TENCENT ANNOUNCES 2023 SECOND QUARTER AND INTERIM RESULTS

HONG KONG, Aug. 16, 2023 /PRNewswire/ — Tencent Holdings Limited (“Tencent” or the “Company”, 00700.HK), a leading provider of Internet value-added services in China, today announced the unaudited consolidated results for the second quarter (“2Q2023”) and first half year of 2023 (“1H2023”) ended June 30, 2023.

2Q2023 Key Highlights

Revenues: +11% YoY, non-IFRS[1] profit attributable to equity holders of the Company: +33% YoY

  • Total revenues were RMB149.2 billion (USD20.6 billion[2]), an increase of 11% over the second quarter of 2022 (“YoY”).
  • On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:

        –        Operating profit was RMB50.1 billion (USD6.9 billion), an increase of 37% YoY. Operating margin increased to 34% from 27% last year.

        –        Profit for the period was RMB38.6 billion (USD5.3 billion), an increase of 33% YoY. Net margin increased to 26% from 22% last year.

        –        Profit attributable to equity holders of the Company for the quarter was RMB37.5 billion (USD5.2 billion), an increase of 33% YoY.

        –        Basic earnings per share were RMB3.962. Diluted earnings per share were RMB3.875.
  • On an IFRS basis:

        –       Operating profit was RMB40.3 billion (USD5.6 billion), an increase of 34% YoY. Operating margin increased to 27% from 22% last year.

        –       Profit for the period was RMB27.0 billion (USD3.7 billion), an increase of 41% YoY. Net margin increased to 18% from 14% last year.

        –       Profit attributable to equity holders of the Company for the quarter was RMB26.2 billion (USD3.6 billion), an increase of 41% YoY.

        –       Basic earnings per share were RMB2.761. Diluted earnings per share were RMB2.695.

1H2023 Key Highlights

Revenues: +11% YoY, non-IFRS profit attributable to equity holders of the Company: +31% YoY

  • Total revenues were RMB299.2 billion (USD41.4 billion), an increase of 11% over the first half year of 2022 (“YoY”).
  • On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:

        –        Operating profit was RMB98.5 billion (USD13.6 billion), an increase of 35% YoY. Operating margin increased to 33% from 27% last year.

        –        Profit for the Period was RMB72.1 billion (USD10 billion), an increase of 30% YoY. Net margin increased to 24% from 21% last year.

        –        Profit attributable to equity holders of the Company for the year was RMB70.1 billion (USD9.7 billion), an increase of 31% YoY.

        –        Basic earnings per share were RMB7.393. Diluted earnings per share were RMB7.236.
  • On an IFRS basis:

        –        Operating profit was RMB80.7 billion (USD11.2 billion), an increase of 20% YoY. Operating margin increased to 27% from 25% last year.

        –        Profit for the period was RMB53.4 billion (USD7.4 billion), an increase of 24% YoY. Net margin increased to 18% from 16% last year.

        –        Profit attributable to equity holders of the Company for the period was RMB52.0 billion (USD7.2 billion), an increase of 24% YoY.

        –        Basic earnings per share were RMB5.486. Diluted earnings per share were RMB5.334.
  • Total cash were RMB371.8 billion (USD51.5 billion) at the end of the period.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, “During the second quarter of 2023, we sustained a solid revenue growth rate, along with a gravitation toward high quality revenue streams with better margins. This transition, combined with careful cost discipline developed in the previous year, resulted in profit growth exceeding revenue growth. We achieved notably rapid growth in advertising business, benefitting from deploying machine learning on our advertising platform and from Video Accounts monetisation. We will continue to drive innovation, including through generative AI, where we are providing a library of models to our partners via our Tencent Cloud Model-as-a-Service (MaaS) offering, as well as refining our proprietary foundation model.”

[1] Non-IFRS adjustments excludes share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and impairment provision/(reversals), SSV & CPP, income tax effects and others

[2] Figures stated in USD are based on USD1 to RMB7.2258

2Q2023 Financial Review

Revenues from VAS increased by 4% to RMB74.2 billion for the second quarter of 2023 on a year-on-year basis. International Games revenues increased by 19% to RMB12.7 billion, or up 12% excluding the impact of currency movements, supported by contributions from VALORANT, Triple Match 3D and Goddess of Victory: NIKKE. Domestic Games revenues were stable at RMB31.8 billion, as we released less-commercial content in our biggest games following a strong first quarter, while revenues from emerging competitive eSports titles such as Arena Breakout and Fight of the Golden Spatula increased year-on-year. Social Networks revenues increased by 2% to RMB29.7 billion, driven by increased revenues from mini games and music subscription services, partly offset by decreased revenues from our music- and games-related live streaming services.

Revenues from Online Advertising increased by 34% year-on-year to RMB25 billion for the second quarter of 2023, reflecting robust demand for Video Accounts advertisements and ongoing improvements in machine learning on our advertising platform, as well as a low base effect from the second quarter of 2022. Video Accounts’ advertising revenue exceeded RMB3 billion for the second quarter of 2023.

Revenues from FinTech and Business Services increased by 15% year-on-year to RMB48.6 billion for the second quarter of 2023. FinTech Services revenue achieved double-digit year-on-year growth, supported by expansion in both offline and online commercial payment activities. Business Services revenue improved to a low double-digit year-on-year growth rate, driven by fees generated from Video Accounts live streaming eCommerce transactions and modest growth in cloud services.

Other Key Financial Information for 2Q2023 

EBITDA was RMB51.9 billion, up 34% YoY. Adjusted EBITDA was RMB56.8 billion, up 27% YoY.

Capital expenditures were RMB4.0 billion, up 31% YoY.

Free cash flow was RMB29.9 billion, up 34% YoY.

As at Jun 30, 2023, net cash position totalled RMB17.7 billion. Fair value of our shareholdings[3] in listed investee companies (excluding subsidiaries) totalled RMB435.4 billion (USD60.3 billion) and the carrying value of our unlisted investments was RMB347.0 billion (USD48.0 billion). During the second quarter, the Company repurchased approximately 35.9 million shares on the Hong Kong Stock Exchange for an aggregate consideration of approximately RMB11.2 billion.

Operating Metrics 


As at

30 June

 2023

As at

30 June

 2022

Year-

on-year

change

As at

31 March

2023

Quarter-on-

quarter

change


(in millions, unless specified)







Combined MAU of Weixin

    and WeChat

1,327

1,299

2 %

1,319

1 %







Mobile device MAU of QQ                                     

571

569

0.4 %

597

-4 %







Fee-based VAS registered

    subscriptions

241

235

3 %

226

7 %

 

Business Review and Outlook

Communications and Social Networks

Weixin user engagement increased healthily, benefitting from user time spent growth across Video Accounts, Mini Programs and Moments. Video Accounts total user time spent almost doubled year-on-year. Mini Programs exceeded 1.1 billion MAU, including a notable contribution from Mini Games, which represent the leading casual games platform in China, and which generate distribution and advertising revenues with high margins and platform economics. 

Digital Content

Tencent Video subscriptions decreased 5% year-on-year but grew 2% quarter-on-quarter to 115 million, benefitting from our original animated series and drama series. Our music subscriptions reached 100 million in June 2023, as TME enriched offerings in terms of membership privileges and content.

Domestic Games

Our mobile and PC games’ MAU and DAU each increased year-on-year, and three of our new game launches from the past two years ranked among the top 10 mobile games by total time spent during the quarter[4]. Our evergreen titles also demonstrated vitality, such as Naruto Mobile and DnF. We have recently launched two big PC games in China, VALORANT and Lost Ark. While our Domestic Games revenue was flat year-on-year in the second quarter due to releasing less highly commercial content, we believe this was a temporary phenomenon, and that our Domestic Games revenue should resume year-on-year growth in the third quarter of 2023.

International Games

During the quarter, we saw ongoing revenue growth from PC games, such as VALORANT; signs that the post-pandemic dip in activity is moving behind us in mobile games, notably PUBG MOBILE; and positive contributions from recently released games, including Goddess of Victory: NIKKE.

Online Advertising

We outpaced the overall industry’s growth rate, which we attribute to enhancements to machine learning systems powering our advertising platform and robust demand for Video Accounts advertisements. Advertising spending on our platforms grew at a double-digit year-on-year rate from every major advertiser category, except transportation.

FinTech Services

Our commercial payment revenue increased as consumption spending grew, and our wealth management business expanded its users and aggregated customer assets. On the regulatory front, we have completed self-inspection and corresponding rectification for Tenpay, and upgraded the operational compliance capability of our payment business. We look forward to progressing our business and providing innovative services under the supportive regulatory framework.

Cloud and Other Business Services

We launched the Tencent Cloud MaaS library of models and solutions, leveraging our proprietary vector database and high-performance computing clusters. Our MaaS solutions enable enterprises in industries such as tourism and public services to develop customised large models at higher efficiency and lower cost.

For other detailed disclosure, please refer to our website https://www.tencent.com/en-us/investors.htmlhttp://www.tencent.com/ir, or follow us via Weixin Official Account (Weixin ID: Tencent_IR).

[3] Including those held via special purpose vehicles, on an attributable basis

[4] Source: by total time spent in 2Q2023, according to QuestMobile

About Tencent

Tencent uses technology to enrich the lives of Internet users.

Our communication and social services, Weixin and QQ, connect users with each other and with digital content and services, both online and offline, making their lives more convenient. Our targeted advertising service helps advertisers reach out to hundreds of millions of consumers in China. Our FinTech and business services support our partners’ business growth and assist their digital upgrade.

Tencent invests heavily in talent and technological innovation, actively promoting the development of the Internet industry. Tencent was founded in Shenzhen, China, in 1998. Shares of Tencent (00700.HK) are listed on the Main Board of the Stock Exchange of Hong Kong. 

Investor contact: IR@tencent.com

Media contact: GC@tencent.com 

Non-IFRS Financial Measures

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

The Company’s management believes that the non-IFRS financial measures provide investors with useful supplementary information to assess the performance of the Group’s core operations by excluding certain non-cash items and certain impact of investment-related transactions. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Group’s major associates based on available published financials of the relevant major associates, or estimates made by the Company’s management based on available information, certain expectations, assumptions and premises.

Forward-Looking Statements

This press release contains forward-looking statements relating to the business outlook, estimates of financial performance, 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 realised in the future. Underlying these forward-looking statements are a lot of risks and uncertainties. In light of the risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as representations by the Board or the Company that the plans and objectives will be achieved, and investors should not place undue reliance on such statements.  

 

CONSOLIDATED INCOME STATEMENT

RMB in millions, unless specified



Unaudited


Unaudited


2Q2023

2Q2022


2Q2023

1Q2023

Revenues

149,208

134,034


149,208

149,986

VAS

74,211

71,683


74,211

79,337

Online Advertising

25,003

18,638


25,003

20,964

FinTech and Business Services

48,635

42,208


48,635

48,701

Others

1,359

1,505


1,359

984

Cost of revenues

(78,368)

(76,167)


(78,368)

(81,804)

Gross profit

70,840

57,867


70,840

68,182

Gross margin

47 %

43 %


47 %

45 %

Interest income

3,419

1,945


3,419

2,963

Other gains/(losses), net

(230)

4,420


(230)

944

Selling and marketing expenses

(8,310)

(7,932)


(8,310)

(7,018)

General and administrative expenses

(25,419)

(26,233)


(25,419)

(24,642)

Operating profit

40,300

30,067


40,300

40,429

Operating margin

27 %

22 %


27 %

27 %

Finance costs, net

(3,291)

(1,809)


(3,291)

(2,650)

Share of profit/(loss) of associates and

  joint ventures, net

1,159

 

(4,460)


1,159

 

80

Profit before income tax

38,168

23,798


38,168

37,859

Income tax expense

(11,145)

(4,568)


(11,145)

(11,465)

Profit for the period

27,023

19,230


27,023

26,394

Net margin

18 %

14 %


18 %

18 %

Attributable to:






    Equity holders of the Company

26,171

18,619


26,171

25,838

    Non-controlling interests

852

611


852

556







Non-IFRS profit attributable to equity

    holders of the Company

37,548

 

28,139


37,548

 

32,538







Earnings per share for profit

    attributable to equity holders of

    the Company

(in RMB per share)






– basic

2.761

1.951


2.761

2.725

– diluted

2.695

1.915


2.695

2.639

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

RMB in millions, unless specified



Unaudited


2Q2023

2Q2022

Profit for the period

27,023

19,230

Other comprehensive income, net of tax:



Items that may be subsequently reclassified to profit or loss



Share of other comprehensive income of associates and joint ventures

424

292

Transfer of share of other comprehensive income to profit or loss upon disposal

    and deemed disposal of associates and joint ventures

(23)

 

(14)

Transfer to profit or loss upon disposal of financial assets at fair value through

    other comprehensive income

(3)

 

2

Net gains/(losses) from changes in fair value of financial assets at fair value

    through other comprehensive income

17

 

(8)

Currency translation differences

17,560

6,989

Other fair value gains, net

31

865

Items that will not be subsequently reclassified to profit or loss



Share of other comprehensive income of associates and joint ventures

(743)

(379)

Net losses from changes in fair value of financial assets at fair value

    through other comprehensive income

(20,673)

(61,581)

Currency translation differences

2,742

2,219


(668)

(51,615)

Total comprehensive income for the period

26,355

(32,385)

Attributable to:



    Equity holders of the Company

24,416

(32,083)

    Non-controlling interests

1,939

(302)

 

OTHER FINANCIAL INFORMATION

RMB in millions, unless specified



Unaudited


2Q2023

1Q2023

2Q2022

EBITDA (a)

51,918

52,656

38,628

Adjusted EBITDA (a)

56,848

57,811

44,668

Adjusted EBITDA margin (b)

38 %

39 %

33 %

Interest and related expenses

3,009

2,800

2,327

Net cash/(debt)/ (c)

17,717

31,508

(20,429)

Capital expenditures (d)

3,953

4,411

3,015

 

Note:

(a)    EBITDA is calculated as operating profit minus interest income and other gains/(losses), net, and adding back depreciation of property, plant and equipment,

investment properties as well as right-of-use assets, and amortisation of intangible assets and land use rights. Adjusted EBITDA is calculated as EBITDA

plus equity-settled share-based compensation expenses.

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

(c)     Net cash/(debt) represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus borrowings and

notes payable.

(d)    Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment

properties, land use rights and intangible assets (excluding video and music content, game licences and other content).

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 


RMB in millions, unless specified



Unaudited

Audited


As at

June 30, 2023

As at

December 31, 2022

ASSETS




Non-current assets




  Property, plant and equipment

48,530


53,978

  Land use rights

17,775


18,046

  Right-of-use assets

20,592


22,524

  Construction in progress

13,260


9,229

  Investment properties

567


559

  Intangible assets

171,952


161,802

  Investments in associates

246,101


246,043

  Investments in joint ventures

8,106


6,672

  Financial assets at fair value through profit or loss

216,603


206,085

  Financial assets at fair value through other

   comprehensive income

213,089


 

185,247

  Prepayments, deposits and other assets

28,351


36,752

  Other financial assets

7,222


6,987

  Deferred income tax assets

29,627


29,882

  Term deposits

25,319


28,336






1,047,094


1,012,142





Current assets




  Inventories

2,155


2,333

  Accounts receivable

46,172


45,467

  Prepayments, deposits and other assets

89,777


76,685

  Other financial assets

1,855


1,278

  Financial assets at fair value through profit or loss

29,798


27,963

  Term deposits

176,427


104,776

  Restricted cash

4,578


2,783

  Cash and cash equivalents

139,647


156,739

  Assets held for distribution


147,965






490,409


565,989





Total assets

1,537,503


1,578,131

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

RMB in millions, unless specified





Unaudited

Audited



As at

June 30, 2023

As at

December 31, 2022

EQUITY





Equity attributable to equity holders of the Company





  Share capital



  Share premium


56,611


62,418

  Treasury shares


(2,224)


(1,868)

  Shares held for share award schemes


(4,497)


(4,226)

  Other reserves


(22,850)


(40,914)

  Retained earnings


751,256


705,981








778,296


721,391






Non-controlling interests


62,520


61,469






Total equity


840,816


782,860






LIABILITIES





Non-current liabilities





  Borrowings


154,079


163,668

  Notes payable


139,840


148,669

  Long-term payables


13,668


9,067

  Other financial liabilities


5,095


5,574

  Deferred income tax liabilities


14,369


12,162

  Lease liabilities


17,452


18,424

  Deferred revenue


3,320


3,503








347,823


361,067






Current liabilities





  Accounts payable


100,103


92,381

  Other payables and accruals


66,382


61,139

  Borrowings


45,754


11,580

  Notes payable


14,442


10,446

  Current income tax liabilities


14,070


13,488

  Other tax liabilities


4,300


4,698

  Other financial liabilities


4,478


3,937

  Lease liabilities


6,010


6,354

  Deferred revenue


93,325


82,216

  Dividends payable for distribution in specie



147,965








348,864


434,204






Total liabilities


696,687


795,271






Total equity and liabilities


1,537,503


1,578,131

 

 

 

RECONCILIATIONS OF IFRS TO NON-IFRS RESULTS


As

reported


Adjustments


Non-IFRS


RMB in millions,

unless specified

Share-based

compensation

(a)

Net (gains)/losses

from investee

companies (b)

Amortisation of

intangible assets

(c)

Impairment

provisions/

(reversals) (d)

SSV &

CPP (e)

Others (f)

Income

tax effects

(g)



Unaudited three months ended June 30, 2023


Operating profit

40,300

5,551

(206)

1,023

82

369

3,003

50,122


Profit for the period

27,023

6,859

(287)

2,372

210

369

3,002

(929)

38,619


Profit attributable to

 equity holders

26,171

6,661

(162)

2,187

193

369

3,002

(873)

37,548


Operating margin

27 %








34 %


Net margin

18 %








26 %



Unaudited three months ended March 31, 2023


Operating profit

40,429

5,844

(658)

998

241

1,526

9

48,389


Profit for the period

26,394

7,313

(5,224)

2,271

1,862

1,526

9

(706)

33,445


Profit attributable to

 equity holders

25,838

7,094

(5,224)

2,098

1,852

1,526

9

(655)

32,538


Operating margin

27 %








32 %


Net margin

18 %








22 %



Unaudited three months ended June 30, 2022


Operating profit

30,067

6,507

(5,539)

1,255

2,831

1,370

176

36,667


Profit for the period

19,230

8,439

(6,085)

2,989

3,189

1,370

176

(321)

28,987


Profit attributable to

 equity holders

 

18,619

 

8,257

 

(5,968)

 

2,767

 

3,189

 

1,370

 

176

 

(271)

 

28,139


Operating margin

22 %








27 %


Net margin

14 %








22 %














 

Note:

(a)   Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies’ share-based incentive plans which can be acquired by the Group, and other incentives

(b)   Including net (gains)/losses on deemed disposals/disposals of investee companies, fair value changes arising from investee companies, and other expenses in relation to equity transactions of investee companies

(c)   Amortisation of intangible assets resulting from acquisitions

(d)   Mainly including impairment provisions/(reversals) for associates, joint ventures, goodwill and other intangible assets arising from acquisitions

(e)   Mainly including donations and expenses incurred for the Group’s Sustainable Social Value and Common Prosperity Programme (“SSV & CPP”) initiatives

(f)    Primarily non-recurring compliance-related costs (including the fine imposed by the PBOC on Tenpay which was disclosed in our announcement dated 7 July 2023) and expenses incurred for certain litigation settlements of the Group

(g)   Income tax effects of non-IFRS adjustments

 

 

 

 

 

Cision View original content:https://www.prnewswire.com/apac/news-releases/tencent-announces-2023-second-quarter-and-interim-results-301902356.html

SOURCE Tencent

Leave a Comment