Financial

2018 Interim Report

Published by Tencent

Summary

Tencent Holdings Limited demonstrated robust financial expansion during the first half of 2018, characterized by a 39% year-on-year revenue increase to RMB 147.2 billion and a 26% rise in profit attributable to equity holders, reaching RMB 41.2 billion. This growth was primarily fueled by strong performance in digital content, online advertising, and cloud services. While the company faced a temporary 19% sequential decline in mobile gaming revenue during the second quarter—attributed to release timing and a strategic shift toward user engagement over immediate monetization—management successfully offset these pressures through diversified revenue streams and significant gains from an extensive global investment portfolio. The company’s operational strategy during this period emphasized aggressive capital deployment, with research and development spending rising to RMB 10.7 billion and substantial investments in associates growing to RMB 152.8 billion. These initiatives, alongside increased spending on media content and M&A, resulted in a net debt position of RMB 35.3 billion by mid-year. Financial reporting for the period was marked by the adoption of IFRS 9 and IFRS 15, which necessitated significant reclassifications of financial assets and adjustments to equity reserves, though these changes did not materially impact the underlying financial health of the organization. Geographically focused on its core Chinese market while expanding its international publishing footprint, Tencent maintained a stable risk management framework despite rising debt levels and increased financing costs. The company’s commitment to human capital remained high, supporting a workforce of nearly 49,000 employees with remuneration costs totaling RMB 19.9 billion. Looking forward, the organization continues to prioritize ecosystem stickiness through Mini Programs and high-ARPU genre expansion, while preparing for strategic corporate developments, including the proposed spin-off of its music entertainment subsidiary.

From the report

CONTENTS CONTENTS 2 Corporate Information 2 Corporate Information 3 Financial Performance Highlights 3 Financial Performance Highlights 5 Chairman's Statement 5 Chairman’s Statement 11 Management Discussion and Analysis 11 Management Discussion and Analysis 24 Report on Review of Interim Financial Information 25 Consolidated Income Statement 26 Consolidated Statement of Comprehensive Income 27 Consolidated Statement of Financial Position 30 Consolidated Statement of Changes in Equity 32 Consolidated Statement of Cash Flows 34 Notes to the Interim Financial Information 34 Notes to the Interim Financial Information 81 Other Information 81 Other Information 98 Definition 98 Definition

Corporate Information Corporate Information DIRECTORS NOMINATION COMMITTEE PRINCIPAL PLACE OF BUSINESS DIRECTORS NOMINATION COMMITTEE IN HONG KONG PRINCIPAL PLACE OF BUSINESS Executive Directors Ma Huateng( C h a i r m a n ) IN HONG KONG Ma Huateng( C h a i r m a n ) Li Dong Sheng 29/F., Three’Pacific Place Lau Chi Ping Martin Iain Ferguson Bruce No. 1 Queen s Road East Non-Executive Directors Ian Charles Stone Wanchai Non-Executive Directors Charles St Leger Searle Hong Kong Jacobus Petrus (Koos) Bekker REMUNERATION COMMITTEE CAYMAN ISLANDS PRINCIPAL Jacobus Petrus (Koos) Bekker REMUNERATION COMMITTEE CAYMAN ISLANDS PRINCIPAL Charles St Leger Searle lan Charles Stone (Chairman) SHARE REGISTRAR AND Independent Non-Executive Directors Independent Non-Executive Directors Li Dong Sheng Li Dong Sheng lain Ferguson Bruce Iain Ferguson Bruce lan Charles Stone Ian Charles Stone Yang Siu Shun AUDIT COMMITTEE Ian Charles Stone( C h a i r m a n ) TRANSFER OFFICE Li Dong Sheng SMP Partners (Cayman) Limited Jacobus Petrus (Koos) Bekker Jacobus Petrus (Koos) Bekker SMP Partners (Cayman) Limited Royal Bank House - 3rd Floor AUDITOR Royal Bank House – 3rd Floor AUDITOR 24 Shedden Road 24 Shedden Road P.O. Box 1586 PricewaterhouseCoopers P.O. Box 1586 Certified Public Accountants Grand Cayman, KY1-1110 Cayman Islands

s (Koos) Bekker Jacobus Petrus (Koos) Bekker SMP Partners (Cayman) Limited Royal Bank House - 3rd Floor AUDITOR Royal Bank House – 3rd Floor AUDITOR 24 Shedden Road 24 Shedden Road P.O. Box 1586 PricewaterhouseCoopers P.O. Box 1586 Certified Public Accountants Grand Cayman, KY1-1110 Cayman Islands Yang Siu Shun ( C h a i r m a n ) PRINCIPAL BANKERS HONG KONG BRANCH SHARE (re-designated with effect from Bank of China Limited REGISTRAR AND TRANSFER the conclusion of the 2018 AGM) The Hongkong and Shanghai Banking OFFICE Iain Ferguson Bruce Corporation Limited Computershare Hong Kong Investor Ian Charles Stone Ian Charles Stone Services Limited Charles St Leger Searle REGISTERED OFFICE Services Limited Charles St Leger Searle REGISTERED OFFICE Shops 1712-1716, 17th Floor Shops 1712-1716, 17th Floor CORPORATE GOVERNANCE Cricket Square Hopewell Centre Cricket Square Hopewell Centre CORPORATE GOVERNANCE Hutchins Drive, P.O. Box 2681 183 Queen’s Road East COMMITTEE Hutchins Drive, P.O. Box 2681 183 Queen's Road East COMMITTEE Grand Cayman KY1-1111 Wan Chai, Hong Kong Charles St Leger Searle Cayman Islands Wan Chai, Hong Kong ( C h a i r m a n ) Iain Ferguson Bruce Cayman Islands COMPANY WEBSITE Ian Charles Stone TENCENT GROUP HEAD OFFICE COMPANY WEBSITE Yang Siu Shun TENCENT GROUP HEAD OFFICE www.tencent.com Yang Siu Shun Tencent Building www.tencent.com INVESTMENT COMMITTEE Kejizhongyi Avenue STOCK CODE Lau Chi Ping Martin Hi-tech Park 700 Nanshan District ( C h a i r m a n ) Ma Huateng Hi-tech Park 700 Lau Chi Ping Martin (Chairman) Shenzhen, 518057 Charles St Leger Searle The PRC Ma Huateng Shenzhen, 518057 Charles St Leger Searle The PRC

.com INVESTMENT COMMITTEE Kejizhongyi Avenue STOCK CODE Lau Chi Ping Martin Hi-tech Park 700 Nanshan District ( C h a i r m a n ) Ma Huateng Hi-tech Park 700 Lau Chi Ping Martin (Chairman) Shenzhen, 518057 Charles St Leger Searle The PRC Ma Huateng Shenzhen, 518057 Charles St Leger Searle The PRC 2 TENCENT HOLDINGS LIMITED

> **[Chart page]** This page contains visual data — view in PDF for the best experience. Financial Performance Highlights Financial Performance Highlights SECOND QUARTER OF 2018 SECOND QUARTER OF 2018 Unaudited Three months ended Thre Unaudited Quartere months ended 30 June 30 June Year- 31 March Quarter- 30 June 30 June on-year 31 March on-quarter 2018 2017 change 2018 change (RMB in millions, unless specified) Revenues 73,675 56,606 30% 73,528 Revenues 73,675 56,606 30% 73,528 – Gross profit 34,446 28,306 22% 37,042 -7% Gross profit 34,446 28,306 22% 37,042 -7% Operating profit 21,807 22,560 -3% 30,692 -29% Operating profit 21,807 22,560 -3% 30,692 -29% Profit for the period 18,580 2% Profit for the period 18,254 2% 23,973 -22% Profit attributable to equity holders of the Company 17,867 18,231 -2% 23,290 -23% Non-GAAP profit attributable to equity holders of the Company 19,716 16,391 20% 18,313 8% EPS (RMB per share) – basic 1.893 1.939 -2% 2.470 -23% – diluted 1.868 1.914 -2% 2.435 -23% Non-GAAP EPS (RMB per share) Non-GAAP EPS (RMB per share) 2.089 – basic 1.743 20% 1.942 8% - basic 2.089 1.743 20% 8% – diluted 2.062 1.721 20% 1.915 8% - diluted 2.062 1.721 20% 1.915 8% INTERIM REPORT 2018 3

> **[Chart page]** This page contains visual data — view in PDF for the best experience. Financial Performance Highlights Financial Performance Highlights FIRST HALF OF 2018 FIRST HALF OF 2018 Unaudited 30 June Six Unaudited Year-on-year months ended 30 June 30 June Year-on-year 2018 2017 change (RMB in millions, unless specified) Revenues 147,203 106,158 39% Revenues 147,203 106,158 39% Gross profit 71,488 53,749 33% Gross profit 71,488 53,749 33% Operating profit 52,499 41,832 25% Operating profit 52,499 41,832 25% Profit for the period 42,553 32,802 30% Profit for the period 42,553 32,802 30% Profit attributable to equity holders of the Company 41,157 Profit attributable to equity holders of the Company 32,707 26% Non-GAAP profit attributable to equity holders of the Company 38,029 30,602 24% EPS (RMB per share) – basic 4.363 3.480 25% – diluted 4.303 3.436 25% Non-GAAP EPS (RMB per share) – basic 4.031 3.256 24% – diluted 3.976 3.215 24% 4 TENCENT HOLDINGS LIMITED

Pages: 102
Words: 40,431
Type: Financial

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