Mail Ru : Final audited IFRS results for FY 2015 and preliminary revenue update for Q1 2016

21.04.2016

Mail.Ru Group Limited Final audited IFRS results for FY 2015 and preliminary revenue update for Q1 2016

April 21, 2016. Mail.Ru Group Limited (LSE: MAIL, hereinafter referred as 'the Company' or 'the Group'), one of the largest Internet companies in the Russian-speaking Internet market, today releases its annual report for 2015 and provides the following final audited segment financial information for the year ended 31 December 2015 and preliminary revenue update for Q1 2016.

Performance highlights

• Final audited segment results for FY 2015 are consistent with the preliminary trading statement
  • Group aggregate segment revenue of RUR 36,316m, Group aggregate segment EBITDA of RUR 18,123m and Group aggregate net profit at RUR 9,915m (all numbers ex HeadHunter)
• Q1 2016 Group aggregate segment revenue grew 11.3% Y-o-Y to RUR 9,727m (ex HeadHunter)
• Net cash position ex HeadHunter as of 31 March 2016 was RUR 573m (excluding interest payable of RUR 66m)

Key Recent Developments

• VK major redesign, launched in closed beta for the most loyal users with 1 million early adopters registering for the test within first 3 hours of its launch
• Launch of the enhanced smart newsfeed algorithm on VK
• Launch of Snapster 2.0 with complete redesign and a new concept of photo sharing in 'rooms'
• OK introduced P2P money transfers
• OK released Smart TV video app, introduced ability to create live streams in all groups, enabled video output to TV via Apple AirPlay and Google Chromecast
• OK introduced customizable push notifications for chats in iOS and Android apps
• OK updated groups with text search through all groups' content, group recommendations and ability to subscribe to groups
• Multiple updates of myMail and Mail.Ru email apps for iOS and Android
• Music streaming in Cloud.Mail.Ru app for Android
• Beta release of Mediator, a powerful editorial engine for media to track editorial metrics, and myWidget, a recommendation service that provides content recommendations on the basis of user's interests analysis and activity
• Mail.Ru transforms into Kino.Mail.Ru: relaunch under the new brand with player enabling users to opt for online content provider
• ME introduced in-app editing of OpenStreetMap data and the ability to download specific regions inside any country
• ICQ open-sourced all desktop apps, released its first Linux app, updated Windows app
• Armored Warfare global update including match recording and replays, premium vehicles, balance adjustments, 3 new PvE missions, new PvP map Highwall and social network sharing
• Juggernaut Wars global update including new chapters, heroes levels, battle arenas, new fight animations and heroes skills
• Evolution: Heroes of Utopia global update: numerous improvements and optimizations, new enemies, new story dialogues, French and German language interfaces
• myTarget launched deep-links in Android
• Launch of premium programmatic ad network
• Launch of TV sync, VK and OK promo posts are synchronized in time with TV ads on TNS data
• Launch of API for promoted posts on VK

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

'We are pleased to report our final IFRS audited results for 2015 which, as in previous years, are in line with the preliminary announcement in February. While the macro and geo-political backdrop is substantially unchanged, we have started 2016 with a solid Q1 performance. In Q1 2016, the Company achieved aggregate segment revenue growth of 11.3% Y-o-Y to RUR 9,727 million. To allow like for like comparison all HeadHunter revenues have been excluded from Q1.

We continue to be pleased with the growth in advertising revenues which in Q1 2016 grew 34.0% Y-o-Y to RUR 3,911 million. Visibility remains unchanged but we saw a continuation of the trends in H2 2015 with continued strong demand for our targeted advertising, especially in mobile native ads across our social networks. Growing mobile audience and inventory as well as implementation of ad technologies are driving shift of advertising budgets into mobile. For FY 2016 we expect to see further good growth in this area.

VK engagement and audience continued to see good growth with MAU for the first time reaching over 90m in March 2016, and a record 78% of users accessing via mobile devices. With continued focus on native, and especially mobile advertising, total revenues grew 45.9% in Q1 to RUB 1,879 million. We continue to see significant further opportunities for VK with both an expanding user base and an increasing number of features.

In Q1 2016 our MMO games revenue grew 2.4% Y-o-Y to RUR 2,348 million. Warface remains our largest revenue generating game. We have released a number of new mobile titles and initial user reception has been encouraging. Skyforge and Armored Warfare saw major updates in Q1 which were well received by users. Armored Warfare now has over 5.8m registered users. As previously commented we will be undertaking a number of international marketing campaigns through 2016. Near term focus remains on building the user base, rather than monetisation. Notwithstanding this, Armored Warfare became our second best revenue generating game in Q1. The pipeline is also full and we have further releases in both mobile and desktop planned for later in 2016.

In IVAS, as we have previously commented, our focus remains on improving the user experience and also on fine tuning IVAS mechanics especially on mobile, and hence increasing paying user penetration. As a result of continuing FX headwinds, IVAS revenues declined 2.2% in Q1. We continue to expect FY 2016 IVAS revenues to be broadly in line with 2015.

Our international expansion continues and we remain encouraged by user traction of both myMail and MAPS.ME. myMail continued to gain audience in Q1. The US is the largest market followed by France, the UK, Germany and Italy with MAU reaching 4m in March 2016. MAPS.ME has also seen a number of exciting upgrades and new features which have been popular with users. Total downloads now exceed 40m globally.

We are pleased with strong cash generating capacity of our business. At the end of Q1 2016 we moved into a net cash position of RUR 573 million. As commented at the time of the preliminary full year 2015 results in February, the second tranche of the payment connected to the sale of HeadHunter will be paid by the end of April 2016 and hence will further strengthen our balance sheet.

While the continued challenging macro environment and FX volatility present challenges we are pleased with the solid start to 2016. We are encouraged by the growth in advertising and continue to see a number of exciting opportunities across the business. Based on the start to the year and current visibility and current market conditions, we are pleased to re-iterate our FY 2016 guidance of ex HeadHunter like for like revenue growth of between 8%-14%. As previously stated we will be undertaking further marketing campaigns through 2016, however we continue to maintain effective cost management and as such we continue to anticipate full year EBITDA margins at between 47-49%.'

Current Trading Update*

(*) The numbers in this table and further in the document may not exactly foot or cross-foot due to rounding

(**) Including Other IVAS revenues

Note: Group aggregate segment revenue is calculated by aggregating the segment revenue of the Company's operating segments and eliminating intra-segment and inter-segment revenues. This measure differs in significant respects from IFRS consolidated net revenue. See 'Presentation of Aggregate Segment Financial Information' below.

Liquidity

On ex HeadHunter basis, as of 31 March 2016 the Company had RUR 10,573 million of cash (including term deposits) and RUR 10,000 million of debt outstanding (excluding interest payable of RUR 66 million), therefore the Company's net cash position was RUR 573 million.

Filing of the Annual Report for 2015

The Company's Annual Report and audited consolidated financial statements for the year ended December 31, 2015 prepared in accordance with IFRS and accompanied by an independent auditor's report have been filed on the National Storage Mechanism appointed by the Financial Services Authority and can be accessed at https://corp.mail.ru/media/files/mail.rugrouparfy2015.pdf

A full discussion of the Company's 2015 results is presented on pages 27-36 of the Company's 2015 Annual Report.

Conference call

The management team will host an analyst and investor conference call at 09.00 UK time (11.00 Moscow time), on Thursday 21 April 2016, to discuss details of the Company's performance 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: 86232932
Participant Toll Free Telephone Numbers:
Russia Free Phone 810 800 243 42044
UK Free Phone 080 0073 1340
USA Free Phone 1866 434 1089

For Further Information Please Contact:

Investors
Matthew Hammond
Email: hammond@corp.mail.ru

Press
Madina Tayupova
Email: m.tayupova@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 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 94% of Russian Internet users on a monthly basis (comScore, December 2015) and the Company is the fifth largest Internet business globally, based on the total time spent (comScore, December 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 portal, Mail.Ru (TNS, all Russia, age 12-64, December 2015). The Company operates the three largest Russian language social networks, Vkontakte (VK), Odnoklassniki (OK) and Moi Mir (My World), and Russia's largest online games business (including such gaming titles as Warface, Armored Warfare, Skyforge and Perfect World). The Company's portfolio also includes Mail.Ru Agent and ICQ - two instant messaging services popular in Russia and CIS.

The Company holds minority equity stakes in Qiwi (1.31%) and a number of small venture capital investments in various Internet companies in Russia, Ukraine and Israel.

Presentation of Aggregate Segment Financial Information

The Group aggregate segment financial information is derived from the financial information used by management to manage the Company's business by aggregating the segment financial data of the Company'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 Company's consolidated financial statements in accordance with IFRS. In particular:

• The Company's segment financial information excludes certain IFRS adjustments which are not analysed by management in assessing 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 transactions, disposal of and impairment of investments, business combinations, fair value adjustments, amortisation and impairment thereof, net foreign exchange gains and losses, share in financial results of 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 Company's subsidiaries, including for periods prior to the acquisition of control of the entities in question, so long as the Company 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.

mail.ru Group Ltd. issued this content on 21 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 21 April 2016 06:05:30 UTC

Original Document: https://corp.mail.ru/en/press/releases/9591/