OREANDA-NEWS. On 19 May 2008 ARMADA published its financial results for the 1st quarter of 2008.

ARMADA CEO Alexei Kuzovkin commented on the results: “We have made excellent progress, and now can fully feel the effect of consolidating Soyuzinform, PM Expert and ETC. These acquisitions and strong organic growth of all businesses has led to more than 2.5 times growth in revenue and allowed to strengthen our positions in the lucrative high-margin market sectors. We are therefore absolutely confident that we will reach our financial and operating targets for 2008. Besides, this year we will continue implementing our successful M&A strategy and expect to announce new acquisitions until the year end.”

Revenue. In 1Q2008, ARMADA total revenue soared by over 2.5 times to \\$31.4mln compared to the same period of 2007. In the total 1Q2008 revenue mix, Software Development brought 52%, while 32% came from Hardware Solutions and 16% from IT Services. The growth of contributions from the IT Services and Software Development segments was driven by the recent acquisitions of Soyuzinform, PM Expert and ETC, which operate in these fields, as well as dynamic organic development. In early spring 2008, a number of top business publications issued their ratings of the largest Russian IT market participants, and ARMADA gained top rankings in most categories. The Expert magazine ranked ARMADA as Russia's 3rd largest Software Developer in terms of revenue. Furthermore, the group was rated 24th among Russia's top 80 IT companies. The CNews Analytics agency named ARMADA the winner in the category ‘IT Company of the Year’.

Software Development.

In 1Q2008, revenue from Software Development rose 179% to \\$16.2mln compared to the same period a year earlier, due to increased volume of services provided to existing clients and a growing number of new customers. The acquisition of ETC, a leading Russian e-procurement systems developer, also had a positive impact on revenue. Having become part of ARMADA, ETC was capable of significantly enlarging its client base and obtaining a number of sizable contracts. In March 2008, ETC’s e-commerce solution for the government sector was recognized the best of its kind at the Public Order 2008 exhibition in St. Petersburg.

Last year, ARMADA also won a tender for the development of Linux-based freeware for Russian schools, which became one of the year’s major achievements. The open source software program is aimed at reducing the dependence of Russian users, primarily from the public sector, on foreign solutions, as well as cutting license costs. In 1Q2008, ARMADA developed and tested pilot freeware distribution kits, and set out to deploy these solutions at 1,200 schools in three regions of Russia. Going forward, the government is planning to install freeware solutions at more than 60,000 Russian general educational institutions.

In the reported period, RBC SOFT, a subsidiary of the ARMADA Group, signed a number of contracts with state organizations, including the Ministry of Agriculture, the Federal Air Transport Agency, the Federal Customs Service and the Moscow government. The company has also started to develop an automated car owner liability insurance information system for the Communications Ministry of Russia.

IT Services. In the 1st quarter of 2008, this sector demonstrated the highest growth rates. Revenue from IT Services (primarily consisting of IT outsourcing, IT consulting and training) surged more than tenfold reaching \\$5.1mln, mainly driven by the acquisition in 2007of Soyuzinform and PM Expert, being large players on the project management and IT outsourcing markets.

The company has signed outsourcing contracts to support the IT infrastructure of the Ministry of Finance, the Federal Treasury and the Federal Service for Insurance Supervision. All these organizations are among ARMADA’s long-standing clients. For instance, the group’s IT consultants are currently participating in creation of an integrated IT network at 11 branches of the Federal Service for Insurance Supervision, while Soyuzinform specialists are responsible for the full maintenance of the technical facilities at the Ministry of Finance.

Hardware Solutions. Hardware sales reached \\$10.1mln in 1Q2008, a 63% increase from the same period of 2007. The group’s core hardware business unit is Helios IT-Solutions. The main achievement of the 1st quarter was the completion of a large project aimed to upgrade the IT infrastructure of 78 regional offices of the Federal State Statistics Service.

Outlook for 2008. According to conservative estimates of ARMADA’s management, total revenue for the full year 2008 will reach \\$165mln-170mln (excluding potential acquisitions). This forecast is based on the strong 1st quarter results, positive macroeconomic performance and ongoing IT sector growth in Russia.

In the medium term, the company’s EBITDA margin is expected to rise to about 17% due to increasing contribution of the IT Services and Software Development segments to the total revenue mix. ARMADA intends to continue its M&A strategy, and anticipates to be able to announce new acquisitions in high-margin segments in 2008.