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Rakuten Reports Consolidated Financial Results (IFRS) for the Fiscal Year Ended December 31, 2015
[February 12, 2016]

Rakuten Reports Consolidated Financial Results (IFRS) for the Fiscal Year Ended December 31, 2015


Rakuten, Inc. (TOKYO:4755) today announced the consolidated financial reports (IFRS) for the Fiscal Year ended December 31, 2015. The Rakuten Group achieved revenue of ¥713,555 million for the fiscal year ended December 31, 2015, up 19.2% year-on-year, and Non-GAAP operating income of ¥152,153 million, up 28.8% year-on-year.

Qualitative Information, Financial Statements, etc.

1. Qualitative Information Concerning Consolidated Business Results

(1) Business Results for the Fiscal Year Ending December 31, 2015

The world economy during the fiscal year ended December 31, 2015 continued to stay on a gradual recovery track, although attention must be paid to factors including normalization of U.S. monetary policy, uncertainty over the future outlook of the Chinese economy, and the impact of the falling crude oil prices. The Japanese economy continued its gradual recovery with the effects of various policies amid continuous improvement in the wage and employment condition.

Under such an environment, the Rakuten Group has further promoted its growth strategy. In domestic e-commerce services, the mainstay of Internet Services, the Group maintained stable results through various measures to improve customer satisfaction, strategies to open up the Rakuten ecosystem and enhanced services for smart devices (smartphones and tablet devices). For contents services, the Group decided to acquire OverDrive (News - Alert) Holdings, Inc. (U.S.), (hereinafter "OverDrive Holdings") a full-service digital distributor of eBooks, audio books and other content to libraries and educational institutions, and made it a wholly owned subsidiary in April 2015. The Group also addressed strict cost controls while continuing strategic investments for future profit growth, which put the results on track for improvement. The Rakuten Group is also investing in businesses with new technologies and innovative business models, and records unrealized gains on stocks for such investments. In FinTech (Note 1), the further expansion of the membership base for Rakuten Card brought in more commission income, and the smoothly growing services of Rakuten Securities and Rakuten Bank contributed to an increase in profit as well.

(Note 1) From the third quarter ended September 30, 2015, the Rakuten Group changed the segment name "Internet Finance" to "FinTech." This is to reflect the global spread of the term FinTech, a fusion of finance and (Internet) technology, which the Group has been working on since 2003.

(2) Segment Information

Business results for each segment are as follows:

Internet Services

In the Internet Services segment for the fiscal year ended December 31, 2015, the Rakuten Group actively worked on strategies to open up the Rakuten ecosystem, enhanced services for smart devices, promoting marketing which utilizes big data, implementing measures to improve user satisfaction, and enhancing services for overseas consumers among other initiatives in its core domestic e-commerce services. As a result of these initiatives, domestic e-commerce services revenue was robust with 7.8% year-on-year increase. In travel reservation services, strong demand was seen in domestic travels, car rental, and inbound services (services for reservations directed from foreign language websites). In overseas e-commerce services, Ebates Inc. ("Ebates"), which became a subsidiary in October 2014, contributed significantly to the growth of performance. For contents services, strict cost controls and contribution by OverDrive Holdings in addition to continued strategic investments for future profit growth led to improvement in performance. The Rakuten Group is investing in businesses with new technologies and innovative business models, and records unrealized gains on stocks for such investments.

As a result, revenue for the segment rose to ¥440,744 million, a 21.5% year-on-year increase. While upfront investments are continued to be made in future growth fields, profit from existing businesses have grown steadily, resulting in segment profit of ¥99,508 million, a 45.4% year-on-year increase.





(Millions of yen)

    Fiscal year ended

December 31, 2014

  Fiscal year ended

December 31, 2015

  Amount Change

YoY

  % Change

YoY

Segment Revenue 362,751 440,744 77,993 21.5%
Segment Profit   68,437   99,508   31,071   45.4%
 

FinTech

In the FinTech segment for the fiscal year ended December 31, 2015, shopping transaction value grew by 20.2% year-on-year in credit card related services due to a growth in Rakuten Card membership. Moreover, solid growth in revolving balances resulted in a rise in income including commission income. A significant profit increase was achieved as a result of the application of IFRS 15 in addition to steady revenue growth. In banking services, profits continued to grow due to an increase in interest income from loans with expanding loan balances and the effect of improvement in cost efficiency. In securities services, despite the impact of changing market conditions, domestic stock trading value was solid, and profits continued to grow steadily with an increase in foreign exchange margin transaction volume resulting from volatile foreign exchange market.

As a result of the above, the FinTech segment recorded ¥275,136 million in revenue, a 16.3% year-on-year increase, while segment profit was ¥63,899 million, a 29.1% year-on-year increase.

(Millions of yen)

    Fiscal year ended

December 31, 2014

  Fiscal year ended

December 31, 2015

  Amount Change

YoY

  % Change

YoY

Segment Revenue 236,520 275,136 38,616 16.3%
Segment Profit   49,496   63,899   14,403   29.1%
 

Others

In the Others segment for the fiscal year ended December 31, 2015, the Group conducted aggressive sales activities such as TV advertising and sales campaigns at the storefront with the aim of increasing the number of new subscribers of the MVNO (Mobile Virtual Network Operator) services, Rakuten Mobile. The success of these measures contributed to a significant increase in revenue. In VIBER MEDIA LTD. ("Viber"), a messaging and VoIP services provider which became a consolidated subsidiary in March 2014, strategic investments were continued for its future growth and a consistent growth was seen in the number of user IDs. In professional sports division, profits from the transfer associated with the transfer of a key player in the previous fiscal year was absent.

As a result, revenue for the segment was ¥52,092 million, a 22.7% year-on-year increase, while segment loss was ¥8,599 million (compared with segment profit of ¥191 million for the same period of the previous fiscal year).

(Millions of yen)

    Fiscal year ended

December 31, 2014

  Fiscal year ended

December 31, 2015

  Amount Change

YoY

  % Change

YoY

Segment Revenue 42,445 52,092 9,647 22.7%
Segment Profit   191   (8,599)   (8,790)   -%
 

2. Outlook for the Coming Year

The outlook for each segment is as follows.

Internet Services

In line with the global expansion of the e-commerce market, the Group's domestic e-commerce services will keep making upfront investments for improving customer satisfaction so as to accelerate growth of gross merchandise sales as well as revenue.

In the overseas e-commerce services and content area, revenue is expected to increase thanks to factors including further growth of Ebates and OverDrive Holdings, and we will aim for an improvement in operating income and loss related to such items.

FinTech

In credit card and related services, we will strengthen the marketing initiatives aimed at expansion of market share and promotion of group synergy, and strive to achieve further growth of shopping transaction value. In banking services, solid profit is expected in line with an increase in assets. Meanwhile, it is difficult to make a forecast for securities services due to the substantial impact of stock market conditions.

Others

Rakuten will continue to make strategic investments for future growth in MVNO service "Rakuten Mobile," mobile messaging service "Viber," etc. As a result, increase in revenue is expected.

Office relocation of the Rakuten Group was completed in the current fiscal year, and one-off expenses of ¥4,171 million was recorded.

Notes

(1) Changes in significant subsidiaries during the current period
(Changes in specified subsidiaries resulting in change in scope of consolidation): No

New - (Company name - )

Excluded - (Company name - )

(2) Changes in accounting policies and changes in accounting estimates
1. Changes in accounting policies as required under IFRS: No
2. Changes in accounting policies due to other reasons: Yes
3. Changes in accounting estimates: No

 

(3) Number of shares issued (Common stock)
1. Total number of shares issued at the end of the year (including treasury stocks)
1,430,373,900 shares (As of December 31, 2015)
1,328,603,400 shares (As of December 31, 2014)
2. Number of treasury stocks at the end of the year
6,008,788 shares (As of December 31, 2015)
6,033,034 shares (As of December 31, 2014)
3. Average number of shares during the year (cumulative from the beginning of the year)
1,374,535,931 shares (January 1 - December 31, 2015)
1,320,627,398 shares (January 1 - December 31, 2014)
 

Indication regarding execution of audit procedures

This financial report is not intended for the audit based on the Financial Instruments and Exchange Act. At the time of disclosure of this financial results report, the audit procedures for consolidated financial statements in accordance with the Financial Instruments and Exchange Act are not completed.

Explanation about the appropriate use of earnings forecasts, and other special matters

Consolidated forecasts for the year ending December 31, 2016 are based on information that is available at the time of writing, but a number of known and unknown factors could cause actual results to differ from the projections.

The above information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English summary translation is for your convenience only. To the extent there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version. The following financial information was prepared in accordance with International Financial Reporting Standards ("IFRS").

*The full report is available at:
http://global.rakuten.com/corp/investors/documents/pdf/15Q4tanshin_E.pdf

About Rakuten
Rakuten, Inc. (4755:Tokyo) is one of the world's leading Internet services companies, offering a wide variety of services for consumers and businesses with a focus on e-commerce, finance, and digital content. Since 2012, Rakuten has been ranked among the world's 'Top 20 Most Innovative Companies' in Forbes magazine's annual list. Rakuten is expanding worldwide and currently operates throughout Asia, Europe, the Americas and Oceania. Founded in 1997, Rakuten is headquartered in Tokyo, with over 12,000 employees worldwide.

For more information visit http://global.rakuten.com/corp/.


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