August 22, 2014 / 9:46 AM / 3 years ago

UPDATE says Russian economy increasingly challenging, cuts targets

(Adds details, CEO comment, share price move)

MOSCOW, Aug 22 (Reuters) - Russian internet company cut its full-year revenue growth forecast on Friday, blaming a more challenging economic and political environment and sending its shares tumbling.

Russia’s economy grew 0.8 percent in the second quarter, according to preliminary data that was flattered by one-off factors, and analysts say the country could slip into recession in the second half of 2014 because of western sanctions over Ukraine., controlled by Russia’s richest man Alisher Usmanov, now expects full-year revenue will grow by between 14 and 18 percent, down from a previous forecast range of 22 to 24 percent.

It recorded a slowdown in revenue growth in the second quarter to about 19 percent from 25 percent in the first. First-half revenue grew 22 percent to 15 billion roubles ($416 million).

Shares in, which owns 52 percent of Russia’s biggest social network VKontakte and operates email and gaming services, slid 13 percent by 0939 GMT.

“Through H1, and in particular through Q2, the underlying... environment has continued to become materially more challenging. This has had a negative effect on our advertising revenues, and in particular the display advertising revenues which declined by around 10 percent in Q2,” Mail.Ru CEO Dmitri Grishin said.

He said its Headhunter business, a recruitment site, also underperformed, affected by the weak economy.

“The more challenging underlying environment continues to make forecasting very problematic, and as such we do not anticipate any near-term improvement in the demand for display, or the Headhunter business,” Grishin added.

The company also trimmed its core profit margin forecast to around 53 percent from 53-54 percent.

First-half earnings before interest, taxation, depreciation and amortisation (EBITDA), grew 20 percent to 8 billion roubles and the margin slid to 53.1 percent from 53.9 percent a year earlier. (1 US dollar = 36.0782 Russian rouble) (Reporting by Maria Kiselyova; editing by Tom Pfeiffer)

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