ARMADA OAO
ARMADA OAO: revenue surges 27% in 2011, net profit rises 31%
ARMADA OAO / Key word(s): Final Results/Mergers & Acquisitions /
ARMADA'S REVENUE SURGES 27% IN 2011, NET PROFIT RISES 31% Key highlights: – ARMADA's revenue increases 27% in 2011, EBITDA rises 38% – EBITDA margin rises to 12.2% (from 11.2%) – Net profit margin comes in at 10.6% – In 2011 ARMADA acquired PMT, a software developer of hospital information systems – ARMADA's cash position stood at RUB 1,215m as for December 31, 2011 – ARMADA forecasts organic revenue growth in the range of 25-30% in 2012, as well as one or two M&A deals involving companies with revenue in a range of USD 5m-10m. 'ARMADA successfully fulfilled its development plan for 2011, ramping up revenue and profitability in line with the outlook released by management. In 2012, we will strive to generate further organic growth of revenue of the group of companies by 25-30% and to raise profitability further. In the M&A segment the focus will be on acquiring controlling stakes in small cost-effective software and IT service companies with unique products or services with the potential to expand ARMADA's business. One or two acquisitions of companies with revenue in the range of USD 5m-10m are on the agenda for 2012,' Chairman of ARMADA's Board of Directors Alexey Kuzovkin said. Headline financial indicators, RUB m
* the Group's consolidated audited statement under IFRS.
ARMADA'S EBITDA MARGIN CLIMBED 12.2% FROM 11.2% The key profitability growth driver is a change in the revenue mix where the high-margin Software development segment climbed up to 45% of the total group's revenue (37% in 2010). Organic business development expanded the software's share to 43%. Another 2% came from PMT's revenue consolidated as part of the Group's results since the date of its acquisition by ARMADA in May 2011.
The second profitability growth driver is a decrease in the share of hardware revenues in the mix to 33% from 35% in 2010 (a part of system integration contracts).
TOTAL HEADCOUNT ORGANICALLY WENT UP 10%
ARMADA HAS A WELL-DIVERSIFIED CLIENT BASE ARMADA's client breakdown in 2011, RUB m
The public segment of the Russian IT market is the largest, with a share of nearly 30%. According to the Russian Communications and Mass Media Ministry and CNews analytics[1], annual expenditure by government bodies on IT could reach some RUB 170bn in 2011. The share of government bodies' orders in ARMADA's revenue equaled 55% in 2011, including 13% coming from regional government information system development projects. Another 17% of ARMADA's revenue was contributed by contracts with state-owned companies in various sectors of the economy (finance, energy, oil and gas, healthcare, etc.). In total, revenue from government bodies and state-owned companies (so-called 'state customers') in ARMADA's revenue mix is 72% in 2011, almost unchanged from 70% in 2010, which is in line with the company's development strategy aimed at gaining leadership in this segment. Software development for government bodies has long been ARMADA's core competency. ARMADA worked in tandem with more than 60 federal agencies and more than 250 state-owned companies. In the IT Services segment, ARMADA phased in a number of infrastructure projects for the Central Bank of Russia, Home Credit and Finance Bank, BSGV (Rosbank), Priorbank (Raiffeisen group), TNK-BP, MRSK Siberia, MRSK Ural, MRSK Center and Azbuka Vkusa supermarket chain, to name but a few. ARMADA has consistently scaled up the range of available project management services. The company's customers include Volga Dnepr, TNK-BP, Severstal, Yulmart, MaRussia Motors, and Evraz Group S.A. ARMADA has been successful in implementing educational programs and to date over 40,000 specialists have completed a project management course. The acquisition of PMT (Post Modern Technology, a software developer of hospital information system MEDIALOG) in 2011 allowed ARMADA to enlarge its footprint in the segment of medical information systems. PMT holds leadership in the healthcare IT market in Russia and aims to command a major market share of the state healthcare upgrade project which is expected to get under way in 2012.
ANALYSTS FORECAST 11-14% GROWTH OF THE IT MARKET IN RUSSIA IN 2012 The value of the Russian IT market rose in 2011 according to IDC[4], and was worth about USD 29bn, growing 20% y-o-y. Sales volumes of tablet computers, smartphones and other such devices are included in IDC's hardware market segment, which accounts for 62% of the total IT market. IT Services segment has been estimated at USD 5.8bn (20% of the IT market) and Software at USD 3.4bn (12% of the IT market). A similar estimate of ARMADA's core market segments (Software development and IT Services) was made by French research and consulting company PAC[5]. IT services in 2011 would account for RUB 192bn (about USD 6bn) and software segment amounted to RUB 96bn (about USD 3bn), according to PAC. IDC forecasts the value Russian IT market to reach USD 33bn in 2012, which implies 14% growth y-o-y. PAC analysts issued guidance of an 11% growth rate. PAC analytics also pointed out that the Russian joint Software development and IT services market has robust long-term potential, by comparing per capita expenses in this industry in Western Europe, where they stand at EUR 431, and Russia, where they total EUR 38. This more than tenfold difference reflects the tremendous development potential for ARMADA's priority markets. As of year-end 2011, ARMADA held a 2.2% share of the software development market and about a 1% share of the IT services market in Russia.
OUTLOOK FOR 2012: 25-30% ORGANIC REVENUE GROWTH PLUS NEW M&A DEALS ARMADA has substantial cash resources and a pipeline of potential targets for new M&A deals. Its cash position equals RUB 1,215m as of December 31, 2011. RUB 635m of this cash are proceeds less costs from secondary public offering (SPO) held by ARMADA in April 2011. The efforts of ARMADA's management team in 2012 will focus on purchasing controlling stakes in small software and service companies with revenues in the range of USD 5m-10m, profitability over current one of ARMADA, leadership positions in their market segments congenial to ARMADA's business. Priority market segments include transport, public utilities sector, corporate cloud services and other sectors. One or two such M&A deals are slated for execution in 2012.
ABOUT ARMADA
Website: www.armadaitgroup.com
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