IBS Group Reports Operating Results for the Third Quarter and Nine Months Ended December 31, 2013

RAMSEY, the Isle of Man, February 27, 2014 /PRNewswire/ --

Please refer to the relevant legal information at the end of this document

IBS Group Holding Limited (IBSG:GR; IBSGq.DE), a leading software developer and IT services provider in Central and Eastern Europe, today announced its preliminary unaudited operating results for the third quarter and nine months ended December 31, 2013 (3Q and 9M FYE March 31, 2014).

9M FYE March 31, 2014 highlights

• Consolidated revenues for the first nine months of FYE March 31, 2014 amounted to US$667.7 mn, a decline of 0.6% y-o-y.
• IT Services segment revenues for the nine months of FYE March 31, 2014 amounted to US$319.1 mn, a decline of 18.3% y-o-y; revenues expressed in RUB terms totalled 10,386 mn, a decrease of 13.3%.
• Software Development segment revenues for the nine months of FYE March 31, 2014 were US$292.1 mn, an increase of 27.7% y-o-y.
• Revenues from Russian operations amounted to US$391.2 mn in the nine months of FYE March 31, 2014, a decline of 14.5% y-o-y, while our combined revenues from North American and European operations reached US$276.5 mn, an increase of 28.9% y-o-y.
• Our headcount reached 9,890 employees, an increase of 16.7% y-o-y.
• The net cash position stands at US$46.6 mn, an increase of US$59.5 mn y-o-y.

Consolidated revenues by segment ^[*]

                               3Q FYE 3Q FYE                9M      9M
                               March  March                FYE      FYE
                                31,    31,      Change    March    March   Change
                                                           31,      31,
    US$ mn                      2014     2013    y-o-y    2014     2013    y-o-y

    Consolidated revenues      294.1    294.1      0.0%   667.7    671.9   -0.6%
    IT Services segment        160.2    189.7    -15.5%   319.1    390.5  -18.3%
    IT Services segment, RUB
    mn                       5 236.4  5 619.7    -6.8%   10 386   11 977  -13.3%
    Software Development
    segment                    110.6     83.5    32.4%    292.1    228.7   27.7%
    Corporate, other and
    eliminations                23.3     20.9    11.5%     56.5     52.7    7.2%

* Source: management accounts

Consolidated revenues for the first nine months of FYE March 31, 2014 amounted to US$667.7 mn, a decline of 0.6% y-o-y, at the same time consolidated revenues for the third quarter of FYE March 31, 2014 amounted to US$294.1 mn and remained flat y-o-y. Weak Russian IT services consumption persisted in the third quarter of the financial year, which is reflected in the weak revenues in the IT Services segment. At the same time our Software Development segment benefitted from clients' budget spend improvements, ongoing transformation of our business model to managed services and accelerating demand for sophisticated outsourcing services.

IT Services segment revenues for the nine months of FYE March 31, 2014 amounted to US$319.1 mn, a decline of 18.3% y-o-y; revenues expressed in RUB terms totalled 10,386 mn, a decrease of 13.3%. The segment's revenues for the third quarter amounted to US$160.2 mn, a decline of 15.5% y-o-y in US$ terms and 6.8% in RUB terms respectively. In both periods revenues were negatively affected by depreciation of RUB vs. USD.

Software Development segment revenues for the nine months of FYE March 31, 2014 were US$292.1 mn, an increase of 27.7% y-o-y. The segment's revenues for the third quarter amounted to US$110.6 mn, an increase of 32.4% y-o-y.

Consolidated revenues by geography *

                                9M FYE      Share   9M FYE    Share
                                             of                of     Change
                               March 31,    total  March 31,  total
    US$ mn                       2014      revenue   2013    revenue   y-o-y

    Revenues generated in
    Russia                       391.2      58.6%    457.4    68.1%   -14.5%
    Revenues generated in
    Europe                       134.6      20.2%    108.8    16.2%    23.7%
    Revenues generated in
    North America                141.9      21.2%    105.7    15.7%    34.2%

* Source: management accounts; customer geography determined by the location of clients' key decision makers

Revenues from Russian operations amounted to US$391.2 mn in the nine months of FYE March 31, 2014, a decline of 14.5% y-o-y. Revenues generated in Europe amounted to US$134.6 mn, an increase of 23.7% y-o-y, and now account for 20.2% of the Group revenues. Revenues generated in North America increased to US$141.9 mn, up 34.2% y-o-y, and now account for 21.2% of the Group revenues. The growth in European and North American consolidated revenues is attributed to the Software Development segment.

Headcount *

                                           Change
                         December December        September Change
    Number of employees  31, 2013 31, 2012 y-o-y  30, 2013   q-o-q

    Group headcount       9,890    8,473   16.7%    9,509    4.0%
    IT Services segment   2,242    2,464   -9.0%    2,336    -4.0%
    Software Development
    segment               7,273    5,671   28.2%    6,803    6.9%
    Corporate and other    375      338    10.9%     370     1.4%

* Source: management accounts

Our headcount reached 9,890 employees, an increase of 16.7% y-o-y. In the IT Services segment, the number of employees declined by 9.0% y-o-y to 2,242 IT professionals as we continued to undertake restructuring measures faced with lacklustre demand for our services in Russia. In the Software Development segment, the number of employees amounted to 7,273, an increase of 1,602 IT professionals y-o-y.

Debt *

                    December December Change
    US$ mn          31, 2013 31, 2012 y-o-y  September 30  Change q-o-q
                                                2013

    Total debt        57.8     54.3    3.5      80.5         -22.7
    Current debt      56.0     33.4    22.6     58.8          -2.8
    Non-current
    debt              1.8      20.9   -19.1     21.7         -19.9
    Net debt         -46.6     12.9   -59.5    -13.6         -33.0

* Source: management accounts

Our total debt amounted to US$57.8 mn as of December 31, 2013, up US$3.5 mn y-o-y and a US$22.7 mn decline q-o-q. The net cash position stands at US$46.6 mn, an increase of US$59.5 mn y-o-y.

Outlook

We reiterate our full year consolidated revenues growth guidance to be in the range of 2-5% as measured in US$ terms.

Anatoly Karachinsky, President of IBS Group, commented:

"For the last nine months the Software Development segment has yet again demonstrated impressive performance both in growth and margins. This segment has continuously increased its product portfolio offering the market innovative proprietary Horizon and iStockTrack, as well as introducing new AllView and Ulmo solutions for our automotive and telecom customers, respectively. Our footprint is expanding - we are happy to announce that the 20th Luxoft office has been opened in Sofia, Bulgaria.

The Russian business of IBS Group is still under the pressure of deteriorating macroeconomic environment, which is reflected in the IT Services segment financials. Restructuring in the segment aimed to maximise our effort in the highest-margin and most promising IT areas has continued."

About IBS Group Holding Limited

IBS Group is a leading software development and IT services provider in Central and Eastern Europe. Through its two principal subsidiaries, Luxoft and IBS IT Services, it offers a wide variety of information technology services, such as software development and IT services outsourcing, IT infrastructure and business applications implementation. IBS Group has business operations in Russia, Ukraine, Romania, Poland, Germany, Switzerland, the UK, the USA, Vietnam and Singapore. IBS Group employs more than 9,800 people worldwide. In the year ended March 31, 2013, the Group reported US GAAP consolidated revenues of US$870.3 mn. IBS Group's Global Depositary Receipts are listed on the Regulated Market (General Standard) at the Frankfurt Stock Exchange (Bloomberg: IBSG:GR; Reuters: IBSGq.F)

For more information about IBS Group please visit http://www.ibsgr.com

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SOURCE IBS Group Holding Ltd