China’s Lenovo Group announced results on Thursday May 25, for its fourth fiscal quarter and full-year ended March 31, 2017. It was a year of significant transformation for Lenovo which made good progress in implementing and executing its new “three-wave strategy,” designed to meet the critical business challenges of today, while positioning the company for continued long-term profitable growth.
As part of Lenovo’s transformation, the company put in place an aggressive new end-to-end ownership model to manage each business differently, led by strong new leaders, and is seeing improvements as a result.
“Despite challenging market conditions, Lenovo saw revenue resume to growth in the fourth quarter, after five quarters of decline,” said Yang Yuanqing, Lenovo Chairman and CEO. “To drive further growth, we have clearly defined the three-wave strategy. We will maintain PC leadership in scale, profitability and innovation in the first wave, while building our second wave, mobile and data center businesses into growth engines. Simultaneously, we will execute our third wave of “Device + Cloud” and “Infrastructure + Cloud” to capture the opportunities brought by new technologies. With this new strategy, we are confident to achieve long term, sustainable growth.”
For the fourth fiscal quarter, Lenovo’s revenue was US$9.6 billion, an increase of 4.9 percent year-over-year, fueled in part by a good performance in the PC/smart devices and mobile businesses. For the full-year ended March 31, 2017, Lenovo’s revenue was US$43 billion, down 4.2 percent year-over-year.
The company’s gross profit for the fourth fiscal quarter decreased 9.8 percent year-over-year to US$ 1.4 billion, while for the full year, gross profit fell 7.8 percent to US$6.1 billion. Operating profit for the fourth fiscal quarter was US$74 million. For the full year, Lenovo’s operating profit was US$672 million. Fourth-quarter net income was US$107 million, while net income for the full year was US$535 million, an increase of US$660 million year-over-year.
Basic earnings per share in the fourth fiscal quarter was 0.97 US cents or 7.56 HK cents, and for the full year basic earnings per share was 4.86 US cents or 37.71 HK cents. Lenovo’s Board of Directors declared a dividend of 2.63 US cents, or 20.5 HK cents per share for the fiscal year ended March 31, 2017.
For Lenovo’s PC and Smart Devices (PCSD) business group, which includes PCs, tablets and smart devices, its quarterly sales were up 4.9 percent year-over-year to US$6.7 billion. Quarterly shipments grew one percent to 14.4 million, four points better than the overall market. Pre-tax income for the quarter was US$288 million, a decrease of 4.7 percent year-over-year.
For the full year ended March 31, 2017, Lenovo’s PCSD sales were down 2.3 percent, but beating the overall market, at US$30 billion. Shipments for the year beat the market significantly by 7.1 points, with 66.6 million, while pre-tax income margin stood at five percent, a slight increase year-over-year.
Importantly, Lenovo continued to deliver strong results in both the fourth quarter and full year in the hyper-growth categories in this business, such as gaming, detachables, Chromebooks and Millennial PCs (in China). For example, Lenovo’s gaming and Chromebook shipments were up 20.5 and 38.2 percent respectively in the fourth quarter. Meanwhile Lenovo’s detachables grew at a double digit premium compared to the market, and Millennial PC continued its rapid rise in China with triple digit growth for the fourth quarter in a row.
Lenovo’s Mobile Business Group (MBG), which includes Moto and Lenovo-branded smartphones, saw 19.7 percent revenue growth in the fourth fiscal quarter outside of China,
with total sales of US$1.7 billion. Fourth quarter smartphone shipments increased 17.4 percent to 11.3 million units outside China, beating the market significantly by 12.8 points. For the full year ended March 31, 2017, overall sales were down 5.4 percent and pre-tax income margin decreased 1.9 points outside China.
In Asia Pacific and Latin America, led by success in India and Brazil respectively, Lenovo’s mobile business continued to improve throughout the year. In Western Europe, shipments were up in France, Germany and the UK, while in North America, Lenovo’s channel expansion plans are on track. In China, Lenovo added new leadership, re-aligned its strategy and product portfolio, and cleared inventory to introduce a new product lineup.