OREANDA-NEWS. August 2, 2010. ARMADA (MICEX, RTS: ARMD) announced its preliminary financial results for the first half of 2010.

"The Russian IT market has started to rehabilitate, and governmental customers are playing a vital role in the process. The government is currently shifting from infrastructure creation to investments in the creation of services and software. ARMADA demonstrated a 24% increase in the first six months and is well positioned to outpace the market in terms of its revenue growth rate for the full year — primarily thanks to a considerable share of governmental customers in its client base structure. Thanks to our cost optimization program, we also managed to reach EBITDA 9% margin that is about last year’s level. The figure is expected to be higher for full 2010, since a major part of revenue is usually received in the second half of the year. Furthermore, we may complete several M&A transactions that were launched back in 2008; our final decision will depend on a number of market factors, which, I am confident, will be quite positive in the near future," Alexei Kuzovkin, Chairman of the Board of Directors of OAO ARMADA, stated.

ARMADA’s H1 revenue structure, RUB "000,000

H1 2010 1

H1 2009 2

Growth

Software Development

177

171

4%

IT Services

286

212

35%

Hardware Solutions

513

407

26%

TOTAL

976

790

24%

1 Based on management accounting under the IFRS.

2 Based on management accounting under the IFRS, corrected data.

Revenue

ARMADA’s revenue amounted to RUB 976m in the first half of the year, 24% greater than in the corresponding period of the previous year. All three of the company’s business segments demonstrated an increase in revenue, with the IT sector accounting for the highest growth. The sector incorporates IT outsourcing and other services that ensure business continuity for ARMADA’s clients and therefore do not have seasonal effect on the company’s revenue. Compared to this sector, the creation of new software is affected by the seasonal factor — the main part of the company’s revenue in this segment is generated in the second half of the year. Meanwhile, an increase in the hardware solutions sector may be traced to deferred demand on the market.

The share of governmental customers in the group’s revenue remained unchanged at about 75%. In the total revenue mix, the number of the company’s contracts in the financial sector jumped up to 10% compared to 7% in 2009. The company’s client base is highly diversified: in H1 2010, no single client contributed more than 10% of business.

The upward trend in ARMADA’s revenue in the IT services and software segments serves as confirmation of IDC and PMR analysts" belief that the Russian IT market has entered the active rehabilitation stage. By the same token, Gartner also cited a considerable growth in the hardware solutions segment, thanks to the stabilization of Russia’s economy.

Expenditures

By implementing a series of measures aimed at optimizing its cost structure in 2009, the company managed to cut its expenses by 45% in 2009 compared to 2008 and is now poised to sustain them at the same level. These measures also allowed ARMADA to retain its EBITDA margin at 9% in the first six months of 2010 which is in line with last year’s level. Similarly to 2009, the company did not require any borrowings in this year.

Business

On the software development side, the company has entered into a number of new contracts for the regional implementation of large pilot systems created last year — specifically, one for the Federal Medical Biological Agency and the Traffic Safety Department of the Interior Ministry of Russia. Furthermore,