OREANDA-NEWS. September 05, 2012. Mail.Ru Group Limited (LSE: MAIL, hereinafter referred as "the Company" or "the Group"), a leading Internet company in the high-growth Russian-speaking Internet markets, today releases unaudited interim condensed consolidated IFRS financial statements and provides the following unaudited segment financial information and key operating highlights for the six months ended 30 June 2012.

H1 2012 Performance Highlights
 H1 2012 Group aggregate segment revenue grew 49% Y-o-Y to RUR 9,693 million. Q2 2012 Group aggregate segment revenue demonstrated 48% Y-o-Y growth
 H1 2012 Group aggregate segment EBITDA grew 60% Y-o-Y to RUR 5,318 million
 H1 2012 Group aggregate net profit grew 66% Y-o-Y to RUR 4,003 million
 Net cash position as of 30 June 2012 was RUR 33,135 million (before special dividend payment)
 Monthly audience (TNS Russia) of Mail.Ru portal in June 2012 reached 31.8 million Russian users

Key Recent Developments

Email & portal
Main Page and Email optimized for touch phones
Released Email application for Android in addition to previously released iOS application
A number of improvements to Email service (speed, security and anti-spam)
Introduced HTTPS support for our Email service and on the Main Page
Email now supports IMAP

Social networks
Optimized the look of photos in Odnoklassniki (OK) newsfeed
Introduced multiple photo upload in OK iOS application
New OK application for Android (with music player)
New design of notifications in OK
New OK payment system interface launched
Broad anti-spam and child protection activities

Instant messaging
Released Mail.Ru Agent 6.0 for Windows, better design and better voice and video call quality
Mail.Ru Agent for MacOS now supports multiple accounts and ICQ
Released Mail.Ru Agent application for Android with enhanced call quality
New ICQ clients for iOS and Android with OK accounts support, photo sharing, videos and location

Online games
Launched Allods in Middle East, North Africa and Poland
Continue to execute our games strategy, evidenced by accelerating MMO segment growth in Q2
Warface and mobile Juggernaut continue to gain user traction and revenue

Search & E-Commerce
Search market share was 8.2% in June 2012 (LiveInternet)
Machine learning algorithms for search results ranking launched, improving relevance
Reworked search interface and results page: own style, new pictures output layout
Released mobile applications for Bada and Windows Phone featuring voice search
Tailored our Search for mobile browsers, including java phones and smartphones

Corporate
The Company paid a special dividend of USD 795 million (USD 3.8 per GDR) on 28 August 2012

Commenting on the results of the Group, Dmitry Grishin, Chairman and CEO of Mail.Ru Group, said:

"I am delighted to report that during the Q2 and H1 2012 Mail.Ru Group has exceeded all key performance indicators, delivering strong growth across all segments – email & portal and instant messaging, social networking, online games and search & e-commerce. Compared to H1 2011, Group aggregate segment revenue increased by 49%, reaching RUR 9,693 million and Group aggregate segment EBITDA rose 60% to RUR 5,318 million.

Community IVAS has become a key contributor to our revenues as well as a material driver of revenue growth, delivering an impressive 107% growth Y-o-Y in H1. The main driver of this growth is the increase of paying user engagement – especially in virtual gifts and services, as well as in our API platform and self-developed social games. While context advertising continued to grow in line with the market, we have seen moderate slowdown of growth in display revenue, primarily driven by planned reduction in advertising inventory on some of our properties. Evidenced by continued improvement in Q2 Y-o-Y revenue growth, we continue to execute on our MMO games strategy. Warface has been an important component of this and has seen an increasing traction in terms of both user and revenue, and has become our Top 4 revenue generating game in Q2.

During the first half, we continued to attract new talent, especially core engineering expertise. In the first six months of the year our total headcount increased by 230 full-time employees and reached 2,895 as of 30 June 2012.

We continue to deliver significant improvements in profitability – EBITDA margin of 54.9% compared to 51.0% in H1 2011, driven by scale effect in personnel, server hosting and marketing costs.

Given the strong results of H1 and our continued delivery we are increasing our FY 2012 guidance and now expect to see FY 2012 RUR revenue growth of 40% with FY 2012 EBITDA margin percentage in the low fifties."

Conference call

The Mail.ru Group management team will host an analyst conference call at 14.00 UK time (17.00 Moscow time, 09.00 U.S. Eastern Daylight Time), on Wednesday 5 September 2012, including a Question and Answer session.

To participate in this conference call, please use the following access details:
 

Confirmation Code: 
 

18095346
  

Participant Toll Free Telephone Numbers:  
  

Russia Free Phone 
8108 002 178 2044
  

UK Free Phone 
0800 694 1562
  

USA Free Phone 
1866 245 0744
  

Standard International Call 
+44 (0) 1452 583 043

For further information please contact:

Investors:

 
Matthew Hammond

Managing Director Mail.Ru Group

Phone: +971 505 56 1315

E-mail: hammond@corp.mail.ru

 
Press:

Ksenia Chabanenko

Phone: +7 916 0906626

E-mail: ks@corp.mail.ru

 Cautionary Statement regarding Forward Looking Statements

This press release contains statements of expectation and other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "forecast", "intend", "will", "could", "may" or "might",  the negative of such terms or other similar expressions including "outlook" or "guidance".  The forward-looking statements in this release are based upon various assumptions that are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and may be beyond the Group's control.  Actual results could differ materially from those discussed in the forward looking statements herein.  Many factors  could cause actual results to differ materially from those discussed in the forward looking statements included herein, including competition in the marketplace, changes in consumer preferences, the degree of Internet penetration and online advertising in Russia, concerns about data security, claims of intellectual property infringement, adverse media speculation, changes in political, social, legal or economic conditions in Russia, exchange rate fluctuations, and the Group's success in identifying and responding to these and other risks involved in its business, including those referenced under "Risk Factors" in the Group's public filings.  The forward-looking statements contained herein speak only as of the date they were made, and the Group does not intend to amend or update these statements except to the extent required by law to reflect events and circumstances occurring after the date hereof.

About Mail.Ru Group

Mail.Ru Group (LSE:MAIL, listed since November 5, 2010) is a leading Internet company in the high-growth Russian-speaking Internet markets (Russia is Europe's largest Internet market measured by number of users, comScore, September 2011). Mail.Ru Group's sites reach approximately 84 per cent of Russian Internet users on a monthly basis (comScore, December 2011) and the Company is the world's sixth largest Internet business, based on total time spent online (comScore, December 2011).

In line with the Communitainment (Communications + Entertainment) strategy the Company is moving rapidly to build an integrated communication and entertainment platform. The Company operates two of the three largest (TNS, December 2011) Russian language online social networking sites (Odnoklassniki and Moi Mir (or "My World")). The Company also operates the two largest Instant Messaging ("IM") networks in Russia (Mail.Ru Agent and ICQ), Russia's leading email service and Russia's largest Internet portal Mail.ru (based on monthly unique users, TNS, December 2011), and the Company operates Russia's largest online games platform.

The Company holds strategic minority equity stakes in VKontakte (39.99%) and Qiwi, formerly OE Investments (21.35%). The Company also holds small minority stakes in international Internet companies including Facebook (1.34%), Zynga (1.15%) and Groupon (4.11%) as well as a number of small venture capital investments in various Internet companies in Russia and Ukraine.

Operating segments

Starting from December 2011, we have identified our operating segments based on the types of products and services we offer. We have identified the following reportable segments on this basis:
Email, Portal and IM;
Social Networks;
Online Games;
E-Commerce, Search and Other Services

The Email, Portal and IM segment includes email, instant messaging and portal (main page and verticals). It earns almost all revenues from display and context advertising.

The Social Networks segment includes our two social networks (Odnoklassniki and My World) and earns revenues from (i) user payments for virtual gifts, (ii) revenue sharing with application developers, and (iii) online advertising, including display and context advertising.

The Online Games segment includes online gaming services, including MMO, social and mobile games. It earns almost all revenues from (i) sale of virtual in-game items to users and (ii) royalties for games licensed to third-party online game operators.

The E-Commerce, Search and Other Services segment primarily consists of search engine services earning almost all revenues from context advertising, e-commerce and online recruitment services and related display advertising. This segment also includes a variety of other services, which management considers insignificant for the purposes of performance review and resource allocation.

Each segment's EBITDA is calculated as the respective segment's revenue less operating expenses (excluding depreciation and amortisation and impairment of intangible assets), including our corporate expenses allocated to the respective segment.


Liquidity

As of 30 June 2012, the Group's net cash balance (including term deposits) was RUR 33,135 million, or USD 1,010 million[1], and the Group had no debt outstanding.

Filing of the Report

The Group's interim condensed consolidated financial statements for the six months ended 30 June 2012 prepared in accordance with IFRS and accompanied by an independent auditor's review report have been filed on the National Storage Mechanism appointed by the Financial Services Authority and can be accessed at http://corp.mail.ru/files/Mail.Ru_Group_6m_2012.pdf

Presentation of Aggregate Segment Financial Information

The Group aggregate segment financial information is derived from the financial information used by management to manage the Group's business by aggregating the segment financial data of the Group's operating segments and eliminating intra-segment and inter-segment revenues and expenses.  Group aggregate segment financial information differs significantly from the financial information presented on the face of the Group's consolidated financial statements in accordance with IFRS. In particular:
The Group's segment financial information excludes items that management believes obscure the core operating performance of the business. Such adjustments affect such major areas as revenue recognition, deferred tax on unremitted earnings of subsidiaries, share-based payment expense, impairment of investments, business combinations, fair value adjustments, amortisation and impairment thereof, net foreign exchange gains and losses, share in financial results of non-core associates, as well as irregular non-recurring items that occur from time to time and are evaluated for adjustment as and when they occur. The tax effect of these adjustments is also excluded from segment reporting.
The segment financial information is presented for each period on the basis of an ownership interest as of the date hereof and consolidation of each of the Group's subsidiaries, including for periods prior to the acquisition of control of the entities in question, so long as the Group held at least one share of such entities during such periods. The financial information of subsidiaries disposed of prior to the date hereof is excluded from the segment presentation starting from the beginning of the earliest period presented.
Segment revenues do not reflect certain other adjustments required when presenting consolidated revenues under IFRS. For example, segment revenue excludes barter revenues and adjustments to defer online gaming and social network revenues under IFRS.