OREANDA-NEWS. On 19 August 2008 (MICEX, RTS: ARMD) published its financial results for the first half of 2008. “The company has demonstrated strong growth on the Russian IT market, with revenue up 64% in the first half of 2008, which was primarily driven by the high degree of integration and interaction among ARMADA’s companies at all corporate levels. Our order book volume has already run up to 75% of the revenue goal for 2008, which makes us confident of reaching the targets set for the full year,” ARMADA General Director Alexei Kuzovkin said.

“We are poised to further pursue the strategy of business expansion through the acquisition of rapidly growing IT companies, which carry undisputable synergy with ARMADA. To finance our M&A plans, in July, we received USD 16m as the first tranche of a credit line for USD 102m. We are currently in talks with a number of companies and hope to announce new M&A deals before the end of 2008, which are set to build up the value of the integrated company for shareholders,” Alexei Kuzovkin added.

Revenue.

In H1 2008, the company’s total revenue surged 64% to USD 56.4m as compared with the same period of the previous year. The organic growth was 43% in the reported period. A strong revenue increase of 426% in the IT Services segment was triggered by the acquisitions of the Soyuzinform and PM Expert companies in 2007. Of the total revenue mix, the contribution of Software Development remained the largest, at 43%, amid a steadily growing share of the high-margin IT Services segment (18%), while Hardware Solutions contributed 39% to the total revenue.

At the beginning of the year, leading business-related titles produced their ratings of Russia's largest IT market participants, naming ARMADA the leading company in most categories. For example, the Expert magazine declared ARMADA Russia's 3rd largest software developer, while CNews Analytics named ARMADA the IT Company of the Year.

Software Development.

In the first half of the year, the software business delivered growth of 46%, with revenue reaching USD 24.4m. In the period under review, ARMADA completed a series of large projects for such clients as Raiffeisenbank, KIT Finance, the Federal Protective Service of Russia and the Federal Agency for Information Technology. Importantly, the company has signed contracts with such customers as VTB, M.video, Alfa Capital, the Bank of Moscow, the Federal State Statistics Service (Rosstat), the Federal Service for Supervision of Education and Science, the Natural Resources Ministry, the Justice Ministry, the Central Bank of Russia, the Agriculture Ministry, the Federal Air Transport Agency, the Federal Customs Service and the Government of Moscow.

ETC, Russia's leading developer of e-commerce systems, made a significant contribution to the company’s results. ETC’s solutions have been implemented at Mechel, Amurmetal and the Ministry of Communications and Mass Media in the period under review. Company specialists are continuing working on a project commissioned by Gazprom.

Under its ongoing contracts, ARMADA is engaged in projects aiming to solve important social tasks, such as the automation of Moscow’s state employment agency, the creation of a portal monitoring Moscow’s technical infrastructure and information systems, the development of a public database of Russian laws and regulations, as well as the creation of an e-manual for Russian schoolchildren.

IT Services.

The IT Services segment was the unquestionable leader in H1 2008 in terms of revenue growth rate, with its pace of expansion at 426% up to USD 10m. Armada is represented in this segment primarily by Soyuzinform and PM Expert, which were acquired in H2 2007. 

PM Expert opened a representative office in Kazakhstan as the country’s economic community showed keen interest in project management services. PM Expert also completed a project for the Moscow City Telephone Network (MGTS) to streamline project management at the company’s IT unit. This solution helped ARMADA’s client to improve its project management practices, and enhance control over quality, project deadlines and budgets. PM Expert also successfully carried out a project involving the installation of a life insurance information system at Renaissance Life. In addition, the company won several tenders and has been contracted to provide IT services to Uralmashplant and Metalloinvest.

Soyuzinform won a tender to create autonomous hydrometeorological labs for Russia's Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet). This was the Federal Service’s first order awarded to Armada. In the event of its successful completion, the company will be well positioned to get more contracts.

Hardware Solutions.

Revenue from ARMADA’s Hardware Solutions segment was USD 22m, representing an increase of 39% on H1 2007. The main contributor to Armada revenue from Hardware Solutions is its subsidiary Helios IT-Solutions. The company completed a number of projects this summer: it created the IT infrastructure for Zeppelin Russland, provided software and hardware equipment for the single state examination’s regional information centers, upgraded the IT infrastructure at Rosstat’s 78 regional offices, and won a tender to supply hardware for the Federal Customs Service of Russia

Forecast for 2008.

By mid-year, ARMADA has already secured in signed contracts 75% of the revenue expected for the full year. This puts the company in a strong position to reach its 2008 revenue target of USD 165-170m (excluding planned acquisitions).

Given the increasing contribution from ARMADA’s high priority segments of IT Services and Software Development to the company’s total revenue, the management reiterates its forecast of EBITDA margin growth to 17% in the medium term.

ARMADA has received USD 16m as the first tranche of a credit line of USD 102m, and plans to use this funding to finance its business expansion through M&A transactions. In the 2nd half of 2008, ARMADA expects to announce a number of deals in high margin IT market sectors.