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Mail.ru Group Limited
Audited IFRS results for FY 2019
February 26, 2020. Mail.ru Group Limited (MAIL, 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 audited IFRS results and segment financial information for the year ended 31 December 2019.
Performance highlights*
► On a pro-forma basis, for the three months ended 31 December 2019:
- Q4 2019 Group aggregate segment revenue grew 18.6% YoY to RUB 25,620m.
- Q4 2019 Group aggregate segment EBITDA grew 0.7% YoY to RUB 9,798m.
- Q4 2019 Group aggregate net profit declined -17.6% YoY to RUB 5,671m.
► On a pro-forma basis, for the twelve months ended 31 December 2019:
- FY 2019 Group aggregate segment revenue grew 22.4% YoY to RUB 87,070m.
- FY 2019 Group aggregate segment EBITDA grew 9.6% YoY to RUB 29,752m.
- FY 2019 Group aggregate net profit increased 3.8% YoY to RUB 15,649m.
► Net debt position as of 31 December 2019 was RUB 13,736m.
* 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 has been a pivotal year for us in our strategic goal of transitioning into an Internet ecosystem, to be formed on the basis of our strong and well-diversified product portfolio as well as complementary and well-funded partnerships.
Despite the somewhat challenging macro and significant base effects throughout 2019 for the core advertising and games businesses, they continued to grow strongly.
On a pro-forma basis Q4 2019 revenues grew 18.6% YoY to RUB 25,620mand FY 2019 revenues grew 22.4% YoY to RUB 87,070m. We also note that reported revenues now exclude high-growth businesses in foodtech and ecommerce. We have been putting significant resources behind a number of our new projects, especially Youla, content and MRG Tech Lab, with marketing of two games launches, rollout of an international gaming platform and completion of key partnership transactions in Q4. Even with this taken into account, Q4 2019 EBITDA on a pro-forma basis grew 0.7% YoY to RUB 9,798m, with FY 2019 EBITDA up 9.6% to RUB 29,752m, in line with our guidance.
Total revenues in Q4 2019 grew 18.6% YoY to RUB 25,620m.
Advertising revenues in Q4 2019 grew 24.6% YoY to RUB 11,319m.
MMO revenues in Q4 2019 grew 9.5% YoY to RUB 7,781m.
Community IVAS revenues in Q4 2019 grew 6.9% YoY to RUB 4,360m.
Other revenues in Q4 2019 grew 62.9% YoY to RUB 2,160m.
Despite the backdrop to the 2019 advertising market being more challenging and a high base as a result of FY 2018 growth of >30%, advertising revenue trend remained solid in Q4 and H2 performance was better than H1 (+23.4% vs +21.6% YoY). We continue to benefit from the ongoing shift of budgets online and to social within digital, as we are increasing engagement, improving AdTech and growing ROIs for our clients, a rising number of which are SMEs. Despite the market expectation of a deceleration in digital advertising growth in 2020, we have an ambition to deliver superior result and gain market share for the 4th year in a row. VK will be among pillars for continued growth, having expanded revenues by >20% in 2019 and on track to become the leading local super-app.
Having nearly doubled revenues during the previous two years, including Q4 2018 YoY growth of 36.8% and despite the shift of two Games launches from Q4 2019 into 2020, MMO revenues continued to expand, rising by 9.5% for the quarter (+14% in USD) and 20.1% in FY 2019, which remains above global average. We are confident in our 2020 pipeline as well as continued performance of existing titles, including War Robots, Warface, Hustle Castle and others. We continue to expect Games EBITDA to double versus 2018 level in 2022 with low to mid-twenties margin through the cycle, with broadly similar revenue growth in 2020, despite the expected single digit growth in Q1 2020, based on set launch timeline.
Youla continued its rapid growth, being one of the largest mobile-focused classifieds globally in terms of Android DAU. Having started monetization only in Q4 2017, Youla delivered RUB 2.1bn in revenues in 2019. We want to continue to invest into Youla as we believe in its significant audience growth and monetization potential, including through further synergies with the Group through social and other integrations. We are targeting ~RUB 3.7-4.0bn in revenues for Youla in 2020, with a proportional EBITDA loss of the 2019 level or better.
We are pleased with the performance of our New Initiatives, including Marusia. The Pulse recommendation system launched last January reached 45m MAU and 3.5m DAU in Q4, with 10 minutes in average daily time spent.
In 2019, we managed to complete the two planned major transactions with the AliExpress Russia JV in ecommerce and the O2O JV in food-tech and mobility. We have also signed non-binding documents around Payments JV, which aims to further enhance our ecommerce partnership. Our new partners include Alibaba, the largest ecommerce company globally, and Sberbank, the largest financial institution in Russia, both of which are also now our shareholders, along with Naspers and Tencent.
Now is the time to focus on creating a sound ecosystem via cross-selling and deeper integration of our assets, which we have already started to do through the launch of the Combo loyalty program and a unified Group ID, with a lot more to come in these areas in 2020.
In Q4, the cash generating capacity of our business remained strong, albeit being impacted by funding Delivery Club, Citymobil and Pandao ahead of the JV deals closing. The free cash flow (FCF) generation of our business is expected to normalize in 2020. As previously stated, with the M&A related investments we will utilize bank lines for near term cash management. Our net debt position, post M&A costs (including $100mn contribution for AER JV and RUB 8.6bn contribution to O2O JV), at the end of Q4 2019 stood at RUB 13,736m. We have another $82m contribution to make towards AER JV in October 2020 and a potential RUB 4.6bn payment due to O2O JV in November, subject to KPIs. In Q4 we have utilized RUB 8.5bn in credit lines with an average effective interest rate of 7.2% vs a 7.7% rate on prior borrowing.
Strategic vision & guidance
Our current three-year vision sees a potential for acceleration of revenue growth, but in order to achieve that, we need to put additional resources into technologies and product lines, which will drive engagement and enhance our ecosystem as well as expand our addressable market, including through offline channels.
We aim to focus on ecosystem development, including through increased synergies throughcross-selling and deeper integration of the Group's assets through the Combo loyalty program, a unified Group ID, mini apps and an integrated payment infrastructure. We are transforming VK more and more into the heart of our ecosystem. The VK account will be the foundation for our Group ID, VK Pay is being scaled across the Group, VK Mini Apps will turn into the unified Group platform for developers and VK Super App Software Development Kit will be the technology uniting all these initiatives alongside with the Сombo loyalty offer and Marusia voice technology.
We want to further enhance myTarget advertising tools and expand our advertising network. We want to be active in AI, content and hardware investments and broaden our personalized service offering. We will further develop and actively market our new and promising products (e.g. Youla, Combo, Marusia/Capsule, Pulse, video and music) as drivers of engagement. Among other initiatives, in 2020 we will launch a unified video service for the Group. Sales of Capsule, our smart speaker withMarusia virtual assistant,will launch in the near term. Marusia will also be available as a separate app and will be integrated across the Group's services and used in IOT rollout.
In 2020 we will remain focused on advertising solutions and technologies as well as driving content consumption. Growing effectiveness of our advertising through ongoing AdTech development and innovative new ad products, while attracting new types of advertisers, such as SMEs and offline retailers, and expanding our advertising network are the areas where we will center our efforts in the coming years.
We set our ambitions high and aim to deliver above-market ad revenue growth. We already see a large improvement in conversions from our recent initiatives.
As core to our ecosystem, we will focus on further growth in VK revenues and engagement. We aim to develop VK into a core Russian super-app and boost engagement among audience of 30+. We will invest into VK's content platform (including video and music), messaging, Mini Apps and other areas. We will be extremely focused on growing engagement and time spent. Doubling VK revenues in 2022 vs 2018 levels remains our goal. With VK showing 27.3% revenues growth in 4Q - we are on track. We aim to boost the advertising revenue share on OK. Gaming, social commerce and SME will be in major focus for both of our core social networks, with cross-pollination of video and Mini Apps.
There is a large number of unrealized synergies within the Group, which will be leveraged through the integration of a single ID, a broad loyalty program, and VK Pay across the ecosystem. Our Unified ID service as well as the Combo loyalty program are being rolled out across products as tools that will provide smooth integration, simple authorization and added value to the user. The goal for all services is to be personalized, with smooth and easy navigation among them for the user.
Taking all of the above into account, we are targeting 18-20% revenue growth to RUB 103-105bn for the Group in 2020 as a base case, with a slight decline in EBITDA margin for the C&S segment due to music investments (ex Music margins would be broadly flat). Games margins will be broadly in line with 2019, as ever, subject to the traction of the planned launches. The profitability of the New Initiatives, which account for <10% of Group's revenues, will depend on the success of our ongoing investments across MRG Tech Lab, on which we will update the market as the year progresses. We believe that such a strategic approach will significantly enhance our market position and allow us to exceed current market expectations for mid-term revenues and EBITDA.
The profitability of our business will remain H2 and especially Q4 weighted, driven by Games. Q1 will be the low point of the year in terms of profitability and growth, with significant sequential acceleration expected in both advertising and games in Q2.
We remind that recently deconsolidated projects like Delivery Club and Pandao are now part of AER and O2O JVs and are equity accounted. Both have ambitions to be industry leaders and hence will be in an active investment phase in the coming years.
We remain committed to public markets, and to making it as easy as possible to own our shares. The Board of Directors is actively considering a secondary listing on the Moscow Stock Exchange, with the final announcement to come in due course.
Segmental highlights
Communications and Social
Communications and Social segment revenues grew 17.6% in Q4 to RUB 14,914m, with a 15.4% increase to RUB 50,521m for the year, driven by continued growth in all of the major engagement metrics.
VK
VK remains a strong leader among communication platforms in Russia, with 71.6m MAU (+2.2% YoY), including 65.2m on mobile (+3% YoY) as of December 2019.
VK is focused on boosting time spent and stickiness: up 12.5% in 2019 to 36 minutes per day, including 16% growth on mobile. According to Mediascope, on average users visit VK every second day, much more than any other social network. VK's most active user category remains the 12-24-year-olds, who spend on average 68 minutes per day on the platform. However, we are investing resources into making VK equally relevant to all age groups in our ambition to make VK the main super-app in Russia.
Thanks to more than 200 product updates in 2019 and the development of the VK content platform, engagement continued to rise in 2019, with, amongst others: 1) continued double-digit growth in average daily newsfeed views; 2) +45% in published monthly Stories and authors; 3) +47% in daily live streams; 4) +34% in daily video uploads and over 80m people globally consuming video on VK monthly; 5) +15% in daily messages delivered, to over 10bn; 6) +27% in the monthly number of audio and video calls, to 55m in Dec; 7) +10% in the number of 'Likes'.
VK has been rolling out multiple community tools for interacting with audiences, which led to a 26% increase in the number of active communities on VK to 3m in December. The updates also allowed content creators to earn RUB 1.5bn between November 2018 and October 2019 using VK's monetization tools. Users will soon be able to support content creators and media projects using VK Donut, with monthly content subscriptions and payments processed using VK Pay or payment cards. There will be a 5% commission collected by VK on such transfers at launch.
The VK Mini Apps platform continues to expand rapidly with now over 13,000 active Mini Apps. The platform has seen 14x growth in MAU since January to ~23mn in December. Mini Apps allow users to play games, shop, communicate, order food, look for jobs and much more, all inside the VK ecosystem without having to download third-party apps. Entertainment and Shopping remain the most popular categories, with 15.8m MAU, including over 3m for the AliExpress mini app offering the full range of products available on the AliExpress marketplace, which was launched on VK at the end of August 2019.
QR code usage continues to rise, with over 10m QR code scans in Q4 versus 300,000 in Q1 2019.
VK ad effectiveness continued to increase in 2019: click-through rate (CTR) grew 35% for CPC ads. As for leads ads -- cost per lead (CPL) declined by 50%, and the proportion of lead ads grew 1.5x, following latest optimization. VK added new statistics, improved optimization algorithms, introduced ad auction predictions, launched retargeting using QR codes and updated the ad formats. These updates had a positive effect on advertisers' ROI. Advertisers' average ticket size grew by 12% and the number of advertisers by 17%. VK launched further automation of ad pricing, with advertisers now able to simply set a daily ad budget limit, with the system determining the rate that will allow the ad to achieve maximum reach.
The launch of the new HTML5-based interactive ad format and the development of VK Mini Apps and QR codes have provided opportunities for an even deeper connection between offline and online, increasing the sales of special offers for brands by 40%. The number of active businesses on VK reached the 1m mark thanks to business ecosystem development and the launch of new tools. The introduction of the ability to quickly launch ad campaigns via mobile at the end of 2019, in which a smart system suggests a target audience and budget, significantly simplified the use of ads for SMEs or for those who want to launch campaigns on the go.
All efforts resulted in VK delivering 27.3% revenue growth YoY in Q4, with top-line tracking in line with medium-term guidance of doubling VK revenue in the next 3-4 years versus the level in 2018. We expect to deliver faster growth in VK in 2020 versus 2019 and aim for VK to be the main app for internet users in Russia and CIS, given its ability to meet user aspirations in communication, entertainment and self-realization while addressing key daily needs of businesses and individuals alike.
Stories, video, music, communities, messaging and social commerce are among the key growth areas within social networks, which is why our focus is centered around them. We will also invest resources into bloggers and influencers while continuing to stimulate and promote UGC and PGC through the VK Talents platform. We aim to boost VK Mini Apps penetration and expand the platform throughout Mail.ru Group products while simultaneously establishing VK as the core of the Group's user identification system. We will also invest resources in our key products, including our content platform and messenger, to grow our 30+ year-old audience and increase their engagement. This audience will become one of the drivers of SME and social commerce.
OK
OK audience was stable YoY in 2019, at 43m MAU in Russia, with rising engagement driving +2.8% growth in DAU, including +11% on mobile.Advertising remains one of OK main revenue drivers. Its share in the social network's total revenue increased from low 20-s% in 2014 to over 40% in 2019. 2019 brought a 33.4% increase in the number of advertisers, triggered by the launches of new ad instruments and creative mechanics in ad campaigns on OK. The ad revenue model retains high growth potential. Newsfeed ads including mobile and video are among the most promising areas revenue-wise, particularly driven by the newsfeed's engagement growth, increasing mobile audience and the development of the video platform.
In 2019, OK focused on the enhancement of its features as a communication services platform for sharing true emotions with friends and family. IVAS was one of the key drivers behind engagement growth along with other communication services. OK users exchanged 45bn of virtual gifts (paid and free) in 2019, growing 4x YoY. The number of virtual gift senders grew 45%. On peak days, during national holidays, gift numbers exceeded half a billion per day. The monthly number of stickers and their senders doubled YoY.
OK's mobile gaming platform continues to grow. OK made RUB 3.2bn in total payouts to game developers in 2019, including RUB 600m mobile share, growing 2x YoY.
Thanks to new algorithms, which allow tagging friends on photos and videos, machine learning and neural networks of the news feed, OK posted a record of 240m daily likes. In Q4 2019 OK also set a record of 6m new daily friendships. AI-based friend recommendation algorithms helped to increase monthly friend requests by 50% YoY.
OK was also improving its video call service throughout 2019, resulting in the average daily number of calls growing 56%.Average video viewing time increased by 27% YoY, with OK continuing to successfully monetize own content.In 2019, OK continued to expand the SME ecosystem that resulted in SME-related ad revenues growth 2.2x YoY. In Q4 2019 OK launched new business profiles for entrepreneurs. As of now, over 1m users run business through their OK pages. The ads manager that was launched in Q4 2019 now offers a hyperlocal ad instrument (SuperGeo) for location targeting within a range of 500m-10km. This feature is in high demand among SMEs. Additionally, users with more than 100 friends got access to their profile statistics.
OK's marketplace of Chinese goods underwent a major update, with enhanced personalization algorithms and improved social features, which resulted in 29.4% revenue growth, with over 4.5m in orders made and 42% of users making a second purchase within a month after their initial order. Various AER integrations will be a major focus in 2020.
OK's strategy assumes continued focus on promoting emotional exchange by users via gifs and stickers, with further enhancement of own video, games and business platforms as well as integrations around social commerce.
Games
At 23% for 2019, the growth of our gaming segment continues to outperform the global games market1, with full year revenue of RUB 30,669m. In USD, MMO growth was 14% in Q4 (vs 9.5% in RUB). This is a function of ongoing strength of established titles, including Warface, Hustle Castle and War Robots, as well as recent releases, such as Lost Ark (PC) and American Dad! Apocalypse Soon (Mobile).
Our mobile-focused international expansion is progressing, including through partnerships with regional players. We continue to try to mitigate the hit-driven nature of the gaming business through portfolio diversification in terms of genres and titles, while aiming to maximize returns on investment by growing our major titles into multi-platform franchises and with continued focus on developing our own IP. We have increased the number of users registered in our games by 26% in 2019, to 605m.
We finished the year with 13 in-house studios and 22 studios within our gaming investment arm (MRGV). In 2019, international revenues accounted for 68% of total MMO revenue. The share of mobile revenues stood at 61% in Q4 vs 57% in 2018. Mobile revenue share will further rise towards 80% in the coming 2-3 years.
The Warface franchise continues to perform well, being our top-3 revenue-generating game, supported by community management. In 2018 the franchise expanded to consoles and was among the top F2P games on the PS4 in the US in terms of downloads. We continue to expand Warface's footprint by bringing it to new platforms including the 2020 releases of the first mobile and Nintendo Switch versions. The new mobile game within the Warface franchise - Warface: Global Operations - was delayed from H2 2019 in order to further improve product quality and maximize returns on advertising. A new console game project will launch in Q2 for PS4 and Xbox One. As such, we continue to see Warface as our key franchise.
War Robots (>150m installs) is in a mature phase of its lifecycle and hence is showing EBITDA improvement, which is expected to continue in 2020. Hustle Castle continues to show strong performance, with revenue growth of 36% in 2019, a new daily revenue record of RUB 100m and with 55m downloads at year-end. Over the three years since its release, Hustle Castle continues to be a strong margin generator. The product's metrics remain consistent, and our development team has a full pipeline of updates, with the title core in our portfolio.
American Dad! Apocalypse Soon mobile game, developed in-house in partnership with FOX Next, was launched in November 2019, with 3.6m installs today. Lost Ark MMORPG (licensed from Smilegate) was launched on PC within Russia/CIS in November 2019 and has seen 1.7m in registered users. PC title Conqueror's Blade with its 1.7m registered users at year-end continues to show strong potential for growth on international markets, with an eventful publishing pipeline in 2020. Left to Survive, our own title developed by the WhaleKit studio and released in July 2018, remains among top-5 revenue-generating games with around 15m downloads. Narrative-driven mobile game Love Sick: Interactive Stories from the SWAG MASHA studio remains among top-10 titles with 4m downloads since its launch in February 2019. We will continue to allocate resources to all of these games in 2020.
We launched our international games platform MY.GAMES Store in open beta-test mode in December 2019.
We have a full pipeline of releases for 2020, including from MRGV acquired studios, many of which have games suitable for global launch. These studios are a reflection of MRGV's strategy, where we identify studios at an early development stage, use our marketing and analytics expertise to scale their initial projects and expand their portfolios as part of MY.GAMES. Overall, we believe that our games portfolio, both existing and new releases, is well positioned, with ~100 titles in ongoing operation and over 15 in the pipeline.
Our annual revenue growth rate has already led us to rank among top-50 game companies globally today, with a goal to be among top-25 largest global players in the medium term under the MY.GAMES brand, in which we will be investing.
As ever, the quarterly margin of our gaming business is a function of a mix between different platforms and timing of marketing spend for new and already well-performing titles. We have based our strategy on maximizing efficiency of marketing expenses to guarantee the highest EBITDA for our division. This implies varying levels of spending on audience acquisition for our major mobile titles throughout the year. Q1 is traditionally the most spend-heavy quarter, with reduced spend on user acquisition during the high season (Q4). This allows us to maintain marketing efficiency despite the ensuing decline in new user acquisition into year-end (total MAU declines as a result), while our product metrics remain confidently positive on an annual basis. Q4 2019 games margin was 33% and FY games profitability was 17%.
The focus for 2020 will remain on continuing our expansion internationally and into mobile, which means a ~$150bn (and rising) global revenue opportunity. While continuing to invest in our gaming business, we remain committed to our goal of doubling EBITDA of the Games Division in 2022 versus the 2018 reported level and achieving a low to mid-twenties EBITDA margin throughout the cycle.
1Newzoo, 2019 forecast: 7.2% YoY global games growth, including 9.7% YoY for mobile
New initiatives
The New Initiatives segment revenue in Q4 2019 grew 85.0% YoY to RUB 2,349m, with 126.7% growth to RUB 6,233m for the year. Among key drivers was continued progress in monetization of Youla as well as rising scale of our Cloud, online-education and other new initiatives.
Youla
Solid growth of Youla continued in Q4 2019 with revenue of RUB 708m, +1.7x YoY. It delivered RUB 2.1bn in revenues in 2019, above budget, with a RUB 2bn EBITDA loss, in line with budget. Youla has 27m MAU2and is one of the largest mobile-first classifieds globally3 less than five years since launch.
Most recently, the service launched new AI-based functionality which allows faster upload of new product photos with automatic product identification as well as estimated sales time depending on set price. Youla has become the first classified globally to launch video calls, which allow users to evaluate goods remotely. The functionality was launched through collaboration with OK, leveraging proven technology.
In December, Youla added an option for users to hide their phone number as a measure of privacy and to customize the time frame when calls are allowed, which enhances user satisfaction. Launches of Stories, video and online calls marked additional steps of Youla towards social commerce, which we aim to continue in 2020.
Worki jobs vertical opened a rep office in St. Petersburg to expand its presence in key regions and boost sales. Since its acquisition in May 2019 the number of paying B2B clients has grown by 3x. In Q4 Worki has continued realizing its unique competitive advantages and boosting social features through its integration into VK, where top-100 HR brand communities already have over 3.5 m subscribers. Initial results are very encouraging, with a conversion rate from registration to application of almost 90%. The Worki app on VK, launched in Q3, added interviewing job seekers functionality based on VK messenger. It aims to speed up the recruitment process, since users check VK messages more often than job boards.
Our strategic goal in Classifieds is to remain a mobile-focused technological leader among domestic players with deep attention to security and safety, differentiation through extensive social and ecommerce functionality, accessible through the Group. The near-term focus will be on deeper monetization of general, jobs and services verticals with further expansion beyond high-frequency verticals into higher average check ones. This will require further investment in 2020 with the target to deliver ~RUB 3.7-4.0bn in revenues, with a proportional EBITDA loss similar to 2019 level or better.
2 AIM Group Marketplaces Report, May'19
3Internal statistics on MAU at all platforms
Cloud & B2B Software Development
Our B2B-technology business has surpassed RUB 1bn in revenues in 2019, showing 140% YoY growth.
MRG Tech Lab
Capsule, our Marusia-powered smart speaker will be launched for sale soon. Marusia now has more than 60 skills and will be more deeply integrated with the Group's services throughout 2020.
The Pulse personalized content recommendation platform, launched in January 2019, continues to expand, having reached 45m MAU and 3.5mn DAU in Q4. It is attracting users with over 300,000 unique materials coming from more than 3,000 sources, with average time spent at 10 minutes per user per day. 2020 should show initial monetization results.
In 2020, we will continue to put resources behind our initiatives in new technologies as part of MRG Tech Lab, with a particular focus on artificial intelligence, speech and visual recognition.
Online education (including GeekBrains, Skillbox)
As was planned, in December we exercised an option to gain control in Skillbox educational platform, raising our stake to 60.33%.
Advertising technologies
Mail.ru Group ranks first across all the Internet holdings present in Russia in terms of daily reach4, at ~58.4mn, which means daily access to ~48% of local population and ~72% reach monthly (~88.4mn or~93% of domestic Internet users). Russians spend 168 minutes on mobile on average per day (web+apps)5and key Mail.ru Group platforms account for 17% of this time.
We remain the leading company in terms of media ad sales given our continued focus on technological advancement with differentiation across mobile and desktop platforms and a strong focus on boosting ROIs for advertisers. 69% of Russian Internet users access the Internet through mobile, including 34% exclusively through mobile only (32.8mn people, up 21% YoY), and hence our rising focus on mobile advertising tools.
Multiple enhancements have been done to the myTarget platform: improving of contextual ad lists, updated Look-alike system, launch of multiple accounts access within the platforms. We have expanded video ad monthly impressions by 81% (Dec'19 compared to Dec'18) due to the video network growth and launch of pre-roll ads in the VK app. Contextual targeting has grown 2.2x YoY (compared to Q4 2018).
Overall, we continue to boost efficiency of performance marketing through various channels across the Group's ecosystem, with a particular focus on SMEs. We are enhancing our ad tools while simplifying them.
We are focused on further increasing transparency and trustworthiness of digital advertising and its measurement quality. That is why we improved independent ad campaigns verification available within the myTarget platform, enhancing integration with third parties' verification tools. During 2019 we announced the launch of direct deals between publishers and advertisers on both ad placements and special projects. We launched myTarget App Marketplace for advertising apps and services of AdTech companies. Developers can now integrate their own solutions into the myTarget platform and monetize those providing clients with a broader set of tools and personalized services.
We entered the digital out-of-home (DOOH) market segment, with real-time sociodemographic targeting that allows to automatically choose the most relevant ads according to the profile of the audience in front of the ad panel. We plan to further expand DOOH partners' list and regional network in 2020.
We entered the indoor advertising market in partnership with the leading Russian retail company X5 Retail Group. Advertisers can now run their ads on the loyalty terminals placed inside the stores, using interactive mechanics and maintaining communication with the reached audience in other digital channels, including the myTarget platform. We plan to enhance the tool and expand our exposure to the indoor ad segment and O2O marketing in general in 2020.
We launched our own Data Management Platform (DMP) that united the Group's key marketing solutions, including Social CRM, Notify CRM, Performance Retail platform, etc. With the DMP clients can gather and manage all their audience data as well as activate it in O2O integrated campaigns within our resources.
Partnerships with other market players, expansion of performance-based advertising share, broader SME rollout as well as scaling of our own ad network are among our key strategic priorities in advertising in 2020.
4Mediascope WEB-Index, Russia 0+, age 12+, December 2019.5 Mediascope WEB-Index, Russia 0+, age 12+, December 2019.
Key Partnerships
O2O JV (equal ownership with Sberbank and Mail.ru Group)
On Dec 19th, Sberbank and Mail.ru Group completed the formation of the JV, which aims to create a leading Russian O2O services platform focused on food-tech and mobility.
Delivery Club
Delivery Club revenues were up 128% YoY to RUB 1.47bn in Q4, with RUB 4.46bn in revenues in 2019, up 131% and ahead of target of doubling revenues for the year. Despite the abnormally warm winter, Delivery Club saw 3.35mn in monthly orders in December (+122%YoY). Q4 and Q1 are seasonally strongest quarters, with Q1 shaping to be stronger than Q4, including the new peak of 3.5m in monthly restaurant orders seen in January. Delivery Club is targeting to nearly double its revenues in 2020.
Delivery Club is now present in more than 150 cities and is connected to over 13,700 restaurants. 53% of orders are coming from 1P versus 23% as of Q4 2018. Own delivery is available across 38 cities accounting for ~30% of Russian population. The 1P expansion continues to have a strong positive impact on retention, frequency, and average delivery time. Although 1P will continue to increase in the short-run, we seek a balanced operational model over the longer term to ensure maximum profitability.
Delivery Club's major focus remains on further improvement of the efficiency of logistics and order processing through continuous investment in underlying technologies. It remains committed to providing the fastest delivery in the market and best selection as well as attractive long-term economics. Overall, Delivery Club observes stronger network effect, driven by increased number of restaurant supply, higher order counts and increased marketing and logistics efficiencies, helping to grow the platform.
Delivery Club continues to explore ways to expand our value proposition, which can help them achieve maximum profitability in thelong-run. First dark kitchens were launched in Q4. In December Delivery Club launched express delivery (within 20 minutes) of grocery products, with retailer Verniy and their Bystronom delivery service as our first partner. The service is available in select areas of Moscow. They are pleased with the initial traction, encouraging retention numbers and orders frequency. In 2020, grocery delivery partnership network and geography will be expanded, including most recently through Samokat in St Petersburg. McDonald's opened McCafe Express, its first coffee point within the Sberbank branch. Delivery Club serves as a delivery partner across these projects, with no capital commitment planned at this stage.
Citymobil
Citymobil reached GMV of RUB 3.6bn in December, with RUB 8.9bn GMV in Q4, having rolled out to 17 largest Russian cities in 2019 versus being present solely in Moscow and Yaroslavl as of Q4 2018. Monthly rides for Citymobil in December exceeded 13mn, with 30% growth in rides MoM. For the quarter, rides grew by 3.4x YoY. Citymobil has been seeing 540k in daily rides in recent weeks and remains top-ranked in terms of downloads in Russia in the Travel category6.
Citymobil is targeting at least 3.5x growth in rides in 2020 YoY to at least >250mn.Citymobil continues to target being at least a strong number 2 across all cities of presence. It is already among top-2 across 13 cities of presence, including Moscow7,and is top-3 across all cities of presence.
Citymobil has entered the B2B segment in Moscow with a plan to expand it to regions in 2020, which sets to further improve overall unit economics.
Citymobil will work on further enhancement of its mapping, routing and matching services, along with deeper integration with Sberbank and Mail.ru Group ecosystems as well as other product initiatives.
6.App Store
7Moscow Transportation Department dataAliExpress Russia (AER) JV (15% stake held by Mail.ru Group)
The AER JVin Russia/CIS was launched in October 2019.
AliExpress marketplace platform operated by AER continues to be the leading e-commerce platform in Russia and CIS given the advantages coming from 50m SKU base, a monthly user base of around 25 million in Russia, major brand awareness and a mass market focus. The number of buyers in the AliExpress marketplace in Russia increased by 30% YoY to 24.9m in November,with the acceleration of audience growth driven by the integration of Mail.ru Group's advertising tools and influenced by social commerce.
During the local 11/11 sale AER reported RUB17.2bn in GMV over two days, highest among all ecommerce platforms.AliExpress marketplace was also the most popular app in the shopping category ahead of Black Friday8, with the turnover over the related three-day period rising by 60% YoY, to RUB22.3bn setting a new record and exceeding 1/3 of total ecommerce turnover of Russia for the same period9.
There is rising demand for offering from local sellers, which account for 15% of total sales of AER, rising by ~2x YoY. Some of the major brands were added to TMall in Q4 included LG, Panasonic, Sharp, JBL, Nokia, MegaFon, Samsung.
AER is actively investing into service quality, with all orders in excess of RUB330 (>30% of all orders) now combined and having a single tracking number. AER launched free returns function at AliExpress marketplace in September to stimulate growth in average check and demand in categories like fashion. Cainiao (logistics arm of Alibaba) leased seven aircraft in order to improve direct deliveries to AER, with daily flights between China and Novosibirsk, Yekaterinburg and Moscow, which account for ~70% of AER's turnover. Cainiao also opened another warehouse center. These measures are among multiple steps made towards better shipping and shopping experience on increasing scale and efficiency.
The three top priorities for AER in 2020 include: a) Further enhancement of cross-border AliExpress platform, with a focus on service improvement, particularly around delivery time; b) Further scaling of TMall as the domestic marketplace; c) Development of Social commerce, primarily via the social networks of Mail.ru Group, with VK also providing access to thousands of potential local sellers to be on-boarded onto AER.
In 2020, we expect to see deeper integration between AER and our social networks and further collaboration in distribution.
8.App Annie
9.AKIT
Conference call and webcast:
The management team will host an analyst and investor conference call and webcast at 18.00 UK time / 13.00 NY / 21.00 Moscow, on the same day, including a Question and Answer session.
To participate in this conference call, please use the following access details:
Confirmation Code:9659812
From Russia 8 800 500 9283
From the UK 0800 358 6377
From the US 888-204-4368
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
Ksenia Egorova
Mobile: +7 (925) 347-83-81
E-mail: k.egorova@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, listed since November 5, 2010) is the largest internet business in Russia in terms of total daily audience (Mediascope Web Index Desktop+Mobile, Russia 0+, population aged 12-64, December 2019).
Mail.ru Group is developing the leading domestic internet communications and entertainment platform. The company 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 four instant messaging services. The company also holds the international gaming brand MY.GAMES, with a portfolio of hundreds of popular games for a range of platforms and over 600 million users worldwide. In 2019, Mail.ru Group Tech Lab was launched with a primary focus on technology and innovation development.
Mail.ru Group is a shareholder of AliExpress Russia JV along with Alibaba Group, MegaFon and Russian Direct Investment Fund. The company partners with Sberbank to jointly develop O2O service platform targeting food delivery and taxi markets.
Filing of Consolidated Financial Statements for FY 2019
The Group's audited consolidated financial statements for the year ended 31 December 2019 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 Conduct Authority and can be accessed athttp://www.morningstar.co.uk/uk/NSMor on the Group's website athttp://corp.mail.ru/media/files/mail.rugroupifrsfy2019.pdf
Group Aggregate Segment Financial Information*
RUB millions | Q4 2018 | Q4 2019 | YoY | FY 2018 | FY 2019 | YoY |
Group aggregate segment revenue (1) | ||||||
Online advertising | 9,082 | 11,319 | 24.6% | 29,782 | 36,505 | 22.6% |
MMO games | 7,108 | 7,781 | 9.5% | 23,295 | 27,987 | 20.1% |
Community IVAS | 4,080 | 4,360 | 6.9% | 15,005 | 16,371 | 9.1% |
Other revenue** | 1,326 | 2,160 | 62.9% | 3,082 | 6,207 | 101.4% |
Total Group aggregate segment revenue | 21,596 | 25,620 | 18.6% | 71,164 | 87,070 | 22.4% |
Group aggregate operating expenses | ||||||
Personnel expenses | 4,023 | 5,713 | 42.0% | 14,140 | 19,007 | 34.4% |
Office rent and maintenance | 76 | 77 | 1.3% | 199 | 278 | 39.7% |
Agent/partner fees | 4,492 | 6,385 | 42.1% | 15,787 | 21,174 | 34.1% |
Marketing expenses | 2,226 | 2,440 | 9.6% | 10,212 | 12,246 | 19.9% |
Server hosting expenses | 181 | 144 | -20.4% | 693 | 702 | 1.3% |
Professional services | 143 | 221 | 54.5% | 498 | 734 | 47.4% |
Other operating (income)/expenses, excl. D&A | 723 | 842 | 16.5% | 2,498 | 3,177 | 27.2% |
Total Group aggregate operating expenses | 11,864 | 15,822 | 33.4% | 44,027 | 57,318 | 30.2% |
Group aggregate segment EBITDA (2) | 9,732 | 9,798 | 0.7% | 27,137 | 29,752 | 9.6% |
margin, % | 45.1% | 38.2% | 38.1% | 34.2% | ||
Depreciation,amortisation and impairment*** (3) | 1,986 | 2,470 | 24.4% | 9,302 | 10,012 | 7.6% |
Other non-operating income (expense), net | 109 | -449 | -511.9% | 233 | -851 | -465.2% |
Profit before tax (4) | 7,855 | 6,879 | -12.4% | 18,068 | 18,889 | 4.5% |
Income tax expense (5) | 974 | 1,208 | 24.0% | 2,985 | 3,240 | 8.5% |
Group aggregate net profit (6) | 6,881 | 5,671 | -17.6% | 15,083 | 15,649 | 3.8% |
margin, % | 31.9% | 22.1% | 21.2% | 18.0% |
Note 1: Group aggregate segment financial information for Q4 and FY 2018 has been retrospectively adjusted to account for pro-forma inclusion of Native Roll, Panzerdog, Relap, Worki, Swag Masha and Skillbox.
Note 2: Group aggregate segment financial information for Q4 and FY 2018 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 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, Skillbox, B2B new projects including cloud as well as MRG 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 - Q4 2019
RUB millions | Communications and Social | Games | New initiatives | Eliminations | Group |
Revenue | |||||
External revenue | 14,832 | 8,458 | 2,330 | - | 25,620 |
Intersegment revenue | 82 | 21 | 19 | (122) | - |
Total revenue | 14,914 | 8,479 | 2,349 | (122) | 25,620 |
Total operating expenses | 7,113 | 5,660 | 3,171 | (122) | 15,822 |
EBITDA | 7,801 | 2,819 | (822) | - | 9,798 |
EBITDA margin, % | 52.3% | 33.2% | -35.0% | 38.2% | |
Net profit | 5,671 | ||||
Net profit margin, % | 22.1% |
Operating Segments Performance - Q4 2018
RUB millions | Communications and Social | Games | New initiatives | Eliminations | Group |
Revenue | |||||
External revenue | 12,642 | 7,684 | 1,270 | - | 21,596 |
Intersegment revenue | 44 | 2 | - | (46) | - |
Total revenue | 12,686 | 7,686 | 1,270 | (46) | 21,596 |
Total operating expenses | 5,149 | 4,927 | 1,834 | (46) | 11,864 |
EBITDA | 7,537 | 2,759 | (564) | - | 9,732 |
EBITDA margin, % | 59.4% | 35.9% | -44.4% | 45.1% | |
Net profit | 6,881 | ||||
Net profit margin, % | 31.9% |
Operating Segments Performance - FY 2019
RUB millions | Communications and Social | Games | New initiatives | Eliminations | Group |
Revenue | |||||
External revenue | 50,313 | 30,551 | 6,206 | - | 87,070 |
Intersegment revenue | 208 | 118 | 27 | (353) | - |
Total revenue | 50,521 | 30,669 | 6,233 | (353) | 87,070 |
Total operating expenses | 23,186 | 25,425 | 9,060 | (353) | 57,318 |
EBITDA | 27,335 | 5,244 | (2,827) | - | 29,752 |
EBITDA margin, % | 54.1% | 17.1% | -45.4% | 34.2% | |
Net profit | 15,649 | ||||
Net profit margin, % | 18.0% |
Operating Segments Performance - FY 2018
RUB millions | Communications and Social | Games | New initiatives | Eliminations | Group |
Revenue | |||||
External revenue | 43,575 | 24,841 | 2,748 | - | 71,164 |
Intersegment revenue | 191 | 4 | 1 | (196) | - |
Total revenue | 43,766 | 24,845 | 2,749 | (196) | 71,164 |
Total operating expenses | 18,122 | 19,839 | 6,262 | (196) | 44,027 |
EBITDA | 25,644 | 5,006 | (3,513) | - | 27,137 |
EBITDA margin, % | 58.6% | 20.1% | -127.8% | 38.1% | |
Net profit | 15,083 | ||||
Net profit margin, % | 21.2% |
Note 1: Group aggregate segment financial information for Q4 and FY 2018 has been retrospectively adjusted to account for pro-forma inclusion of Native Roll, Panzerdog, Relap, Worki, Swag Masha and Skillbox.
Note 2: Group aggregate segment financial information for Q4 and FY 2018 has been retrospectively adjusted to account for pro-forma exclusion of Delivery Club and ESforce.
Liquidity
As of 31 December 2019, the Group had RUB 9,782 million of cash and RUB 23,518 million of debt outstanding. The Group's net debt position was RUB 13,736 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.
The 2019 IFRS net profit was affected by a number of significant one-off non-cash items, including gains and losses resulting from the formation of joint ventures, remeasurement of assets held for sale, change in MMO revenue deferral estimate and others. These items were not included in Group aggregate net profit. Please refer to the reconciliations below for a full list of differences between aggregate segment financial information and IFRS.
The Group's share in the net results of our key JVs (AER and O2O) since their formation, prepared based on principles used for the segment financial information of the Company's consolidated operations, was RUB 1,038m.
A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Group for the three months ended 31 December 2019 and 2018 is presented below:
RUR millions | Q4 2019 | Q4 2018 |
Group aggregate segment revenue, as presented to the CODM | 25,620 | 21,596 |
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 | 1,279 | 1,691 |
Differences in timing of revenue recognition | (1,079) | (3,805) |
Dividend revenue from venture capital investments | 10 | 8 |
Consolidated revenue under IFRS | 25,830 | 19,489 |
A reconciliation of Group aggregate segment EBITDA to IFRS consolidated profit/(loss) before income tax expense of the Group for the three months ended 31 December 2019 and 2018is presented below:
RUB millions | Q4 2019 | Q4 2018 |
Group aggregate segment EBITDA, as presented to the CODM | 9,798 | 9,732 |
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 | (1,804) | (2,765) |
IFRS 16 implementation | - | (912) |
Differences in timing of revenue recognition | (710) | (3,503) |
Net (loss)/gain on venture capital investments | (533) | 49 |
Share-based payment transactions | (565) | (3,848) |
Other | (2) | 1 |
EBITDA | 6,184 | (1,246) |
Depreciation and amortisation | (3,266) | (2,411) |
Impairment of intangible assets | (29) | 10 |
Share of loss of equity accounted associates | (1,111) | (141) |
Finance income | 119 | 164 |
Finance expenses | (595) | (1) |
Other non-operating (loss)/gain | (50) | (31) |
Gain on joint ventures formation | 15,855 | - |
Loss on fair value remeasurement of Assets held for sale | (4,519) | - |
Net loss on derivative financial assets and liabilities at fair value through profit or loss | (198) | (1,096) |
Impairment of equity accounted associates | (1) | (37) |
Net gain on disposal of intangible assets | 18 | 40 |
Net gain on disposal of subsidiary | - | 47 |
Net foreign exchange gain | 168 | 190 |
Consolidated profit/(loss) before income tax expense under IFRS | 12,576 | (4,512) |
A reconciliation of Group aggregate net profit to IFRS consolidated net profit/(loss) of the Group for the three months ended 31 December 2019 and 2018is presented below:
RUB millions | Q4 2019 | Q4 2018 |
Group aggregate segment net profit, as presented to the CODM | 5,671 | 6,881 |
Adjustments to reconcile net profit as presented to the CODM to consolidated net profit/(loss) under IFRS: | ||
Share-based payment transactions | (565) | (3,848) |
Differences in timing of revenue recognition | (710) | (3,502) |
Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale | (1,447) | (2,899) |
IFRS 16 implementation | - | 108 |
Amortisation of fair value adjustments to intangible assets | (788) | (1,222) |
Gain on joint ventures formation | 15,855 | - |
Loss on fair value remeasurement of assets held for sale | (4,519) | - |
Net loss on financial instruments at fair value through profit or loss | (731) | (1,048) |
Net gain on disposal of intangible assets | 18 | 40 |
Net gain on disposal of subsidiary | - | 47 |
Net foreign exchange gain | 168 | 190 |
Share of loss of equity accounted associates | (1,111) | (141) |
Impairment of equity accounted associates | (1) | (37) |
Other non-operating loss | (50) | (31) |
Other | (19) | 3 |
Tax effect of the adjustments | (247) | 891 |
Consolidated net profit/(loss) under IFRS | 11,524 | (4,568) |
A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Group for the year ended 31 December 2019 and 2018 is presented below:
RUB millions | 12m 2019 | 12m 2018 |
Group aggregate segment revenue, as presented to the CODM | 87,070 | 71,164 |
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 | 2,615 | 2,992 |
Differences in timing of revenue recognition* | 6,520 | (8,154) |
Barter revenue | 8 | 74 |
Dividend revenue from venture capital investments | 18 | 29 |
Consolidated revenue under IFRS | 96,231 | 66,105 |
A reconciliation of Group aggregate segment EBITDA to IFRS consolidated profit/(loss) before income tax expense of the Group for the twelve months ended 31 December 2019 and 2018is presented below:
RUB millions | 12m 2019 | 12m 2018 |
Group aggregate segment EBITDA, as presented to the CODM | 29,752 | 27,137 |
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 | (8,091) | (5,904) |
IFRS 16 implementation | - | (3,540) |
Differences in timing of revenue recognition * | 8,265 | (7,464) |
Net (loss)/gain on venture capital investments | (139) | 26 |
Share-based payment transactions | (1,742) | (6,732) |
Other | 11 | 27 |
EBITDA | 28,056 | 3,550 |
Depreciation and amortisation | (12,771) | (9,665) |
Impairment of intangible assets | (659) | (1,711) |
Share of loss of equity accounted associates | (1,691) | (497) |
Finance income | 585 | 545 |
Finance expenses | (1,459) | (17) |
Other non-operating loss | (182) | (12) |
Gain on joint ventures formation | 15,855 | - |
Loss on fair value remeasurement of assets held for sale | (4,519) | - |
Net loss on derivative financial assets and liabilities at fair value through profit or loss | (758) | (516) |
Gain on remeasurement of previously held interest in equity accounted associate | 324 | - |
Reversal of impairment / (Impairment) of equity accounted associates | 60 | (37) |
Net gain on disposal of intangible assets | 418 | - |
Net gain on disposal of subsidiary | - | 47 |
Net foreign exchange (loss)/gain | (980) | 796 |
Consolidated profit/(loss) before income tax expense under IFRS | 22,279 | (7,517) |
A reconciliation of Group aggregate net profit to IFRS consolidated net profit/(loss) of the Group for the twelve months ended 31 December 2019 and 2018is presented below:
RUB millions | 12m 2019 | 12m 2018 |
Group aggregate segment net profit, as presented to the CODM | 15,649 | 15,083 |
Adjustments to reconcile net profit as presented to the CODM to consolidated net profit/(loss) under IFRS: | ||
Share-based payment transactions | (1,742) | (6,732) |
Differences in timing of revenue recognition* | 8,265 | (7,464) |
Effect of difference in dates of acquisition, loss of control in subsidiaries and assets held for sale | (6,959) | (6,006) |
IFRS 16 implementation | - | 435 |
Amortisation of fair value adjustments to intangible assets | (3,192) | (5,174) |
Gain on joint ventures formation | 15,855 | - |
Loss on fair value remeasurement of assets held for sale | (4,519) | - |
Net loss on financial instruments at fair value through profit or loss | (897) | (490) |
Gain on remeasurement of previously held interest in equity accounted associate | 324 | - |
Net gain on disposal of intangible assets | 418 | - |
Net gain on disposal of subsidiary | - | 47 |
Net foreign exchange (loss)/gain | (980) | 796 |
Share of loss of equity accounted associates | (1,691) | (497) |
Reversal of impairment / (impairment) of equity accounted associates | 60 | (37) |
Other non-operating loss | (182) | (12) |
Other | (11) | (16) |
Tax effect of the adjustments | (1,547) | 2,004 |
Consolidated net profit/(loss) under IFRS | 18,851 | (8,063) |
* including increase of RUR 13,324 (2018: 877) as a result of management's reassessment of the in-game items lifetime
Selected Operating Statistics
u MMO average monthly payers amounted to 1,077 thousand users in H2 2019 (the numbers combine paying users of individual MMO and mobile games and may include overlap).
Consolidated IFRS Statement of Financial Position
RUB millions |
December 31, 2019 |
December 31, 2018 |
ASSETS | ||
Non-current assets | ||
Investments in equity accounted associates and joint ventures | 49,834 | 2,816 |
Goodwill | 140,665 | 140,446 |
Right-of-use assets | 4,942 | - |
Other intangible assets | 19,526 | 20,759 |
Property and equipment | 8,330 | 7,050 |
Financial assets at fair value through profit or loss | 1,749 | 2,015 |
Deferred income tax assets | 1,774 | 4,793 |
Long-term loans receivable | 286 | 110 |
Other non-current assets | 115 | 1,574 |
Total non-current assets | 227,221 | 179,563 |
Current assets | ||
Trade accounts receivable | 12,288 | 9,916 |
Prepaid expenses and advances to suppliers | 978 | 1,123 |
Financial assets at fair value through profit or loss | 90 | 1,072 |
Loans receivable | 655 | 35 |
Other current assets | 1,367 | 1,318 |
Cash and cash equivalents | 9,782 | 11,723 |
Assets held for sale | 2,334 | 32 |
Total current assets | 27,494 | 25,219 |
Total assets | 254,715 | 204,782 |
EQUITY AND LIABILITIES | ||
Equity attributable to equity holders of the parent | ||
Issued capital | - | - |
Share premium | 60,286 | 58,482 |
Treasury shares | (1,152) | (286) |
Retained earnings | 125,351 | 106,685 |
Accumulated other comprehensive income/(loss) | 170 | (165) |
Total equity attributable to equity holders of the parent | 184,655 | 164,716 |
Non-controlling interests | 809 | 259 |
Total equity | 185,464 | 164,975 |
Non-current liabilities | ||
Deferred income tax liabilities | 2,181 | 2,405 |
Deferred revenue | 1,737 | 12,397 |
Non-current lease liability | 1,568 | - |
Long-term interest-bearing loans and borrowings | 19,474 | - |
Total non-current liabilities | 24,960 | 14,802 |
Current liabilities | ||
Trade accounts payable | 7,863 | 8,263 |
Income tax payable | 481 | 893 |
VAT and other taxes payable | 1,939 | 1,430 |
Deferred revenue and customer advances | 10,920 | 8,809 |
Short-term portion of long-term interest-bearing loans | 4,044 | - |
Current lease liability | 3,153 | - |
Other payables, accrued expenses and contingent consideration liabilities | 15,348 | 5,610 |
Liabilities directly associated with assets held for sale | 543 | - |
Total current liabilities | 44,291 | 25,005 |
Total liabilities | 69,251 | 39,807 |
Total equity and liabilities | 254,715 | 204,782 |
Consolidated IFRS Statement of Comprehensive Income
RUB millions | FY 2019 | FY 2018 |
Online advertising | 36,571 | 31,970 |
MMO games | 36,417 | 15,728 |
Community IVAS | 15,763 | 13,890 |
Other revenue | 7,480 | 4,517 |
Total revenue | 96,231 | 66,105 |
Net (loss)/gain on venture capital investments | (139) | 26 |
Personnel expenses | (21,507) | (22,698) |
Office rent and maintenance | (246) | (2,528) |
Agent/partner fees | (25,030) | (16,404) |
Marketing expenses | (16,422) | (15,583) |
Server hosting expenses | (675) | (1,966) |
Professional services | (785) | (587) |
Other operating expenses | (3,371) | (2,815) |
Total operating expenses | (68,036) | (62,581) |
EBITDA | 28,056 | 3,550 |
Depreciation and amortisation | (12,771) | (9,665) |
Impairment of intangible assets | (659) | (1,711) |
Share of loss of equity accounted associates and joint ventures | (1,691) | (497) |
Finance income | 585 | 545 |
Finance expenses | (1,459) | (17) |
Other non-operating loss | (182) | (12) |
Gain on joint ventures formation | 15,855 | - |
Loss on fair value remeasurement of assets held for sale | (4,519) | - |
Net loss on derivative financial assets and liabilities at fair value through profit or loss | (758) | (516) |
Reversal of impairment / (impairment) of equity accounted associates | 60 | (37) |
Net gain on disposal of intangible assets | 418 | - |
Net gain on disposal of shares in subsidiary | - | 47 |
Gain on remeasurement of previously held interest in equity accounted associates | 324 | - |
Net foreign exchange (loss)/gain | (980) | 796 |
Profit/(loss) before income tax expense | 22,279 | (7,517) |
Income tax expense | (3,428) | (546) |
Net profit/(loss) | 18,851 | (8,063) |
Attributable to: | ||
Equity holders of the parent | 18,686 | (7,991) |
Non-controlling interest | 165 | (72) |
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 | 335 | (293) |
Total other comprehensive income/(loss) net of tax effect of 0 | 335 | (293) |
Total comprehensive income/(loss), net of tax | 19,186 | (8,356) |
Attributable to: | ||
Equity holders of the parent | 19,021 | (8,284) |
Non-controlling interest | 165 | (72) |
Earnings/(loss) per share, in RUR: | ||
Basic earnings/(loss) per share attributable to ordinary equity holders of the parent | 86 | (37) |
Diluted earnings/(loss) per share attributable to ordinary equity holders of the parent | 85 | n/a |
Consolidated IFRS Statement of Cash Flows
RUR millions | Year ended December 31, 2019 | Year ended December 31, 2018 |
Profit/(loss) before income tax | 22,279 | (7,517) |
Adjustments to reconcile profit/(loss) before income tax to cash flows: | - | - |
Depreciation and amortisation | 12,771 | 9,665 |
Impairment losses on financial assets at amortized cost | 301 | 164 |
Net loss/(gain) on venture capital investments | 139 | (26) |
Net loss on financial assets and liabilities at fair value through profit or loss | 758 | 516 |
Gain on joint ventures formation | (15,855) | - |
Loss on fair value remeasurement of assets held for sale | 4,519 | - |
Net gain on disposal of subsidiaries | - | (47) |
Net gain on disposal of intangible assets | (418) | - |
Loss on disposal of property and equipment and intangible assets | - | 15 |
Gain on remeasurement of previously held interest in equity accounted associate | (324) | - |
Finance income | (585) | (545) |
Finance expenses | 1,459 | 17 |
Dividend revenue from venture capital investments | (18) | (29) |
Share of loss of equity accounted associates | 1,691 | 497 |
(Reversal of impairment) / impairment of equity accounted associates | (60) | 37 |
Impairment of intangible assets | 659 | 1,711 |
Net foreign exchange loss/(gain) | 980 | (796) |
Share-based payment expense | 1,742 | 6,732 |
Other non-cash items | 16 | 30 |
Change in operating assets and liabilities: | ||
Increase in accounts receivable | (3,566) | (2,934) |
(Increase)/Decrease in prepaid expenses and advances to suppliers | (406) | 604 |
Decrease/(increase) in inventories and other assets | 1,340 | (314) |
(Decrease) / increase in accounts payable and accrued expenses | (2,818) | 1,592 |
Decrease/(increase) in non-current prepaid expenses and advances | 67 | (217) |
(Decrease)/increase in deferred revenue and customer advances | (8,065) | 7,588 |
Increase in financial assets at fair value through profit or loss | (1,820) | (3,081) |
Increase in financial liabilities at fair value through profit or loss | 3,652 | 1,225 |
Operating cash flows before interest, income taxes and contingent consideration settlement | 18,438 | 14,887 |
Dividends received from venture capital investments | 7 | 28 |
Settlement of contingent consideration of business combinations | (688) | - |
Interest received | 493 | 561 |
Interest paid | (1,459) | (13) |
Income tax paid | (3,871) | (2,981) |
Net cash provided by operating activities | 12,920 | 12,482 |
Cash flows from investing activities: | ||
Cash paid for property and equipment | (4,688) | (4,492) |
Cash paid for intangible assets | (3,697) | (2,156) |
Dividends received from equity accounted associates | 71 | 40 |
Loans issued | (790) | (83) |
Loans collected | 1,903 | - |
Cash paid for acquisitions of subsidiaries, net of cash acquired | (9,361) | (8,031) |
Settlement of initial fair value of the contingent consideration at acquisition date | (1,132) | - |
Proceeds from disposal of subsidiaries, net of cash disposed | - | (20) |
Cash paid for investments in equity accounted associates and joint ventures | (15,687) | (1,960) |
Net cash provided by investing activities | (33,381) | (16,702) |
Cash flows from financing activities: | - | |
Payment of lease liabilities | (3,493) | - |
Loans received, net of bank commission | 23,383 | - |
Cash paid for treasury shares | (896) | - |
Net cash used in financing activities | 18,994 | - |
Net decrease in cash and cash equivalents | (1,467) | (4,220) |
Effect of exchange differences on cash balances | (431) | 572 |
Cash and cash equivalents at the beginning of the period | 11,723 | 15,371 |
Change in cash related to asset held for sale | (43) | - |
Cash and cash equivalents at the end of the period | 9,782 | 11,723 |
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Mail.ru Group Ltd Audited IFRS results for FY19 - RNS
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mail.ru Group Ltd. published this content on 26 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 February 2020 17:02:04 UTC
