Financial

Interim Results: 2004

Published by Tencent

Summary

Tencent Holdings Limited experienced a period of rapid expansion during the first half of 2004, characterized by substantial revenue growth and a successful transition to a publicly traded entity. Total revenues for the six-month period ending June 30, 2004, reached RMB 528.1 million, representing a 77.7% increase over the previous year. This financial momentum was largely fueled by the robust performance of mobile, telecommunications, and internet value-added services, which remain the core pillars of the company’s business model. Profit for the period rose by 58.1% to RMB 220.6 million, reflecting a strong operational foundation despite rising costs associated with bandwidth, server capacity, and revenue-sharing agreements. The company’s strategic position was significantly bolstered by its initial public offering on June 16, 2004, which raised RMB 1,656.7 million and resulted in cash and cash equivalents totaling RMB 1.95 billion by the end of the half-year. While the second quarter saw a slight contraction in certain internet value-added services due to the proactive removal of inactive user accounts, the overall growth trajectory remained positive. The company also demonstrated significant organizational scaling, more than doubling its workforce to 804 employees to support its expanding operations. Looking ahead, management intends to leverage its strengthened capital position to drive further growth through the diversification of payment channels, the expansion of QQ-based value-added services, and the pursuit of strategic acquisitions. By maintaining a focus on corporate governance and operational efficiency, the company aims to sustain its market leadership within the Chinese internet and mobile services sectors. These results underscore a pivotal phase of institutional development, setting the stage for continued investment in infrastructure and service innovation.

From the report

Interim Results Following the initial listing of the shares in Tencent Holdings Limited (the “Company”) on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 16 June 2004, the board of directors of the Company (the “Board”) is pleased to announce the unaudited consolidated results of the Company, its subsidiaries and companies consolidated for accounting purposes (collectively, the “Group”) for the three and six months ended 30 June 2004, respectively. These interim results have been reviewed by the Audit Committee of the Company, comprising a majority of independent non-executive directors, and by PricewaterhouseCoopers, the auditors of the Company (the “Auditors”), in accordance with SAS700 “Engagements to review interim financial reports” issued by the Hong Kong Society of Accountants. Condensed Consolidated Profit and Loss Accounts For the three and six months ended 30 June 2004 Unaudited Unaudited Three months ended Six months ended 30 June 30 June 2004 2003 2004 2003 Note RMB’000 RMB’000 RMB’000 RMB’000 Revenues Mobile and telecommunications value-added services 156,054 115,086 298,871 199,383 Internet value-added services 99,913 47,898 204,499 80,910 Online advertising 12,847 8,529 21,062 15,347 Others 1,699 646 3,634 1,512 270,513 172,159 528,066 297,152 Cost of revenues (100,159) (51,437) (187,527) (87,776) Gross profit 170,354 120,722 340,539 209,376 Other operating income/ (expense), net — (1,182) 18 (1,146) Selling and marketing expenses (26,465) (10,970) (49,509) (23,283) General and administrative expenses (28,310) (22,502) (62,384) (39,154)

ost of revenues (100,159) (51,437) (187,527) (87,776) Gross profit 170,354 120,722 340,539 209,376 Other operating income/ (expense), net — (1,182) 18 (1,146) Selling and marketing expenses (26,465) (10,970) (49,509) (23,283) General and administrative expenses (28,310) (22,502) (62,384) (39,154) Profit from operations 3 115,579 86,068 228,664 145,793 Finance income, net 1,003 494 1,934 237 Profit before taxation 116,582 86,562 230,598 146,030 Taxation 4 (3,293) (4,342) (10,005) (6,465) Profit for the period 113,289 82,220 220,593 139,565 Earnings per share - basic (RMB) 6 0.085 0.060 0.170 0.103 - diluted (RMB) 6 0.085 0.060 0.170 0.103 Proposed dividends 5 N/A N/A N/A N/A

Condensed Consolidated Balance Sheets As at 30 June 2004 and 31 December 2003 Unaudited Audited 30 June 31 December 2004 2003 Note RMB’000 RMB’000 Assets Non-current assets Fixed assets 7 113,298 80,139 Deposit in connection with the formation of an operating company, Shiji Kaixuan Technology 15 — 11,000 Current assets Accounts receivable 8 141,856 99,726 Amounts due from shareholders — 82 Prepayments, deposits and other receivables 9 42,572 35,872 Term deposits with initial term of over three months 62,971 23,311 Cash and cash equivalents 1,950,665 325,586 2,198,064 484,577 Total assets 2,311,362 575,716 Equity and liabilities Current liabilities Trade payables 10 3,864 — Other payables and accruals 11 86,129 59,301 Dividends payable 145 — Income taxes payable 4,644 7,115 Other taxes payable 23,656 32,679 Deferred revenue 12,839 3,676 131,277 102,771 Non-current liabilities Deferred tax liabilities 13 — 988 Total liabilities 131,277 103,759 Shareholders’ equity Share capital 12 183 138 Reserves 2,179,902 471,819 Total shareholders’ equity 2,180,085 471,957 Total liabilities and shareholders’ equity 2,311,362 575,716

Condensed Consolidated Statement of Changes in Equity For the six months ended 30 June 2004 Unaudited Share Share Capital Statutory Retained capital premium reserve reserves earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2004 13815,261 20,000 3,653 432,905 471,957 Dividends paid — — — — (28 ,935) (28 ,935) Profit for the period ———— 220,593 220,593 Issue of shares 45 1,656,687 — — — 1,656,732 Shares issue expenses — (140,262) — — — (140,262) Balance at 30 June 2004 183 1,531,686 20,000 3,653 624,563 2,180,085 Unaudited Share Share Capital Statutory Retained capital premium reserve reserves earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2003 149 53,105 1,000 — 143,696 197,950 Dividends paid — — — — (10,334) (10,334) Profit for the period ———— 139,565 139,565 Balance at 30 June 2003 149 53,105 1,000 — 272,927 327,181

Condensed Consolidated Cash Flow Statement For the six months ended 30 June 2004 Unaudited Six months ended 30 June 2004 2003 RMB’000 RMB’000 Net cash inflow from operating activities 177,860 126,526 Net cash used in investing activities (69,383) (17,495) Net cash inflow/ (used) in financing activities 1,516,602 (10,334) Increase in cash and cash equivalents 1,625,079 98,697 Cash and cash equivalents at 1 January 325,586 45,254 Cash and cash equivalents at 30 June 1,950,665 143,951 Analysis of balances of cash and cash equivalents: Bank balances and cash 1,950,665 143,951

Notes to the Condensed Accounts 1 Basis of preparation and presentation These unaudited consolidated condensed accounts of the Company, its subsidiaries and companies consolidated for accounting purposes (collectively, the “Group”) are prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim financial reporting” issued by the International Accounting Standards Board. These condensed accounts should be read in conjunction with the Accountants’ Report and audited financial statements of the Group for the three years ended 31 December 2003 and the three months ended 31 March 2004 (collectively, the “IPO Financial Statements”) for inclusion in the prospectus of the Company dated 7 June 2004 in connection with the initial listing of the shares on the Main Board of the Stock Exchange. The accounting policies and methods of computation used in the preparation of these condensed accounts are consistent with those used in the IPO Financial Statements. In particular, we have consolidated Shenzhen Tencent Computer Systems Company Limited (“Tencent Computer”) and Shenzhen Shiji Kaixuan Technology Company Limited (“Shiji Kaixuan”) into the financial statements of the Group notwithstanding the lack of legal share ownership, because in substance certain contractual arrangements enacted with these companies give the Company control over the two companies by way of controlling more than one half of the voting rights of the two companies, governing their financial and operational policies and appointing or removing the majority of the members of their controlling authorities, and casting the majority of votes at meetings of such authorities.

Pages: 48
Words: 12,046
Type: Financial

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