Lenovo Group Ltd. (HKSE: 992) (ADR: LNVGY):
-- Revenue of HK$103.6 billion, up 359% in FY2005/06
-- Full-year EBITDA (excluding restructuring charges) of HK$3.0
billion, up 154%
-- Full-year pre-tax income (excluding restructuring charges) of
HK$1.2 billion, up 7%
-- Full-year profit attributable to shareholders (including
restructuring charges) of HK$173 million
-- Full-year basic EPS of 1.97 HK cents (including restructuring
charges) versus 14.99 HK cents in FY2004/05
-- Net cash reserves of HK$6.1 billion (as of March 31, 2006)
Lenovo Group today reported results for the fiscal fourth quarter
and full year ended March 31, 2006. For the fourth quarter,
consolidated revenue increased 417 percent year over year to HK$24.4
billion, driven by continued strong performance in China and the May
2005 acquisition of IBM's Personal Computing Division. PC shipments
for the combined company grew 11 percent year over year. Excluding
restructuring charges taken in the fourth quarter, pre-tax income
declined during the same period to a loss of HK$317 million, due to
normal seasonal pressure on profitability, combined with investments
made in new products and the launch of the Lenovo brand worldwide. Net
cash reserves as of March 31, 2006, totaled HK$6.1 billion. Lenovo's
board of directors has proposed a final dividend of 2.8 HK cents per
share.
In March 2006, Lenovo announced an action plan to enhance
responsiveness to customers in all of its markets, strengthen Lenovo's
global competitive position, and increase operational efficiency. As a
result, Lenovo's reported results reflect a restructuring charge
relating to the plan of approximately US$70 million, or HK$543
million, taken in the fourth fiscal quarter which ended March 31,
2006. Reflecting that restructuring charge, Lenovo reported a loss
attributable to shareholders of HK$903 million and basic earnings per
share for the fourth quarter 2005/06 of (10.16) Hong Kong cents.
"The Board is pleased that Lenovo has met its first-year
integration objectives for a smooth transition, stability in the
business, and profitability in our international operations," said
Yang Yuanqing, Lenovo's chairman. "We've continued to prove the
advantages of our dual business model in China as we gained share
profitably. At the same time, we've retained key customers from the
acquired IBM PCD business and begun the next phase of our plan.
"Looking forward, we expect to realize the great potential of this
company by leveraging the complementary strengths of the combined
businesses. In China, we will sustain our strong momentum by further
refining the relationship side of our dual business model, using the
expertise from the acquired business. At the same time - using the
expertise from legacy Lenovo - we will build the transaction side of
our model outside of China to capitalize upon the significant
opportunities in the high-growth SMB and emerging markets while
enhancing our relationship business with a tightly integrated
end-to-end management system," said Mr. Yang.
William J. Amelio, Lenovo's president and chief executive officer,
said, "Lenovo is a great business with innovative products and a
disciplined operating plan. We are sharply focused on taking the steps
now that we believe will make us successful and more profitable over
the long term: improving our operating efficiency, building brand
awareness, and expanding our dual business model.
"We're making steady progress, and we are very pleased with our
accomplishments over the past year. We have confidence in our ability
to take the appropriate measures for sustainable, profitable growth.
We will grow and win by excelling in innovation, superior customer
satisfaction, and operational excellence," Mr. Amelio said.
GEOGRAPHIC OVERVIEW
-- In Greater China, Lenovo's leadership position was further
strengthened by robust PC shipments in the fourth quarter.
Shipments to mainland China were up 31 percent, ahead of the
market, solidifying Lenovo's leadership position in the PC
market. As a result, consolidated revenue for the fourth
quarter totaled HK$8.4 billion, or 35 percent of the Company's
total revenue, while operating profit was HK$402 million for
the same period.
Operating results for the following geographic segments exclude
the restructuring charge taken in the fourth fiscal quarter.
-- Lenovo PC shipments in the Americas were flat year over year.
Consolidated revenue in the Americas totaled HK$7.4 billion in
the fourth quarter, or 30 percent of total revenue, and the
segment reported an operating loss of HK$252 million.
-- Shipments for the Asia Pacific business (excluding Greater
China) declined 5 percent. Consolidated revenue in Asia
Pacific totaled HK$3.5 billion in the fourth quarter, or 14
percent of total revenue; and the segment delivered an
operating profit of HK$62 million.
-- In the Europe, Middle East and Africa region (EMEA), shipments
declined 3 percent. EMEA delivered consolidated revenue of
HK$5.1 billion in the fourth quarter, or 21 percent of total
revenue, and an operating loss of HK$87 million.
PRODUCT OVERVIEW
-- Lenovo's Notebook shipments in the March quarter were up 14
percent year over year, reaching record high levels, driven by
the Company's leading share of the China market. The segment's
consolidated revenue was HK$12.5 billion, or 51 percent, of
the Company's total revenue.
-- Lenovo's Desktop business also posted record shipments in the
March quarter, with growth of 9 percent year over year.
Consolidated revenue for the desktop PC segment was HK$10.4
billion, or 43 percent of the overall total revenue.
-- Lenovo's Mobile Handset business (conducted primarily in
China) reported shipments of mobile handsets increased 122
percent in the fourth quarter, driving segment revenue of
HK$1.2 billion, up 109 percent year over year.
FULL YEAR RESULTS
For the 2005/06 fiscal year, consolidated revenue increased 359
percent year over year to HK$103.6 billion. Lenovo's PC shipments grew
11 percent year over year. In the same period, pre-tax income
(excluding restructuring charges taken in the fourth quarter) grew 7
percent to HK$1.2 billion.
Reflecting the restructuring charges taken in the fourth quarter,
Lenovo reported full-year profit attributable to shareholders of
HK$173 million and basic earnings per share for the full 2005/06
fiscal year of 1.97 Hong Kong cents versus 14.99 Hong Kong cents for
the 2004/05 fiscal year.
About Lenovo Group Ltd.
Lenovo (HKSE: 992) (ADR: LNVGY) is dedicated to building the
world's most innovative personal computers. Lenovo's business model is
built on innovation, operational efficiency and customer satisfaction
as well as a focus on investment in emerging markets. Formed by Lenovo
Group's acquisition of the former IBM Personal Computing Division, the
company develops, manufactures and markets reliable high-quality,
secure, and easy-to-use technology products and services worldwide.
Lenovo has major research centers in Yamato, Japan; Beijing, Shanghai
and Shenzhen, China; and Raleigh, North Carolina. For more
information, see www.lenovo.com.
