Tencent’s Non-IFRS Profit Drops 25% YoY in Q4
Chinese tech giant Tencent announced on Wednesday the company’s unaudited consolidated results for the fourth quarter of 2021 and the audited consolidated results for the year ended December 31, 2021.
As of the end of the fourth last year, Tencent’s total revenues were 144.19 billion yuan ($22.62 billion), an increase of 8% over the fourth quarter of 2020. On a non-IFRS basis, Tencent’s profit in the fourth quarter of last year was 25.76 billion yuan, a decrease of 25% YoY. Profit attributable to equity holders of the company for the quarter was 24.88 billion, a decrease of 25% YoY.
In 2021, Tencent’s total revenues were 560.12 billion yuan, an increase of 16% over 2020. On a non-IFRS basis, its profit for the year was 127.92 billion yuan, an increase of 1% YoY. Profit attributable to equity holders of the company for the year was 123.79 billion yuan, an increase of 1% YoY.
Pony Ma, Chairman and CEO of Tencent, said, “2021 was a challenging year, in which we embraced changes and implemented certain measures that reinforced the company’s long-term sustainability, but also had the effect of slowing our revenue growth. Despite financial headwinds, we continued to make strategic headway, including driving the widespread adoption of our enterprise software and productivity tools, increasing the content creation and consumption in our Video Accounts, while also expanding our international games business.”
Tencent‘s domestic Games revenues grew by 1% to 29.6 billion yuan, driven by games including Honour of Kings, as well as recently launched titles such as Fight of The Golden Spatula and League of Legends: Wild Rift. These gains were partly offset by the decrease in revenues from the Moonlight Blade Mobile and Peacekeeper Elite titles.
International Games revenues grew by 34% to 13.2 billion yuan, reflecting both new content including Valorant and Clash Royale, and an upwards adjustment to the revenue of the company’s Supercell title after a review of the company’s revenue deferral periods. Revenues were further bufferred by the consolidation of Digital Extremes.
In addition to increased revenues, Tencent ks exploring the development of several animated series in addition to continuing development of new titles and a movie based on the Honour of Kings’ characters. In the fourth quarter of 2021, total time spent by minors was reduced by 88% year-on-year, and contributed only 0.9% of the total time spent on its domestic games. Total grossing receipts from minors was reduced by 73% year-on-year while contributing 1.5% of the total grossing receipts of its domestic games.
Looking ahead, Tencent expects to fully absorb the impact of measures put in place to protect minors by the second half of 2022.
Value Added Services
Revenues from value added services (VAS) increased by 7% to 71.9 billion yuan for the fourth quarter of 2021 on a year-on-year basis. Social Networks revenues grew by 4% to 29.1 billion yuan in Q4, driven by the Video Accounts live streaming service, video and music subscription services.
Tencent’s fee-based VAS subscriptions grew 8% year-on-year to 236 million. Meanwhile, Tencent Video increased its subscription counts by 1% year-on-year to 124 million. In view of the latest market conditions, the company is implementing a cost optimisation process to reduce financial losses in their video division. For music, subscription counts grew 36% year-on-year to 76 million, benefiting from expanded sales channels and high-quality content and services.
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Revenues from online advertising decreased by 13% to 21.5 billion yuan for the fourth quarter of 2021 on a year-on-year basis. The decline reflects weakness in advertiser categories including education, games and Internet services, but was partly offset by the consolidation of Sogou’s advertising revenue.
For the fourth quarter of 2021, daily active advertisers on the company’s flagship Weixin communications APP expanded by over 30% year-on-year. Over one-third of Moments’ advertising revenue was generated from advertisements using Mini Programs as landing pages and advertisements connecting users to customer service representatives via WeCom. Tencent expects its advertising business to resume growth in late 2022.
FinTech and Business Services
Revenues from fintech and business services increased by 25% to 48.0 billion yuan in Q4 on a year-on-year basis.
Tencent was able to strengthen its payment ecosystem by enhancing user security, upgrading transaction and customer management functions for SMEs, as well as reducing merchants’ transaction friction via tools such as Weixin Pay Score. The company now also supports the digital yuan as an additional funding option within Weixin Pay, as part of the PBOC’s digital yuan pilot phase.