Overview HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
2 - 3
HMS GROUP
IN 2O21
Overview
#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 for 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: ar2021.grouphms.com
CONTENTS
4 Overview
6
Who We Are
10 Investment Thesis
12 Our History
14 Our Strategy
16 HMS Business Model
18 HMS Markets
& Macroeconomics
18 Macroeconomic
Environment
20 Market trends
24 HMS Performance
26 Performance in 2021
30 2021 Calendar
of Events
32 HMS Key Projects,
Development
& Innovations
35 Corporate Social
Responsibility
40 Corporate
Governance
42 Board of Directors
46 Risk Management
& Internal Control
50 HMS Global Depository
Receipts
54 Information
for Shareholders
and Disclaimer
56 Appendices
56 Vocabulary,
Calculations
and Formulas
FINANCIAL HIGHLIGHTS
Revenue in 2O21
2O21
2O2O
2O19
2O18
2O17
46,476
51,413
52,619
44,422
Rub 57,159 mn
+23% YOY
+7% CAGR 2017-2021
57,159
EBITDA in 2O21
2O21
2O2O
2O19
2O18
2O17
Rub 6,723 mn
+36% YOY
0% CAGR 2017-2021
4,947
4,824
6,621
6,839
6,723
Total debt in 2O21
2O21
2O2O
2O19
2O18
2O17
22,175
24,321
19,458
16,336
Rub 22,668 mn
+2% YOY
+9% CAGR 2017-2021
22,668
Backlog in 2O21
2O21
2O2O
2O19
2O18
2O17
53,851
44,693
42,634
44,155
Rub 42,264 mn
-22% YOY
-1% CAGR 2017-2021
42,264
Net debt in 2O21
Rub 13,896 mn
+18% YOY
+5% CAGR 2017-2021
2O21
2O2O
2O19
2O18
2O17
11,814
14,369
13,163
11,422
13,896
Order intake in 2O21
2O21
2O2O
2O19
2O18
2O17
54,2O5
52,196
55,891
58,948
Rub 47,68O mn
-12% YOY
-5% CAGR 2017-2021
47,68O
HMS GROUP
2-3
HMS Group (HMS HYDRAULIC MACHINES & SYSTEMS
GROUP PLC, registered in Cyprus) is one of the largest
privately-owned machine-building companies in Russia
and the CIS, headquartered in Moscow, Russia.
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.
Industrial pumps
Oil & gas equipment and projects
Compressors
Construction
Headoffice & trade company
OVERVIEW
HMS Group is the only machine-building company from
Russia listed on the London Stock Exchange. Since May
2021, global depositary receipts of HMS Group are also
listed on the Moscow Exchange.
R&D CENTRES,
including one
of the largest pump-testing
facilities in Europe
4
12
MANUFACTURING
FACILITIES
in Russia, CIS
countries and
Germany
6
~
O
O
O
WELL-
DIVERSIFIED
CLIENT BASE
~12,4OO
EMPLOYEES
ABOUT HMS
GROUP
Overview HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
4 - 5
ional information
Overview HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
6 - 7
ABOUT HMS GROUP
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. 70% on average.
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.
Revenue structure by contracts’ type, 2O21
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.
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.
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. Also, since May 25, 2021,
the Global Depositary Receipts of HMS Group are
admitted to trading on the Moscow Exchange.
The Group consists of 12 manufacturing facilities
in Russia, CIS countries and Germany, plus four
Research & Development centres, including one
of the largest pump-testing facilities in Europe, and
employs 12.4 thousand people.
The company carries out its trade and commercial
operations in the CIS countries, Europe and Asia.
Revenue from recurring business, % in total HMS revenue
Revenue from large contracts, % in total HMS revenue
2O21
2O2O
2O19
2O18
2O17
40%
60%
3O%
7O%
3O%
7O%
36%
64%
74%
26%
Overview HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
8 - 9
INDUSTRIAL
PUMPS
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.
Core products and services:
– Oil refineries
– Nuclear and Thermal power
– Water utilities
– Water injection
– Trunk pipelines
– General industrial pumps
1
37%
contribution
in EBITDA
12%
EBITDA
margin
34%
contribution
in consolidated
revenue
2
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.
Core products and services:
– Oil & gas production
– Oil & gas transportation
– Gas processing
– Oil refineries
– Oil & gas chemistry
– Refrigeration applications for various
industries
contribution
in EBITDA
contribution
in consolidated
revenue
EBITDA
margin
13%
33%
38%
3
CONSTRUCTION
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.
Core products and services:
– 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.
contribution
in EBITDA
contribution
in consolidated
revenue
EBITDA
margin
6%
2%
1%
4
OIL AND GAS
EQUIPMENT
AND PROJECTS
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.
Core products and services:
– Oil pumping stations and pump stations
for water injection
– Oil & gas and water processing units
– High-precision and automated metering
units
– Tanks, reservoirs and vessels
– Oil development equipment
contribution
in EBITDA
contribution
in consolidated
revenue
EBITDA
margin
1O%
32%
27%
THE COMPANY OPERATES VIA FOUR
OPERATING SEGMENTS:
Overview HMS GROUP
Annual Report 2O21
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Additional information
INVESTMENT THESIS
BUSINESS PLATFORM AND CORE
EXPERTISE ARE ESTABLISHED
AND PROVIDE A STRONG BASE
FOR FUTURE GROWTH
MATURE BUSINESS PLATFORM
■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
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)
TARGETS
■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
FACTORS OF BUSINESS SUSTAINABILITY:
HMS Group has a stable business platform
and controlled level of leverage
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
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
Well-diversified quality
client base:
– Over 6,000 small and medium clients generate
on average 75% 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
1
4
5
2
3
1O - 11
Overview HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
12 - 13
OUR HISTORY
GROWTH
OF MARKET SHARE
ON TRADITIONAL
HMS’ MARKETS,
ENTRY INTO NEW
MARKETS
1993
-
1998
2OO7
-
2OO8
1999
–
2OO3
2OO9
–
2O13
2OO4
-
2OO7
2O14
-
2O21
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)
The investment industrial
group Hydraulic Machines
& Systems was established
as an industrial holding (since
2008 – HMS 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
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
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
The company acquired its key
production facilities: Neftemash
(Tyumen), Nasosenergomash
(Sumy), and Livnynasos (Orel
region, Central Russia)
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
(Kazancompressormash) started
sales of complete gas compression
systems for booster compressor
stations and gas trunk-line
compressor stations of Gazprom
HMS 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)
■A unique 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
FOUNDATION
AND BEARING
ON THE LARGEST
BASE
OF INSTALLED
EQUIPMENT
IN RUSSIA
Overview HMS GROUP
Annual Report 2O21
Overview
Markets
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Governance
Additional information
14 - 15
HMS Group is one of
the leading Russian machine-
building companies with
focus on industrial pumps
and industrial 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
customers with high-end
products and the most
efficient solutions.
OUR
STRATEGY
VISION
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
customer base by developing new products
and sophisticated solutions. Capital investment
programs ensure development 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 the Middle East
and Asia.
We also look into options to enter new market
segments that we consider promising.
Business efficiency
Overview
HMS Group concentrates on profitability and
further development in order to create value for
shareholders. The company implements systematic
efforts to increase the efficiency of its business,
from standalone plants up to the whole Group.
Our technical expertise and proven experience
allow us to participate in high-margin large projects
of national importance. 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 advanced products
and efficient 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 29 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 constantly
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
customers.
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.
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 2021, we continued to provide support to a number
of charity funds, schools, and civic and sport
organisations in the regions of our business activities.
HMS BUSINESS MODEL
HMS Group’s business consists of three product-
oriented business units: Industrial Pumps,
Industrial Compressors, Oil & Gas Equipment
and Projects. All of them imply production
of standard products (recurring operations),
as well as delivery of technological units
within large integrated projects of our clients
MARKETING
& SALES
RESEARCH
& DEVELOPMENT
PROCUREMENT
&
MANUFACTURING
AFTER-SALES
SERVICE
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, 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 for oil & gas
sector, water and wastewater utilities. HMS’ expertise
in engineering allows us to design efficient solutions
that meet the highest customer requirements.
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 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 in oil
& gas equipment.
Our marketing function strengthens
and promotes the HMS brand in both conventional
and prospective markets. As part of our marketing
strategy, we regularly acquaint our customers
with new products and solutions at leading trade
exhibitions in Russia and abroad.
Overview HMS GROUP
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16 - 17
MARKETS &
MACROECONOMICS
The global GDP increased by 6.1%, which
allowed to compensate the decrease of 2020
(by 3.1%). Emerging markets demonstrated
the highest growth (by +6.8%), especially India
(+8.9%) and China (+8.1%). At the same time
advanced economies were recovering slower
(by 5.2%): the US GDP increased by 5.7%, while
other major economies showed modest growth:
European Union — by 5.4%, Japan — by 1.6%.
Following the global trend, the Russian GDP
increased by 4.7%. Some of the largest contributors
to the growth were wholesale trade (+9% YoY),
minerals extraction (+4.2% YoY), production of coke
and oil products (+1.4%).
Backed by continued OPEC+ cutting oil production,
Brent oil price grew significantly during the year: from
US$ 51 per barrel in January to US$ 80 in December, with
the average price of US$ 71 per barrel. Russian natural
gas export prices increased from the average of US$
127 per thousand m3 in 2020 to US$ 272 per thousand
m3 in 2021 (+114%, and the average price jumped
to US$ 482 per thousand m3 in the fourth quarter).
The Russian currency was relatively stable
throughout the year. The average USDRUB exchange
rate in 2021 amounted to 74 rubles per dollar
(compared to 72 rubles per dollar in 2020), while
EURRUB exchange rate reached 87 rubles per euro
(compared to 83 rubles per euro in 2020).
The current account surplus reached
US$ 122 billion (3.4 times higher than US$ 36 billion
in 2020). The exports of goods and services
amounted to US$ 550 billion, while the imports
reached US$ 379 billion. Crude oil exports brought
US$ 111 billion in 2021 (+53% YoY), and natural gas
exports grew to US$ 56 billion (+116% YoY) backed
by high gas prices.
The consumer inflation in Russia (the Consumer
Price Index) was growing and reached 8.4%
at the end of the year (compared with 4.9% in 2020).
Industrial Producers Price Index jumped to 28.5%
(significantly higher than 3.6% in 2020). Some
of the components which contributed to the growth
were minerals extraction (Producers Price Index
reached 59.2%), chemicals production (up to 64%),
and steel production (up to 55%), which reflected
the growing demand on the global markets.
In order to control the inflation, the Central Bank
of Russia was gradually increasing the key rate during
the year, from 4.25% in January to 8.5% in December.
As a consequence, the weighted average commercial
interest rates also increased: rates for short-term
loans for non-financial organizations grew from
6.25% to 9.01% (YoY) and rates for long-term loans
for non-financial organizations increased from 6.77%
to 8.85% accordingly.
As a result, total corporate debt increased
insignificantly to Rub 69.5 trillion by January 1st
2021 (+4.6% YoY), while loans to households
grew to Rub 26.8 trillion (+21% YoY), supported
by stimulating government measures, such as
subsidized mortgage.
The Russian Federal Budget showed a total
surplus of Rub 515 billion, equal to 0.4% of the GDP.
Total budget revenue reached Rub 25.3 trillion, while
spending was at the level of Rub 24.8 trillion. Total
external debt of Russia reached US$ 480 billion
on January 1st 2022 (27% of the Russian GDP),
including US$ 60 billion of the Public debt.
Year 2021 was marked by continued pandemics
of COVID-19, yet most countries and
businesses managed to adapt to work under
numerous local restrictions, as well
as the global uncertainty, so the production
and the trade across most sectors
of the global economy turned to growth.
US$ 122 billion
+6.1%
+4.7%
global GDP
Russian GDP
Current account surplus
Rub 25.3 trillion
US$ 48O billion
8.4%
28.5%
consumer inflation in Russia
Industrial producers'
price Index
Total budget revenue
Total external debt of Russia
MACROECONOMIC
ENVIRONMENT IN 2O21
Markets HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
18 - 19
21
2O -
MARKET TRENDS
Key markets for HMS Group are oil & gas industry
(from upstream to downstream, including petrochemistry),
power generation, metals and mining, water utilities as well
as other industries. Despite the overall economic recovery,
some of the constraints for our target markets remained
valid in 2021 (such as OPEC+ cutting oil production).
The year 2021 was also marked by a number
of government plans on the prospective decarbonization
of the Russian economy. It was announced that the country
would target to achieve carbon neutrality (net-zero carbon
dioxide emissions) by 2060. What is more, a number
of large projects on hydrogen production had been planned
or launched. The hydrogen produced from natural gas, coal
and water (electrolysis) is expected to be consumed within
the country, as well as sold to clients in Europe and Asia.
OIL AND GAS INDUSTRY
Upstream
There are five vertically integrated companies
which dominate the Russian oil industry, and account
for 3/4 of the country’s oil production and refining.
About half of produced oil is processed at the country’s
refineries, while the other half is exported.
The oil extraction demonstrated moderate growth
to 524.5 million tons of product (+2.2% YoY), which was
still significantly lower than the maximums achieved
in 2018-2019 in accordance with OPEC+ agreement.
During the year, the country’s operating well
stock increased by 2.5% to 183,168 units (including
7,365 new wells). The total drilling volume declined
by 3.6% to 27 million meters in 2021.
A number of new oilfields were put into operation
in 2021. For example, Lukoil launched 4 oilfields:
Ust’-Dolgynskoye, Talmazovskoye, Astaninskoye
and Shisterovskoye. Gazprom Neft launched
Tazovskoye field, and Rosneft put Pikhtovoye oilfield
into operation.
Natural gas extraction (including gas condensate)
in Russia increased significantly by 10.1% YoY (from
692.9 bcm to 762.8 bcm). The major gas company
in Russia, Gazprom, accounted for 67% of gas
production in Russia in 2021. The second largest gas
producer, NOVATEK, produced 10% of all natural gas
volume.
In 2021, Gazprom continued to develop
a number of new large gas condensate fields, including
Kharasaveyskoye and Kovyktinskoye (currently in pilot
production). The year was also marked by the discovery
of a new gas condensate field (Rosneft), which contains
about 384 bcm of gas condensate.
Top-5 oil producers in Russia in 2O21
(incl. gas condensate), %
Rosneft
35
Lukoil
14
Surgutneftegaz
11
Gazprom Neft
7
Tatneft
5
Others
27
Total investments in oil & gas upstream declined
by 4% to Rub 1,950.2 billion in 2021.
Midstream
Transneft is the major owner and operator
of the Russian oil trunk pipeline system
(51.0 thousand km), and oil-product trunk pipeline
system (16.4 thousand km) with over than 500 of oil
pumping stations. The company continued
reconstruction and modernization of its pipeline system
in 2021.
The only operator of gas pipelines is Gazprom.
The total length of the Russian gas transportation
system is ~176.8 thousand km, comprising over 250
gas compressor stations. In 2021, Gazprom finished
the construction of the 390 km part of the Sakhalin —
Khabarovsk — Vladivostok pipeline.
The main prospective projects for the next years
is the construction of the Power of Siberia-2 (from the
Yamal Peninsula to China), the Bovanenkovo-Ukhta and
Ukhta—Torzhok pipelines (the 3rd line).
Downstream
The total number of large oil refineries in Russia
is 35, which together with smaller refineries processed
281 million tons of crude oil in 2021 (+3.9% YoY).
The largest refinery operator is Rosneft, with twelve
major refineries.
The production of all basic petroleum products
increased in 2021: gasoline — by 6.2% to 40.8 million
tons, diesel fuel — by 3.0% to 80.3 million tons, and fuel
oil — by 6.2% to 43.4 million tons. A half of all diesel fuel
was exported abroad, while for gasoline and fuel oil the
share of export reached 10% and 9% accordingly.
The depth of processing decreased to 83.4%
in 2021 (-0.6% YoY).
In 2021, investment agreements between
the Ministry of Energy and the main oil companies was
signed. It should stimulate the companies to modernize
14 oil refineries and build new production capacities
by 2031 (total investments by 2027 — Rub 800 billion).
Investment agreements cover Rosneft refineries
(Novokuibyshev, Syzran, Tuapse, Komsomolsk),
Gazprom Neft refineries (Moscow and Omsk), a LUKOIL
plant (LUKOIL-Nizhegorodnefteorgsintez), Afipsky
Oil Refinery, Orsknefteorgsintez, as well as Gazprom
Neftekhim Salavat, Tatneft’s subsidiary Taneko,
Antipinsky Oil Refinery, Novoshakhtinsk Oil Products
Plant and Ilsky Oil Refinery.
Crude oil production in Russia (incl. gas
condensate) and Urals oil price dynamics,
2O14-2O21
Oil price, US$/barrel (Urals)
Crude oil Production in Russia (including gas condensate),
million tons
2O21
524.5
2O2O
513.O
2O19
56O.3
2O18
555.9
2O17
546.7
2O16
547.3
2O15
2O14
533.6
526.7
64
7O
53
42
51
98
42
69
Natural and Petroleum associated gas
production in Russia and average export
price of gas, 2O14-2O21
Associated gas production in Russia, bcm
Export gas price, USD/ tcm
Natural gas production in Russia, bcm
2O21
2O2O
692.9
2O19
737.7
2O18
725.4
2O17
691.1
2O16
64O.2
2O15
2O14
635.5
641.9
241.O 662.1
598.2
643.6
635.9
6O5.7
556.9
556.9
569.4
126.7
189.4
223.1
181.5
157.O
225.3
313.8
94.7
94.1
89.5
85.4
83.3
78.6
72.5
762.8
1OO.7
Primary oil processing volume and
processing depth in Russia, 2O14-2O21
Processing depth, %
Primary oil processing in Russia, million tons
2O21
281
2O2O
27O
2O19
285
2O18
287
2O17
28O
2O16
281
2O15
2O14
283
289
84%
83%
83%
81%
79%
74%
72%
83%
Overview
Markets
Performance
Governance
Additional information
Markets HMS GROUP
Annual Report 2O21
22 - 23
MARKET TRENDS
Total installed capacity and electricity
output in Russia, 2O14-2O21
Top-5 petroleum refiners in Russia
in 2O21 (including gas condensate), %
Rosneft
3O
Gazprom Neft
11
Lukoil
15
Surgutneftegaz
7
Slavneft
5
Others
31
Russian gas-processing industry is represented
by 33 plants, which processed 70.3 bcm of natural gas
and petroleum associated gas in 2021 (-9.1% YoY).
Top-10 plants processed 84% of all gas volume, while
the three largest plants make 51% of total volume
(Orenburg GPP, Astrakhan GPP and Surgut Gas
Processing Facility).
The first production line of the new Amur GPP
was launched in 2021. It would be one of the largest
GPPs in the world with 42 bcm of gas per year design
processing capacity, full capacity of the plant should
be achieved by 2025.
LNG production is one of the segments with
highest potential in Russian energy market. The volume
of LNG produced in Russia amounted to 30.1 million
tons compared to 30.5 million tons processed in the
previous year (-1.1%). 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).
According to Gazprom, the latter will «process
45 billion cubic meters of gas and produce 13 million
tons of LNG, up to 3.8 million tons of ethane fraction,
up to 2.4 million tons of LPG». A larger number
of small-scale LNG plants are expected to be built
in the next years as well.
Total investments in oil downstream in Russia
declined by 11% to Rub 572.6 billion in 2021.
POWER GENERATION
There are 911 medium and large power plants
in Russia (with installed capacity higher than 5 MW
each). The structure of the installed capacity of the
United Power System (covers almost all territory
of Russia excluding technologically isolated energy
systems of Chukotka, Kamchatka, Sakhalin, Magadan
region, northern parts of Yakutia and some other
territories) remained practically unchanged in 2021.
Thermal power plants accounted for 66% of installed
capacity, hydro power plants — 20%, nuclear power
plants — 12%, renewable power plants — 2%.
METALS AND MINING
Mining industry in Russia consists of a number
of large companies, typically with the full production
cycle from ore mining to the production of metal
products with high value added.
Extraction of coal increased by 9.1% (from
402.1 million tons to 438.4 million tons). Overall
investments in coal extraction grew by 24.6% in 2021
(Rub 172.8 billion). Exports of coal also demonstrated
growth by 7.9% (212.6 million tons).
Extraction of iron ore showed a minor increase
by 0.9% (100.9 million tons), while steel production
(including steel produced of scrap metal) increased
by 4.4% (61.3 million tons), and cast iron production
grew by 3.4% (53.8 million tons). Investments in metal
ores extraction increased by 11.4% (Rub 359.2 billion),
in metals production — by 20.0% (Rub 482.2 billion).
The year 2021 was marked by a high growth
of metals prices with the highest levels observed
in June-August. For example, Industrial Producers Price
Index for cast iron, steel and ferro-alloys reached +98%
in July (compared to the level of December 2020) and
declined to +55% in December 2021 (YoY). By the end
of 2021 industrial prices for aluminum grew by 34%
(YoY), lead, zinc and tin metals — by 47%, copper —
by 27%.
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,
some of the projects imply low-carbon production of steel.
WATER AND WASTEWATER
UTILITIES
Private and municipal companies continue
investment activities in accordance with the objectives
of the National project «Ecology». There will be spend
up to Rub 700 billion per year on the implementation
of the project in 2022-2024. Prospective projects
include construction of wastewater sludge utilization
facilities in many regions, as well as multiple projects
on construction of wastewater treatment facilities
at the industrial plants and municipal facilities.
Average tariffs for cold water supply grew
by 3.8% (YoY), hot water supply — 3.7%, sewage —
3.8%, electricity — 4.4%. Total investments in water
utilities and wastes utilization in Russia amounted
to Rub 217.9 billion (+4.1%).
Total installed capacity and electricity
output of the United Power System by types
of power plants in 2O21
Installed capacity, %
Thermal
66
Hydro
2O
Nuclear
12
Renewable
2
In 2021, as the economy and the industrial
production recovered, Russia increased its electricity output
from 1,063 billion kWh to 1,131 billion kWh (+6% YoY).
Total installed capacity of Russian power system increased
by 1.3 GW (3.2 GW of new/improved capacity was put into
operation in 2021, including new units at the Leningradskaya
NPP (1,188 MW), the Svobodnenskaya PP (160 MW)
and a number of renewable power plants: solar and
wind (1,232 MW). 1.9 GW of inefficient and outdated
equipment was decommissioned.
Installed capacity, GW
Electricity output, billion kWh
2O21
1,131
2O2O
1,O63
2O19
1,O96
2O18
1,O92
2O17
1,O74
2O16
1,O72
2O15
2O14
1,O49
1,O47
251
252
25O
247
244
243
24O
253
Total investments in the energy sector declined
by 4.4% in 2021 to Rub 796.2 billion.
The Russian United Power System Development
Program (updated in 2021) implies that over 10.2 GW
of new capacity will be launched in 2022-2027.
The largest projects include new units of the Kurskaya
NPP (2,200 MW), the Zainskaya PP (850 MW), the
Udarnaya PP (500 MW), the Nerungrinskaya PP (450 MW).
New capacities are expected to be more efficient and
reliable. For instance, the State Atomic Energy Corporation
ROSATOM is decommissioning its older RBMK1 units and
is constructing new VVER2 nuclear power plants. Being
one of the global leaders of the energy industry, ROSATOM
is running a number of projects abroad, including the Akkuyu
NPP (Turkey), the Kudankulam NPP (India) and others.
A larger number of unconventional (renewable)
power plants are to be built in various regions
of the country, which will improve energy distribution
in remote areas.
1 The RBMK (in Russian transliterates as reaktor bolshoy moshchnosti kanalnyy, i.e. "high-power channel-type reactor")
is a class of graphite-moderated nuclear power reactor designed and built by the Soviet Union
2 The VVER (in Russian transliterates as vodo-vodyanoi enyergeticheskiy reactor, i.e. “water-water power reactor”)
or the water-water energetic reactor (WWER) is a series of pressurized water reactor designs originally developed
in the Soviet Union, and now Russia
Electricity output, %
Thermal
61
Hydro
19
Nuclear
2O
Renewable
O.5
Overview
Markets
Performance
Governance
Additional information
Markets HMS GROUP
Annual Report 2O21
HMS
PERFORMANCE
Rub 47.7 billion
Order intake in 2O21
2.O7X
Net debt/EBITDA ratio
Rub
57.2
billion
Rub
6.7
billion
Revenue in 2O21
EBITDA
Performance HMS GROUP -------------------------------------------------------------------------------------------------- Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
24 - 25
Performance HMS GROUP
Annual Report 2O21
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Orders
47,680
54,205
-12%
10,846
5,951
82%
Backlog
42,264
53,851
-22%
42,264
47,259
-11%
Revenue
57,159
46,476
23%
16,038
15,326
5%
EBITDA
6,723
4,947
36%
1,526
2,341
-35%
EBITDA margin
11.8%
10.6%
9.5%
15.3%
Profit for the year/period
1,241
(816)
na
32
831
-96%
Free cash flow
(982)
2,958
na
3,491
231
1,414%
in millions of Rub
2021
2020
Change
yoy
Share
of FY 2021
revenue
Share
of FY 2020
revenue
Gross profit
11,423
9,405
21%
20.0%
20.2%
Distribution & transportation
1,799
1,986
-9%
3.1%
4.3%
General & administrative
5,704
5,243
9%
10.0%
11.3%
SG&A expenses
7,503
7,228
4%
13.1%
15.6%
Other operating expenses
111
412
-73%
0.2%
0.9%
Operating expenses ex. Cost of sales
7,614
7,641
0%
13.3%
16.4%
Operating profit
3,809
1,338
185%
6.7%
2.9%
Finance costs
1,976
1,926
3%
3.5%
4.1%
in millions of Rub
2021
2020
Change
yoy
Share
of FY 2021
revenue
Share
of FY 2020
revenue
Cost of sales
45,737
37,071
23%
80.0%
79.8%
Materials and components
30,023
23,760
26%
52.5%
51.1%
Labour costs incl Social taxes
7,673
6,906
11%
13.4%
14.9%
Depreciation and amortization
2,087
2,122
-2%
3.7%
4.6%
Construction and design1
3,643
2,557
42%
6.4%
5.5%
Others
2,310
1,726
34%
4.0%
3.7%
in millions of Rub
2021
2020
Change
yoy
Finance costs
1,976
1,926
3%
Interest rate, average
9.91%
8.00%
Interest rate Rub, average
10.03%
8.12%
Backlog was Rub 42.3 billion, down by 22% yoy,
compared with Rub 53.9 billion at the end of 2020,
but in the same time the company is working on a
number of opportunities in 2022. In terms of contracts
type, both recurring business and large contracts
decreased.
Order intake was down to Rub 47.7 billion,
by 12% yoy, compared with Rub 54.2 billion for
FY 2020, mainly due to less large contracts signed
in the reporting period. All business segments
grew except the compressors. In terms of contracts
type, large contracts were down.
Gross profit grew to Rub 11.4 billion, by 21%
yoy, compared with Rub 9.4 billion for FY 2020.
SG&A expenses2 were up 4% yoy.
Distribution & transportation expenses were down
9% yoy due to lower transportation costs (-28% yoy).
As a share of revenue, distribution & transportation expenses
declined to 3.1%, compared with 4.3% for FY 2020.
Finance costs increased
to Rub 2.0 billion, up by 3% yoy, mainly
due to a growth in interest expenses
(+2% yoy) because of higher interest
rates, compared with FY 2020.
Average interest rate grew to 9.91%
p.a., compared with 8.00% p.a. last year.
Revenue from large contracts grew 66% yoy,
and revenue from recurring business was up by 5% yoy.
EBITDA from large contracts increased 91% yoy, while
EBITDA from recurring business declined 12% yoy.
Profit for the period was Rub 1.2 billion,
compared with loss for the period at Rub 816 million
for FY 2020.
Free cash outflow was Rub 1.0 billion, compared
with free cash inflow of Rub 3.0 billion for FY 2020, due
to the higher working capital requirements for execution
of large contracts that are within the normal quarterly volatility.
EXPENSES AND OPERATING PROFIT
Cost of sales was Rub 45.7 billion, up by 23% yoy, in line with revenue growth, compared with Rub 37.1 billion
for FY 2020, mainly due to the growth in materials and components costs (+26% yoy).
General & administrative expenses were
up to Rub 5.7 billion (+9% yoy) mainly due the growth
in labour costs incl. social taxes (+15% yoy). As a share
of revenue, general & administrative expenses were
down to 10.0%, compared with 11.3% for FY 2020.
Operating profit was up to Rub 3.8 billion
(+185% yoy), compared with Rub 1.3 billion
for FY 2020.
1 Construction and design and engineering services of subcontractors
2 SG&A expenses - Selling, General and Administrative Expenses, compiled of distribution & transportation expenses plus
general & administrative ones
Industrial pumps
Order intake was Rub 22.2 billion, up by 25%
yoy, compared with Rub 17.8 billion for FY 2020, due
to both the large long-term contract signed in 2Q 2021
and a growth in recurring orders.
Backlog was Rub 20.9 billion, up 14% yoy,
compared with Rub 18.2 billion at the end of FY 2020,
based on large contracts and recurring business.
Revenue was down to Rub 20.0 billion (-2% yoy),
compared with Rub 20.3 billion for FY 2020.
EBITDA was down 16% yoy to Rub 2.5 billion,
compared with Rub 2.9 billion for FY 2020, due to less
revenue generated by both recurring business and large
contracts. EBITDA margin was 12.3%, compared with
14.5% during FY 2020.
BUSINESS SEGMENTS PERFORMANCE
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Orders
22,245
17,773
25%
5,747
4,003
44%
Backlog
20,851
18,227
14%
20,851
21,753
-4%
Revenue
19,951
20,256
-2%
6,804
5,157
32%
EBITDA
2,455
2,931
-16%
910
711
28%
EBITDA margin
12.3%
14.5%
13.4%
13.8%
PERFORMANCE IN 2021
Revenue grew to Rub 57.2 billion by 23% yoy,
compared with Rub 46.5 billion for FY 2020, based
on revenue growth in all business segments except
the pumps. EBITDA was Rub 6.7 billion,
up by 36% yoy, implying EBITDA margin of 11.8%
Performance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
26 - 27
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Orders
5,533
22,617
-76%
2,570
581
342%
Backlog
11,419
24,765
-54%
11,419
12,897
-11%
Revenue
19,891
14,947
33%
4,634
5,330
-13%
EBITDA
2,537
1,939
31%
488
1,071
-54%
EBITDA margin
12.8%
13.0%
10.5%
20.1%
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Orders
2,017
247
718%
17
19
-8%
Backlog
716
1,541
-54%
716
911
-21%
Revenue
898
718
25%
221
319
-31%
EBITDA
51
(63)
na
24
48
-50%
EBITDA margin
5.7%
-8.8%
10.9%
15.1%
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Orders
17,886
13,568
32%
2,511
1,348
86%
Backlog
9,278
9,318
0%
9,278
11,697
-21%
Revenue
18,425
11,284
63%
5,057
5,027
1%
EBITDA
1,818
241
653%
425
575
-26%
EBITDA margin
9.9%
2.1%
8.4%
11.4%
Oil and Gas equipment & projects
Order intake grew to Rub 17.9 billion, up by 32%
yoy, compared with Rub 13.6 billion during FY 2020,
due to large contracts signed in the reporting period.
Backlog stayed almost unchanged
at Rub 9.3 billion, supported by large contracts.
Compressors
Order intake declined to Rub 5.5 billion, down
by 76% yoy, compared with Rub 22.6 billion for FY 2020,
due to less large contracts signed in the reporting period.
Backlog was Rub 11.4 billion, down by 54% yoy,
compared with Rub 24.8 billion at the end of 2020.
Construction
Order intake equaled Rub 2.0 billion. Backlog was
down to Rub 0.7 billion.
Revenue grew to Rub 18.4 billion, up by 63%
yoy, compared with Rub 11.3 billion for FY 2020, due
to large contracts.
EBITDA increased to Rub 1.8 billion, up by 653% yoy,
compared with Rub 241 million for FY 2020 due to a larger
share of large contracts in the reporting period. EBITDA
margin was 9.9%, compared with 2.1% for FY 2020.
Revenue grew to Rub 19.9 billion, up by 33%
yoy, compared with Rub 14.9 billion for FY 2020, due
to large contracts.
EBITDA increased to Rub 2.5 billion, up by 31%
yoy, compared with Rub 1.9 billion for FY 2020. EBITDA
margin was down to 12.8%, compared with 13.0% for
FY 2020.
Revenue was up to Rub 898 million, compared
with Rub 718 million for FY 2020. EBITDA was
Rub 51 million, compared with Rub (63) million last
year.
Working capital increased to Rub 10.0 billion
(+49% yoy), compared with Rub 6.8 billion
at the end of 2020. Working capital changes are within
the normal quarterly volatility.
Debt position
Total debt was up 2% yoy to Rub 22.7 billion,
compared with Rub 22.2 billion at the end of 2020.
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Working capital
10,047
6,752
49%
10,047
13,390
-25%
Working capital / Revenue LTM
17.6%
14.5%
17.6%
23.9%
Maintenance capex
1,384
1,392
-1%
374
353
6%
Acquisitions
-
-
-
-
in millions of Rub
2021
2020
Change
yoy
4Q 2021
3Q 2021
Change
qoq
Total debt
22,668
22,175
2%
22,668
22,642
0%
Net debt
13,896
11,814
18%
13,896
16,771
-17%
Net debt / EBITDA LTM
2.07
2.39
2.07
2.48
As a share of revenue LTM, working capital was
at 17.6% vs. 14.5% at the end of 2020.
Maintenance capex was Rub 1.4 billion, down 1% yoy.
Net debt was Rub 13.9 billion (+18% yoy),
compared with Rub 11.8 billion at the end of 2020.
Net debt to EBITDA LTM ratio was 2.07x, down
from 2.39x at the end of 2020.
Debt management
In March 2022, based on the Federal Law
№ 71-FZ dated 26 March 2022, the Group fixed for
the three months the interest rates of its total Rub-
denominated floating rate borrowing portfolio in amount
of Rub 3.9 billion at 12.5%, 13.5% and 16.5% per
annum for the April, May and June 2022, respectively.
In April 2022, the Group signed preferential credit
facility agreements in the total amount of Rub 4.9 billion
at 11% per annum with 1-year maturity for financing
its operational needs.
As of April 1, 2022, HMS Group has only
Rub 187 million to be repaid in 2022.
The average interest rate grew to 10.15%
per annum as of April 1, 2022.
in millions of Rub
2022
2023
2024
2025
Debt to be repaid as of April 1, 2022
187
9,994
11,517
281
Contracts
In February 2022, HMS Group announced
the signing of Rub 7.0 billion contract to manufacture
and deliver oil & gas equipment in 2023-2025.
In April 2022, HMS Group announced the signing
of Rub 3.3 billion contract to manufacture and deliver
gas transportation units in 2023-2024 to a gas
condensate field located in Russia.
Buyback program
After the reporting date, no GDRs have been
purchased under the buyback program. The company
holds 257,960 of its GDRs in treasury (1.1% of its issued
share capital).
WORKING CAPITAL AND CAPITAL EXPENDITURES
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Performance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
28 - 29
2021 CALENDAR OF EVENTS
JANUARY
■One of HMS’ managers has
acquired 29,790 HMS’ Global
depositary receipts using his own
funds.
■Kazancompressormash
manufactured and delivered
a compressor system for
a delayed coking unit (TANECO).
FEBRUARY
■HMS Group signed
a Rub 2.3 billion contract
within a long-term framework
agreement to manufacture mobile
compressor units. The framework
agreement was signed in 2019.
The equipment is to be delivered
at the client’s site in 2022.
MARCH
■HMS Group repurchased
176,000 of its global depositary
receipts within its buy-back
program. Following the
transaction, the company holds
257,960 of its GDRs in treasury,
representing in total 1.1 percent
of its used share capital.
APRIL
■HMS Group signed a
Rub 7.5 billion contract for delivery
and installation of oil & gas
equipment for one of the largest
gas fields in Russia. The contract
was 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. That
was a follow-up contract HMS
Group has secured with this
client. The first one was a Rub
10.2 billion contract announced
in 2017, and that was the first
project of that kind in Russia.
■ Kazancompressormash
took part in the International
Industrial Exhibition INNOPROM
in Uzbekistan from April 5
to April 7, 2021. The event had
an extensive business program aim
to expand industrial cooperation
between the Russian Federation
and Central Asia, establishing
and strengthening business
contacts, and establishing
joint manufactures.
Kazancompressormash experts
presented their competencies and
references in the field of design,
manufacture, and supply of high-
tech compressors and complex
solutions for various industries
based on existing production.
■HMS Group manufactured
and delivered a batch
of condensate pumps for
the 1st power generating
unit of the Rooppur NPP
in Bangladesh.
MAY
■The Moscow Exchange approved
the listing of the Company’s
Global Depositary Receipts
representing ordinary shares of the
Company (ISIN US40425X4079)
and their inclusion in the Level 1
List. The GDRs are listed under
the ticker “HMSG” and the first
trading day on the Moscow
Exchange was on May 25, 2021,
with quotations and settlements
in Russian rubles. The listing on
the Moscow Exchange expanded
HMS Group’s investor base, and
included Russian investors, who
were not present in London, and
supported liquidity of HMS’ GDRs.
■HMS Group participated in the
Watrex Expo – a leading trade
fair dedicated to Waste Water &
Water Treatment Technologies
on June 14 – 16 at the Egypt
International Exhibition Center
«EIEC» in Cairo. The company
represented its reliable and
energy-efficient solutions for
water supply and sewage
disposal applications: borehole
and surface water intakes, water
supply for residential buildings
and manufacturing plants,
desalination and water treatment,
pressure increase in water
supply systems, HVAC systems
for civil construction, irrigation
in agriculture and sewage disposal
and wastewater treatment
systems.
■HMS Group signed an agreement
with LUKoil to develop, deliver
and conduct tests of a new
pump unit for booster systems
in the framework of moderation
of a modular pumping station,
at the Pokachevskoe field.
The units are intented for injection
of freshwater into reservoirs under
the pressure.
JULY
■Fitch Ratings affirmed JSC HMS
Group’s Ratings (IDR)s at “B+”
with the outlook “Stable” and
Expert RA affirms at “ruA-“ with
the outlook “Stable”.
The Fitch rating reflected HMS'
“leading market position, strong
customer base, albeit less
diversified than peers', moderate
profitability and comfortable
liquidity position.”
Expert RA made a point that
unlike oil service companies
HMS’ activity doesn’t carry
excess force majeure risk that
refers to manufacturing, and
the Group forecasts its costs
more precisely. The credit rating
agency believes that a growth
of HMS’ backlog makes it count
on further improvement of the
company’s financial results aligned
with the corresponding reduction
of the net debt ratio below 2.5x.
The full text of Fitch’s press
release is available on the agency’s
website.
The full text of Expert RA’s press
release in Russia is available
on the agency’s website.
AUGUST
■HMS signed a Rub 3.3 billion
follow-up contract to engineer
and procure nuclear pumps
and pump-based solutions
■Complete gas-pumping
units (GPU) made by
Kazancompressormash were
put into operation at Beregovoye
gas condensate (NOVATEK).
Kazancompressormash designed,
manufactured, packaged and
supplied three gas compressor
units and station equipment,
including regulation valve skids,
intermediate separators, interim
and output gas air coolers.
The 32GC2-36/20-107 GTU
gas compressor units were
designed for handling raw
natural gas for low-temperature
separation process at the
gas treatment plant CGTP-V
with subsequent forwarding
processed gas into the trunk
pipeline system. The units were
placed in the enlarged containers
comprising a compressor module
by HMS Neftemash and a gas
turbine module by United Engine
Corporation-ODK-Gas Turbines
with the gas turbine GTD-4RM
manufactured by UEC-Saturn.
Earlier in 2019, two centrifugal
compressor systems made by
Kazancompressormash were
commissioned at a booster
compressor station at the
Cenomanian deposit at the
Beregovoye gas condensate field
(NOVATEK) for operation as a part
of GPU-4RM gas pumping units.
NOVEMBER
■A compressor system
by Kazancompressormash was put
into operation at the Fluid catalytic
cracking unit of the TANECO
Refinery and Petrochemical Complex
(Tatneft, Nizhnekamsk). A two-
section centrifugal compressor
6GC1-748/1.4-18 with 1.1 mn
nm3/day capacity and 1.67 MPa
discharge pressure developed
by NIIturbokompressor (HMS Group)
is intended to handle rich gas with
high heavy hydrocarbon content.
The compressor with a horizontally
split casing is driven by an electric
motor via a multiplying gear. The unit
of a compact size was designed
and manufactured in accordance
with the API, TANECO and Tatneft
standards requirements and equipped
with an automatic control system,
dry gas dynamic seals, a low-
voltage switchboard, a variable
frequency drive and process gas
line control valves. A cleaning
system for a flow path and an
impeller during the operation allows
maintenance of the compressors
without its shutdown and interruption
of the customer's process cycle.
The design solutions ensure at least
40,000 hours service life between
overhauls and the ability to perform
oil replacement of the running
compressor. The system successfully
passed acceptance tests
at the customer's facility and was
approved for operation.
DECEMBER
■HMS Group signed a Rub 1.4 billion
contract to engineer and manufacture
compressor equipment, which will be
delivered in 2023.
■HMS Group successfully put into
operating a blast apparatus at sewage
treatment facilities in Orenburg.
In the framework of the project’s
implementation, HMS delivered
6 centrifugal single-stage turbo
compressor units, coming with control
systems and auxiliary technological
equipment, that replaced outdated
equipment made in 1976.
Performance HMS GROUP
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Additional information
31
3O -
HMS KEY PROJECTS,
DEVELOPMENT & INNOVATIONS
EXPORT ACTIVITIES
Export sales revenue of HMS Group
showed a US$ 16 million growth compared
to 2020, and reached US$ 67 million.
The 2021 year continued with a significant
growth in Egyptian water market and HMS
compressors expansion to the international
markets.
RESEARCH
AND DEVELOPMENT
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 designed and delivered
a feed pump for a thermal station use. Its
signature feature is the ability to be used
not only as a startup and standby pump,
but also as a full-time operating pump
at thermal stations with overcritical gas
conditions.
HMS Livgidromash set up a serial
production of a new line of Kordis-seria
overhung-type pumps which meet up-to-
date efficiency requirements, with capacity
up to 2,000 m3/h and pumping head up to
100 meters. The pump product portfolio
consists of three designs: overhung,
cantilever-and-monoblock, and overhung
design with in-line nozzles.
The company set up a serial
production of APD booster stations for
cold-and-hot water systems. The station
consists of from two to six pumps with
a capacity from 1 to 125 m3/h, a control
station with a frequency converter, suction
and discharge headers, valves and pressure
sensors. The operation patterns are
regulated depending on water demand.
OIL & GAS
EQUIPMENT
Thermo-Chemical Binary
Mixture Technology (TCBXT)
In 2021, HMS Group continued
works on promotion and commercialization
of its new technology in subsoil users.
During 2021, the science-experimental
work to improve the effectiveness
of the binary mixture was conducted
in cooperation with Kazan Federal University.
In October 2021, the company treated
three holes at Tatneft. In pilot runs at Tatneft,
HMS conducted practical application
of a new nonacid activator suggested
by Kazan Federal University. Also a new
treatment method without a wireline crew
support was tested at two of those three
holes. The method is in pumping the binary
mixture through an annular space without
pulling out a submersible pumping equipment
and carrying out other support works that are
usually conducted by the wireline crew.
The main advantages of the method
are as follows:
■The general downtime of a well is less
than two full days, while the downtime
with the wireline crew’s work can reach
up to ten full days.
■There are no direct expenses related
with payments to the wireline crew and
no indirect expenses related to the well
downtime during work of the wireline crew.
■The suggested method excludes ingestion
of the binary mixture and the activator into
a borehole submersible pump, so there
is no negative impact of injected reagents
on the submersible pumping equipment.
■A well flowback is done with a standard
submersible pumping equipment
that reduces the time to operations
and commissioning.
■The payback time of expenses, incurred
by well treatment, reduces almost twice.
During the treatment, a new
method of steam-gas well flowback was
developed. HMS Group conducted tests
at the experimental well and expects its
further application at an experimental well
of one of oil companies in Volga region.
The method’s aim is a well flowback
after the TCBXT treatment or fluid recovery
of oil, gas and gas-condensate wells using
generation of a steam-gas bubble and
saturation of a borehole fluid. A binary
mixture on the basis of ammonia nitrate and
sodium nitrite, analogic to the mixture used
in the TCBXT, is applied as a steam-gas
mixture generator.
Currently, HMS Group is in
preparation stage of TCBXT works at three
wells of NNK-Orenburgneftegaz. Also,
the company negotiates treatment of ten
wells at Tatneft and coordinates works with
Orenburgneft and Belkamneft.
Rodless oil extraction
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.
The field tests have started in summer
2021.
The oil extraction from a well
equipped with a submersible gear allows
to manage the oil extraction accurately
and remotely in the online mode
according to digital reports, keeping track
of equipment — that is the base for creation
of the important feature of a “digital field”.
The system of rodless oil extraction
visually differs from traditional beam units,
as the first one does not have a cables and
rods system on its surface. The rodless
system is a hydromechanical submersible
gear which is introduced into a 20-meter
pipe and run in a borehole.
The equipment decreases costs
of oil extraction due to lower costs for land
use and overhaul repair. The system uses
less electricity and is less metal-intensive.
The rodless oil extraction system is more
eco-friendly: it discounts the possibility
of oil leaks in case of the system failure.
In 2021, HMS successfully conducted
the following works:
■Production of complete pilot pump units based
on the hydromechanical submersible gear.
■Procurement, assembly, trying, regulation,
preliminary and acceptance testing
of manufactured pilot models at testing
stands, including a 40 meter-deep stand-
borehole.
■Modernization and improvement
of the hydromechanical gear’s wet
end, enhancement of its characteristics
and reliability.
■Application of new technology solutions
to improve pumps’ reliability and ability
to be used at deeper boreholes, as well
as enhancement of their efficiency.
In 2021, HMS tested a pumping unit
with the hydromechanical gear at a number
of wells, and the tests proved the gear’s
working efficiency under industrial conditions.
The developed
technical solution
decreases costs
of oil extraction from
poor wells, making
it possible to withdrawn
from traditional beam
units.
The new patented
system maintains day
capacity up to 8 m3
and is intended for
installment in wells with
up to 2,000 m 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 (25–30 kW).
Export sales revenue
of HMS Group reached
HMS Neftemash
started
field tests
of the unique
system of the
US$ 67 million
rodless oil
extraction
mechanism
Performance HMS GROUP
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COMPRESSORS
In 2021, HMS Group continued
realization of projects on the production
of compressor equipment with a balanced
expansion of its product portfolio
and mastering of new products.
For example, the company completed
a pilot run of dry-running gas seals which
are the parts of a 4GC2-194/12-112 GTU
compressor for associated petroleum
gas transportation run at Gazpromneft-
Orenburg. The dry-running gas seals are
fully made of domestic materials with
a tungsten-carbide-carbon-graphite
stationary and rotating face. Currently,
the seals are actively exploited. Their total
time is 4,579 hours, and the designed
solutions are ready for replication in new
projects.
LEGAL PROTECTION
OF INTELLECTUAL
PROPERTY
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. More than 264 objects of
intellectual property can be found in HMS’
current operating portfolio, including
180 patents, 31 registered computer
programmes, and 53 registered trademarks.
In 2021, the company received
10 patents for new technical solutions,
and filed applications for 13 patents.
The company continued registration
of its exclusive rights on the Thermo-
Chemical Binary Mixture Technology. Also,
HMS continued registration of its inventions
in the Rodless oil extraction technology,
including filing patent applications abroad.
MODERNIZATION
Kazancompressormash started
a complex of works to move the rotor
workshop closer to the main assembly
workshop with a heat-treating shop.
In addition to movement of current
equipment, the company plans to purchase
machine tools taking into account up-to-
date standards of technological workflows.
In 2021, the company completed repair
works and rerouting of the engineering
networks.
In 2021, Kazancompressormash put
in service a unique large-size INTEGREX
e-670H multi-tasking machining center,
which is a complete fusion of the CNC
turning center and the machining center.
The machine delivers precision and
performance for heavy, large-diameter,
shaft-type workpieces for a wide range
of industry applications.
The machine is equipped with
a high-output integral spindle motor
featuring two gear ranges for a wide
scope of heavy-duty machining
applications. A drop-worm system
with the same positioning accuracy
as a machining center rotary table drives
the C-axis (0.0001-degree increments).
The high performance milling spindle
is a 50 taper, single spindle turret with
automatic tool changer. A heavy-duty
roller gear cam makes up the framework
of the machine's B-axis that provides
milling spindle indexing or contouring
and maximum tool point agility.
The implementation of the machining
center, outside of enhancement of technological
capabilities, speeded production cycles,
improved the accuracy of part cutting,
reduced costs of operation, etc.
CORPORATE SOCIAL
RESPONSIBILITY
PRIMARY AREAS
OF SOCIAL POLICY
Social development policy
and providing adequate living
standards and normal working
and life conditions for HMS’
employees.
■Hardship-duty pays;
■Preservation of average earnings after
transfer to easier work;
■Pecuniary aid in the event of the worker’s
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.
The company has developed and implemented collective agreements,
in-house policies and acts, which reflect social welfare issues, benefits, compensations
and guarantees granted to the employees, including:
HMS KEY PROJECTS, DEVELOPMENT
& INNOVATIONS
Performance HMS GROUP
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Performance
Governance
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34 - 35
SAFETY AND HEALTH
HMS Group believes that achieving its strategic
goals and maintaining its competitive advantages
requires systematic management of labor health
protection and the 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:
Prioritisation of its employees’
health and safety over business
performance results and continuous
improvement of work conditions and
labor health protection at every
working place.
Significant decrease of risks
of industrial traumatism
and professional illness
of the company’s employees:
– Regular medical examinations, and availability
of stationary medical and feldsher’s stations.
– Issuance of free personal protective equipment, including
work clothes, safety shoes and other personal safety
apparel. The special commissions at HMS’ facilities
analyse the given personal safety apparel on a regular
basis and examine novelty products, which appear
on the market.
– 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.
COVID-19
In 2021, the company continued the policy
implemented in April 2020 to prevent the COVID-19
decease and expansion. HMS Group undertook all
the necessary measures in its offices and production
facilities in accordance with regulatory requirements.
The company informed personnel on a regular
basis about necessity to comply with the preventive
measures, and personal and social hygiene rules
through corporate information materials, as well
as materials 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 was 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 offices and production
facilities. HMS imposed restrictions on business
CHARITY AND SOCIAL
ASSISTANCE
The company believes in its responsibility
for social and economic climate in regions where
it operates, 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 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 realised through:
■Social support and protection of citizens, including
improvement of the financial position of the indigenous
peoples, social assistance to the unemployed,
the 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.
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:
– Regular examination of industrial safety, and regular
training in the area of industrial safety.
Establishment of personal
responsibility by company
employees of all levels for meeting
all labour 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.
1
2
3
4
CORPORATE SOCIAL
RESPONSIBILITY
trips: its employees were sent on business trips only
in the case of urgent operating issues, which couldn’t
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 higher-temperature and/
or showing signs of the acute respiratory disease are
suspended or not admitted to their working places.
Workplaces adopted “stay at home if unwell”
practice and HMS implemented flexible sick leave
policies to discourage workers with symptoms
of decease from coming to their workplaces.
The facilities were equipped with bactericidal air
recirculating irradiators, and all surfaces were cleaned
and treated with sanitizers several times per day.
The company tested employees for the COVID-19 on
regular basis. Employees on their request were vaccinated
at offices and production facilities of HMS Group.
Performance HMS GROUP
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Performance
Governance
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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 recognise 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;
RATIONAL USAGE OF RAW MATERIALS, ENVIRONMENTAL
ITEMS AND ENERGY;
IMPROVING HMS’ IMAGE IN THIS SPHERE.
Average Headcount as of 31 December 2O21
Oil & gas equipment and projects
Compressors
Construction (former EPC)
HMS Management Company
Total
Industrial pumps
2O16
8.8
2.8
2.3O.6
O.3
14.7
8.6
2.9
2.3 O.6 O.3
14.6
2O17
8.2
3.2
2.2
O.6 O.3
14.5
2O18
7.8
3.6
2.1 O.3
O.3
14.O
2O19
7.4
3.2
2.1
O.1
O.3
13.1
2O2O
7.2
2.9
2.1
O.1
O.2
12.4
2O21
As an employer of 12.4 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 them and assists
them in achieving their full potential.
Prevention and detection of occupational
deceases held the important place in labor and
safety measures. The company accomplishes
it by timely and periodical medical examination
of its employees, especially those who are
in occupational health risk. Also HMS Group
organized flu vaccination for employees
on their request.
HMS Group believes, that implementation
of the best available technologies and talent
management is one of the key mechanisms
of new opportunities realization. In 2021,
the focus in talent management was
at realization of in-house training programs
regarding the company’s products,
including:
■Design of thermal power stations.
Application of pump units in thermal power;
■DeLium, APD, Boosta, Ciris-series water
pumps;
■Automation and review of product
portfolios and capabilities of serial
management and protection stations;
■Basic principles of selection and operation
of pump units;
■Product portfolio of pumps used in oil and
gas treatment. Basic principles of their
selection and operation.
THE ENVIRONMENT
PEOPLE
In order to increase personnel
engagement in training process,
achievement of the maximum conversion
and analysis of training productivity,
the company implemented a system
of online learning based on the webinar.ru
platform.
In addition, HMS realized a modular
program for sales persons (negotiations,
sales, presentations), aimed at improvement
of customer service quality.
In 2021, the average headcount
decreased by 0.6 thousand people
(-4.9% yoy) due to the personnel
optimization.
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, revised 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 unfavourable
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.
Aiming to decrease negative impact
on the environment, facilities of HMS Group
conduct separate waste collection by hazard
characteristics and categories, timely
discarding of waste of hazard classes I to IV
subject to utilization and deactivation, timely
disposal of waste of hazard classes IV-V
to be stored at SHW landfills.
Within the framework of the activity
on environmental protection,
Kazancompressormash performed
recertification audit regarding
the compliance of the facility’s
the integrated management system
with GOST R ISO 9001-2015, GOST
R ISO 45001-2020 «Occupational
health and safety management
systems» and GOST R ISO 14001-2016
«Environmental management system».
Based on the audit results, the facility
received the ISO compliance certificate
with maturity in 2024.
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Governance
Additional information
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Performance HMS GROUP
Annual Report 2O21
CORPORATE
GOVERNANCE
Good corporate governance generates
trust and engagement between a company
and its stakeholders and contributes
to a company’s long-term success.
Accountability, integrity, transparency,
fairness, equity, sustainability and good
ethics are all fundamental values of good
corporate governance.
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.
Overview
Markets
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Governance
Additional information
41
4O -
Governance HMS GROUP
Annual Report 2O21
BOARD OF DIRECTORS
THE BOARD
OF DIRECTORS
AND PERFORMANCE
Chairman
Mr. Nikolay N. Yamburenko
Chairman of the Board of Directors,
Non-Executive Director, Chair
of the Strategy and Investments
Committee
Mr. Nikolay 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.
Executive Directors
Mr. Artem V. Molchanov
Member of the Board of Directors,
Managing Director (CEO)
As one of the founders of the Group,
Mr. Artem Molchanov has held various
executive positions within HMS Group since
its establishment in 1993. Mr. Molchanov
became the President of HMS Group
in 2008 and was appointed as an executive
member of the Board of Directors in October
2010. Mr. Molchanov has almost 30 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. Kirill Molchanov has held various
executive positions within HMS Group since
its establishment in 1993. Mr. Molchanov
was appointed as an executive member
of the Board of Directors in October 2010
and has served as Vice President of HMS
Group since 2008. Mr. Molchanov has
almost 30 years of industry experience.
He graduated from the Bauman
Moscow Higher Technical School
(currently the Bauman Moscow State
Technical University) with a degree
in electromechanical engineering. Also,
he graduated from the Judge Business
School, University of Cambridge with
an executive MBA degree.
Mr. Yury N. Skrynnik
Member of the Board of Directors
Mr. Yury 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 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 30 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.
General Overview
As at 31 December 2021, 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.
Non-executive Directors
Mr. Ezio Vergani
Member of the Board of Directors,
Chair of the Audit Committee
Mr. Ezio 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. Andreas 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 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.
Mr. Giorgio Veronesi
Member of the Board of Directors,
Chair of the Remuneration Committee
Mr. Giorgio 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. Vladimir 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 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 20 years
of experience in the industry.
Mr. Vyacheslav Tsoy
Member of the Board of Directors
Mr. Vyacheslav 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.
Markets
Performance
Governance
Additional information
42 - 43
Governance HMS GROUP
Annual Report 2O21
Overview
BOARD OF DIRECTORS
PRINCIPAL
ACTIVITIES
OF THE BOARD
OF DIRECTORS
IN 2021
The Board of Directors held
four ordinary meetings in 2021. Due
to the COVID-19 pandemic, two out of four
meetings of the Board of Directors were
held via videoconference call. In 2021,
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.
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 2021 is set out below.
Audit Committee
General Overview
As at 31 December 2021, 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.
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’
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 2021
Three meetings of the Audit Committee
were held in 2021. 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
and interim dividend distribution.
External Audit of Financial
Statements
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.
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 2021, 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 2020. Deloitte
remains appointed for the 2021 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 2021
Two meetings of the Remuneration
Committee were held in 2021. 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 2021 LTIP
targets and the list of participants.
DIRECTORS’
COMPENSATION
The total compensation of the
Chairman of the Board was Euro 270,115 for
the year ended 31 December 2021.
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 2021.
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.
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 2021
One meeting of the Strategy and
Investments Committee was held in 2021.
The main matter reviewed by the Committee
was the updated strategy and financial
model of the Group.
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
44 - 45
RISK MANAGEMENT
AND INTERNAL CONTROL
OPERATIONAL MANAGEMENT
System of internal control
Setting of risk-appetite oversight
BOARD
EXECUTIVE MANAGEMENT
Implementation and oversight
Policy implementation and identification improvements
INTERNAL AUDIT
AUDIT COMMITTEE
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 HMS’ 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.
CONTINUOUS IMPROVEMENT
HMS Group’s goal is to continuously improve
its governance and risk management sub-systems.
We assess the findings of audits and internal
investigations and use them to revise our internal
processes and procedures.
The key features of the risk management process
include:
■The gathering and analysis of information related
to internal and external factors which can affect
the achievement of the Group’s objectives;
The Group uses a formal
risk management program across
its companies; there is an ongoing process
for identifying, evaluating and managing
the significant risks the company 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.
The Board is responsible for
the Group’s system of internal control
and for reviewing its effectiveness.
This system is designed to manage rather
than eliminate the risk of failure to achieve
business objectives and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
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
■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;
■Making appropriate decisions to manage identified risks;
■Actively monitoring the steps taken to control the most
significant risks.
Internal control and risk management
monitoring is performed through internal and
external assurance providers, which include:
■Financial statement audits performed
by external auditors. Discussion
by the Audit Committee of the results
of the audit, including a review
of the financial performance, any changes
to disclosure, a subsequent events
review, important accounting matters
and other internal control matters.
■Review and formal approval of the financial
results by the CEO, CFO, Audit Committee
and the Board.
■Board and sub-committee approval and
monitoring of operating, financial and other
plans.
KEY FEATURES OF THE INTERNAL CONTROL SYSTEM
OVER FINANCIAL REPORTING
The table below shows the relationship between
the main categories of the risks we encounter and how
they affect our strategy
Below is the summary of the principal risks
facing the Group’s business. HMS also faces other
risks both known and unknown; some of them apply
to similar companies operating in both the Russian
and international markets.
PRINCIPAL RISKS
AND UNCERTAINTIES
■Consolidation and verification of correct
identification and proper assessment
of critical business risks. The Audit
Committee reviews changes to the risk
profiles together with progress on actions
for key risks on a regular basis.
■Internal audit function. The Head
of Internal Audit functionally
reports to the Audit Committee
and administratively to the First Deputy
CEO. The internal audit department
performs its activities in accordance with
an audit plan and incorporates review
of material controls, including financial,
compliance and operational controls.
The results of each audit are discussed
in detail with the companies and
business units concerned and action
plans are agreed upon.
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
46 - 47
RISK MANAGEMENT
AND INTERNAL CONTROL
GLOBAL POLITICAL
AND ECONOMIC RISKS,
SALES AND PROJECT
EXECUTION RISKS,
LEGISLATION AND
REGULATIONS RISKS,
TECHNOLOGY RISKS
In the existing geopolitical
environment, a number of risks increased
and a range of uncertainties emerged.
The management of HMS Group carefully
monitors the current situation and makes
all possible efforts in the interests of all
shareholders.
CONTRACT EXECUTION
RISKS
HMS Group performs a systematic
work to manage legal risks through their
identification, and prevention of reasons
and conditions when they arise at the pre-
contractual stage as well as at the stages
of contracts execution and legal
proceedings.
Risks formation in 2021 was stipulated
by a number of reason both macroeconomic
and contractual related to a number
of projects executed by the company.
Main legal risks which arise at the stage
of contracts execution, contracts signing:
a) Risk of nonfulfillment of a contract
by a client (in whole or in part);
b) Risk of nonfulfillment of their
liabilities by third parties (sub-tiers),
responsible for delivery (production)
of a product’s components;
c) Risk of «a mediator» insolvency
(failure to generate a cash flow
in a settlements’ chain «client — producer»)
d) Risk of penalty claims for
the breach of the contract;
e) Default risk (including, as a result
of sanctions and/or other enforcement
actions from state services);
f) Piracy risks
Management of legal risks is based
on their quality (expert) assessment and
directed to their identification, monitoring
of risk factors, as well as their mitigation.
HMS Legal department uses
the following basic strategy of risks
management:
■Legal risks are verified at the stage
of contracts’ preliminary qualification and
vetting as well as their further support;
■Regarding risks (a)-(с): contracts
execution security to guarantee adequate
sources of costs covering in the case
of contracts nonfulfillment is maintained
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 (banking, corporate)
for advance payments/contract
performance, third-party guarantees,
collateral and others;
– Withholding of an advance payment till
the provision of a security; if it is not
provided, then payment after delivery;
– Management of the contract
commitments chain «client — producer»,
which assures the receipt of the payment
at the time of cash flow passing
■Regarding (d) risks: control and
organization of the work to fix legally
important facts and circumstances through
putting together evidential documentation
(letter, acts, protocols, etc.), identified
factors of contractual nonfulfillment
(a customer’s fault), with subsequent
claims settlement by signing amendments
to the contract;
■Regarding (e) risks: monitoring of changes
and control of deals compliance with
the current legislation of the Russian
Federation;
■Regarding (f) risks: processing of patent
search, due diligence, and record-keeping
of intellectual activity results.
In case when risks occur at the trial
level, standard legal procedures and
collected documentation, which proves
the counter nonfulfillment by the client,
perspectively deliver success of the trial
(complete or partial rejection of the suit,
or significant lowering of penal sanctions)
HUMAN CAPITAL
In the existing geopolitical
environment, a number of risks increased
and a range of uncertainties emerged.
The management of HMS Group carefully
monitors the current situation and makes
all possible efforts in the interests of all
shareholders and its employees.
ACQUISITIONS
& DISPOSALS
During the whole period of its
operation, the Group has completed
a number of acquisitions targeting the key
players in the markets of industrial pumps,
compressors, modular oil & gas equipment
and EPC-contracts.
Taking into account the economic
slow-down and high uncertainties,
insufficient demand in many segments
that makes it difficult to evaluate potential
synergies from M&As, the Group does
not consider any material acquisitions
in the nearest future, so this risk as 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 depends
on our ability to prevent occurrences
of fraud and corruption at all levels within
the Group.
Tightening of anti-corruption control
over government-owned corporations can
affect a pattern of interaction of HMS Group
with its largest Russian customers in mutual
trust and confidence.
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 as well.
CREDIT
AND LIQUIDITY RISKS
At the end of 2021, the company
refinanced of a part of bank credits.
As the result, currently HMS Group had only
Rub 187 million repayments falling in 2022.
At the end of 2021, the Group
accumulated Rub 8.8 billion of available
cash. Considering all the above factors,
HMS estimates its exposure to credit and
liquidity risks as immaterial.
COVID-19
Starting from early 2020, a new
coronavirus disease (COVID-19) has
begun rapidly spreading all over the world
resulting in announcement of the pandemic
status 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. Group’s management
does not expect a significant adverse
impact of the current operating environment
on the financial position and operating
results of the Group and the Group’s ability
to continue as a going concern.
HMS Group promotes ethical
behaviour among its employees and
maintains dedicated violation reporting
channels to raise concerns within the Group
through an ethics hotline available 24/7.
The Group’s internal audit and/or security
department perform investigations into
alleged fraud and misconduct. If necessary,
the results of such investigations
are provided to 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.
FINANCIAL RISKS
HMS Group doesn’t use financial
instruments for hedging or other risk
management, so the company is not
exposed to such kind of risks, including
price and liquidity risks.
FOREIGN EXCHANGE
RISKS
The Group has no material foreign
exchange mismatch. The company 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.
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
48 - 49
HMS GLOBAL DEPOSITORY
RECEIPTS
SHAREHOLDING
As of December 31, 2021,
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.
There are 6,676,593 depositary
receipts outstanding in the GDR
program.
During 2021, the Group’s Executive
Directors and persons discharging managerial
responsibilities (“PDMRs”) didn’t acquired an
interest over the Company's global depositary
receipts (“GDRs”) under the Company's LTIP.
SHARE PRICE
Fitch Ratings
Expert RA
National Credit
Ratings
HMS Credit Rating / Outlook
B+ / Stable
ruA- / Stable
A-.ru / Stable
Date of Rating / Date of
Confirmation
22 Feb 2017 / 16
July 2021
11 July 2017 / 15
July 2021
12 Oct 2021
Credit ratings as of December 31, 2021
On 30 March 2022, Fitch Ratings
withdrew its ratings of JSC HMS Group
and terminated the rating engagement
agreement due to the sanctions adopted
by the Council of the European Union.
LONG TERM INCENTIVE PLAN
Price of HMS Group’s GDRs on the London Stock Exchange,
2O11-2O21
Min, US$
Max, US$
GDR price at the end of the
period, US$
Market capitalization at the
end of the period, US$ mn
2011
19.90
41.21
22.05
516.69
2012
19.50
29.90
21.10
494.43
2013
10.50
21.15
12.50
292.91
2014
1.30
12.50
1.30
30.46
2015
1.30
4.50
2.76
64.67
2016
2.05
8.01
7.46
174.81
2017
7.46
9.80
9.80
229.64
2018
6.60
11.30
7.00
164.03
2019
4.10
7.50
4.60
107.79
2020
3.50
5.85
3.90
91.39
2021
3.84
5.50
4.00
93.73
1Q 2021
3.84
4.60
4.06
95.14
2Q 2021
3.90
5.50
4.40
103.10
3Q 2021
4.24
4.84
4.40
103.10
4Q 2021
4.00
4.46
4.00
93.73
Price per 1 GDR, US$
Volume of trades, th US$
O1.O1.2O21
O1.O2.2O21
O1.O3.2O21
O1.O4.2O21
O1.O5.2O21
O1.O6.2O21
O1.O7.2O21
O1.O8.2O21
O1.O9.2O21
O1.1O.2O21
O1.11.2O21
O1.12.2O21
6.OO
4.OO
5.OO
O.OO
1.OO
2.OO
3.OO
HMS Group’s GDRs performance in 2O21, the London Stock Exchange
14O
12O
1OO
8O
6O
4O
2O
O
Volume of trades, th US$
Price per 1 GDR, US$
O1.O5.2O21
O1.O6.2O21
O1.O7.2O21
O1.O8.2O21
O1.O9.2O21
O1.1O.2O21
O1.11.2O21
O1.12.2O21
O
O
2,OOO
4,OOO
6,OOO
8,OOO
1O,OOO
12,OOO
16,OOO
14,OOO
2OO
3OO
5OO
1OO
4OO
6OO
7OO
HMS Group’s GDRs performance in 2O21, the Moscow Exchange
Price per 1 GDR, Rub
Volume of trades, th Rub
Volume of trades, th Rub
Price per 1 GDR, Rub
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
51
5O -
HMS GLOBAL DEPOSITORY
RECEIPTS
Price of HMS Group’s GDRs on the Moscow Exchange, 2O21
History of dividend payments
Min, Rub
Max, Rub
GDR price at the end of the
period, Rub
Market capitalization at the
end of the period, Rub mn
2021
289.00
600.05
303.50
7,112
1Q 2021
-
-
-
-
2Q 2021
323.00
600.05
326.55
7,652
3Q 2021
316.00
345.00
328.50
7,698
4Q 2021
289.00
341.50
303.50
7,112
Period
Dividend per share,
Rub
Dividend per GDR,
Rub
Amount announced,
Rub mn
Record Date
Payment Date
2012
6.82
6.82
799.1
10.06.2013
28.06.2013
2013
3.41
3.41
399.5
10.06.2014
27.06.2014
2015
8.37
41.85
980.7
03.06.2016
21.06.2016
2016
8.53
42.65
999.5
09.06.2017
27.06.2017
2017
11.95
59.75
1,400.2
15.06.2018
03.07.208
2018
9.81
49.05
1,149.5
14.06.2019
01.07.2019
2019
3.41
17.05
399.5
19.06.2020
30.06.2020
2020
4.25
21.25
497.9
18.06.2021
01.07.2021
2021 9m
2.14
10.70
250.0
23.12.2021
29.12.2021
DIVIDENDS
As a general rule, the company targets to pay out
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
BUYBACK PROGRAM
As of today, HMS has repurchased 1,385,836
GDRs since the start of the program. The Buyback
program will end as soon as the total amount of acquired
securities has reached the maximum amount specified
(1,405,961 GDRs) or, if earlier, in June 2022.
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.
forecast. HMS also plans to pay out dividends basically
twice a year (interim and final). Dividends are announced
per 1 ordinary share.
In December 2021, HMS Group paid Rub 2.14 interim
dividends per 1 ordinary share (Rub 10.70 per 1 GDR).
In 2015, the company approved new conditions
of the program: the maximum number of GDRs,
which could be repurchased, was increased to 5%
of the subscribed capital of HMS Group, including
previously acquired and held in the form of treasury
shares.
In 2016, the company increased the maximum
number of GDRs, which could be repurchased, to 6%
of the subscribed capital of HMS Group.
Major shareholders of HMS Group as of December 31, 2O21
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.
Shareholders by legal entities, %
Shareholding by holders (effective share), %
JSC HMS Holding
71.5
Free-float (other holders of GDRs)
27.4
Treasury GDRs
1.1
Vladimir Lukyanenko
27.4
Free-float
27.4
Managers and persons closely associated
with management
24.3
German Tsoy
19.8
Treasury GDRs
1.1
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
52 - 53
INFORMATION
FOR SHAREHOLDERS
AND DISCLAIMER
GDRs of HMS Hydraulic Machines
& Systems Group Plc are traded
on the London Stock Exchange and
the Moscow 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.
On the date of Annual report publication, trading of GDRS
of HMS Group has been suspended on the London Stock Exchange
GENERAL INFORMATION
Company Name
HMS HYDRAULIC MACHINES & SYSTEMS GROUP PLC
Company Type
Public
Fiscal Year-End
December 31
Disclosure
The London Stock Exchange
Managing Director (CEO)
Artem Molchanov
First Deputy CEO (CFO)
Kirill Molchanov
Ticker
HMSG
CUSIP
RegS: 40425X407
144A: 40425X308
LEI
254900DDFETNLASV8M53
Exchange
London Stock Exchange
MOEX
ISIN
RegS: US40425X4079
144A: US40425X3089
CFI
EDSXFR
Ratio, GDR:ordinary shares
1:5
Issued GDRs
6,676,593
Ordinary shares (share capital)
117,163,427
Local exchange
Not traded
Underlying ISIN
CY0104230913
Underlying CFI
ESVUFR
Depositary bank
BNY Melon
Contacts for inquiries regarding:
General Shareholder
enquiries and Investor
Relations contacts
GLOBAL DEPOSITARY RECEIPTS
SHAREHOLDERS’ CONTACTS:
DISCLAIMER
■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
HMS Group
Investor Relations
7 Chayanova str.
125047 Moscow, Russia
Tel: +7 495 730 6601
Fax: +7 495 730 6602
Email: ir@hms.ru
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
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
54 - 55
VOCABULARY, CALCULATIONS
AND FORMULAS
UNITS OF MEASUREMENT
ABBREVIATIONS & CONTRACTIONS
bcm
Billion cubic meters
bcma
Billion cubic meters per annum
bn
Billion
cub.m.
Cubic meter
cmpa
Cubic meter per annum
km
kilometer
kW
Kilowatt
M
Meter
m3
Cubic meter
mn
Million
MPa
Megapascal, a unit of pressure
measurement
Mt
Millions of tonnes
MW
Megawatt
Nm3/Hour
Normal cubic metre per hour
Rub/RUB
Russian ruble
Scm3/hour
Standard cubic meters per hour
t
Ton / tonne
tcm
Trillion cubic meters
US$
US Dollar
API
American Petroleum Institute
Bank of Russia
Central Bank of the Russian Federation, cbr.ru
BIM
Building Information Modelling
BM
Binary mixture
CAGR
Compound annual growth rate, is the mean annual growth rate of an
investment over a specified period of time longer than one year
CIS, the
Commonwealth of Independent States
Chg
Change
GDP
Gross Domestic Product
GDR
Global depositary receipt
GTNG
Giprotyumenneftegaz
ERP
Enterprise Restructuring Project
EU
European Union
EUR
Euro
KKM
Kazankompressormash
KMPO
Kazan Motor-Building Production Association (KMPO JSC)
LNG
Liquefied natural gas
LSE
London Stock Exchange
NEM
Nasosenergomash
OGEP
Oil and gas engineering and projects business segment
OPEC
Organization of the Petroleum Exporting Countries
R&D
Research and development
yoy
Year-on-year
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
FORMULAS AND CALCULATIONS
Governance HMS GROUP
Annual Report 2O21
Overview
Markets
Performance
Governance
Additional information
56 - 57