|[February 14, 2013]
Rakuten Reports Consolidated Financial Results for the Fiscal Year Ended December 31, 2012
TOKYO --(Business Wire)--
Inc. (JASDAQ:4755) today announced consolidated financial reports
for the fiscal year ended December 31, 2012. The Rakuten Group, for the
fiscal year ended December 31, 2012 achieved solid growth with
consolidated net sales of ¥443,474 million (up 16.7% year on year),
operating profit of ¥72,259 million (up 2.1% year on year), and ordinary
profit of ¥71,514 million (up 4.8% year on year). All three results are
record highs. On the other hand, there was an extraordinary loss
recorded of ¥28,571 million, including the loss from the restructuring
of overseas businesses and impairment of goodwill. This was mainly
attributable to a loss from business restructuring in Play.com (U.K.)
due to the organizational restructuring carried out against changes in
local regulations, and the recording of an impairment of goodwill in
Buy.com (U.S.) due to income plan falling below initial forecasts, as a
result of prioritizing a switch in the business model so as to raise
mid-term competitiveness. As a result of these factors, current net
income amounted to ¥19,413 million (compared with a net loss of ¥2,287
million in the previous fiscal year).
Qualitative Information Concerning Consolidated Business Results
(1) Business Results for the Fiscal Year Ended December 31, 2012
In the world economy during the fiscal year ended December 31, 2012, the
prolonged European debt crisis and slowdown in growth in newly
developing regions led to heightening uncertainty for the world outlook.
In the Japanese economy, although personal consumption generally
remained strong, the deterioration in the overseas economy and other
factors saw it weaken from the middle of the year. Despite recent signs
of a prevailing recovery in the domestic and overseas economy, there
continues to be aspects of these trends that require close watch.
Meanwhile, the worldwide spread of the Internet and the developing shift
in social foundations across the world means that the Internet continues
to be a major engine for worldwide economic growth, as documented in a
recent White Paper (News - Alert) on Information and Communications (*1). The Internet
shopping market, with the rapid spread of smartphone and tablet devices,
coupled with the accompanying changes in consumer lifestyles, is likely
to see continuous growth.
Under such environment, Rakuten seeks to vigorously drive forward its
growth strategy even further, by actively taking Rakuten Ichiba's B2B2C
marketplace model to the world while also enhancing services for
smartphone and tablet devices. In addition, we also aim to improve
delivery quality, from measures such as reinforcing our logistics
infrastructure. In the Internet Finance business segment, we are
aggressively promoting the business centering on Rakuten Card, which has
notable synergies with Internet Services.
(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,
2012, Rakuten worked on enhancing its product lineup, strengthening
services for smartphone and tablet devices, improving next-day delivery
services, and running large-scale sales events called 'Rakuten Super
Sale', among other initiatives in its core 'Rakuten Ichiba' service. In
addition to the success of these initiatives, the expanding use of
e-commerce in daily consumption saw the number of unique buyers and
order numbers perform strongly, with the domestic e-commerce gross
merchandise sales rising by 15.3% over the previous fiscal year, as the
segment continues to maintain a high level of growth.
In Travel services, we added a 12.9% year on year increase to gross
transaction value. Dynamic Packages had solid sales and upgraded its
single payment service for corporate hotel reservations in pursuit of a
more diversified earnings base.
In its overseas ventures, despite posting an extraordinary loss, Rakuten
is promoting the expansion of its business model overseas by focusing on
marketplace-model services while also actively implementing initiatives
including points programs that have proven successful in Japan. During
the first quarter, Rakuten made the Canadian-based Kobo Inc., a
worldwide operator of e-books where the market in enjoying continuous
high sales growth, into a consolidated subsidiary.
As a result, net sales for the segment rose to ¥285,814 million, a 25.0%
year-on-year increase, while segment operating income was down 10.6%
year on year to ¥58,639 million due to our continued advance
investments, mainly in overseas businesses.
< Internet Finance >
For the Internet Finance segment for the fiscal year ended December 31,
2012, in credit card and related services, the shopping transaction
value accompanying an increase in credit card membership rose 36.0% over
the previous fiscal year. Also, a solid rise in the revolving shopping
balance resulted in a rise in commission income and subsequent notable
growth in profit.
Banking services benefited from its effective marketing programs to
Rakuten members and solid growth in loan balances to achieve increased
interest income from loans. In securities services, activation of the
domestic market from the fourth quarter has been generating a huge
increase in current domestic stock transaction payments. In its aim to
further enhance financial services, from the fourth quarter, Rakuten has
made AIRIO Life Insurance Co., Ltd. (*2) a consolidated subsidiary.
As a result of the above, the Internet Finance segment recorded ¥156,430
million in net sales (10.8% increase over the previous fiscal year).
Segment operating profit was ¥23,714 million (compared to a segment
operating profit of ¥12,970 million in the previous fiscal year) which
was an 82.8% growth in income over the previous fiscal year, due to a
¥4,264 million allowance in the previous fiscal year, for loss on
interest repayment taken in advance of the re-organization of the credit
< Others >
During the fiscal year ended December 31, 2012, operating profit in the
Others segment firmed up, despite lower telecommunications sales
stemming from the shift to a new business model emphasizing new,
high-growth ventures such as cloud services, while moving away from a
traditional landline operator providing bypass services. The
professional sports division lifted net sales through year-on-year
revenue increases in both advertising and tickets.
As a result of the above, net sales for the segment were ¥33,269
million, a 2.6% year-on-year decrease, while segment operating profit
grew 38.8% year on year to ¥1,585 million.
Heisei 24 Nen Joho Tsushin ni Kansuru Genjo Hokoku [Fiscal 2012
Information and Communications Status Report] (published by the
Ministry of Internal Affairs and Communications, July 17, 2012)
Assuming approval from the relevant authorities, as of April 1,
2013, AIRIO Life Insurance Co., Ltd. will change its trade name to
Rakuten Life Insurance Co., Ltd.
(3) Outlook for the Coming Year
In the year ending December 31, 2013, we anticipate further expansion in
the use of our services in Japan including e-commerce and travel,
resulting in continued high growth. In financial services, although
there will be a certain degree of impact from financial conditions, we
anticipate a continuous growth in earnings created from synergies within
the Rakuten Group. Aiming for an early return in income, Rakuten will
continue to make strategic allocations of corporate resources and active
investments in high-growth areas such as e-books, in order to generate
more mid-to-long-term income opportunities.
While making these forward-looking investments, Rakuten intends to
surpass its current financial results in the fiscal year ending December
Rakuten, Inc. and its group companies are also involved in the
securities business and other finance-related business activities, with
the result that their business performance is affected by financial
market trends and other factors. For these reasons, it is impossible to
predict financial results, and no forecasts are included in this report.
(4) Changes in Accounting Policy
(a) Changes in Recognition Timing of the Reserve for Points
The former accounting procedure for the Rakuten Super Points program
treated regular points by recognizing a reserve for points at an amount
corresponding to the balance of points available for customer use at the
end of the period and treated limited-time points as an expense in the
period used. Under the new policy, the projected value of points granted
for both regular and limited-time points will be recognized in the
reserve for points at the time of transaction.
Points granted and used have both grown recently as point programs play
an increasingly important role each year as marketing tools. In response
to these conditions, the Rakuten Group has constructed a point campaign
management system and developed an internal management structure in
order to gain timely understanding of campaign effects. In the first
quarter accounting period, we have been able to promptly calculate the
estimated value of granted points from campaigns at the time of
generation for both regular and limited-time points. We are thus able to
gauge and to manage the point balances in the important Rakuten Super
Points marketing tool. At the same time, we have adopted a uniform
accounting procedure for the Rakuten Super Points program. This method
accounts for points in the reserve for points by using the projected
value of point grants, and recognition timing will be based on the
transaction that caused the points to be generated.
The change in accounting policy is applied retroactively, and quarterly
and annual financial statements for the previous year are presented
after retrospective application.
As a result, the amounts for operating profit and ordinary profit for
the previous fiscal year are each ¥554 million lower and loss before
income taxes and minority interests for it is ¥554 million larger than
before retrospective application, and the reserve for points at the end
of the previous fiscal year is ¥5,290 million higher. In addition,
reflecting the cumulative effect in net assets at the beginning of the
previous fiscal year reduces retained earnings at that time by ¥2,812
(b) Application of the Accounting Standard for Net Income per Share
Starting in the first quarter of the current fiscal year, we are
applying the Accounting Standard for Earnings per Share (Accounting
Standards Board of Japan [ASBJ], Statement No. 2, revised June 30, 2010)
and the Guidance on Accounting Standard for Earnings per Share (ASBJ
Guidance No. 4, revised June 30, 2010).
According to this change, the calculation of diluted net income per
share for stock options whose right to exercise is established after a
fixed period of work service sets the value of receipts on the
assumption that funds are paid in when rights are exercised and has
changed to a method that includes the future service-related portion
furnished by the company.
For the stock split conducted during the fiscal year ended December 31,
2012, net income per share and net income per diluted share were
calculated under the assumption that the stock split took effect at the
start of the previous fiscal year.
(c) Application of the Accounting Standards for Accounting Changes
and Error Corrections
As a result of accounting changes and corrections to prior period errors
after the beginning of the first quarter financial reporting period, we
have applied the Accounting Standards for Accounting Changes and Error
Corrections (ASBJ Statement No. 24, December 4, 2009) and the Guidance
on Accounting Standards for Accounting Changes and Error Corrections
(ASBJ Guidance No. 24, December 4, 2009).
(1) Significant changes in the scope of consolidation: Yes
Increase: Kobo Inc.
(2) Changes in accounting policies and presentation of the
Changes due to amendment of accounting standards: Yes
Other changes: Yes
Changes in the accounting estimate: No
Modified re-disclosure: No
(3) Number of shares issued (Common stock)
1.Common stock (including treasury stock)
1,320,626,600 shares (As of December 31, 2012)
1,319,457,800 shares (As of December 31, 2011)
6,007,996 shares (As of December 31, 2012)
6,007,900 shares (As of December 31, 2011)
3.Average number of shares issued for the fiscal year ended December
1,313,987,266 shares (January 1 - December 31, 2012)
1,312,810,029 shares (January 1 - December 31, 2011)
Rakuten, Inc. made a 100-for-1 stock split regarding shares of its
common stock on July 1, 2012. Common stock and treasury stock as of
December 31, 2011 and December 31, 2012, and average numbers of
shares during the fiscal years ended December 31, 2011 and 2012 are
calculated under the assumption that the stock split took effect at
the start of the previous fiscal year.
The above information was originally prepared and published by the
Company in Japanese as it contains timely disclosure materials to be
submitted to the Osaka Securities 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 generally accepted
accounting principles in Japan.
*The full report is available at:
Rakuten, Inc. (JASDAQ:4755), is one of the world's leading Internet
service companies, providing a variety of consumer- and business-focused
services including e-commerce, eBooks & eReading, travel, banking,
securities, credit card, insurance, e-money, portal and media, online
marketing and professional sports. Selected by Forbes as 7th among the
World's Most Innovative Companies of 2012, Rakuten is expanding globally
and currently has operations throughout the Americas, Europe, Asia and
Oceania. Founded in 1997, Rakuten is headquartered in Tokyo, with over
10,000 employees and partner staff worldwide. For more information,
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