Annual Report 2020

CEO statement

We see the growing opportunities on the market and believe that we have strength and skills to seize them

The 2020 was the extraordinary year, year of the pandemic. The worst pandemic in a century has cost over hundred thousand and millions lives. It continues to adjust behaviors and trends, which most probably will transform the post-COVID-19 world.

The COVID-19 pandemic has frozen economic activity for a while as countries imposed tight restrictions on movement to halt the spread of the virus. Trade restrictions and supply chain disruptions have affected execution of a number of contracts, postponed a launch of anticipated tenders and projects, etc. Quarantine restrictions were introduced, factories were put on lockdown for weeks, and the pandemic and efforts to halt it resulted in an unprecedented collapse in oil demand and a crash in oil prices.

In our view, the company have passed successfully this crisis, though 2020 was tough for HMS. We have faced impact of several factors which affected financial results of HMS Group. It included weak results of the oil & gas business segment due to a temporary decrease in demand on production in the oil extraction.

We believe that tried in 2019 and continued in 2020 the programs of business optimization and cost-cutting clearly demonstrated their effectiveness, because our EBITDA grew 3% YoY, in comparison with 2019.

Today, our backlog grew by 20% YoY, compared with 2019, due to both compressors and oil & gas equipment. A wave of deferred demand came back to the previous level after the most quarantine restrictions in summer 2020 were removed, though we haven’t managed to compensate the first six months losses by the end of the year.

The successfully completed investment project to localize heavy pumps, including for petrochemicals and nuclear power, in 2020 continued to deliver growth of orders for the products produced. Also, we have developed and launched production of a new range of pump sizes. Currently, we work on a large more than Rub 2 billion follow-up contract to deliver pumps to a foreign nuclear power station to be signed in the nearest future.

We ended the 2020 year with an acceptable level of debt. Net debt-to-EBITDA LTM ratio was down to 2.4x, which is lower than bank and internally-set covenants.

In tough environment, HMS Group successfully placed two bond issues, refinanced and prolonged current credit lines that minimized 2021-year repayment and maintained a solid cash cushion.

We see the growing opportunities on the market and believe that we have strength and skills to seize them.

Yours faithfully,
Artem Molchanov