illness.
Production facilities introduce modern
methods of accident prevention and maintain
hygiene and sanitary conditions, which
prevent professional illnesses and ailments
driven by workplace factors.
On this basis, the company set up four main
goals in the area of labor health protection
and accident prevention:
1. Prioritization of employees’ health
and safety over business performance
results and continuous improvement
of work conditions and labor health
protection at every working place.
2. Significant decrease of risks of industrial
traumatism and professional illness of the
company’s employees:
Ƚ regular medical examinations
and availability of stationary medical
and feldsher’s stations;
Ƚ issuance of free personal protective
equipment, including work clothes,
safety shoes and other personal
safety apparel. The special
commissions at HMS’ facilities analyze
the given personal safety apparel on a
regular basis and examine novelty
products which appear on the market;
Ƚ issuance of milk to employees with
harmful working conditions, etc.
We promote and encourage a healthy
lifestyle not only because it helps to maintain
a productive and positive workplace, but also
because it is the right thing to do.
3. Compliance of HMS’ activities in the
area of labor health protection with
the requirements and expectations
of all interested parties, and with rules
and regulations established under
legislation and normative technical
documents:
Ƚ regular examination of industrial
safety and regular training in the area
of industrial safety.
4. Establishment of personal responsibility
by company employees of all levels
for meeting all labor health protection
requirements accurately and in a timely
manner. Also, HMS actively engages its
employees while developing in-house
documentation, which determines
the regulations of implementation
and realization of the labor health safety
system.
Workplaces adopted the “stay at home
if unwell” practice and HMS implemented
flexible sick leave policies to discourage
workers with symptoms of the decease
from coming to their workplaces.
The facilities are equipped with bactericidal
air recirculating irradiators, and all surfaces
are cleaned and treated with sanitizers
several times per day.
The company tests employees
for the COVID-19 on a regular basis. And our
employees on their request can be vaccinated
with the “Sputnik V” at offices and production
facilities of HMS Group.
COVID-19
Since April 2020, as to prevent the expansion
of COVID-19 decease, HMS Group undertakes
all the necessary measures in its offices
and production facilities in accordance with
regulatory requirements.
The company informs personnel on a regular
basis about the necessity to comply with
the preventive measures and personal
and social hygiene rules through corporate
information materials, as well as materials
provided by the Russian consumer protection
agency Rospotrebnadzor and other official
state sources.
Where business processes allow,
the company limited contacts between
staff members of separate manufacture
workshops, sites, departments and functional
work groups, which were not connected
by collective tasks and work processes.
Where the workshop allows, there
is a 1.5-meter physical distance implemented
between workers and their workplaces.
The remote working was widely practiced.
The company minimized offline business
meetings or any mass events in its offices
and production facilities. HMS imposed
restrictions on business trips: its employees
were sent on business trips only in the case
of urgent operating issues, which could not
be cancelled or postponed.
HMS Group provided its employees
and visitors with individual protective
equipment — disposable gloves and face
masks with change not less than
in 2–3 hours.
The company organized an “entry filter”
on entering HMS’ offices and production
facilities, including spots for hands
disinfection and temperature screening.
Individuals with a high temperature and/
or showing signs of the acute respiratory
disease are suspended or not admitted
to their working places.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
42
HMS GROUP
Annual Report 2020
43
Corporate Social Responsibility
Continued
Social Assistance
The Environment
People
Average headcount as of December 31, 2020,
in thousand people
The company believes in its responsibility
for social and economic climate in regions
where it operates and takes part in social
projects and programs, among other things
on a voluntary pro-bono basis. The charity
activities are realized in the form of public
private partnership aiming at the sustainable
development of the company and the region
where it operates.
HMS Group focuses on helping children who
are in need of medical treatment, as well as
children in need of social and professional
assistance. These projects are carried out
through:
—
social support and protection
of citizens, including improvement
of the financial position of indigenous
peoples, and social assistance
to unemployed, disabled and other
disadvantaged groups who, due
to their specific physical or intellectual
condition or other circumstances, are
unable to implement their legitimate
rights and interests by themselves;
promoting the prestige and the role
of the family in society;
promoting the protection
of motherhood, fatherhood
and childhood.
—
—
In general, the environmental impact of our
production facilities is low due to the business
specifics. Nevertheless, the management
and personnel of HMS Group fully recognize
their responsibility to nature and to future
generations. The company continues to work
on developing and selling energy-efficient
products and service solutions. Apart
from that, HMS Group set the following
environmental goals, which are critical in the
company’s view:
—
reducing emissions of harmful
substances into the atmosphere;
abating waste water pollution;
improving waste management in the area
of reducing waste and curbing adverse
environmental impact;
developing and widely using waste-free
technologies in industrial processes;
ensuring rational usage of raw materials,
environmental items and energy;
improving HMS’ image in this sphere.
—
—
—
—
—
As an employer of 13 thousand people,
HMS is one of the major job creators across
the cities where its facilities are located.
Employees are one of HMS Group’s core
assets, and the company encourages
and assists them in achieving their full
potential.
In 2020, the average headcount decreased
by 1 thousand people (–6.9% YoY) due
to attrition and personnel optimization, as
well as reduction of staff in the construction
segment because of its production cutback.
7.4
2020
7.8
2019
8.2
2018
8.6
2017
8.8
2016
8.9
2015
HMS Group’s facilities conducted quarterly
surveys of emission of harmful substances
into the atmosphere and evaluations of the
effectiveness of dust and gas catchers.
The company conducted an examination
of emission sources, revized a draft
of maximum permissible emissions, received
new permits for air emissions, and developed
a set of actions to decrease the level
of pollutant emissions under unfavorable
weather conditions. For the last years, no
excess of the maximum allowable pollutant
emissions has been discovered.
The Group’s production facilities conducted
chemical and microbiological analyses
of natural surface water and waste storm
water on a quarterly basis, and spillover
tracking of storm water on a monthly basis.
3.2
3.6
3.2
2.9
2.8
1.9
2.1
0.1
0.3
Total
13,1
2.1
2.2
2.3
2.3
0.3
0.3
14,0
0.6
0.3
14,5
0.6
0.3
14,6
0.6
0.3
14,7
2.3
1.6
0.3
15,0
Industrial pumps
Oil & gas equipment and projects
Compressors
Construction (former EPC)
HMS Management Company
Total
13 thousand
employees in 2020
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION
44
44
HMS GROUP
HMS GROUP
Annual Report 2020
Annual Report 2020
45
Corporate
Good corporate governance
generates trust
and engagement between
a company and its stakeholders
and contributes to a company’s
long-term success.
The Board of Directors of HMS Group is committed
to the highest standards of corporate governance
and aims to ensure on an ongoing basis that
the Company is a modern, transparent, competitive
and sustainable organization. By adopting best
practices in corporate governance and corporate
administration, the Company has achieved
a dynamic and effective communication
between the Board, the Company’s management
and its shareholders, leading to the successful
implementation of its strategy.
The Company’s corporate affairs are governed
by the memorandum and articles of association
of the Company and the provisions of applicable
Cyprus law. Although the Company is not 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 and practices, which are detailed below
in this section. 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.
Under the Cyprus Companies Law, the directors
have to declare the nature of their interest (either
direct or indirect) in transactions at a meeting of the
directors of the company. Under the memorandum
and articles of association of the Company, directors
may not vote on a matter in which they have
an interest even if the director has disclosed his
interests in the transaction.
HMS Group continues to review its corporate
governance policies in line with international
best practice.
Governance
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 46
HMS GROUP
Annual Report 2020
47
Board of Directors
The Board of Directors and Performance
As at 31 December 2020, the Board consisted
of nine (9) Directors: the Group Chairman who was
independent on appointment, three (3) Executive
Directors and five (5) Non-executive Directors.
Chairman
Executive Directors
Mr. Nikolay N. Yamburenko
Mr. Artem V. Molchanov
engineering. He graduated from the Judge
Business School, University of Cambridge
with an executive MBA degree.
Chairman of the Board of Directors, Non-
Executive Director, Chair of the Strategy
and Investments Committee
Member of the Board of Directors,
Managing Director (CEO)
Mr. Yury N. Skrynnik
Member of the Board of Directors
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 Livhydromash (HMS Pumps), 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.
As one of the founders of the Group,
Mr. Molchanov has held various executive
positions within the HMS Group since its
establishment in 1993. Mr. Molchanov
became the President of the 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.
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 the 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 the 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
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 Unit, a position he
has held since its establishment in 2012.
Previously, Mr. Skrynnik held the position
of Director for Strategic Marketing. Prior
to joining the 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
Mr. Giorgio Veronesi
Mr. Vyacheslav Tsoy
Mr. Ezio Vergani
Member of the Board of Directors, Chair
of the Audit Committee
Mr. Vergani was appointed as an independent
non-executive member of the Board
of Directors in June 2018.
Mr. Vergani is the owner and the President
of Asco Pompe, an Italian company which
produces, distributes, supplies and integrates
products and technological systems for fluid
handling, monitoring and water treatment.
Prior to joining Asco Pompe, from 1985
to 2008, Mr. Vergani was the CEO and major
shareholder of Finder Pompe, one of the
European leading companies in the design
and manufacture of engineered pumps
and systems for oil & gas. Mr. Vergani has
received a Master’s degree in mechanical
engineering from the Politecnico University
of Milan, Italy and the Executive Program
Certificate of the Stanford Business School,
Palo Alto, California, USA. He has served
as a Board member in Confindustria Lecco
since 2014.
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.
Member of the Board of Directors, Chair
of the Remuneration Committee
Member of the Board of Directors
Mr. Veronesi was appointed as
an independent non-executive member of the
Board of Directors in June 2018.
He has graduated in Chemical Engineering
at the University of Padua, Italy and has over
35 years of experience in the international
engineering and construction sector.
Mr. Veronesi has held various senior
positions at leading engineering companies
Foster Wheeler, Tecnimont, Siirtec Nigi
and Techint. He has been the Commercial
Manager in Techint E&C since 2012.
Mr. Vladimir V. Lukyanenko
Member of the Board of Directors
Mr. Lukyanenko was appointed as a non-
executive member of the Board of Directors
in July 2016. He is also the member
of the Remuneration Committee, the Audit
Committee and the Strategy and Investments
Committee. Currently he is the Director
General of PROFITPROM LLC. From 2006
to 2008 Mr. Lukyanenko was the Vice-
President of Hydraulic Machines LLC. From
2006 to 2008 Mr. Lukyanenko was the Vice-
President of the HMS Group. He has served
as the Chairman of the Supervisory Board
of Sumy Frunze NPO PJSC (Ukraine) from
2003 until 2007. He graduated from Moscow
Chemical Engineering Institute (currently
Moscow State University of Engineering
Ecology) with a degree in machine building
in 1991. Mr. Lukyanenko has over 18 years
of experience in the industry.
Mr. Tsoy was appointed as non-executive
member of the Board of Directors in April
2019. Currently, he is the General Director
of “ITS” LLC, a manufacturer of prefabricated
modular equipment. Prior to joining “ITS”
LLC, Mr. Tsoy served from 2006 to 2011 as
an analyst and deputy director of capital
markets at HMS Group. From 2003 to 2006,
Mr. Tsoy was an analyst at “Smith Barney”,
a private wealth management company.
Mr. Tsoy graduated with honours from Drew
University, New Jersey, USA with a degree
in economics and finance in 2003.
Principal Activities
of the Board
of Directors in 2020
The Board of Directors held four ordinary
meetings and one extraordinary meeting
in 2020. Due to the COVID-19 pandemic, four
out of five meetings of the Board of Directors
were held via videoconference call. In 2020,
the Board of Directors continued working
on the development of the Company’s mid-
term and long-term financial and business
strategies, including in relation to investment
plans, mergers and acquisitions activities,
budgeting, the long-term incentive program
for the management of the Company
and general corporate development.
At its meetings, the Board of Directors
also reviewed other issues connected with
the activities of the Company that are within
its remit, including the approval of corporate
reports.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 48
HMS GROUP
Annual Report 2020
49
Board of Directors
Continued
The Board
of Directors
Committees
In order to exercise proper oversight
of risk and control and pursuant to the
authority granted to the Board under
the Company’s memorandum and articles
of association, the Board has delegated
certain responsibilities to committees of the
Board. The [principal] committees are
the Audit Committee, the Remuneration
Committee, and the Strategy and Investments
Committee. Each Committee has its own
internal terms of reference which set forth
its duties and responsibilities, as well as
qualifications for Committee membership,
procedures for Committee member
appointment and removal, Committee
structure and operations, and reporting lines
to the Board of Directors. A brief description
of the main activities of these [principal]
Committees in 2020 is set out below.
Audit Committee
General Overview
As at 31 December 2020, the Audit Committee
comprises three independent Directors and is
expected to meet two to four times per year.
Currently, the Audit Committee is chaired
by Mr. Ezio Vergani; its other members are
Mr. Giorgio Veronesi and Mr. Nikolay N.
Yamburenko.
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 codes of conduct.
The Audit Committee also supervises
the Group’s submission of financial
information and a number of other audit-
related issues, and assesses the efficiency
of the work of the Chair of the Board
of Directors.
Further details on the main features of the
Group’s internal quality control and risk
management systems, including in relation
to the financial reporting process, are set out
in the next section.
Activities in 2020
Two meetings of the Audit Committee were
held in 2020. The main issues that the Audit
Committee oversaw during the year were
the preliminary review of IFRS financial
statements, 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.
External Audit of Financial Statements
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 appointment
of the external auditor and the remuneration
of the auditor, and advises the Board
of Directors on other terms and conditions
of the contract with the auditor. In 2020,
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 2019.
Deloitte remains appointed for the 2020 audit.
Remuneration Committee
General Overview
The Remuneration Committee comprises
four Directors and is expected to meet
at least once per year. Currently,
the Remuneration Committee is chaired
by Mr. Giorgio Veronesi; its other members
are Mr. Nikolay N. Yamburenko, Mr. Ezio
Vergani and Mr. Vladimir V. Lukyanenko.
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 2020
The Audit Committee is responsible
for considering, amongst other matters: (i)
monitoring the financial reporting process
and the integrity of the Group’s financial
statements, including its annual and interim
financial statements; (ii) the effectiveness
of the Group’s internal quality control
and risk management systems; (iii) auditors’
Every year the Company/Group appoints
an external auditor who is responsible for the
auditing and review 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.
Two meetings of the Remuneration
Committee were held in 2020. The main
matter reviewed by the Remuneration
Committee was the implementation of the
Group’s updated Long-Term Incentive Plan
(“LTIP”), as well as the 2020 LTIP targets
and the list of participants.
Strategy and Investments Committee
General Overview
The Strategy and Investments Committee
comprises four 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. Vladimir V.
Lukyanenko and the other members are
Mr. Giorgio Veronesi, Mr. Yury N. Skrynnik
and Mr. Nikolay N. Yamburenko.
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 2020
One meeting of the Strategy and Investments
Committee was held in 2020. The main matter
reviewed by the Committee was the updated
strategy and financial model of the Group.
Directors’
Compensation
Long Term
Incentive Plan
During 2020, the Group’s Executive Directors
and persons discharging managerial
responsibilities (“PDMRs”) listed below
acquired an interest over the Company’s
global depositary receipts (“GDRs”) following
the grant of awards under the Company’s
LTIP for the 2017 and 2018 award years.
The awards were part of a grant of GDRs
to seventeen Company managers as
a motivational package for the 2017 and 2018
award years under the LTIP. The total amount
of GDRs awarded to the LTIP participants
was equal to 2.87 percent of the Company’s
issued share capital.
The total compensation of the Chairman
of the Board was Euro 270,115 for the year
ended 31 December 2020.
The 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 260,000 for the year ended
31 December 2020.
Diversity policy
statement
The Company operates in accordance with
the fundamental principles of equality,
diversity and non-discrimination and the
Charter of Fundamental Rights of the
European Union. All career, training
and development opportunities are afforded
on the basis of gender, religious and other
possible forms of equality. Decisions
and policies in respect of remuneration
and recognition are similarly based on the
principles of equality, merit and ability.
In the Board’s opinion, this approach,
which incorporates equality and diversity
as qualitative measures, achieves its aims
better than a formal diversity policy focused
on quantitative measures, and for this reason
the Company does not have a formal diversity
policy in place. Nevertheless, the Board
maintains a regular review of this position.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 50
HMS GROUP
Annual Report 2020
51
Risk management
and internal control
Overview
HMS Group is exposed to various risks and
uncertainties that may have undesirable
financial or reputational implications. A risk
management and internal control system has
been integrated into the Group’s operations
in order to minimise the negative impact
of such risks and to benefit from available
opportunities. 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.
System of internal control
Setting of risk-appetite oversight
BOARD
Implementation and oversight
EXECUTIVE MANAGEMENT
AUDIT COMMITTEE
Policy implementation and identification improvements
Operational management
Internal audit
Continuous
improvement
The 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 revise
our internal processes and procedures.
The key features of the risk management
process include:
—
Identifying the possible 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;
—
The gathering and analysis of information
related to internal and external factors
which can affect the achievement of the
Group’s objectives;
— Making appropriate decisions to manage
identified risks; and
—
Actively monitoring the steps taken
to control the most significant risks.
Key features
of the internal
control system
over financial
reporting
The Group uses a formal risk management
and internal control program across its
companies; there is an ongoing process for
identifying, evaluating and managing the
significant risks that the Group faces. 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.
—
—
—
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.
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.
The Board is responsible for the Group’s
system of internal control and for reviewing
its effectiveness. This system is designed
—
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, by way of its function,
reports to the Audit Committee and, for
administrative purposes, to the First
Deputy CEO. The internal audit
department performs its activities
in accordance with an audit plan and
incorporates a 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.
Principal risks
and uncertainties
The table below shows the main categories
of the risks that we encounter and how they
affect our strategy.
Below is the summary of the principal
risks and uncertainties facing the Group’s
business. The Group also faces other
risks and uncertainties, both known and
unknown; some of them apply to similar
companies operating in both the Russian and
international markets.
Risk
Enhancing
margins
Driving
growth
Generating
cash
Maximising
returns
Securing
customers
Securing
long-term
suppliers
Global political 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
Credit and liquidity risks
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 52
HMS GROUP
Annual Report 2020
53
Risk management and
internal control
Continue
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,
and Germany) but also in jurisdictions where
the Group has other interests (e.g. projects
in the Middle East and Central Asia).
Starting from 2014, sanctions have been
imposed in several packages by the US
and the EU on certain Russian officials,
businessmen and companies.
Nowadays, more than 14,000 Russian legal
entities and 174 Russian citizens have been
sanctioned. According to experts’ reviews,
more than 28 percent of Russian companies
under sanctions are manufacturing facilities,
approximately 17 percent trade companies,
nine percent transport companies, and three
percent natural resource providers and
agricultural companies. The great number
of companies subject to foreign sanctions
is related to OFAC’s so-called «50 Per
Cent Rule». Under this rule, any company,
of which 50 percent or more in the aggregate
of interests are owned by a blocked person
or entity, will be blocked even if the company
itself is not on the list of entities under sanctions.
The above-mentioned events have led
to reduced access of Russian businesses
to international capital markets. Russian
companies try to seek alternatives via the
government or foreign non-Western investors
(e.g, Chinese investors, initially). For instance,
in December 2020 the Russian government
approved the list of 70 legal entities receiving
Chinese investment for a total of US$ 107 billion.
The impact of further economic and political
developments on the future operations
and financial position of the Group might
be significant.
The introduction of new regulations or the
imposition of trade barriers or a new round
of sanctions against Russia could disrupt
the Group’s business activities or impact
the Group’s customers, suppliers or other
parties with which it does business, though
amid fairly high crude oil prices the influence
of these actions could be softened.
We consider the additional imposition
of targeted personal sanctions to be the most
probable of these risks facing our Group.
They alone will unlikely create systemic risks
and financial stability risks. Such measures
could return certain private capital to Russia
and put some pressure on the Russian ruble
amid relatively high oil prices.
Sanctions against the corporate sector
(finance, defense, oil and gas industries)
would create the most serious risks for
Russia’s economics and financial system.
Tighter and broader restrictions concerning
both the use of equipment and/or software
and financial operations could lead
to a heavy disturbance on the markets. The
capacity to develop new fields could also
be constrained by sanctions; in the longer
term, as existing fields run out, the country
may find it hard to maintain the current level
of crude oil output and gas production.
In 2019, Ukraine and Russia widened
the range of sanctions imposed on each
other. In March 2019, Ukraine broadened
sanctions against 294 Russian companies
and 848 citizens. In response, in addition
to individual sanctions against certain
companies and Ukrainian citizens, Russia
widened its list of restricted import goods
from Ukraine, including starch, fruit-sugar,
certain medical equipment, heaters, central
heating boilers and certain machine-building
products.
In 2020, Russia continued widening the range
of sanctions imposed on individuals. In total,
there have been 849 Ukrainian citizens listed
for sanction, for whom economic measures
were applied, including the freezing of non-
cash money, uncertificated securities and
assets in Russia, as well as the prohibition
of their transfer out of the Russian Federation.
Additionally, in November 2020, Russia
extended a prohibition on the import
of Ukrainian agricultural products.
In general, the most dangerous effect
of sanctions lies in growing uncertainty.
Uncertainty affects both short-term and long-
term investment projects. This could have
an adverse, material effect on the Group’s
financial position and prospects.
Sales
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 and for
state-sponsored infrastructure projects.
The Group’s business depends on being
awarded contracts and on the renewal and
extension of existing contracts. A large share
of the Group’s revenue is generated by a limited
number of key customers and contracts and
may incur losses due to unfavourable terms
of contracts with certain large customers,
though the Group does not depend on any
one particular client, contract or industry.
The management of legal risks is based on
expert assessment, and the identification of,
monitoring of, and mitigation against risk
factors are generally performed by HMS’s
Legal department.
HMS’s Legal department uses the following
basic strategy of risk management:
—
—
Regarding risk (e): we monitor changes
and control deal compliance with the
current legislation of the Russian
Federation;
Regarding risk (f): we carry out patent
searches, due diligence, and record-
keeping of intellectual activity results.
Project execution
risks
Since the Group’s contracts are typically
on a fixed-price basis, there are risks associated
with cost overruns (especially in large integrated
projects). 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.
Contract
execution risks
The Group systematically reviews and manages
its legal risks through identifying and preventing
conditions giving rise to such risks, at the pre-
contractual stage of an engagement as well
as at the stages of execution and any legal
proceedings.
Risk formation in 2018 was stipulated
by a number of reasons, both macroeconomic
and contractual related to a number of projects
executed by the Group. The main legal risks
which arise when contracts are executed
include:
—
—
Legal risks are identified and/or
verified when potential contracts are
vetted as well as through further
support;
Regarding risks (a)-(c) above: contracts
execution security to guarantee
adequate sources of funds to cover
any breach or non-performance
of the obligations of a contract, through:
• Usage of different kinds of collateral
and non-material securities provided
by a counterparty when entering
into an agreement in the form of
independent guarantees (e.g., banking
or corporate) for advance payments/
contract performance, third-party
guarantees, collateral and others;
• Withholding of an advance payment
until the provision of a security; if it is
not provided, then payment is made
after delivery; and
a. The risk of non-performance of a contract
• Management of the “contract
by a client (in whole or in part);
b. The risk of non-fulfillment of obligations
or liabilities by third parties, responsible
for delivery or production of a product’s
components;
c. The risk of a «mediator» insolvency
(i.e., a failure to generate a cash flow
in a «settlements’ chain» from client
to producer);
d. The risk of penalty, litigation or claims for
a breach of the contract;
e. Default risk (including, as a result
of sanctions and/or other enforcement
actions from state services); and
f. Piracy risks.
commitments chain” from client
to producer, which assures the receipt
of the relevant payment at the time
of cash flow passing.
—
Regarding risk (d) above: we control
and identify the legally important facts
and circumstances of the contract,
through putting together evidential
documentation (letter, acts, protocols,
etc.), identified factors of contractual
non-fulfillment (a customer’s fault),
with subsequent claims settled through
the signing of amendments to the
contract;
When risks occur at the level of litigation,
we follow standard legal procedures and
collect relevant documentation, in order
to evidence the client’s breach of contract.
This helps to deliver success at trial (by way
of complete or partial rejection of the suit,
or significant lowering of penal sanctions).
Human Capital
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
human resources practices. In line with the
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.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 54
HMS GROUP
Annual Report 2020
55
Risk management and
internal control
Continue
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.
Loss of key research and development
employees (talented personnel with
high potential and unique research and
development knowledge) can reduce the
organisation’s productivity. Moreover,
the Group can spend considerable time
and money in replacing such employees.
The Group employs a proactive approach
to avoid unwanted resignations. The Group
is increasing its focus on approaching and
retaining the right talent, using a tailored mix
of financial and non-financial incentives.
Acquisitions
& disposals
Since its formation, the Group has completed
a number of acquisitions targeting the
key players in the markets of industrial
pumps, compressors, modular oil and gas
equipment, and engineering, procurement
and construction contracts.
Taking into account the economic slow-
down and high uncertainties, insufficient
demand in many segments, all of which make
it difficult to evaluate potential synergies
from mergers and acquisitions, the Group
is not currently considering any material
acquisitions in the near future, so considers
this risk immaterial.
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 depend on our
ability to prevent occurrences of fraud and
corruption at all levels within the Group.
The tightening of anti-corruption control over
government-owned corporations can affect
the pattern of interaction of the Group with its
largest Russian customers in terms of mutual
trust and confidence.
In addition, the tightening of anti-corruption
control over state authorities (arrests and
cases against ministers, governors and other
state officials), often accompanied by media
publications with political complexion, can
affect mutual trust and confidence between
business and state authorities.
The 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. If necessary, the results of such
investigations are provided to the CEO,
the Board, the management and the 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.
The Group has implemented procedures
to ensure that all employees are aware of the
requirements of the Group’s anti-corruption
policies, with a particular focus on those
roles most exposed to the risk of breach.
Information
technologies
There are several significant risks
in information technology that can affect
the Group, including cyber security
and incident response risk, information
technology resiliency and continuity risk, data
management risk, and technology operations
risk. The Group believes that the main risks
for the Group are the risk of data loss, the risk
of a computer virus epidemic or a large-scale
(purposeless) hacking, and the risk of a special
virus attack intended to pilfer information
without detection.
The Group has developed a group-wide
information security (IS) strategy and a road-
map based on the audit results. The action
plan was started in 2018, including the creation
of an Information Security department. The
Group implements measurements on ongoing
basis to mitigate the risk of information
security breaches, including through the
development of an Information Security Policy,
perimeter protection, segmentation of the
network, TDS /Intrusion Prevention System,
and two-factor authentication.
Legislation
and regulations
Foreign
exchange risks
Laws and regulations affecting businesses
in Russia continue to change rapidly.
Tax and regulatory frameworks are
subject to different interpretations. The
future economic direction of the Russian
Federation is heavily influenced by the
fiscal and monetary policies adopted by the
government, together with developments
in the legal, regulatory and political
environment. 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, the Group recognises that
these developments may have significant
implications for its business and development
plans. The Group continues to monitor these
developments.
The Group has no material foreign exchange
mismatch. The Group operates primarily
in Russia, with the majority of its revenue
generated in Russian rubles. Operating costs
are also mainly Russian ruble-denominated
and almost 100 percent of debt is in Russian
rubles.
Credit
and liquidity risks
In February 2017, HYDROMASHSERVICE
JSC, the Group’s subsidiary, issued 3.0 billion
rubles of bonds. The maturity of the bonds
was 10 years with a three-year put option
and semi-annual coupon periods. A coupon
rate of 10.75 percent was set for the first six
coupon periods. In February 2020, the bonds
were fully redeemed by the Group.
Financial risks
In 2020, the Group continued work with its
debt portfolio.
The Group’s activities expose it to a variety
of financial risks: market risk (including
currency risk, fair value interest rate risk,
cash flow interest rate risk and price risk),
credit risk and liquidity risk. The Group’s
overall risk management focuses on the
unpredictability of financial markets and
seeks to minimise potential adverse effects
on the Group’s financial performance. Risk
management is carried out by the Group’s
finance department. The Group’s finance
department identifies and evaluates financial
risks in close co-operation with the Group’s
operating units.
The Group does not use financial instruments
for hedging or other risk management and,
as a result, the Group is not exposed to risks
relating to hedging.
In July 2020, the Group through its subsidiary
HYDROMASHSERVICE JSC issued 3.0 billion
rubles of bonds. The maturity of the bonds
is 10 years with a three-year put option and
semi-annual coupon periods. A coupon rate
of 8.15 percent is set for the first six coupon
periods. Subsequent coupon rates are
to be determined in July 2023.
In October 2020, HYDROMASHSERVICE
JSC issued 3.0 billion rubles of bonds.
The maturity of the bonds is 10 years with
a three-year put option and semi-annual
coupon periods. A coupon rate of 7.95
percent is set for the first six coupon
periods. Subsequent coupon rates are
to be determined in September 2023.
The financial resources acquired from
issuing such bonds were used for the partial
refinancing of bank credits. As a result
of the above actions, at the end of 2020,
the Group had only 1.3 billion rubles
to be repaid in 2021.
At the end of 2020, the Group accumulated
10.4 billion rubles of available cash. The
Group didn’t exceed the credit limits of any
of the banks during the reporting period.
Considering all the above factors, the Group
estimates its exposure to credit and liquidity
risks as immaterial.
The COVID-19
pandemic
Starting from late 2019/early 2020, a new
coronavirus disease (the COVID-19) began
rapidly spreading all over the world
resulting in the declaration of a pandemic
by the World Health Organization in March
2020. Responses put in place by many
countries to contain the spread of COVID-19
are resulting in significant operational
disruption for many companies and have
significant impact on global financial markets.
In addition, in March and April 2020, oil prices
dropped significantly, which resulted in the
immediate weakening of the strength of the
Russian ruble against major currencies.
The Group’s management does not expect
the current operating environment to have
a significant adverse impact on the financial
position and operating results of the Group
and the Group’s ability to continue as a going
concern.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 56
HMS GROUP
Annual Report 2020
57
57
HMS global
depository receipts
Shareholding
As of December 31, 2020, 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.
Currently there are 6,676,593 depositary
receipts outstanding in the GDR program.
Long Term
Incentive Plan
During 2020, the Group’s Executive Directors
and PDMRs acquired an interest over
the Company’s GDRs following the grant
of awards under the Company’s LTIP
for the 2017 and 2018 award years.
The awards were the part of a grant of GDRs
to the company’s managers as a motivational
package under the LTIP.
Since the start of the LTIP, the total amount
of GDRs awarded to its participants has
equaled to 4.81% of the company’s issued
share capital.
Credit ratings
HMS Credit Rating / Outlook
Fitch Ratings
B+ / Stable
Expert RA
ruA / Stable
Date of Rating / Date of Confirmation
22 Feb 2017 / 27 July 2020
11 July 2017 / 27 July 2020
Price of HMS Group’s GDRs
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1Q 2020
2Q 2020
3Q 2020
4Q 2020
Min,
US$
19.90
19.50
10.50
1.30
1.30
2.05
7.46
6.60
4.10
3.50
4.60
3.50
4.00
3.78
Max,
US$
41.21
29.90
21.15
12.50
4.50
8.01
9.80
11.30
7.50
5.85
5.85
4.90
4.40
4.70
GDR price at the end
of the period, US$
Market capitalization
at the end of the period, US$ mn
22.05
21.10
12.50
1.30
2.76
7.46
9.80
7.00
4.60
3.90
4.90
4.02
4.00
3.90
516.69
494.43
292.91
30.46
64.67
174.81
229.64
164.03
107.79
91.39
114.82
94.60
93.73
91.39
Share price
HMS Group’s GDRs performance in 2020, the London Stock Exchange
Price per 1 GDR, US$
6,00
5,00
4,00
3,00
1.1.2020
2.1.2020
3.1.2020
4.1.2020
5.1.2020
6.1.2020
7.1.2020
8.1.2020
9.1.2020
10.1.2020
11.1.2020
12.1.2020
Dividends
As a general rule, the company targets to pay
our total dividends for a given reporting period
in the region of 50% of the «Profit attributable
to Shareholders of the Company» for the year,
as set out in its IFRS Consolidated Financial
Statements, subject to capital constraints such
as Debt and Liquidity position and forecast.
HMS also plans to pay out dividends basically
twice a year (interim and final). Dividends are
announced per 1 ordinary share.
For the period ended in 2019, HMS Group
paid Rub 3.41 total dividends per 1 ordinary
share (Rub 17.05 per 1 GDR).
History of dividend payments
Period
Dividend per share, Rub
Dividend per GDR, Rub
Amount announced,
Rub mn
Record Date
Payment Date
2012
2013
2015
2016
2017
2018
2019
6.82
3.41
8.37
8.53
11.95
9.81
3.41
6.82
3.41
41.85
42.65
59.75
49.05
17.05
799.1
399.5
980.7
999.5
1,400.2
1,149.5
399.5
10.06.2013
10.06.2014
03.06.2016
09.06.2017
15.06.2018
14.06.2019
28.06.2013
27.06.2014
21.06.2016
27.06.2017
03.07.2018
01.07.2019
19.06.2020
30.06.2020
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION 58
HMS GROUP
Annual Report 2020
OVERVIEW
MARKETS
PERFORMANCE
GOVERNANCE
ADDITIONAL INFORMATION
59
HMS global
depository receipts
Continue
Buyback program
HMS Group started its buyback program in 2012.
The main objectives of the program’s
implementation were an intention to maximize
shareholder value as well as a reduction
of the effect of external shocks on GDR’s price.
Buyback period is 1 year, and the renewal
of the program should be approved by
the Annual General Meeting of Shareholders.
The total amount of GDRs subject
to the Buyback (taking into account any
GDRs already owned by the Company) shall
not exceed 6% of the subscribed capital
of the Company at prevailing market prices.
The GDRs are purchased by the Company with
the assistance of Renaissance Capital or any
other independent broker as may be further
determined by the Board of Directors.
The amount and timing of the planned
repurchases is determined by the Company
based on its evaluation of its financial
condition, business opportunities and market
conditions at the time, in accordance with
market practices.
The Company’s shares are held by JSC HMS Holding, though HMS Technologies remains
the ultimate controlling parent as the sole shareholder of JSC HMS Holding.
Major shareholders of HMS Group
as of December 31, 2020
Shareholders by legal entities
Shareholding by holders
0.3%
10.7%
17.5%
28.1%
71.5%
0.3%
17.5%
19.8%
35.0%
27.4%
71.5%
JSC HMS Holding
Free-float, where
28.1%
Free-float (other holders of GDRs) 17.5%
Managers and persons closely associated
10.7%
with management
Treasury GDRs
0.3%
Managers and persons closely associated
35.0%
with management
27.4%
Vladimir Lukyanenko
German Tsoy
19.8%
Free-float (other holders of GDRs) 17.5%
0.3%
Treasury GDRs
Information for
shareholders and
disclaimer
GDRs of HMS Hydraulic Machines & Systems
Group Plc are traded on the London Stock
Exchange under ticker HMSG.
The Company’ shares are now held by JSC
HMS Holding, though HMS Technologies
remains the ultimate controlling parent
as the sole shareholder of JSC HMS Holding.
GENERAL INFORMATION
Company Name
Company Type
Fiscal Year-End
Disclosure
Managing Director (CEO)
First Deputy CEO (CFO)
Ticker
CUSIP
LEI
Exchange
ISIN
CFI
Ratio, GDR:ordinary shares
Issued GDRs
Ordinary shares (share capital)
Local exchange
Underlying ISIN
Underlying CFI
Depositary bank
HMS HYDRAULIC MACHINES & SYSTEMS GROUP
PLC
Public
December 31
The London Stock Exchange
Artem Molchanov
Kirill Molchanov
HMSG
RegS: 40425X407
144A: 40425X308
254900DDFETNLASV8M53
London Stock Exchange
RegS: US40425X4079
144A: US40425X3089
EDSXFR
1:5
6,676,593
117,163,427
Not traded
CY0104230913
ESVUFR
BNY Melon
60
HMS GROUP
Annual Report 2020
61
Information for shareholders
and disclaimer
Continue
Vocabulary, calculations
and formulas
Global Depositary Receipts
shareholders’ contacts:
Contacts for inquiries regarding:
General Shareholder enquiries
and Investor Relations contacts
HMS Group
Investor Relations
7 Chayanova str. 125047 Moscow, Russia
Tel: +7 495 730 6601
Fax: +7 495 730 6602
Email: ir@hms.ru
—
—
—
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
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
Units of measurement
Abbreviations & contractions
Billion cubic meters
API
American Petroleum Institute
Billion cubic meters per annum
Bank of Russia
Central Bank of the Russian Federation, cbr.ru
Billion
Cubic meter
Cubic meter per annum
BIM
BM
CAGR
Building Information Modelling
Binary mixture
Compound annual growth rate, is the mean annual growth rate
of an investment over a specified period of time longer than one year
bcm
bcma
bn
cub.m.
cmpa
km
kW
M
m3
mn
MPa
Mt
MW
kilometer
Kilowatt
Meter
Cubic meter
Million
Megapascal, a unit of pressure
measurement
Millions of tonnes
Megawatt
Nm3/Hour
Normal cubic metre per hour
Rub/RUB
Russian ruble
Scm3/hour
Standard cubic meters per hour
t
tcm
US$
Ton / tonne
Trillion cubic meters
US Dollar
CIS, the
Commonwealth of Independent States
Chg
GDP
GDR
GTNG
ERP
EU
EUR
KKM
KMPO
LNG
LSE
NEM
OGEP
OPEC
R&D
yoy
Change
Gross Domestic Product
Global depositary receipt
Giprotyumenneftegaz
Enterprise Restructuring Project
European Union
Euro
Kazankompressormash
Kazan Motor-Building Production Association (KMPO JSC)
Liquefied natural gas
London Stock Exchange
Nasosenergomash
Oil and gas engineering and projects business segment
Organization of the Petroleum Exporting Countries
Research and development
Year-on-year
Formulas and calculations
Management of the Group assesses
the performance of operating segments
based on a measure of adjusted EBITDA, which
is derived from the consolidated financial
statements prepared in accordance with IFRS.
EBITDA is defined as operating profit/loss
from continuing operations adjusted for other
operating income/expenses, depreciation
and amortisation, impairment of assets,
excess of fair value of net assets acquired
over the cost of acquisition, defined benefits
scheme expense and provisions (including
provision for obsolete inventory, provision for
impairment of accounts receivable, unused
vacation allowance, warranty provision,
provision for legal claims, tax provision and
other provisions). This measurement basis,
therefore, excludes the effects of a number
of non-recurring income and expenses
on the results of the operating segments.
EBIT is calculated as Gross profit minus
Distribution & transportation expenses minus
General & administrative expenses minus
Other operating expenses.
Total debt is calculated as Long-term
borrowings plus Short-term borrowings.
Net debt is calculated as Total debt minus
Cash & cash equivalents at the end of the period.
ROCE is calculated as EBIT LTM divided
by Average Capital Employed (Total debt +
Total equity).
ROE is calculated as Total equity period
average divided by Profit for the period.
Operating profit adj. & Profit for the year adj.
are deferred as adjusted by impairment
of PPE, investment property and goodwill.
Working capital is calculated as Inventories
plus Trade and other receivables, excluding
Short-term loans issued, Bank deposits and
Promissory notes receivable, plus Current
income tax receivable minus Trade and other
payables minus Short-term provisions for
liabilities and charges minus Current income
tax payable minus Other taxes payable.
Capex = Organic capex = Purchase of PPE +
Purchase of intangible assets.
OVERVIEWMARKETSPERFORMANCEGOVERNANCEADDITIONAL INFORMATION