Mail.ru Group Limited Unaudited IFRS results for Q2 2019

MP4 replay

  Mail.ru Group Limited (MAIL.LI, hereinafter referred to as "the Company" and together with its subsidiaries “Mail.ru Group” or "the Group"), one of the largest companies in the Russian-speaking Internet market, today releases unaudited IFRS results and segment financial information for the three and six months ended 30 June 2019.

Performance highlights*

Excluding Delivery Club and ESforce on a pro-forma basis, for the three months ended 30 June 2019:

–    Q2 2019 Group aggregate segment revenue grew 22.9% YoY to RUB 20,045 million.

–    Q2 2019 Group aggregate segment EBITDA grew 21.6% YoY to RUB 7,220 million.

–    Including non-cash impairment charge of RUB 630 million in Q2 2019 and non-cash impairment charge of RUB 1,698 million in Q2 2018, Group aggregate net profit in Q2 2019 increased 71.8% YoY to RUB 3,240 million. Ex these charges, net profit grew 8.0% YoY.

Excluding Delivery Club and ESforce on a pro-forma basis, for the six months ended 30 June 2019:

–    H1 2019 Group aggregate segment revenue grew 22.4% YoY to RUB 39,463 million.

–    H1 2019 Group aggregate segment EBITDA grew 6.4% YoY to RUB 12,747 million.

–    Including non-cash impairment charge of RUB 630 million in Q2 2019 and non-cash impairment charge of RUB 1,698 million in Q2 2018, H1 2019 Group aggregate net profit increased 14.4% YoY to RUB 6,117 million. Ex these charges, net profit declined 4.2% YoY.

Net debt position as of 30 June 2019 was RUB 472 million.

* Performance highlights are based on the Group aggregate segment financial information, which is different from IFRS accounts. See "Presentation of Aggregate Segment Financial Information”.

Commenting on the results of the Group, Dmitry Grishin, Chairman of the Board, and Boris Dobrodeev, CEO (Russia) of Mail.ru Group, said:

“2019 is a transformational year for us and we have made significant progress. The structure of our ecosystem is now clear and we have brought in a number of very high quality strategic partners. These partners, with both capital and expertise, will help us achieve the market leadership and diversification in businesses like ecommerce, food delivery, ride-hailing and esports where we see major long-term potential for value creation. These verticals fit well into the eco-system we are developing centered around our communication platforms.

At the same time, we are excited to report that the overall business is also performing well despite the more challenging macro and significant base effects for the core advertising and games businesses.

Total revenues in Q2 2019 grew 22.9% YoY to RUB 20,045m.
Advertising revenues in Q2 2019 grew 22.5% YoY to RUB 8,417m.
MMO revenues in Q2 2019 grew 28.8% YoY to RUB 6,858m.
Community IVAS revenues in Q2 2019 grew 7.5% YoY to RUB 3,898m.
Other revenues in Q2 2019 grew 77.2% YoY to RUB 872m.

As part of our FY 2018 results release we stated that we are examining various strategic options for our O2O businesses and we are pleased to report that Sberbank will invest with us into an O2O-focused company based around Delivery Club and Citymobil, with a post-money valuation of up to USD 1.7bn. This allows us to add as much as USD 1bn of new capital into the leading food delivery business and rapidly rising ride-hailing company, while also combining financial expertise to the mix of our customer, restaurant, taxi park and driver offering.

Given significant synergies between Youla and the whole ecosystem as well as tangible progress in improving the economics of the business, we took a decision to not deconsolidate Youla and as such we are pleased to report including Youla in our headline numbers going forward.

FY 2019 assumes H2 weighted revenue growth and better profitability, especially in 4Q, driven by Games. While we see the advertising market being more challenging in 2019 than it was in 2018 we continue to expect that advertising will show solid growth as budgets continue to shift online from all other media.

At the beginning of the year we gave guidance of 18-22% revenue growth and EBITDA of 32-34bn on an IFRS 16 basis excluding Delivery Club and Youla. As a result of the formation of our new partnerships, ESforce (which in 2018 had revenues of RUB 2.7bn and EBITDA of RUB 0.7bn) and Delivery Club are now both assets held for sale. We will retain Youla and hence now give guidance including Youla, but excluding ESforce and Delivery Club. As such we now forecast FY 2019 revenue growth of 22-24% or RUB 86-88bn on a pro-forma basis. Youla will have EBITDA losses of around RUB 2bn in 2019 and hence we now expect FY 2019 EBITDA of around RUB30bn.

In 2019 we continue to focus on our leadership position in the core Social and Communications segment as we build the base for leadership in Russian social commerce on the back of the transformational AliExpress Russia transaction. We would like to reiterate our longer-term goals of doubling VK revenues in the next 3-4 years and are pleased with the fact that VK continues to show growth in user numbers and engagement with healthy revenue growth despite a significant base effect from the last 4 years, with revenues quadrupling over that period.

Our Games segment continues to increase its global reach, now joined by ESforce, and we are confident in our H2 pipeline. Looking into the future, we aim to double Games EBITDA in 4 years and we anticipate we will benefit from synergies with ESforce as the partnership with Modern Pick gains traction.

In Q2, the cash generating capacity of our business remained unchanged and cash conversion was as expected. As a result, our net debt position, post M&A costs, at the end of Q2 2019 was RUB 472m. As previously stated with the M&A related investments we will utilize bank lines for near term cash management. To date, we have utilized RUB 8.5bn in credit lines, with an average effective interest rate of 9%.

Strategy & focus areas

Our strategy remains unchanged and the recent transactions are fully in line with this. We remain committed to building the leading domestic Internet ecosystem, centered around our Social and Communication segment, which we aim to control and where we engage users for significant, and rising, amounts of time. Around the core, there will be a number of verticals, which will serve to complement the user experience with our particular focus on high-frequency services. Many of these are in development phase and hence sit within our New Initiatives segment. Some of these will be wholly owned, in others we will hold significant stakes. The partnerships aim to combine resources and expertise, while providing investment capabilities necessary to lead the Russian digital transformation within various verticals. These partnerships will benefit from access to Mail.ru Group’s eco-system and will also allow us to offer the widest possible number of products to the local user who is at the core of our everyday thinking.

The games unit is at the heart of our global ambitions and over the last few years we have successfully internationalized our products and in Q2 2019 69% of games revenues was international. On 16 July we announced a partnership with Modern Pick based around our esports business and this marks another step closer towards this goal and should unlock broader synergies between the core Games division and esports in the coming years.

Advertising technology

myTracker, an analytics platform for mobile apps, has doubled the number of connected devices in the past two years. In June it became one of the global pioneers in predictive app user life-time value (LTV) forecasting, with post download and cross-device analysis.

We have launched targeted video ads on Smart TVs. We also launched direct deals between advertisers and publishers to manage ad campaigns on our myTarget platform. We have simplified targeting settings with the ability to edit lists of queries for contextual targeting. We have improved the measurement of our potential reach prior to ad campaign launch and released a new format of short out-stream ads on our NativeRoll video ad network. We have further enhanced dynamic remarketing ad product. We have also refreshed geo-targeting tools, which help to optimize marketing campaigns.

Our overall focus remains on ad delivery optimization (oCPM), improvement of context targeting, geo-targeting, performance retail, with the aim to further expand our own advertising network (which accounts for ~15% of ad revenues) and small and medium-sized enterprise (SME) advertiser base. Despite our market share gains in the past 3 years, we still only account for 16% of domestic digital market and hence believe there is significant room for further market share gains in the long-run given the continuous investments we make into underlying ad tech.

Segmental highlights

Communications and Social

Communications and Social segment revenues grew 12.9% in Q2 to RUB 11,656m driven by continued growth in all of the major engagement metrics.

VK

Despite competition, a more mature user base and the ongoing shift to mobile, overall Russian MAU grew by 2.4% YoY to 70m as of June 2019, including 62.6m on mobile (+5.8% YoY). Stickiness increased as well, as DAU has been growing faster than MAU. 42% of Russians use VK daily, while VK’s monthly reach is 81% of local Internet users and 85% of those using social networks[1]. VK was ranked as 12th most visited website globally by Ahrefs.

Engagement continues to rise. VK has now surpassed 10bn in daily messages delivered (+53% YoY in Q2), with VK targeting to further expand its social reach by launching chats in communities where the volume of sent messages was up 159% YoY during the quarter. Other communication products are also showing solid dynamics, with live stream views up 109% YoY as of Q2 18, while the number of posted streams increased by 258% YoY. VK allowed users to add links to VK internal content to mobile streaming sessions. Growth in Stories also continued, with views up 59% YoY during the quarter.

~80m people consume video on VK monthly, with ~650m views daily, ~80% of which come from mobile devices. As of Q2, video views were up 51% YoY, accelerating from the 38% growth seen during Q1. We are pleased with the rise in video consumption and have started to test personalized video recommendations inside the VK mobile app.

Since the launch of video and voice calls in Q2 18, the number of monthly calls increased by 72% YoY to 50m as of Q2 19.

VK continues to focus on improving its advertising technologies and refining the opportunities and cost-efficiencies, in order to attract more businesses to develop on VK. These efforts led to a significant increase of CTR YTD, and we have also successfully managed to lower cost per lead (CPL) by 13% YTD, markedly improving return on investment (ROI) - which helps us to grow market share and increase revenues.

VK is testing a big update of its business platform with changes in navigation, statistics including personalized output, ability to track new parameters like CPL, video views etc, mass editing of ads and additional statistics data. Users can now track statistics for any time frame, easily top up and browse through campaigns.

We continue to invest resources into functionality with the broader launch of local news feeds, discover thematic feeds, enhanced group and business page menus, which serve to enhance capabilities and add functionality for businesses. VK started testing calls to users from groups/communities and launched a podcast hosting service. VK now allows users to manage comments in posts more efficiently, allowing admins to highlight key comments and better manage discussions.

VK is focused on stimulating and promoting user-generated-content (UGC), having launched a platform where users can search for musicians, artists, designers etc. Content creators can place their portfolios on the platform. We also aim to further improve our music offering, including experiments around event promotion with ticket sales functionality within VK.

It has been nearly a year since VK launched the VK Mini Apps platform, which now offers >5,000 active services and allows users to complete tasks without leaving VK including topping up their transport card, ordering food or taxis, dating, looking for a job etc. Among the integrations in Q2 was one with Citymobil which is available to users across all cities in which Citymobil has presence. Users are able to order a cab within VK, share the cost of the ride with friends, pay for the ride via VK Pay to benefit from a special discount. Mini Apps is an open platform so anyone can offer an app. VK Mini Apps have >10m MAU, with significant room for further expansion. There are also plans around the integration of Mini Apps with the VK ad network to be able to better monetize their audience.

Ecommerce integrations will also be among the major priorities for H2. According to Data Insight, 44% of all Internet users in Russia already make purchases on VK. We are also focused on making VK the key platform in Russia associated with payment through QR codes, with 160,000 scans in Q1, rising to >1m in Q2.

OK

OK MAU at 43 million monthly active users in Russia as of Q2 remains largely stable despite seasonality.

OK remains focused on ramping up the use of communication services. The social network’s own virtual services encourage users to communicate more actively thus increasing retention and IVAS usage. In May 2019, a number of unique recipients of virtual gifts in OK increased ~3x YoY, with the number of unique recipients of messages growing by over 30%. DAU sending stickers and postcards has also risen 5x YoY up to 5m users.

OK is focused on the improvement of the user experience, having launched the new ML-algorithm for newsfeed ranking and quick user feedback, with a new AI algorithm used for matching potential friends, revamped new user onboarding bot, launched join links for chats and a AI-based customer generated user avatar.

In Q2 OK has launched its own ads manager, a powerful tool that allows SMEs and content creators to run and manage ads. The launch follows OK’s strategy to develop small and medium-sized businesses. OK continues to upgrade Groups for business: starting from June 2019, group administrators can upload 5 times as much information as before.

Mobile HTML5 games in OK also demonstrated good growth. In January-May 2019, OK paid RUB 200m to games developers, a two-fold increase compared to the same period last year. The number of gamers in the social network has more than doubled.

In Q2 OK retained its leadership in the online video market. In April 2019, Brand Analytics, an independent market research firm, named OK the number one platform in Russia in terms of video uploads among both social networks and video services for the second year in a row. OK also continues to develop tools for creating interactive videos through its creative studio. Videos with interactive annotations (quizzes, polls, links embedded to the player) gained over 50m views per day. Overall, OK has 870m daily video views including 130m streams.

OK recognizes the rising popularity of video formats having launched a vertical video format, allowing authors, media and advertisers to publish videos filmed in portrait mode, which will be shown to users in vertical form, therefore making content consumption more comfortable for the user. The new format is also available for advertisers in myTarget.

OK also continues to work on expanding its partnerships and stimulating business activities. Integration with AER will be a big focus for OK in H2, particularly in Q4.

Music

The music subscriber base in the integrated BOOM app has grown to 2.5m in July, up from 2.1m as of Q1 19. Music is an important driver of user retention and is among the key components of our eco-system for users and hence, as previously stated, we will be putting an additional investment of around RUB 0.5bn into our content offering in 2019.

Email

Mail.ru remains the largest e-mail service in Russia with 103m active accounts. Our email service now predicts users' interests and makes recommendations to unsubscribe from unwanted newsletters. This behavior based approach doubled the total number of unsubscribe actions, minimizing clutter in users’ mailboxes. We also introduced smart cards for emails with event information and options to add to the calendar or navigate to the venue and we are now testing “order a taxi” option within such messages.

As a part of our long term focus on data privacy and security we are shifting away from passwords towards one-time codes delivered via SMS or push. It is now available as an option for 20% of the mobile audience. We have also rolled out a new security checkup for all web users, which resulted in users making stronger passwords (+20% QoQ), adding their phone numbers and alternative email addresses (+66% QoQ).

Mobile audience share of our email service surpassed desktop in 2018, at 60% today, with a growing share of mobile only users. To satisfy the growing needs of this audience we updated navigation and completely redesigned Android and iOS applications as of the end of H1.

All this supports the user base of our email service, which remains in a strong leadership position in Russia and Russian speaking segment of the internet worldwide, with ~27m MAU (Desktop + Mobile, May) vs ~19m for Gmail or ~17m for Yandex Mail. DAU was +7% YoY in May to 12m including 33% growth for mobile (to 6.4m) according to Mediascope. 

According to data from App Annie, the Group’s email service leads in terms of mobile downloads, with ~2x download gap to 2nd largest competitor on iOS and ~4x on Android.

Games

Q2 Gaming segment revenues grew by 33.7% to RUB 7,544m, driven by ongoing strong performance of existing titles as well as new launches. We continue to grow materially faster than the global games market despite the nearly doubling of games revenues in 2017-18.

During Q2 our games division was rebranded under MY.GAMES, with all existing and new titles moving to a single brand.

We continue to broaden our internal talent pool and diversify our offering in terms of genres and geographies, with 13 internal studios in our portfolio and 18 studios in the pipeline within our investment arm called MRGV.

We remain committed to broadening our global reach, with 69% of revenues coming from international markets, up from 67% as of Q1. At this stage, we are selling our games across >190 countries. The US, Germany and Japan continue to be our largest markets. Asia remains a major international opportunity, especially China. Our overall goal is to become even more global and draw 80% of revenues from international markets by the end of 2022.

Our share of mobile revenues continues to rise, to above 60% of revenues as of Q2 vs 59% in 2018. Share from PC may be increased in the near-term with the European launch of the open-beta of Conqueror’s Blade in June as well as the anticipated launch of Lost Ark in late 2019. The demo version of Lost Ark was tested at the end of May with a very positive reception. We have also announced a new strategy mobile game - American Dad! Apocalypse Soon, developed in partnership with FOX Next, which is scheduled for release this fall. Additionally, we are garnering interest from studios around target development of a AAA console shooter.

Hustle Castle remains our most successful in-house developed gaming project. As of the end of Q2 2019, the game surpassed 47 million installs.

War Robots is now entering the more mature phase of its lifecycle (>133m installs) and as such the game presents us with a significant EBITDA opportunity. Going forward we will further rationalize marketing expenses and focus on maximizing EBITDA. This is a function of the age of the title and in line with our strategy

Warface remains among our top F2P games on the PS4 in the US in terms of downloads. The Mars version of Warface for PC was launched in June, with the Sunrise version for X1 and PS4 expected to be released in the near-term and a mobile version of the game in the pipeline for the end of 2019.

Left to Survive, another title developed in-house and released in July 2018, is now our number 4 revenue generating game with ~15m downloads (similar scale to Hawk). Tacticool is also progressing well, with >7m downloads.

MY.GAMES will also be launching its own new gaming and media platform and will continue to organize gaming festivals and esports tournaments around its games, with >200 Warface competitions organized since 2013 with online viewership exceeding 100m users.

As ever, the margin of our gaming business is a function of the mix between different platforms and the timing of marketing spend for the new titles. Our Games profitability is expected to continue to improve through the year and be particularly Q4 weighted, which is the normal cycle for our games business.

Our longer-term goal remains to double Games EBITDA over the next 4 years while aiming for a low to mid 20’s EBITDA margin through the cycle. This is despite the expected further increase in the mobile share of revenues.

To provide a better understanding of our Games division we hosted a detailed teach-in on the segment at the end of May, with a related presentation and MP4 replay available on our website.

New initiatives and partnerships

The New Initiatives segment revenue in Q2 2019 grew 147.0% YoY to RUB 961m on the back of continued progress being made in Youla monetization.

Delivery Club

In Q2 2019, Delivery Club doubled revenues YoY to RUB 865m, with the continuation of the trends we have seen in Q1 and the business is on track to deliver a twofold revenue increase in 2019.

We continue to expand our partner network, now exceeding 10,500 restaurants vs 9,400 at the end of Q1. We also continue our restaurant connection rollout across top-3 local QSRs (McDonald’s, KFC, Burger King), among others.

Our reach has now expanded to 120+ cities. During Q2 we rolled out own delivery to seven additional cities, including Saratov, Chelyabinsk, Omsk, Voronezh and Sochi increasing our total to 18, which means that we are starting to provide own delivery in cities with a population of below 1 million people in addition to the full coverage of the largest Russian cities. In Q2 2019, the volume of orders delivered by our own logistics service grew by 4.2 times YoY and exceeded 40% of total orders. We aim to expand own delivery to 30+ cities by the end of the year, which assumes further growth in 1P in the short-run, albeit we seek a balanced operational model over the longer term.

Our major focus continues to be on the improvement of the efficiency of logistics and order processing. During Q2 we launched “Alan”, a demand forecasting system with artificial intelligence. Overall, we are committed to a further shortening of delivery times and providing the fastest delivery in the market.

During Q2, Delivery Club has updated its mobile app for customers, restaurants as well as couriers. It now enables customers to choose whether they want to add plastic utensils to their order, create a list of favorite restaurants and quickly receive feedback from customer support service via an in-app chat. Delivery Club has also launched a new B2B product - an API for partners allowing them to take orders on their websites and provide delivery utilizing Delivery Club couriers.

We are seeing a significant shift in customer behavior such as rising order frequency, smoothing out of peak hours, and interest in a more varied diet. We believe that changing consumer habits will be the basis for rapid growth of the market in the future, with food delivery set to become a daily habit of Russians. Alongside our partner Sberbank we therefore reiterate our strong commitment to Delivery Club and its market leadership. Following the signing of the partnership agreement, the asset is booked as held for sale in IFRS accounts until deal closing (expected in the coming months), with exclusion on pro-forma basis from management accounts as of today’s results.

Youla

The Youla rebranding was positively accepted by experts and by users. During Q2 2019 Youla acquired Worki (jobs board) in order to boost own positions in the jobs vertical, which was launched in Q2 2018 and which doubled its MAU by the end of H1 2019.

Solid growth continued in Q2 2019 with revenue reaching RUB 455m, which is 1.9x growth over Q2 2018. Overall, Youla remains on track to deliver ~RUB 2bn in revenues in 2019, and we remain committed to the classifieds vertical as core to our eco-system. 

ESforce

The biggest event of Q2 for ESforce was EPICENTER Major in Dota 2, organized by Epic Esports Events in Moscow on June 22-30 with USD 1m in prize money. The event had ~ 46m views ex China across multiple platforms, with a > 15m unique audience, including >50% coming from Russian streams by the RuHub, a platform owned by ESforce, with streaming offered in 21 different languages. The final round of the tournament (June 28-30) had a physical audience of 31,102. Virtus.Pro, owned by ESforce, finished 3rd with USD 100,000 in prize money, which placed them among the top-10 teams globally in prize money won during H1 2019. Separately, RuHub became a top-10 platform globally and the first ever from Russia in terms of views on Twitch.

We have announced that we are contributing a 51% stake in ESforce to Modern Pick in exchange for a stake in the combined company. ESforce was valued at USD 110m as part of the transaction (>USD 120m adjusting for disposals). Since the announcement, Modern Pick signed a binding purchase agreement around Slightly Mad Studios (SMS), which offers a track record of development of racing hits, including Project CARS franchise and Need for Speed for Electronic Arts. We are very excited about the new partnership and the potential it offers for deeper synergies between the combined business and our core Games division as well as our ability to transform ESforce into a global business. Following the signing of the partnership agreement around the 51% stake in ESforce with Modern Pick, the asset is classified as held for sale in IFRS accounts until deal closing (expected in the next few months), with an exclusion on a pro-forma basis from management accounts as of today’s results.

Cloud

Mail.ru Cloud Solutions (MCS), our B2B-cloud business, is growing at a triple digit rate. To further scale it, we launched a Digital Technology division where Cloud solutions, Tarantool, communication and other internally developed tools are being offered as a broad digital product solution to corporates, with particular focus on large clients.

MCS received certification from the international Cloud Native Computing Foundation (CNCF), with the Group’s Kubernetes platform becoming the first in Russia to achieve Certified Kubernetes — Hosted certification. Mail.ru Group has also joined the Linux Foundation and CNCF, which should allow global IT specialists to gain access to Russian technology.

The Group also announced its entry into the private cloud market given rising corporate focus on data security and launched Cloud Managed Services, which allows companies to outsource their IT services.

On the B2C market, Cloud Mail.ru remains the leader in terms of mobile app downloads, according to data from App Annie.

Mail.ru Group Tech Lab including Marusia

In June we launched our Marusia voice assistant. During the beta test period Marusia can search for information (answer questions, show current weather, find movie tickets etc), help with routine tasks (calculate, turn on your music, find tickets or create simple reminders) and socialize with users (make toasts or jokes, make small talk, play games and entertain kids with fairytales and riddles).

There are significant synergies between Marusia and the wider Group. The unique level of integration with existing services will provide it with access to the largest content source across the Russian web: unique integration with social networks VK & OK (with the largest number of paying music subscribers), functional services (ordering food (Delivery Club), mobility services (Citymobil)) and other features.

Looking ahead, we plan to put more resources behind our initiatives in new technologies as part of Mail.ru Group Tech Lab, with a particular focus on artificial intelligence, speech and visual recognition, including implementation of those for voice powered features and products. We always focused on delivering the best user experience and being on the edge of the technological trends. Mail.ru Group Tech Lab is accumulating expertise to develop technologies and come up with product solutions that will be paramount for our eco-system in the years to come.

This year we don’t expect these projects to have any material revenues and Mail.ru Group Tech Lab will have a cost of between RUB 1-1.5bn (included into FY 2019 EBITDA guidance).

Ecommerce including AER

As announced in June we have now signed the definitive agreements for the launch of AER JV in Russia/CIS. Since then further progress has been made and we expect the launch to happen in the coming months. Dmitry Sergeev has been nominated to the position of Co-CEO of AER, along with the head of AliExpress, Liu Wei. We expect further integration with our social networks and further collaboration in distribution. There are clear strategic opportunities for Mail.ru Group and AER going forward.”

Conference call and webcast

The management team will host an analyst and investor conference call and webcast at 12.00 UK time / 7.00 NY / 14.00 Moscow, on Thursday 25th July 2019, including a Question and Answer session.

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

Participant Toll Free Telephone Numbers:

Confirmation Code: 6706793

From Russia     8 800 500 9283

From the UK     0800 358 6377

From the US     888-254-3590

To join the audio webcast from your laptop, tablet or mobile device, please click on the following link:

Event Link

For further information please contact:

Investors:

Tatiana Volochkovich
Phone: +7 495 725 6357 extension: 3434
Mobile: +7 905 594 6604
E-mail: t.volochkovich@corp.mail.ru

Press:

Olga Zyryaeva
Mobile: +7 (925) 347-83-81
E-mail: o.zyryaeva@corp.mail.ru

Cautionary Statement regarding Forward Looking Statements and Disclaimers

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 (MAIL.LI, listed since November 5, 2010) is the largest internet business in Russia in terms of total daily audience (Mediascope Web Index, desktop and mobile, Russia, population aged 12-64 in the cities 100,000+, May 2019).

Mail.ru Group is developing the leading domestic internet communications and entertainment platform. The сompany owns Russia’s two largest Russian language social networks, VKontakte (VK) and Odnoklassniki (OK), leading email service, one of Russia’s largest internet portals (Mail.ru), and three instant messaging services. Mail.ru Group’s gaming portfolio under MY.GAMES brand includes Russia's largest MMO games and global mobile games. In 2019, Mail.ru Group Tech Lab was launched with a primary focus on technology and innovation development.

Filing of the Interim Condensed Consolidated Financial Statements for Q2 and H1 2019

The Group's interim condensed consolidated financial statements for the three and six months ended 30 June 2019 prepared in accordance with IFRS and accompanied by an independent auditor's review report have been filed on the National Storage Mechanism appointed by the Financial Conduct Authority and can be accessed at http://www.morningstar.co.uk/uk/NSM or on the Group’s website at http://corp.mail.ru/media/files/mail.rugroupifrsq22019.pdf.

Group Aggregate Segment Financial Information*

RUB millions

Q2

2018

Q2

2019

YoY

H1

2018

H1

2019

YoY

Group aggregate segment revenue (1)

     

 

 

 

Online advertising

6,870

8,417

22.5%

13,359

16,244

21.6%

MMO games

5,325

6,858

28.8%

10,445

13,289

27.2%

Community IVAS

3,626

3,898

7.5%

7,520

8,099

7.7%

Other revenue**

492

872

77.2%

915

1,831

100.1%

Total Group aggregate segment revenue

16,313

20,045

22.9%

32,239

39,463

22.4%

       

 

 

 

Group aggregate operating expenses

     

 

 

 

Personnel expenses

3,378

4,358

29.0%

6,632

8,610

29.8%

Office rent and maintenance

39

54

38.5%

76

123

61.8%

Agent/partner fees

3,573

4,784

33.9%

7,052

9,325

32.2%

Marketing expenses

2,505

2,622

4.7%

4,792

6,387

33.3%

Server hosting expenses

177

184

4.0%

334

367

9.9%

Professional services

91

172

89.0%

238

324

36.1%

Other operating (income)/expenses, excl. D&A

611

651

6.5%

1,139

1,580

36.1%

Total Group aggregate operating expenses

10,375

12,825

23.6%

20,263

26,716

31.8%

Group aggregate segment EBITDA (2)

5,938

7,220

21.6%

11,976

12,747

6.4%

margin, %

36.4%

36.0%

 

37.1%

32.3%

 

       

 

 

 

Depreciation, amortisation and impairment*** (3)

3,578

2,864

-20.0%

5,385

5,000

-7.1%

Other non-operating income (expense), net

26

-193

-842.3%

79

-236

-398.7%

Profit before tax (4)

2,386

4,163

74.5%

6,670

7,511

12.6%

Income tax expense (5)

500

923

84.6%

1,322

1,394

5.4%

Group aggregate net profit (6)

1,886

3,240

71.8%

5,348

6,117

14.4%

margin, %

11.6%

16.2%

 

16.6%

15.5%

 

 

Note 1: Group aggregate segment financial information for Q2 and H1 2018 has been retrospectively adjusted to account for pro-forma inclusion of UMA and pro-forma exclusion of Pandao.

Note 2: Group aggregate segment financial information for Q2 and H1 2018 and Q1 2019 has been retrospectively adjusted to account for pro-forma exclusion of Delivery Club and ESforce.

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

(**) Including Other IVAS revenues.

(***) Including the impairment of Skyforge in the amount of RUB 630m in Q2 2019 and impairment of Armored Warfare in the amount of RUB 1,698m in Q2 2018.

(1)  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.

(2)  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 Group's operating segments including allocated Group’s corporate expenses, and eliminating intra-segment and inter-segment expenses. See "Presentation of Aggregate Segment Financial Information".

(3)  Group aggregate depreciation, amortisation and impairment expense is calculated by aggregating the depreciation, amortisation and impairment expense of the subsidiaries consolidated as of the date hereof, excluding amortisation and impairment of fair value adjustments to intangible assets acquired in business combinations.

(4)  Profit before tax is calculated by deducting from Group aggregate segment EBITDA Group aggregate depreciation, amortisation and impairment expense and adding/deducting Group aggregate other non-operating incomes/expenses primarily consisting of interest income on cash deposits, interest expenses, dividends from financial and available-for-sale investments and other non-operating items.

(5)  Group aggregate income tax expense is calculated by aggregating the income tax expense of the subsidiaries consolidated as of the date hereof. Group aggregate income tax expense is different from income tax as would be recorded under IFRS, as (i) it excludes deferred tax on unremitted earnings of the Group's subsidiaries and (ii) it is adjusted for the tax effect of differences in profit before tax between Group aggregate segment financial information and IFRS.

(6)  Group aggregate net profit is the (i) Group aggregate segment EBITDA; less (ii) Group aggregate depreciation, amortisation and impairment expense; less (iii) Group aggregate other non-operating expense; plus (iv) Group aggregate other non-operating income; less (v) Group aggregate income tax expense. Group aggregate net profit differs in significant respects from IFRS consolidated net profit. See "Presentation of Aggregate Segment Financial Information".

Operating Segments

We have changed the composition of the reporting segments in order to better reflect Group’s strategy, the way the business is managed and units’ interconnection within its eco-system. From the first quarter of 2019 the Group has identified the following reportable segments on this basis:

  • Communications and Social;
  • Games; and
  • New initiatives.

The Communications and Social segment includes email, instant messaging and portal (main page and media projects). It earns substantially all revenues from display and context advertising. This segment also aggregates the Group’s social network Vkontakte (VK) and two other social networks (OK and My World) and earns revenues from (i) commission from application developers based on the respective applications’ revenue, (ii) user payments for virtual gifts, stickers and music subscriptions and (iii) online advertising, including display and context advertising. It also includes Search and music services (UMA). These businesses have similar nature and economic characteristics as they are represented by social networks and online communications, common type of customers for their products and services and are regulated under similar regulatory environment.

The Games segment includes online gaming services, including MMO, social and mobile games operated by the Group. It earns substantially all revenues from (i) sale of virtual in-game items to users, (ii) royalties for games licensed to third-party online game operators and (iii) in-game advertising.

The New initiatives reportable segment represents separate operating segments aggregated in one reportable segment given the similar nature of newly acquired and dynamically developing businesses. This segment primarily consists of Youla classifieds earning substantially all revenues from advertising and listing fees. Maps.me, Geek Brains, B2B new projects including cloud as well as Mail.ru Group Tech Lab initiatives are booked here along with other services, which are considered insignificant by the CODM for the purposes of performance review and resource allocation.

Each segment's EBITDA is calculated as the respective segment's revenue less operating expenses (excluding depreciation and amortisation and impairment of intangible assets), including our corporate expenses allocated to the respective segment.

Operating Segments Performance – Q2 2019

RUB millions

Communications and Social

Games

New initiatives

Eliminations

Group

Revenue

         

External revenue

11,598

7,487

960

 -

20,045

Intersegment revenue

58

57

1

 (116)

 -

Total revenue

11,656

7,544

961

 (116)

20,045

Total operating expenses

5,349

6,125

1,467

 (116)

12,825

EBITDA

6,307

1,419

 (506)

 -

7,220

EBITDA margin, %

54.1%

18.8%

-52.7%

 

36.0%

Net profit

       

3,240

Net profit margin, %

 

 

 

 

16.2%

Operating Segments Performance – Q2 2018

RUB millions

Communications and Social

Games

New initiatives

Eliminations

Group

Revenue

         

External revenue

 10,281

 5,643

 389

 -

 16,313

Intersegment revenue

 39

 -

 -

 (39)

 -

Total revenue

 10,320

 5,643

 389

 (39)

 16,313

Total operating expenses

 4,152

 5,008

 1,254

 (39)

 10,375

EBITDA

 6,168

 635

 (865)

 -

 5,938

EBITDA margin, %

59.8%

11.3%

-222.4%

 

36.4%

Net profit

       

 1,886

Net profit margin, %

 

 

 

 

11.6%

Operating Segments Performance – H1 2019

RUB millions

Communications and Social

Games

New initiatives

Eliminations

Group

Revenue

         

External revenue

 23,103

 14,427

 1,933

 -

 39,463

Intersegment revenue

 68

 77

 1

 (146)

 -

Total revenue

 23,171

 14,504

 1,934

 (146)

 39,463

Total operating expenses

 10,339

 13,333

 3,190

 (146)

 26,716

EBITDA

 12,832

 1,171

 (1,256)

 -

 12,747

EBITDA margin, %

55.4%

8.1%

-64.9%

 

32.3%

Net profit

       

 6,117

Net profit margin, %

 

 

 

 

15.5%

Operating Segments Performance – H1 2018

RUB millions

Communications and Social

Games

New initiatives

Eliminations

Group

Revenue

         

External revenue

 20,536

 10,994

 709

 -

 32,239

Intersegment revenue

 93

 -

 1

 (94)

 -

Total revenue

 20,629

 10,994

 710

 (94)

 32,239

Total operating expenses

 8,341

 9,280

 2,736

 (94)

 20,263

EBITDA

 12,288

 1,714

 (2,026)

 -

 11,976

EBITDA margin, %

59.6%

15.6%

-285.4%

 

37.1%

Net profit

       

 5,348

Net profit margin, %

 

 

 

 

16.6%

Note 1: Group aggregate segment financial information for Q2 and H1 2018 has been retrospectively adjusted to account for pro-forma inclusion of UMA and pro-forma exclusion of Pandao.

Note 2: Group aggregate segment financial information for Q2 and H1 2018 and Q1 2019 has been retrospectively adjusted to account for pro-forma exclusion of Delivery Club and ESforce.

Liquidity

As of 30 June 2019, the Group had RUB 8,054 million of cash and RUB 8,526 million of debt outstanding. The Group’s net debt position was RUB 472 million.

Presentation of Aggregate 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 Group'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 Group's consolidated financial statements in accordance with IFRS. In particular:

  • The Group'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 Group's subsidiaries, including for periods prior to the acquisition of control of the entities in question. 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.

A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Group for the three months ended 30 June 2018 and 2019 is presented below:

RUB millions 

Q2 2019

Q2 2018

Group aggregate segment revenue, as presented to the CODM

20,045

16,313

Adjustments to reconcile revenue as presented to the CODM to consolidated revenue under IFRS:

 -

 -

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

795

763

Differences in timing of revenue recognition

 (1,242)

 (1,592)

Barter revenue

62

7

Dividend revenue from venture capital investments

7

16

Consolidated revenue under IFRS

19,667

15,507

A reconciliation of Group aggregate segment EBITDA to IFRS consolidated profit/(loss) before income tax expense of the Group for the three months ended 30 June 2018 and 2019 is presented below:

RUB millions 

Q2 2019

Q2 2018

Group aggregate segment EBITDA, as presented to the CODM

7,220

5,938

Adjustments to reconcile EBITDA as presented to the CODM to consolidated profit/(loss) before income tax expenses under IFRS:

 -

 -

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

 (1,502)

 (1,418)

IFRS 16 implementation

 -

 (882)

Differences in timing of revenue recognition

 (1,032)

 (1,446)

Net gain on venture capital investments

314

16

Share-based payment transactions

 (492)

 (499)

Other

 -

14

EBITDA

4,508

1,723

Depreciation and amortisation

 (3,153)

 (2,438)

Impairment of intangible assets

 (630)

 (1,698)

Share of loss of equity accounted associates

 (258)

 (132)

Finance income

169

88

Finance expenses

 (324)

 (1)

Other non-operating income/(loss)

 (60)

28

Net loss on derivative financial assets and liabilities at fair value through profit or loss

 (206)

 (283)

Gain on re-measurement of previously held interest in equity accounted associate

276

 -

Reversal of impairment of equity accounted associates

111

 -

Net gain on disposal of intangible assets

400

 -

Net foreign exchange gain/(loss)

 (215)

139

Consolidated profit/(loss) before income tax expense under IFRS

618

 (2,574)

A reconciliation of Group aggregate net profit to IFRS consolidated net profit/(loss) of the Group for the three months ended 30 June 2018 and 2019 is presented below:

RUB millions

Q2 2019

Q2 2018

Group aggregate segment net profit, as presented to the CODM

3,240

1,886

Adjustments to reconcile net profit as presented to the CODM to consolidated net profit/(loss) under IFRS:

 -

 -

Share-based payment transactions

 (492)

 (499)

Differences in timing of revenue recognition

 (1,032)

 (1,445)

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

 (1,413)

 (1,374)

IFRS 16 implementation

 -

112

Amortisation of fair value adjustments to intangible assets

 (787)

 (1,326)

Net gain/(loss) on financial instruments at fair value through profit or loss

108

 (267)

Gain on re-measurement of previously held interest in equity accounted associate

276

 -

Net gain on disposal of intangible assets

400

 -

Net foreign exchange gain/(loss)

 (215)

139

Share of loss of equity accounted associates

 (258)

 (132)

Reversal of impairment of equity accounted associates

111

 -

Other

 (22)

 (19)

Tax effect of the adjustments and tax on unremitted earnings

381

379

Consolidated net profit/(loss) under IFRS

297

 (2,546)

A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Group for the six months ended 30 June 2018 and 2019 is presented below:

RUB millions 

H1 2019

H1 2018

Group aggregate segment revenue, as presented to the CODM

39,463

32,239

Adjustments to reconcile revenue as presented to the CODM to consolidated revenue under IFRS:

 -

 

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

1,160

1,109

Differences in timing of revenue recognition

 (3,517)

 (2,774)

Barter revenue

71

11

Dividend revenue from venture capital investments

8

16

Consolidated revenue under IFRS

37,185

30,601

A reconciliation of Group aggregate segment EBITDA to IFRS consolidated loss before income tax expense of the Group for the six months ended 30 June 2018 and 2019 is presented below:

RUB millions 

H1 2019

H1 2018

Group aggregate segment EBITDA, as presented to the CODM

12,747

11,976

Adjustments to reconcile EBITDA as presented to the CODM to consolidated loss before income tax expenses under IFRS:

 -

 -

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

 (3,707)

 (2,570)

IFRS 16 implementation

 -

 (1,730)

Differences in timing of revenue recognition

 (2,749)

 (2,528)

Net gain/(loss) on venture capital investments

323

 (23)

Share-based payment transactions

 (803)

 (2,222)

Other

12

10

EBITDA

5,823

2,913

Depreciation and amortisation

 (6,138)

 (4,823)

Impairment of intangible assets

 (630)

 (1,698)

Share of loss of equity accounted associates

 (551)

 (132)

Finance income

312

265

Finance expenses

 (527)

 (16)

Other non-operating loss

 (117)

 (5)

Net gain/(loss) on derivative financial assets and liabilities at fair value through profit or loss

 (316)

395

Gain on re-measurement of previously held interest in equity accounted associate

161

 -

Reversal of impairment of equity accounted associates

111

 -

Net gain on disposal of intangible assets

400

 -

Net foreign exchange gain/(loss)

 (934)

309

Consolidated loss before income tax expense under IFRS

 (2,406)

 (2,792)

A reconciliation of Group aggregate net profit to IFRS consolidated net loss of the Group for the six months ended 30 June 2018 and 2019 is presented below:

RUB millions

H1 2019

H1 2018

Group aggregate segment net profit, as presented to the CODM

6,117

5,348

Adjustments to reconcile net profit as presented to the CODM to consolidated net loss under IFRS:

 -

 -

Share-based payment transactions

 (803)

 (2,222)

Differences in timing of revenue recognition

 (2,749)

 (2,528)

Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale

 (3,475)

 (2,496)

IFRS 16 implementation

 -

215

Amortisation of fair value adjustments to intangible assets

 (1,566)

 (2,656)

Net gain on financial instruments at fair value through profit or loss

7

373

Gain on re-measurement of previously held interest in equity accounted associate

161

-

Net gain on disposal of intangible assets

400

 -

Net foreign exchange gain/(loss)

 (934)

309

Share of loss of equity accounted associates

 (551)

 (132)

Reversal of impairment of equity accounted associates

111

 -

Other

 (7)

 (16)

Tax effect of the adjustments and tax on unremitted earnings

133

568

Consolidated net loss under IFRS

 (3,156)

 (3,237)

Selected Operating Statistics

► Mail.ru Group is holding the lead in Russian internet (Mediascope, Russia, cities 100k+, age 12-64, daily active users, May 2019).

► MMO average monthly payers amounted to 1,186 thousand users in H1 2019 (the numbers combine paying users of individual MMO and mobile games and may include overlap).

Consolidated IFRS Statement of Financial Position

RUB millions

June 30, 2019
(unaudited)

December 31, 2018
(audited)

ASSETS

 

 

Non-current assets

 

 

Investments in equity accounted associates

1,282

2,816

Goodwill

138,103

140,446

Right-of-use assets

5,832

-

Other intangible assets

18,830

20,759

Property and equipment

7,488

7,050

Financial assets at fair value through profit or loss

2,629

2,015

Deferred income tax assets

3,420

4,793

Other non-current assets

266

1,684

Total non-current assets

177,850

179,563

Current assets

 

 

Trade accounts receivable

9,145

9,916

Prepaid expenses and advances to suppliers

531

1,123

Financial assets at fair value through profit or loss

973

1,072

Other current assets

898

1,353

Cash and cash equivalents

8,054

11,723

Total current assets

19,601

25,187

Assets held for sale

18,289

32

TOTAL ASSETS

215,740

204,782

     

EQUITY AND LIABILITIES

   

Equity attributable to equity holders of the parent

   

Issued capital

-

-

Share premium

59,266

58,482

Treasury shares

 (921)

 (286)

Retained earnings

103,514

106,685

Accumulated other comprehensive income/(loss)

139

 (165)

Total equity attributable to equity holders of the parent

161,998

164,716

Non-controlling interests

634

259

Total equity

162,632

164,975

Non-current liabilities

   

Deferred income tax liabilities

2,102

2,405

Deferred revenue

12,295

12,397

Non-current lease liability

1,982

-

Long-term interest-bearing loans and borrowings

7,084

-

Total non-current liabilities

23,463

14,802

Current liabilities

   

Trade accounts payable

6,819

8,263

Income tax payable

510

893

VAT and other taxes payable

1,529

1,430

Deferred revenue and customer advances

10,439

8,809

Short-term portion of long-term interest-bearing loans

1,442

-

Financial liabilities at fair value through profit or loss, current

32

-

Short-term lease liability

3,081

-

Other payables, accrued expenses and contingent consideration liabilities

3,970

5,610

Total current liabilities

27,822

25,005

Liabilities directly associated with assets held for sale

1,823

-

TOTAL LIABILITIES

53,108

39,807

TOTAL EQUITY AND LIABILITIES

215,740

204,782

Consolidated IFRS Statement of Comprehensive Income

RUB millions

Q2 2019
(unaudited)

Q2 2018
(unaudited)

H1 2019
(unaudited)

H1 2018
(unaudited)

Online advertising

8,595

7,299

16,342

13,867

MMO games

5,674

3,768

10,384

7,521

Community IVAS

3,896

3,453

7,618

7,296

Other revenue

1,502

987

2,841

1,917

Total revenue

19,667

15,507

37,185

30,601

 

 

 

 

 

Net gain/(loss) on venture capital investments

314

16

323

 (23)

         

Personnel expenses

 (5,105)

 (4,345)

 (9,870)

 (9,788)

Office rent and maintenance

 (58)

 (624)

 (124)

 (1,222)

Agent/partner fees

 (5,761)

 (4,053)

 (10,728)

 (7,586)

Marketing expenses

 (3,391)

 (3,442)

 (8,547)

 (6,528)

Server hosting expenses

 (173)

 (507)

 (343)

 (973)

Professional services

 (230)

 (130)

 (372)

 (285)

Other operating expenses

 (755)

 (699)

 (1,701)

 (1,283)

Total operating expenses

 (15,473)

 (13,800)

 (31,685)

 (27,665)

EBITDA

4,508

1,723

5,823

2,913

         

Depreciation and amortisation

 (3,153)

 (2,438)

 (6,138)

 (4,823)

Impairment of intangible assets

 (630)

 (1,698)

 (630)

 (1,698)

Share of loss of equity accounted associates

 (258)

 (132)

 (551)

 (132)

Finance income

169

88

312

265

Finance expenses

 (324)

 (1)

 (527)

 (16)

Other non-operating gain/(loss)

 (60)

28

 (117)

 (5)

Net gain/(loss) on derivative financial assets and liabilities at fair value through profit or loss

 (206)

 (283)

 (316)

395

Reversal of impairment of equity accounted associates

111

-

111

-

Net gain on disposal of intangible assets

400

-

400

-

Gain on re-measurement of previously held interest in equity accounted associate

276

-

161

-

Net foreign exchange gain/(loss)

 (215)

139

 (934)

309

Profit/(loss) before income tax expense

618

 (2,574)

 (2,406)

 (2,792)

Income tax benefit/(expense)

 (321)

28

 (750)

 (445)

Net profit /(loss)

297

 (2,546)

 (3,156)

 (3,237)

Attributable to:

       

Equity holders of the parent

318

 (2,551)

 (3,151)

 (3,247)

Non-controlling interest

 (21)

5

 (5)

10

Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods

       

Exchange differences on translation of foreign operations:

       

     Differences arising during the period

 (26)

3

304

 (65)

Total other comprehensive income/(loss) net of tax effect of 0

 (26)

3

304

 (65)

Total comprehensive income/(loss), net of tax

271

 (2,543)

 (2,852)

 (3,302)

Attributable to:

       

Equity holders of the parent

292

 (2,548)

 (2,847)

 (3,312)

Non-controlling interest

 (21)

5

 (5)

10

Earnings/(loss) per share, in RUB:

       

Basic earnings/(loss) per share attributable to ordinary equity holders of the parent

1

 (12)

 (15)

 (15)

Diluted earnings/(loss) per share attributable to ordinary equity holders of the parent

1

 (12)

 (15)

 (15)

Consolidated IFRS Statement of Cash Flows

RUB millions

H1 2019
(unaudited)

H1 2018
(unaudited)

Cash flows from operating activities:

   

Loss before income tax

 (2,406)

 (2,792)

Adjustments to reconcile loss before income tax to cash flows:

   

Depreciation and amortisation

6,138

4,823

Impairment losses on financial assets at amortized cost

164

8

Net (gain)/loss on venture capital investments

 (323)

23

Net (gain)/loss on financial assets and liabilities at fair value through profit or loss

316

 (395)

Net gain on disposal of intangible assets

 (400)

-

Gain on re-measurement of previously held interest in equity accounted associate

 (161)

-

Finance income

 (312)

 (265)

Finance expenses

527

16

Dividend revenue from venture capital investments

 (8)

 (16)

Share of loss of equity accounted associates

551

132

Reversal of impairment of equity accounted associates

 (111)

-

Impairment of intangible assets

630

1,698

Net foreign exchange (gain)/loss

934

 (309)

Share-based payment expense

803

2,222

Other non-cash items

21

 8

Change in operating assets and liabilities:

-

-

(Increase)/decrease in accounts receivable

240

 (95)

(Increase)/decrease in prepaid expenses and advances to suppliers

 (149)

630

(Increase)/decrease in inventories and other assets

415

 (219)

Decrease in accounts payable and accrued expenses

 (1,133)

 (13)

(Increase)/decrease in non-current prepaid expenses and advances

15

 (131)

Increase in deferred revenue and customer advances

2,726

2,572

Increase in financial assets at fair value through profit or loss

 (1,730)

 (1,675)

Operating cash flows before interest, income taxes and contingent consideration settlement

6,747

6,222

Dividends received from venture capital investments

7

16

Settlement of contingent consideration of business combination

 (688)

-

Interest received

251

286

Interest paid

 (270)

 (13)

Income tax paid

 (2,017)

 (1,413)

Net cash provided by operating activities

4,030

5,098

Cash flows from investing activities:

 

 

Cash paid for property and equipment

 (2,048)

 (2,151)

Cash paid for intangible assets

 (1,186)

 (757)

Dividends received from equity accounted associates

71

19

Loans issued

 (204)

 (71)

Loans collected

354

-

Cash paid for acquisitions of subsidiaries, net of cash acquired

 (7,543)

 (7,502)

Settlement of initial fair value of the contingent consideration at acquisition date

 (1,132)

 (1,758)

Cash paid for investments in equity accounted associates

 (989)

-

Net cash used in investing activities

 (12,677)

 (12,220)

Cash flows from financing activities:

   

Payment of lease liabilities

 (1,822)

-

Loans received, net of bank commission

8,482

-

Cash paid for treasury shares

 (656)

-

Net cash provided by financing activities

6,004

-

Net decrease in cash and cash equivalents

 (2,643)

 (7,122)

Effect of exchange differences on cash balances

 (404)

316

Cash and cash equivalents at the beginning of the period

11,723

15,371

Cash and cash equivalents at the end of the period relating to continuing operations

8,676

8,565

Change in cash related to asset held for sale

 (622)

-

Cash and cash equivalents at the end of the period

8,054

8,565

[1] Mediacope, Russia, population aged 12-64 in the cities 100k+, May 2019.