25th Sep 2007 07:00
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 internetmedia and services to the global Russian-speaking community, today announced itscondensed consolidated financial results in accordance with InternationalFinancial Reporting Standards (IFRS) for the six months ended 30 June 2007. Thefollowing preliminary information has been reviewed and approved for release bythe 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 forpresentation purposes to exclude the Television operation, which wasdiscontinued following its sale in January 2007, and have been restated toinclude part of the provision for potential tax related charges of US$2.6million reported in the 2006 full year report and to include certainunderaccrued expenses, refer to Note 16. ** The Group does not have a significant influence on Begun at 30 June 2007, anda 25% investment in Begun is accounted for as an available for sale financialasset, 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$50 million) (source: Russian Association of Communication Agencies - AKAR) Mark Opzoomer, Chief Executive Officer of Rambler Media, commented: "In theperiod from January to June 2007, over 28 million Russian speaking consumersvisited our portal each month on average, demonstrating that Rambler Media isattracting one of the largest and fastest growing online audiences in Europe.Our revenues grew by 58% in the period and are expected to continue tooutperform the advertising market as more and more businesses turn to theinternet to reach their target audiences. "While 2006 was about transforming Rambler Media from a multimedia Group to apure internet player, 2007 is a year of transition. Since Arthur and I becameCEO and CFO respectively earlier this year, our priorities have been tointegrate and optimise the different internet properties that make up RamblerMedia. One of our key objectives is to improve the Group's profitability. Inthis respect, we expect to see an improvement in the second half of 2007 and2008. In addition, we have recently increased our ownership in Begun, one ofRussia's fastest growing and leading paid-search advertising platforms, whichgives Rambler Media access to a larger share of the text-based advertisingmarket in Russia. Rambler Media is now uniquely positioned to benefit fromgrowth in both the online display and search related advertising markets inRussia." FINANCIAL SUMMARY \* T(US$ '000s) Jan - Jun Jan - Jun Jan - Dec 2007 2006 2006 (restated**)Group Revenue 20,512 12,963 30,646Internet 18,408 11,639 28,305Mobile Value Added Services 2,104 1,324 2,341Investment income 1,202 684 1,574 ----------------- -------------- --------------Total revenue and investment income 21,714 13,647 32,220EBITDA* 621 807 1,624Net 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 0.001Profit / (loss) per share from continuing operations - basic and diluted (0.042) 0.078 0.001Profit / (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)--------------------------------------- ----------------- -------------- --------------\* T * Earnings before interest, tax, depreciation and amortisation ** The Group's financial results for the first half of 2006 have been changedfor presentation purposes to exclude the Television operation, which wasdiscontinued following its sale in January 2007. The financial results of theGroup's continuing operations have been restated to include part of theprovision for potential tax related charges of US$2.6 million reported in the2006 full year report and to include certain underaccrued expenses, refer toNote 16. The reconciliation between results of business segments and the numbers reportedin the company's financial statements for the period ended 30 June 2007 is asfollows. Inter-segment revenues are not material and therefore have not beendisclosed. \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 18,408 2,104 20, 512 - 20,512Operating expenses and overheads (20,383) (2,147) (22,530) - (22,530) --------- ------- ----------- ------------ -------- (1,975) (43) (2,018) - (2,018)Investment income 1,202 - 1,202 1,202Depreciation and amortisation 1,313 124 1,437 - 1,437EBITDA 540 81 621 - 621 ========= ======= =========== ============ ========\* T The segmental results for the six months ended 30 June 2006 are as follows: \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 11,639 1,324 12,963 2,154 15,117Operating expenses and overheads (11,608) (1,742) (13,350) (3,813) (17,163) --------- ------- ----------- ------------ -------- 31 (418) (387) (1,659) (2,046)Investment income 684 - 684 - 684Depreciation and amortisation 403 107 510 244 754EBITDA 1,118 (311) 807 (1,415) (608) ========= ======= =========== ============ ========\* T CONFERENCE CALL INFORMATION The Group will host a conference call to present the results at 2 pm (MoscowTime)/ 12 pm (CET) / 10 am (London Time) / 6 am (New York Time) today. Theresults statement is available on Rambler Media's website atwww.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: \* TRambler Media Shared Value LimitedMark Opzoomer Nicolas DuperrierTel. +7 495 500 3826 Tel. +44 (0) 20 7321 5010 [email protected]\* T \* TING Wholesale BankingDaniel Friedman / William MarleTel. +44 (0) 20 7767 1000\* T ABOUT RAMBLER MEDIA Rambler Media is a diversified Russian language media and services group whichoperates or has interests in leading internet properties including the oldestRussian 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 advertisingcompany 'Begun'. Rambler Media's shares are traded on AIM, the junior market ofthe London Stock Exchange under the symbol 'RMG'. For more information onRambler Media, visit our corporate website at www.ramblermedia.com. Certain statements within this announcement constitute forward-lookingstatements. Such forward-looking statements involve risks and other factorswhich may cause the actual results, achievements or performance of the Companyto be materially different from any future results, achievements or performanceexpressed or implied by such forward-looking statements. Such risks and otherfactors include, but are not limited to, general economic and businessconditions, changes in government regulations, and court interpretations of suchregulations, currency fluctuations (including the US$/Rbs rate), competition,and changes in development plans. There can be no assurance that the results andevents contemplated by the forward-looking statements contained in thisannouncement will, in fact, occur. Any forward-looking statements made in thisannouncement represent management's best judgment as to what may occur in thefuture and are correct only as at the date of this announcement. The Companywill not undertake any obligation to release publicly any revisions to theseforward-looking statements to reflect events or circumstances occurring afterthe date of this announcement except as required by applicable law or by anyapplicable regulatory authority. Rambler Media Limited, Condensed consolidated half-yearly financial information, 30 June 2007 Contents \* T PageInterim management report 7Balance sheet 14Income statement 15Statement of changes in equity 16Cash flow statement 17Notes to financial information 18Statement of directors' responsibilities 31Auditors' review report 32\* T Interim management report Rambler Media Limited (LSE:RMG), ("the Group") is a diversified Russian languagemedia and services group which operates or has interests in leading internetproperties 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 sharesare traded on AIM, the junior market of the London Stock Exchange under thesymbol '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. \* The Group's financial results for the first half of 2006 have been changed forpresentation purposes to exclude the Television operation, which wasdiscontinued following its sale in January 2007, and have been restated toinclude part of the provision for potential tax related charges of US$2.6million reported in the 2006 full year report and to include certainunderaccrued expenses, refer to Note 16. ** The Group does not have a significant influence on Begun at 30 June 2007, anda 25% investment in Begun is accounted for as an available for sale financialasset, 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$50 million) (source: Russian Association of Communication Agencies - AKAR). 2.4. Financial and operating review \* T(US$ '000s) Jan - Jun Jan - Jun Jan - Dec 2007 2006 2006 (restated**)Group Revenue 20,512 12,963 30,646Internet 18,408 11,639 28,305Mobile Value Added Services 2,104 1,324 2,341Investment income 1,202 684 1,574 ----------- -------------- --------------Total revenue and investment income 21,714 13,647 32,220EBITDA* 621 807 1,624Net 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 0.001Profit / (loss) per share from continuing operations - diluted (0.042) 0.078 0.001Profit / (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)--------------------------------------------- ----------- -------------- --------------\* T * Earnings before interest, tax, depreciation and amortisation ** The Group's financial results for the first half of 2006 have been changedfor presentation purposes to exclude the Television operation, which wasdiscontinued following its sale in January 2007. The financial results of theGroup's continuing operations have been restated to include part of theprovision for potential tax related charges of US$2.6 million reported in the2006 full year report and to include certain underaccrued expenses, refer toNote 16. The reconciliation between results of business segments and the numbers reportedin the company's financial statements for the period ended 30 June 2007 is asfollows. Inter-segment revenues are not material and therefore have not beendisclosed. \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 18,408 2,104 20, 512 - 20,512Operating expenses and overheads (20,383) (2,147) (22,530) - (22,530) --------- ------- ----------- ------------ -------- (1,975) (43) (2,018) - (2,018)Investment income 1,202 - 1,202 1,202Depreciation and amortisation 1,313 124 1,437 - 1,437EBITDA 540 81 621 - 621 ========= ======= =========== ============ ========\* T The segmental results for the six months ended 30 June 2006 are as follows: \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 11,639 1,324 12,963 2,154 15,117Operating expenses and overheads (11,608) (1,742) (13,350) (3,813) (17,163) --------- ------- ----------- ------------ -------- 31 (418) (387) (1,659) (2,046)Investment income 684 - 684 - 684Depreciation and amortisation 403 107 510 244 754EBITDA 1,118 (311) 807 (1,415) (608) ========= ======= =========== ============ ========\* T 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 toreach close to US$21 million (H1 2006, US$13 million), thus outperforming theRussian internet display advertising market itself, which was estimated to havegrown by 52% in the same period (source: Russian Association of CommunicationAgencies - AKAR). The Group reported a 60% increase in like-for-like totalrevenue 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 thefirst 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 inseparate 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 wasthe case in the full year 2006, due to a sharp rise in operating expenses withlabour compensation representing the biggest cost. Actions taken by the newexecutive management to rationalise costs, along with continuing revenue growth,are intended to yield EBITDA growth for the Group from the second half of 2007and in 2008. 2.5.3. Operating Expenses The Group's operating expenses (including depreciation, amortisation and taxrelated provision) reached US$22.5 million in H1 2007, up 69% from US$13.3million for the first half of last year. Labour expense rose by 60% to US$8.8million (H1 2006, US$5.5 million) and accounted for 40% of operating costs inthe period. This increase was primarily driven by wage inflation ofapproximately 30% in the Russian internet market, organic increase in headcountand certain personnel restructuring costs. The Group changed functional currency in 2007 from US Dollar to Russian Roubleand recognised foreign currency translation loss US$0.7 million as a result offluctuations of exchange rates, refer to Note 3 (b). Other significant operating costs included commissions and partner fees, whichrose by 135% from US$2.3 million in H1 2006 to US$5.4 million in H1 2007 as aresult of increased revenues. Legal and professional fees also went up from US$1.1 million in H1 2006 toUS$1.6 million in H1 2007 due to increased advice on strategy and potentialtransactions in H1 2007. The Group's amortisation expense went up by 700% from US$0.11 million in H1 2006to $0.87 million due to amortisation of intangibles resulting from 2006acquisitions. The Group's depreciation expense went up by 40% from US$0.4million to US$0.56 million in line with increase in the underlying depreciablefixed assets. As stated in the 2006 annual report, the Group's results include provisions forpotential tax related charges. These provisions relate to potential liabilitiesfor taxes other than income tax, which arise from the legal structure of theGroup and the jurisdictions in which various income and expense items arerecognised and assessed. The Group is taking steps to simplify its legalstructure. This process is expected to be completed within 10 months and toresult in a forward prevailing tax rate of approximately 26% when complete. Forthe first half of 2007, the provision for potential tax related charges amountedto 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, theprovisions may be released at some point in the future. The Group's consolidated net loss after interest and tax was US$0.4 million inH1 2007 (H1 2006, US$1.3 million profit excluding the loss from the discontinuedTV operation of US$1.7 million). In addition to the net loss in H1 2007, thedisposal of the TV operation in January 2007 generated a net gain on disposal ofUS$7.1 million. The Group's loss per share from continuing operations (basic) was US$0.042 (H12006, 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 yearfrom US$11.6 million to US$18.4 million in the first six months of 2007following sustained growth in the number of Rambler.ru users, up 40%, and stronggrowth in Russia's banner internet advertising market, up 52%. Although theGroup 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 moreadvertisers choosing to advertise through the internet and Rambler's popularwebsites. The Group's strategy is to maintain competitive pricing in order tosuccessfully build a large network of advertisers, particularly in what isconsidered as the early phase in the development of internet advertising inRussia. In the first six months of 2007, 62% of internet revenue was generated bydisplay advertising, which is sold through the Group's agency Index 20, and 32%of internet revenue came from search related or text-based advertising, mainlythrough Begun's extended advertising network, the rest was attributable toe-commerce and other revenues. The proportion of search related advertisingwithin total internet revenue is expected to increase going forward as the Groupwill be able to consolidate Begun's results from August 2007. In addition to its internet revenue, Rambler Media also recorded investmentincome of US$1.20 million, up 76% from US$0.68 million a year earlier fordividends received from Rambler's 25% interest in Begun, one of Russia's leadingsearch and contextual text based advertising platforms with a network of over10,000 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$1.1million). 2.6.2 Operating review Rambler.ru (www.rambler.ru) ("Rambler") is a leading Russian language internetportal which successfully combines search with communication and communityactivities; and media and entertainment services, enabling mass audiences tonavigate to specific pages according to their interest. In H1 2007, Rambler.rureached 28.6 million unique monthly users on average, up more than 40% from the20 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 PublicOpinion Foundation). In April 2007, Rambler.ru attracted record traffic of over32 million users (up 60% from April 2006). Rambler users consulted an average of80 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 billionqueries, 27% more than in H1 2006 - or 230 million search queries per month onaverage. Rambler continued to upgrade its search relevance capabilities.According to public tests carried out by Ashmanov & Partners IT-consultancy inJuly 2007, search relevance was improved by up to 30% following the launch of anew search interface in the summer. The search speed was also improved in theperiod with results being processed twice as fast as before. In H1 2007, anaverage 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% fromJuly 2006 and representing 21% of Rambler's average monthly audience. Rambler'stotal number of registered email accounts is now at 23.8 million, 42% higherthan in December 2006. In June, Rambler launched a new SMS alert servicenotifying users of new mail received. This service was launched jointly withleading 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 significanttechnical improvements and more user friendly interfaces. Users now have theability to express user emotions by colourful flash cartoons and user status canbe selected before connecting onto the service instead of in full view of onlinecontacts. A new video broadcasting service through Rambler Vision was alsointegrated, thus enriching the user experience with blogs, photos and socialnetworking features. The ICQ instant messaging service has been used byapproximately 6 million users on average in the first half of 2007, of whom morethan 2 million used Rambler-ICQ joint service. This means that one out of everythree ICQ user in Russia has been using Rambler-ICQ, representing 7% ofRambler'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 averagemonthly audience. Rambler News (http://www.rambler.ru/news/) was enriched withvideo and audio content as well as new links with easier access to sports,finance, regional news, real estate and other sections. Rambler News alsolaunched successful special weekly online supplements for auto, style, home andpersonal finance. Lenta.ru (www.lenta.ru), one of the Group's most frequentednews sites and the leading online newspaper in Russia, grew its onlinereadership by 14% (32% in June 07 vs. June 06) in the first six months of 2007compared to the same period last year, with 2.8 million unique visitors permonth. In April, Rambler Sport (http://sport.rambler.ru/) sponsored and launched aspecial project dedicated to the 2007 International Ice Hockey WorldChampionships hosted in Moscow. The site attracted 1.1 million users in just twoweeks and positioned Rambler Sport as the leading Russian speaking sports newssite. Rambler Games (http://games.rambler.ru/), which was launched in 2006, continuedto be very popular in the first six months of 2007 and became the number onegaming portal by both the number of unique users and page views since May 2007according to data collected by Top100. In the first half of 2007, 1.4 millionusers played Rambler games on average each month, representing 5% of Rambler'saverage monthly audience. In May, Rambler Audio was re-launched with a new interface and faster streamdownloads, resulting in an increased number of visitors. 1.3 million usersvisited Rambler Audio's pages in June 2007, 130% more than in June 2006. Thisnumber increased to 1.5 million in July. Rambler Audio also started selling MP3songs. 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$0.08million (H1 2006, US$0.31 million loss). Although Mobile services arestrategically important for the Group to allow Rambler's large internet audienceto enjoy online services on their mobile devices, the services are expected tocontribute less to the Group's revenue generation going forward as Internetservices take an increasingly larger share. Because this segment will be closelyintegrated with the internet operations, the Mobile segment will no longer bereported separately in the next results statements. 3. Position The Group ended the period with cash balances of US$42 million. This includesthe US$21 million proceeds from the sale of Rambler TV received at the beginningof 2007. Russia has rapidly become one of Europe's largest online communities, thirdafter Germany and the UK, with 28.7 million Russians online in the spring of2007, representing about 25% of the Russian adult population (source: The PublicOpinion Foundation). This percentage is forecast to more than double by 2010,according to the Russian Ministry of Communications, which could make Russia thelargest online market in Europe. The overall Russian advertising market isgrowing very strongly, and internet advertising is the fastest growing segment.Online display advertising was estimated to have increased by 67% year on yearin 2006 to US$100 million (2005, US$60 million) and by 52% year on year to US$77million in H1 2007 (H1 2006, US$50 million) (source: Russian Association ofCommunication Agencies - AKAR). In addition, text based advertising onRussian-language internet sites soared to US$110 million in 2006 from US$45million 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 othermedia and is forecast to attract 4% of total advertising by 2010 (source: ZenithOptimedia). The Group is well-positioned to continue its rapid growth, in line with orfaster 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 orinvolves transactions with Russian entities. As a result the Group hassignificant exposure to the Russian taxation and currency control regimes. Russian tax and customs legislation is subject to varying interpretations, andchanges, which can occur frequently. Management's interpretation of suchlegislation as applied to the transactions and activity of the Group may bechallenged by the relevant authorities. The Russian tax authorities may be taking a more assertive position in theirinterpretation of the legislation and assessments, and it is possible thattransactions and activities that have not been challenged in the past may bechallenged. The Supreme Arbitration Court issued guidance to lower courts onreviewing tax cases providing a systemic roadmap for anti-avoidance claims, andit is possible that this will significantly increase the level and frequency oftax authorities scrutiny. As a result, significant additional taxes, penalties and interest may beassessed. Fiscal periods remain open to review by the authorities in respect oftaxes for three calendar years preceding the year of review. Under certaincircumstances reviews may cover longer periods. Russian transfer pricing legislation introduced 1 January 1999 provides thepossibility for tax authorities to make transfer pricing adjustments and imposeadditional tax liabilities in respect of all controllable transactions, providedthat the transaction price differs from the market price by more than 20%. Controllable transactions include transactions with interdependent parties, asdetermined 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% fromthe price applied in similar transactions by the same taxpayer within a shortperiod of time, and barter transactions. There is no formal guidance as to howthese rules should be applied in practice. In the past, the arbitration courtpractice with this respect has been contradictory. Tax liabilities arising from intercompany transactions are determined usingactual transaction prices. It is possible with the evolution of theinterpretation of the transfer pricing rules in the Russian Federation and thechanges in the approach of the Russian tax authorities, that such transferprices could potentially be challenged in the future. Given the brief nature ofthe current Russian transfer pricing rules, the impact of any such challengecannot be reliably estimated; however, it may be significant to the financialcondition and/or the overall operations of the entity. The Group includes companies incorporated outside of Russia. Russian tax laws donot provide detailed rules on taxation of foreign companies. It is possible thatwith the evolution of the interpretation of these rules and the changes in theapproach of the Russian tax authorities, the non-taxable status of some or allof the foreign companies of the Group in Russia may be challenged. Where theGroup believes that it is probable that its position could not be sustained, therelated tax and associated balances have been accrued. However, it is possiblethat additional challenges may occur and the impact of such challenges, if any,cannot be reliably estimated; however, it may be significant to the financialcondition 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 thatreduce the overall tax rate of the Group. As noted above, such tax positions maycome under heightened scrutiny as a result of recent developments inadministrative and court practices; the impact of any challenge by the taxauthorities cannot be reliably estimated; however, it may be significant to thefinancial condition and/or the overall operations of the entity. 5. Forward-looking statements Certain statements in this half-yearly report are forward-looking. Although theGroup believes that the expectations reflected in these forward-lookingstatements are reasonable, we can give no assurance that these expectations willprove to be correct. Because these statements involve risks and uncertainties,actual results may differ materially from those expressed or implied by theseforward-looking statements. We undertake no obligations to update any forward-looking statements whether asa 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) \* T Notes 30 June 31 December 2007 2006 -------- -------------- ---------------AssetsNon 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 19,993Current 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 ============== =============== LiabilitiesCurrent 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 13,042Long 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' equityIssued capital 8 157 153Share premium 60,878 57,208Options reserve 109 601Assets 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 andShareholders' Equity: 92,747 65,702 ============== ===============\* T The accompanying notes are an integral part of this condensed interim financialinformation. These condensed interim financial statements were approved by the Directors on18 September 2007 \* TMark Opzoomer Arthur AkopyanCEO CFO\* T Rambler Media Limited Condensed Consolidated Interim Income Statement for the 6 month period ended 30 June 2007 (expressed in US$'000s) \* T Notes 1 January 2007 1 January 2006 to to 30 June 30 June 2006 2007 (restated) -------- -------------- -----------------Continuing OperationsRevenue 11 20,512 12,963 Other income 11 1,202 684 Operating expenses 12 (22,530) (13,350) -------------- ----------------- Operating (loss) / profit (816) 297 Interest income 11 892 568 -------------- -----------------Profit before taxation 76 865 Taxation 14, 16 (473) 398 -------------- ----------------- (Loss) / profit for the period from continuing operations (397) 1,263 Discontinued operationsProfit / (loss) from discontinued 18 operations 7,089 (1,680) -------------- ----------------- Net profit / (loss) 6,692 (417) Attributable to:- equity holders of the company 6,439 (487)- minority interest 13 253 70 -------------- ----------------- 6,692 (417) ============== ================= Earnings/(loss) per share for profit/(loss) attributable to the equity holders of the company, expressed in cents per shareEarnings/(loss) per share from 15 continuing operations - basic (in US$ 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)\* T The accompanying notes are an integral part of this condensed interim financialinformation. 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) \* T 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 43,804Restatement (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 - 138Cost of share option - - - 88 - - - 88 - 88Profit for the period (as previously reported) - - - - - 2,406 - 2,406 70 2,476Minority interest arising on acquisition - - - - - - - - 1,437 1,437Restatement - - - - - (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 - 1,171Cost of share option - - - 172 - - - 172 - 172Loss 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 - 2,504Share option reserve transferred to share premium - - - (601) - - - (601) - (601)Cost of share option - - - 103 - - - 103 - 103Profit for the period - - - - - 6,439 - 6,439 253 6,692Valuation of available-for-sale financial assets - 17,214 - - - - - 17,214 - 17,214Deferred 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 ======= ========== ======= ======= ======= =========== =========== ========== ========= ==========\* T Rambler Media Limited Condensed Consolidated Interim Statement of Cash Flows for the 6 month period ended 30 June 2007 (expressed in US$'000s) \* T 1 January 2007 1 January 2006 to 30 June to 30 June 2007 2006 (restated) --------------- --------------- Cash flows from operating activitiesNet income / (loss) 6,692 (417)Adjusted for:(Profit) / loss attributable to discontinued operations (7,089) 1,680Interest receivable (892) (569)Interest charged - 1Dividends receivable (1,202) (684)Taxation charge 473 (398)Cost of share options vested 103- 88Foreign currency translation loss 678 -Depreciation and amortisation 1,437 510Increase in other provisions for liabilities and charges 533 1,176Overhead costs attributable to discontinued operations paid by continuing operations 57 419 --------------- ---------------Operating cash flows before working capital changes 790 1,806Increase in debtors and receivables (4,856) (1,979)Increase/ (decrease) in prepayments 419 (264)Increase in creditors & other payables 3,265 2,482Increase in deferred revenue 949 112 --------------- ---------------Cash generated from operations 567 2,157Income taxes paid (234) (3)Interest paid - (7) --------------- ---------------Net cash (used in) / from operating activities - continuing operations 333 2,147Net cash used in operating activities - discontinued operations - (2,012) --------------- ---------------Net (used in)/ from operating activities 333 135 Cash flows from investing activitiesAcquisitions 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 activitiesProceeds of equity financing 1,904 138Repayment of borrowings - (10)Interest received 892 569 --------------- ---------------Net cash from financing activities - continuing operations 2,796 697Net 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 21,482Cash at the beginning of the year - discontinued operations 476 - Cash at the end of the period - continuing operations 41,836 19,795Cash at the end of the year - discontinued operations - 172Cash at the end of the period 41,836 19,967 =============== ===============\* T 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 2004as a private limited company (now a public company - see below). The company hasits registered office at First Island House, Peter Street, St. Helier, JerseyJE2 4SP. The condensed consolidated financial information presented hereinincludes the condensed interim financial information of the company, its whollyowned 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, servicesand content delivery company which operates various internet propertiesincluding 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 "RamblerTelecom", interactive advertising company "Index 20", and mobile content serviceprovider "Rambler Mobile". During 2006 the company decided to dispose itstelevision business, which formerly consisted of TVK Rambler and NBN, thissegment is reported as a discontinued operation. Rambler Media's shares are traded on the AIM market of the London Stock Exchangeunder the symbol "RMG" since the Initial Public Offering (IPO) which took placeon 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 inRambler Media Limited collectively with its related companies: First MercantileNet Ventures Fund Limited (FMNVF Ltd), Russian Federation First Mercantile FundLimited and Sopica Special Opportunities Fund Limited. On 31 October 2006Prof-Media, a Russian media holding, has acquired 48.8% of shares in RamblerMedia Limited from funds managed by FM Asset Management Limited. In December2006, following the anti-monopoly approval, Prof-Media, has obtained control andlater increased its stake to 54.8%. 2. Basis of preparation This condensed consolidated interim financial information for the half-yearended 30 June 2007 has been prepared in accordance with IAS 34, "Interimfinancial reporting". The interim condensed financial report should be read inconjunction with the annual financial statements for the year ended 31 December2006. The accounting policies adopted are consistent with those of the annualconsolidated financial statements for the year ended 31 December 2006, asdescribed in the annual consolidated financial statements for the year ended 31December 2006. 3. Accounting policies a) Basis of consolidation These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standards ("IFRS") under thehistorical cost convention. The principal accounting policies applied in thepreparation of these condensed consolidated interim financial statements are setout below. These policies have been consistently applied to all the periodspresented, unless otherwise stated (refer to Note 3 (e), New AccountingPronouncements). b) Functional currency Management exercised its judgement to determine that for the purposes of the2007 IFRS financial statements Russian Rouble most fairly represents theeconomic effects of the underlying transactions, events and conditions due tothe following factors: - majority of clients are invoiced by Rambler's Russian operating entitiesbringing more than 95% revenue. Due to improving Rouble exchange rate theRambler 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 wasaccounted for by establishing new functional currency bases for non-monetaryitems. Those bases were computed by translating the historical reportingcurrency amounts of assets and liabilities into Russian Roubles at currentexchange rate as at 1 January 2007. After the change of functional currency toRussian Rouble, Rambler Group's revenues, costs, property and equipmentpurchased which are either priced incurred, payable, or otherwise measured inforeign currencies are being converted to Russian Roubles at the historicalexchange rates prevailing on the date transactions occurred. Debt and tradeliabilities are measured at the exchange rate prevailing on the balance sheetdate. Resulting exchange differences are being charged or credited to the incomestatement. c) Presentation currency All amounts in these financial statements are presented in thousands of USdollars ("US$ thousands"), unless otherwise stated. It is a common practice forRussian companies operating in the media industry to use UD$ as a presentationcurrency. The Russian Rouble is not a fully convertible currency outside the RussianFederation and, accordingly, any translation of RUR denominated assets andliabilities into US$ for the purpose of these condensed consolidated interimfinancial statements does not imply that Group could or will in the futurerealise or settle in US$ the translated values of these assets and liabilities. The results and financial position of each Group entity (functional currency ofnone of which is a currency of a hyperinflationary economy) are translated intothe presentation currency as follows: (i) assets and liabilities for each balance sheet presented are translated atthe closing rate at the date of that balance sheet; (ii) income and expenses for each income statement are translated at averageexchange rates (unless this average is not a reasonable approximation of thecumulative effect of the rates prevailing on the transaction dates, in whichcase income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised as a separate componentof equity. At 30 June 2007 the principal rate of exchange used for translating foreigncurrency 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 functionalcurrency at the official exchange rate of the Central Bank of the RussianFederation at the respective balance sheet dates. Foreign exchange gains andlosses resulting from the settlement of the transactions and from thetranslation of monetary assets and liabilities into each entity's functionalcurrency at year-end official exchange rates of the Central Bank of the RussianFederation are recognised in profit or loss. Translation at year-end rates doesnot apply to non-monetary items, including equity investments. Effects ofexchange rate changes on the fair value of equity securities are recorded aspart of the fair value gain or loss. e) New accounting pronouncements Certain new standards and interpretations have been published that are mandatoryfor the Group's accounting periods beginning on or after 1 January 2007 or laterperiods and which the entity has not early adopted: IFRS 7 Financial Instruments: Disclosures and a complementary Amendment to IAS 1Presentation of Financial Statements - Capital Disclosures (effective from 1January 2007). The IFRS introduces new disclosures to improve the informationabout financial instruments. The volume of disclosures will increasesignificantly with an emphasis on quantitative aspects of risk exposures and themethods of risk management. The quantitative disclosures will provideinformation about the extent to which the entity is exposed to risk, based oninformation 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 andSimilar Financial Institutions, and some of the requirements in IAS 32,Financial Instruments: Disclosure and Presentation. The Amendment to IAS 1introduces disclosures about level of an entity's capital and how it managescapital. The Group is currently assessing what impact the new IFRS and theamendment to IAS 1 will have on disclosures in its financial statements. IFRS 7disclosures will be done in the year-end consolidated financial statements. IFRS 8, Operating Segments (effective for annual periods beginning on or after 1January 2009). The Standard applies to entities whose debt or equity instrumentsare 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 ofissuing any class of instruments in a public market. IFRS 8 requires an entityto report financial and descriptive information about its operating segments andspecifies how an entity should report such information. The Group is currentlyassessing what impact IFRS 8 will have on disclosures in its financialstatements. 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 didnot significantly affect the Group's financial statements. 4. Segmental Information The segmental results for the six months ended 30 June 2007 are as follows: \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 18,408 2,104 20, 512 - 20,512Operating 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) ========= ======= =========== ============ ========\* T The segmental results for the six months ended 30 June 2006 are as follows: \* T Internet Mobile Total Discontinued Services VAS Continuing operations Total operations --------- ------- ----------- ------------ --------Total Revenue 11,639 1,324 12,963 2,154 15,117Operating 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) ========= ======= =========== ============ ========\* T 5. Capital expenditure \* T Leasehold Office Television Total improvements equipment equipment ------------ ---------- ---------- -------Cost31 December 2005 548 4,847 1,600 6,995 Additions 39 861 33 933Disposals - (22) - (22)Discontinued operations (172) (410) (1,633) (2,215) ------------ ---------- ---------- -------30 June 2006 415 5,276 - 5,691 Additions 14 1,223 30 1,267Disposals - (131) (8) (139)Discontinued operations - (38) (22) (60) ------------ ---------- ---------- -------31 December 2006 429 6,330 - 6,759 Additions 48 854 - 902Reclassification - (20) - (20)Disposals - (11) - (11)Currency translation 9 135 - 144 ------------ ---------- ---------- -------30 June 2007 486 7,288 - 7,774 ------------ ---------- ---------- ------- Accumulated Depreciation31 December 2005 389 2,044 747 3,180 Charge 36 442 168 646Discontinued operations (90) (211) (915) (1,216) ------------ ---------- ---------- -------30 June 2006 335 2,275 - 2,610 Charge 3 434 - 437Disposals - (19) - (19)Discontinued operations - - - - ------------ ---------- ---------- -------31 December 2006 338 2,690 - 3,028 Charge 25 539 - 564Disposals - (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 ============ ========== ========== =======\* T 6. Intangible Assets \* T Domain Broadcast Software Goodwill Total and trade network and other names intangibles ------------ --------- ------------ -------- --------Cost31 December 2005 931 13,626 642 571 15,770Additions 81 386 467On acquisition of subsidiary 3,998 - 48 386 4,432Discontinued 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 - 1,016On 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 - 334Reclass - - 20 - 20Amortisation (753) - (120) - (873)Currency translation 194 - 102 43 339 ------------ --------- ------------ -------- --------30 June 2007 9,570 - 1,778 2,213 13,561 ------------ --------- ------------ -------- --------\* T Goodwill is tested for impairment annually at year end (31 December) or wheneverthere is any indication of impairment. At 30 June 2007, there was no indicationof impairment for goodwill. Intangible assets that are subject to amortization are reviewed for impairmentwhenever events or changes in circumstance indicate that the carrying amount maynot be recoverable. There was no indication of impairment at 30 June 2007. 7. Financial Assets \* T 2007 2006 ----------------------------- -------------------- Begun 18,000 771Other 102 93 ----------------------------- -------------------- Total 18,102 864 ============================= ====================\* T Begun was treated as an investment carried at cost at 31 December 2006. TheCompany had no significant financial or operational influence over the company.It was not practical to determine the fair value of this investment at 31December 2006, but, and even though it was not possible to predict the futuredividend yield from the Begun investment, based on the dividends received andother available information, management believed that the fair value of theinvestment in Begun significantly exceeded the cost at which the investment wasincluded in the 2006 annual financial statements. On 8 August 2007 the Group has increased its stake in Begun to 50.1% (refer Note22 'Post-Balance Sheet Events'). At 30 June 2007 an investment in Begun is treated as an available-for-salefinancial asset. The fair value of this asset at 30 June 2007 was determined byreference to the recent completion of an acquisition of an additional 25% stakein Begun. Dividend income received from Begun is included in other income. Dividends aredeclared 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$ (notthousands) is comprised as follows: \* T 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 ------------------------------ -------------------\* T Employee share options exercised during the first half of 2007 resulted in125,545 being issued (30 June 2006: 40,817 shares), with exercise proceeds ofUS$ 1,904 thousand (30 June 2006: US$ 40,817 thousand). The related weightedaverage 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 theCompany approved the grant of options pursuant to the Rambler Media LimitedShare Option Plan and the Rambler Media Limited Executive Share Option Plan (the"Share Option Plans"). Under the terms approved, directors of the Company maynot allot more than 1,300,000 shares to the Share Option Plans without furtherapproval by ordinary resolution of the Company in general meeting. \* T Number Weighted average Total proceeds exercise prices, received and USD receivable, USD'000----------------------------------------------------------------------- --------- ----------------- ------------------- Balance at 31 December 2006 125,545 15.40 1,934New awards 103,903 40.18 4,175Exercised (125,545) 15.17 (1,904)----------------------------------------------------------------------- --------- ----------------- -------------------Balance at 30 June 2007 103,903 40.47 4,205----------------------------------------------------------------------- --------- ----------------- -------------------\* T The estimated fair value of each share option granted was calculated by applyinga Black-Scholes option pricing model. The model inputs were the share price atgrant date and exercise price (disclosed in a table above), expected volatilityof 21% for options granted in 2007, no expected dividends and an averagerisk-free interest rate of 3.5%. To allow for the effects of early exercise, itwas assumed that the employees would exercise the options after vesting date.Share options agreement have an early exercise condition whereby the employeeshave a right of early exercise in the event of management change. Following thechange of management, all employees who had options at 31 December 2006 usedtheir 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: \* T Total------------------------------------------------------------------------------------------------------------------------ Carrying amount at 31 December 2006 3,757 Additions charged to profit or loss 534 Carrying amount at 30 June 2007 4,291\* T All of the above provisions relate to potential liabilities for taxes other thanincome taxes, and associated balances arising from the legal structure of theGroup and the jurisdictions in which various income and expense items arerecorded and where they may be deemed to be assessed for tax purposes. Theseissues are also impacted by the absence of group relief between various entitiesin the Group structure. 11. Revenue and Other Income Revenue comprises: \* T 1 January 1 January 2007 to 30 2006 to 30 June 2007 June 2006 ----------------------------- ------------------- Internet 18,408 11,639Mobile Value Added Services 2,104 1,324 ----------------------------- ------------------- 20,512 12,963 ============================= ===================\* T \* T 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 ------------------------------- ------------------\* T 12. Operating expenses Operating expenses comprise: \* T 1 January 2007 1 January to 30 June 2006 to 30 2007 June 2006 ---------------------------- --------------------- Labour 8,778 5,497Content and transmission 1,167 241Commissions and partner fees 5,442 2,271Rent 589 396Legal and professional 1,561 1,074Provision for taxes other than income taxes 534 1,176General expenses 806 547Share Options 103 88Depreciation 564 401Amortisation 873 109Marketing and advertising 1,157 1,192Foreign currency translation loss 678 14Other 278 344 ---------------------------- --------------------- Total Operating expenses 22,530 13,350 ============================ =====================\* T 13. Minority interest \* T 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 =================\* T 14. Income taxes The Rambler Group has operations in a number of jurisdictions and isconsequently exposed to the fiscal regimes of more than one country. Its mainexposure is to the fiscal regime of the Russian Federation. Income taxes have been provided for in the consolidated financial statements inaccordance with Russian legislation enacted or substantively enacted by thebalance sheet date. The income tax charge/benefit comprises current tax anddeferred tax and is recognised in the consolidated income statement unless itrelates to transactions that are recognised, in the same or a different period,directly in equity. Income tax comprised the following: \* T 1 January 1 January 2007 to 30 2006 to 30 June 2007 June 2006 (restated)--------------------------------------------------------------------------------------------------- --------------------Current tax expense 563 677Deferred tax benefit (90) (1,075)Income tax charge/(benefit) for the period 473 (398)--------------------------------------------------------------------------------------------------- --------------------\* T A reconciliation between the expected and the actual taxation charge is providedbelow: \* T 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)-------------------------------------------------------------------------------------------------- ---------------------\* T 15. Earnings/(loss) per share Earnings/(loss) per share has been calculated as follows: \* T 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 15,017Weighted average number of shares in issue (thousands)- diluted 15,376 15,360---------------------------------------------------------------------------------------------------- ------------------ Basic (loss)/earnings per share from continuingoperations (expressed in US$ per share) (0.042) 0.079Diluted (loss)/earnings per share from continuingoperations (expressed in US$ per share) (0.042) 0.078---------------------------------------------------------------------------------------------------- ------------------\* T Earnings/(loss) per share from discontinued operations is calculated as follows: \* T 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 15,017Weighted average number of shares in issue (thousands)- diluted 15,376 15,360------------------------------------------------------------------------------------------------- ---------------------- Basic earnings/(loss) per share from discontinuedoperations (expressed in US$ per share) 0.461 (0.112)Diluted earnings/(loss) per share from discontinuedoperations (expressed in US$ per share) 0.461 (0.109)------------------------------------------------------------------------------------------------- ----------------------\* T 16. Restatement of results for the period ended 30 June 2006 In 2007 management has reassessed judgments in relation to the previouslyrecorded liabilities for income tax and taxes other than on income. These issuesrelated to liabilities arising from the legal structure of the Group and thejurisdictions in which various income and expense items are recognized andassessed. The corresponding adjustments were reflected in financial statementsfor year 2006. The management has decided to restate the resulting provisionsfor taxes for the first half of 2006. \* T As Adjustment Restated previously reported---------------------------------------------------------------------------------------- ---------- ---------- --------Effect on the consolidated Balance sheet as at 31 December 2005Current income tax payable - 800 800Other provisions for liabilities and charges - 1,200 1,200---------------------------------------------------------------------------------------- ---------- ---------- -------- Effect on the consolidated Balance sheet as at 30 June 2006Current income tax payable - 1,477 1,477Other provisions for liabilities and charges - 2,376 2,376---------------------------------------------------------------------------------------- ---------- ---------- --------Effect on the consolidated Income statement as at 31 December 2005Taxation 365 800 1,165Operating expenses 17,699 1,200 18,899---------------------------------------------------------------------------------------- ---------- ---------- -------- Effect on the consolidated Income statement as at 30 June 2006Taxation (1,075) 677 (398)Operating expenses 14,946 1,176 16,122---------------------------------------------------------------------------------------- ---------- ---------- --------\* T The management identified underaccrued expenses for bonuses 2006, commissionsand IFRS audit proportionally for the first half of 2006, which resulted in arestatement of comparative information for the first half of 2007. Theseexpenses were accounted for in full in the Group's consolidated accounts for theyear ended 31 December 2006. \* T As Adjustment Restated at previously 30 June 2006 reported---------------------------------------------------------------------- -------------------- ------------- -------------Effect on the consolidated Balance sheet as at 30 June 2006Trade 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 6,806Commissions and partner fees 2,031 383 2,414Legal and professional 1,055 345 1,400---------------------------------------------------------------------- -------------------- ------------- -------------\* T 17. Directors' Remuneration The directors' salaries for 2007 and 2006 paid by Group companies are as follows(not in thousands): \* T 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 ============================= ====================\* T 18. Discontinued operations and disposals groups The sale of Rambler TV business to Osgora Productions Limited (a subsidiary ofProf-Media) was completed and closed on 12 January 2007. The final settlementfor Rambler's TV business in the amount of US$21 million was received on 10January 2007. Details of the sale are as follows: \* TCash and cash equivalents 476Intangible assets 13,898Other net assets 1,537Net assets of business 15,911------------------------------------------------------------------------------------------------------------------------Total purchase consideration 23,000------------------------------------------------------------------------------------------------------------------------less: cash of business (476)Inflow of cash on sale 22,524Profit on sale 7,089------------------------------------------------------------------------------------------------------------------------\* T In the statements for the first half of 2006 the management has segregateddiscontinuing operations (TV business) in order to present first half of 2006 inthe manner consistent with the 2006 annual report. 19. Business combinations On 16 January 2006 the Rambler Group purchased 51% of Price.ru for US$ 1.53million payable in cash. The initial provisional estimate of net assets ofPrice.ru at the date of acquisition was US$ 200 thousand, this has given rise togoodwill of US$ 1.33 million in the Group's interim H1 2006 financialstatements. The Company has reassessed fair value of identifiable assets andliabilities of Price Express in Group's annual Report 2006 and respectively incomparative results of the Group's interim H1 2007 financial statements.Price.ru is a leading Russian e-commerce internet property, its web-sitesPrice.ru, Domoteka.ru and Tyndex.ru provide price and product comparison toolsdesigned to help on-line shoppers make the most cost effective buying decisions.As a result of this reassessment the Company has recognized intangible assets inthe amount of US$ 3.9 million. 20. Contingent liabilities (a) Litigation In the course of its normal business the Rambler Group receives legal claimsfrom time to time. In the opinion of the directors none of the litigationcurrently in progress is likely to result in the crystallisation of a materialliability. (b) Commitment to pay for exclusive internet partnership An agreement was signed on 8 December 2004 by the Rambler Group that commits itto paying a minimum of US$ 200 thousand per annum for a minimum of 12 months inrespect of an exclusive internet partnership to promote a customised co-brandedinstant messaging product for Russian and other CIS countries. The Rambler Grouppaid a similar amount in December 2006, December 2005 and intends to do so forthe foreseeable future. (c) Lease commitments The Group is committed to the following lease payments under the non-cancellableoperating leases: \* T 2006 2005---------------------------------------------------------------------- ----------------------------- ------------------ Expiring within one year 1,352 1,298---------------------------------------------------------------------- ----------------------------- ------------------\* T 21. Related-Party Transactions Transactions between Rambler Companies and its related parties, as well asrelated 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 contextualadvertising company Begun for a cash consideration of US$18 million, whichbrought the Group's total ownership in Begun to 50.1% and thus obtained controlover Begun. Although the Group had an option to purchase 25% of the shares (with furtheroption to purchase 50% of the shares) of Begun the above acquisition was not arealization of the option, as the previous purchase agreement was terminated bythe new set of acquisition documents. The Group will consolidate the results of Begun's operation from the date ofacquisition, the acquisition does not result in a fundamental change toRambler's business, nor will be there any change in the board or voting controlof Rambler. It is impracticable to provide a full disclosure required by IFRS 3 in thesecondensed interim consolidated accounts, as the Group is currently in theprocess of performing a purchase price allocation for this acquisition. The fulldisclosure will be provided in the Group's 2007 annual consolidated financialstatements. 23. Seasonality The internet advertising volume of sales is subject to certain seasonalfluctuations, the second half of the year is typically higher than the firsthalf due to holiday seasons. For the six months ended 30 June 2006 sales volumewas 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 beenprepared in accordance with IAS 34. The directors of Rambler Media Limited are listed in Rambler Group Annual Reportfor 31 December 2006. A list of current directors is maintained on Rambler MediaLimited website: www.ramblermedia.com. _________________ ________________ \* TMark Opzoomer Arthur AkopyanCEO CFO18 September 2007\* T PricewaterhouseCoopers CI LLP \* TPricewaterhouseCoopers CI LLPTwenty Two ColomberieSt HelierJersey JE1 4XAChannel IslandsTelephone +44 (0) 1534 838200Facsimile +44 (0) 1534 838201www.pwc.com\* T Independent review report to Rambler Media Limited Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated interimbalance sheet as at 30 June 2007 and the related consolidated interim statementsof income, cash flows and changes in shareholders' equity for the six monthsthen ended and related notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the AIM Rulesfor Companies which require that the financial information must be presented andprepared in a form consistent with that which will be adopted in the company'sannual financial statements. This interim report has been prepared in accordance with the InternationalAccounting Standard 34, 'Interim financial reporting'. Review work performed We conducted our review in accordance with International Standard on ReviewEngagements 2410, 'Review of Interim Financial Information Performed by theIndependent Auditor of the Entity' issued by the International Auditing andAssurance Standards Board. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and, based thereon, assessing whether the disclosedaccounting policies have been applied. A review excludes audit procedures suchas tests of controls and verification of assets, liabilities and transactions.It is substantially less in scope than an audit and therefore provides a lowerlevel of assurance. Accordingly we do not express an audit opinion on thefinancial information. This report, including the conclusion, has been preparedfor and only for the company for the purpose of the AIM Rules for Companies andfor no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. \* TPricewaterhouseCoopers CI LLPChartered AccountantsJersey18 September 2007\* T £2007 PricewaterhouseCoopers CI LLP. All rights reserved.'PricewaterhouseCoopers' refers to the Channel Island firm ofPricewaterhouseCoopers CI LLP or, as the context requires, thePricewaterhouseCoopers global network or other member firms of the network, eachof which is a separate and independent legal entity. PricewaterhouseCoopers CILLP, a limited liability partnership registered in England with registerednumber OC309347, provides assurance, advisory, and tax services. The registeredoffice is 1 Embankment Place, London WC2N 6RH and its principal place ofbusiness is Twenty Two Colomberie, St. Helier, Jersey JE1 4XA. Copyright Business Wire 2007Related Shares:
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