Mail.Ru Group Limited Unaudited IFRS Results for H1 2015
H1 2015 Performance Highlights
– H1 2015 Group aggregate segment revenue grew 6.9% Y-o-Y to RUR 18,301 million. Q2 2015 Group aggregate segment revenue grew 6.4% Y-o-Y
– H1 2015 Group aggregate segment EBITDA grew 4.5% Y-o-Y to RUR 9,130 million
– H1 2015 Group aggregate net profit decreased by 10.5% Y-o-Y to RUR 5,606 million
– Net debt position as of 30 June 2015 was RUR 14,159 million (excluding interest payable of RUR 121 million)
– Mail.Ru Group is the leading online property in Russia with 75.4 million monthly active users (comScore MMX Multi-Platform, Russia, age 6+, June 2015)
Key Recent Developments
– New versions of myMail and Mail.Ru email apps: with fast photo attaching on iOS and offline search and separate version for tablets on Android
– myMail launched cooperation with ItaliaOnline
– Text search inside attachment content in Mail.Ru email service
– Secure email collection from and into Mail.Ru inbox via OAuth 2.0 protocol
– Cloud.Mail.Ru updated with online image editing on web, video streaming of all formats on all devices and screen grabber in desktop apps
– Video service relaunch in VK, including video catalogue with recommendations and licensed content as well as multiple new features
– VK starts vulnerability reward program on HackerOne platform
– Native advertising in VK newsfeed on both desktop and mobile
– Launch of Snapster: a new photo app by VK with photo editing, enhanced filters including new filter creation and sharing as well as self-destructing messages
– Multiple updates of OK.RU photo and video services in web and on mobile apps, including live streaming of events and video channels in groups
– New video player with adaptive streaming and photostreams in OK.RU apps for iOS and Android
– New extended group statistics for group administrators in OK.RU
– International (N.America and Europe) launch of internally developed MMORPG Skyforge
– Worldwide launch of closed beta test of MMO game Armored Warfare
– Launch of RB Videomatic, a technological targeted video advertising platform developed and owned by Mail.Ru Group, Gazprom-Media Digital switched its advertising network to RB Videomatic
– Launch of myTarget’s English version and dollar based auction for international clients
– VK held VK CUP, a contest for young programmers, and VK FEST, a major two day off-line event in Saint-Petersburg
Commenting on the results of the Company, Dmitry Grishin, Chairman and CEO (Russia) of Mail.Ru Group, said:
In H1 2015, the Company achieved revenue growth of 6.9% Y-o-Y to RUR 18,301 million. As in previous reported results the revenue growth rates are based on a full pro-forma consolidation of VK from the beginning of 2013. Despite a challenging FX backdrop we have continued to exercise tight cost control during H1 and as a result have an H1 EBITDA margin of 49.9% with segment H1 EBITDA of RUR 9,130 million. As a result of the interest payments on the loan connected to the acquisition of VK net income declined 10.5% to RUR 5,606 million.
With the ongoing economic and geo-political situation the overall operating environment in H1 2015 remained somewhat challenging. However during Q2 we have seen some stabilization in the advertising environment. Targeted advertising, especially mobile and VK saw strong, and improving, growth rates. At this point visibility remains limited, and it is too early to say if these trends will continue, however Q3 advertising has thus far had a solid start.
VK integration is on track and the team continues to execute well. In Q2 VK revenues grew 41.4% to RUR 1,408 million. As previously commented the focus for 2015 in VK will be the continued expansion of video and mobile advertising where we continue to see strong advertising interest and execution. With H1 revenue growth of 34.4% and limited increase in costs we are pleased to announce that VK margins have increased from 34.4% in H1 2014 to 47.3% in H1 2015.
In H1 our MMO revenues grew by 1.4%, Q2 was affected by a high base effect from Q2 2014 and limited revenues from the new games. The outlook for H2 remains strong and we are pleased to announce that Skyforge has now started its international release and reception has been encouraging. In Q2 Armored Warfare started its closed beta test in Russia with the international closed beta in August. The full release in Europe, North America and Russia is currently scheduled for H2 2015. World of Speed closed beta test is also planned for H2 2015.
Community IVAS revenues showed solid growth in H1, growing ahead of the increase in the user base as we continue to focus on increasing paying user penetration – especially in virtual gifts and services, as well as in our API platform. We remain focused on increasing user engagement and improving our product. We would expect that FY IVAS revenue growth is likely to be slightly below the total revenue growth.
Our other revenue stream remains very sensitive to the underlying economic environment and hence saw revenues decline by 3.5% in H1. We do not anticipate any near term improvements in this revenue stream.
Our international expansion continues and we remain encouraged by the traction of myMail which continued to gain traction in H1. The US is the largest market followed by France, UK, Germany and Brazil. We will also look to leverage the myMail user base with through the international release of games later this year.
Despite the continued challenging macro environment we have had a solid first half of the year. We are encouraged by the traction in target and VK and continue to see a number of exciting opportunities in these areas. MMO has a busy second half with a number of releases both in mobile and desktop games. Based on current visibility and current market conditions, we are pleased to re-iterate our FY 2015 guidance of revenue growth (including both VK and Headhunter on a pro-forma basis) to be between 7%-12%, however given the continued strong cost control and the good revenue, and hence margin growth, in VK we now expect FY EBITDA margins of between 47-48% vs previous guidance of between 46-47%.About Mail.Ru Group
Mail.Ru Group (LSE:MAIL, listed since November 5, 2010) is a leading company in the Russian-speaking Internet markets (Russia is Europe's largest Internet market measured by the number of users, comScore). Mail.Ru Group's sites reach approximately 96% of Russian Internet users on a monthly basis (comScore, June 2015) and the Company is the sixth largest Internet business globally, based on the total time spent (comScore, June 2015).
In line with the ‘communitainment’ (communication plus entertainment)
strategy, the Company is moving rapidly to build an integrated communications
and entertainment platform. The Company owns Russia’s leading email service and
one of Russia’s largest internet portals, Mail.Ru (TNS, all Russia, age 12-64, June
2015); three major Russian language social networks, Vkontakte (VK),
Odnoklassniki (OK.RU) and Moi Mir (My World); and Russia’s largest online games
business. Our portfolio also includes a leading OpenStreetMap-based offline
mobile maps and navigation service MAPS.ME and two instant messaging (IM)
services, Mail.Ru Agent and ICQ, popular in Russia and CIS.