Investment theses

Business platform and core expertise are established and provide strong base for future growth

Mature Business Platform

HMS Group’s business is based on a mature and established business platform with a focus on products where the Company has unmatched R&D expertise and production capabilities.

The company has stable recurring business with confirmed order backlog for the next year.

EU presence: HMS Group has access and is conducting business with EU engineering companies (Siemens, Alstom, etc.) through its EU-based subsidiary Apollo Goessnitz.

Business is to be further developed organically, i.e. currently there are no plans for M&A.

Further development will be carried out with low CAPEX at ca. 1.5x the D&A level.

Entering New Markets

Further development of business with Gazprom & other major names in the oil & gas industry by executing large customized projects in all HMS Group’s key segments.

Customers in new markets are already a part of the client base and offer strong future opportunities.

Return to the market of oil transportation on the back of localization of trunk line pumps in Russia.

Oil & gas refining and petrochemicals represent another growth area with expanded strong references, incl. major international engineering companies.

Optimization of the Business Portfolio

HMS entered the oil & gas infrastructure construction segment in 2007 with a view to offering integrated solutions.

Following the financial crises, this segment saw a sharp decrease in profitability.

HMS Group decided to exit the segment and continues to develop Engineering and Procurement (“EP”) business, based on HMS products and engineering competences.

Factors of Business Sustainability

1. 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

2. 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

3. Management focuses on maintaining a moderate debt position:

  • The current Net debt-to-EBITDA ratio of 1.97 is conservative and in line with BBB/BB rating categories
  • 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

4. 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

5. Low capex needs and flexible dividend policy

  • HMS Group is a fully invested business with modest maintenance capital expenditure needs at c. 1.5x the D&A level
  • All major acquisitions have already been completed
  • There are no strict dividend commitments, which allows us to minimize payments in a harsh market environment, as was the case in 2014

6. Market share and installed base

  • HMS is a major player in pumps, oil and gas equipment and compressors, with significant market shares and established relations with clients (including follow-on services)
  • The company has the largest installed equipment base in Russia