Lenovo delivers stable
profitability in year of accelerating transformation
(BUSINESS WIRE) -- Lenovo Group
(HKSE: 992) (ADR: LNVGY) today announced full-year results, reporting Group
revenue of US$62 billion and net income of US$1.6 billion, or US$1.9 billion on
a non-Hong Kong Financial Reporting Standards (HKFRS) [1] basis. Profitability
was stable with gross margin and operating margin both delivering 18-year highs
and non-HKFRS net margin flat year-to-year. While Group revenue was impacted
due to the softness in the device market, revenue from non-PC businesses
reached a fiscal year high of nearly 40%, fueled by Lenovo’s diversified growth
engines of Solutions and Services Group (SSG) and Infrastructure Solutions
Group (ISG) growing revenue to record highs of US$6.7 billion and US$9.8
billion respectively, up 22% and 37% year-on-year.
After a year of industry and
global uncertainties, Lenovo sees positive signs of the market stabilizing. The
Group expects the entire PC and smart devices market to resume year-to-year
growth in the second half of 2023, and for the IT services market to resume
relatively high growth - together these will drive the total IT market in 2023
back to moderate growth. In the mid-to-long term, digital and intelligent
transformation will continue to accelerate, leading to a big growth potential
for cloud and computing infrastructure.
Lenovo’s cash position remains
strong, and its cash conversion cycle has further improved. This healthy
liquidity has seen the Group continue to invest in R&D around ‘New IT’
(client, edge, cloud, network, and intelligence) to build its future core
competencies. During the last year, Lenovo increased its full year investment
in R&D to US$2.2 billion, up 6% year-to-year.
In Q4, the Group recognized a
one-time restructuring and other charges of US$249M, among various other actions,
to deliver around US$850M of annual run-rate group expense savings, helping to
establish a solid foundation for the Group’s operations in a challenging
market, and position it for future growth.
Lenovo’s Board of Directors
declared a final dividend of 3.8 US cents or 30.0 HK cents per share for the
fiscal year ended March 31, 2023.
Financial Highlights:
Financial Highlights:
|
|
FY 22/23 US$
millions |
FY 21/22 US$
millions |
Change |
|
|
Group Revenue |
61,947 |
71,618 |
(14%) |
|
|
Pre-tax income |
2,136 |
2,768 |
(23%) |
|
|
Net Income (profit
attributable to equity holders) |
1,608 |
2,030 |
(21%) |
|
|
Net Income (profit
attributable to equity holders – non-HKFRS) [1] |
1,878 |
2,164 |
(13%) |
|
|
|
|
|||
|
Basic earnings per share (US
cents) |
13.50 |
17.45 |
(3.95) |
|
Chairman and CEO quote – Yuanqing Yang:
“Lenovo has delivered stable profitability in the last fiscal year as
our diversified growth engines continue to hit new milestones. Their momentum
is driving steady progress in our services-led transformation, and our non-PC
businesses’ revenue mix increased to nearly 40%. Our clear strategy is working,
and our operation is resilient, even in the face of global uncertainties. Going
forward, we will continue to invest in R&D to capture the next wave of
growth opportunities, so we are well prepared for the future.”
Solutions and Services Group (SSG): high margin, strong growth
Opportunity:
The ‘New IT’ services segments within the trillion-dollar IT services
market continue to expand, with Device-as-a-Service (DaaS) and cloud solutions
expected to grow at double digits CAGR by 2025. Spending in solutions and
services will remain strong, in particular in education, smart retail, smart
city, and manufacturing.
FY22/23 performance:
- SSG
continues to be the growth engine for the Group and an important profit
contributor.
- Revenue
reached an all-time record, up 22% year-to-year to US$6.7 billion, with a
high operating margin of 21%.
- High
double-digit growth across all segments, with the revenue mix from
non-hardware-centric solutions and services now accounting for more than
half of SSG’s revenue.
Sustainable Growth:
- SSG
continues to invest in building scalable and repeatable horizontal
solutions or building blocks that can be deployed in any industry,
leveraging Lenovo IP.
- In
addition, SSG enriched its digital workplace solutions and TruScale hybrid
cloud solutions portfolio.
- Scaled
TruScale for SAP with Private Edition Customer Data Center (PE CDC) and
expanded exclusive partnership to provide technical managed service for
SAP PE CDC customers in China.
Infrastructure Solutions Group (ISG): record revenue, record profit,
hypergrowth
Opportunity:
ISG continues to benefit from the ongoing ICT infrastructure upgrade. By
2025, the server market alone is expected to surpass US$132 billion, with
storage expected to reach US$36 billion and edge infrastructure US$37 billion.
FY22/23 performance:
- Historic
full year performance for ISG as a profitable high-growth engine. Revenue
grew to almost US$10 billion, up 37% year-to-year, with record operating
profit of US$98 million.
- Revenue
from the server business grew by almost 30% year-to-year to a record high,
making Lenovo the third largest server provider in the world.
- Storage
also reached a record high revenue, tripling the previous fiscal year’s
results and moving from the #8 position in the world to #5. Software
revenue grew 25% year-to-year, another record.
Sustainable Growth:
- ISG
continues to enhance its full stack capabilities that cover both the Cloud
Service Provider and Enterprise and SMB segments.
- At
the same time, ISG is investing in infrastructure innovations empowered by
artificial intelligence (AI), such as AI-powered edge computing and hybrid
cloud.
- Inhouse
manufacturing and cost competitiveness has been bolstered with the
addition of an inhouse facility in Budapest, Hungary.
Intelligent Devices Group (IDG): leading market position and
profitability
Opportunity:
The business was impacted by several quarters of device market softness
due to channel inventory digestion. With PCs the essential productivity tool in
today’s digital era, Lenovo anticipates that the PC market will return to
growth in the 2nd half of calendar year 2023. The
digitalization trend and hybrid work model continue to drive steady growth in
smart spaces solutions.
FY22/23 performance:
- IDG
revenue declined year-on-year to US$49.4 billion, but successfully
maintained the #1 position in the PC market with 23.2% market share
globally and maintained its industry-leading profitability of 7.3%.
- Revenue
mix from premium products increased to nearly 30%.
- The
smartphone business has been profitable for three consecutive years and
achieved premium-to-market revenue growth in most markets.
Sustainable Growth:
- IDG
will closely manage expense and further sharpen its operational
excellence.
- It
will continue to invest in technology innovations focusing on premium
offerings and adjacent areas, while at the same time enhancing smart space
solutions for hybrid work models.
Q4 Performance
Fiscal year Q4 was the most challenging quarter of the year given
pressures from both the PC market and the global economy. Lenovo closed the
quarter with revenue of US$12.6 billion, down 24% year-to-year. Revenue from
IDG declined 33% year-to-year, while the strong momentum from the growth
engines of SSG and ISG helped offset the device market softness. SSG revenue
was up 18% YTY to US$1.6 billion, and ISG revenue was up 56% to US$2.2 billion.
Non-PC revenue mix during the quarter reached a historic high of 43%, up 12
points year-to-year.
Q4 Operational highlights
Environmental, Social, Governance - Lenovo’s Environmental, Social and
Governance Rating score was recently upgraded to AAA by MSCI, the international
ratings agency. This upgrade represents the highest possible rating for
corporations leading in ESG programs. In addition, EcoVadis recognized Lenovo
for its excellence in sustainable procurement at its 7th annual Sustainable
Procurement Leadership Awards. The company was also recently recognized by
Forbes as one of the Best Employers for Diversity in 2023, evaluated based on
direct recommendations, indirect recommendations, and research on the key
performance indicators.
[1] non-HKFRS measure was adjusted by excluding net fair value changes
on financial assets at fair value through profit or loss, amortization of
intangible assets resulting from mergers and acquisitions, mergers and
acquisitions related charges; restructuring and other charges; and the
corresponding income tax effects, if any.
About Lenovo
Lenovo (HKSE: 992) (ADR: LNVGY) is a US$62 billion revenue global
technology powerhouse, ranked #171 in the Fortune Global 500, employing 77,000
people around the world, and serving millions of customers every day in 180
markets. Focused on a bold vision to deliver smarter technology for all, Lenovo
has built on its success as the world’s largest PC company by further expanding
into growth areas that fuel the advancement of ‘New IT’ technologies (client,
edge, cloud, network, and intelligence) including server, storage, mobile,
software, solutions, and services. This transformation together with Lenovo’s
world-changing innovation is building a more inclusive, trustworthy, and
smarter future for everyone, everywhere. To find out more visit
https://www.lenovo.com, and read about the latest news via our StoryHub.
|
LENOVO GROUP FINANCIAL SUMMARY For the quarter and year ended
March 31, 2023 (in US$
millions, except per share data) |
||||||||
|
|
|
Q4 |
Q4 |
Y/Y CHG |
|
FY22/23 |
FY21/22 |
Y/Y CHG |
|
Revenue |
|
12,635 |
16,694 |
(24)% |
|
61,947 |
71,618 |
(14)% |
|
Gross
profit |
|
2,143 |
2,864 |
(25)% |
|
10,501 |
12,049 |
(13)% |
|
Gross
profit margin |
|
17.0% |
17.2% |
(0.2) pts |
|
17.0% |
16.8% |
0.2 pts |
|
Operating
expenses |
|
(1,852) |
(2,275) |
(19)% |
|
(7,832) |
(8,968) |
(13)% |
|
R&D
expenses |
|
550 |
576 |
(5)% |
|
2,195 |
2,073 |
6% |
|
Expenses-to-revenue
ratio |
|
14.7% |
13.6% |
1.1 pts |
|
12.6% |
12.5% |
0.1 pts |
|
Operating
profit |
|
291 |
589 |
(51)% |
|
2,669 |
3,081 |
(13)% |
|
Other
non-operating income/(expenses) – net |
|
(161) |
(69) |
134% |
|
(533) |
(313) |
70% |
|
Pre-tax
income |
|
130 |
520 |
(75)% |
|
2,136 |
2,768 |
(23)% |
|
Taxation |
|
(24) |
(99) |
(75)% |
|
(455) |
(623) |
(27)% |
|
Profit
for the period/year |
|
106 |
421 |
(75)% |
|
1,681 |
2,145 |
(22)% |
|
Non-controlling
interests |
|
8 |
(9) |
N/A |
|
(73) |
(115) |
(37)% |
|
Profit
attributable to equity holders |
|
114 |
412 |
(72)% |
|
1,608 |
2,030 |
(21)% |
|
Profit
attributable to equity holders – non-HKFRS[1] |
|
284 |
507 |
(44)% |
|
1,878 |
2,164 |
(13)% |
|
Earnings
per share (US cents) |
|
0.95 0.93 |
3.52 3.20 |
(2.57) (2.27) |
|
13.50 12.74 |
17.45 15.77 |
(3.95) (3.03) |
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Contacts
Hong Kong –
Angela Lee, angelalee@lenovo.com, +852 2516 4810
London –
Charlotte West, cwest@lenovo.com, +44 7825 605720
Zeno Group
- LenovoWWcorp@zenogroup.com
