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Tencent Announces 2012 Second Quarter and Interim Results

August 15, 2012

HONG KONG, Aug. 15, 2012 /PRNewswire-Asia/ — 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 second quarter and the first half year of 2012 ended June 30, 2012.

Highlights of the First Half of 2012:

  • Total revenues were RMB20,175.1 million (USD3,189.8 million(1)), an increase of 54.3% over the first half of year ended June 30, 2011 (“YoY”).
  • Revenues from Internet value-added services (“IVAS”) were RMB15,168.2 million (USD2,398.2 million), an increase of 42.6% YoY.
  • Revenues from mobile & telecommunications value-added services (“MVAS”) were RMB1,842.8 million (USD291.4 million), an increase of 17.3% YoY.
  • Revenues from online advertising were RMB1,419.8 million (USD224.5 million), an increase of 79.0% YoY.
  • Revenues from e-Commerce transactions were RMB1,610.3 million (USD254.6 million).
  • Gross profit was RMB12,027.4 million (USD1,901.6 million), an increase of 40.6% YoY. Gross margin decreased to 59.6% from 65.4% for the first half of 2011.
  • Operating profit was RMB7,629.0 million (USD1,206.2 million), an increase of 23.6% YoY. Operating margin decreased to 37.8% from 47.2% for the first half of 2011.
  • Non-GAAP operating profit(2) was RMB8,289.8 million (USD1,310.7 million), an increase of 31.2% YoY. Non-GAAP operating margin decreased to 41.1% from 48.3% for the first half of 2011.
  • Profit for the period was RMB6,072.9 million (USD960.2 million), an increase of 16.2% YoY. Net margin decreased to 30.1% from 40.0% for the first half of 2011.
  • Non-GAAP profit for the period(2) was RMB6,720.9 million (USD1,062.6 million), an increase of 26.9% YoY. Non-GAAP net margin decreased to 33.3% from 40.5% for the first half of 2011.
  • Profit attributable to equity holders of the Company for the period was RMB6,049.6 million (USD956.5 million), an increase of 15.9% YoY.
  • Non-GAAP profit attributable to equity holders of the Company(2) for the period was RMB6,667.3 million (USD1,054.1 million), an increase of 26.5% YoY.
  • Basic earnings per share were RMB3.316. Diluted earnings per share were RMB3.252.

Highlights of the Second Quarter of 2012:

  • Total revenues were RMB10,527.2 million (USD1,664.4 million), an increase of 9.1% over the first quarter of 2012 (“QoQ”) or an increase of 56.2% over the second quarter of 2011 (“YoY”).
  • Revenues from IVAS were RMB7,786.6 million (USD1,231.1 million), an increase of 5.5% QoQ or an increase of 44.6% YoY.
  • Revenues from MVAS were RMB929.0 million (USD146.9 million), an increase of 1.7% QoQ or an increase of 17.0% YoY.
  • Revenues from online advertising were RMB879.7 million (USD139.1 million), an increase of 62.9% QoQ or an increase of 71.7% YoY.
  • Revenues from e-Commerce transactions were RMB857.5 million (USD135.6 million), an increase of 13.9% QoQ.
  • Gross profit was RMB6,215.9 million (USD982.8 million), an increase of 7.0% QoQ or an increase of 41.0% YoY. Gross margin decreased to 59.0% from 60.2% last quarter.
  • Operating profit was RMB3,937.6 million (USD622.6 million), an increase of 6.7% QoQ or an increase of 41.4% YoY. Operating margin decreased to 37.4% from 38.3% last quarter.
  • Non-GAAP operating profit(3) was RMB4,221.5 million (USD667.4 million), an increase of 3.8% QoQ or an increase of 32.0% YoY. Non-GAAP operating margin decreased to 40.1% from 42.2% last quarter.
  • Profit for the quarter was RMB3,110.6 million (USD491.8 million), an increase of 5.0% QoQ or an increase of 32.7% YoY. Net margin decreased to 29.5% from 30.7% last quarter.
  • Non-GAAP profit for the quarter(3) was RMB3,410.4 million (USD539.2 million), an increase of 3.0% QoQ or an increase of 26.6% YoY. Non-GAAP net margin decreased to 32.4% from 34.3% last quarter.
  • Profit attributable to equity holders of the Company for the quarter was RMB3,100.1 million (USD490.1 million), an increase of 5.1% QoQ or an increase of 32.0% YoY.
  • Non-GAAP profit attributable to equity holders of the Company for the quarter(3) was RMB3,386.3 million (USD535.4 million), an increase of 3.2% QoQ or an increase of 26.0% YoY.
  • Basic earnings per share were RMB1.698. Diluted earnings per share were RMB1.665.
  • Key platform statistics:
    • Monthly active Instant Messaging (“IM”) user accounts were 783.6 million, an increase of 4.2% QoQ or an increase of 11.6% YoY.
    • Peak simultaneous online IM user accounts were 166.6 million, a decrease of 0.5% QoQ or an increase of 21.9% YoY.
    • Monthly active Qzone user accounts were 597.6 million, an increase of 3.6% QoQ or an increase of 11.5% YoY; monthly active Pengyou user accounts were 247.7 million, an increase of 15.5% QoQ or an increase of 30.6% YoY.
    • Peak simultaneous online QQ Game Platform user accounts were 8.8 million, flat QoQ or an increase of 17.3% YoY.
    • Fee-based IVAS registered subscriptions were 74.7 million, a decrease of 8.7% QoQ or a decrease of 2.4% YoY.
    • Fee-based MVAS registered subscriptions were 34.6 million, an increase of 0.3% QoQ or an increase of 16.1% YoY.
    (1) Figures stated in USD are
     based on USD1 to RMB6.3249
    (2) See "Non-GAAP Financial
     Measures" section for more
     details on the reasons for
     presenting these measures
    (3) 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, “We delivered another solid set of revenue and earnings results during the second quarter of 2012 despite a more challenging macro environment. Leveraging our leading social platforms across both PCs and mobile phones, we continued to build stronger user engagement. We also made progress in our open platform initiatives, bringing benefits to our users and our partners. The growth in our new advertising solutions drove rapid growth in our advertising revenue. To embrace the advent of mobile Internet and the challenges of the evolving Internet industry, we will continue to invest in innovations and technologies so as to provide our users with even better user experience.”

Financial Review for the Second Quarter of 2012

IVAS revenues increased 5.5% QoQ to RMB7,786.6 million and represented 74.0% of our total revenues for the second quarter of 2012. Online game revenues increased 4.6% QoQ to RMB5,564.7 million. Game revenues from China registered modest growth during the quarter with weaker seasonality due to school examinations, while contributions from international markets, whose seasonality may differ from that of China, continued to climb. For our community and open platforms, revenues increased 7.8% QoQ to RMB2,221.9 million, riding on growth in item-based sales within applications, including those on our SNS platforms. QQ Membership subscriptions revenue also contributed to the increase.

MVAS revenues increased 1.7% QoQ to RMB929.0 million and represented 8.8% of our total revenues. This was mainly attributable to growth in our bundled SMS packages and mobile games.

Online advertising revenues increased 62.9% QoQ to RMB879.7 million and represented 8.4% of our total revenues. In addition to more favourable seasonality in the second quarter, our online advertising business benefited from the rapid revenue growth of performance advertising on our social networks, and brand display advertising on our video platform.

e-Commerce transactions revenues increased 13.9% QoQ to RMB857.5 million and represented 8.1% of our total revenues. This primarily reflected growth in GMV of principal e-Commerce transactions. Commission fees generated from transactions on our marketplace also contributed to the growth of our e-Commerce transactions business.

Other Key Financial Information for the Second Quarter of 2012

Share-based compensation was RMB255.7 million for the second quarter of 2012 as compared with RMB236.6 million for the previous quarter.

Capital expenditure was RMB915.2 million for the second quarter of 2012 as compared with RMB662.1 million for the previous quarter.

The Company repurchased 26,000 shares on the Stock Exchange for an aggregate consideration of approximately RMB4.3 million as compared with 128,400 shares repurchased for an aggregate consideration of approximately RMB15.9 million in the previous quarter.

As at June 30, 2012, net cash position totaled RMB19,631.6 million which excluded unsecured short-term borrowings of RMB3,288.9 million, secured short-term borrowings of RMB320.4 million, long-term borrowings of RMB948.7 million and long-term notes payable of RMB3,751.8 million.

As at June 30, 2012, the total number of shares of the Company in issue was 1.844 billion.

Business Review and Outlook

Overall Financial Performance

Despite maturing Internet user growth and decelerating economic growth, we sustained healthy year-on-year improvements in our revenues, earnings, and cash flow during the second quarter of 2012. Our IVAS business continued to expand year-on-year as our existing and new games added users, and as we generated more revenue from applications on our open platforms. Our MVAS business experienced modest growth during the quarter, thanks primarily to our bundled SMS packages and mobile games. Our online advertising business achieved a significant year-on-year growth rate, due to new platform contributions and market share gains in key advertiser categories. Revenue of our e-Commerce transactions business increased sequentially, benefiting from growth in GMV of principal transactions and commission fees derived from transactions on our marketplace.

Strategic Highlights

In May 2012, we announced a reorganisation of our business units into six new business groups. In addition, a wholly-owned subsidiary has been formed for managing our e-Commerce transactions business. This reorganisation is intended to help us capture new opportunities in the evolving Internet industry, by better allocating our resources toward the core technologies and platforms that may support our future business growth.

We believe establishment of the new business groups will reinforce our entrepreneurial spirit, execution and innovation, and will sharpen each group’s focus on addressing its target users’ needs. Simultaneously, under the principle of “One Tencent”, the business groups will continue to enjoy company-wide synergies by sharing technical infrastructure and by integrating certain services, where we believe such integration brings value to users.

Divisional and Product Highlights

IM Platform

Monthly active user accounts (“MAUs”) of QQ IM increased by 12% on a year-on-year basis to 784 million at the end of the second quarter of 2012. Such growth rate was broadly in line with the user growth of the overall Internet market in China. PCU for the quarter was 167 million, representing 22% growth as compared to the same period last year. Per user engagement continued to improve, as evidenced by the year-on-year growth rates of PCU and daily user hours exceeding that of MAUs. We believe QQ IM’s PCU growth rate may slow in future as increased mobile usage creates more dispersion of time spent on QQ IM through different day parts.

Media Platforms

We believe we are uniquely positioned in the China Internet market because of our leadership across multiple media platforms, and our ability to provide cross-platform integration and user benefits. During the second quarter of 2012, we expanded our platforms and deepened our media influence. QQ.com continued to lead amongst Internet portals in China in terms of traffic and unique visitors. Recently, we have revamped QQ.com’s front page and certain major channels to help users find and share news, video, and microblog content more easily. Tencent Microblog further expanded its user base, with 469 million registered user accounts and 82 million daily active user accounts at the end of the second quarter of 2012. Tencent Video achieved solid user growth as we continued to enrich our content and improve our user experience.

IVAS

In the second quarter of 2012, our online communities registered continued growth in user base. Qzone maintained its position as the leading social network in China, with MAUs increasing by 12% on a year-on-year basis to 598 million at the end of the second quarter of 2012. MAUs of Pengyou reached 248 million at the end of the quarter, representing year-on-year growth of 31%. For our IVAS subscription services, we introduced more stringent measures during the quarter to clean up free-riders who subscribed through telecommunications operators, in order to enhance the quality of our subscriber base. As a result of these measures, our IVAS registered subscriptions declined and our overall collection rates improved. Given these measures mostly affected non-paying users, they had limited impact on our revenues. As for our open platforms, we continued to introduce more third-party and first-party applications to users during the second quarter. Consequently, item-based sales within applications grew strongly. Recently, we have introduced a streamlined process for third-party developers to launch their applications across our range of services more efficiently.

Our online game business continued to grow in terms of users and revenues. Contributions from international markets, whose seasonality may differ from that of China, continued to climb as we broadened our user base in different regions. Our QQ Game Platform enjoyed a healthy growth rate, with its PCU increasing by 17% on a year-on-year basis to 8.8 million for the second quarter of 2012.

We continued to develop our game pipeline, putting new titles such as Legend of Yulong and NBA2K Online into closed beta testing during the second quarter. In July, we announced an exclusive strategic partnership with Activison Blizzard to bring its Call of Duty Online title to China. We believe that our game platform and operational expertise will support the delivery of what we expect to be an immersive and highly interactive game experience.

MVAS

In the second quarter of 2012, our MVAS business registered stable year-on-year revenue growth and modest sequential revenue growth, primarily from our bundled SMS packages and mobile games. We continued to market our smartphone applications, such as mobile security and mobile browser, to further expand our user base on the mobile Internet. The regulatory environment for MVAS remains uncertain, and we will continue to position for the mobile Internet future.

Online Advertising

Driven by new platform contributions and market share gains in key advertiser categories, we achieved a robust year-on-year revenue growth rate in the second quarter of 2012. Our sequential revenue growth was mainly driven by positive seasonality and improved monetisation on our new platforms. Within brand display advertising, our strong traffic and high ROI enabled us to sustain growth despite a more challenging macro environment, and revenues from our online video platform more than doubled sequentially. Within performance display advertising, we achieved strong revenue growth on our social networks during the quarter, reflecting more inventory and thus impressions made available to advertisers, as well as improved click-through rates on the back of enhancements to our targeted advertising system. Within search advertising, we grew revenues from desktop search, mobile search, and e-Commerce search, while continuing to improve our search results quality, mobile search experience, and search integration with upstream properties, such as our portal and mobile browser.

e-Commerce Transactions

Despite an intensively competitive market environment, GMV of our principal transactions increased sequentially during the second quarter of 2012. Commission fees derived from transactions on our marketplace also increased, albeit from a low base. We will continue our efforts to leverage our significant user base to build an e-Commerce open platform and a healthy industry value chain.

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                                              Unaudited
                                            ---------                                              ---------
                                             2Q2012                           1Q2012                         2Q2012             2Q2011
                                             ------                           ------                         ------             ------
    Revenues                                          10,527,244                        9,647,858                   10,527,244          6,739,044
            Internet VAS                               7,786,625                        7,381,621                    7,786,625          5,386,578
            Mobile & Telecom VAS                         929,007                          913,842                      929,007            793,839
    Online advertising                                   879,691                          540,113                      879,691            512,312
             e-Commerce transactions                     857,526                          752,817                      857,526                  -
                                                         -------                          -------                      -------                ---
             Others                                       74,395                           59,465                       74,395             46,315
                                                          ------                           ------                       ------             ------
    Cost of revenues                                  (4,311,379)                      (3,836,317)                  (4,311,379)        (2,331,637)
                                                      ----------                       ----------                   ----------         ----------
    Gross profit                                       6,215,865                        5,811,541                    6,215,865          4,407,407
                                                       ---------                        ---------                    ---------          ---------
                               Gross margin                 59.0%                            60.2%                        59.0%              65.4%
    Interest income                                      196,806                          166,733                      196,806            106,546
    Other (losses)/gains,
     net                                                  (3,219)                         (63,642)                      (3,219)             2,809
    S&M expenses                                        (609,672)                        (469,200)                    (609,672)          (369,491)
    G&A expenses                                      (1,862,165)                      (1,754,074)                  (1,862,165)        (1,363,372)
    Operating profit                                   3,937,615                        3,691,358                    3,937,615          2,783,899
                           Operating margin                 37.4%                            38.3%                        37.4%              41.3%
                                                            ----                             ----                         ----               ----
    Finance (costs)/income,
     net                                                (115,256)                         (69,982)                    (115,256)             1,771
    Share of profit/
     (losses) of associates                                5,411                           (9,753)                       5,411             23,454
    Share of (losses)/profit
     of jointly controlled
     entities                                             (9,375)                           1,380                       (9,375)           (60,689)
    Profit before income tax                           3,818,395                        3,613,003                    3,818,395          2,748,435
    Income tax expense                                  (707,824)                        (650,673)                    (707,824)          (405,163)
                                                        --------                         --------                     --------           --------
    Profit for the period                              3,110,571                        2,962,330                    3,110,571          2,343,272
                                                       ---------                        ---------                    ---------          ---------
                                 Net margin                 29.5%                            30.7%                        29.5%              34.8%
                                                            ----                             ----                         ----               ----
    Attributable to:
            Equity holders of the
             Company                                   3,100,075                        2,949,510                    3,100,075          2,349,246
            Non-controlling
             interests                                    10,496                           12,820                       10,496             (5,974)
                                                          ------                           ------                       ------             ------

    Non-GAAP profit
     attributable to equity
     holders of the Company                            3,386,266                        3,281,064                    3,386,266          2,686,757
                                                       ---------                        ---------                    ---------          ---------

    Earnings per share
     (GAAP)
    - basic (RMB)                                          1.698                            1.618                        1.698              1.289
    - diluted (RMB)                                        1.665                            1.587                        1.665              1.260
                                                           -----                            -----                        -----              -----

                                           CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                               In RMB '000 (unless otherwise stated)

                                  Unaudited                                        Unaudited
                                  ---------                                        ---------
                                    2Q2012                       1Q2012                      2Q2012            2Q2011
                                    ------                       ------                      ------            ------
    Profit for the period                  3,110,571                    2,962,330                   3,110,571         2,343,272
                                           ---------                    ---------                   ---------         ---------
    Other comprehensive income;
     net of tax:
    Net (losses)/gains from
     changes in fair value of
     available-for-sale
     financial assets                       (530,203)                   1,288,914                    (530,203)          264,280
    Currency translation
     differences                               7,743                        6,076                       7,743               (74)
                                               -----                        -----                       -----               ---
    Total comprehensive income
     for the period                        2,588,111                    4,257,320                   2,588,111         2,607,478
                                           ---------                    ---------                   ---------         ---------
    Attributable to:
        Equity holders of the
         Company                           2,576,886                    4,244,489                   2,576,886         2,613,452
        Non-controlling interests             11,225                       12,831                      11,225            (5,974)
                                              ------                       ------                      ------            ------

                                                                                          OTHER FINANCIAL INFORMATION
                                                                                     In RMB '000 (unless otherwise stated)

                                                                                                                 Unaudited
                                                                                                                 ---------
                                                                                                                  2Q2012                            1Q2012                            2Q2011
                                                                                                                  ------                            ------                            ------
    EBITDA (a)                                                                                                              4,331,322                         4,254,547                       3,171,308
    Adjusted EBITDA (a)                                                                                                     4,558,963                         4,461,209                       3,361,637
                                                                                                                            ---------                         ---------                       ---------
    Adjusted EBITDA margin (b)                                                                                                   43.3%                             46.2%                           49.9%
                                                                                                                                 ----                              ----                            ----
    Interest expense                                                                                                           69,344                            67,578                          13,132
                                                                                                                               ------                            ------                          ------
    Net cash (c)                                                                                                           19,631,631                        20,818,507                      15,749,917
                                                                                                                           ----------                        ----------                      ----------
    Capital expenditures (d)                                                                                                  915,156                           662,130                         943,047
                                                                                                                              -------                           -------                         -------

    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 the revenues.
    c) Net cash is calculated as cash and cash equivalents, term deposits with initial term of over three months, and restricted cash pledged for secured bank borrowings, minus total
     borrowings and long-term notes payable.
    d) Capital expenditures consist of additions (excluding business combination) 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)                                     Unaudited      Unaudited
                                                   ---------    ---------
                                                    30 June       31 March
                                                          2012                    2012
                                                          ----                    ----
    ASSETS
    Non-current assets
    Fixed assets                                     6,201,179               5,847,891
    Construction in
     progress                                          323,786                 314,638
    Investment
     properties                                         21,643                  21,757
    Land use rights                                    348,509                 281,882
    Intangible
     assets                                          4,194,417               4,119,882
    Investment in
     associates                                      5,292,559               4,590,785
    Investment in
     jointly
     controlled
     entities                                           53,908                  63,283
    Deferred income
     tax assets                                        184,608                 204,520
    Available-for-
     sale financial
     assets                                          5,320,869               5,838,319
    Prepayments,
     deposits and
     other assets                                    3,877,451               1,263,010
                                                     ---------               ---------
                                                    25,818,929              22,545,967
                                                    ----------              ----------
    Current assets

    Inventories                                        202,106                 191,949
    Accounts
     receivable                                      2,500,207               2,344,835
    Prepayments,
     deposits and
     other assets                                    3,275,968               2,493,145
    Term deposits
     with initial
     term of over
     three months                                   17,014,730              15,909,027
    Restricted cash                                  2,317,431               2,859,053
    Cash and cash
     equivalents                                    10,602,451              13,348,679
                                                    ----------              ----------
                                                    35,912,893              37,146,688
                                                    ----------              ----------
    Total assets                                    61,731,822              59,692,655
                                                    ==========              ==========

    EQUITY
    Equity attributable to the Company's equity
     holders
    Share capital                                          198                     198
    Share premium                                    2,488,779               2,293,660
    Shares held for
     share award
     scheme                                           (609,657)               (606,140)

    Other reserves                                     532,264                 990,850
    Retained
     earnings                                       31,652,090              29,659,904
                                                    ----------              ----------
                                                    34,063,674              32,338,472
    Non-
     controlling
     interests                                         650,698                 618,676
                                                       -------                 -------
    Total equity                                    34,714,372              32,957,148
                                                    ----------              ----------

    LIABILITIES
    Non-current liabilities

    Borrowings                                         948,735                       -
    Long-term
     notes payable                                   3,751,839               3,731,549
    Deferred income
     tax
     liabilities                                       893,822                 987,585
    Long-term
     payables                                        1,441,920               1,285,096
                                                     ---------               ---------
                                                     7,036,316               6,004,230
                                                     ---------               ---------
    Current liabilities
    Accounts
     payable                                         3,368,438               2,935,710
    Other payables
     and accruals                                    4,872,613               4,273,372
    Derivative
     financial
     instruments                                        14,680                  40,853
    Borrowings                                       3,609,323               5,676,325
    Current income
     tax
     liabilities                                       998,523                 992,151
    Other tax
     liabilities                                       256,781                 228,051
    Deferred
     revenue                                         6,860,776               6,584,815
                                                     ---------               ---------
                                                    19,981,134              20,731,277
                                                    ----------              ----------
    Total
     liabilities                                    27,017,450              26,735,507
                                                    ----------              ----------
    Total equity
     and
     liabilities                                    61,731,822              59,692,655
                                                    ==========              ==========

                                                                          RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS

                                                                                        As                                          Adjustments                              Non-GAAP
                                                                                     reported
                                                                                     --------
    In RMB '000 except percentages                                                Equity-settled                  Cash-settled                    Gain on                   Amortisation
                                                                             share-based compensation     share-based compensation (a)             deemed             of intangible assets (c)
                                                                                                                                                disposal (b)
    ---                                                                                                                ---                                                                 ---
                                                                            Unaudited six months ended 30 June 2012
                                                                            ---------------------------------------
    Operating profit                                                        7,628,973          434,303                        57,975                               -                 168,511   8,289,762
                                                         Operating margin        37.8%                                                                                                              41.1%
    Profit for the period                                                   6,072,901          434,303                        57,975                               -                 155,752   6,720,931
                                                               Net margin        30.1%                                                                                                              33.3%
    Profit attributable to equity holders of the Company                    6,049,585          425,609                        51,130                               -                 141,006   6,667,330
    ----------------------------------------------------                    ---------          -------                        ------                             ---                 -------   ---------
                                                                            Unaudited six months ended 30 June 2011
                                                                            ---------------------------------------
    Operating profit                                                        6,170,402          334,452                        33,537                        (459,037)                238,445   6,317,799
                                                         Operating margin        47.2%                                                                                                              48.3%
    Profit for the period                                                   5,227,480          334,452                        33,537                        (459,037)                159,669   5,296,101
                                                               Net margin        40.0%                                                                                                              40.5%
    Profit attributable to equity holders of the Company                    5,219,620          330,373                        31,053                        (459,037)                149,468   5,271,477
    ----------------------------------------------------                    ---------          -------                        ------                        --------                 -------   ---------
                                                                   RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS

                                                                                          As                                              Adjustments                                Non-GAAP
                                                                                       reported
                                                                                       --------
    In RMB '000 except percentages                                                  Equity-settled                   Cash-settled                  Gain on            Amortisation
                                                                               share-based compensation     share-based compensation (a)            deemed            of intangible
                                                                                                                                                                      assets (c)
                                                                                                                                                 disposal (b)
    ---                                                                                                                              ---                                        ---
                                                                                       Unaudited three months ended 30 June 2012
                                                                                       -----------------------------------------
    Operating profit                                                          3,937,615          227,641                        28,081                          -          28,137    4,221,474
                                                          Operating margin         37.4%                                                                                                  40.1%
    Profit for the period                                                     3,110,571          227,641                        28,081                          -          44,060    3,410,353
                                                                Net margin         29.5%                                                                                                  32.4%
    Profit attributable to equity holders of the Company                      3,100,075          221,817                        24,643                          -          39,731    3,386,266
    ----------------------------------------------------                      ---------          -------                        ------                        ---          ------    ---------
                                                                   Unaudited three months ended 31 March 2012
                                                                   ------------------------------------------
    Operating profit                                                          3,691,358          206,662                        29,894                          -         140,374    4,068,288
                                                          Operating margin         38.3%                                                                                                  42.2%
    Profit for the period                                                     2,962,330          206,662                        29,894                          -         111,692    3,310,578
                                                                Net margin         30.7%                                                                                                  34.3%
    Profit attributable to equity holders of the Company                      2,949,510          203,792                        26,487                          -         101,275    3,281,064
    ----------------------------------------------------                      ---------          -------                        ------                        ---         -------    ---------
                                                                    Unaudited three months ended 30 June 2011
                                                                    -----------------------------------------
    Operating profit                                                          2,783,899          190,329                        24,446                          -         199,215    3,197,889
                                                          Operating margin         41.3%                                                                                                  47.5%
    Profit for the period                                                     2,343,272          190,329                        24,446                          -         136,440    2,694,487
                                                                Net margin         34.8%                                                                                                  40.0%
    Profit attributable to equity holders of the Company                      2,349,246          187,252                        22,618                          -         127,641    2,686,757
    ----------------------------------------------------                      ---------          -------                        ------                        ---         -------    ---------

    (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 Company, and other incentives
    (b)   Gain on deemed disposal of previously held interest in associates
    (c)    Amortisation of intangible assets resulting from acquisitions, net of related deferred tax

SOURCE Tencent Holdings Limited


Source: PR Newswire