Tencent Announces 2021 Second Quarter and Interim Results
HONG KONG, Aug. 18, 2021 /PRNewswire/ -- Tencent Holdings Limited ("Tencent" or the "Company", 00700.HK), a leading provider of Internet value added services in China, today announced the unaudited consolidated results for the second quarter ("2Q2021") and first half year of 2021 ("1H2021") ended June 30, 2021.
1H2021 Key Highlights
Revenues: +23% YoY, non-IFRS[1] profit attributable to equity holders of the Company: +17% YoY
- Total revenues were RMB273.6 billion (USD42.3 billion[2]), an increase of 23% over the first half year of 2020 ("YoY").
- On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit was RMB85.6 billion (USD13.2 billion), an increase of 17% YoY. Operating margin decreased to 31% from 33% last year.
- Profit for the period was RMB69.6 billion (USD10.8 billion), an increase of 18% YoY. Net margin decreased to 25% from 27% last year.
- Profit attributable to equity holders of the Company for the period was RMB67.2 billion (USD10.4 billion), an increase of 17% YoY.
- Basic earnings per share were RMB7.055. Diluted earnings per share were RMB6.916.
- On an IFRS basis:
- Operating profit was RMB108.8 billion (USD16.8 billion), an increase of 42% YoY. Operating margin increased to 40% from 34% last year.
- Profit for the period was RMB92.0 billion (USD14.2 billion), an increase of 49% YoY. Net margin increased to 34% from 28% last year.
- Profit attributable to equity holders of the Company for the period was RMB90.4 billion (USD14.0 billion), an increase of 46% YoY.
- Basic earnings per share were RMB9.492. Diluted earnings per share were RMB9.299.
- Total cash were RMB255.2 billion (USD39.5 billion) at the end of the period.
2Q2021 Key Highlights
Revenues: +20% YoY, non-IFRS profit attributable to equity holders of the Company: +13% YoY
- Total revenues were RMB138.3 billion (USD21.4 billion), an increase of 20% over the second quarter of 2020 ("YoY").
- On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit was RMB42.8 billion (USD6.6 billion), an increase of 14% YoY. Operating margin decreased to 31% from 33% last year.
- Profit for the period was RMB35.1 billion (USD5.4 billion), an increase of 13% YoY. Net margin remained decreased to 25% from 27% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB34.0 billion (USD5.3 billion), an increase of 13% YoY.
- Basic earnings per share were RMB3.574. Diluted earnings per share were RMB3.504.
- On an IFRS basis:
- Operating profit was RMB52.5 billion (USD8.1 billion), an increase of 34% YoY. Operating margin increased to 38% from 34% last year.
- Profit for the period was RMB43.0 billion (USD6.7 billion), an increase of 33% YoY. Net margin increased to 31% from 28% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB42.6 billion (USD6.6 billion), an increase of 29% YoY.
- Basic earnings per share were RMB4.472. Diluted earnings per share were RMB4.387.
[1] Non-IFRS adjustments (formerly referred as non-GAAP) excludes share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and impairment provision/(reversals), as well as income tax effects. [2] Figures stated in USD are based on USD1 to RMB6.4601 |
Mr. Ma Huateng, Chairman and CEO of Tencent, said, "In the quarter, we enhanced our services and achieved healthy growth rates across our business lines, particularly Business Services and advertising, while our game revenue benefitted from international growth. We are increasingly deploying our technologies and expertise to help SMEs, public services, corporations collaborate internally, and connect with their users externally, which we believe contributes to the real economy and to society at large. During the recent Henan floods, Tencent Docs, our cloud-based productivity solution, played a valuable role assisting people providing and seeking help, thanks to its collaborative data editing functionality."
2Q2021 Financial Review
Revenues from VAS increased by 11% to RMB72.0 billion for the second quarter of 2021 on a year-on-year basis. Games revenues increased by 12% to RMB43.0 billion, primarily driven by the increase in revenues from games such as Honour of Kings, PUBG Mobile, Valorant, Clash of Clans and Moonlight Blade Mobile, partly offset by the decrease in revenues from Peacekeeper Elite. Mobile games VAS revenues (including mobile games revenues attributable to our social networks business) increased by 13% to RMB40.8 billion, while PC client games revenues grew by 1% to RMB11.0 billion for the second quarter of 2021. Social networks revenues grew by 9% to RMB29.0 billion, mainly due to revenue growth from digital content services, as well as in-game virtual item sales.
Revenues from Online Advertising increased by 23% to RMB22.8 billion for the second quarter of 2021, reflecting rising demand from advertiser categories such as Internet services and consumer staples, as well as consolidation of Bitauto's advertising revenue, which outweighed weakness in education. Social and others advertising revenues grew by 28% to RMB19.5 billion, due to increased adoption of Mini Programs as landing pages, more video advertising inventories inside Weixin Moments, as well as revenue growth from our mobile advertising network. Media advertising revenues were RMB3.3 billion, broadly stable compared to the second quarter of 2020, as greater advertising revenues from our music apps offset lower news advertising revenues.
Revenues from FinTech and Business Services increased by 40% to RMB41.9 billion for the second quarter of 2021 on a year-on-year basis. FinTech Services revenue growth primarily reflected increasing digital payment transactions. Business Services revenues increased rapidly year-on-year, due to digitalisation of public services and traditional industries, as well as consolidation of Bitauto's Business Services revenue.
Other Key Financial Information for 2Q2021
EBITDA was RMB44.6 billion, up 10% YoY. Adjusted EBITDA was RMB50.3 billion, up 15% YoY.
Capital expenditures were RMB6.9 billion, down 27% YoY.
Free cash flow was RMB17.3 billion, down 39% YoY.
As at June 30, 2021, net debt position totalled RMB21.0 billion. Fair value of our stakes in listed investee companies (excluding subsidiaries) totalled RMB1,446.0 billion, compared to RMB1,362.3 billion as of March 31, 2021, and RMB726.2 billion as of June 30, 2020.
Operating Metrics
As at 30 June 2021 | As at 30 June 2020 | Year- on-year change | As at 31 March 2021 | Quarter-on-quarter change | |
(in millions, unless specified) | |||||
Combined MAU of Weixin and | 1,251.4 | 1,206.1 | 3.8% | 1,241.6 | 0.8% |
Mobile device MAU of QQ | 590.9 | 647.6 | -8.8% | 606.4 | -2.6% |
Fee-based VAS registered subscriptions | 229.4 | 203.4 | 12.8% | 225.7 | 1.7% |
Business Review and Outlook
Communication and Social
For Weixin, the active user base and engagement further increased, underscoring the vibrancy of our service and commerce ecosystem. Transaction volume generated from Mini Programs more than doubled year-on-year as we helped businesses thrive by facilitating management of their own channels and user relationships, while also enabling them to achieve higher profit margins than on marketplaces. Brands and merchants can: 1) acquire customers for their Mini Programs offline via QR Codes and Weixin Pay; 2) create and distribute content via their own Official Accounts and Weixin Groups, engaging users and driving repeat visits to their Mini Programs; 3) convert visits into sales with Mini Programs' powerful shopping functionalities; and 4) deepen user connections via Video Accounts and live streaming as additional touchpoints.
For QQ, young users are increasingly active in consuming entertainment content such as anime and comics. To cater to young users' need for immersive social and entertainment experiences, we enriched QQ's Augmented Reality camera effects for video content production and video chat. We also automated the in-app video editing process with smart templates and multimedia tools to drive more appealing user-generated content.
Digital Content
Our fee-based VAS subscriptions grew 13% year-on-year to 229 million. Video subscriptions increased 9% year-on-year to 125 million, benefitting from diversified content across sports, animated series, drama series and movies. Music subscriptions increased 41% year-on-year to 66 million, driven by Tencent Music Entertainment's effective marketing and by increased consumer willingness to subscribe for music services.
Games
We reinforced the IP of our key titles in China and overseas. We adapted Honour of Kings into the drama series, "You Are My Glory", which is the most-watched drama series on Tencent Video by video views per episode year-to-date. PUBG Mobile collaborated with internationally recognised brands such as Godzilla vs. Kong, McLaren and Line Friends to create crossover content. Clash of Clans released a major content upgrade in April 2021 and launched its nineth anniversary event in August 2021, retaining its ranking among the top 10 mobile games by DAU internationally. Valorant achieved 14 million MAU on its first anniversary.
We extended our presence in emerging genres through self-developed games. Alchemy Stars, developed by our Tourdog Studio, became Japan's most downloaded tactical RPG in July 2021, benefitting from its anime art style and unique tile-connecting gameplay. Light and Night, developed by our Aurora Studio, ranked as China's top dating simulation game by DAU in July 2021, enhancing our engagement with female players. Our first Survival, Open World, Crafting (SOC) game, Undawn, developed by our Lightspeed and Quantum Studios, has accumulated over 30 million pre-registrations in China to date.
We have sought to pioneer a healthy game playing environment in the game industry. In August 2021, we further tightened our game time and spending limits for Minors[3] in China, beyond regulatory requirement. For Honour of Kings and Peacekeeper Elite, we reduced Minors' daily game time limit to 1 hour on non-statutory holidays and to 2 hours on statutory holidays, versus regulatory requirement of 1.5 hours and 3 hours respectively. We also prevented in-game spending by players aged under 12. These measures will be rolled out in all of our games gradually. We are also cracking down on Minors misusing adult accounts, and transactions of adult accounts on third-party platforms. During the second quarter of 2021, players aged under 16 accounted for 2.6% of our China game grossing receipts. Among which, players aged under 12 accounted for 0.3%.
[3] players who are aged under 18 years old |
Online Advertising
We expanded our overall advertiser base by enhancing industry solutions and enabling merchants to better manage their private domain operations within our Weixin ecosystem. More advertisers adopted Mini Programs as landing pages for their Moments advertisements, leading to higher sales conversion and revenue growth. Advertisers increasingly recognised Official Accounts' capability in generating sales leads.
During the Tokyo 2020 Olympic Games, we provided integrated marketing solutions across Weixin, QQ, Tencent Video, Tencent Sports, Tencent News and other properties. Leveraging our strengths in social, long-form and short-form video distribution, as well as in content management, we outperformed other online platforms in terms of video views and user sharing.
FinTech
Daily active users and payment frequency grew at healthy year-on-year rates. SMEs are important contributors to, and beneficiaries of our payment ecosystem growth; we will continue to help SMEs benefit from greater mobile payment acceptance, by charging very low or zero payment take rate in certain cases, and by providing complementary resources and services to support their growth.
Cloud and Other Business Services
We utilise our cloud infrastructure, PaaS and SaaS technologies to assist digitalisation for public services and traditional industries. Enhancements to our technology and product development supported broad customer adoption of our platform and software services such as security, AI and data analytic services. The videolisation trend offers more opportunities for our video cloud solutions, and according to IDC, we ranked first in China in terms of video cloud solution revenue. We deepened connections between our communication and productivity SaaS tools (WeCom, Tencent Meeting and Tencent Docs) to support better collaboration within enterprises, as well as between enterprises and their users.
For other detailed disclosure, please refer to our website https://www.tencent.com/en-us/investors.htmlhttp://www.tencent.com/ir, or follow us via Weixin Official Account (Weixin ID: Tencent_IR):
About Tencent
Tencent uses technology to enrich the lives of Internet users.
Our communication and social services, Weixin and QQ, connect users with each other and with digital content and services, both online and offline, making their lives more convenient. Our targeted advertising service helps advertisers reach out to hundreds of millions of consumers in China. Our FinTech and business services support our partners' business growth and assist their digital upgrade.
Tencent invests heavily in talent and technological innovation, actively promoting the development of the Internet industry. Tencent was founded in Shenzhen, China, in 1998. Shares of Tencent (00700.HK) are listed on the Main Board of the Stock Exchange of Hong Kong.
Non-IFRS Financial Measures
To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-IFRS financial measures (in terms of operating profit, operating margin, profit for the period, net margin, profit attributable to equity holders of the Company, basic EPS and diluted EPS), have been presented in this press release. These unaudited non-IFRS financial measures should be considered in addition to, not as a substitute for, measures of the Group's financial performance prepared in accordance with IFRS. In addition, these non-IFRS financial measures may be defined differently from similar terms used by other companies.
The Company's management believes that the non-IFRS financial measures provide investors with useful supplementary information to assess the performance of the Group's core operations by excluding certain non-cash items and certain impact of M&A transactions. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Group's major associates based on available published financials of the relevant major associates, or estimates made by the Company's management based on available information, certain expectations, assumptions and premises.
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 realised in future. Underlying the forward-looking statements is a lot 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 | Unaudited | ||||
2Q2021 | 2Q2020 | 2Q2021 | 1Q2021 | ||
Revenues | 138,259 | 114,883 | 138,259 | 135,303 | |
VAS | 72,013 | 65,002 | 72,013 | 72,443 | |
Online Advertising | 22,833 | 18,552 | 22,833 | 21,820 | |
FinTech and Business Services | 41,892 | 29,862 | 41,892 | 39,028 | |
Others | 1,521 | 1,467 | 1,521 | 2,012 | |
Cost of revenues | (75,514) | (61,673) | (75,514) | (72,668) | |
Gross profit | 62,745 | 53,210 | 62,745 | 62,635 | |
Gross margin | 45% | 46% | 45% | 46% | |
Interest income | 1,630 | 1,749 | 1,630 | 1,614 | |
Other gains, net | 20,763 | 8,607 | 20,763 | 19,521 | |
Selling and marketing expenses | (10,013) | (7,756) | (10,013) | (8,530) | |
General and administrative expenses | (22,638) | (16,499) | (22,638) | (18,967) | |
Operating profit | 52,487 | 39,311 | 52,487 | 56,273 | |
Operating margin | 38% | 34% | 38% | 42% | |
Finance costs, net | (1,942) | (2,005) | (1,942) | (1,367) | |
Share of (loss)/profit of associates and joint | (3,857) | (295) | (3,857) | 1,348 | |
Profit before income tax | 46,688 | 37,011 | 46,688 | 56,254 | |
Income tax expense | (3,666) | (4,557) | (3,666) | (7,246) | |
Profit for the period | 43,022 | 32,454 | 43,022 | 49,008 | |
Net margin | 31% | 28% | 31% | 36% | |
Attributable to: | |||||
Equity holders of the Company | 42,587 | 33,107 | 42,587 | 47,767 | |
Non-controlling interests | 435 | (653) | 435 | 1,241 | |
Non-IFRS profit attributable to equity | 34,039 | 30,153 | 34,039 | 33,118 | |
Earnings per share for profit | |||||
- basic | 4.472 | 3.491 | 4.472 | 5.020 | |
- diluted | 4.387 | 3.437 | 4.387 | 4.917 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME RMB in millions, unless specified | ||
Unaudited | ||
2Q2021 | 2Q2020 | |
Profit for the period | 43,022 | 32,454 |
Other comprehensive income, net of tax: | ||
Items that may be subsequently reclassified to profit or loss | ||
Share of other comprehensive (loss)/income of associates and joint | (11) | 159 |
Transfer of share of other comprehensive income to profit or loss upon | 5 | (2) |
Currency translation differences | (1,428) | 2,358 |
Other fair value gains/(losses) | 92 | (687) |
Items that will not be subsequently reclassified to profit or loss | ||
Share of other comprehensive income of associates and joint ventures | 53 | - |
Net gains from changes in fair value of financial assets at fair value | 46,522 | 56,797 |
Currency translation differences | (305) | - |
Other fair value gains | - | 102 |
44,928 | 58,727 | |
Total comprehensive income for the period | 87,950 | 91,181 |
Attributable to: | ||
Equity holders of the Company | 87,511 | 89,242 |
Non-controlling interests | 439 | 1,939 |
OTHER FINANCIAL INFORMATION RMB in millions, unless specified | |||
Unaudited | |||
2Q2021 | 1Q2021 | 2Q2020 | |
EBITDA (a) | 44,567 | 49,355 | 40,525 |
Adjusted EBITDA (a) | 50,347 | 52,927 | 43,742 |
Adjusted EBITDA margin (b) | 36% | 39% | 38% |
Interest and related expenses | 1,912 | 1,726 | 1,822 |
Net (debt)/cash (c) | (20,972) | 5,581 | 7,212 |
Capital expenditures (d) | 6,936 | 7,734 | 9,466 |
Note: (a) EBITDA is calculated as operating profit minus interest income and other gains/losses, net, and adding back depreciation of property, plant and equipment, (b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. (c) Net (debt)/cash represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus borrowings and (d) Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||
RMB in millions, unless specified | ||||
Unaudited | Audited | |||
As at June 30, 2021 | As at December 31, 2020 | |||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 61,141 | 59,843 | ||
Land use rights | 15,953 | 16,091 | ||
Right-of-use assets | 13,769 | 12,929 | ||
Construction in progress | 5,805 | 4,939 | ||
Investment properties | 559 | 583 | ||
Intangible assets | 161,904 | 159,437 | ||
Investments in associates | 356,687 | 297,609 | ||
Investments in joint ventures | 7,743 | 7,649 | ||
Financial assets at fair value through profit or loss | 178,915 | 165,944 | ||
Financial assets at fair value through other comprehensive income | 291,500 | 213,091 | ||
Prepayments, deposits and other assets | 29,936 | 24,630 | ||
Other financial assets | 385 | 4 | ||
Deferred income tax assets | 22,971 | 21,348 | ||
Term deposits | 39,219 | 31,681 | ||
1,186,487 | 1,015,778 | |||
Current assets | ||||
Inventories | 1,020 | 814 | ||
Accounts receivable | 53,523 | 44,981 | ||
Prepayments, deposits and other assets | 57,481 | 40,321 | ||
Other financial assets | 471 | 1,133 | ||
Financial assets at fair value through profit or loss | 9,417 | 6,593 | ||
Term deposits | 65,330 | 68,487 | ||
Restricted cash | 2,322 | 2,520 | ||
Cash and cash equivalents | 141,721 | 152,798 | ||
331,285 | 317,647 | |||
Total assets | 1,517,772 | 1,333,425 | ||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) | ||||
RMB in millions, unless specified | ||||
Unaudited | Audited | |||
As at June 30, 2021 | As at December 31, 2020 | |||
EQUITY | ||||
Equity attributable to equity holders of the Company | ||||
Share capital | - | - | ||
Share premium | 58,013 | 48,793 | ||
Shares held for share award schemes | (4,674) | (4,412) | ||
Other reserves | 172,666 | 121,139 | ||
Retained earnings | 620,202 | 538,464 | ||
846,207 | 703,984 | |||
Non-controlling interests | 80,764 | 74,059 | ||
Total equity | 926,971 | 778,043 | ||
LIABILITIES | ||||
Non-current liabilities | ||||
Borrowings | 114,007 | 112,145 | ||
Notes payable | 147,481 | 122,057 | ||
Long-term payables | 10,876 | 9,910 | ||
Other financial liabilities | 8,102 | 9,254 | ||
Deferred income tax liabilities | 15,228 | 16,061 | ||
Lease liabilities | 10,962 | 10,198 | ||
Deferred revenue | 6,540 | 6,678 | ||
313,196 | 286,303 | |||
Current liabilities | ||||
Accounts payable | 99,279 | 94,030 | ||
Other payables and accruals | 49,637 | 54,308 | ||
Borrowings | 14,686 | 14,242 | ||
Current income tax liabilities | 8,599 | 12,134 | ||
Other tax liabilities | 1,404 | 2,149 | ||
Other financial liabilities | 3,735 | 5,567 | ||
Lease liabilities | 4,013 | 3,822 | ||
Deferred revenue | 96,252 | 82,827 | ||
277,605 | 269,079 | |||
Total liabilities | 590,801 | 555,382 | ||
Total equity and liabilities | 1,517,772 | 1,333,425 | ||
RECONCILIATIONS OF IFRS TO NON-IFRS RESULTS | ||||||||
As reported | Adjustments | Non-IFRS | ||||||
RMB in millions, unless specified | Share-based compensation (a) | Net (gains) from | Amortisation of intangible assets (c) | Impairment Provision (d) | Income tax effects (e) | |||
Unaudited three months ended June 30, 2021 | ||||||||
Operating profit | 52,487 | 6,202 | (20,383) | 1,124 | 3,372 | – | 42,802 | |
Profit for the period | 43,022 | 7,658 | (20,413) | 3,140 | 3,338 | (1,605) | 35,140 | |
Profit attributable to equity | 42,587 | 7,376 | (20,537) | 2,767 | 3,331 | (1,485) | 34,039 | |
Operating margin | 38% | 31% | ||||||
Net margin | 31% | 25% | ||||||
Unaudited three months ended March 31, 2021 | ||||||||
Operating profit | 56,273 | 3,704 | (18,331) | 1,062 | 50 | – | 42,758 | |
Profit for the period | 49,008 | 5,036 | (22,231) | 2,699 | 178 | (187) | 34,503 | |
Profit attributable to equity | 47,767 | 4,855 | (21,829) | 2,352 | 178 | (205) | 33,118 | |
Operating margin | 42% | 32% | ||||||
Net margin | 36% | 26% | ||||||
Unaudited three months ended June 30, 2020 | ||||||||
Operating profit | 39,311 | 3,507 | (14,672) | 870 | 8,613 | - | 37,629 | |
Profit for the period | 32,454 | 4,225 | (16,108) | 1,886 | 9,268 | (505) | 31,220 | |
Profit attributable to equity | 33,107 | 4,019 | (15,436) | 1,503 | 7,310 | (350) | 30,153 | |
Operating margin | 34% | 33% | ||||||
Net margin | 28% | 27% | ||||||
Note: (a) Including put options granted to employees of investee 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 (b) Including net (gains) on deemed disposals/disposals of investee companies, fair value changes arising from investee companies, and other expenses in relation to equity transactions of investee companies (c) Amortisation of intangible assets resulting from acquisitions (d) Impairment provisions for associates, joint ventures, goodwill and other intangible assets arising from acquisitions (e) Income tax effects of non-IFRS adjustments |
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SOURCE Tencent