OREANDA-NEWS. November 19, 2007. Business highlights for the 1-3Q 2007:
Total revenue up 66% to $75m (including organic growth of 54%). The increase was driven by the development of the Software Production and IT Services segments.
In July 2007, ARMADA became the first Russian IT company, which successfully completed IPO on MICEX and RTS raising $29.8 m
In June 2007, ARMADA acquired a controlling interest in PM Expert, the top project management services provider in Russia
In September 2007, the group bought Soyuzinform, one of the leading players on the Russian IT outsourcing market
ARMADA confirms its forecast for 2007: total revenue is expected to reach $100-105m (excluding acquisitions made this year).

Today OAO ARMADA (MICEX, RTS: ARMD) announced its financial results for the first nine months of 2007. Commenting on them, Alexei Kuzovkin, CEO of ARMADA said, “I am very pleased with the achieved results. In the reported period, ARMADA demonstrated impressive growth rates, outstripping the general IT market forecast for the full year 20072 . A number of important events happened during this period: we spun-off from RBC and became a separate public company, held a successful IPO and made several acquisitions in the high margin and fast growing segments. We intend to further expand our market share both organically and through attractive acquisitions”.

Revenue. ARMADA’s total revenue increased 66% from $45.1m in the first nine months of 2006 to $75.0m in 2007. This growth was driven by the expansion of the company’s customer base and order book, consolidation of new assets, as well as cross-selling within the group.

The acquisition of PM Expert and Soyuzinform fostered the development of IT Services and resulted in 4-fold revenue growth in this segment. As of the end of the reported period, 45% of company’s revenue was generated by Software Development, 43% came from Hardware Solutions and 12% - from IT Services. ARMADA is planning to further expand the IT Services segment, increasing its total share of revenue.

In the summer 2007, ARMADA relocated to a new office building, which made it possible to move together with its earlier acquired company Helios IT-Solutions, substantially improving the efficiency of interaction between business units and reducing administrative costs.

Software Development. ARMADA’s revenue in the Software Development segment amounted to $33.8m for the first nine months of 2007, representing a 67% growth compared to the previous year. The expansion of the client base along, with an increase in the number of repeat clients and new cross-selling opportunities among various companies within the ARMADA group are to be considered the company's main growth factors.

In the period under review, ARMADA developed custom-made software and specialized databases for the Agriculture Ministry, Federal State Statistics Service, Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet), Ministry of Economic Development and Trade and Ministry of Foreign Affairs of Russia. Corporate information systems were built for Comstar – United Telesystems, L’Etoille and the Rossiya airline, X5 Retail Group, Sberbank, Gazprom neft, Gostiniy Dvor, Bank of Moscow and the Sheremetyevo-3 air terminal.

IT Services. Revenue from the provision of IT Services has more than quadrupled, reaching $8.9m. The rapid growth in this segment was achieved primarily due to the acquisition of new assets – PM Expert and Soyuzinform.

The consolidation of PM Expert, the major Russian project management consultant, and Soyuzinform, a pioneer of the Russian IT outsourcing market, allowed ARMADA to enter the rapidly growing segments of the IT market as well as broaden its product range. Among the customers of PM Expert and Soyuzinform are a number of large Russian and foreign corporations such as Sberbank, VimpelCom, Gazprombank, Ernst & Young, RUSAL, Rosgosstrakh, RAO UES and state agencies including Russia’s Finance Ministry, Emergencies Ministry, Fuel and Energy Ministry and Tax Ministry, Presidential Administrative Department and the Moscow government.

For example, among the new customers acquired by ARMADA was Toyota Motor Corporation. In the reported period, the company carried out eleven projects for the Russian branch of Toyota Motor, aimed at optimizing the client’s financial, storage and logistical processes.

At the request of the Moscow government ARMADA provided a whole range of IT outsourcing services for the development of the children’s portal DETI.MOS.RU, which became one of the largest government-sponsored online resources on the Russian Internet.

Among the customers of the IT Services branch were also such companies and organizations as TNK-BP, Aviva insurance company, the Federal Forestry Agency, Finance Ministry, Federal Treasury, Federal State Statistics Service, Ministry of Foreign Affairs and the Federal Service for Financial Monitoring of Russia.

ARMADA regards IT Services as its highest priority, and is set to further develop this segment both organically and through the ongoing integration of recently made acquisitions.

Hardware Solutions. This segment is mainly represented by Helios IT-Solutions company, which has been part of ARMADA since 2006. Hardware Solutions revenue for the first nine months of 2007 reached $32.3m, which is a 43% growth compared to 2006.

The sales expansion was driven by the increased quantity and complexity of orders. For example, the company completed a number of significant projects for the provision of specialized IT hardware for the Federal Grid Company of the Unified Energy System (FGC UES) and the Interior Ministry of Russia. ARMADA also modernized the network computing infrastructure for the Federal State Statistics Service.

Outlook for 2007. Total revenue of the company (excluding acquisitions made this year) is expected to reach $100-105m. “This is a rather conservative forecast for the full year, which doesn’t take into account our recent acquisitions – PM Expert, Soyuzinform and ETC. In addition, considering that the major part of ARMADA’s revenue usually comes in the second half of the year, there is a good reason to believe that the declared forecast can be outperformed,” Alexei Kuzovkin said.

Significant events subsequent to the reported period. In October 2007, ARMADA announced the acquisition of a 51% stake in eTradeCommunity (ETC). The deal amounted to $1.8m, and the payment was made in cash based on the price to earnings 2007 ratio (P/E) of 5. ETC focuses on the development, implementation and maintenance of e-procurement solutions for government organizations and the corporate sector. The systems it has implemented so far process roughly 30% of all electronic state procurement in Russia.

[2] According to IDC estimation the 2007F IT market growth rate will amount to 20%.