Rambler Media Limited
RAMBLER MEDIA LIMITED
CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE 6 MONTHS ENDED 30 JUNE 2007
Rambler Media Limited (LSE:RMG), ("the Group"), a leading provider of internet
media and services to the global Russian-speaking community, today announced its
condensed consolidated financial results in accordance with International
Financial Reporting Standards (IFRS) for the six months ended 30 June 2007. The
following preliminary information has been reviewed and approved for release by
the Group's auditors.
KEY EVENTS
-- On 8 August 2007, Rambler Media announced that its wholly owned
subsidiary Vieli Enterprises Ltd completed its acquisition of a further
25% stake in contextual advertising company Begun for a cash
consideration of US$18 million, bringing the Group's total ownership of
Begun to 50.1% and leveraging Rambler's position in the text-based
advertising market.
-- The sale of the Group's TV business was completed in January 2007,
allowing the Group to dedicate fully to growing the Group's Internet
segment. The TV operation was sold for US$23 million with a net gain on
disposal of US$7.1 million.
-- Appointment of new executive management in March 2007.
PERFORMANCE
Highlights
-- Group revenue up 58% year on year to US$20.5 million (H1 2006, US$13.0
million*) - outpacing growth of internet advertising market of 52%
(source: Russian Association of Communication Agencies - AKAR)
-- Group EBITDA of US$0.6 million, including US$0.7 million foreign
currency translation loss (Group EBITDA H1 2006, US$0.8 million*)
-- Group net profit after interest and tax of US$6.7 million, including
results of disposal of TV operation (H1 2006, net loss of US$0.5
million*)
-- Strong balance sheet with US$41.8 million of cash at 30 June 2007 before
acquisition of further 25% stake in Begun** in August 2007 for US$18
million.
* The Group's financial results for the first half of 2006 have been changed for
presentation purposes to exclude the Television operation, which was
discontinued following its sale in January 2007, and have been restated to
include part of the provision for potential tax related charges of US$2.6
million reported in the 2006 full year report and to include certain
underaccrued expenses, refer to Note 16.
** The Group does not have a significant influence on Begun at 30 June 2007, and
a 25% investment in Begun is accounted for as an available for sale financial
asset, refer to Note 7.
Rambler User Statistics
-- 28.6 million unique monthly users of main Rambler.ru portal on average
in H1 2007, up more than 40% year on year - twice as fast as Russian
internet penetration (25.8 million unique monthly users in June 2007 vs.
19.9 million in June 2006, representing 30% growth).
-- Peak traffic of over 32 million unique monthly users in April 2007
-- 2.3 billion monthly page views on average in H1 2007, up 64% year on
year (1.91 billion in June 2007 vs. 1.42 billion in June 2006
representing 35% increase)
-- Total search queries amounted to 1.4 billion in H1 2007, up 27% year on
year
-- 23.8 million registered Rambler email accounts at the end of the period,
up 42% from December 2006
Russian Internet / Advertising Market
-- Russian internet penetration up 20% year on year in H1 2007 to 24.8
million monthly internet users (source: The Public Opinion Foundation)
-- Russian internet display advertising up 52% year on year in H1 2007 to
US$77 million (H1 2006, US$50 million) (source: Russian Association of
Communication Agencies - AKAR)
Mark Opzoomer, Chief Executive Officer of Rambler Media, commented: "In the
period from January to June 2007, over 28 million Russian speaking consumers
visited our portal each month on average, demonstrating that Rambler Media is
attracting one of the largest and fastest growing online audiences in Europe.
Our revenues grew by 58% in the period and are expected to continue to
outperform the advertising market as more and more businesses turn to the
internet to reach their target audiences.
"While 2006 was about transforming Rambler Media from a multimedia Group to a
pure internet player, 2007 is a year of transition. Since Arthur and I became
CEO and CFO respectively earlier this year, our priorities have been to
integrate and optimise the different internet properties that make up Rambler
Media. One of our key objectives is to improve the Group's profitability. In
this respect, we expect to see an improvement in the second half of 2007 and
2008. In addition, we have recently increased our ownership in Begun, one of
Russia's fastest growing and leading paid-search advertising platforms, which
gives Rambler Media access to a larger share of the text-based advertising
market in Russia. Rambler Media is now uniquely positioned to benefit from
growth in both the online display and search related advertising markets in
Russia."
FINANCIAL SUMMARY
(US$ '000s) Jan - Jun Jan - Jun Jan - Dec
2007 2006 2006
(restated**)
Group Revenue 20,512 12,963 30,646
Internet 18,408 11,639 28,305
Mobile Value Added Services 2,104 1,324 2,341
Investment income 1,202 684 1,574
----------------- -------------- --------------
Total revenue and investment income 21,714 13,647 32,220
EBITDA* 621 807 1,624
Net profit / (loss) attributable to
equity holders of the group 6,439 (487) (3,035)
Net gain from disposal of TV (included
innet profit above) 7,089 - -
Profit / (loss) per share from
continuing operations - basic and
diluted (0.042) 0.079 0.001
Profit / (loss) per share from
continuing operations - basic and
diluted (0.042) 0.078 0.001
Profit / (loss) per share from
discontinued operations - basic 0.461 (0.112) (0.202)
Profit / (loss) per share from
discontinued operations - diluted 0.461 (0.109) (0.202)
--------------------------------------- ----------------- -------------- --------------
* Earnings before interest, tax, depreciation and amortisation
** The Group's financial results for the first half of 2006 have been changed
for presentation purposes to exclude the Television operation, which was
discontinued following its sale in January 2007. The financial results of the
Group's continuing operations have been restated to include part of the
provision for potential tax related charges of US$2.6 million reported in the
2006 full year report and to include certain underaccrued expenses, refer to
Note 16.
The reconciliation between results of business segments and the numbers reported
in the company's financial statements for the period ended 30 June 2007 is as
follows. Inter-segment revenues are not material and therefore have not been
disclosed.
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 18,408 2,104 20, 512 - 20,512
Operating expenses and overheads (20,383) (2,147) (22,530) - (22,530)
--------- ------- ----------- ------------ --------
(1,975) (43) (2,018) - (2,018)
Investment income 1,202 - 1,202 1,202
Depreciation and amortisation 1,313 124 1,437 - 1,437
EBITDA 540 81 621 - 621
========= ======= =========== ============ ========
The segmental results for the six months ended 30 June 2006 are as follows:
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 11,639 1,324 12,963 2,154 15,117
Operating expenses and overheads (11,608) (1,742) (13,350) (3,813) (17,163)
--------- ------- ----------- ------------ --------
31 (418) (387) (1,659) (2,046)
Investment income 684 - 684 - 684
Depreciation and amortisation 403 107 510 244 754
EBITDA 1,118 (311) 807 (1,415) (608)
========= ======= =========== ============ ========
CONFERENCE CALL INFORMATION
The Group will host a conference call to present the results at 2 pm (Moscow
Time)/ 12 pm (CET) / 10 am (London Time) / 6 am (New York Time) today. The
results statement is available on Rambler Media's website at
www.ramblermedia.com.
To participate in the conference call, please register online at
www.sharedvalue.net/ramblermedia/hy2007.
The number for the conference call will be available upon registration.
For further information, please visit www.ramblermedia.com or contact:
Rambler Media Shared Value Limited
Mark Opzoomer Nicolas Duperrier
Tel. +7 495 500 3826 Tel. +44 (0) 20 7321 5010
rambler@sharedvalue.net
ING Wholesale Banking
Daniel Friedman / William Marle
Tel. +44 (0) 20 7767 1000
ABOUT RAMBLER MEDIA
Rambler Media is a diversified Russian language media and services group which
operates or has interests in leading internet properties including the oldest
Russian internet portal and search engine 'Rambler.ru', on-line newspaper
'Lenta.ru', price comparison website 'Price.ru', internet tracking system
'Rambler Top 100', instant messaging service 'Rambler-ICQ', high-tech portal
'Ferra.ru', interactive advertising Group 'Index20' and 'contextual advertising
company 'Begun'. Rambler Media's shares are traded on AIM, the junior market of
the London Stock Exchange under the symbol 'RMG'. For more information on
Rambler Media, visit our corporate website at www.ramblermedia.com.
Certain statements within this announcement constitute forward-looking
statements. Such forward-looking statements involve risks and other factors
which may cause the actual results, achievements or performance of the Company
to be materially different from any future results, achievements or performance
expressed or implied by such forward-looking statements. Such risks and other
factors include, but are not limited to, general economic and business
conditions, changes in government regulations, and court interpretations of such
regulations, currency fluctuations (including the US$/Rbs rate), competition,
and changes in development plans. There can be no assurance that the results and
events contemplated by the forward-looking statements contained in this
announcement will, in fact, occur. Any forward-looking statements made in this
announcement represent management's best judgment as to what may occur in the
future and are correct only as at the date of this announcement. The Company
will not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances occurring after
the date of this announcement except as required by applicable law or by any
applicable regulatory authority.
Rambler Media Limited,
Condensed consolidated half-yearly financial information,
30 June 2007
Contents
Page
Interim management report 7
Balance sheet 14
Income statement 15
Statement of changes in equity 16
Cash flow statement 17
Notes to financial information 18
Statement of directors' responsibilities 31
Auditors' review report 32
Interim management report
Rambler Media Limited (LSE:RMG), ("the Group") is a diversified Russian language
media and services group which operates or has interests in leading internet
properties including the oldest Russian internet portal and search engine
'Rambler.ru', on-line newspaper 'Lenta.ru', price comparison website 'Price.ru',
internet tracking system 'Rambler Top 100', instant messaging service
'Rambler-ICQ', high-tech portal 'Ferra.ru', interactive advertising Group
'Index20' and 'contextual advertising company 'Begun'. Rambler Media's shares
are traded on AIM, the junior market of the London Stock Exchange under the
symbol 'RMG'.
1. Key Events
-- On 8 August 2007, Rambler Media announced that its wholly owned
subsidiary Vieli Enterprises Ltd completed its acquisition of a further
25% stake in contextual advertising company Begun for a cash
consideration of US$18 million, bringing the Group's total ownership of
Begun to 50.1% and leveraging Rambler's position in the text-based
advertising market.
-- The sale of the Group's TV business was completed in January 2007,
allowing the Group to dedicate fully to growing the Group's Internet
segment. The TV operation was sold for US$23 million with a net gain on
disposal of US$7.1 million.
-- Appointment of new executive management in March 2007.
2. Performance
2.1. Highlights
-- Group revenue up 58% year on year to US$20.5 million (H1 2006, US$13.0
million*) - outpacing growth of internet advertising market of 52%
(source: Russian Association of Communication Agencies - AKAR).
-- Group EBITDA of US$0.6 million, including US$0.7 million foreign
currency translation loss (Group EBITDA H1 2006, US$0.8 million*)
-- Group net profit after interest and tax of US$6.7 million, including
results of disposal of TV operation (H1 2006, net loss of US$0.5
million*)
-- Strong balance sheet with US$41.8 million of cash at 30 June 2007 before
acquisition of further 25% stake in Begun** in August 2007 for US$18
million.
he Group's financial results for the first half of 2006 have been changed for
presentation purposes to exclude the Television operation, which was
discontinued following its sale in January 2007, and have been restated to
include part of the provision for potential tax related charges of US$2.6
million reported in the 2006 full year report and to include certain
underaccrued expenses, refer to Note 16.
** The Group does not have a significant influence on Begun at 30 June 2007, and
a 25% investment in Begun is accounted for as an available for sale financial
asset, refer to Note 7.
2.2. Rambler User Statistics
-- 28.6 million unique monthly users of main Rambler.ru portal on average
in H1 2007, up more than 40% year on year - twice as fast as Russian
internet penetration (25.8 million unique monthly users in June 2007 vs.
19.9 million in June 2006, representing 30% growth).
-- Peak traffic of over 32 million unique monthly users in April 2007
-- 2.3 billion monthly page views on average in H1 2007, up 64% year on
year (1.91 billion in June 2007 vs. 1.42 billion in June 2006
representing 35% increase)
-- Total search queries amounted to 1.4 billion in H1 2007, up 27% year on
year
-- 23.8 million registered Rambler email accounts at the end of the period,
up 42% from December 2006
2.3. Russian Internet / Advertising Market
-- Russian internet penetration up 20% year on year in H1 2007 to 24.8
million monthly internet users (source: The Public Opinion Foundation)
-- Russian internet display advertising up 52% year on year in H1 2007 to
US$77 million (H1 2006, US$50 million) (source: Russian Association of
Communication Agencies - AKAR).
2.4. Financial and operating review
(US$ '000s) Jan - Jun Jan - Jun Jan - Dec
2007 2006 2006
(restated**)
Group Revenue 20,512 12,963 30,646
Internet 18,408 11,639 28,305
Mobile Value Added Services 2,104 1,324 2,341
Investment income 1,202 684 1,574
----------- -------------- --------------
Total revenue and investment income 21,714 13,647 32,220
EBITDA* 621 807 1,624
Net profit / (loss) attributable to equity
holders of the Group 6,439 (487) (3,035)
Net gain from disposal of TV (included in net
profit above) 7,089 - -
Profit / (loss) per share from continuing
operations - basic (0.042) 0.079 0.001
Profit / (loss) per share from continuing
operations - diluted (0.042) 0.078 0.001
Profit / (loss) per share from discontinued
operations - basic 0.461 (0.112) (0.202)
Profit / (loss) per share from discontinued
operations - diluted 0.461 (0.109) (0.202)
--------------------------------------------- ----------- -------------- --------------
* Earnings before interest, tax, depreciation and amortisation
** The Group's financial results for the first half of 2006 have been changed
for presentation purposes to exclude the Television operation, which was
discontinued following its sale in January 2007. The financial results of the
Group's continuing operations have been restated to include part of the
provision for potential tax related charges of US$2.6 million reported in the
2006 full year report and to include certain underaccrued expenses, refer to
Note 16.
The reconciliation between results of business segments and the numbers reported
in the company's financial statements for the period ended 30 June 2007 is as
follows. Inter-segment revenues are not material and therefore have not been
disclosed.
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 18,408 2,104 20, 512 - 20,512
Operating expenses and overheads (20,383) (2,147) (22,530) - (22,530)
--------- ------- ----------- ------------ --------
(1,975) (43) (2,018) - (2,018)
Investment income 1,202 - 1,202 1,202
Depreciation and amortisation 1,313 124 1,437 - 1,437
EBITDA 540 81 621 - 621
========= ======= =========== ============ ========
The segmental results for the six months ended 30 June 2006 are as follows:
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 11,639 1,324 12,963 2,154 15,117
Operating expenses and overheads (11,608) (1,742) (13,350) (3,813) (17,163)
--------- ------- ----------- ------------ --------
31 (418) (387) (1,659) (2,046)
Investment income 684 - 684 - 684
Depreciation and amortisation 403 107 510 244 754
EBITDA 1,118 (311) 807 (1,415) (608)
========= ======= =========== ============ ========
2.5. The Group financial review
2.5.1 Revenue and investment income
Group revenue for the first six months of 2007 increased by 58% year on year to
reach close to US$21 million (H1 2006, US$13 million), thus outperforming the
Russian internet display advertising market itself, which was estimated to have
grown by 52% in the same period (source: Russian Association of Communication
Agencies - AKAR). The Group reported a 60% increase in like-for-like total
revenue and investment income to US$21.7 million (H1 2006, US$13.6 million).
Investment income from the Group's stake in Begun, which was 25% during the
first half, grew by 76% from US$0.68 million in H1 2006 to US$1.20 million,
reflecting the strength of the Russian internet text-based advertising market.
Revenue growth for the Group's Internet and Mobile operations are detailed in
separate sections.
2.5.2. EBITDA
The Group reported consolidated EBITDA of US$0.6 million in H1 2007.
Profitability in the first six months of 2007 continued to be limited, as was
the case in the full year 2006, due to a sharp rise in operating expenses with
labour compensation representing the biggest cost. Actions taken by the new
executive management to rationalise costs, along with continuing revenue growth,
are intended to yield EBITDA growth for the Group from the second half of 2007
and in 2008.
2.5.3. Operating Expenses
The Group's operating expenses (including depreciation, amortisation and tax
related provision) reached US$22.5 million in H1 2007, up 69% from US$13.3
million for the first half of last year. Labour expense rose by 60% to US$8.8
million (H1 2006, US$5.5 million) and accounted for 40% of operating costs in
the period. This increase was primarily driven by wage inflation of
approximately 30% in the Russian internet market, organic increase in headcount
and certain personnel restructuring costs.
The Group changed functional currency in 2007 from US Dollar to Russian Rouble
and recognised foreign currency translation loss US$0.7 million as a result of
fluctuations of exchange rates, refer to Note 3 (b).
Other significant operating costs included commissions and partner fees, which
rose by 135% from US$2.3 million in H1 2006 to US$5.4 million in H1 2007 as a
result of increased revenues.
Legal and professional fees also went up from US$1.1 million in H1 2006 to
US$1.6 million in H1 2007 due to increased advice on strategy and potential
transactions in H1 2007.
The Group's amortisation expense went up by 700% from US$0.11 million in H1 2006
to $0.87 million due to amortisation of intangibles resulting from 2006
acquisitions. The Group's depreciation expense went up by 40% from US$0.4
million to US$0.56 million in line with increase in the underlying depreciable
fixed assets.
As stated in the 2006 annual report, the Group's results include provisions for
potential tax related charges. These provisions relate to potential liabilities
for taxes other than income tax, which arise from the legal structure of the
Group and the jurisdictions in which various income and expense items are
recognised and assessed. The Group is taking steps to simplify its legal
structure. This process is expected to be completed within 10 months and to
result in a forward prevailing tax rate of approximately 26% when complete. For
the first half of 2007, the provision for potential tax related charges amounted
to approximately US$0.53 million, 60% less than for the same period in 2006,
thanks to the corrective actions taken by the Group. If appropriate, the
provisions may be released at some point in the future.
The Group's consolidated net loss after interest and tax was US$0.4 million in
H1 2007 (H1 2006, US$1.3 million profit excluding the loss from the discontinued
TV operation of US$1.7 million). In addition to the net loss in H1 2007, the
disposal of the TV operation in January 2007 generated a net gain on disposal of
US$7.1 million.
The Group's loss per share from continuing operations (basic) was US$0.042 (H1
2006, profit US$0.079), and respectively diluted - loss US$0.042 (H1 2006,
profit US$0.078).
2.6. Internet segment
2.6.1. Financial review
Revenue from Rambler Media's core internet operations grew by 59% year on year
from US$11.6 million to US$18.4 million in the first six months of 2007
following sustained growth in the number of Rambler.ru users, up 40%, and strong
growth in Russia's banner internet advertising market, up 52%. Although the
Group was able to raise Cost Per Click (CPC) advertising rates in April 2007,
the increase in revenue was primarily driven up by volume, with more and more
advertisers choosing to advertise through the internet and Rambler's popular
websites. The Group's strategy is to maintain competitive pricing in order to
successfully build a large network of advertisers, particularly in what is
considered as the early phase in the development of internet advertising in
Russia.
In the first six months of 2007, 62% of internet revenue was generated by
display advertising, which is sold through the Group's agency Index 20, and 32%
of internet revenue came from search related or text-based advertising, mainly
through Begun's extended advertising network, the rest was attributable to
e-commerce and other revenues. The proportion of search related advertising
within total internet revenue is expected to increase going forward as the Group
will be able to consolidate Begun's results from August 2007.
In addition to its internet revenue, Rambler Media also recorded investment
income of US$1.20 million, up 76% from US$0.68 million a year earlier for
dividends received from Rambler's 25% interest in Begun, one of Russia's leading
search and contextual text based advertising platforms with a network of over
10,000 individual advertisers and over 30,000 partner distribution sites.
The Group's Internet EBITDA was US$0.5 million in H1 2007 (H1 2006, US$1.1
million).
2.6.2 Operating review
Rambler.ru (www.rambler.ru) ("Rambler") is a leading Russian language internet
portal which successfully combines search with communication and community
activities; and media and entertainment services, enabling mass audiences to
navigate to specific pages according to their interest. In H1 2007, Rambler.ru
reached 28.6 million unique monthly users on average, up more than 40% from the
20 million users in the same period last year. This growth rate is above the 20%
increase in Russian internet penetration in the period (source: The Public
Opinion Foundation). In April 2007, Rambler.ru attracted record traffic of over
32 million users (up 60% from April 2006). Rambler users consulted an average of
80 pages per month each on Rambler's sites in the first half of 2007, up 12%
from 71 pages in the same period last year, demonstrating more active usage.
In H1 2007, Rambler Search processed a total of approximately 1.4 billion
queries, 27% more than in H1 2006 - or 230 million search queries per month on
average. Rambler continued to upgrade its search relevance capabilities.
According to public tests carried out by Ashmanov & Partners IT-consultancy in
July 2007, search relevance was improved by up to 30% following the launch of a
new search interface in the summer. The search speed was also improved in the
period with results being processed twice as fast as before. In H1 2007, an
average of 45% of Rambler's audience used Rambler Search each month.
As of July 2007, Rambler's monthly email audience was 5.9 million, up 50% from
July 2006 and representing 21% of Rambler's average monthly audience. Rambler's
total number of registered email accounts is now at 23.8 million, 42% higher
than in December 2006. In June, Rambler launched a new SMS alert service
notifying users of new mail received. This service was launched jointly with
leading Russian mobile operator Mobile TeleSystems OSJC (MTS).
The new version of Rambler's instant messaging service Rambler-ICQ 5.1
(http://icq.rambler.ru/) was introduced on 25 December 2006, with significant
technical improvements and more user friendly interfaces. Users now have the
ability to express user emotions by colourful flash cartoons and user status can
be selected before connecting onto the service instead of in full view of online
contacts. A new video broadcasting service through Rambler Vision was also
integrated, thus enriching the user experience with blogs, photos and social
networking features. The ICQ instant messaging service has been used by
approximately 6 million users on average in the first half of 2007, of whom more
than 2 million used Rambler-ICQ joint service. This means that one out of every
three ICQ user in Russia has been using Rambler-ICQ, representing 7% of
Rambler's average monthly audience.
During the first half of 2007, Rambler News' audience grew by approximately 40%
to reach 4.3 million users in July, representing 14% of Rambler's average
monthly audience. Rambler News (http://www.rambler.ru/news/) was enriched with
video and audio content as well as new links with easier access to sports,
finance, regional news, real estate and other sections. Rambler News also
launched successful special weekly online supplements for auto, style, home and
personal finance. Lenta.ru (www.lenta.ru), one of the Group's most frequented
news sites and the leading online newspaper in Russia, grew its online
readership by 14% (32% in June 07 vs. June 06) in the first six months of 2007
compared to the same period last year, with 2.8 million unique visitors per
month.
In April, Rambler Sport (http://sport.rambler.ru/) sponsored and launched a
special project dedicated to the 2007 International Ice Hockey World
Championships hosted in Moscow. The site attracted 1.1 million users in just two
weeks and positioned Rambler Sport as the leading Russian speaking sports news
site.
Rambler Games (http://games.rambler.ru/), which was launched in 2006, continued
to be very popular in the first six months of 2007 and became the number one
gaming portal by both the number of unique users and page views since May 2007
according to data collected by Top100. In the first half of 2007, 1.4 million
users played Rambler games on average each month, representing 5% of Rambler's
average monthly audience.
In May, Rambler Audio was re-launched with a new interface and faster stream
downloads, resulting in an increased number of visitors. 1.3 million users
visited Rambler Audio's pages in June 2007, 130% more than in June 2006. This
number increased to 1.5 million in July. Rambler Audio also started selling MP3
songs.
2.7. Mobile segment
Mobile Value Added Services revenues were US$2.1 million in the period, up 59%
from US$1.3 million the year before. The Mobile segment EBITDA is US$0.08
million (H1 2006, US$0.31 million loss). Although Mobile services are
strategically important for the Group to allow Rambler's large internet audience
to enjoy online services on their mobile devices, the services are expected to
contribute less to the Group's revenue generation going forward as Internet
services take an increasingly larger share. Because this segment will be closely
integrated with the internet operations, the Mobile segment will no longer be
reported separately in the next results statements.
3. Position
The Group ended the period with cash balances of US$42 million. This includes
the US$21 million proceeds from the sale of Rambler TV received at the beginning
of 2007.
Russia has rapidly become one of Europe's largest online communities, third
after Germany and the UK, with 28.7 million Russians online in the spring of
2007, representing about 25% of the Russian adult population (source: The Public
Opinion Foundation). This percentage is forecast to more than double by 2010,
according to the Russian Ministry of Communications, which could make Russia the
largest online market in Europe. The overall Russian advertising market is
growing very strongly, and internet advertising is the fastest growing segment.
Online display advertising was estimated to have increased by 67% year on year
in 2006 to US$100 million (2005, US$60 million) and by 52% year on year to US$77
million in H1 2007 (H1 2006, US$50 million) (source: Russian Association of
Communication Agencies - AKAR). In addition, text based advertising on
Russian-language internet sites soared to US$110 million in 2006 from US$45
million in 2005. In 2006, revenue from Internet advertising accounted for 1.6%
of the total advertising market but the segment is growing faster than any other
media and is forecast to attract 4% of total advertising by 2010 (source: Zenith
Optimedia).
The Group is well-positioned to continue its rapid growth, in line with or
faster than that of the online advertising market, due to its established brand,
large market share, and wide range of internet media and services.
4. Principal risks
Russian taxation and currency control regulations
A substantial part of the operations of the Group is conducted in Russia or
involves transactions with Russian entities. As a result the Group has
significant exposure to the Russian taxation and currency control regimes.
Russian tax and customs legislation is subject to varying interpretations, and
changes, which can occur frequently. Management's interpretation of such
legislation as applied to the transactions and activity of the Group may be
challenged by the relevant authorities.
The Russian tax authorities may be taking a more assertive position in their
interpretation of the legislation and assessments, and it is possible that
transactions and activities that have not been challenged in the past may be
challenged. The Supreme Arbitration Court issued guidance to lower courts on
reviewing tax cases providing a systemic roadmap for anti-avoidance claims, and
it is possible that this will significantly increase the level and frequency of
tax authorities scrutiny.
As a result, significant additional taxes, penalties and interest may be
assessed. Fiscal periods remain open to review by the authorities in respect of
taxes for three calendar years preceding the year of review. Under certain
circumstances reviews may cover longer periods.
Russian transfer pricing legislation introduced 1 January 1999 provides the
possibility for tax authorities to make transfer pricing adjustments and impose
additional tax liabilities in respect of all controllable transactions, provided
that the transaction price differs from the market price by more than 20%.
Controllable transactions include transactions with interdependent parties, as
determined under the Russian Tax Code, all cross-border transactions
(irrespective whether performed between related or unrelated parties),
transactions where the price applied by a taxpayer differs by more than 20% from
the price applied in similar transactions by the same taxpayer within a short
period of time, and barter transactions. There is no formal guidance as to how
these rules should be applied in practice. In the past, the arbitration court
practice with this respect has been contradictory.
Tax liabilities arising from intercompany transactions are determined using
actual transaction prices. It is possible with the evolution of the
interpretation of the transfer pricing rules in the Russian Federation and the
changes in the approach of the Russian tax authorities, that such transfer
prices could potentially be challenged in the future. Given the brief nature of
the current Russian transfer pricing rules, the impact of any such challenge
cannot be reliably estimated; however, it may be significant to the financial
condition and/or the overall operations of the entity.
The Group includes companies incorporated outside of Russia. Russian tax laws do
not provide detailed rules on taxation of foreign companies. It is possible that
with the evolution of the interpretation of these rules and the changes in the
approach of the Russian tax authorities, the non-taxable status of some or all
of the foreign companies of the Group in Russia may be challenged. Where the
Group believes that it is probable that its position could not be sustained, the
related tax and associated balances have been accrued. However, it is possible
that additional challenges may occur and the impact of such challenges, if any,
cannot be reliably estimated; however, it may be significant to the financial
condition and/or the overall operations of the entity.
Russian tax legislation does not provide definitive guidance in certain areas.
From time to time, the Group adopts interpretations of such uncertain areas that
reduce the overall tax rate of the Group. As noted above, such tax positions may
come under heightened scrutiny as a result of recent developments in
administrative and court practices; the impact of any challenge by the tax
authorities cannot be reliably estimated; however, it may be significant to the
financial condition and/or the overall operations of the entity.
5. Forward-looking statements
Certain statements in this half-yearly report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations will
prove to be correct. Because these statements involve risks and uncertainties,
actual results may differ materially from those expressed or implied by these
forward-looking statements.
We undertake no obligations to update any forward-looking statements whether as
a result of new information, future events or otherwise.
Rambler Media Limited
Condensed Consolidated Interim Balance Sheet as at 30 June 2007
(expressed in US$'000s)
Notes 30 June 31 December
2007 2006
-------- -------------- ---------------
Assets
Non Current Assets
Property, plant and equipment 5 4,117 3,731
Intangible assets 6 13,561 13,741
Financial assets 7 18,102 864
Deferred income tax asset 1,690 1,657
-------------- ---------------
37,470 19,993
Current Assets
Trade debtors 8,899 5,529
Prepayments 1,207 1,217
VAT, net 1,775 612
Other receivables 1,560 1,172
Bank and cash balances 41,836 18,461
-------------- ---------------
55,277 26,991
Non-current assets held for sale - 18,718
-------------- ---------------
Total assets 92,747 65,702
============== ===============
Liabilities
Current Liabilities
Trade creditors 7,322 4,379
Current income tax payable 2,810 2,536
VAT payable 629 303
Other provisions for liabilities
and charges 10 4,291 3,757
Deferred income 3,016 2,067
-------------- ---------------
18,068 13,042
Long Term Liabilities
Deferred taxation 8,198 4,124
-------------- ---------------
8,198 4,124
Liabilities directly associated
with assets held for sale - 4,807
-------------- ---------------
Total liabilities 26,266 21,973
Shareholders' equity
Issued capital 8 157 153
Share premium 60,878 57,208
Options reserve 109 601
Assets valuation reserve 13,083 -
Accumulated losses (11,697) (17,846)
Currency translation reserve 9 -
-------------- ---------------
Total shareholders' equity 62,539 40,116
Minority interest 13 3,942 3,613
-------------- ---------------
Liabilities and
Shareholders' Equity: 92,747 65,702
============== ===============
The accompanying notes are an integral part of this condensed interim financial
information.
These condensed interim financial statements were approved by the Directors on
18 September 2007
Mark Opzoomer Arthur Akopyan
CEO CFO
Rambler Media Limited
Condensed Consolidated Interim Income Statement
for the 6 month period ended 30 June 2007
(expressed in US$'000s)
Notes 1 January 2007 1 January 2006 to
to 30 June 30 June 2006
2007 (restated)
-------- -------------- -----------------
Continuing Operations
Revenue 11 20,512 12,963
Other income 11 1,202 684
Operating expenses 12 (22,530) (13,350)
-------------- -----------------
Operating (loss) / profit (816) 297
Interest income 11 892 568
-------------- -----------------
Profit before taxation 76 865
Taxation 14, 16 (473) 398
-------------- -----------------
(Loss) / profit for the period from
continuing operations (397) 1,263
Discontinued operations
Profit / (loss) from discontinued 18
operations 7,089 (1,680)
-------------- -----------------
Net profit / (loss) 6,692 (417)
Attributable to:
- equity holders of the company 6,439 (487)
- minority interest 13 253 70
-------------- -----------------
6,692 (417)
============== =================
Earnings/(loss) per share for
profit/(loss) attributable to the
equity holders of the company,
expressed in cents per share
Earnings/(loss) per share from 15
continuing operations
- basic (in US$ per share) (0.042) 0.079
- diluted (in US$ per share) (0.042) 0.078
Earnings/(loss) per share from 15
discontinuing operations
- basic (in US$ per share) 0.461 (0.112)
- diluted (in US$ per share) 0.461 (0.109)
The accompanying notes are an integral part of this condensed interim financial
information.
Rambler Media Limited
Condensed Consolidated Interim Statement of Changes in Shareholders' Equity
for the 6 month period ended 30 June 2007
(expressed in US$'000s)
Attributable to equity holders of the company
---------------------------------------------------------------------------------------------- - -
Issued Assets Share Options Merger Accumulated Translation Total Minority Total
capital valuation premium reserve reserve Losses reserve (restated) interest equity
reserve (restated) (restated)
------- ---------- ------- ------- ------- ----------- ----------- ---------- --------- ----------
31 December 2005 (as
previously
reported) 150 - 55,902 341 51 (12,663) - 43,781 23 43,804
Restatement (2,000) - (2,000) (2,000)
------- ---------- ------- ------- ------- ----------- ----------- ---------- --------- ----------
31 December 2005 150 - 55,902 341 51 (14,663) - 41,781 23 41,804
-
Share capital issued 1 - 137 - - - - 138 - 138
Cost of share option - - - 88 - - - 88 - 88
Profit for the
period (as
previously
reported) - - - - - 2,406 - 2,406 70 2,476
Minority interest
arising on
acquisition - - - - - - - - 1,437 1,437
Restatement - - - - - (2,893) - (2,893) - (2,893)
------- ---------- ------- ------- ------- ----------- ----------- ---------- --------- ----------
30 June 2006
(restated) 151 - 56,039 429 51 (15,150) - 41,520 1,530 43,050
Share capital issued 2 - 1,169 - - - - 1,171 - 1,171
Cost of share option - - - 172 - - - 172 - 172
Loss for the period - - - - (51) (2,696) - (2,747) 78 (2,669)
Minority interest
arising on
acquisition - - - - - - - - 2,005 2,005
------- ---------- ------- ------- ------- ----------- ----------- ---------- --------- ----------
31 December 2006 153 - 57,208 601 - (17,846) - 40,116 3,613 43,729
Share capital issued 1 - 2,503 - - - - 2,504 - 2,504
Share option reserve
transferred to
share premium - - - (601) - - - (601) - (601)
Cost of share option - - - 103 - - - 103 - 103
Profit for the
period - - - - - 6,439 - 6,439 253 6,692
Valuation of
available-for-sale
financial assets - 17,214 - - - - - 17,214 - 17,214
Deferred tax thereon - (4,131) - - - - - (4,131) - (4,131)
Translation reserve 3 - 1,167 6 - (290) 9 895 76 971
------- ---------- ------- ------- ------- ----------- ----------- ---------- --------- ----------
30 June 2007 157 13,083 60,878 109 - (11,697) 9 62,539 3,942 66,481
======= ========== ======= ======= ======= =========== =========== ========== ========= ==========
Rambler Media Limited
Condensed Consolidated Interim Statement of Cash Flows
for the 6 month period ended 30 June 2007
(expressed in US$'000s)
1 January 2007 1 January 2006
to 30 June to 30 June
2007 2006
(restated)
--------------- ---------------
Cash flows from operating activities
Net income / (loss) 6,692 (417)
Adjusted for:
(Profit) / loss attributable to discontinued operations (7,089) 1,680
Interest receivable (892) (569)
Interest charged - 1
Dividends receivable (1,202) (684)
Taxation charge 473 (398)
Cost of share options vested 103- 88
Foreign currency translation loss 678 -
Depreciation and amortisation 1,437 510
Increase in other provisions for liabilities and charges 533 1,176
Overhead costs attributable to discontinued operations paid by continuing operations 57 419
--------------- ---------------
Operating cash flows before working capital changes 790 1,806
Increase in debtors and receivables (4,856) (1,979)
Increase/ (decrease) in prepayments 419 (264)
Increase in creditors & other payables 3,265 2,482
Increase in deferred revenue 949 112
--------------- ---------------
Cash generated from operations 567 2,157
Income taxes paid (234) (3)
Interest paid - (7)
--------------- ---------------
Net cash (used in) / from operating activities - continuing operations 333 2,147
Net cash used in operating activities - discontinued operations - (2,012)
--------------- ---------------
Net (used in)/ from operating activities 333 135
Cash flows from investing activities
Acquisitions of subsidiary undertakings - (1,708)
Purchase of property, plant and equipment (1,324) (834)
Purchase of intangibles assets (334) (206)
Dividends received 903 515
--------------- ---------------
Net cash used in investing activities - continuing operations (755) (2,233)
Net cash from / (used in) investing activities - discontinued operations 20,524 (114)
--------------- ---------------
Net cash from/ (used in) investing activities 19,769 (2,347)
Cash flows from financing activities
Proceeds of equity financing 1,904 138
Repayment of borrowings - (10)
Interest received 892 569
--------------- ---------------
Net cash from financing activities - continuing operations 2,796 697
Net cash from financing activities - discontinued operations - -
--------------- ---------------
Net cash from investing activities 2,796 697
Net increase / (decrease) in cash 22,898 (1,515)
Cash at the beginning of the period - continuing operations 18,461 21,482
Cash at the beginning of the year - discontinued operations 476 -
Cash at the end of the period - continuing operations 41,836 19,795
Cash at the end of the year - discontinued operations - 172
Cash at the end of the period 41,836 19,967
=============== ===============
Notes to the condensed consolidated half-yearly interim financial information
1. General Information
Rambler Media Limited ("the company") was incorporated in Jersey on 10 June 2004
as a private limited company (now a public company - see below). The company has
its registered office at First Island House, Peter Street, St. Helier, Jersey
JE2 4SP. The condensed consolidated financial information presented herein
includes the condensed interim financial information of the company, its wholly
owned subsidiaries and investees in which the parent company has control
(together "the Group").
The Group's principal place of business is the Russian Federation and CIS.
Rambler Media is a diversified Russian language media, entertainment, services
and content delivery company which operates various internet properties
including the leading Russian language internet portal and search engine
"Rambler.ru", Top 100 rating system, free email service, on-line newspaper
"Lenta.ru", price comparison website "Price.ru", data center operator "Rambler
Telecom", interactive advertising company "Index 20", and mobile content service
provider "Rambler Mobile". During 2006 the company decided to dispose its
television business, which formerly consisted of TVK Rambler and NBN, this
segment is reported as a discontinued operation.
Rambler Media's shares are traded on the AIM market of the London Stock Exchange
under the symbol "RMG" since the Initial Public Offering (IPO) which took place
on 15 June 2005.
At June 30, 2007 the Rambler Group had 517 employees in continuing operations
(31 December 2006: 495; 30 June 30 2006: 458).
Until 30 October 2006, FM Asset Management Limited owned a majority stake in
Rambler Media Limited collectively with its related companies: First Mercantile
Net Ventures Fund Limited (FMNVF Ltd), Russian Federation First Mercantile Fund
Limited and Sopica Special Opportunities Fund Limited. On 31 October 2006
Prof-Media, a Russian media holding, has acquired 48.8% of shares in Rambler
Media Limited from funds managed by FM Asset Management Limited. In December
2006, following the anti-monopoly approval, Prof-Media, has obtained control and
later increased its stake to 54.8%.
2. Basis of preparation
This condensed consolidated interim financial information for the half-year
ended 30 June 2007 has been prepared in accordance with IAS 34, "Interim
financial reporting". The interim condensed financial report should be read in
conjunction with the annual financial statements for the year ended 31 December
2006.
The accounting policies adopted are consistent with those of the annual
consolidated financial statements for the year ended 31 December 2006, as
described in the annual consolidated financial statements for the year ended 31
December 2006.
3. Accounting policies
a) Basis of consolidation
These condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") under the
historical cost convention. The principal accounting policies applied in the
preparation of these condensed consolidated interim financial statements are set
out below. These policies have been consistently applied to all the periods
presented, unless otherwise stated (refer to Note 3 (e), New Accounting
Pronouncements).
b) Functional currency
Management exercised its judgement to determine that for the purposes of the
2007 IFRS financial statements Russian Rouble most fairly represents the
economic effects of the underlying transactions, events and conditions due to
the following factors:
- majority of clients are invoiced by Rambler's Russian operating entities
bringing more than 95% revenue. Due to improving Rouble exchange rate the
Rambler started to invoice clients in Roubles since August 2006.
- majority (95%) of operating expenses are fixed in Rouble gross terms.
For the prior periods functional currency was United States Dollar.
A change in functional currency from US dollar to the Russian Rouble was
accounted for by establishing new functional currency bases for non-monetary
items. Those bases were computed by translating the historical reporting
currency amounts of assets and liabilities into Russian Roubles at current
exchange rate as at 1 January 2007. After the change of functional currency to
Russian Rouble, Rambler Group's revenues, costs, property and equipment
purchased which are either priced incurred, payable, or otherwise measured in
foreign currencies are being converted to Russian Roubles at the historical
exchange rates prevailing on the date transactions occurred. Debt and trade
liabilities are measured at the exchange rate prevailing on the balance sheet
date. Resulting exchange differences are being charged or credited to the income
statement.
c) Presentation currency
All amounts in these financial statements are presented in thousands of US
dollars ("US$ thousands"), unless otherwise stated. It is a common practice for
Russian companies operating in the media industry to use UD$ as a presentation
currency.
The Russian Rouble is not a fully convertible currency outside the Russian
Federation and, accordingly, any translation of RUR denominated assets and
liabilities into US$ for the purpose of these condensed consolidated interim
financial statements does not imply that Group could or will in the future
realise or settle in US$ the translated values of these assets and liabilities.
The results and financial position of each Group entity (functional currency of
none of which is a currency of a hyperinflationary economy) are translated into
the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component
of equity.
At 30 June 2007 the principal rate of exchange used for translating foreign
currency balances was US$ 1 = RR 25.82 (31 December 2006: US$ 1 = RR 26.33).
d) Foreign currency translation
Monetary assets and liabilities are translated into each entity's functional
currency at the official exchange rate of the Central Bank of the Russian
Federation at the respective balance sheet dates. Foreign exchange gains and
losses resulting from the settlement of the transactions and from the
translation of monetary assets and liabilities into each entity's functional
currency at year-end official exchange rates of the Central Bank of the Russian
Federation are recognised in profit or loss. Translation at year-end rates does
not apply to non-monetary items, including equity investments. Effects of
exchange rate changes on the fair value of equity securities are recorded as
part of the fair value gain or loss.
e) New accounting pronouncements
Certain new standards and interpretations have been published that are mandatory
for the Group's accounting periods beginning on or after 1 January 2007 or later
periods and which the entity has not early adopted:
IFRS 7 Financial Instruments: Disclosures and a complementary Amendment to IAS 1
Presentation of Financial Statements - Capital Disclosures (effective from 1
January 2007). The IFRS introduces new disclosures to improve the information
about financial instruments. The volume of disclosures will increase
significantly with an emphasis on quantitative aspects of risk exposures and the
methods of risk management. The quantitative disclosures will provide
information about the extent to which the entity is exposed to risk, based on
information provided internally to the entity's key management personnel.
Qualitative and quantitative disclosures will cover exposure to credit risk,
liquidity risk and market risk including sensitivity analysis to market risk.
IFRS 7 replaces IAS 30, Disclosures in the Financial Statements of Banks and
Similar Financial Institutions, and some of the requirements in IAS 32,
Financial Instruments: Disclosure and Presentation. The Amendment to IAS 1
introduces disclosures about level of an entity's capital and how it manages
capital. The Group is currently assessing what impact the new IFRS and the
amendment to IAS 1 will have on disclosures in its financial statements. IFRS 7
disclosures will be done in the year-end consolidated financial statements.
IFRS 8, Operating Segments (effective for annual periods beginning on or after 1
January 2009). The Standard applies to entities whose debt or equity instruments
are traded in a public market or that file, or are in the process of filing,
their financial statements with a regulatory organisation for the purpose of
issuing any class of instruments in a public market. IFRS 8 requires an entity
to report financial and descriptive information about its operating segments and
specifies how an entity should report such information. The Group is currently
assessing what impact IFRS 8 will have on disclosures in its financial
statements.
The Group has adopted the following other new standards or interpretations:
-- IFRIC 7, Applying the Restatement Approach under IAS 29 (effective for
periods beginning on or after 1 March 2006, that is from 1 January
2007).
-- IFRIC 8, Scope of IFRS 2 (effective for periods beginning on or after 1
May 2006, that is from 1 January 2007).
-- IFRIC 9, Reassessment of Embedded Derivatives (effective for annual
periods beginning on or after 1 June 2006);
-- IFRIC 10, Interim Financial Reporting and Impairment (effective for
annual periods beginning on or after 1 November 2006);
-- IFRIC 11, IFRS 2--Group and Treasury Share Transactions (effective for
annual periods beginning on or after 1 March 2007);
-- IFRIC 12, Service Concession Arrangements (effective for annual periods
beginning on or after 1 January 2008).
Unless otherwise described above, these new standards and interpretations did
not significantly affect the Group's financial statements.
4. Segmental Information
The segmental results for the six months ended 30 June 2007 are as follows:
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 18,408 2,104 20, 512 - 20,512
Operating expenses and overheads (20,383) (2,147) (22,530) - (22,530)
--------- ------- ----------- ------------ --------
Net loss before interest, tax and minority interest (1,975) (43) (2,018) - (2,018)
========= ======= =========== ============ ========
The segmental results for the six months ended 30 June 2006 are as follows:
Internet Mobile Total Discontinued
Services VAS Continuing operations Total
operations
--------- ------- ----------- ------------ --------
Total Revenue 11,639 1,324 12,963 2,154 15,117
Operating expenses and overheads (11,608) (1,742) (13,350) (3,813) (17,163)
--------- ------- ----------- ------------ --------
Net profit/(loss) before interest, tax and minority interest 31 (418) (387) (1,659) (2,046)
========= ======= =========== ============ ========
5. Capital expenditure
Leasehold Office Television Total
improvements equipment equipment
------------ ---------- ---------- -------
Cost
31 December 2005 548 4,847 1,600 6,995
Additions 39 861 33 933
Disposals - (22) - (22)
Discontinued operations (172) (410) (1,633) (2,215)
------------ ---------- ---------- -------
30 June 2006 415 5,276 - 5,691
Additions 14 1,223 30 1,267
Disposals - (131) (8) (139)
Discontinued operations - (38) (22) (60)
------------ ---------- ---------- -------
31 December 2006 429 6,330 - 6,759
Additions 48 854 - 902
Reclassification - (20) - (20)
Disposals - (11) - (11)
Currency translation 9 135 - 144
------------ ---------- ---------- -------
30 June 2007 486 7,288 - 7,774
------------ ---------- ---------- -------
Accumulated Depreciation
31 December 2005 389 2,044 747 3,180
Charge 36 442 168 646
Discontinued operations (90) (211) (915) (1,216)
------------ ---------- ---------- -------
30 June 2006 335 2,275 - 2,610
Charge 3 434 - 437
Disposals - (19) - (19)
Discontinued operations - - - -
------------ ---------- ---------- -------
31 December 2006 338 2,690 - 3,028
Charge 25 539 - 564
Disposals - (2) - (2)
Currency translation 7 60 67
------------ ---------- ---------- -------
30 June 2007 370 3,287 - 3,657
------------ ---------- ---------- -------
Net book value
30 June 2007 116 4,001 - 4,117
============ ========== ========== =======
31 December 2006 91 3,640 - 3,731
============ ========== ========== =======
6. Intangible Assets
Domain Broadcast Software Goodwill Total
and trade network and other
names intangibles
------------ --------- ------------ -------- --------
Cost
31 December 2005 931 13,626 642 571 15,770
Additions 81 386 467
On acquisition of subsidiary 3,998 - 48 386 4,432
Discontinued operations - (13,747) (259) - (14,006)
Amortisation (5) (53) (51) - (109)
Discontinued operations - 93 15 - 108
------------ --------- ------------ -------- --------
30 June 2006 4,924 - 781 957 6,662
------------ --------- ------------ -------- --------
Additions 1 - 1,015 - 1,016
On acquisition of subsidiary 5,391 - - 1,213 6,604
Amortisation (187) - (354) - (541)
------------ --------- ------------ -------- --------
31 December 2006 10,129 - 1,442 2,170 13,741
------------ --------- ------------ -------- --------
Additions - - 334 - 334
Reclass - - 20 - 20
Amortisation (753) - (120) - (873)
Currency translation 194 - 102 43 339
------------ --------- ------------ -------- --------
30 June 2007 9,570 - 1,778 2,213 13,561
------------ --------- ------------ -------- --------
Goodwill is tested for impairment annually at year end (31 December) or whenever
there is any indication of impairment. At 30 June 2007, there was no indication
of impairment for goodwill.
Intangible assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstance indicate that the carrying amount may
not be recoverable. There was no indication of impairment at 30 June 2007.
7. Financial Assets
2007 2006
----------------------------- --------------------
Begun 18,000 771
Other 102 93
----------------------------- --------------------
Total 18,102 864
============================= ====================
Begun was treated as an investment carried at cost at 31 December 2006. The
Company had no significant financial or operational influence over the company.
It was not practical to determine the fair value of this investment at 31
December 2006, but, and even though it was not possible to predict the future
dividend yield from the Begun investment, based on the dividends received and
other available information, management believed that the fair value of the
investment in Begun significantly exceeded the cost at which the investment was
included in the 2006 annual financial statements.
On 8 August 2007 the Group has increased its stake in Begun to 50.1% (refer Note
22 'Post-Balance Sheet Events').
At 30 June 2007 an investment in Begun is treated as an available-for-sale
financial asset. The fair value of this asset at 30 June 2007 was determined by
reference to the recent completion of an acquisition of an additional 25% stake
in Begun.
Dividend income received from Begun is included in other income. Dividends are
declared by Begun based on profits generated and not at any set rate.
The other financial assets represent loans carried at amortized cost.
8. Share Capital
The share capital of the Company at the balance sheet date expressed in US$ (not
thousands) is comprised as follows:
2007 2006
------------------------------ -------------------
Authorised ordinary shares of US$ 0.01 each (20 million shares) 200,000 200,000
------------------------------ -------------------
Issued and fully paid share capital ordinary shares of US$ 0.01 each 157,179 152,717
------------------------------ -------------------
Employee share options exercised during the first half of 2007 resulted in
125,545 being issued (30 June 2006: 40,817 shares), with exercise proceeds of
US$ 1,904 thousand (30 June 2006: US$ 40,817 thousand). The related weighted
average share price at the time of exercise was US$ 15.16 (30 June 2006: US$
3.42) per share.
9. Share based payments
On 18 October 2004 at an Extraordinary General Meeting the Shareholders of the
Company approved the grant of options pursuant to the Rambler Media Limited
Share Option Plan and the Rambler Media Limited Executive Share Option Plan (the
"Share Option Plans"). Under the terms approved, directors of the Company may
not allot more than 1,300,000 shares to the Share Option Plans without further
approval by ordinary resolution of the Company in general meeting.
Number Weighted average Total proceeds
exercise prices, received and
USD receivable,
USD'000
----------------------------------------------------------------------- --------- ----------------- -------------------
Balance at 31 December 2006 125,545 15.40 1,934
New awards 103,903 40.18 4,175
Exercised (125,545) 15.17 (1,904)
----------------------------------------------------------------------- --------- ----------------- -------------------
Balance at 30 June 2007 103,903 40.47 4,205
----------------------------------------------------------------------- --------- ----------------- -------------------
The estimated fair value of each share option granted was calculated by applying
a Black-Scholes option pricing model. The model inputs were the share price at
grant date and exercise price (disclosed in a table above), expected volatility
of 21% for options granted in 2007, no expected dividends and an average
risk-free interest rate of 3.5%. To allow for the effects of early exercise, it
was assumed that the employees would exercise the options after vesting date.
Share options agreement have an early exercise condition whereby the employees
have a right of early exercise in the event of management change. Following the
change of management, all employees who had options at 31 December 2006 used
their right to exercise them in the first quarter of 2007.
10. Other provisions for liabilities and changes
Movements in Other Provisions for Liabilities and Charges are as follows:
Total
------------------------------------------------------------------------------------------------------------------------
Carrying amount at 31 December 2006 3,757
Additions charged to profit or loss 534
Carrying amount at 30 June 2007 4,291
All of the above provisions relate to potential liabilities for taxes other than
income taxes, and associated balances arising from the legal structure of the
Group and the jurisdictions in which various income and expense items are
recorded and where they may be deemed to be assessed for tax purposes. These
issues are also impacted by the absence of group relief between various entities
in the Group structure.
11. Revenue and Other Income
Revenue comprises:
1 January 1 January
2007 to 30 2006 to 30
June 2007 June 2006
----------------------------- -------------------
Internet 18,408 11,639
Mobile Value Added Services 2,104 1,324
----------------------------- -------------------
20,512 12,963
============================= ===================
1 January 1 January
2007 to 30 2006 to 30
June 2007 June 2006
------------------------------- ------------------
------------------------------- ------------------
Other income - dividends from Begun 1,202 684
------------------------------- ------------------
Interest income 892 569
------------------------------- ------------------
12. Operating expenses
Operating expenses comprise:
1 January 2007 1 January
to 30 June 2006 to 30
2007 June 2006
---------------------------- ---------------------
Labour 8,778 5,497
Content and transmission 1,167 241
Commissions and partner fees 5,442 2,271
Rent 589 396
Legal and professional 1,561 1,074
Provision for taxes other than income taxes 534 1,176
General expenses 806 547
Share Options 103 88
Depreciation 564 401
Amortisation 873 109
Marketing and advertising 1,157 1,192
Foreign currency translation loss 678 14
Other 278 344
---------------------------- ---------------------
Total Operating expenses 22,530 13,350
============================ =====================
13. Minority interest
Total
-----------------
As at 1 January 2007 3,613
Share of results of Business-Studio for the six months 2007 (49%) (15)
Share of results of Price.ru for the six months 2007 (49%) 221
Share of results of Paintium for the six months 2007 (49%) 45
Share of results of Holmruk for the six months 2007 (49%) 2
Currency translation 76
-----------------
As at 30 June 2007 3,942
=================
14. Income taxes
The Rambler Group has operations in a number of jurisdictions and is
consequently exposed to the fiscal regimes of more than one country. Its main
exposure is to the fiscal regime of the Russian Federation.
Income taxes have been provided for in the consolidated financial statements in
accordance with Russian legislation enacted or substantively enacted by the
balance sheet date. The income tax charge/benefit comprises current tax and
deferred tax and is recognised in the consolidated income statement unless it
relates to transactions that are recognised, in the same or a different period,
directly in equity.
Income tax comprised the following:
1 January 1 January
2007 to 30 2006 to 30
June 2007 June 2006
(restated)
--------------------------------------------------------------------------------------------------- --------------------
Current tax expense 563 677
Deferred tax benefit (90) (1,075)
Income tax charge/(benefit) for the period 473 (398)
--------------------------------------------------------------------------------------------------- --------------------
A reconciliation between the expected and the actual taxation charge is provided
below:
1 January 2006
1 January 2007 to 30 June 2006
to 30 June 2007 (restated)
-------------------------------------------------------------------------------------------------- ---------------------
Accounting profit before taxation 76 865
Theoretical tax charge at statutory rate of 24% (2006: 24%) 18 208
Tax effect of items which are not deductible or assessable for
taxation purposes:
Loss/(profit) accumulated in tax free jurisdictions (275) (606)
Non-deductible expenses 730 -
---------------------------- ---------------------
455 (606)
Profit tax expense/(benefit) for the period 473 (398)
-------------------------------------------------------------------------------------------------- ---------------------
15. Earnings/(loss) per share
Earnings/(loss) per share has been calculated as follows:
1 January 2007 1 January 2006
to 30 June to 30 June
2007 2006 (restated)
---------------------------------------------------------------------------------------------------- ------------------
(Loss)/profit for the period from continuing operations attributable
to equity holders (650) 1,193
Weighted average number of shares in issue (thousands)
- basic 15,376 15,017
Weighted average number of shares in issue (thousands)
- diluted 15,376 15,360
---------------------------------------------------------------------------------------------------- ------------------
Basic (loss)/earnings per share from continuing
operations (expressed in US$ per share) (0.042) 0.079
Diluted (loss)/earnings per share from continuing
operations (expressed in US$ per share) (0.042) 0.078
---------------------------------------------------------------------------------------------------- ------------------
Earnings/(loss) per share from discontinued operations is calculated as follows:
1 January 2007 1 January 2006
to 30 June 2007 to 30 June 2006
(restated)
------------------------------------------------------------------------------------------------- ----------------------
Profit/(loss) for the period from discontinued operations 7,089 (1,680)
Weighted average number of shares in issue (thousands)
- basic 15,376 15,017
Weighted average number of shares in issue (thousands)
- diluted 15,376 15,360
------------------------------------------------------------------------------------------------- ----------------------
Basic earnings/(loss) per share from discontinued
operations (expressed in US$ per share) 0.461 (0.112)
Diluted earnings/(loss) per share from discontinued
operations (expressed in US$ per share) 0.461 (0.109)
------------------------------------------------------------------------------------------------- ----------------------
16. Restatement of results for the period ended 30 June 2006
In 2007 management has reassessed judgments in relation to the previously
recorded liabilities for income tax and taxes other than on income. These issues
related to liabilities arising from the legal structure of the Group and the
jurisdictions in which various income and expense items are recognized and
assessed. The corresponding adjustments were reflected in financial statements
for year 2006. The management has decided to restate the resulting provisions
for taxes for the first half of 2006.
As Adjustment Restated
previously
reported
---------------------------------------------------------------------------------------- ---------- ---------- --------
Effect on the consolidated Balance sheet as at 31 December 2005
Current income tax payable - 800 800
Other provisions for liabilities and charges - 1,200 1,200
---------------------------------------------------------------------------------------- ---------- ---------- --------
Effect on the consolidated Balance sheet as at 30 June 2006
Current income tax payable - 1,477 1,477
Other provisions for liabilities and charges - 2,376 2,376
---------------------------------------------------------------------------------------- ---------- ---------- --------
Effect on the consolidated Income statement as at 31 December 2005
Taxation 365 800 1,165
Operating expenses 17,699 1,200 18,899
---------------------------------------------------------------------------------------- ---------- ---------- --------
Effect on the consolidated Income statement as at 30 June 2006
Taxation (1,075) 677 (398)
Operating expenses 14,946 1,176 16,122
---------------------------------------------------------------------------------------- ---------- ---------- --------
The management identified underaccrued expenses for bonuses 2006, commissions
and IFRS audit proportionally for the first half of 2006, which resulted in a
restatement of comparative information for the first half of 2007. These
expenses were accounted for in full in the Group's consolidated accounts for the
year ended 31 December 2006.
As Adjustment Restated at
previously 30 June 2006
reported
---------------------------------------------------------------------- -------------------- ------------- -------------
Effect on the consolidated Balance sheet as at 30 June 2006
Trade Creditors 2,882 1,040 3,922
---------------------------------------------------------------------- -------------------- ------------- -------------
Effect on the consolidated Income statement as at 30 June 2006 (all
from continuing operations)
Labour 6,494 312 6,806
Commissions and partner fees 2,031 383 2,414
Legal and professional 1,055 345 1,400
---------------------------------------------------------------------- -------------------- ------------- -------------
17. Directors' Remuneration
The directors' salaries for 2007 and 2006 paid by Group companies are as follows
(not in thousands):
1 January 2007 to 1 January 2006 to
30 June 2007 30 June 2006
----------------------------- --------------------
Robert Mott Brown III 52,765 26,250
Irina Gofman 177,565 112,500
James Mullins 96,875 112,500
Mark Opzoomer 156,574 22,747
Arthur Akopyan 86,667 -
----------------------------- --------------------
Total Short term employee benefits 570,446 273,997
============================= ====================
18. Discontinued operations and disposals groups
The sale of Rambler TV business to Osgora Productions Limited (a subsidiary of
Prof-Media) was completed and closed on 12 January 2007. The final settlement
for Rambler's TV business in the amount of US$21 million was received on 10
January 2007.
Details of the sale are as follows:
Cash and cash equivalents 476
Intangible assets 13,898
Other net assets 1,537
Net assets of business 15,911
------------------------------------------------------------------------------------------------------------------------
Total purchase consideration 23,000
------------------------------------------------------------------------------------------------------------------------
less: cash of business (476)
Inflow of cash on sale 22,524
Profit on sale 7,089
------------------------------------------------------------------------------------------------------------------------
In the statements for the first half of 2006 the management has segregated
discontinuing operations (TV business) in order to present first half of 2006 in
the manner consistent with the 2006 annual report.
19. Business combinations
On 16 January 2006 the Rambler Group purchased 51% of Price.ru for US$ 1.53
million payable in cash. The initial provisional estimate of net assets of
Price.ru at the date of acquisition was US$ 200 thousand, this has given rise to
goodwill of US$ 1.33 million in the Group's interim H1 2006 financial
statements. The Company has reassessed fair value of identifiable assets and
liabilities of Price Express in Group's annual Report 2006 and respectively in
comparative results of the Group's interim H1 2007 financial statements.
Price.ru is a leading Russian e-commerce internet property, its web-sites
Price.ru, Domoteka.ru and Tyndex.ru provide price and product comparison tools
designed to help on-line shoppers make the most cost effective buying decisions.
As a result of this reassessment the Company has recognized intangible assets in
the amount of US$ 3.9 million.
20. Contingent liabilities
(a) Litigation
In the course of its normal business the Rambler Group receives legal claims
from time to time. In the opinion of the directors none of the litigation
currently in progress is likely to result in the crystallisation of a material
liability.
(b) Commitment to pay for exclusive internet partnership
An agreement was signed on 8 December 2004 by the Rambler Group that commits it
to paying a minimum of US$ 200 thousand per annum for a minimum of 12 months in
respect of an exclusive internet partnership to promote a customised co-branded
instant messaging product for Russian and other CIS countries. The Rambler Group
paid a similar amount in December 2006, December 2005 and intends to do so for
the foreseeable future.
(c) Lease commitments
The Group is committed to the following lease payments under the non-cancellable
operating leases:
2006 2005
---------------------------------------------------------------------- ----------------------------- ------------------
Expiring within one year 1,352 1,298
---------------------------------------------------------------------- ----------------------------- ------------------
21. Related-Party Transactions
Transactions between Rambler Companies and its related parties, as well as
related party balances are not material for the period ended 30 June 2007.
22. Post Balance Sheet Events
On 8 August 2007 Rambler has completed acquisition of a 25% stake in contextual
advertising company Begun for a cash consideration of US$18 million, which
brought the Group's total ownership in Begun to 50.1% and thus obtained control
over Begun.
Although the Group had an option to purchase 25% of the shares (with further
option to purchase 50% of the shares) of Begun the above acquisition was not a
realization of the option, as the previous purchase agreement was terminated by
the new set of acquisition documents.
The Group will consolidate the results of Begun's operation from the date of
acquisition, the acquisition does not result in a fundamental change to
Rambler's business, nor will be there any change in the board or voting control
of Rambler.
It is impracticable to provide a full disclosure required by IFRS 3 in these
condensed interim consolidated accounts, as the Group is currently in the
process of performing a purchase price allocation for this acquisition. The full
disclosure will be provided in the Group's 2007 annual consolidated financial
statements.
23. Seasonality
The internet advertising volume of sales is subject to certain seasonal
fluctuations, the second half of the year is typically higher than the first
half due to holiday seasons. For the six months ended 30 June 2006 sales volume
was affected by both seasonality and growth of the market and it represented 41%
of the annual sales in the year ended 31 December 2006.
Statements of directors' responsibility
The directors' confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34.
The directors of Rambler Media Limited are listed in Rambler Group Annual Report
for 31 December 2006. A list of current directors is maintained on Rambler Media
Limited website: www.ramblermedia.com.
_________________ ________________
Mark Opzoomer Arthur Akopyan
CEO CFO
18 September 2007
PricewaterhouseCoopers CI LLP
PricewaterhouseCoopers CI LLP
Twenty Two Colomberie
St Helier
Jersey JE1 4XA
Channel Islands
Telephone +44 (0) 1534 838200
Facsimile +44 (0) 1534 838201
www.pwc.com
Independent review report to Rambler Media Limited
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated interim
balance sheet as at 30 June 2007 and the related consolidated interim statements
of income, cash flows and changes in shareholders' equity for the six months
then ended and related notes. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Rules
for Companies which require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in the company's
annual financial statements.
This interim report has been prepared in accordance with the International
Accounting Standard 34, 'Interim financial reporting'.
Review work performed
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the International Auditing and
Assurance Standards Board. A review consists principally of making enquiries of
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the disclosed
accounting policies have been applied. A review excludes audit procedures such
as tests of controls and verification of assets, liabilities and transactions.
It is substantially less in scope than an audit and therefore provides a lower
level of assurance. Accordingly we do not express an audit opinion on the
financial information. This report, including the conclusion, has been prepared
for and only for the company for the purpose of the AIM Rules for Companies and
for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey
18 September 2007
�2007 PricewaterhouseCoopers CI LLP. All rights reserved.
'PricewaterhouseCoopers' refers to the Channel Island firm of
PricewaterhouseCoopers CI LLP or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network, each
of which is a separate and independent legal entity. PricewaterhouseCoopers CI
LLP, a limited liability partnership registered in England with registered
number OC309347, provides assurance, advisory, and tax services. The registered
office is 1 Embankment Place, London WC2N 6RH and its principal place of
business is Twenty Two Colomberie, St. Helier, Jersey JE1 4XA.
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