CEO statement

NIKOLAY YAMBURENKO
There are great opportunities available on the market, and we are confident that we possess the power and abilities to seize them.

CEO of HMS Group, Artem Molchanov

Dear Shareholders,

Next year, we will celebrate the anniversary of HMS Group, which will be turning 25 years old. In terms of human age, the company is reaching adulthood. Since its establishment in 1993, we have come a long way, growing from a small trade company to one of the largest private machine-building companies in Russia. In the Forbes list for 2016, HMS Group is honored to be ranked 9th place. It is also important to point out that in this list we are the only producer of oil & gas equipment, in addition to being the only company listed on the London Stock Exchange.

Over the last few years, we have completed the optimization and integration of acquired assets, in particular by KKM, that in turn illustrated successful integration of KKM into HMS Group.

Furthermore, we have accumulated vast experience in the realization of large projects, involving complex technological solutions, with such large Russian and international companies as Transneft, Rosneft, Gazprom, Gazprom Neft, BP, ENI, and others. We have gained a reputation as a reliable supplie and have received references that allow us to further strengthen our presence on the extremely competitive and high-tech market of solutions based around pumps, compressors and oil & gas equipment, both within Russia and abroad.

HMS Group expects to complete its localization project for Ukrainian and German pumps at the base of HMS Livgidromash, located in the Orlov region, by the end of 2017. The main emphasis of this localization is on high-tech pumps for transportation of oil and oil products, oil processing and petro-chemistry (in accordance with API standards), as well as for thermal and nuclear power generation and water utilities.

The company has improved its access to capital, both on the public debt market and on the market of bank facilities. At the end of 2016, Fitch assigned the company a B+ credit rating. In February 2017, we successfully returned to the bond market. In 2017, the key priority of HMS’ debt policy will be the optimization of interest rates, along with the prolongation of the debt portfolio’s duration.

In 2016, the Board of Directors approved a new development strategy based on the following:

  • Export: organic growth via entry into global markets and the reengineering of HMS’ products to comply with the standards of these markets;
  • Large contracts: the further development of technological engineering;
  • Shareholder policy: the distribution of a substantial part of the profit among shareholders in the form of dividends, and the increase of IR activity.
  • The initial results of this strategy were reflected in the financial results of 2016, in the order intake portfolio for 2017, and in the growth of HMS’ market capitalization.

    In the context of all its business components, including production, finance, sales, and the agreed policy of the shareholders, HMS Group has prepared a basis for further development by signing new large contracts with Russian companies, as well as by increasing export activity. There are great opportunities available on the market, and we are confident that we possess the power and abilities to seize them.

    Not everything depends on us – a significant amount also depends on our clients and when they start to implement the realization of certain projects. Given the existing possibilities and with a little luck, we believe in the continual growth of HMS Group’s business.

    .

    Yours faithfully,
    Artem Molchanov

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