Lenovo Reports Fourth Quarter and Full Year 2005/06 Results

    — 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.

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