OREANDA-NEWS  On 12 November was announced, that ARMADA (MICEX, RTS: ARMD) released its financial results for the first nine months of 2008. “In the third quarter, ARMADA revenue continued dynamic growth, which reached 23% in the first nine months of 2008. Despite the complicated situation on the global markets, I am confident that ARMADA will deliver on its promise to reach the earlier announced annual revenue target of USD 165-170m. The third quarter results in combination with the seasonality factor, when the major part of our revenue traditionally comes in the fourth quarter, give me strong ground to reconfirm the full year forecast,” ARMADA CEO Alexei Kuzovkin stated.

Business highlights:

ARMADA total revenue expands 23% to USD 91.9m

Of the revenue mix, the share of government contracts increases from 45% in 2007 to 75% in the first nine months of 2008

ARMADA reconfirms its forecast for 2008: total revenue is expected to reach USD 165m-USD 170m

ARMADA is planning to proceed with its M&A strategy in the near-term perspective

Mr. Kuzovkin also commented on the growth plans of the company: “In the near future, we expect to intensify the cooperation with government organizations, which are currently the most reliable customers. According to the nine months results, the state sector’s contribution to the total revenue mix has already risen to 75%. In order to strengthen this segment of our business, we have invited to the Executive Board of ARMADA Dmitry Milovantsev, who earlier served as Russian Deputy IT and Communications Minister. Next year, we are planning to continue the execution of our M&A strategy, taking a more conservative approach though. Our potential acquisition targets will be companies with sustainable revenue streams and a strong portfolio of contracts with state institutions. Moreover, we expect the current revaluation, which is taking place on the market, to give us an opportunity to buy new assets relatively cheaply”.

Revenue. ARMADA total revenue for the first nine months of 2008 amounted to USD 91.9m, an increase of 23% compared to the same period in 2007. Of the total revenue mix, Software Development generated 43%, Hardware Solutions accounted for 39%, and IT Services brought the remaining 18%.

Software Development. In the first nine months of 2008, revenue from Software Development increased 16% from USD 33.8m in 2007 to USD 39.1m.

In the third quarter, ARMADA won several tenders to develop information and statistic systems for Russia's Ministries of Justice and Natural Resources, as well as the Federal Service for Hydrometeorology and Environmental Monitoring. In addition, ARMADA launched a number of Internet portals, including those created for the Federal State Statistics Agency and Russian Investment Club.

The company also continued to cooperate with local administrations of Russian regions. ETC, which is part of the ARMADA Group, won a tender to provide its e-procurement software solution for the city administration of Izhevsk (Udmurtia). With RBC SOFT winning a tender to develop information systems for the Moscow office of the State Employment Service, and the Healthcare Department of Moscow, ARMADA took part in the Electronic-Moscow program, whose next stage will be implemented in 2008-2010.

In September 2008, ARMADA announced the completion of a pilot project to supply Linux-based freeware to schools in the Perm and Tomsk regions and the Tatarstan Republic. With such unique experience, ARMADA will have a serious competitive advantage over its rivals when applying for the project’s next stage to install Linux-based software in all Russian schools. Extending ARMADA’s cooperation with Russia's Ministry of Education, the company signed an agreement to develop an e-textbook on law for Russian schoolchildren.

IT Services. In the first nine months of 2008, this sector brought the company USD 16.6m, an increase of 87% from the same period a year earlier. PM Expert and Soyuzinform, which had been acquired by ARMADA in 2007, made the largest contribution to the revenue from IT Services.

In the third quarter, ARMADA completed a project on the creation of an integrated information space for Renaissance Life. The new automated system linked together over 50 regional branches of the insurance company across Russia with the total staff of over 2,500 people. In addition, ARMADA built a corporate project management system for the IT department of the Moscow City Telephone Network. The solution automated the operations of a business unit, which carries out over 50 IT projects annually.

Hardware Solutions. In the reported period, hardware sales increased 12% from USD 32.3m in 2007 to USD 36.2m in 2008. In the third quarter, ARMADA announced the completion of a project to supply hardware sets to the unified state exam (USE) information centers to ensure efficient information reception, storage, processing and transfer. The project is part of the USE experiment in Russia held under the federal education program for 2006-2010. The company also took part in projects to create IT infrastructure for the Moscow Pedagogical University and Moscow State University of Railway Engineering, and won a tender to supply specialized software and hardware solutions for the Federal Education Agency in early October.

Ratings and awards. In autumn 2008, ARMADA was granted the IBM Premier Partner status, the top level of accreditation for IBM partners, in recognition of the company’s high-quality expertise in the software development and hardware spheres. This status will become the company’s additional competitive advantage during state tenders.

In July 2008, ARMADA was rated Russia's second largest software developer in 2007 by @ASTERA, a specialized Internet portal. In September 2008, the success of Helios IT-Solution, a subsidiary of the ARMADA Group, was distinguished with an award by Intel, which reconfirmed the efficiency of its business cooperation with the international corporation.

PM Expert passed a regular audit by Project Management Institute (PMI) and reconfirming its status as a Global Registered Education Provider (Global R.E.P.), which has so far been granted to 1,000 organizations in 70 countries globally (including only 8 companies in Russia).

Development strategy and forecast for 2008. Based on the 9M2008 results, ARMADA reconfirms its full-year forecast: the company’s total revenue is expected to reach USD 165m-170m in 2008. In view of the current challenging macroeconomic situation, the company is putting a stronger focus on the cooperation with government organizations and state-controlled corporations. Considering that about 30% of revenue is generated by long-term and recurring contracts, the company has good visibility for the near future. ARMADA expects its organic revenue growth to continue at an annual rate of 25-30% in the short term. In addition, ARMADA is planning to carry on its M&A strategy next year, with niche players, which are primarily focused on providing IT services to government organizations, becoming the most attractive acquisition targets.

Forward-looking statements

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