Tencent Announces 2012 Fourth Quarter and Annual Results

           Tencent Announces 2012 Fourth Quarter and Annual Results

PR Newswire

HONG KONG, March 20, 2013

HONG KONG, March 20, 2013 /PRNewswire/ -- Tencent Holdings Limited ("Tencent"
or the "Company", SEHK 00700), a leading provider of comprehensive Internet
services in China, today announced the unaudited consolidated results for the
fourth quarter of 2012 and audited consolidated results for the year ended
December 31, 2012.

Highlights of 2012 full year:

  oTotal revenues were RMB43,893.7 million (USD6,983.3 million[1]), an
    increase of 54.0% over the year ended December 31, 2011 ("YoY").
  oRevenues from Internet value-added services ("IVAS") were RMB31,995.2
    million (USD5,090.3 million), an increase of 38.9% YoY.
  oRevenues from mobile & telecommunications value-added services ("MVAS")
    were RMB3,723.0 million (USD592.3 million), an increase of 13.8% YoY.
  oRevenues from online advertising were RMB3,382.3 million (USD538.1
    million), an increase of 69.8% YoY.
  oRevenues from e-Commerce transactions were RMB4,427.8 million (USD704.4
    million).
  oGross profit was RMB25,686.4 million (USD4,086.6 million), an increase of
    38.3% YoY. Gross margin decreased to 58.5% from 65.2% last year.
  oOperating profit was RMB15,479.4 million (USD2,462.7 million), an increase
    of 26.3% YoY. Operating margin decreased to 35.3% from 43.0% last year.
    Non-GAAP operating profit[2] was RMB17,052.8 million (USD2,713.0 million),
    an increase of 29.1% YoY. Non-GAAP operating margin decreased to 38.9%
    from 46.4% last year.
  oProfit for the year was RMB12,784.9 million (USD2,034.0 million), an
    increase of 25.0% YoY. Net margin decreased to 29.1% from 35.9% last
    year.
    Non-GAAP profit for the period[2] was RMB14,397.8 million (USD2,290.6
    million), an increase of 30.8% YoY. Non-GAAP net margin decreased to
    32.8% from 38.6% last year.
  oProfit attributable to equity holders of the Company for the year was
    RMB12,731.9 million (USD2,025.6 million), an increase of 24.8% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the
    year[2] was RMB14,286.4 million (USD2,272.9 million), an increase of 30.6%
    YoY.
  oBasic earnings per share were RMB6.965. Diluted earnings per share were
    RMB6.833 .
  oThe Board of Directors has recommended a final dividend of HKD1.00 per
    share for the year ended December 31, 2012, subject to the approval of the
    shareholders at the Annual General Meeting. The proposed dividend will be
    payable on May 30, 2013.

Highlights of the fourth quarter of 2012:

  oTotal revenues were RMB12,153.1 million (USD1,933.5 million), an increase
    of 5.1% over the third quarter of 2012 ("QoQ") or an increase of 53.4%
    over the fourth quarter of 2011("YoY").
  oRevenues from IVAS were RMB8,455.9 million (USD1,345.3 million), an
    increase of 1.0% QoQ or an increase of 32.1% YoY.
  oRevenues from MVAS were RMB933.9 million (USD148.6 million), a decrease of
    1.3% QoQ or an increase of 9.3% YoY.
  oRevenues from online advertising were RMB947.3 million (USD150.7 million),
    a decrease of 6.7% QoQ or an increase of 58.3% YoY.
  oRevenues from e-Commerce transactions were RMB1,683.6 million (USD267.8
    million), an increase of 48.5% QoQ.
  oGross profit was RMB6,880.5 million (USD1,094.7 million), an increase of
    1.5% QoQ or an increase of 32.8% YoY. Gross margin decreased to 56.6%
    from 58.6% last quarter.
  oOperating profit was RMB3,726.1 million (USD592.8 million), a decrease of
    9.7% QoQ or an increase of 20.5% YoY. Operating margin decreased to
    30.7% from 35.7% last quarter.
    Non-GAAP operating profit[2] was RMB4,320.2 million (USD687.3 million), a
    decrease of 2.8% QoQ or an increase of 22.9% YoY. Non-GAAP operating
    margin decreased to 35.5% from 38.4% last quarter.
  oProfit for the quarter was RMB3,470.8 million (USD552.2 million), an
    increase of 7.1% QoQ or an increase of 36.0% YoY. Net margin increased
    to 28.6% from 28.0% last quarter.
    Non-GAAP profit for the quarter[2] was RMB4,089.7 million (USD650.7
    million), an increase of 14.0% QoQ or an increase of 39.6% YoY. Non-GAAP
    net margin increased to 33.7% from 31.0% last quarter.
  oProfit attributable to equity holders of the Company for the quarter was
    RMB3,463.6 million (USD551.0 million), an increase of 7.6% QoQ or an
    increase of 36.5% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the
    quarter[2] was RMB4,067.8 million (USD647.2 million), an increase of 14.5%
    QoQ or an increase of 40.3% YoY.
  oBasic earnings per share were RMB1.890. Diluted earnings per share were
    RMB1.856.
  oKey platform statistics:

       oMonthly active Instant Messaging ("IM") user accounts were 798.2
         million, an increase of 1.8% QoQ or an increase of 10.7% YoY.
       oPeak simultaneous online IM user accounts were 176.4 million, an
         increase of 5.4% QoQ or an increase of 15.5% YoY.
       oMonthly active Qzone user accounts were 602.7 million, an increase of
         1.7% QoQ or an increase of 9.2% YoY; Monthly active Pengyou user
         accounts were 247.3 million, a decrease of 4.5% QoQ or an increase of
         22.1% YoY.
       oPeak simultaneous online QQ Game Platform user accounts were 8.8
         million, a decrease of 6.4% QoQ or an increase of 4.8% YoY.
       oFee-based IVAS registered subscriptions were 70.9 million, a decrease
         of 3.9% QoQ or a decrease of 8.2% YoY.
       oFee-based MVAS registered subscriptions were 33.6 million, a decrease
         of 0.3% QoQ or an increase of 7.0% YoY.

[1] Figures stated in USD are based on USD1 to RMB6.2855
[2] See "Non-GAAP Financial Measures" section for more details on the reasons
for presenting these measures

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During 2012, widespread
smartphone adoption brought both disruption and opportunities to the China
Internet industry. At Tencent, we began to see early results from substantial
investments we have made, and continue to make, in mobile Internet products.
Tencent now provides many of China's most popular smartphone apps for
activities such as communications, social networking, web browsing, games,
news, and music, among others. These apps enable us to reach users who are
increasingly spending time on smartphones, extend our ecosystem from PCs to
mobile, and provide new mobile-specific features unavailable on PCs. During
the year, we also introduced a powerful targeted advertising system leveraging
our social networks, built the market-leading open platform in partnership
with third party developers, diversified our game revenue internationally, and
ramped up a sizeable e-commerce business. As a result, we achieved healthy
increases in revenue and earnings in 2012, while continuing to invest
aggressively in platforms, innovation and technology in order to enhance value
to our users and drive long-term growth for our company."

Financial Review for the Fourth Quarter of 2012

IVAS revenues increased 1.0% QoQ to RMB8,455.9 million and represented 69.6%
of our total revenues for the fourth quarter of 2012. Online game revenues
amounted to RMB5,990.4 million, broadly stable compared to the previous
quarter. We registered growth in revenues from international markets and new
self-developed titles. These factors were largely offset by the impact of
weaker seasonality in China and our focus on future expansion packs rather
than marketing for several major titles. Revenues from our community and open
platforms climbed by 2.8% to RMB2,465.5 million. This primarily reflected an
increase in revenues from item-based sales within applications on our open
platforms. Revenues from QQ Membership also increased as a result of
promotional activities.

MVAS revenues decreased 1.3% QoQ to RMB933.9 million and represented 7.7% of
our total revenues. This mainly reflected a decrease in revenues from our
bundled SMS packages, partially offset by revenue growth from our mobile games
and mobile books.

Online advertising revenues decreased 6.7% QoQ to RMB947.3 million and
represented 7.8% of our total revenues. This primarily reflected a decrease
in brand display advertising revenues driven by the absence of the positive
impact arising from the London Olympic Games, as well as weaker seasonality,
partially offset by increased revenues from performance-based social
advertising on our social networks and search advertising on our e-Commerce
platforms.

e-Commerce transactions revenues increased 48.5% QoQ to RMB1,683.6 million and
represented 13.8% of our total revenues. This mainly reflected an increase in
volume of principal e-Commerce transactions as a result of seasonal
promotional activities and geographic expansion in southern China from the
original eastern China base. Fees generated from transactions on our
marketplaces also increased.

Other Key Financial Information for the Fourth Quarter of 2012

Share-based compensation was RMB302.8 million for the fourth quarter of 2012
as compared with RMB217.3 million for the previous quarter.

Capital expenditure was RMB1,783.8 million for the fourth quarter of 2012 as
compared with RMB1,132.3 million for the previous quarter.

The Company didn't repurchase any shares on the Stock Exchange during the
fourth quarter of 2012 and the previous quarter.

As at December 31, 2012, net cash position totaled RMB27,381.3 million which
excluded borrowings of RMB3,182.8 million and long-term notes payable of
RMB7,516.8 million.

As at December 31, 2012, the total number of shares of the Company in issue
was 1.853 billion.

Business Review and Outlook

2012 was a year of challenge and change, during which Tencent sharpened its
focus on mobile Internet experiences.

From a macro perspective, China experienced slower GDP growth amid economic
uncertainties in Europe and the US. China's Internet user growth continued to
decelerate during the year as the scale of Internet user base expanded further
and penetration reached 42% at the end of 2012 according to China Internet
Network Information Center, limiting the simple growth brought about by new
Internet users. Nevertheless, engagement per user increased further as the
Internet deepened its penetration into users' daily lives and the value chains
of different business sectors in China. As a result, business opportunities
available on the Internet continued to broaden. We have been and will
continue making substantial investment in our platforms and services to better
serve our users and to catalyse the emergence of these business opportunities.

During the year, there was a significant shift in user activity from PC to
mobile, driven by rapid expansion of China's mobile Internet user base,
enhanced capabilities of smartphones and increased adoption of compelling
mobile applications. Offering a revolutionary user experience, the mobile
Internet is reshaping existing business models and the industry value chain.
Against this backdrop, Tencent and some peers have been aggressively investing
in products and marketing to build their mobile user base, although business
models on the mobile Internet remain uncertain and, in areas such as
advertising and value-added services, monetisation lags behind traffic growth.

2012 witnessed the continued evolution of other major Internet sectors in
China. For the online games sector, mobile games and web games increasingly
supplemented client games as drivers of industry user growth, albeit from a
relatively low base. In the online advertising sector, advertisers shifted
part of their spending to video advertising and, more notably, to
performance-based social advertising. For the e-Commerce sector, B2C
competition was intense but showed signs of moderation towards the end of the
year, while transaction volumes maintained rapid growth.

Overall Financial Performance

We achieved significant growth in revenues and earnings in 2012. Our
diversified business portfolio, focus on building user platforms, and
commitment to creating healthy industry value chains have enabled Tencent to
remain resilient despite rapid and unpredictable value migration within the
Internet industry.

  oIVAS. Our online game business extended its leadership in China via new
    game genres, and achieved significant revenue contributions from
    international markets. For our community and open platforms, the year saw
    healthy revenue growth, primarily driven by a strong increase in
    item-based sales within applications on our open platforms.
  oMVAS. The business benefited from revenue growth in mobile games and our
    bundled SMS packages. Mobile books also demonstrated promising growth
    potential.
  oOnline advertising. We achieved above-industry-average revenue growth
    rates, primarily due to performance-based social advertising, as well as
    market share gains in portal and online video advertising.
  oe-Commerce transactions. In 2012, we stepped up the scale of our B2C
    e-Commerce transactions business. Despite a highly competitive
    environment, we achieved significant growth in transaction volume and
    revenues through the year.

In the fourth quarter of 2012, the year-on-year growth rates of our revenues
and earnings remained robust.

  oIVAS. On a year-on-year basis, our online game business benefited from
    increased activity of our major titles, higher contributions from
    international markets and new self-developed titles launched during 2012.
    Item-based sales on our open platforms enjoyed strong year-on-year revenue
    growth.
  oMVAS. Overall year-on-year revenue growth rate of the business reduced
    mainly due to slower subscriptions growth for our bundled SMS packages.
    Mobile games and mobile books continued to grow significantly compared to
    the same period last year.
  oOnline advertising. The business sustained significant revenue growth on
    a year-on-year basis, mainly driven by performance-based social
    advertising, video advertising and search advertising on our e-Commerce
    platforms. Traditional brand display advertising also registered solid
    growth.
  oe-Commerce transactions. Principal transactions grew sequentially as a
    result of seasonal promotions and geographic expansion in southern China
    from the original eastern China base. Transaction volume on our
    marketplaces also increased on a quarter-on-quarter basis.

Strategic Highlights

In 2012, we established strong presence in a wide range of mobile application
categories such as communications, social networking, media, security and
browser. We have developed some of China's most popular mobile applications,
including Wireless QQ and Weixin. While we will continue to invest
aggressively in developing and marketing independent mobile services such as
our security product and web browser, we are also organically integrating new
applications into Weixin, which can enhance our users' experience while
leveraging their existing social connections.

We reinforced and extended our social leadership during the year, with
continued user expansion on our core platforms. We also deepened the
integration of these platforms to further improve user engagement and enhanced
the mobilisation of PC-oriented platforms to cater for increasing usage of the
mobile Internet. Meanwhile, our open platforms continued to grow and create
value for users and third-party developers.

In May 2012, we announced a re-organisation of our business units into six new
business groups and a wholly-owned subsidiary focusing on e-Commerce
business. This allows us to optimise resource allocation, to reinforce our
entrepreneurial spirit, execution and innovation, and to sharpen our focus on
users' needs. Each business line continues to leverage company-wide synergies
under the new organisational structure.

Our business is increasingly benefitting from investments we have made in
companies whose products or services are complementary to our own. For
example, Riot Games' LoL has attained widespread popularity, strengthening our
game portfolio in China and broadening our game revenue internationally.
During 2012, we continued to selectively invest in companies where we see
opportunities for long-term strategic benefits, notably businesses which can
supply first-class products into our platforms, and businesses which we see as
driving change in the Internet industry. For example, we purchased minority
stakes in Epic Games, a US-based development team with a long history of
creating popular games and a market-leading game development engine, and in
Kakao, a leading mobile messaging service provider in Korea.

We completed a USD600 million senior unsecured notes offering in September
2012. This is our second international bond issue, following our first such
transaction in December 2011, reflecting investors' confidence in our business
model and financial performance. We remain firmly committed to maintaining
our strong credit profile and investment grade credit ratings.

Divisional and Product Highlights

Communication Platforms

QQ IM, the largest online community in China, grew steadily in 2012. MAU
reached 798 million at the end of 2012, representing a year-on-year growth
rate of 11%, which was broadly in line with the Internet user growth rate in
China. PCU increased by 16% year-on-year to 176 million. Driven by
increasing adoption of the mobile Internet, our mobile user base grew more
rapidly compared to our PC user base.

Weixin enjoyed substantial user growth in 2012 , thanks to its innovative
features and compelling user experience. It has quickly become a major
communications and social platform for smartphone users in China. Beyond the
domestic market, we have launched the product "WeChat" which leverages
Weixin's technology to serve the international markets. Recently, total
registered user accounts of Weixin and Wechat have exceeded 300 million.

Social Platforms

Our leading social networks registered solid growth, with increase in the
scale and activity of mobile users. MAU of Qzone increased by 9% year-on-year
to 603 million at the end of 2012, while MAU of Pengyou increased by 22% to
247 million. Weixin Moments, a feature within Weixin which enables users to
share experiences with their Weixin contact lists, enjoyed rapid user
adoption.

Media Platforms

In 2012, our media platforms expanded further with enhanced media influence
and brand position. QQ.com maintained its position as the most-visited portal
in China with solid traffic growth, leveraging the opportunities presented by
the London Olympic Games. We also extended our vertical channels, such as
news and finance, to the mobile Internet via vertical-specific smartphone
applications. Tencent Microblog reached 87 million DAU at the end of 2012.
As the growth of microblog users in China decelerates, we are exploring
integration points between Tencent Microblog and Weixin to deepen our
differentiation. Tencent Video gained significant audience share during the
year riding on content enrichment and user experience enhancement, and has
become one of the leading online video platforms in China in terms of monthly
unique visitors and video views.

IVAS

Our IVAS registered subscriptions count declined during 2012, primarily due to
stringent measures we launched in the second quarter, which aimed to improve
the quality of our subscriber base by cleaning up certain user accounts
acquired through mobile channels, for whom fee collection was unlikely. To
cater for users' increasing activity on mobile, we are enriching the
mobile-related features and privileges of our IVAS subscription services.

We operate multiple open platforms providing third-party application
developers with access to a large user base across our diverse product
portfolio, including Qzone, QQ Game, and Tencent Microblog. In 2012, we
increased significantly the number of third-party applications on our open
platforms by collaborating with more developers and enhancing the support we
provide to them. With increased user base and user activity, we achieved
rapid growth in item-based sales within applications. To position for future
growth opportunities, we are extending our open platforms to the mobile
Internet and enriching our platforms with a greater diversity of applications.

Our online game business extended its domestic leadership, supported by growth
in our major titles and contribution from self-developed titles launched
during the year, including Legend of Yulong and Legend of Xuanyuan. We also
achieved significant growth in international markets riding on the success of
LoL. Our QQ Game Platform benefited from increased user activity and its PCU
reached 8.8 million in the fourth quarter of 2012. In the future, we will
focus on strengthening our market leadership by further enriching our game
portfolio and by increasing our penetration into the web game and mobile game
sectors. We will also continue to explore opportunities in international
markets.

MVAS

In 2012, our MVAS business registered steady revenue increase, mainly driven
by our bundled SMS packages and mobile games. In addition, mobile books
registered strong revenue growth, albeit from a relatively low base.

During the year, we increased our focus on mobile games and expanded our game
portfolio as we believe that the sector presents one of the key business
opportunities on the mobile Internet. In addition, our mobile browser and
mobile security product enhanced their market positions with significant user
growth.

For certain key services such as QQ IM, Qzone and games, we managed the PC and
mobile versions separately in the past. To deliver a unified user experience
across platforms, we are now aligning the product development and management
of these services between PC and mobile versions.

Online Advertising

Our online advertising business achieved strong revenue growth in 2012,
underpinned by growth in brand display advertising and performance-based
social advertising. In addition, search advertising registered growth.

In brand display advertising, we achieved healthy revenue growth and market
share gains against a challenging macro environment. We also leveraged the
London Olympic Games to better penetrate selected up-scale brand advertisers.
Riding on the rapid user and traffic growth of Tencent Video, our online video
advertising revenues grew strongly during the year. Traditional brand display
advertising experienced solid growth along with increased traffic and the
enhanced media influence of our platforms.

In performance-based social advertising, we benefited significantly from the
launch of our targeted advertising system on social networks, which was
well-received by advertisers such as e-Commerce companies and application
developers. Supported by greater impression volume and improved click-through
rates, performance-based social advertising has become a significant revenue
contributor to our online advertising business.

In search advertising, we benefited from the rapid growth of e-Commerce search
and new contributions from mobile search. We are in the process of revamping
our search business and will focus on improving our basic search experience
and operations.

e-Commerce Transactions

In 2012, we stepped up the scale of our B2C e-Commerce transactions business
in certain product categories, such as consumer electronics, and registered
significant growth in transaction volume. During the year, we expanded our
geographical coverage and increased investments in logistics and fulfillment
infrastructure. Our business structure was also re-organised to enable more
focused and efficient management.

Although the e-Commerce industry is highly competitive, we believe that it is
an appealing downstream opportunity to leverage our competitive advantages
which include our massive logged-in user base, our existing billing and
payment relationships with consumers, our insight into our users' interests,
and our network's ability to enhance "word-of-mouth" effect by users. Looking
ahead, we will continue to expand our geographic presence in China, to improve
user experience by investing in our business infrastructure and to explore new
opportunities such as mobile commerce.

Outlook for 2013

During 2013, we intend to:

  oExtend our communications and social leadership from PC to smartphone via
    applications such as Wireless QQ and Weixin, and enrich user experience by
    integrating additional services into these applications. Such additional
    services may include content applications, games, and location-based
    activities, among others.
  oTake advantage of the disruptive opportunities which the mobile Internet
    creates to expand our product range and reach with users beyond what we
    have achieved on PC. In China, we are investing aggressively in our
    mobile security software and mobile browser services. Internationally, we
    are stepping up our marketing investment to acquire users for WeChat.
  oServe our users relevant content, products, and advertising by making
    appropriately targeted recommendations at the right time and under the
    right circumstances. We believe our logged-in relationship with users,
    together with our users' desire to share experiences with friends via our
    communications and social platforms, will enable us to provide highly
    relevant recommendations and customisation, which represent competitive
    advantages in downstream activities such as e-Commerce, digital
    entertainment, and media content. We will continue to invest heavily in
    such downstream activities, including e-Commerce and advertising, so as to
    fully capture the revenue opportunities surrounding our platforms.

In view of the increasing integration between the PC and mobile Internet, we
will combine the IVAS and MVAS segments in our financial reports and merge
related revenue categories under IVAS and MVAS from the first quarter of 2013
onwards. We believe that this adjustment in financial reporting better
reflects current market trends and our future business development.

# # #

About Tencent

Tencent aims to enrich the interactive online experience of Internet users by
providing a comprehensive range of Internet and wireless value-added
services. Through its various online platforms, including Instant Messaging
QQ, web portal QQ.com, the QQ Game Platform under Tencent Games, multi-media
social networking service Qzone and wireless portal, Tencent services the
largest online community in China and fulfills the user's needs for
communication, information, entertainment and e-Commerce on the Internet.

Tencent has four main streams of revenues: Internet value-added services,
mobile and telecommunications value-added services, online advertising and
e-Commerce.

Shares of Tencent Holdings Limited are traded on the Main Board of the Stock
Exchange of Hong Kong Limited, under stock code 00700. The Company became a
constituent of the Hong Kong's Hang Seng Index (HSI) on June 10, 2008. For
more information, please visit www.tencent.com/ir.

For enquiries, please contact:

Catherine Chan Tel: (86) 755 86013388 ext 88369 or (852) 31485100 Email:
cchan#tencent.com
Jane Yip Tel: (86) 755 86013388 ext 81374 or (852) 31485100 Email:
janeyip#tencent.com

Non-GAAP Financial Measures

To supplement the consolidated results of the Company prepared in accordance
with IFRS, certain non-GAAP financial measures, including non-GAAP operating
profit, non-GAAP operating margin, non-GAAP profit for the period, non-GAAP
net margin and non-GAAP profit attributable to equity holders of the Company,
have been presented in this press release. These unaudited non-GAAP
financial measures should be considered in addition to, not as a substitute
for, measures of the Company's financial performance prepared in accordance
with IFRS. In addition, these non-GAAP financial measures may be defined
differently from similar terms used by other companies.

The Company's management believes that the non-GAAP financial measures provide
investors with useful supplementary information to assess the performance of
the Company's core operations by excluding certain non-cash items and certain
impact of acquisitions.

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
realized in future. Underlying the forward-looking statements is a large
number 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
In RMB '000 (unless otherwise stated)
                             Unaudited                Audited
                             4Q2012      4Q2011       2012         2011
Revenues                     12,153,053  7,922,451    43,893,711   28,496,072
 Internet VAS             8,455,911   6,401,763    31,995,183   23,042,758
 Mobile & Telecom VAS     933,901     854,310      3,722,968    3,270,841
 Online advertising       947,258     598,438      3,382,328    1,992,216
 e-Commerce transactions  1,683,562   -            4,427,806    -
 Others                   132,421     67,940       365,426      190,257
Cost of revenues             (5,272,571) (2,741,535)  (18,207,360) (9,928,308)
Gross profit                 6,880,482   5,180,916    25,686,351   18,567,764
Gross margin                 56.6%       65.4%        58.5%        65.2%
Interest income              266,351     137,623      835,671      468,990
Other (losses)/gains, net    (202,248)   69,725       (283,900)    420,803
Selling and marketing        (1,094,775) (743,657)    (2,993,437)  (1,920,853)
expenses
General and administrative   (2,123,735) (1,553,038)  (7,765,272)  (5,283,154)
expenses
Operating profit             3,726,075   3,091,569    15,479,413   12,253,550
Operating margin             30.7%       39.0%        35.3%        43.0%
Finance (costs)/income, net  (62,802)    (5,494)      (347,518)    35,505
Share of losses of           (28,856)    (63,721)     (54,386)     (24,255)
associates
Share of losses of jointly   (12,410)    (40,819)     (26,494)     (165,731)
controlled entities
Profit before income tax     3,622,007   2,981,535    15,051,015   12,099,069
Income tax expense           (151,201)   (430,332)    (2,266,163)  (1,874,238)
Profit for the period        3,470,806   2,551,203    12,784,852   10,224,831
Net margin                   28.6%       32.2%        29.1%        35.9%
Attributable to:
 Equity holders of the    3,463,593   2,537,026    12,731,871   10,203,083
Company
 Non-controlling          7,213       14,177       52,981       21,748
interests
Non-GAAP profit attributable
to equity holders of the     4,067,756   2,899,588    14,286,423   10,940,208
Company
Earnings per share (GAAP)
- basic (RMB)                1.890       1.396        6.965        5.609
- diluted (RMB)              1.856       1.370        6.833        5.490







CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In RMB '000 (unless otherwise stated)
                                                                             Unaudited            Audited
                                                                             4Q2012    4Q2011     2012       2011
Profitfortheperiod 3,470,806 2,551,203  12,784,852 10,224,831
Other comprehensive income, net of tax:
Net gains/ (losses) from changes in fair                                     103,105   (324,624)  823,893    (1,233,873)
 value of available-for-sale financial assets
Currency translation differences                                             (3,879)   (21,067)   10,065     (34,256)
Total comprehensive income for the period                               3,570,032 2,205,512  13,618,810 8,956,702
Attributable to:
 Equity holders of the Company                                            3,        2,194,008  13,566,608 8,937,627
                                                                             564,351
 Non-controlling interests                                                5,681     11,504     52,202     19,075











OTHER FINANCIAL INFORMATION
In RMB '000 (unless otherwise stated)
                                            Unaudited                         Audited
                                            4Q2012     3Q2012     4Q2011      2012       2011
EBITDA(a) 4,362,868  4,591,603  3,502,553   17,540,340 13,298,239
Adjusted EBITDA (a)                         4,640,940  4,784,020  3,722,671   18,445,132 14,030,930
Adjusted EBITDA margin (b)              38.2%      41.4%      47.0%       42.0%      49.2%
Interest expense                            103,536    86,104     27,959      326,562    72,537
Net cash (c)                                27,381,274 23,492,375 17,667,030  27,381,274 17,667,030
Capital expenditures (d)                    1,783,830  1,132,314  891,994     4,493,430  3,689,199
Note:

(a) EBITDA consists of operating profit less interest income, and plus other losses/(gains), net,
depreciation of fixed assets and investment properties and amortisation of intangible assets.
Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses.

(b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.

(c) Net cash represents year/period end balance and is calculated as cash and cash equivalents,
short-term and long-term deposits, and restricted cash pledged for secured bank borrowings, minus
total borrowings and long-term notes payable.

(d) Capital expenditures consist of additions (excluding business combinations) to fixed assets,
construction in progress, land use rights and intangible assets (excluding game and other content
licences).









CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 In RMB '000 (unless otherwise stated)                                                                     Audited
                                                                                                            As at 31 December
                                                                                                            2012        2011
ASSETS
Non-current assets
Fixed assets                                                                                               7,402,766   5,884,952
Construction in progress                                                                                    533,691     158,656
Investment properties                                                                                       21,674      21,871
Land use rights                                                                                             794,439     230,915
Intangible assets                                                                                           4,719,075   3,779,976
Interests in associates                                                                                     7,310,266   4,433,374
Investment in jointly controlled entities                                                                   35,409      61,903
Deferred income tax assets                                                                                  168,906     198,058
Available-for-sale financial assets                                                                         5,632,590   4,343,602
Prepayments, deposits and other assets                                                                      1,236,129   2,187,570
Long-term deposits                                                                                          10,891,718  -
                                                                                                            38,746,663  21,300,877
Current assets
Inventories                                                                                                 568,084     -
Accounts receivable                                                                                         2,353,959   2,020,796
Prepayments, deposits and other assets                                                                      3,877,800   2,211,917
Short-term deposits                                                                                         13,805,675  13,716,040
Restricted cash                                                                                             2,520,232   4,942,595
Cash and cash equivalents                                                                                   13,383,398  12,612,140
                                                                                                            36,509,148  35,503,488
Totalassets 75,255,811  56,804,365
EQUITY
Equity attributable to the Company's equity holders
Share capital                                                                                               199         198
Share premium                                                                                               2,879,990   1,950,876
Shares held for share award scheme
                                                                                                            (667,464)   (606,874)

Other reserves                                                                                              815,697     409,266
Retained earnings                                                                                           38,269,085  26,710,368
                                                                                                            41,297507   28,463,834
Non-controlling interests                                                                                   850,759     624,510
Total equity                                                                                                42,148,266  29,088,344
LIABILITIES
Non-current liabilities
Borrowings                                                                                                  2,105,643   -
Long-term notes payable                                                                                     7,516,766   3,733,331
Deferred income tax liabilities                                                                             1,311,562   939,534
Long-term payables                                                                                          1,508,578   1,859,808
                                                                                                            12,442,549  6,532,673
Current liabilities
Accounts payable                                                                                            4,211,733   2,244,114
Other payables and accruals                                                                                 6,301,449   5,014,281
Derivative financial instruments                                                                            -           20,993
Borrowings                                                                                                  1,077,108   7,999,440
Current income tax liabilities                                                                              419,872     708,725
Other tax liabilities                                                                                       540,095     179,499
Deferred revenue                                                                                            8,114,739   5,016,296
                                                                                                            20,664,996  21,183,348
Total liabilities                                                                                           33,107,545  27,716,021
Total equity and liabilities                                                                                75,255,811  56,804,365







RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS
Year ended 31  December 2012
                                                   Adjustments
                                        As         Equity-settled Cash-settled     Losses/(gains) Amortisationof               Special
                                                                                                                    Impairment
                                        reported   share-based    share-based      on deemed        intangible      provision(d) dividend   Non-GAAP
                                                   compensation                    disposal  (b)
                                                                  compensation(a)                  assets  (c)                   Income(e)
                    (RBM in thousands ,unless specified)
Operatingprofit 15,479,413 904,792        107,600          5,150            247,272         699,000       (390,472)  17,052,755
Profit for the year                     12,784,852 904,792        107,600          5,150            286,830         699,000       (390,472)  14,397,752
Profit attributable                     12,731,871 890,285        94,884           5,150            255,705         699,000       (390,472)  14,286,423
to equity holders
Operating margin                        35.3%                                                                                                38.9%
Net margin                              29.1%                                                                                                32.8%

Year ended 31  December 2011
                                                   Adjustments
                                        As         Equity-settled Cash-settled     Losses/(gains) Amortisationof            Special
                                                                                                                    Impairment
                                        reported   share-based    share-based      on deemed        intangible      provision  dividend   Non-GAAP
                                                   compensation                    disposal  (b)                    (d)
                                                                  compensation(a)                  assets  (c)                Income(e)
                    (RBM in thousands ,unless specified)
Operatingprofit 12,253,550 732,691        82,080           (708,486)        607,851         243,000    -          13,210,686
Profit for the year                     10,224,831 732,691        82,080           (708,486)        431,434         243,000    -          11,005,550
Profit attributable                     10,203,083 724,266        75,749           (708,486)        402,596         243,000    -          10,940,208
 to equity holders
Operating margin                        43.0%                                                                                             46.4%
Net margin                              35.9%                                                                                             38.6%

RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS
                                                  Adjustments
                                        As        Equity-settled Cash-settled     Losses/(gains) Amortisationof            Special
                                                                                                                   Impairment
                                        reported  share-based    share-based      on deemed        intangible      provision  dividend   Non-GAAP
                                                  compensation                    disposal  (b)                    (d)
                                                                 compensation(a)                  assets  (c)                Income(e)
Unaudited three months ended 31 December 2012 (RMB in thousands , unless specified)
Operatingprofit 3,726,075 278,072        24,765           -                40,267          251,000    -          4,320,179
Profit for the period                   3,470,806 278,072        24,765           -                65,065          251,000    -          4,089,708
Profit attributable                     3,463,593 275,016        21,833           -                56,314          251,000    -          4,067,756
 to equity holders
Operating margin                        30.7%                                                                                            35.5%
Net margin                              28.6%                                                                                            33.7%
Unaudited three months ended 30 September 2012 (RMB in thousands , unless specified)
Operating profit                        4,124,365 192.417        24,860           5,150            38,494          448,000    (390,472)  4,442,814
Profit for the period                   3,241,145 192.417        24,860           5,150            66,013          448,000    (390,472)  3,587,113
Profit attributable                     3,218,693 189,660        21,921           5,150            58,385          448,000    (390,472)  3,551,337
 to equity holders
Operating margin                        35.7%                                                                                            38.4%
Net margin                              28.0%                                                                                            31.0%
Unaudited three months ended 31 December 2011 (RMB in thousands , unless specified)
Operating profit                        3,091,569 220,118        24,249           (249,449)        185,194         243,000    -          3,514,681
Profit for the period                   2,551,203 220,118        24,249           (249,449)        140,554         243,000    -          2,929,675
Profit attributable                     2,537,026 216,959        24,249           (249,449)        129,753         243,000    -          2,899,588
 to equity holders
Operating margin                        39.0%                                                                                            44.4%
Net margin                              32.2%                                                                                            37.0%


Note:

(a)Including put options granted to employees of investees on their shares and shares to be issued under investees' share-based incentive plans
which can be acquired by the Group, and other incentives
(b) Losses/(gains) on deemed disposal of previously held interests in associates and/or available-for-sale financial assets
(c)Amortisation of intangible assets resulting from acquisitions, net of related deferred tax
(d) Impairment provision for interests in associates, jointly controlled entities and/or available-for-sale financial assets
(e)Special dividend income from Mail.ru



SOURCE Tencent Holdings Limited

Website: http://www.tencent.com
 
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