Financial

Interim Report 2006: Tencent Holdings Limited

Published by Tencent

Summary

Tencent Holdings Limited demonstrated robust financial expansion during the first half of 2006, characterized by a 112.9% year-over-year revenue increase to RMB 1.35 billion. This growth was primarily fueled by the rapid scaling of internet value-added services and online advertising, which offset rising operational costs. By the end of June 2006, the company’s market reach expanded significantly, with registered instant messaging accounts climbing to 549 million. Net profit for the six-month period reached RMB 517.6 million, reflecting the successful integration of strategic acquisitions like the Joymax group and the continued monetization of the QQ.com portal. Operational expenditures rose to RMB 801.6 million during this period, driven by intensified investments in research and development, staff benefits, and infrastructure requirements such as bandwidth and server custody. Despite these costs and a notable increase in share-based compensation expenses, the company maintained a strong liquidity position with RMB 2.7 billion in cash and investments. Capital management remained a priority, evidenced by the repurchase and cancellation of 18.3 million shares to bolster long-term shareholder value, alongside the issuance of 10.3 million shares through existing option schemes. While the company achieved substantial gains across its core segments, it acknowledged a more challenging outlook for its wireless value-added services due to shifting regulatory policies from China Mobile. Nevertheless, the firm’s diversified revenue model and commitment to corporate governance standards provide a stable foundation for navigating these industry headwinds. By balancing aggressive R&D investment with disciplined financial management and strategic acquisitions, the company solidified its position as a dominant force in the Chinese internet services market throughout the first half of 2006.

From the report

Interim Report The Board of Directors (the “Board”) of Tencent Holdings Limited (the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the three and six months ended 30 June 2006. These interim results have been reviewed by PricewaterhouseCoopers, the auditors of the Company (the “Auditors”), in accordance with International Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the International Auditing and Assurance Standards Board, and by the Audit Committee of the Company, comprising a majority of the independent non-executive directors of the Company. Condensed Consolidated Balance Sheet Tencent As at 30 June 2006 and 31 December 2005 Unaudited Audited Holdings 30 June 31 December 2006 2005 ASSETS Note RMB’000 RMB’000 Limited Non-current assets 2006 Fixed assets 6 494,885 365,047 Leasehold land payments 6 9,908 — Interim Intangible assets 6 216,444 21,432 Held-to-maturity investments 7 239,868 244,581 Deferred tax assets 15 91,983 96,362 Report Available-for-sale investments 8 36,073 36,073 1,089,161 763,495 Current assets Inventories 2,571 2,647 Accounts receivable 9 381,406 222,754 Prepayments, deposits and other receivables 62,350 32,570 Financial assets held for trading 10 286,343 383,887 Term deposits with initial term of over three months 711,543 445,725 Cash and cash equivalents 1,458,733 1,576,044 2,902,946 2,663,627

s 2,571 2,647 Accounts receivable 9 381,406 222,754 Prepayments, deposits and other receivables 62,350 32,570 Financial assets held for trading 10 286,343 383,887 Term deposits with initial term of over three months 711,543 445,725 Cash and cash equivalents 1,458,733 1,576,044 2,902,946 2,663,627 Total Assets 3,992,107 3,427,122

5 Condensed Consolidated Balance Sheet (Continued) As at 30 June 2006 and 31 December 2005 Unaudited Audited 30 June 31 December 2006 2005 Note RMB’000 RMB’000 EQUITY Shareholders’ equity Share capital 11 191 192 Share premium 11 1,439,916 1,666,044 Share-based compensation reserve 11, 12 73,913 40,109 Other reserves 80,925 66,609 Limited Retained earnings 1,513,330 1,155,459 3,108,275 2,928,413 Holdings LIABILITIES liabilities Non-current Tencent Deferred tax liabilities 15 17,532 810 Long term payable 16 106,056 — 123,588 810 Report Current liabilities 50,857 25,555 Interim Accounts payable Other payables and accruals 13 353,956 196,187 Current income tax liabilities 47,555 28,766 2006 Other tax liabilities 20,199 13,256 Deferred revenue 14 287,677 234,135 760,244 497,899 Total Liabilities 883,832 498,709 Total Equity and Liabilities 3,992,107 3,427,122 Net current assets 2,142,702 2,165,728 Total assets less current liabilities 3,231,863 2,929,223 On behalf of the board of directors of the Company Ma Huateng Zhang Zhidong Director Director The accompanying notes on pages 6 to 34 form an integral part of these Interim Financial Statements.

Condensed Consolidated Income Statement For the three and six months ended 30 June 2006 Unaudited Unaudited Three months Six months ended 30 June ended 30 June 2006 2005 2006 2005 Note RMB’000 RMB’000 RMB’000 RMB’000 Revenues Internet value-added services 462,260 169,883 898,798 318,947 Mobile and telecommunications value-added services 178,355 136,498 341,781 270,769 Online advertising 62,972 25,170 104,742 40,463 Others 1,394 2,114 4,965 3,957 Tencent 704,981 333,665 1,350,286 634,136 Cost of revenues (199,035) (108,963) (374,728) (210,891) Holdings Gross profit 505,946 224,702 975,558 423,245 Other gains, net 17 21,357 15,148 42,893 27,053 Limited Selling and marketing expenses (74,838) (45,501) (154,586) (84,014) General and administrative expenses (142,440) (75,596) (272,247) (144,122) 2006 Operating profit 310,025 118,753 591,618 222,162 Interim Finance costs, net 19 (6,537) (51) (16,632) (166) Profit before income tax 303,488 118,702 574,986 221,996 Report Income tax (expenses)/benefit 20 (35,599) 68,271 (57,397) 61,931 Profit for the period 267,889 186,973 517,589 283,927 Earnings per share for profit attributable to the equity holders of the Company during the period (expressed in RMB per share) – basic 21 0.151 0.106 0.290 0.161 – diluted 21 0.147 0.103 0.282 0.156 The accompanying notes on pages 6 to 34 form an integral part of these Interim Financial Statements.

5 Condensed Consolidated Statement of Changes in Shareholders’ Equity For the six months ended 30 June 2006 Unaudited Share-based Share Share compensation Capital Statutory Retained capital premium reserve reserve reserves earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2006 192 1,666,044 40,109 20,000 46,609 1,155,459 2,928,413 Profit for the period ————— 517,589 517,589 Employees share option scheme: – value of employee services — — 33,804 ——— 33,804 Limited – proceeds from shares issued 1 14,948 ———— 14,949 Repurchase and cancellation of shares (2 ) (241,076 ) ———— (241,078 ) Holdings Profit appropriations to 14,316 (14,316 ) statutory reserves ———— — Dividend relating to 2005 Tencent (Note 22) ————— (145,402 ) (145,402 ) Balance at 30 June 2006 191 1,439,916 73,913 20,000 60,925 1,513,330 3,108,275 Report Share-based Unaudited Interim Share Share compensation Capital Statutory Retained capital premium reserve reserve reserves earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2006 Balance at 1 January 2005, 192 1,777,721 5,583 20,000 32,442 816,300 2,652,238 as restated Profit for the period ————— 283,927 283,927 Employees share option scheme: – value of employee services — — 9,843 ——— 9,843 – proceeds from shares issued 1 4,183 ———— 4,184 Profit appropriations to statutory reserves ———— 14,167 (14,167 ) — Dividend relating to 2004 ————— (132,036 ) (132,036 ) Balance at 30 June 2005 193 1,781,904 15,426 20,000 46,609 954,024 2,818,156

– value of employee services — — 9,843 ——— 9,843 – proceeds from shares issued 1 4,183 ———— 4,184 Profit appropriations to statutory reserves ———— 14,167 (14,167 ) — Dividend relating to 2004 ————— (132,036 ) (132,036 ) Balance at 30 June 2005 193 1,781,904 15,426 20,000 46,609 954,024 2,818,156 The accompanying notes on pages 6 to 34 form an integral part of these Interim Financial Statements.

Pages: 60
Words: 15,608
Type: Financial

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