OREANDA-NEWS. RBC OJSC (MICEX-RTS: RBCM) hereby reports preliminary unaudited financial results and discloses operating performance in the fourth quarter and full-year 2012.

“The year 2012 was a year of changes for RBC. We acquired and consolidated RU-CENTER, rolled out regional expansion of Rbc.ru, developed an action plan for a more sharply-defined positioning of our online resources, and completed the upgrade of RBC television channel. The new management team carried out optimization of business processes and the company’s structure in order to make RBC more transparent and attractive to the business community.

All these activities resulted in a stronger position of RBC in its operating units. RBC remains the undisputed leader in online news and business information, RBC channel is the only successful nationwide business television channel, Hosting Community is the clear market leader in domains registration and hosting services, while RBC’s titles occupy leading positions in the print media segment.

In 2012, RBC’s revenue increased 21% to RUB 5.68bn. EBITDA in 2012 grew to RUB 530m.

At the same time, the fourth quarter saw a slowdown in advertising expenditures compared to the same period last year. A combination of factors was responsible for this trend: the overall economic situation, a high base in 2011 and the ban on alcohol advertising, which was implemented in 2012. RBC was particularly hit by a drop in automotive advertising during the last months of the year. Due to these factors combined, revenue and EBITDA fell short of targets.

Nonetheless, the management is confident about the future. In 2012 the groundwork was laid for qualitative and sustainable growth, and RBC strengthened its position as the fourth largest Russian online company3.

We have exciting plans for 2013 – the year of RBC’s 20th anniversary. In the business Internet segment, we plan to carry out a large-scale update of resources and mobile applications factoring in market demand and RBC’s rebranding, as well as launch new projects that will allow us to continue diversifying revenue and the client base. Throughout the year, we intend to re-position a number of consumer Internet projects with the aim of boosting their competitiveness and monetization. Our plans also include expanding the TV channel’s programming grid and extending the channel’s distribution. RBC channel is projected to get very close to the EBITDA breakeven point. In general, the management’s top priorities for 2013 are increasing the share of services in the company’s revenue and boosting business profitability,” RBC CEO Sergey Lavrukhin stated.

The company's financial results in Q3 and 9M

For the sake of convenience in presenting financial data in light of the acquisition of a major asset – RU-CENTER – a separate line was added for the new segment, Hosting, which reflects the results of activities of Hosting Community group of companies. Hosting Community currently integrates six leading players on the Russian telematic services market: domain name registrars RU-CENTER, R01 and Centrohost, as well as hosting companies Hosting Center, SpaceWeb, and Peterhost.

Million rubles

Q4 2012

Q4 2011

Change

2012

2011

Change

Revenue

1,922

1,722

12%

5,676

4,682

21%

Internet

877

1,004

-13%

2,695

2,512

7%

Advertising

753

917

-18%

2,238

2,258

-1%

Services

124

87

43%

457

254

80%

Hosting

411

196

110%

1,169

592

97%

including RU-CENTER3

299

—

—

695

—

—

Television

304

220

38%

846

606

40%

Printed publications

330

302

9%

967

972

-1%

Business publications4

170

166

2%

417

425

-2%

Salon Press Publishing House

160

136

18%

550

547

1%

Operating expenses

1,427

1,131

26%

5,146

4,188

23%

EBITDA

495

591

-16%

530

494

7%

Revenue and EBITDA. RBC’s aggregate revenue climbed 12% year-on-year in the fourth quarter of 2012 to RUB 1.92bn mainly on the back of higher revenue from hosting and domain name registration services, which surged after RBC acquired RU-CENTER, as well as thanks to RBC channel’s higher advertising sales and increased revenue from online services. At the same time, revenue growth was dampened by low advertising sales primarily for the company’s non-business, and also partially business online resources as the banner online advertising segment decelerated substantially during the final months of the year. That said, RBC’s revenue rose 21% to RUB 5.68bn in full-year 2012.

The fourth quarter is the most important period for the media industry, since it usually accounts for a substantial part of full-year revenue and up to two thirds of operating profit. However, RBC’s EBITDA amounted to RUB 495m in Q4, down from RUB 592m in the year-earlier period, due to lower-than-expected revenue from the online advertising segment and the launch of a new investment cycle to develop the company’s business. Full-year 2012 EBITDA went up 7% to RUB 530m.

Internet. RBC’s Internet revenue decreased 13% year-on-year to RUB 877m in Q4 with a 43% upsurge in revenue from online services, which failed to offset an 18% decline in advertising revenue in the last three months of 2012. Nevertheless, full-year Internet revenue rose 7% to RUB 2.70bn.

In the fourth quarter, RBC’s business and entertainment online services saw steady growth. For instance, marketing research sales were on the rise alongside revenue from subscriptions to paid content and services offered by Loveplanet.ru dating website.

Advertising revenue headed south in Q4, which is mainly due to performance in the non-business online segment, against the backdrop of a considerable slowdown on the advertising market. The downturn is also attributable to the need to reposition some of RBC’s entertainment services in order to boost their competitiveness and monetization. The ban on online alcohol advertising, which took effect in late July 2012, also had a negative impact on RBC’s advertising revenue in the second half of the year. For instance, alcohol producers accounted for around 5% of revenue generated by business and entertainment resources in 2011, while in 2012 their share shrank to just 1%. In addition, sluggish auto sales reported at the end of the year by certain western carmakers, which are among RBC’s major advertisers, also exerted downward pressure on advertising revenue.

RBC is seeking to diversify its client base by expanding cooperation with advertisers in the lifestyle and luxury segments. In order to fully comply with the demand of premium-level audience and clients, RBC embarked in Q4 on a project to upgrade content and design of its online resources. In December 2012, RBC.Style (Style.rbc.ru) became the company’s first relaunched online project.

In late 2012, RBC embarked on a project to step up its operations on regional markets by launching the first regional version of Rbc.ru portal in St. Petersburg. The company’s management expects this initiative to strengthen RBC’s regional footprint, boost audience share, and secure additional advertising budgets in the regions.

All in all, RBC strengthened its positions as one of Russia’s leading online companies in 2012. RBC’s monthly online audience in Russia climbed 7% to 20.5m unique users as of the end of 2012. Among the company’s online business outlets, RBC daily’s online version Rbcdaily.ru and Utro.ru general interest online newspaper reported the highest growth rates in terms of Russian audience numbers with increases of 19% to 3.1m users and 17% to 5.5m users, respectively. The audience of Rbc.ru, the most popular news and business portal on the Russian Internet, rose 3% to 10.3m users in Russia. Among non-business resources, Loveplanet.ru reported the highest growth rate of 73% and reached 3.8m Russia-based users, and Smotri.com video hosting saw its audience numbers advance 16% to 3.3m users. RBC’s aggregate monthly audience stood at 63.7m users as of the end 2012.

In 2013, RBC will focus on upgrading the existing online projects and their mobile applications in line with the new market environment, launching and developing online services, and also rolling out creative solutions (special projects) for advertisers.

Hosting. Revenue in the hosting segment surged by 110% to RUB 411m in Q4 2012 and by 97% to RUB 1.17bn in FY2012. The major factor that contributed to higher revenue was the completion of the acquisition of RU-CENTER.

Hosting Community has been optimizing its organizational structure and the portfolio of services provided by its subsidiaries since mid-2012 as part of the integration process. The group has been merging key departments with overlapping functions and creating uniform business processes.

The main goals of Hosting Community in 2013 include completing all integration processes, ensuring above-the-market revenue growth through the development of additional services and expansion of their share, as well as achieving higher EBITDA margin.

Television. RBC channel’s revenue climbed 38% to RUB 304m in Q4 2012 and 40% to RUB 846m in full-year 2012. The pace of revenue growth in the second half of the year was substantially above the market average (the cable & satellite television segment showed a 27% growth in 2012). This result is attributable to complete renovation of RBC, which enabled it to boost the audience and sell-out ratio (the sell-out ratio rose approximately 27% year-on-year in Q4 2012).

The television channel completed transition to an up-to-date technological platform in 2012, which includes a 16:9 widescreen broadcasting format, tapeless production of content, 3D and 4D graphics software. In addition, RBC's studio was merged with the newsroom into a single complex in order to fast-track news stories on the air. The channel's broadcasting design has been improved and a new programming grid has been introduced.

RBC’s monthly audience in Russia rose by 12% in 2012 to 20.4m viewers as of December, including 5.2m viewers in Moscow.

RBC will focus on further development of the channel distribution, expansion of the programming grid and boosting the sales of commercials building on the benefits offered by its 3D and 4D graphics software. The most important objectives of this business segment are cost optimization and achieving EBITDA close to the breakeven point as of the end of 2013.

Printed Publications. Revenue from RBC's printed publications rose by 9% in Q4 2012 to RUB 330m. Both business publications and interior design magazines showed revenue growth during the last three months of the year. However, this growth could not offset the decrease in the sales in January-September 2012, and the full-year revenue in this segment edged down by 1% to RUB 972m.

RBC’s key business publications substantially improved their ratings in 2012. Average Issue Readership (AIR4) of RBC daily newspaper rose 35% in 2012 to 107,700 readers, and AIR of RBC magazine grew 20% to RUB 433,200 readers during the same period. As a result, RBC daily came in second place among business dailies, while RBC magazine confirmed its status as the most popular business magazine in Moscow.

RBC’s key targets in the segment of business printed publications are to expand cooperation with lifestyle and luxury advertisers and to make RBC daily profitable at the EBITDA level.

1 TNS is the source of statistics provided here and hereinafter.

2 AIR in September 2012-February 2013.

3 In terms of monthly Internet audience in Russia.

4 AIR in September 2012-February 2013.