OREANDA-NEWS. On 27 February, OAO Armada released its preliminary financial results for the year 2007. “It was Armada’s first year as a separate company, and I am very pleased with the achieved results. The IPO conducted on Russian stock exchanges allowed us to finance a number of acquisitions. The new businesses were successfully integrated into the group and delivered strong results, which exceeded our expectations. This eventually had a positive effect on the company’s consolidated financial performance,” Armada CEO Alexei Kuzovkin said. “In 2008, we will pursue the strategy aimed to combine dynamic organic growth and expansion through acquisitions, using both internal and debt financing to build a warchest for further development,” Mr. Kuzovkin added.

Revenue and EBITDA margin. Armada’s consolidated revenue rose 62% to US$ 130.5 mln in 2007 from a year-ago level due to organic growth and contribution from acquisitions, which expanded Armada’s client base and product line and unlocked new cross-selling opportunities within the holding.

New acquisitions boosted the share of the IT Services business in Armada’s revenue, which, in turn, drove the EBITDA margin up to 14.8% in 2007 compared to 13.9% in 2006. Hardware Solutions accounted for 47% of total revenue, while Software Development generated 42%, and IT Services contributed the remaining 11%.

Software Development. In 2007, Software Development generated $55.3m, up 51% from 2006. In this area, Armada focuses on the development of software and custom databases, as well as the creation of corporate information systems.

In October 2007, Armada announced an acquisition of a controlling stake in eTradeCommunity (ETC), the leading e-procurement systems developer. ETC has already implemented e-procurement systems in the Belgorod, Tyumen, Kaliningrad, Saratov and Perm regions, and in the Republic of Bashkortostan. Its corporate client base includes such companies as Alcatel, British American Tobacco and Amurmetal.

In late 2007, Armada entered a large-scale project to deploy Linux-based freeware at Russian schools. Pilot distribution packages are currently being installed at schools of the Republic of Tatarstan and the Perm and Tomsk regions. It is expected, that this project would become the first step towards the creation of a domestic open-source operating system in Russia to be deployed by state agencies and commercial organizations.

IT Services. Revenue from IT Services quadrupled compared with 2006, rising from $3.7m to $14.8m. The main contribution was made by PM Expert and Soyuzinform, the companies focused on IT outsourcing, IT consulting, training and project management, which were acquired in the middle of 2007. Both companies demonstrated strong growth in 2007, with financial results being above the expectations of Armada management at the time of acquisitions.

Last year the company created IT platforms for a number of government agencies, including the Federal Financial and Budget Supervision Service and the Finance Ministry of Russia. Armada’s IT consultants were engaged in such projects as the construction of the East Siberia – Pacific Ocean pipeline, as well as the development of unified statistic information systems for the agricultural industry and civil aviation. One of the company’s largest customers was the Russian branch of Toyota Motor. In the reported period, Armada completed eleven projects aimed at the optimization of financial, storage and logistic procedures of Toyota.

Hardware Solutions. In 2007, the hardware business brought US$ 60.4 mln., up 50% from a year earlier. In the Armada Group, this segment is mainly represented by Helios IT-Solutions, which carried out a number of comprehensive projects to deliver hardware solutions to both public and private organizations. As such, the company upgraded the network and computer infrastructure of the Federal State Statistics Service (Rosstat), as well as the commercial energy meter system for the Federal Grid Company. In September 2007, Helios IT-Solutions was again acknowledged as Moscow’s Authorized Supplier of Goods, Works and Services.

IPO. Armada was the first Russian IT company to hold an IPO on the RTS and MICEX stock exchanges in July 2007. It issued 2 million common shares, or 17% of its post-IPO share capital. The offering price was set at RUB 380 (approx. USD 14.9) per share, and the issue was 9.5 times oversubscribed. In late 2007, both exchanges transferred Armada’s shares to their Quotation Lists “B” from the initial Quotation lists “I”.

Integration of new acquisitions. Armada pays special attention to the integration of newly acquired companies into the group’s structure. To streamline the process, an internal integration department was set up in 2007. Its main tasks include creation of overall interaction guidelines for the personnel policy, sales and marketing processes, and coordination of joint activities of all of the company’s business units, as well as identification and implementation of best practices.

In summer 2007, the company moved into a new office building, which allowed uniting the majority of the subsidiaries on the same premises and, as consequence, raising their interaction efficiency and reducing administrative costs.

Client base. As in 2006, government agencies and state-controlled corporations were Armada’s major clients responsible for 45% of the company’s consolidated revenue. ARMADA continued cooperation with financial institutions and manufacturing and energy companies. However, every large customer generated less than 10% of total revenue. New assets acquired during the period under review allowed the company to attract new clients, including TNK-BP, Toyota Motor, the Finance Ministry of Russia, Moscow City Telephone Network and Nestle. By the end of 2007, Armada’s total client base counted over 1100 organizations.

Strategy and Forecast for 2008. Armada’s strategy is targeted at consistent growth both through organic expansion and acquisitions in the high-margin IT market sectors, such as software development and IT services. According to management estimations, the group’s organic revenue growth is expected to reach 27-30% in 2008, with consolidated revenue (excluding potential acquisitions) forecasted between US$ 165-170mln. In the medium term, the company’s EBITDA margin is expected to rise to about 17%.

Forward-looking statements

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