RMG.L Regulatory News (RMG)

26 Sep 2006 07:04

137% period on period increase in internet revenue Nearly 100% period on period increase in total revenue EBITDA* positive at Group level for the first time for the period £ Rambler Media Limited (RMG.LN), a leading integrated media company providingservices to the global Russian-speaking community, today announced its financialresults for the six months ended 30 June 2006. £ FINANCIAL HIGHLIGHTS £ -- Total revenue up nearly 100% period on period to US$ 16 million (US$ 8 million) £ -- Internet total revenue up 137% to US$ 12.3 million (US$ 5.2 million), representing 78% of total Group revenue £ -- Group business profitable for first time in first half of the year with net profit of US$ 2.5 million (net loss of US$ 2.3 million) £ -- Strong balance sheet with US$ 20 million of cash at period end £ OPERATING HIGHLIGHTS £ -- Over 50% period on period increase in number of unique monthly users of Rambler.ru to over 21 million £ -- 80% increase in monthly page views to 1.5 billion £ -- More than 1.6 million Rambler-ICQ Instant messaging unique users per month in less than one year after the service was launched £ -- Acquisition of 51% of Price Express, a leading Russian price comparison internet company, operating www.price.ru, www.domoteka.ru and www.tyndex.ru , enabling Rambler to expand its range of online services £ -- Exclusive partnership with Trader Media East Ltd for launch of online classifieds ads in Russia with leading newspaper Iz Ruk V Ruki £ -- Acquisition of 51% of online Russian social network www.damochka.ru and 51% of online banner technology company Bannerbank £ -- Favourable market trends and new service launches provide support for anticipated continued growth in the rest of the year and beyond \* T* Earnings before interest, tax, depreciation and amortisation\* T £ Irina Gofman, Chief Executive Officer of Rambler Media, commented: •RamblerMedia reports its second consecutive profitable half year for the Group. Ourgrowth continued to accelerate through the first six months of 2006, driven bythe introduction of new innovative online services and increasing internetpenetration in Russia. These solid results (+137% internet revenue period onperiod) reflect our continued focus on our internet business, now accounting fornearly 80% of our group revenue, and reinforce Rambler•s position as the numberone multi-service internet portal for the Russian community. Our TV divisioncontinues to demonstrate strong sales growth and we have successfully adaptedour strategy in our Mobile Content business to quickly reach profitability inthe segment. We are confident that these favourable market trends will continuein the second half of the year and beyond.• £ FINANCIAL SUMMARY \* T(US$ €000s) Jan - Jun Jan • Jun Jan • Dec Jan • Dec 2006 2005 2005 2004 (reviewed) (reviewed) (audited) (audited)Net sales 15,117 8,028 21,421 12,505Other income 684 - 515 - ---------------------------------------------------------Total revenue 15,801 8,028 21,936 12,505EBITDA* profit/(Loss) 1,608 (1,501) (568) (2,690)Net profit/(loss) 2,477 (2,334) (2,384) (4,412)Profit/(loss) per share - basic and fully diluted (US$) 0.16 (0.16) (0.18) (0.41)Profit/(loss) per share - fully diluted (US$) 0.16 (0.15) (0.17) (0.41)\* T \* T * Earnings before interest, tax, depreciation and amortisation\* T £ Overview £ Rambler Media reported nearly 100% period on period increase in totalrevenue to US$ 16 million for the first six months of 2006. This figure includesUS$ 0.68 million of income from Rambler•s 25% stake in Begun.ru, paid searchplatform. The Group reported its first net profit for the period at US$ 2.5million (loss of US$ 2.3 million in H1 2005). The ongoing investments in theoperating businesses reflect Rambler Media•s focus on increasing the penetrationand market share of its brands, technologies, products and services. £ Internet £ Rambler Internet reported a significant increase in EBITDA following strongperiod on period growth in the number of users and in advertising sales. TheInternet segment•s EBITDA reached US$ 3.35 million in the first six months of2006, up from US$ 0.5 million in H1 2005. Total revenue in the Internet servicesdivision grew by 137% period on period from US$ 5.2 million to US$ 12.3 millionand represented 78% of total Group revenue for the year. £ A leading Internet portal for the Russian community £ Rambler Internet•s primary business is Rambler.ru (www.rambler.ru), aleading Russian language Internet portal offering search, communication andmedia services. It is complemented by a number of other web properties,including leading on-line Russian language newspaper Lenta.ru (www.lenta.ru),which attracted an average of 2.7 million unique visitors per month in the firstsix months of the year, and several specialised web resources. Rambler Internetgenerates its revenues primarily from banner advertising, sponsored key wordsearches and e-commerce. Rambler Media has a 25% plus one share equity stake inBegun.ru, a fast growing Russian sponsored search company, and retains an optionto increase its stake in Begun.ru in the future. £ In the first half of 2006, Rambler.ru reached 21 million unique monthlyusers, up more than 50% from the 13.6 million users in the first half of 2005.This growth rate is well above the average 25% yearly increase in RussianInternet penetration, demonstrating the increased take-up and usage of Ramblerand its growing market share. Today, 65% of all Russian internet users regularlyvisit Rambler.ru, making it one of the most visited internet site in Russia.Internet advertising is the fastest growing segment of the Russian advertisingmarket and was estimated to have increased by 71% year on year in 2005 to US$ 60million (US$ 35 million) (Source: Russian Association of Communication Agencies- RACA). £ Rambler-ICQ £ One of Rambler•s most successful recent projects has been its partnershipwith ICQ to offer instant messaging services. Before its partnership withRambler, ICQ had 2 million users in Russia. Since Rambler-ICQ•s launch at theend of 2005 and throughout the first half of 2006, ICQ has been used by 3.6million users, of whom 1.6 million are active users via the Rambler-ICQ jointservice (http://icq.rambler.ru/). This means that one out of every 3 ICQ user inRussia has been using Rambler-ICQ less than a year after the service waslaunched, thus nearly doubling the total number of ICQ users. Furthermore,Rambler-ICQ users have proven to be twice as active as average ICQ users. Theappeal of Rambler-ICQ is that it integrates Rambler email services and providesaccess to Rambler•s internet search engine and online games, as well asRussian-language news, weather forecasts and other useful information. In March2006, the ICQ 2-Way SMS service was introduced to enable ICQ users to create andsend SMS messages directly from their desktop to GSM users in the RussianFederation and allow the mobile recipient to reply back directly to the ICQuser. Instant Message Forwarding also allows ICQ users to forward their instantmessages via SMS directly to their mobile phone and reply back directly to thesender. £ Acquisitions and Partnerships £ In January, Rambler Media bought 51% of Price Express, a leading e-commerceinternet company operating the portals price.ru (www.price.ru), Domoteka.ru(www.domoteka.ru) and Tyndex.ru (www.tyndex.ru). The portals provide price andproduct comparison tools designed to help online shoppers make the mostcost-effective buying decisions. Price Express has a database of 40 millionpriced items, offering consumers one of the largest and quickest buying choicesin the Russian internet market. Over 1 million shoppers visited Price Express•swebsites every month in the period. £ In April, Rambler Media entered into an exclusive partnership with TraderMedia East Limited, a leader in classified advertising, to create a co-brandedwebsite which will give Rambler.ru customers access to online classified contentin Russia. Trader Media East•s operation in Russia & CIS, better known for itslocal brand •Iz Ruk v Ruki•, produces 144 publications, totaling 75 million adsper year and 3.8 million readers per week. The website www.irr.ru aggregatescontent from publications in 81 cities and 4 other websites and employsstate-of-the-art technology with over 1.4 million ads of content. Through thelaunch of a new co-branded website, Iz Ruk v Ruki private and professionalcustomers will be able to distribute their ads through Rambler to maximise theeffectiveness of their advertising and to access Rambler•s numerous onlineproperties and services. The new service will also enable Rambler•s users tosearch through the biggest database of classified ads from all regions ofRussia. £ In June, Rambler Media announced its intention to acquire Damochka.ru(www.damochka.ru) and BannerBank from eHouse Holding. Damochka.ru is a leadingRussian language, social network, and personal ads website with over 1.7 millionregistered users. Dating and social networking is proving very popular in Russiaand the acquisition reinforces Rambler•s position as the number onemulti-service internet portal for the Russian community. BannerBank operates aVirtual Banner Network (VBN), one of Russia•s most sophisticated banner exchangenetworks, which optimises online advertising campaigns and provides detailedinformation about the impact of banner advertising. It generates approximately130 million banner views per day. The acquisition of 51% of each business wascompleted by Rambler in July. £ Other new services £ In the first half of 2006, Rambler launched a specific page for its userslocated in the United States. Rambler users in the US, estimated at more than0.6 million for Rambler.ru, are now able to view more US-specific search andnews results when accessing Rambler.ru•s main page from North America. Thisreflects Rambler Media•s strategy to explore further opportunities for Americanadvertisers to target the US Russian speaking community and benefit from higheradvertising prices in the United States, a more mature market than Russia. £ New game services were recently introduced as part of Rambler.ru•s mainportal, including multiplayer and skill games. This is in addition to Rambler•snew online gaming portal (www.ramblas.ru), which has been developed inpartnership with St Minver and is still in Beta version before its officiallaunch. £ Internet outlook £ Market trends remain favourable, with the number of Internet users in Russiaforecast to increase by approximately 29% year on year in 2006 according to theMinistry of Informatisation and Communication. The internet advertising marketis expected to grow by 65% to 70%, according to the Russian Association ofCommunication Agencies. The value of the Internet access and data transmissionservices markets is forecast to grow by 33% year on year to US$ 2 billion in2006 according to Jason and Partners, whilst the total value of B2C product andservice transactions was estimated to have increased by 35% to US$ 1.5 billionin 2005. Rambler Internet is well positioned to benefit from this growth due toits established brand, large and growing market share, and its wide range ofexisting and new services. (Source: Russian Association of CommunicationAgencies (RACA), J•son & Partners, Ministry of Communications, NationalAssociation of Electronic Commerce) £ Mobile £ At the beginning of the year, Rambler Media rebranded SMXCOM as •RamblerMobile•, creating better association with Rambler Internet. £ Sales of Mobile VAS reached US$ 1.3 million (US$ 1.9 million) in the firsthalf of 2006, and accounted for 8% of Group revenues in the period (23% of Grouprevenues in H1 2005), clearly demonstrating the Group•s increased focus on itscore Internet activities. £ The mobile content sector (SMS, MMS and premium SMS content) in Russia hasgrown at a slower pace than initially forecast by market sources, up 21% in 2005to US$ 350 million (from US$ 290 million) (Source: Jason and Partners RussianWireless Content Report 2005-2007). Due to the slower growth and the increasedcompetition in the mobile content market in Russia, the Group has adaptedRambler Mobile•s business model to be increasingly focused on a revenue sharingmodel in order to avoid incurring direct advertising costs. £ In the period, Rambler Mobile reported an EBITDA loss of US$ 0.3 million,nearly reaching breakeven point. Rambler Mobile continued to invest in thedevelopment and marketing of its mobile content brands and its relationshipswith Mobile TeleSystems, VimpelCom and Megafon in Russia, which together accountfor approximately 90% of mobile subscribers. £ 90% of Rambler Mobile•s sales are generated from in-house developedSMS-based products and the Company also has licensing agreements with thirdparty providers of content such as ring tones, icons, screen savers and games.Revenues are generated from a share of the fixed fees paid by subscribers totheir network provider for the download of Rambler Mobile products. £ New services have recently been launched including Interactive VoiceRetrieval (IVR) services, on line / offline interactive mobile games, and ICQ2-way SMS. Further integration with Rambler web properties is reflected in suchprojects as dating, photo and video, and horoscopes. £ Rambler Mobile plans to be in the position to offer mobile users a widerange of premium rate voice and SMS services at competitive rates and therebyincrease revenue and improve profitability. Rambler Mobile further expects tobenefit from enhanced mobile phone capabilities and deployment of new cellulartechnologies, as well as closer integration with other Rambler Media ownedcompanies by adding and integrating mobile content to existing products,programming and services. £ Television £ Sales generated by Rambler TV grew by 129% period on period to US$ 2.2million from less than US$ 1 million in the first half of last year, andrepresented 14% of Group revenues in the period. Revenues are primarilygenerated from the sale of advertising airtime, as well as •below the line•advertising. The division reported an EBITDA loss of US$ 1.4 million from a lossof US$ 1.3 million in the first half of 2005. £ Rambler TV is a free-to-air documentary and entertainment channel, whichholds a national broadcasting license in Russia and reaches 40 million peoplethrough a network of 900 local affiliate stations broadcasting in 470 towns andcities across Russia. 30% of the content is produced by Rambler Media. Thechannel•s core target audience is 25-45 year-old adults, which is the mosteconomically active segment of the population. Research by TNS Gallup Media inJuly 2005 demonstrated that Rambler TV reaches consumers who have higher thanaverage education. £ The gross TV Advertising market grew by 35% year on year in 2005 to US$ 2.3billion, and accounted for 47% of total Russian gross advertising spend duringthe period (Source: Russian Association of Communication Agencies (RACA)).Rambler TV•s national share of viewing amongst the total universe of viewersbetween the age of 6 and 54 grew by 26% from 0.34% in first half 2005 to 0.43%in the first half 2006, including growth in the Saint Petersburg•s station sharefrom 1.56% to 1.9%. Rambler TV has also continued to invest in increasing itsnational penetration, which rose by 38% from 24% to 33% for the period. (Source:TNS Gallup Media, April-June 2006) £ FINANCIAL POSITION £ The Company ended the period with cash balances of US$ 20 million. £ RECENT DEVELOPMENTS £ Rambler Media expects to benefit from the Russian Federation Government•snew TV advertising law introduced by the State Duma, which reduced the allowableadvertising airtime for the major TV channels with effect from July 1, 2006.Prices of TV advertising on the leading channels are expected to increase as aresult of the new legislation, which may encourage advertisers to seekalternative marketing channels, such as smaller TV networks and online media. £ At an Extraordinary General Meeting of shareholders held in Jersey on 7July, Mr. Alexander Rappoport, Mr. Oleg Edward Radzinsky and Mr. Vitaly Rudenkowere appointed as new Non-executive Directors of the Company and Dr. ValentinZorin resigned from the Board of Directors. However, Dr. Zorin continues in hisposition as chairman of Rambler Media•s advisory panel. £ Also during the Summer, Rambler signed an agreement with Fast Search &Transfer ASA (FAST) to deploy the FAST Enterprise Search Platform (FAST ESP)across its Internet business. This will provide Rambler with improvedtechnological modules in order to expand Rambler•s proprietary search enginecapabilities. The first phase of implementation of the FAST upgrade will takeplace in the second half of the year. £ Finally, Rambler has acquired 26% of Chess Planet, which operates the portalwith the same name: (www.chessplanet.ru) with the intention to launch a jointwebsite that will allow Rambler users to play virtual chess on the Rambler webportal. Chess Planet is an international Russian-language online club wherechess enthusiasts can play chess, improve their skills, as well as train otherplayers. 715,000 games were played on Chess Planet in the last months, twice asmany as at the start of 2006, and Chess Planet visitors spend an average of 2 to3 hours a day on the portal. £ OTHER INFORMATION £ The Company•s consolidated accounts have been prepared according toInternational Financial Reporting Standards (IFRS). The following preliminaryfinancial information has been approved for release by the company•s auditors. £ The company will host a conference call to present the results at 5:00 pm(Moscow Time)/ 3:00 pm (CET) / 2:00 pm (London Time) / 9:00 am (New York Time)today. The results statement and related documentation are available on RamblerMedia•s website at www.ramblermedia.com. To participate in the conference call,please register online at www.sharedvalue.net/ramblermedia/hy2006. The numberfor the conference call will be available upon registration. £ For further information, please visit www.ramblermedia.com or contact: \* TRambler Media Shared Value LimitedIrina Gofman Nicolas DuperrierTel. +7 495 500 3826 Tel. +44 (0) 20 7321 5010 rambler@sharedvalue.net\* T £ ABOUT RAMBLER MEDIA £ Rambler Media is an integrated and diversified Russian language media,entertainment, services and content delivery company with three main segments:internet services, mobile value added services, and television broadcasting.Rambler Media operates businesses including the Russian language internet portaland search engine 'rambler.ru', on-line newspaper 'Lenta.ru•, broadband ISP'Rambler Telecom', interactive advertising company 'Index20', mobile contentservice provider 'Rambler Mobile', and documentary and entertainment TV network'Rambler TV'. Rambler Media•s shares are traded on the AIM market of the LondonStock Exchange under the symbol 'RMG'. For more information on Rambler Media,visit our corporate website at www.ramblermedia.com. £ Certain statements within this announcement constitute forward lookingstatements. Such forward looking statements involve risks and other factorswhich may cause the actual results, achievements or performance of the Companyto be materially different from any future results, achievements or performanceexpressed or implied by such forward looking statements. Such risks and otherfactors include, but are not limited to, general economic and businessconditions, changes in government regulations, and court interpretations of suchregulations, currency fluctuations (including the US$/Rbs rate), competition,changes in development plans. There can be no assurance that the results andevents contemplated by the forward looking statements contained in thisannouncement will, in fact, occur. Any forward looking statements made in thisannouncement represent management•s best judgment as to what may occur in thefuture and are correct only as at the date of this announcement. The Companywill not undertake any obligation to release publicly any revisions to theseforward looking statements to reflect events, circumstance or unanticipatedevents occurring after the date of this announcement except as required byapplicable law or by any applicable regulatory authority. \* TINTERIM SUMMARISED CONSOLIDATED PROFIT & LOSS ACCOUNT(US $€000s) Notes 1 January 2006 1 January 2005 to to 30 June 30 June 2005 2006 (reviewed) (reviewed) -------- -------------- ----------------- Revenue 9 15,117 8,028 Other income 9 684 - -------------- ----------------- Total Revenue 15,801 8,028 Operating expenses 10 (14,946) (10,178) -------------- ----------------- Operating profit/(loss) 855 (2,150) Interest income 569 -Interest expense (7) (62)Share of loss of associate - (14) -------------- -----------------Profit/(loss) before taxation 1,417 (2,226) Taxation 1,060 (50) -------------- ----------------- Profit/(loss) for the period 2,477 (2,276) Attributable to- equity holders of the company 2,407 (2,334)- minority interest 12 70 58 -------------- ----------------- 2,477 (2,276) ============== ================= Earnings per share for profit/(loss) attributable to the equity holders of the company, expressed in cents per share- basic 13 16 (16) - diluted 13 16 (15) The accompanying notes are an integral part of this profit and loss account.\* T \* TINTERIM SUMMARISED CONSOLIDATED BALANCE SHEET(US $€000s) Notes 30 June 31 December 2006 2005 (reviewed) (audited) -------- -------------- ---------------AssetsNon Current Assets Property, plant and equipment 6 4,090 3,815 Intangible assets 7 17,903 15,770 Financial assets 8 778 778 -------------- --------------- 22,771 20,363Current Assets Trade debtors 4,868 3,690 Inventory 436 367 Prepayments 851 392 VAT, net 439 558 Other receivables 1,665 861 Bank and cash balances 19,967 21,482 -------------- --------------- 28,226 27,350 -------------- ---------------Total assets 50,997 47,713 ============== =============== LiabilitiesCurrent Liabilities Trade creditors 2,882 1,213 Deferred income 880 829 Loans 15 10 -------------- --------------- 3,777 2,052Long Term Liabilities Loans 131 131 Deferred taxation 649 1,726 -------------- --------------- 780 1,857 -------------- ---------------Total liabilities 4,557 3,909 Shareholders• equityIssued capital 13 151 150Share premium 56,039 55,902Options reserve 429 341Merger reserve 51 51Accumulated losses (10,256) (12,663) -------------- ---------------Total shareholders• equity 46,414 43,781 Minority interest 11 26 23 -------------- ---------------Liabilities andShareholders• Equity: 50,997 47,713 ============== =============== The accompanying notes are an integral part of this balance sheet.These financial statements were approved by the Directors on 25th September 2006.\* T \* TINTERIM SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS(US $€000s) 1 January 1 January 2005 2006 to 30 to 30 June June 2006 2005 (reviewed) (reviewed) ------------ --------------- Cash flows from operating activitiesOperating result 2,406 (2,334)Adjusted for:Minority interest 70 58Interest receivable (569) -Interest charged 7 62Dividends receivable (684) -Taxation charge (1,060) 50Cost of share options exercised 88 58Depreciation and amortisation 754 649Loss on disposal of fixed assets - -Increase in debtors and receivables (2,274) (2,652)Increase/(decrease) in creditors & payables 1,416 2,569Taxation paid (12) - ------------ ---------------Net cash used in operating activities 142 (1,540) Cash flows from investing activitiesPurchase of subsidiary (1,708) -Purchase of property, plant and equipment (866) (678)Acquisition of intangibles (288) (449)Investments - (792) ------------ ---------------Net cash used in investing activities (2,862) (1,919) Cash flows from financing activitiesProceeds from long-term borrowings - -Repayment of long-term borrowings (10) (1,035)Proceeds of equity financing 138 27,780Dividends received 515 -Interest received 569 -Interest paid (7) - ------------ ---------------Net cash from financing activities 1,205 26,745 Net Increase in cash (1,515) 23,286Cash at the beginning of the period 21,482 6,783 ------------ ---------------Cash at the end of the period 19,967 30,069 ============ ===============\* T \* TINTERIM SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS• EQUITY(US $€000s) Attributable to equity holders of the company --------------------------------------------------------- Issued Additional Options Merger Accum. Total capital capital/share reserve reserve losses equity (Note premium 15) (Note 15) ----------------------------------------------- ---------I January 2005 (audited) 120 29,703 260 51 (10,279) 19,855 Share capital issued 30 30,720 - - - 30,750 Cost of share capital issued (4,521) - - - (4,521) Cost of share option - - 94 - - 94 Loss for the period - - - - (2,543) (2,543) Minority interest (58) (58) ----------------------------------------------- ---------30 June 2005 (reviewed) 150 55,902 354 51 (12,764) 43,693 Cost of share option - - (13) - - (13) Profit for the period - - - - 66 66 Minority interest 35 35 ------------------------------------------------------------------31 December 2005 (audited) 150 55,902 341 51 (12,663) 43,781 Share capital issued - - - - - - Exercise of share options 1 137 - - - 138 Cost of share option - - 88 - - 88 Profit for the period - - - - 2,477 2,477 Minority interest (70) (70) ----------------------------------------------- --------- 30 June 2006 (reviewed) 151 56,039 429 51 (10,256) 46,414 =============================================== =========\* T £ NOTES (US $€000s) £ 1. Rambler Companies and Principal Activities £ Rambler Media Limited was incorporated in Jersey on 10 June 2004 as aprivate limited company. It was formed to act as a holding vehicle for the mediainterests controlled by First Mercantile Net Ventures Fund Ltd. During the yearended 31 December 2004, the directors of Rambler decided to seek a listing onthe London AIM market. In anticipation of this event the status of the companywas changed to that of a public limited company on 18 October 2004. The InitialPublic Offering took place on 15 June 2005. £ The Rambler Group provides a diversified and integrated Russian languagemedia, entertainment and content service with operations in three main segments:Internet services, Mobile Value Added Services and Television Broadcasting. £ Rambler Media Limited has its registered office at First Island House, PeterStreet, St. Helier, Jersey JE2 4SP. Its principal place of business is 26Leninskaya Sloboda Ulitsa, Moscow, Russian Federation. £ 2. Principal Accounting Policies £ a) Basis of preparation £ The interim financial statements have been prepared in accordance with theaccounting policies set out in the Group's financial statements for the yearended December 2005. The interim financial statements are unaudited but havebeen reviewed by the auditors. £ The Group•s financial report including financial statements and notesthereto is prepared in compliance with IAS 34 (Interim Financial Reporting). Theinterim financial report should be read in conjunction with the annual financialstatements for the year ended 31 December 2005. £ The following new standards, amendments to standards and interpretations aremandatory for financial year ending 31 December 2006: £ Amendment to IAS 19, 'Actuarial gains and losses, group plans anddisclosures', This interpretation is considered by the Directors to be notrelevant for the Group; £ Amendment to IAS 21, Amendment 'Net investment in a foreign operation', Thisamendment is considered by the Directors to be not relevant for the Group; £ Amendment to IAS 39, Amendment 'Cash flow hedge accounting of forecastinter-group £ transactions', This amendment is considered by the Directors to be notrelevant for the Group; £ Amendment to IAS 39 and IFRS 4, Amendment 'Financial guarantee contracts', .This amendment is considered by the Directors to be not relevant for the Group; £ IFRS 6, 'Exploration for and evaluation of mineral resources',. Thisstandard is considered by the Directors to be not relevant for the Group; £ IFRIC 4, 'Determining whether an arrangement contains a lease', Thisinterpretation is considered by the Directors to be not relevant for the Group; £ IFRIC 5, 'Rights to interests arising from decommissioning, restoration andenvironmental £ rehabilitation funds', . This interpretation is considered by the Directorsto be not relevant for the Group; and £ IFRIC 6, 'Liabilities arising from participating in a specific market -waste electrical and electronic equipment', This interpretation is considered bythe Directors to be not relevant for the Group. £ b) Basis of consolidation £ The financial statements consist of Rambler Media Limited (the Company) andits respective subsidiary undertakings (the Group). On the acquisition of abusiness, including an interest in a subsidiary undertaking, fair values areattributed to the Group•s share of net separable assets. Where the cost ofacquisition exceeds the fair values attributable to such net assets thedifference is treated as purchased goodwill and capitalised in the balance sheetin the year of acquisition. £ 3. Turnover £ All proceeds are receivable in the ordinary course of business and arerecorded exclusive of Value Added Tax. £ 4. Seasonality of the business £ Interim operations are subject to regular seasonal reduction of all lines ofbusiness in January of each year due to the Russian Federation nationalholidays. The significant reduction in January turnover indices in comparisonwith December figures occurs annually. £ 5. Labour costs £ The Group has measured the expected cost of and obligation for accumulatedcompensated vacation reserve up to 30 June 2006 at USD 272 thousand, includingall applicable social taxes at the estimated average annual effective tax rate. £ 6. Leasehold Improvements and Equipment \* T Leasehold Office Television Vehicles Total improvements equipment equipment ----------------------------------------------------------------------Cost31 December 2004 516 3,293 1,391 4 5,204 Additions 17 641 20 - 678Disposals - (41) - - (41) ----------------------------------------------------------------------30 June 2005 533 3,893 1,411 4 5,841 Additions 8 944 90 - 1,042On acquisition of subsidiary 8 30 176 - 214Disposals - (22) (51) - (73) ----------------------------------------------------------------------31 December 2005 549 4,845 1,626 4 7,024 Additions 41 792 33 - 866On acquisition of subsidiary 67 21 - - 88Disposals - - - - - ----------------------------------------------------------------------30 June 2006 657 5,658 1,659 4 7,978 ---------------------------------------------------------------------- Accumulated Depreciation31 December 2004 194 955 427 2 1,578 Charge 35 366 93 1 495Disposals - (1) - - (1) ----------------------------------------------------------------------30 June 2005 229 1,320 520 3 2,072 Charge 160 743 227 1 1,161On acquisition of subsidiary 1 2 26 - 29Disposals - (23) - - (23) ----------------------------------------------------------------------31 December 2005 390 2,042 773 4 3,209 Charge 36 442 166 - 644On acquisition of subsidiary 28 7 - - 35Disposals - - - - - ----------------------------------------------------------------------30 June 2006 454 2,491 939 4 3,888 ---------------------------------------------------------------------- Net book amount 30 June 2006 203 3,167 720 - 4,090 ====================================================================== 31 December 2005 159 2,803 853 - 3,815 ======================================================================\* T £ 7. Intangible Assets \* T Domain Broadcast Software and Goodwill Total and network other trade intangibles names -------------------------------------------------------Cost31 December 2004 985 8,572 480 571 10,608(audited) -------------------------------------------------------30 June 2005 985 8,572 428 571 10,556(reviewed) -------------------------------------------------------31 December 2005 931 13,626 642 571 15,770(audited) -------------------------------------------------------30 June 2006 (reviewed) 935 13,684 782 2,502 17,903 =======================================================\* T £ 8. Financial Assets \* T 1 January 2006 to 1 January 2005 30 June 2006 to 30 June (reviewed) 2005 (reviewed) ----------------- --------------- ZAO Begun 771 771Other 7 7 ----------------- --------------- Total 778 778 ================= ===============\* T £ In December 2004 the Company entered into an agreement with the thenshareholders of ZAO Begun to purchase 25% plus 1 share of ZAO Begun for $750,000and an option to purchase an additional 25% of the shares. The purchase wascompleted in March 2005 but the option has yet not been exercised. The majorityshareholder of ZAO Begun has an option to sell an additional 50% minus 1 sharein the event that the Company exercises the option. The Company spent anadditional $21,000 on completing the transaction. £ Dividends are declared by ZAO Begun based on profits generated and not atany set rate. £ ZAO Begun is treated as an investment as the Company has no significantfinancial or operational influence over the company. Dividend income receivedfrom ZAO Begun is included in other income. £ It is not practical to determine the fair value of this investment, otherthan to state that fair value is believed by management to significantly exceedthe cost at which the investment is included in these financial statements dueto the dividends received to date and therefore it is not possible to forecastdividend yield from the Company. £ 9. Revenue and Other Income £ Revenue is comprised: \* T 1 January 2006 1 January 2005 to to 30 June 2006 30 June 2005 (reviewed) (reviewed) --------------- --------------- Internet 11,439 5,198Television 2,354 962Mobile Value Added Services 1,324 1,868 --------------- --------------- 15,117 8,028 =============== ===============\* T \* T 1 January 2006 1 January 2005 to to 30 June 2006 30 June 2005 (reviewed) (reviewed) --------------- --------------- Barter included in revenue: 514 - --------------- ---------------Other income • dividends from ZAO Begun 684 - --------------- ---------------Interest income 569 - --------------- ---------------\* T £ Periodically, the Company engages in barter transactions for marketing orother services. Barter revenue (revenue from advertising time provided inexchange for services) is recognized only if the services received are of adissimilar nature and if the revenue has economic substance and can be reliablymeasured. Exchanges of similar advertising services are not recognized asrevenue. £ Revenue from barter transactions is recognized at the fair value of servicesreceived, adjusted by the amount of any cash transferred. £ If Rambler Companies enter into a barter transaction where dissimilaradvertising services are exchanged then revenue is measured at the fair value ofthe advertising services provided, in accordance with Standing InterpretationsCommittee (•SIC•) 31 •Revenue • Barter Transactions Involving AdvertisingServices•. £ 10. Operating expenses £ Operating expenses comprise: \* T 1 January 2006 1 January 2005 to to 30 June 2006 30 June 2005 (reviewed) (reviewed) ---------------- --------------- Labour 6,494 4,324Content and transmission 1,569 885Commissions and partner fees 2,031 2,143Management charge - -Rent 552 429Legal and professional 1,055 438General expenses 671 325Share Options 88 58Depreciation 645 546Amortisation 109 103Marketing and advertising 1,356 368Other 376 559 ---------------- --------------- Total Operating expenses 14,946 10,178 ================ ===============\* T £ 11. Segmental Information £ The segmental results for the six months ended 30 June 2006 are as follows: \* T Internet Services TV Mobile VAS Total ----------------- ------------- --------------- ---------------Total Revenue 12,323 2,154 1,324 15,801Operating expenses and overheads (9,391) (3,813) (1,742) (14,946) ----------------- ------------- --------------- --------------- Net profit/(loss) before interest, tax and minority interest 2,932 (1,659) (418) 855 ================= ============= =============== ===============\* T £ The segmental results for the six months ended 30 June 2005 are as follows: \* T Internet Services TV Mobile VAS Total ----------------- ------------- --------------- --------------- Total Revenue 5,198 962 1,868 8,028Operating expenses and overheads (5,012) (2,514) (2,652) (10,178) ----------------- ------------- --------------- --------------- Net profit/(loss) before interest, taxation and minority interest 186 (1,552) (784) (2,150) ================= ============= =============== ===============\* T £ 12. Minority interest \* T Total -------------- As at 1 January 2006 23 Arising on purchase of Price.ru (111) Purchase of minority interest of Infoproject 44 Share of results of OOO Business-Studio for the six months 2006 (49%) (4) Share of results of Price.ru for the six months 2006 (49%) 74 --------------As at 30 June 2005 26 ==============\* T £ 13. Profit and loss per Share £ Profit/(loss) per share has been calculated as follows: \* T 2006 2005Net profit/(loss) 2,407 (2,334) Issued shares 15,017 14,976 ------------ ------------- Profit/(loss) per share USD 0.16 USD (0.16) ============ ============= Fully diluted profit (loss) per share has been calculated as follows: Net profit/(loss) 2,407 (2,334) Issued shares 15,017 14,976Shares over which options have been issued 343 315 ------------ ------------- 15,360 15,291 ------------ ------------- Fully diluted profit/(loss) per share USD 0.16 USD (0.15) ============ ============= Weighted average number of basic and diluted shares 14,966 13,611\* T £ 14. Share Capital £ The share capital of the Company at the balance sheet date expressed in USD(not thousands) is comprised as follows: \* T 2006 2005 ------------ ------------- ------------ -------------Authorised ordinary shares of USD 0.01 each (20 million shares) 200,000 200,000 ------------ ------------- Issued and fully paid share capital ordinary shares of USD 0.01 each 150,165 149,757 ------------ -------------\* T £ 15. Acquisitions £ Price.ru £ In January 2006, the Company acquired a 51% interest in Price Express, aleading Russian price comparison internet company. £ 16. Post Balance Sheet Events £ Purchase of Damochka.ru and BannerBank £ On 18 July 2006 the Group executed a share sale and purchase agreement witheHouse Holding for the purchase of 51% of a leading Russian social networkinternet company Damochka.ru and 51% of the online banner exchange companyBannerBank. The Group retains the option to acquire the remaining 49% of bothcompanies for three months. Copyright Business Wire 2006