Financial

Interim Report 2011: Tencent Holdings Limited

Published by Tencent

Summary

Tencent Holdings Limited demonstrated robust financial expansion during the first half of 2011, characterized by a 47% year-over-year revenue increase to RMB 13.08 billion. This growth was primarily fueled by the strong performance of Internet value-added services and online gaming segments. Despite this top-line success, the company experienced margin compression, with net margins falling to 34.8% in the second quarter compared to 41.4% in the same period of 2010. This decline was largely attributed to heightened administrative expenses, increased investment in research and development, and costs associated with the acquisition of a majority stake in Riot Games for approximately RMB 1.68 billion. The company’s strategic focus during this period centered on transitioning toward an open platform model and diversifying its digital ecosystem through aggressive investments in e-commerce, software, and content. By June 30, 2011, the carrying value of investments in associates had risen to RMB 2.78 billion. To support these initiatives and infrastructure requirements, Tencent increased its short-term borrowings to RMB 8.15 billion through bank loans and USD-denominated bond issuances. While maintaining a solid liquidity position, the firm faced external headwinds, including regulatory shifts in the mobile value-added services sector and a broader deceleration in China’s internet user growth. Geographically concentrated in the People’s Republic of China, the company continued to leverage preferential tax rates for its High/New Technology Enterprise subsidiaries. Operational scaling was evident in the workforce, which expanded to 12,904 employees, leading to a rise in total remuneration costs. Management remains committed to long-term shareholder value, evidenced by active share repurchase programs and the utilization of share-based compensation schemes to retain talent. Moving forward, the company balances these capital-intensive growth strategies against potential risks related to foreign currency fluctuations and the evolving revenue models inherent in its open platform transition.

From the report

Tencent ifl Tencent Holdings Limited Incorporated in the Cayman Islands with limited liability A # (Stock Code : 700) QQ.com 2011 nterm Report smart communication inspires

Tencent Holdings Limited Interim Report 2011 The Board of Directors (the “Board”) of Tencent Holdings Limited (the “Company”) is pleased to present the unaudited consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the three and six months ended 30 June 2011. These interim results have been reviewed by PricewaterhouseCoopers, the auditor of the Company (the “Auditor”), in accordance with International Standard on Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity” issued by the International Auditing and Assurance Standards Board, and by the audit committee of the Company. Consolidated Statement of Financial Position As at 30 June 2011 Unaudited Audited 30 June 31 December 2011 2010 Note RMB’000 RMB’000 ASSETS Non-current assets Fixed assets 7 4,665,626 3,292,828 Construction in progress 7 127,795 386,943 Investment properties 7 22,100 37,229 Land use rights 7 227,532 229,890 Intangible assets 7 3,480,998 572,981 Investment in associates 8 2,783,735 1,070,633 Investment in jointly controlled entities 9 10,556 74,542 Deferred income tax assets 19 197,573 219,019 Available-for-sale financial assets 10 4,655,567 4,126,878 Prepayments, deposits and other assets 12 1,988,322 445,430 18,159,804 10,456,373 Current assets Accounts receivable 11 2,255,439 1,715,412 Prepayments, deposits and other assets 12 1,605,071 487,872 Term deposits with initial term of over three months 13,189,618 11,725,743 Restricted cash 3,877,183 1,036,457 Cash and cash equivalents 7,963,090 10,408,257 28,890,401 25,373,741

rrent assets Accounts receivable 11 2,255,439 1,715,412 Prepayments, deposits and other assets 12 1,605,071 487,872 Term deposits with initial term of over three months 13,189,618 11,725,743 Restricted cash 3,877,183 1,036,457 Cash and cash equivalents 7,963,090 10,408,257 28,890,401 25,373,741 Total assets 47,050,205 35,830,114

Tencent Holdings Limited Interim Report 2011 Consolidated Statement of Financial Position As at 30 June 2011 Unaudited Audited 30 June 31 December 2011 2010 Note RMB’000 RMB’000 EQUITY Equity attributable to the Company’s equity holders Share capital 13 198 198 Share premium 13 1,053,831 1,100,302 Shares held for share award scheme 13 (476,340) (258,137) Share-based compensation reserve 13 1,535,242 1,199,663 Other reserves 840,687 1,919,695 Retained earnings 22,166,555 17,795,225 25,120,173 21,756,946 Non-controlling interests 222,333 83,912 Total equity 25,342,506 21,840,858 LIABILITIES Non-current liabilities Deferred income tax liabilities 19 945,833 967,211 Long-term payables 20 2,258,839 – 3,204,672 967,211

Tencent Holdings Limited Interim Report 2011 Consolidated Statement of Financial Position As at 30 June 2011 Unaudited Audited 30 June 31 December 2011 2010 Note RMB’000 RMB’000 Current liabilities Accounts payable 15 2,028,941 1,380,464 Other payables and accruals 16 3,637,803 2,997,808 Derivative financial instruments 17 33,900 17,964 Short-term borrowings 18 8,150,065 5,298,947 Current income tax liabilities 506,474 341,103 Other tax liabilities 245,962 225,188 Deferred revenue 3,899,882 2,760,571 18,503,027 13,022,045 Total liabilities 21,707,699 13,989,256 Total equity and liabilities 47,050,205 35,830,114 Net current assets 10,387,374 12,351,696 Total assets less current liabilities 28,547,178 22,808,069 On behalf of the Board Ma Huateng Zhang Zhidong Director Director The accompanying notes on pages 10 to 48 form an integral part of this Interim Financial Information.

Pages: 86
Words: 27,592
Type: Financial

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