Lenovo Reports Fourth Quarter and Full?Year 2007/08 Results

22/05/2008 - 12:25

Lenovo Group today reported results for its fourth fiscal quarter and

full year ended March 31, 2008, driven by strong performance in all

geographies and product segments. During the fourth quarter, Lenovo´s

worldwide PC shipments grew 21 percent, well ahead of the industry

average growth of approximately 15 percent. As previously announced, Lenovo completed the sale of its mobile handset

business in March 2008 in order to better focus on its core PC business.

As a result, the Company recorded approximately US$65 million as a

pre-tax gain on disposal. Taking into consideration the operating loss

the profit from the mobile handset business amounted to US$36 million

and US$20 million in the fiscal fourth quarter and full year

respectively. Consolidated sales for the quarter from continuing operations (excluding

the mobile handset business) rose 13.5 percent year over year to US$3.7

billion. The Company´s gross profit margin for

the fourth quarter reached 15.0 percent. Including the impact of

restructuring, Lenovo reported pre-tax income of US$103 million from

continuing operations. Including the net profit of US$36 million from

discontinued operations, profit attributable to shareholders for the

quarter grew 133 percent to US$140 million. Basic earnings per share totaled 1.56 US cents, or 12.17 HK cents. Net

cash reserves as of March 31, 2008, totaled US$1.6 billion. Lenovo´s

board of directors has proposed a final dividend of 12.80 HK cents, or

approximately 1.64 US cents per share. "Lenovo continued to demonstrate strong

execution of our strategies in the past quarter, achieving the eighth

consecutive quarter of profitable growth," said Lenovo Chairman Yang Yuanqing. "In the

past three years since the acquisition, Lenovo has successfully achieved

the financial targets which we set and accomplished numerous milestones.

We have successfully assumed responsibility for our sales and customers

completed our brand transition, rolled out the transaction business

outside of China, launched our consumer business, and released highly

innovative products. Lenovo´s global

competitiveness substantially increases with each of these solid steps

and provides greater momentum for sustainable growth. "Looking forward, Lenovo will continue to

maintain our momentum in the relationship business and the Greater China

region, while pursuing growth opportunities in the emerging markets

notebook markets and transaction business, specifically the consumer

business, and actively fostering new business to maintain profitable

growth that outpaces the industry." "Lenovo´s unique

heritage has enabled us to implement one of the strategic foundations of

this company - our worldsourcing business

model," said President and CEO William J.

Amelio. "A complete approach to doing

business in a new global economy, worldsourcing transcends boundaries

cultures and structures. It enables us to leverage our cultural and

geographic strengths to manage costs, increase efficiency and harness

the power of innovation from across the global organization." GEOGRAPHIC OVERVIEW

Lenovo Greater China posted US$1.29 billion in consolidated

sales in the fourth fiscal quarter, up 18 percent, as the Company´s

growth of 25 percent in PC shipments outpaced the industry average for

the Greater China market. During the quarter, Lenovo further

strengthened its number one market position on the strength of sales

across product lines. The company´s Greater

China business accounted for 34 percent of total sales in the quarter.

The Americas accounted for US$1.0 billion in consolidated

sales, or 27 percent of total sales. The quarter marked Lenovo´s

fifth consecutive profitable quarter for the Americas, on the strength

of desktop market share gains and overall PC demand in Canada. Lenovo

also improved productivity in the region, cutting controllable

expenses. Sales of notebooks in the U.S. were affected by a slowing

economy, although Lenovo maintained its overall U.S. market share.

Lenovo PC shipments in the Americas during the quarter increased 9

percent.

In the Europe, Middle East and Africa region (EMEA), shipments

increased 30 percent in the fourth fiscal quarter. For the same

period, consolidated sales totaled US$879 million, or 24 percent of

total sales. Sales growth was spurred by demand for notebook

computers, despite some weakening in consumer demand.

Shipments for the Asia Pacific business (excluding Greater

China) increased 18 percent in the fourth fiscal quarter. Consolidated

sales in Asia Pacific totaled US$543 million in the fourth quarter, or

15 percent of total sales. Market share gains in Japan and volume

gains in ASEAN, Australia and New Zealand were offset by investment in

India.

PRODUCT OVERVIEW

Lenovo´s Notebook computers

continued to be the largest contributor to total sales. Notebook

shipments in the fourth fiscal quarter were up 38 percent year over

year, and consolidated sales grew 22 percent to US$2.3 billion, or 61

percent of total sales for the quarter. Growth was driven by increased

adoption of notebook PCs worldwide and an expanded portfolio of Lenovo

products introduced to meet growing demand.

In the fourth fiscal quarter, Lenovo´s Desktop shipments rose 9 percent year over year. Consolidated sales

increased 2 percent to US$1.4 billion in the quarter, or 38 percent of

total sales. Performance was positively impacted by continued focus on

operational efficiencies and introduction of competitive desktop PC

offerings.

FULL YEAR RESULTS For the 2007/08 fiscal year, consolidated sales from continuing

operations (excluding the mobile handset business) increased 17 percent

year over year to US$16.4 billion. Lenovo´s

PC shipments grew 22 percent year over year, ahead of the estimated

industry average of 16 percent. The Company´s

gross profit margin for the fiscal year improved to 15.0 percent from

13.5 percent. Including the impact of restructuring, pre-tax income for continuing

operations surged 232 percent to US$512 million. Reflecting the impact

of restructuring and the net profit of US$20 million from discontinued

operations, full-year profit attributable to shareholders increased 201

percent year over year to US$484 million. Basic earnings per share for the 2007/2008 fiscal year totaled 5.51 US

cents, or 42.98 HK cents. ABOUT LENOVO Lenovo (HKSE: 992) (ADR: LNVGY) develops, manufactures and markets

high-quality, secure and easy-to-use technology products and services

worldwide and is dedicated to building the world´s

best-engineered personal computers. Formed by Lenovo Group´s

acquisition of the former IBM Personal Computing Division, Lenovo´s

heritage in both emerging and developed markets has resulted in a New

World Company business model where ideas, operations and resources are

borderless and mobile. With four operational hubs in Beijing, Raleigh

Singapore and Paris, Lenovo has major research centers in Yamato, Japan;

Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina, as

well as a marketing center in Bangalore, India. For more information

see www.lenovo.com

= = = = = = = = = = =

LENOVO GROUP FINANCIAL SUMMARY For the fiscal quarter and full year ended March 31, 2008 (in US$ millions, except per share data) - - - - - -

- - - - - -

Q4 07/08

Q4 06/07

Y/Y % CHG

FY 07/08

Y/Y % CHG - - - - - -

Continuing operations(1)

- - - - - -

Sales 3,734

3,290

13.5 % 16,352

17.0 % - - - - - -

Gross Profit 559

489

14.3 % 2,450

29.8 % - - - - - -

Gross Profit Margin 15.0 % 14.9 % 0.1 pts 15.0 % 1.5 pts - - - - - -

Operating Expenses (470 ) (424 ) 10.8 % (1,921 ) 10.8 % - - - - - -

Operating Expense Margin 12.6 % 12.9 % (0.3) pts 11.7 % (0.7) pts - - - - - -

Other Income / (Expense), net 6

(2 ) -

110.8 % - - - - - -

Pre-Tax Income before restructuring and other non-operating income

/ (expense)

50.8

546

215.5

% - - - - - -

Other non-operating income / (expense)(2)

)

- - - - - -

Restructuring Costs 0

(48 ) 303.9 % - - - - - -

Pre-Tax Income 103

68.6 % 512

231.8 % - - - - - -

Profit from continuing operations 104

87.8 % 464

262.5 % - - - - - -

Profit from discontinued operations(3) 36

-(5 ) 20

-(5 ) - - - - - -

Profit Attributable to Shareholders 140

132.8 % 484

200.5 % - - - - - -

EPS (US cents)

- - - - - -

Basic 1.56

0.70

122.9 % 5.51

194.7 % - - - - - -

Diluted 1.44

0.68

111.8 % 5.06

175.0 % - - - - - -

Dividend per share (HK cents) 12.80

2.80

357.1 % 15.80

203.8 % - - - - - -

EBITDA(1)(4) 152

110

39.1 % 798

113.0 % - - - - - -

- - - - - -

(1) Continuing operations

include the PC business only. Mobile handset sales of US$93

million in Q4 and US$436 million in FY 2007/08 are classified as

discontinued operations. (2) Includes finance income

finance cost and share of profits/(losses) of associated companies. (3) Includes taxation from

discontinued mobile handset business. (4) Excludes restructuring

charges. (5) Comparison not applicable

because current year includes gain on sale. - - - - - -