SHENZHEN, China, March 18, 2015 /PRNewswire/ --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 2014 ("4Q2014") and audited consolidated results for the year ended December 31, 2014 ("FY2014").
FY2014 Key Highlights:
[1] Figures stated in USD are based on USD1 to RMB6.1190 [2] EPS was stated after taking into account the effect of Share Subdivision. Comparative figures have been restated on the assumption that the Share Subdivision had been effective in prior periods. [3] Since the first quarter of 2014, we have included gains/losses on disposals of investees and businesses in the non-GAAP adjustment. Comparative figures have been restated to conform to the new presentation. |
4Q2014 Key Highlights:
Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During 2014, we made significant progress in a number of strategic initiatives that reinforced our leadership and enhanced our competitiveness. Our social platforms QQ and Weixin continued to innovate and grow. By leveraging our expertise in mobile Internet, we extended our leadership in games and online media, and made breakthroughs in emerging platforms such as online security, Android appstore, and mobile payments. We implemented our "Connection" strategy, in which we organically link our large user base with appropriate content and services, and we built strategic relationships with numerous best-of-breed vertical partners, through investment and business cooperation. We believe this strategy will enable us to create superior experiences for our users, and to participate in the growth of vertical opportunities, as the mobile Internet increasingly penetrates consumers' daily lives."
4Q2014 Financial Review
Value Added Services ("VAS"). Revenues from our VAS business increased by 44% YoY to RMB17,137 million. Online game revenues increased by 41% to RMB11,964 million. The increase was primarily driven by significant growth in revenues from smart phone games integrated with Mobile QQ and Weixin, mainly reflecting our expanded user base, our enriched game portfolio and, to a lesser extent, the impact of the aforementioned adoption of gross revenue recognition. Revenues from PC client games also increased. Social networks revenues grew by 50% to RMB5,173 million. The increase was mainly driven by higher in-game item sales within mobile platforms, as well as by subscription revenues from our QQ Membership, Super VIP, Qzone and digital content subscription services. If gross revenue recognition for smart phone games is adopted for the fourth quarter of 2013, revenues from our VAS business, online games, and social networks would have increased by 42%, 39% and 48% respectively for the fourth quarter of 2014.
Online advertising. Revenues from our online advertising business increased by 75% YoY to RMB2,627 million. The increase primarily reflected revenue growth in video advertising as a result of more viewers and enhanced revenues from performance-based social advertising on mobile driven by Mobile Qzone and Weixin Official Accounts.
eCommerce transactions. Revenues from our eCommerce transactions business decreased by 87% YoY to RMB446 million. The decline mainly reflected a traffic shift to JD.com following our strategic transaction with JD.com in March 2014, and the repositioning of our Yixun business from principal to marketplace operations.
Other Key Financial Information for 4Q2014
Share-based compensation was RMB644 million, up 39% YoY.
EBITDA was RMB7,929 million, up 53% YoY. Adjusted EBITDA was RMB8,424 million, up 54% YoY.
Capital expenditure was RMB1,603 million, down 5% YoY.
Free cashflow was RMB9,181 million, up 76% YoY.
Net cash position totaled RMB22,758 million, down 37% YoY, due to strategic investments, partly offset by an increase in free cash flows generated during the year. Fair value of our stakes in listed investee companies (both associates and available-for-sale financial assets) totalled RMB60 billion as at December 31 2014.
Strategic Highlights
In 2014, we focused on our "Connection" strategy, linking our users with content, services and hardware to enhance their lives online and offline. Leveraging our core communications and social platforms, Weixin, and Mobile QQ, we made significant progress in fostering a healthy mobile ecosystem which provides our users with an expanding range of products and services, taking advantage of our strengths such as unified login, users' social graphs, multi-platform marketing capabilities, infrastructure support, payment solutions and insights into user needs.
During the year, we moved forward in monetising mobile Internet use, initially through smart phone games and performance-based social advertising. We invested heavily in content for businesses such as our literature service, music service, and video service, contributing to substantial traffic growth. Our portfolio of mobile utilities, including mobile security, browser and application store, achieved healthy market share gains. For example, YingYongBao became one of China's leading Android application stores. We significantly expanded the user bases of our mobile payment platforms and we explored Internet finance opportunities with the launch of our wealth management platform and the inception of our bank affiliate, WeBank.
To complement our internal initiatives, we entered into a strategic transaction with JD.com to reposition our eCommerce business, and we continue to enrich our O2O ecosystem by making strategic investments in and partnering with industry leaders, including 58.com, Dianping, Dididache and Koudai Gouwu.
In terms of balance sheet management, we established a USD5 billion global medium term note programme in April 2014 and subsequently issued various tranches of senior notes, with an aggregate principal amount of USD4.9 billion at the end of February 2015. We received a credit ratings upgrade from Moody's on our issuer and senior unsecured debt ratings from Baa1 to A3 in March 2014.
Business Review and Outlook
Divisional and Product Highlights
Key Platforms
In 2014, QQ and Qzone benefited from significant growth in China's mobile user base, and consolidated their leading positions in communications and social networking.
Combined MAU of Weixin and WeChat reached 500 million at the end of 2014, representing YoY growth of 41%.
The aggregate number of user accounts that have integrated bank cards with Mobile QQ Wallet and Weixin Payment exceeded 100 million as we enriched payment scenarios and launched initiatives to build user awareness and habit, such as Red Packet gifting.
Our online media platforms extended their leadership in China. Tencent News leveraged enhanced content, improved user experience and plug-ins to Mobile QQ and Weixin to achieve significant user growth and became the leading mobile news platform in China. Tencent Video improved its market position with a strong uplift in user base and traffic, thanks to enriched content and improved user experience.
VAS
In social networks, our business benefited from significant growth in in-game item sales on our mobile platforms, and higher subscription revenues as we enhanced the mobile privileges and mobile user experience for QQ Membership, Super VIP and Qzone subscription service. We also added more premium content for our literature, music, and video subscription services.
In online games, we extended our leadership in the China market from PC to mobile.
Looking ahead, we aim to diversify and capitalize on our strong title pipeline for PC and mobile games to penetrate into new genres and solidify our market leadership.
Online Advertising
In 2014, our online advertising business benefited from revenue growth across the brand display and performance display categories. During the year, video advertising registered a robust revenue increase due to viewer traffic growth, including traffic arising from the Voice of China 3 program and FIFA World Cup content. We made significant progress in mobile advertising on Mobile Qzone and Weixin Official Accounts. Looking forward, we aim to allocate more inventory toward performance advertising, including inventory on Weixin Moments and YingYongBao. We continue to invest aggressively in video content to further build our traffic, including our recent exclusive partnerships with the HBO and NBA.
eCommerce Transactions
Our eCommerce transaction business underwent a strategy transition subsequent to our strategic transaction with JD.com in March 2014. Shifting our traffic to JD.com led to a substantial reduction in our eCommerce revenues, costs, and losses. Looking forward, we believe the strategy transition enables us to benefit more efficiently from the growth of eCommerce in China via our significant equity stakes in best-in-class eCommerce companies such as JD.com, and via generating performance-based advertising revenues from eCommerce advertisers.
Outlook and strategies for 2015
During 2015, in addition to developing our ongoing businesses, we intend to cultivate an increasingly vibrant mobile ecosystem, bringing our own and our partners' products and services to China consumers. Key aspects of cultivating this ecosystem include:
For other detailed disclosure, please refer to our website www.tencent.com/ir.
About Tencent
Tencent uses technology to enrich the lives of Internet users. Every day, hundreds of millions of people communicate, share experiences, consume information and seek entertainment through our integrated platforms. Tencent's diversified services include QQ, Weixin/ WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com and Tencent News for information and Tencent Video for video content.
Tencent was founded in Shenzhen in 1998 and went public on the Main Board of the Hong Kong Stock Exchange in 2004. The Company is one of the constituent stocks of the Hang Seng Index. Tencent seeks to evolve with the Internet by investing in innovation, providing a hospitable environment for partners, and staying close to users.
For enquiries, please contact:
Investor:
Catherine Chan Tel: (86) 755 86013388 ext 88369/ (852) 3148 5100 Email: cchan#tencent.com
Angie Chang Tel: (86) 755 86013388 ext 73951/ (852) 3148 5100 Email: angiechang#tencent.com
Media:
Canny Lo Tel: (86) 755 86013388 ext 66630/ (852) 3148 5100 Email: cannylo#tencent.com
Limin Chen Tel: (86) 755 86013388 ext 56011 Email: liminchen#tencent.com
Non-GAAP Financial Measures
To supplement the consolidated results of the Company prepared in accordance with IFRS, certain non-GAAP financial measures, including non-GAAP operating profit, non-GAAP operating margin, non-GAAP profit for the period, non-GAAP net margin and non-GAAP profit attributable to equity holders of the Company, have been presented in this press release. These unaudited non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of the Company's financial performance prepared in accordance with IFRS. In addition, these non-GAAP financial measures may be defined differently from similar terms used by other companies.
The Company's management believes that the non-GAAP financial measures provide investors with useful supplementary information to assess the performance of the Company's core operations by excluding certain non-cash items and certain impact of acquisitions.
Forward-Looking Statements
This press release contains forward-looking statements relating to the business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realized in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.
CONSOLIDATED INCOME STATEMENT RMB in millions, unless specified |
|||||
Unaudited |
Audited |
||||
4Q2014 |
4Q2013 |
2014 |
2013 |
||
Revenues |
20,978 |
16,970 |
78,932 |
60,437 |
|
VAS |
17,137 |
11,932 |
63,310 |
44,985 |
|
Online advertising |
2,627 |
1,497 |
8,308 |
5,034 |
|
eCommerce transactions |
446 |
3,324 |
4,753 |
9,796 |
|
Others |
768 |
217 |
2,561 |
622 |
|
Cost of revenues |
(8,332) |
(8,198) |
(30,873) |
(27,778) |
|
Gross profit |
12,646 |
8,772 |
48,059 |
32,659 |
|
Gross margin |
60% |
52% |
61% |
54% |
|
Interest income |
443 |
377 |
1,676 |
1,314 |
|
Other gains, net |
343 |
405 |
2,759 |
904 |
|
Selling and marketing expenses |
(2,063) |
(2,033) |
(7,797) |
(5,695) |
|
General and administrative expenses |
(3,975) |
(2,770) |
(14,155) |
(9,988) |
|
Operating profit |
7,394 |
4,751 |
30,542 |
19,194 |
|
Operating margin |
35% |
28% |
39% |
32% |
|
Finance (costs)/ income, net |
(273) |
6 |
(1,182) |
(84) |
|
Share of (losses)/profits of associates and joint ventures |
(275) |
(18) |
(347) |
171 |
|
Profit before income tax |
6,846 |
4,739 |
29,013 |
19,281 |
|
Income tax expense |
(892) |
(808) |
(5,125) |
(3,718) |
|
Profit for the period |
5,954 |
3,931 |
23,888 |
15,563 |
|
Net margin |
28% |
23% |
30% |
26% |
|
Attributable to: |
|||||
Equity holders of the Company |
5,860 |
3,911 |
23,810 |
15,502 |
|
Non-controlling interests |
94 |
20 |
78 |
61 |
|
Non-GAAP profit attributable to equity holders of the Company |
6,723 |
4,440 |
24,224 |
16,975 |
|
Earnings per share (GAAP) |
|||||
- basic (RMB) |
0.632 |
0.425 |
2.579 |
1.693 |
|
- diluted (RMB) |
0.625 |
0.418 |
2.545 |
1.660 |
|
Note: Adoption of gross revenue recognition for smart phone games Starting from the fourth quarter of 2014, we recognise revenues from smart phone games on a gross basis, mainly to reflect changes in our co-operation models that resulted in us becoming the principal, rather than agent, for certain licensed games we publish on an exclusive basis. Correspondingly, we recorded revenue sharing with third-party developers and related channel costs in costs of revenues, instead of treating them as contra-revenue items. For the fourth quarter of 2014, the change increased our revenues from smart phone games integrated with Mobile QQ and Weixin by RMB907 million, and related cost of revenues by the same amount. The change did not impact the Group's profits. We believe the change brings us closer into line with general industry practice. |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME RMB in millions, unless specified |
|||||
Unaudited |
Audited |
||||
4Q2014 |
4Q2013 |
2014 |
2013 |
||
Profit for the period |
5,954 |
3,931 |
23,888 |
15,563 |
|
Other comprehensive income, net of tax: |
|||||
Items that may be subsequently reclassified to profit or loss |
|||||
Share of other comprehensive income of associates |
38 |
48 |
81 |
48 |
|
Net (losses)/gains from changes in fair value of available-for-sale financial assets |
(1,439) |
830 |
(1,705) |
2,825 |
|
Currency translation differences |
(280) |
(50) |
(289) |
(60) |
|
Total comprehensive income for the period |
4,273 |
4,759 |
21,975 |
18,376 |
|
Attributable to: |
|||||
Equity holders of the Company |
4,183 |
4,746 |
21,891 |
18,327 |
|
Non-controlling interests |
90 |
13 |
84 |
49 |
OTHER FINANCIAL INFORMATION RMB in millions, unless specified |
|||||
Unaudited |
Audited |
||||
4Q2014 |
4Q2013 |
2014 |
2013 |
||
EBITDA (a) |
7,929 |
5,184 |
30,908 |
20,566 |
|
Adjusted EBITDA (a) |
8,424 |
5,467 |
32,710 |
21,734 |
|
Adjusted EBITDA margin (b) |
40% |
32% |
41% |
36% |
|
Interest expense |
264 |
105 |
866 |
394 |
|
Net cash (c) |
22,758 |
36,218 |
22,758 |
36,218 |
|
Capital expenditures (d) |
1,603 |
1,679 |
4,718 |
5,799 |
|
Note: (a) EBITDA consists of operating profit less interest income and other (gains)/losses, net, and plus depreciation of fixed assets and investment properties and amortisation of intangible assets. Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses. (b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. (c) Net cash represents period end balance and is calculated as cash and cash equivalents, term deposits, minus borrowings and notes payable. (d) Capital expenditures consist of additions (excluding business combinations) to fixed assets, construction in progress, land use rights and intangible assets (excluding game and other content licences). |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
||||
In RMB millions (unless otherwise stated) |
Audited |
|||
As at 31 December |
||||
2014 |
2013 |
|||
ASSETS |
||||
Non-current assets |
||||
Fixed assets |
7,918 |
8,693 |
||
Construction in progress |
3,830 |
2,041 |
||
Investment properties |
268 |
- |
||
Land use rights |
751 |
871 |
||
Intangible assets
|
9,304 |
4,103 |
||
Investments in associates |
51,131 |
10,867 |
||
Investments in redeemable preference shares of associates |
2,941 |
1,119 |
||
Investments in joint ventures |
63 |
9 |
||
Deferred income tax assets |
322 |
431 |
||
Available-for-sale financial assets |
13,277 |
12,515 |
||
Prepayments, deposits and other assets |
1,209 |
1,480 |
||
Term deposits |
4,831 |
11,420 |
||
95,845 |
53,549 |
|||
Current assets |
||||
Inventories |
244 |
1,384 |
||
Accounts receivable |
4,588 |
2,955 |
||
Prepayments, deposits and other assets |
7,804 |
5,365 |
||
Term deposits |
10,798 |
19,623 |
||
Restricted cash |
9,174 |
4,131 |
||
Cash and cash equivalents |
42,713 |
20,228 |
||
75,321 |
53,686 |
|||
Total assets |
171,166 |
107,235 |
EQUITY |
||||
Equity attributable to the Company's equity holders of |
||||
Share capital |
- |
- |
||
Share premium |
5,131 |
2,846 |
||
Shares held for share award schemes
|
(1,309) |
(871) |
||
Other reserves |
2,129 |
3,746 |
||
Retained earnings |
74,062 |
52,224 |
||
80,013 |
57,945 |
|||
Non-controlling interests |
2,111 |
518 |
||
Total equity |
82,124 |
58,463 |
||
LIABILITIES |
||||
Non-current liabilities |
||||
Borrowings |
5,507 |
3,323 |
||
Notes payable |
25,028 |
9,141 |
||
Long-term payables |
2,052 |
1,600 |
||
Deferred income tax liabilities
|
2,942 |
1,441 |
||
Deferred revenue |
3,478 |
- |
||
39,007 |
15,505 |
|||
Current liabilities |
||||
Accounts payable |
8,683 |
6,680 |
||
Other payables and accruals |
19,123 |
10,246 |
||
Borrowings |
3,215 |
2,589 |
||
Notes payable |
1,834 |
- |
||
Current income tax liabilities |
461 |
1,318 |
||
Other tax liabilities |
566 |
593 |
||
Deferred revenue |
16,153 |
11,841 |
||
50,035 |
33,267 |
|||
Total liabilities |
89,042 |
48,772 |
||
Total equity and liabilities |
171,166 |
107,235 |
||
Net current assets |
25,286 |
20,419 |
||
Total assets less current liabilities |
121,131 |
73,968 |
RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS |
|||||||||
As reported |
Adjustments |
||||||||
RMB in millions, unless specified |
Equity-settled share-based compensation |
Cash-settled share-based compensation (a) |
(Gains)/Losses on deemed disposal (b) |
Amortisation of intangible assets (c) |
Impairment provision (d) |
Special dividend Income (e) |
Non-GAAP |
||
|
|||||||||
Operating profit |
30,542 |
1,082 |
695 |
(5,111) |
59 |
2,510 |
- |
30,497 |
|
Profit for the year |
23,888 |
1,082 |
695 |
(5,038) |
563 |
2,510 |
- |
24,420 |
|
Profit attributable to equity holders |
23,810 |
1,770 |
637 |
(5,054) |
555 |
2,506 |
- |
24,224 |
|
Operating margin |
39% |
39% |
|||||||
Net margin |
30% |
31% |
|||||||
|
|||||||||
Operating profit |
19,194 |
1,168 |
618 |
(272) |
139 |
87 |
(438) |
20,496 |
|
Profit for the year |
15,563 |
1,168 |
618 |
(88) |
240 |
87 |
(438) |
17,150 |
|
Profit attributable to equity holders |
15,502 |
1,155 |
547 |
(88) |
210 |
87 |
(438) |
16,975 |
|
Operating margin |
32% |
34% |
|||||||
Net margin |
26% |
28% |
|||||||
|
|||||||||
Operating profit |
7,394 |
495 |
149 |
(1,153) |
13 |
1,170 |
- |
8,068 |
|
Profit for the period |
5,954 |
495 |
149 |
(1,155) |
228 |
1,170 |
- |
6,841 |
|
Profit attributable to equity holders |
5,860 |
488 |
136 |
(1,158) |
227 |
1,170 |
- |
6,723 |
|
Operating margin |
35% |
38% |
|||||||
Net margin |
28% |
33% |
|||||||
|
|||||||||
Operating profit |
7,515 |
546 |
152 |
(159) |
15 |
195 |
- |
8,264 |
|
Profit for the period |
5,676 |
546 |
152 |
(162) |
76 |
195 |
- |
6,483 |
|
Profit attributable to equity holders |
5,657 |
536 |
137 |
(162) |
74 |
191 |
- |
6,433 |
|
Operating margin |
38% |
42% |
|||||||
Net margin |
29% |
33% |
|||||||
|
|||||||||
Operating profit |
4,751 |
283 |
180 |
(242) |
24 |
87 |
- |
5,083 |
|
Profit for the period |
3,931 |
283 |
180 |
(58) |
66 |
87 |
- |
4,489 |
|
Profit attributable to equity holders |
3,911 |
278 |
160 |
(58) |
62 |
87 |
- |
4,440 |
|
Operating margin |
28% |
30% |
|||||||
Net margin |
23% |
26% |
|||||||
Note: (a) Including put options granted to employees of investees companies on their shares and shares to be issued under investee companies' share-based incentive plans which can be acquired by the Group, and other incentives |
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