31 Aug 2011 07:00
Mail.Ru Group Limited
Preliminary Trading Statement for the First Half 2011
August 31, 2011. Mail.Ru Group Limited (LSE: MAIL, hereinafter referred as "the Company" or "the Group"), one of the largest Internet companies in the high-growth Russian-speaking Internet market, today provides the following preliminary unaudited segment financial information for the half year ended 30 June 2011.
H1 2011 Highlights
u Group aggregate 1H 2011 segment revenue was $228.2m, an increase of 66.3% compared to 1H 2010 (or 59.3% organic growth, i.e. excluding the effect of ICQ acquisition completed in July 2010). 2Q 2011 aggregate segment revenue demonstrated 64.0% year on year growth
u Group aggregate 1H 2011 segment EBITDA was $115.2m, an increase of 114.3% compared to 1H 2010
u Group aggregate 1H 2011 segment Net Income was $85.6m, an increase of 115.5% compared to 1H 2010
u Net Cash position as of June 30 2011 was $192.0m
u Monthly audience (TNS Russia) of Mail.Ru portal in June 2011 reached 27.5m Russian users
Key Recent Developments
u The email service has been revamped to fit the needs of our audience
o New modern design launched
o New antispam-mechanism developed and introduced
o Cooperation agreement signed with Microsoft providing our users with the opportunity to view Microsoft Office documents directly in their browser window
u Further development of our instant messaging services
o New versions of Mail.Ru Agent supporting Odnoklassniki and VKontakte messaging
o New version of Mail.Ru Agent for Mac OS
o New versions of ICQ for PC, Mac OS and Linux
o ICQ On-Site, a web plug-in for third party sites was released
u Continued redesign of Odnoklassniki, including
o Launch of video service
o Improved photo functionality
u We continue to develop our online games business
o 4 MMO games (Farm Kingdom, Territory 2, Business Tycoon Online, Boomz!) and 2 mobile games (The Bubbles, Time Quest) launched since April 2011
o Signed a cooperation agreement with Bigpoint, the leading European gaming portal, under which Bigpoint and Mail.Ru Group will offer selected partner games on their portals
u New features in our search product, including real-time search of new public comments and discussions online
u We launched the beta-version of Target, our self-serve advertising service. The service allows advertisers to run advertising campaigns for audiences segmented by gender, age and location on Odnoklassniki and My World social networks
u Opened sales office in Rostov-on-Don, the eleventh operating location of Mail.Ru Group in Russia
u Successfully completed the selection stage of the 2011 Russian Code Cup, the first Russian national competition for programming
u Alexander Karavaev will be leaving Mail.Ru Group as of September 30th for personal reasons. Verdi Israelian will combine the role of CFO and COO effective immediately
u Exercised the option to acquire 7.44% of shares in VKontakte for $111.7m taking Mail.Ru Group's equity stake to 39.99%
Commenting on the results of the Group, Dmitry Grishin, co-founder and CEO of Mail.Ru Group, said:
"For the first six months of 2011, Mail.Ru Group has significantly exceeded all key performance indicators compared to the prior period, delivering strong growth across all strategic sectors - communications, social networks and online gaming. In comparison with the first half of 2010, group aggregate segment revenue increased by 66.3%, reaching $228.2 million and group aggregate segment EBITDA rose 114.3% to $115.2 million.
The Group maintained its market leading position and achieved impressive growth in the development of Odnoklassiniki with its June 2011 average daily audience growing by 44%, compared to the same period last year, according to TNS. Significant success was also achieved by Mail.Ru Agent, the Group's instant messenger - its monthly audience for the year increased by 35%.
We also continued to strengthen our competitive advantages, creating new opportunities for advertisers. Earlier this year, we launched Target, the new targeted self-serve advertising service and joined all projects in a single technological advertising platform.
During the first half, the Group has increased its investment in new talent, focusing on training and the recruitment of new high quality professionals. In the first six months of the year our total headcount increased by 361 full-time employees and reached 2,450 as of 30 June 2011. To support the development of Russian talent, the Group organized the largest domestic competition for programmers - The 2011 Russian Code Cup. More than 3,000 people participated in the qualifying stages online, with 50 of the most talented proceeding to the final stage of the competition where they will meet in Moscow in September to determine the overall winner.
We continue to deliver significant improvements in profitability - EBITDA margin of 50.5% compared to 39.2% in 1H 2010, driven by significant synergies in server hosting and rental costs, as well as savings in headquarter costs.
The strong progress during the period further validates the Group's strategy of integrating its services: email, social networks, instant messengers and online gaming. Looking toward the second half, the Group will continue to focus its efforts on delivering synergies from the integration of its key projects and growing its presence through expansion in Russia and the CIS to capitalize on the increasing demand for our services.
Given the strong results of H1 and our continued delivery we are increasing our FY 2011 guidance and now expect to see FY 2011 revenue growth of around 50% with FY 2011 EBITDA margin percentage in the high forties."
Conference call
The Mail.Ru Group management team will host an analyst and investor conference call at 14.00 UK time (17.00 Moscow time, 9.00 U.S. Eastern Daylight Time), on Wednesday 31 August 2011, to discuss details of the Company's performance for the half year ended 30 June 2011 and certain forward-looking information. The conference call will include a Question and Answer session.
To participate in this conference call, please use the following access details:
Confirmation Code: |
4057488 |
Participant Toll Free Telephone Numbers: | |
From Russia | 810 800 2503 1012 |
From the UK | 0800 279 9640 |
From the US | 1866 850 2201 |
Investor Relation Contacts:
Matthew Hammond
Managing Director Mail.Ru Group
Phone: +971 505 56 1315 / +44 7711 624 679
E-mail: ir@corp.mail.ru
Press Contacts:
Alexey Ivanov
VP Corporate communications Mail.Ru Group
Phone: +7 495 725 6359 / +7 903 797 73 82
E-mail: alexey.ivanov@corp.mail.ru
Jon Snowball
Financial Dynamics
Phone: +44 (0)20 7831 3113
E-mail: Jon.Snowball@fd.com
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 is a leading Internet company in the high-growth Russian-speaking Internet markets. Mail.Ru Group's sites reach approximately 80 per cent of Russian Internet users on a monthly basis and the Company is the world's fifth largest Internet business, based on page viewsa. Russia is today Europe's second largest Internet market measured by number of usersb.
The origins of the Company date back to 1998 and since its formation as a group in 2005, and particularly since the end of 2008, the Company has moved rapidly to build an integrated communication and entertainment platform that allows it to attract and monetise one of the largest daily Internet audiences in the Russian speaking world. The Company, which is incorporated in the British Virgin Islands, operates two of the threec largest 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 second largest Internet portal based on daily and monthly unique users (Mail.ru), and the Company operates Russia's largest online games platform.
The Company holds strategic minority equity stakes in VKontakte and Qiwi (formerly OE Investments). It holds a 39.99 per cent stake in VKontakte, Russia's largest social networking site measured by daily unique users, and it holds a 21.35 per cent interest in Qiwi, one of Russia's leading payment processing companies. The Company also holds small minority stakes in international Internet companies including Facebook, Zynga and Groupon as well as a number of small venture capital investments in various Internet companies in Russia and Ukraine.
a Source: comScore, June 2011
b Source: Internet World Stats, March 2011
c Based on monthly unique users. Source: TNS Gallup, June 2011
Group aggregate segment financial informationa
Group aggregate segment revenue (1) | ||
Display advertising | 35.8 | 58.8 |
Context advertising | 11.8 | 26.0 |
Total online advertising | 47.6 | 84.8 |
MMO games | 44.4 | 63.7 |
Community IVAS | 31.3 | 54.5 |
Total IVAS | 75.7 | 118.2 |
Other revenue (*) | 13.9 | 25.2 |
Total Group aggregate segment revenue | 137.2 | 228.2 |
Revenue growth (%) | 66.3% | |
Organic revenue growth (2) (%) | 59.3% | |
Group aggregate segment EBITDA (3) | 53.7 | 115.2 |
EBITDA profitability (%) | 39.2% | 50.5% |
Depreciation and amortisation (4) | 9.1 | 17.6 |
Share of profit (loss) of equity associates (5) | 6.7 | 6.0 |
Other non-operating income (expense), net | -0.1 | 2.5 |
Profit before income tax | 51.2 | 106.1 |
Income tax expense (6) | 11.5 | 20.5 |
Group aggregate Net Income (7) | 39.7 | 85.6 |
Net profitability | 28.9% | 37.5% |
[a] The numbers in this table and further in the document may not exactly foot or cross-foot due to rounding
(*) Including Other IVAS revenues
(1) Group aggregate segment revenue is calculated by aggregating the segment revenue of the Mail.ru, Odnoklassniki (hereinafter referred to as "OK") and Headhunter segments and eliminating intra-segment and inter-segment revenues. This measure differs in significant respects from IFRS consolidated net revenue. This information may also differ from the proportionate core revenue presented in the operating segments notes to the interim consolidated financial statements of the Group as of and for the six months ended 30 June 2010. See "Presentation of Segment Financial Information." Group aggregate segment revenue numbers for the periods after July 2010 include the revenues of ICQ.
(2) Organic revenue growth excludes the impact of including revenues from ICQ in Mail.ru segment revenue from the date of acquisition of ICQ in the second half of 2010.
(3) Group aggregate segment EBITDA is calculated by subtracting Group aggregate segment operating expenses from Group aggregate segment revenue. Group aggregate segment operating expenses are calculated by aggregating the segment operating expenses (excluding the depreciation and amortisation) of the Mail.ru, OK and Headhunter segments with Group corporate expenses and eliminating intra-segment and inter-segment expenses. Prior to the Group IPO in November 2010 the Group Corporate expenses included an advisory fee paid to DST Advisors ("DSTA"). Group aggregate segment EBITDA includes ICQ EBITDA from the date of acquisition.
(4) Group aggregate segment depreciation and amortization expense is calculated by aggregating the segment depreciation and amortization expense of the Mail.ru, OK and Headhunter segments with such expenses incurred at the corporate level, excluding amortization of fair value adjustments to intangible assets acquired.
(5) Group share of income from associates includes the Group's share of income from VK.com and Qiwi as calculated based on the ownership percentage as of the date hereof (i.e. 39.99% and 21.35%, respectively). Group share of income from associates as presented herein differs in significant respects from Group share of income from associates as would be recorded under IFRS due to: (i) difference in the ownership percentages as under IFRS the actual ownership would be used for each reporting period and (ii) differences in net income of associates as the numbers presented herein are prepared based on principles used for Mail.ru, OK and Headhunter segments, i.e. do not include certain adjustments which would be required under IFRS. See "Presentation of Segment Financial Information."
(6) Profit before tax is calculated by deducting from Group aggregate segment EBITDA Group aggregate segment depreciation and amortisation and adding (i) Group share of income from associates and adding/deducting (ii) Group aggregate segment other non-operating incomes/expenses primarily consisting of interest income on cash deposits, dividends from financial and available for sale investments, release of certain accruals and other non-operating items. The Group previously did not include dividends from financial and available for sale investments into presentation of operating segments. The Group's segment other non-operating incomes/expenses as presented above include such dividends starting from the earliest period presented.
(7) Group aggregate segment income tax expense is calculated by aggregating the segment income tax expense of the Mail.ru, OK and Headhunter segments with such expenses incurred at the corporate level.
(8) Group aggregate segment net income is the (i) Group aggregate segment EBITDA; less (ii) Group aggregate segment depreciation and amortization expense; plus (iii) Group share of income from associates; less (iv) Group aggregate segment other non-operating expense; plus (v) Group aggregate segment other non-operating income; less (vi) Group aggregate segment income tax expense. Group aggregate segment net income differs in significant respects from IFRS consolidated net income. See "Presentation of Segment Financial Information." Group aggregate segment Net Income includes the impact of ICQ for the periods after July 2010.
Key Performance Indicators
Mail.ru portal, monthly unique users, TNS | 24.0 | 27.5 |
Mail.ru portal, daily unique users, TNS | 11.3 | 13.6 |
Social Networks | ||
My World monthly unique users, TNS | 17.6 | 18.6 |
My World daily unique users, TNS | 4.5 | 4.7 |
Odnoklassniki monthly unique users, TNS | 15.3 | 18.0 |
Odnoklassniki daily unique users, TNS | 5.4 | 7.8 |
Email monthly unique users, TNS | 20.7 | 22.9 |
Email daily unique users, TNS | 9.0 | 10.3 |
Instant Messaging | ||
Mail.ru Agent global monthly users | 15.6 | 21.0 |
ICQ global monthly users | 42.0 | 30.8 |
ICQ Russia monthly users | 15.1 | 15.6 |
Average monthly paying users, Thousands | 1H 2010 | 1H 2011 |
MMO Games | 167 | 227 |
Note: All TNS data is Russia only. Mail.ru portal includes 34 projects. Mail.ru Agent, ICQ and MMO Games is internal Company data. ICQ users include unaffiliated.
Liquidity
During 1H 2011, Mail.ru Group aggregate segment capital expenditure was $22.5m. At 30 June 2011, the Group's net cash balance was $192.0m and the Group had no debt outstanding as of 30 June 2011.
Group aggregate segment capital expenditure is calculated by aggregating the segment capital expenditures respectively of the Mail.ru, OK and Headhunter segments with Group corporate capital expenditure.
Release of IFRS Financial Statements
A full statement and presentation of the Group's 1H 2011 IFRS results will be made in October 2011. Further details of the time and location of the presentation will be provided before that date.
The financial data presented herein is preliminary, it has neither been reviewed nor audited by the Group's independent auditor and the Group's independent auditor has not yet completed review procedures in respect of the 1H 2011 financial information. Management is still in the process of finalising the financial data including reviewing the period-end adjustments, accruals, revenue recognition and several other accounting areas. Segment financial information included in the Group's 1H 2011 IFRS financial statements may differ in significant respects from the information included herein.
Presentation of 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 Mail.ru, OK and Headhunter 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. This information may also differ from the data presented in the operating segments notes to the consolidated financial statements of the Group as of and for the years ended 31 December 2010 and to the interim consolidated financial statements of the Group as of and for the six months ended 30 June 2010. In particular:
• The Group's segment financial information excludes items that management believes obscure the core operating performance of the business, including IFRS adjustments principally affecting major areas including but not limited to: revenue recognition (including online gaming revenue deferral), certain accruals, deferred taxation, share-based payments, business combinations, fair value adjustments, amortization and impairment charges related thereto.
• The segment financial information for each segment 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 forming the segment, 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.
• 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 revenues under IFRS.
• The segment net profit of individual segments does not reflect ''corporate'' expenses at the headquarters level. These corporate expenses are, however, reflected in the calculation of Group aggregate segment net income and Group aggregate segment EBITDA.