OREANDA-NEWS. Armada Group (MICEX-RTS: ARMD) hereby releases its audited financial IFRS results for FY12.

"ArmadaЃfs revenue went up 20%, EBITDA margin came in at 10.8%, and operating cash flow advanced 35%. Armada rolled out a new area of business by entering into long-term technical support contracts with regard to previously developed IT solutions. Armada is expected to retain momentum in FY13 by showing above-market growth rates, while maintaining high profitability," Chairman of ArmadaЃfs Board of Directors Alexey Kuzovkin said.

"That said, the Board of Directors is not satisfied with the situation when the companyЃfs market capitalization does not reflect its fair market value. An eventual partial buyback will be placed on the agenda of BoD meeting in the near future, " he pointed out.

Table. Headline financial indicators, RUB m

Ѓ@

2012

2011

Change, %

Revenue*, including:

5,579

4,656

20%

Software Development and Implementation

2,216

2,082

6%

IT Services

3,363

2,574

31%

EBITDA

604

566

7%

EBITDA margin, %

10.8%

12.2%

 Ѓ@

Net profit *

410

492

-17%

Net profit margin, %

7.3%

10.6%

 Ѓ@

* the GroupЃfs consolidated audited statement under IFRS.

REVENUE
ArmadaЃfs consolidated IFRS revenue climbed 20% to RUB 5.58bn in FY12. Revenue generated by the software development and implementation segment totaled RUB 2.22bn or 40% of total revenue, while IT services accounted for 60% of total revenue at RUB 3.36bn.

The upsurge in revenue in the IT services segment is attributable to new long-term technical support contracts with regard to previously developed software solutions and IT system maintenance. These services covered such products as medical information systems of the Federal Medical-Biological Agency (FMBA), medical systems of the Blood Supply Service, the state services portal and systems for Moscow city multipurpose centers, and also mos.ru portal, information systems of the Ministry of Justice and Finance Ministry, the Single Interdepartmental Information and Statistics System of the Federal State Statistics Service, and other of ArmadaЃfs previously-developed solutions.

In 2012, infrastructure projects (RUB 541m) were broken down into a separate revenue item. The reason is that cloud solutions, which became increasingly popular among customers, require the creation of corporate cloud computing centers. These services were reported in the system integration segment in ArmadaЃfs earlier reports.

Table. Revenue breakdown by customerЃfs segments in 2012, RUB m

Ѓ@

Segment revenue

Share of total
revenue, %

Share of total
revenue by public & state owned coЃfs, %

Government authorities

1,867

34%

34%

Healthcare

777

14%

12%

Industries

563

10%

2%

Energy

523

9%

9%

Finance

490

9%

4%

Other

1,359

24%

1%

TOTAL

5,579

100%

62%

Government authorities accounted for 34% of ArmadaЃfs FY12 revenue. Private companies with public participation, such as Sberbank, Gazprom, TNK-BP, etc., accounted for another 28%, and the remaining 38% went to private companies. Overall, public bodies and state-owned companies accounted for 62% of ArmadaЃfs total FY12 revenue.

Table. Top-5 customerЃfs revenue share in total revenue in 2012

Ѓ@

Share of total revenue, %

Regional government

6%

Federal government authority

3%

Bank

3%

Energy (electricity)

2%

Energy (oil & gas)

2%

TOTAL

16%

ArmadaЃfs customer base is well-diversified with the largest customer accounting for just 6% of its consolidated revenue. The top 5 customers generate 16% of the companyЃfs revenue. In 2012, Armada worked with over 1,500 customers.

PROFIT
EBITDA rose 7% to RUB 604m from RUB 566m, while EBITDA margin amounted to 10.8%.

Gross profit margin reached 27% in the software development and implementation segment and 12.4% in the IT services segment. The profit margin in the IT services segment was impacted by a substantial share of support contracts, which means long-term guaranteed orders for the company. The profit margin of these projects was lower than usual because they are a new business opened in 2012, but in 2013 the profit margin of these projects is expected to reach a level typical of services segments and the segment will become ArmadaЃfs core business.

Net profit totaled RUB 410m and net profit margin amounted to 7.3%. The effective tax rate stood at 16% in 2012.

A factor that impacted net profit was an increase in inventories and materials (from RUB 175m in 2011 to RUB 488m in 2012), as their sales will have a positive effect on FY13 profit.

AUDITOR
ArmadaЃfs auditor under IFRS is Delovoy Profil.

Delovoy Profil has been on the market for more than 16 years and has been providing auditing services to companies in the oil and gas, metals, retail, IT and telecommunications, finances and other sectors. Its customers include Sberbank, Vnesheconombank, Rosneft, Lukoil, Norilsk Nickel, System Operator of the Unified Energy System, MTS, Rigla Pharmacy Chain, Armada, etc.

Expert RA rated the company as RussiaЃfs 9-th largest auditing and consulting group as of the end of 2011. According to the rating agency of Kommersant Publishing House, Delovoy Profil ranks 7-th among RussiaЃfs biggest auditing and consulting groups. Delovoy Profil is a full-fledged member and the exclusive representative in Moscow and the Moscow Region of Midsnell Group International (MGI), which is a worldwide association of independent auditing, accounting, and consulting firms.

Cooperation with Delovoy Profil has enabled Armada to release to investors audited reports at the earliest possible date, at the beginning of April, whereas reports audited by other firms were released only by autumn.

EMPLOYEES
Headcount rose 8% to 969 employees as of December 31, 2012.

The companyЃfs board of directors approved in January 2011 a two-year stock option program which envisages allocation of 130,000 shares among 13 senior managers of Armada free of charge pending achievement of key performance targets. The program was executed in 2012.

PROJECTS
Every vehicle is registered in the information system developed by Armada. One of three doctors in Russian clinics equipped with information systems uses the Medialog information system designed by Armada. ArmadaЃfs software is used to enroll children in nursery schools and schools and obtain other state services in Moscow and a number of other regions.

E-government
Armada designed and is supporting the new version of the Moscow state services portal www.pgu.mos.ru, which provides Moscow citizens and organizations with access to over 130 various services as of 2013. In 2012, ArmadaЃfs specialists made accessible on the Moscow state services portal such socially important services as enrollment to nursery schools and schools, making an appointment for a motor vehicle inspection and obtaining a driverЃfs license, as well as payment of fines and for public utility services. Additionally, Armada is implementing a project to create and deploy software for an automated municipal service system. The system is used to accept and register requests for services from Moscow citizens and organizations and provides a computerized workplace to over 8,000 employees of 600 organizations including 54 multi-functional centers in Moscow.

In 2012, Armada completed a major phase of the project to develop and deploy the Unified Interagency Information and Statistical System (EMISS) which integrates the resources of over 60 Russian federal government agencies, including the Interior Ministry, the Federal Migration Service, the Emergency Response Ministry, the Defense Ministry, and the Justice Ministry.

Healthcare
PMT, a subsidiary of Armada, ranks first among companies not affiliated with the government which deploy healthcare information systems. Its healthcare information system Medialog is being rolled out in seven Russian regions. The federal special-purpose program "Healthcare modernization" will continue in 2013 because tenders took place only in a small number of regions in 2012.

As part of the government program to promote voluntary blood donations, Armada is implementing a major project to develop a single database of blood services in 63 Russian regions.

Culture
Armada created for the Culture Ministry the Kultura.rf portal which promotes RussiaЃfs cultural heritage and traditions. The portal is a unique project in Russia and the largest resource of this kind in Europe. It combines about 2,000 state and municipal museums, which have over 70m exhibits. The portalЃfs database is continuously being updated and expanded.

Financial organizations
In 2012, Armada developed an automated system for open foreign exchange position management for Sberbank. The system links 17 territorial banks with thousands of regional branches. Additionally, Armada won a tender to develop SberbankЃfs portal in 2013-2014, which it had designed earlier. The company continued cooperation in online projects with Raiffeisebank and Alfa Group. The projects to deploy software for IT services management at Vnesheconombank and Priorbank (part of Raiffeisen Group) were winners of the international competition ITSM project of the year.

Industry
In 2012, Armada continued cooperation with subsidiaries of Gazprom. Specifically, it developed a new corporate website for Gazprom Burenie, which includes a tender portal for companies. Helios IT specialists developed computing infrastructure for the data processing center of Gazprom Dobycha Nadym.

PM Expert remains committed to cooperation in project management and consulting with FGC UES, Kubanenergo, Severstal, and MaRussiaMotors. In the project management division, PM Expert successfully completed the first phase of servicing and engineering work as part of a major gas project program of Rospan International, a subsidiary of TNK-BP. The goal of the program is to develop the Vostochno-Urengoyskoye and Novo-Urengoyskoye licensed areas. During the implementation of the project Rospan will gain unique experience inmanagement and administration of large-scale oil & gas projects with CAPEX exceeding USD 6bn.

OUTLOOK FOR 2013
RussiaЃfs IT market expanded 15% in 2011, according to the Communications and Mass Media Ministry. The marketЃfs growth slowed to 7% in 2012 (MinistryЃfs estimation) and IDC market estimated 2012 growth at 4%. ArmadaЃfs revenue climbed 27% in 2011 and 20% in 2012.

The company is expected to outpace market growth in 2013. ArmadaЃfs revenue is expected to outperform the market while profitability is expected to remain high.