Tencent Announces 2012 Fourth Quarter and Annual Results

20 March 2013 9 h 56 min Comments Off

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HONG KONG, March 20, 2013  Tencent Holdings Limited (“Tencent” or the “Company”, SEHK 00700), a leading provider of comprehensive Internet services in China, today announced the unaudited consolidated results for the fourth quarter of 2012 and audited consolidated results for the year ended December 31, 2012.

Highlights of 2012 full year:

  • Total revenues were RMB43,893.7 million (USD6,983.3 million[1]), an increase of 54.0% over the year ended December 31, 2011 (“YoY”).
  • Revenues from Internet value-added services (“IVAS”) were RMB31,995.2 million (USD5,090.3 million), an increase of 38.9% YoY.
  • Revenues from mobile & telecommunications value-added services (“MVAS”) were RMB3,723.0 million (USD592.3 million), an increase of 13.8% YoY.
  • Revenues from online advertising were RMB3,382.3 million (USD538.1 million), an increase of 69.8% YoY.
  • Revenues from e-Commerce transactions were RMB4,427.8 million (USD704.4 million).
  • Gross profit was RMB25,686.4 million (USD4,086.6 million), an increase of 38.3% YoY.   Gross margin decreased to 58.5% from 65.2% last year.
  • Operating profit was RMB15,479.4 million (USD2,462.7 million), an increase of 26.3% YoY.  Operating margin decreased to 35.3% from 43.0% last year.
    Non-GAAP operating profit[2] was RMB17,052.8 million (USD2,713.0 million), an increase of 29.1% YoY.   Non-GAAP operating margin decreased to 38.9% from 46.4% last year.
  • Profit for the year was RMB12,784.9 million (USD2,034.0 million), an increase of 25.0% YoY.  Net margin decreased to 29.1% from 35.9% last year.
    Non-GAAP profit for the period[2] was RMB14,397.8 million (USD2,290.6 million), an increase of 30.8% YoY.   Non-GAAP net margin decreased to 32.8% from 38.6% last year.
  • Profit attributable to equity holders of the Company for the year was RMB12,731.9 million (USD2,025.6 million), an increase of 24.8% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the year[2] was RMB14,286.4 million (USD2,272.9 million), an increase of 30.6% YoY.
  • Basic earnings per share were RMB6.965.  Diluted earnings per share were RMB6.833 .
  • The Board of Directors has recommended a final dividend of HKD1.00 per share for the year ended December 31, 2012, subject to the approval of the shareholders at the Annual General Meeting.  The proposed dividend will be payable on May 30, 2013.

Highlights of the fourth quarter of 2012:

  • Total revenues were RMB12,153.1 million (USD1,933.5 million), an increase of 5.1% over the third quarter of 2012 (“QoQ”) or an increase of 53.4% over the fourth quarter of 2011(“YoY”).
  • Revenues from IVAS were RMB8,455.9 million (USD1,345.3 million), an increase of 1.0% QoQ or an increase of 32.1% YoY.
  • Revenues from MVAS were RMB933.9 million (USD148.6 million), a decrease of 1.3% QoQ or an increase of 9.3% YoY.
  • Revenues from online advertising were RMB947.3 million (USD150.7 million), a decrease of 6.7% QoQ or an increase of 58.3% YoY.
  • Revenues from e-Commerce transactions were RMB1,683.6 million (USD267.8 million), an increase of 48.5% QoQ.
  • Gross profit was RMB6,880.5 million (USD1,094.7 million), an increase of 1.5% QoQ or an increase of 32.8% YoY.   Gross margin decreased to 56.6% from 58.6% last quarter.
  • Operating profit was RMB3,726.1 million (USD592.8 million), a decrease of 9.7% QoQ or an increase of 20.5% YoY.   Operating margin decreased to 30.7% from 35.7% last quarter.
    Non-GAAP operating profit[2] was RMB4,320.2 million (USD687.3 million), a decrease of 2.8% QoQ or an increase of 22.9% YoY.   Non-GAAP operating margin decreased to 35.5% from 38.4% last quarter.
  • Profit for the quarter was RMB3,470.8 million (USD552.2 million), an increase of 7.1% QoQ or an increase of 36.0% YoY.   Net margin increased to 28.6% from 28.0% last quarter.
    Non-GAAP profit for the quarter[2] was RMB4,089.7 million (USD650.7 million), an increase of 14.0% QoQ or an increase of 39.6% YoY.   Non-GAAP net margin increased to 33.7% from 31.0% last quarter.
  • Profit attributable to equity holders of the Company for the quarter was RMB3,463.6 million (USD551.0 million), an increase of 7.6% QoQ or an increase of 36.5% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the quarter[2] was RMB4,067.8 million (USD647.2 million), an increase of 14.5% QoQ or an increase of 40.3% YoY.
  • Basic earnings per share were RMB1.890.   Diluted earnings per share were RMB1.856.
  • Key platform statistics:
    • Monthly active Instant Messaging (“IM”) user accounts were 798.2 million, an increase of 1.8% QoQ or an increase of 10.7% YoY.
    • Peak simultaneous online IM user accounts were 176.4 million, an increase of 5.4% QoQ or an increase of 15.5% YoY. 
    • Monthly active Qzone user accounts were 602.7 million, an increase of 1.7% QoQ or an increase of 9.2% YoY; Monthly active Pengyou user accounts were 247.3 million, a decrease of 4.5% QoQ or an increase of 22.1% YoY. 
    • Peak simultaneous online QQ Game Platform user accounts were 8.8 million, a decrease of 6.4% QoQ or an increase of 4.8% YoY.
    • Fee-based IVAS registered subscriptions were 70.9 million, a decrease of 3.9% QoQ or a decrease of 8.2% YoY. 
    • Fee-based MVAS registered subscriptions were 33.6 million, a decrease of 0.3% QoQ or an increase of 7.0% YoY. 

[1] Figures stated in USD are based on USD1 to RMB6.2855

[2] See “Non-GAAP Financial Measures” section for more details on the reasons for presenting these measures

Mr. Ma Huateng, Chairman and CEO of Tencent, said, “During 2012, widespread smartphone adoption brought both disruption and opportunities to the China Internet industry.  At Tencent, we began to see early results from substantial investments we have made, and continue to make, in mobile Internet products.  Tencent now provides many of China‘s most popular smartphone apps for activities such as communications, social networking, web browsing, games, news, and music, among others.  These apps enable us to reach users who are increasingly spending time on smartphones, extend our ecosystem from PCs to mobile, and provide new mobile-specific features unavailable on PCs.  During the year, we also introduced a powerful targeted advertising system leveraging our social networks, built the market-leading open platform in partnership with third party developers, diversified our game revenue internationally, and ramped up a sizeable e-commerce business.  As a result, we achieved healthy increases in revenue and earnings in 2012, while continuing to invest aggressively in platforms, innovation and technology in order to enhance value to our users and drive long-term growth for our company.”

Financial Review for the Fourth Quarter of 2012

IVAS revenues increased 1.0% QoQ to RMB8,455.9 million and represented 69.6% of our total revenues for the fourth quarter of 2012.  Online game revenues amounted to RMB5,990.4 million, broadly stable compared to the previous quarter.  We registered growth in revenues from international markets and new self-developed titles.  These factors were largely offset by the impact of weaker seasonality in China and our focus on future expansion packs rather than marketing for several major titles.  Revenues from our community and open platforms climbed by 2.8% to RMB2,465.5 million. This primarily reflected an increase in revenues from item-based sales within applications on our open platforms.  Revenues from QQ Membership also increased as a result of promotional activities.

MVAS revenues decreased 1.3% QoQ to RMB933.9 million and represented 7.7% of our total revenues.  This mainly reflected a decrease in revenues from our bundled SMS packages, partially offset by revenue growth from our mobile games and mobile books.

Online advertising revenues decreased 6.7% QoQ to RMB947.3 million and represented 7.8% of our total revenues.  This primarily reflected a decrease in brand display advertising revenues driven by the absence of the positive impact arising from the London Olympic Games, as well as weaker seasonality, partially offset by increased revenues from performance-based social advertising on our social networks and search advertising on our e-Commerce platforms.

e-Commerce transactions revenues increased 48.5% QoQ to RMB1,683.6 million and represented 13.8% of our total revenues.  This mainly reflected an increase in volume of principal e-Commerce transactions as a result of seasonal promotional activities and geographic expansion in southern China from the original eastern China base.  Fees generated from transactions on our marketplaces also increased.

Other Key Financial Information for the Fourth Quarter of 2012

Share-based compensation was RMB302.8 million for the fourth quarter of 2012 as compared with RMB217.3 million for the previous quarter. 

Capital expenditure was RMB1,783.8 million for the fourth quarter of 2012 as compared with RMB1,132.3 million for the previous quarter. 

The Company didn’t repurchase any shares on the Stock Exchange during the fourth quarter of 2012 and the previous quarter.

As at December 31, 2012, net cash position totaled RMB27,381.3 million which excluded borrowings of RMB3,182.8 millionand long-term notes payable of RMB7,516.8 million.

As at December 31, 2012, the total number of shares of the Company in issue was 1.853 billion.

Business Review and Outlook

2012 was a year of challenge and change, during which Tencent sharpened its focus on mobile Internet experiences. 

From a macro perspective, China experienced slower GDP growth amid economic uncertainties in Europe and the US. China‘s Internet user growth continued to decelerate during the year as the scale of Internet user base expanded further and penetration reached 42% at the end of 2012 according to China Internet Network Information Center, limiting the simple growth brought about by new Internet users.  Nevertheless, engagement per user increased further as the Internet deepened its penetration into users’ daily lives and the value chains of different business sectors in China.  As a result, business opportunities available on the Internet continued to broaden.  We have been and will continue making substantial investment in our platforms and services to better serve our users and to catalyse the emergence of these business opportunities.

During the year, there was a significant shift in user activity from PC to mobile, driven by rapid expansion of China‘s mobile Internet user base, enhanced capabilities of smartphones and increased adoption of compelling mobile applications.  Offering a revolutionary user experience, the mobile Internet is reshaping existing business models and the industry value chain.  Against this backdrop, Tencent and some peers have been aggressively investing in products and marketing to build their mobile user base, although business models on the mobile Internet remain uncertain and, in areas such as advertising and value-added services, monetisation lags behind traffic growth.

2012 witnessed the continued evolution of other major Internet sectors in China.  For the online games sector, mobile games and web games increasingly supplemented client games as drivers of industry user growth, albeit from a relatively low base.  In the online advertising sector, advertisers shifted part of their spending to video advertising and, more notably, to performance-based social advertising.  For the e-Commerce sector, B2C competition was intense but showed signs of moderation towards the end of the year, while transaction volumes maintained rapid growth.

full press release

About Tencent

Tencent aims to enrich the interactive online experience of Internet users by providing a comprehensive range of Internet and wireless value-added services.   Through its various online platforms, including Instant Messaging QQ, web portal QQ.com, the QQ Game Platform under Tencent Games, multi-media social networking service Qzone and wireless portal, Tencent services the largest online community in China and fulfills the user’s needs for communication, information, entertainment and e-Commerce on the Internet.

Tencent has four main streams of revenues: Internet value-added services, mobile and telecommunications value-added services, online advertising and e-Commerce.   

Shares of Tencent Holdings Limited are traded on the Main Board of the Stock Exchange of Hong Kong Limited, under stock code 00700.   The Company became a constituent of the Hong Kong‘s Hang Seng Index (HSI) on June 10, 2008. 

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