Mail Ru Group Ltd : Mail.Ru Group Limited Preliminary Trading Update for Q3 2013

Mail.Ru Group Limited Preliminary Trading Update for Q3 2013

25.10.2013

25 October 2013.  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 markets, today provides an update on the preliminary unaudited segment revenues for Q3 2013.

Q3 2013 Performance Highlights

- Q3 2013 Group aggregate segment revenue grew 32.9% Y-o-Y to RUR 6,599 million (9 month 2013 Group aggregate segment revenue grew 29.9% Y-o-Y)

- Net cash position as of 30 September 2013 was RUR 26,089 million

- Monthly audience(TNS Russia) of Mail.Ru portal in September 2013 reached 33.7 million Russian users 

Key Recent Developments

- Support for third-party email accounts in Mail.Ru email web service and mobile apps for iOS and Android

- Public calendars with interesting information and events in Calendar.Mail.Ru (public holidays, sport events schedule, this day in history, etc.)

- New share box, option to unlike and ability to share posts and photos from groups are available on all mobile apps and mobile web of OK

- Favourites in OK - users can add posts from news feed to favourites

- Enhanced tools for viewing and managing photos in OK (view in a full-screen mode, move to another album and quickly delete photos)

- My World released iOS and Android apps optimized for tablets

- My World introduced groups in Android app and photo section in mobile web version

- Release of mobile game Jungle Heat on iOS (in addition to Android version)

- Launch of new mobile game Lucky Fields on Android

- Target.Mail.Ru launched mobile ad platform

- Target.Mail.Ru introduced cross-device targeting (desktop/mobile) and targeting by OK group members

- Significantly redesigned version of Amigo browser released

- Search.Mail.Ru now adds relevant news headlines on search result page for Ukraine and Kazakhstan

- New design of product listing and product info page in price comparison service Torg.Mail.Ru

- Mail.Ru group sold 2.4 mln shares on Qiwi SPO in October reducing its stake to 10.4% and raising gross proceeds of $73.2 mln

- Jan Bune, formerly senior audit partner at Deloitte NL is appointed to the board as an independent non executive director to replace Marcos Galperin who stands down effective 24th October.

Commenting on the Q3 revenue update, Dmitry Grishin, Co-Founder and CEO of Mail.Ru Group, said:

"I am pleased to report that our company has had another successful period with Mail.Ru Group meeting or exceeding key performance indicators, and hence delivering strong growth across all segments. Compared to Q3 2012, group revenue increased by 32.9% reaching 6,599 million, with 9 month 2013 group revenue growing by 29.9% Y-o-Y.

As in H1 contextual advertising continues to be strong supported by a continued focus on the Target product, and our solid market share in search. In addition in Q3 contextual advertising also benefited from our monetization agreement with Yandex. Going forward we will continue to replace display inventory with Target wherever possible as this is a more efficient use of the advertising inventory. As such, we would expect our contextual revenues to continue to grow faster than display revenues.

As we commented with the H1 results Community IVAS showed good growth in Q3, with the main driver of this being the increase of paying user engagement.

Evidenced by continued Y-o-Y growth in H1 and Q3 we continue to execute on our games strategy. Warface remains an important component of this and continues to see increasing traction in terms of both users and revenues, and during Q3 it remained our top revenue generating game. Jungle Heat, which was released under the my.com brand in June, has also been a successful launch and in Q3 became a material revenue contributor with the US as the largest market, and over 90% of the revenues outside of Russia.

In Q3 we also settled into our new offices and hosted the 2013 Russian Code Cup Final for 50 most talented programmers selected from over 3,500 participants of qualification rounds.

Finally we are pleased to announce that Jan Bune will be joining the board as a new independent non-executive. Jan has outstanding corporate and audit experience and we look forward to him serving on our audit committee. Marcos Galperin stands down and we thank him for all of his contributions.

Looking forward, the structural drivers of our business remain unchanged and hence we look into Q4 2013 with confidence. Given the strong first 9 months and notwithstanding a more uncertain macro environment we are pleased to be able to re-iterate our guidance for FY 2013 revenue growth of 27-29% with contextual advertising and games showing the fastest growth. Despite the effect of the new offices we continue to keep tight control over costs and hence continue to expect that a FY 2013 group EBITDA margin of between 53-54%."

Q3 2013 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 Group'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

As of 30 September 2013, the Group's net cash balance (including term deposits) was RUR 26,089 million, or USD 807 million[1], and the Group had no debt outstanding.

[1] The USD number represents a convenience translation. The RUR amounts have been translated into USD using an exchange rate of RUR 32.3451 to USD 1.00, the official exchange rate quoted as of September 30, 2013 by the Central Bank of the Russian Federation

Conference call

The Mail.ru Group management team will host an analyst conference call at 14.00 UK time (17.00 Moscow time, 9.00 U.S. Eastern Daylight Time), on Friday 25th October 2013, including a Question and Answer session.

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

Confirmation Code: 75392645

Participant Toll Free Telephone Numbers:

Russia Free Phone 81080020972044

UK Free Phone 08448719456

USA Free Phone 18663899778

Standard International Call +44 (0) 1452 542303

Investor Relation Contacts:

Matthew Hammond

Mail.Ru Group

Phone: +971 505 56 1315

E-mail: hammond@corp.mail.ru

Press Contacts:

Ksenia Chabanenko

Phone: +7 916 0906626

E-mail: ks@corp.mail.ru

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 the number of users, comScore). Mail.Ru Group's sites reach approximately 85% of Russian Internet users on a monthly basis (comScore, June 2013) and the Company is the sixth largest Internet businesses globally, based on the number of total pages viewed (comScore, June 2013).

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 Russia's largest internet portal, Mail.Ru (TNS, all Russia, age 12-64, June 2013). The Company operates two of the three largest Russian language social networks, Odnoklassniki (OK) and Moi Mir (My World), and Russia's largest online game business. 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 VKontakte (39.99%) and Qiwi (10.4%). The Company also holds a number of small venture capital investments in various Internet companies in Russia and Ukraine.