Qualitative Information, Financial Statements, etc.
1. Qualitative Information Concerning Consolidated Business Results
(1) Business Results for the Fiscal Year Ending December 31, 2014
In the world economy during the fiscal year ended December 31, 2014, there was increasing uncertainty concerning factors such as the impact of reduced monetary easing by the U.S., the economic outlook in emerging nations and crude oil price movements. Meanwhile, in the Japanese economy, despite the risk of factors such as the cooling in consumer sentiment following the consumption tax hike causing downward pressure on the economy, a moderate recovery has continued against a backdrop of improvements in the wage and employment environment.
Meanwhile, according to the most recent White Paper on Information and Communications released by the Ministry of Internal Affairs and Communications*, information and communications technology (ICT) such as Internet and mobile phones is spreading rapidly in many newly developing regions as well. The number of Internet users worldwide continues to rise, climbing from 1.02 billion globally in 2005 to 2.92 billion in 2014. In particular, the number of smartphone users, who are the customer base for mobile Internet, is said to reach 1.75 billion.
Under such an environment, the Rakuten Group has further promoted its growth strategy. In March 2014, we acquired VIBER MEDIA LTD. (hereinafter “Viber”), which operates a mobile messaging service and VoIP service on a global scale, and made it a wholly owned subsidiary. We believe that Viber’s wide customer base will complement the Group’s digital strategy, while firming up our platform for global expansion of Internet Services and Internet Finance services. In addition, in October 2014, the Group acquired Ebates Inc. (hereinafter “Ebates”), provider of the leading membership-based online cash-back site in the U.S., and made it a wholly owned subsidiary. By integrating Ebates’ strong retail network with the business assets and technology of the Rakuten Group, we believe Rakuten Group can develop a unique and innovative e-commerce platform.
In addition, in Internet Services, the Rakuten Group enhanced its services for smart devices (smartphones and tablet devices), and promoted Rakuten Ichiba’s B2B2C marketplace model business to the world through large-scale sales events such as the Rakuten Super Sale. In Internet Finance, the membership base for Rakuten Card expanded further. Through these measures, the Rakuten Eco-System continues to show solid expansion and growth.
(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, 2014, Rakuten actively worked on strengthening its services for smart devices, promoting personalized marketing which utilizes big data, and executing large-scale sales events such as the Rakuten Super Sale among other initiatives in its core Rakuten Ichiba service. As a result of these initiatives, despite the discontinuation of events including the Rakuten Victory Sale that contributed significantly to business results during the previous fiscal year, domestic e-commerce gross merchandise sales continued high level of growth, rising by 13.7% over the previous fiscal year. In Travel services, demand was strong for services including leisure travel sales, corporate services, car rental, and inbound services.
With regard to overseas e-commerce services, Rakuten contributed to the growth in gross merchandise sales by focusing on marketplace-model services while also horizontally rolling out a range of expertise that have proven successful in Japan. In addition, Ebates was made into a subsidiary in October 2014, which resulted in the expansion of operations.
Furthermore, in contents services, we continued strategic investments for future profit growth, while making efforts such as an initiative to reduce fixed costs. Consequently, the performance is improving.
As a result, revenue for the segment rose to ¥362,751 million, a 15.1% year-on-year increase. While advance investments are continued to be made in future growth fields, profit from existing businesses grew steadily, resulting in segment profit of ¥58,806 million. Year-on-year, this represented an 23.9% increase, due in part to the backlash from the posting of impairment loss in the previous fiscal year.
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(Millions of yen)
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Fiscal year ended
December 31, 2013
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Fiscal year ended
December 31, 2014
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Amount Change
YoY
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% Change
YoY
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| Segment Revenue | 315,228 | 362,751 | 47,523 | 15.1% | ||||
| Segment Profit | 47,455 | 58,806 | 11,351 | 23.9% | ||||
In the Internet Finance segment for the fiscal year ended December 31, 2014, in credit card and related services, shopping transaction value, accompanying an increase in Rakuten Card membership, rose significantly over the previous fiscal year. Moreover, solid growth in revolving balances resulted in a rise in income including commission income, and notable growth continues in profit. In securities services, balances of investment trusts that will lead to the stabilization of revenue grew significantly, while commissions on foreign exchange services were also robust. However, these services were affected by stock market conditions and other factors compared with the previous fiscal year. Meanwhile, in banking services, both revenue and profits grew significantly due to the steady growth in loan balances.
As a result of the above, the Internet Finance segment recorded ¥236,520 million in revenue, 17.4% increase over the previous fiscal year, while segment profit was ¥48,399 million, 9.6% increase over the previous fiscal year.
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(Millions of yen)
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||||||||
|
Fiscal year ended
December 31, 2013
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Fiscal year ended
December 31, 2014
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Amount Change
YoY
|
% Change
YoY
|
|||||
| Segment Revenue | 201,494 | 236,520 | 35,026 | 17.4% | ||||
| Segment Profit | 44,174 | 48,399 | 4,225 | 9.6% | ||||
During the fiscal year ended December 31, 2014, revenue in the Others segment firmed up as the professional sports division was strong due to the transfer fee revenue accompanying the transfer of key players in addition to the growth in sponsor revenue and sales of related goods. Meanwhile, strategic investments have been made for the future growth of Viber, which became a consolidated subsidiary in March 2014.
As a result, revenue for the segment was ¥42,445 million, an 18.7% year-on-year increase, while segment loss was ¥639 million versus a profit of ¥3,762 million in the previous fiscal year.
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(Millions of yen)
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||||||||
|
Fiscal year ended
December 31, 2013
|
Fiscal year ended
December 31, 2014
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Amount Change
YoY
|
% Change
YoY
|
|||||
| Segment Revenue | 35,746 | 42,445 | 6,699 | 18.7% | ||||
| Segment Profit | 3,762 | (639) | (4,401) | － | ||||
The outlook for each segment is as follows.
Internet Services
The upward trend in gross transaction value is expected to be maintained amid expansion of the global e-commerce industry, enhancements to Rakuten Group services and other factors.
In the first quarter of the next fiscal year, growth in revenue from the Group’s domestic e-commerce services is expected to be lower than the first quarter of the current fiscal year when last-minute demand was seen ahead of the consumption tax hike. In the second quarter of the next fiscal year, however, revenue is expected to grow more steadily than the second quarter of the current fiscal year when revenue slacked due to a rebound following last-minute demand. From the second half of the next fiscal year onward, further growth in revenue as well as in net income at the same level is projected. For overseas e-commerce and contents services, we will continue to make strategic investments while committing to strict cost control.
Internet Finance
In credit card and related services, high revenue growth is expected to continue. Solid growth in revolving balances is expected to result in a rise in income including commission income, and further growth is expected to continue in profit. In banking services, robust profit is expected following 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 Viber, which operates a mobile messaging service, etc. Stable profit growth is expected in telecommunications services. In the professional sports division, the growth rate for the coming year is expected to be relatively moderate compared to the current fiscal year, where profits from transfer associated with the transfer of a key player was recorded in the professional baseball team.
In addition, the Rakuten Group will relocate its head office during the next fiscal year, and a certain degree of relocation-related temporary expenses is projected to arise.
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Notes
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(1) Changes in significant subsidiaries during the current
period
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(Changes in specified subsidiaries resulting in change in scope
of consolidation): No
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New － (Company name － )
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Excluded － (Company name － )
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|||||||||
| (2) Changes in accounting policies and changes in accounting estimates | ||||||||||
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1.
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Changes in accounting policies as required under IFRS: Yes
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2.
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Changes in accounting policies due to other reasons: No
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3.
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Changes in accounting estimates: No
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| (3) Number of shares issued (Common stock) | ||||||||||
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1.
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Total number of shares issued at the end of the year (including
treasury stocks)
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|||||||||
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1,328,603,400 shares (As of December 31, 2014)
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1,323,863,100 shares (As of December 31, 2013)
|
||||||||||
|
2.
|
Number of treasury stocks at the end of the year
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|||||||||
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6,033,034 shares (As of December 31, 2014)
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||||||||||
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6,033,466 shares (As of December 31, 2013)
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||||||||||
|
3.
|
Average number of shares during the year (cumulative from the
beginning of the year)
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|||||||||
|
1,320,627,398 shares (January 1 – December 31, 2014)
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||||||||||
|
1,315,996,855 shares (January 1 – December 31, 2013)
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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, 2015 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/14Q4tanshin_E.pdf
About Rakuten
Rakuten, Inc. (4755:Tokyo), is one of the world's leading Internet service companies. We provide a variety of products and 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 11,000 employees and partner staff worldwide. For more information: http://global.rakuten.com/corp/.
Contacts : Rakuten Investor Relations
investor-relations@mail.rakuten.com / http://global.rakuten.com/corp/investors/
or
Rakuten Public Relations / Email: pr@mail.rakuten.com / Tel: +81-50-5817-1104
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