LENOVO GROUP: FULL YEAR FINANCIAL RESULTS 2020/21

Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced record results for the Group for both its fourth quarter and fiscal year, with phenomenal growth across all parts of the business. The results demonstrate the Group’s resilience and ability to achieve balanced, consistent, and sustainable growth as it continues to diversify and transform in line with its 3S (Smart IoT, Smart Infrastructure, Smart Solutions) corporate strategy.

Fourth quarter Group revenue grew at 48% year-to-year to US$15.6 billion. Profit recorded its highest growth rate in two years – with pre-tax income of US$380 million and net income of US$260 million – up 392% and 512% respectively. The Q4 results closed out a record year, with annual Group revenue surging past US$60 billion, adding more than US$10 billion on the previous fiscal year. Profit grew even faster, with pre-tax income of almost US$1.8 billion and net income of US$1.2 billion – both up more than 70% year-on-year.

Lenovo’s Board of Directors declared a final dividend of 3.09 US cents or 24 HK cents per share for the fiscal year ended March 31, 2021.

Financial Highlights:

Fourth quarter record driven by simultaneous double-digit revenue growth across all core businesses 

• Best fourth quarter ever for PC and Smart Devices (PCSD) with US$12.4 billion in revenue, up 46% year-on-year and profitability at an all-time high of 6.7%.
• All geographies realized high double-digit growth in PCSD revenue and PC volume outgrew the market – further strengthening the company’s global #1 ranking in PCs.
• Tablets had a breakthrough quarter, with shipments growing 157% year-on-year – around three times as fast as the market.
• High growth and premium segment volumes (Gaming, Thin & Light, Chromebooks, Visuals) continue to outgrow the market and deliver strong double to triple-digit growth rates.
• Revenue from the Mobile Business Group (MBG) achieved hyper-growth, up 86% year-on-year to US$1.54 billion – achieving pre-tax income of US$21 million – a record high since the Motorola acquisition.
• Expanded carrier relationships and a strong product portfolio, including 5G products, saw smartphone volumes grow at triple digit rate in North America, Europe, and Asia Pacific.
• Smartphone market share in our Latin America stronghold reached a record of nearly 21%.
• Revenue for the Data Center Group (DCG) was strong, growing 32% year-on-year to US$1.6 billion, the fifth straight quarter of premium-to-market growth. Profitability improved 4.4 points year-on-year.
• The Cloud Service Provider business grew 73% year-on-year and at a 61-point premium to the market.
• Record high fourth quarter revenue was achieved for Server, Storage, Software Defined Infrastructure, Software, and HPC/AI. Traditional storage was a particular highlight growing at 73% year-on-year.
• Burgeoning Edge business delivering strong signs of future growth.
• Transformation businesses also achieved record growth, fueled by ongoing strong growth in services and software revenue* up 44% year-on-year. Managed Services revenue* (DaaS, TruScale) nearly doubled, and Solutions revenue* grew 65% year-on-year.

Fiscal year milestone fueled by leveraging core competencies of clear strategy, product innovation, operational excellence, and Global/Local model

• For the first time, Group revenue surged past US$60 billion, adding more than US$10 billion, or 20% year-on-year growth in just one year.
• Intelligent Devices Group (PCSD and MBG) and Data Center Group achieved revenue growth of 20% and 15% respectively.
• The Group’s Service-led transformation is forging ahead. Software and Services revenue grew twice as fast at the overall Group revenue, at almost 40% year-on-year to a record US$4.9 billion – now makes up 8%* of Group revenue. 

Operational highlights 

• Effective April 1, 2021, the Lenovo Group brought together services and solutions teams and capabilities from across the company to form a dedicated organization – the new Solutions & Services Group (SSG). This business group will further strengthen our attached services portfolio and increase attach rates, enhance and expand managed services, and develop repeatable solutions in key vertical industries.
• The Group’s global supply chain continues to be best-in-class with the global footprint expanding to include a new in-house factory in Hungary which will be fully operational later in 2021. Most recently Gartner ranked Lenovo as one of the world’s top 25 supply chains, citing the company as a stand-out performer in customer-driven business transformation, noted for embracing the use of advanced technologies like 5G, blockchain and artificial intelligence to optimize the delivery of products and solutions to customers across 180 markets.
• Progress and ambitions around sustainability continue at a significant pace, with Scope 1 and 2 greenhouse gas emissions reduced by 92% over the past decade and have new aggressive science-based targets for 2030 in place to drive progress even harder. The company has also been recognized by the annual Corporate Knights Index as one of the world’s 100 most sustainable companies.
• The company was named as one of the world’s most innovative companies by Boston Consulting Group – ranking 25 out of the top 50.

Business outlook

The challenges of FY 20/21 continue, in varying degrees, into the new year. Nevertheless, with the permanent market changes accelerated over the past year the Group’s outlook for the rest of 2021 and the 21/22 fiscal year remains positive. The market changes over the past year are fueling three major trends that the Group is capitalizing on. Firstly, the consumption upgrade, with customers spending more time on their devices, buying more, and upgrading more often. Secondly, the infrastructure upgrade, with customers moving from buying data center products to buying total infrastructure solutions. And finally, the application upgrade, with digitalization greatly accelerated and intelligent transformation, enabled by A.I., becoming a reality. Lenovo’s proven track record for execution, its global-local operating model, and new organizational structure aligns to these trends, will further strengthen the Group’s ability to drive long-term, sustainable growth.