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EDB buys 60.1% stake in Ukraine's Miratech; reports strong Q2 results

17 July 2007  |  1200 views  |  0 Source: EDB

EDB Business Partner has entered into an agreement to purchase 60.1% of the Ukrainian IT company Miratech.

Miratech is one of the leading companies in the Ukraine for IT services and the majority of its customer base is in the American and European markets. Following the acquisition of Miratech, EDB will have around 570 employees in the Ukraine.

"Acquiring Miratech will help to ensure that EDB will enjoy a powerful and aggressive position in the IT market of the future. This purchase will strengthen both EDB's delivery capacity and its competitiveness, and I have every confidence in the work we are carrying out in the Ukraine", comments Endre Rangnes, CEO of EDB.

The purchase of Miratech is a further step in EDB's work on developing an offer for its customers that combines deliveries from its Norwegian activities with deliveries from cost effective countries. An increasing number of customers now expect and specify this form of delivery model and over a period of time EDB has worked intensively on establishing a model for Global Sourcing to meet these requirements. EDB already owns the IT company Infopulse in the Ukraine, which it acquired earlier this year.

"Together with Infopulse, Miratech will form the core of our Global Sourcing offer. We have high expectations for the effects of this new delivery model, both for EDB and for our customers", adds Endre Rangnes.

More about the business acquired
Miratech was incorporated in 1989 and is the oldest IT company in the Ukraine. The company is one of the leading players in the Ukraine for IT services and outsourcing, and has 220 employees with a high average level of education and in-depth IT expertise. Miratech's head office is in the Ukrainian capital Kiev, and the company also operates in Kharkov and Odessa in the Ukraine.

Miratech reports good profitability, and turnover grew in 2006 by over 35% to around USD 5 million. The company's EBITA margin is in line with the margin reported by EDB. The activities are concentrated to a very large extent on sales to international customers outside the Ukraine. The USA and Europe account for 60% and 30% of sales respectively, with 10% of sales to the Ukrainian market. Miratech's customers are principally IT companies and large systems integrators, and include Genesys, Siemens, and the Ukraine's two leading telecom companies Kyivstar and MTS-Ukraine (formerly UMC). The company uses modern development methodology and holds both ISO 9001:2000 and Software CMM Level 3 certification. Miratech works with the most modern technology platforms.

More about the agreement
EDB is to acquire 60.1% of the business of Miratech from the company's management, who will continue to hold 39.9%. EDB expects to pay between USD 4.2 million and USD 5.9 million for its interest in the company based on company's performance. EDB also has a contractual option to acquire the remaining 39.9% of the share capital of Miratech. The purchase is conditional on the necessary approvals from the authorities and the satisfactory completion of the due diligence.

Binding agreements have been entered into with key individuals at Miratech to ensure their continuing involvement in the company. Miratech will operate as a separate company within the EDB group. The transaction is expected to be completed around the turn of the year, subject to the timing of final approval by the relevant authorities.

Separately, EDB Business Partner reports operating profit before intangible asset amortisation (EBITA) of NOK 155 million for the second quarter of 2007. This is an increase of 12% from the same quarter in 2006. Operating revenue grew by 6% to NOK 1,621 million. The order backlog at the end of the second quarter of 2007 was NOK 13,083 million, an increase of 18% from the first quarter of 2007. This is EDB's highest-ever order backlog.

"EDB is well positioned for further profitable growth. We are winning new contracts against tough international competition, and the record level of the order backlog ensures long-term stability for the company. We are improving profit margins in all business areas, and both the Application Services business area and EDB's Swedish activities report double-digit organic growth", comments Endre Rangnes, CEO of EDB.

Highlights of the second quarter of 2007
  • EBITA margin increased from 9.1% in the second quarter of 2006 to 9.6% in the second quarter of 2007. All business areas reported improved margins.
  • EDB's activities in Sweden reported organic growth of 10% in the second quarter of 2007. Turnover in Sweden passed the SEK 1 billion mark in the first six months, representing overall growth of 52%.
  • EDB is winning market share in application services, which is the most rapidly growing segment of the Nordic IT market. The Application Services business area reported growth of 24% in the second quarter of 2007, of which organic growth contributed 18%.
  • EDB signed international contracts worth NOK 250 million, including a Nordic-wide agreement with GE Money Bank with total contract value of NOK 160 million that represents a breakthrough for deliveries in collaboration with I-flex.
  • Strategic long-term contract signed with SpareBank 1 Alliance with total contract value up to NOK 3.6 billion.
  • Successful launch of new solutions for the public sector, with a contract signed for the City of Trondheim
  • The value of new contracts signed in the quarter is NOK 3.6 billion and brings EDB's order backlog to NOK 13,083 million, the highest ever.


Main figures for the second quarter of 2007
  • Operating revenue was NOK 1,621 million as compared to NOK 1,523 million in the same quarter of 2006, an increase of 6%.
  • Operating profit before intangible asset amortisation (EBITA) was NOK 155 million in the second quarter of 2007, as compared to NOK 138 million for the same quarter of 2006.
  • Profit before tax was NOK 95 million, as compared to NOK 94 million in the same quarter of 2006.
  • Cash from operations before restructuring payments increased by 7% to NOK 158 million.
    Operational investment (Capex) was 40% lower at NOK 46 million.
  • Earnings per share for the second quarter of 2007 was NOK 0.74, as compared to NOK 0.72 for the second quarter of 2006.


Business areas
  • IT Operations: The business area reports revenue of NOK 1,002 million, representing growth of 3% from the second quarter of 2006. EBITA was NOK 84 million as compared to NOK 81 million for the second quarter of 2006, representing growth of 4%.
  • Solutions: The business area reports revenue of NOK 361 million, with growth of 12% from the same quarter last year. EBITA was NOK 56 million as compared to NOK 50 million for the second quarter of 2006, representing growth of 12%.
  • Application Services: The business area reports revenue of NOK 309 million for the quarter, up by 24% from NOK 249 million in the second quarter of 2006. EBITA was NOK 33 million as compared to NOK 24 million in the same quarter last year, representing growth of 38%.


Future prospects

The Nordic IT services market showed good growth in the second quarter, and market conditions were in line with EDB's forecasts. The level of demand is expected to remain high throughout the second half of the year. The research companies IDC and Gartner continue to forecast growth of around 5% for 2007 as a whole. All the industries and sectors that EDB serves continue to show good interest in investing in IT.

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