The Lenovo Group has revealed its fourth fiscal quarter and full-year ended March 31, 2015 results. In a seasonally slow quarter with significant currency impacts, revenue was US$11.3 billion, up 21 percent year-over-year.
If excluding the exchange rate impact, the growth rate would be 28 percent. Lenovo’s operational excellence delivered expectation-beating quarterly net income of US$100 million, even after US$94 million non-cash M&A related accounting charges.
The M&A investments and strong organic growth created a more diverse business for Lenovo with smartphones, tablets, servers and other services contributing 37 percent of revenues in the quarter compared to 17 percent the year before. At the same time, Lenovo continued to see performance in PCs this year with 60 million shipments, and strong profitability, all while maintaining its number one position in the market for the eighth consecutive quarter – according to the company.
For the full year, according to Lenovo, it had a record revenue of US$46.3 billion, up 20 percent year over year. In the same period its pre-tax income before non-cash, M&A-related accounting charges of US$168 million, was US$1.14 billion, up 12 percent year over year. Similarly, net income before non-cash, M&A-related accounting charges was US$997 million, up 22 percent year-over-year. Gross profit for the full year was US$6.7 billion, an increase of 32 percent year-over-year. Gross margin was 14.4 percent, while operating profit for the full fiscal year was US$1.1 (R12.9) billion, a five percent increase year-over-year.
The Company’s gross profit for the fourth fiscal quarter grew to US$1.8 billion, an increase of 43 percent. Gross margin was 15.7 percent. Operating profit was US$127 million, and pre-tax income was US$104 million during the fourth fiscal quarter.
Basic earnings per share in the fourth fiscal quarter was 0.91 US cents, or 7.06 HK cents. Lenovo’s Board of Directors declared a final dividend of 2.64 US cents, or 20.5 HK cents per share for the fiscal year ended March 31, 2015.
Even with currency pressures, Lenovo’s revenue in the Europe/Middle East/Africa (EMEA) geography during the fourth fiscal quarter saw continued growth and increased profitability with revenue up 15 percent to US$3.0 billion, while margin was 2.7 percent. According to the company this was powered by strong PC sales in its north and south regions, 240 percent growth in smartphone shipments and an improving enterprise, business, EMEA accounted for 26 percent of Lenovo’s worldwide revenue. During the quarter, Lenovo had record PC market share in EMEA of 20.5 percent, up 4.8 points. Lenovo achieved the number 1 position in PCs across 17 EMEA countries.
Business Group Overview
In the PC Group or PCG, which includes PCs and Windows tablets, Lenovo’s quarterly sales were US$7.2 billion, with pre-tax income of US$391 million, up 11 percent year-over-year. Pre-tax income margin was 5.5 percent. Lenovo shipped 13.3 million PCs in the quarter, up 2.7 percent year-over-year, for a total market share of 19.5 percent. PCG saw share gain across all geographic regions, with particularly strong performances in Western Europe, the Middle East and Africa.
In the Mobile Business Group or MBG, which includes products from the Motorola investment, Lenovo-branded mobile phone business, Android tablets and smart TVs, Lenovo quarterly sales were US$2.8 billion. In smartphones, Lenovo remained the world’s #3 with 18.7 million in Q4 and a record 76 million in FY 2014/15 shipments and increasing balance globally. For the year (which included two quarters of contributions from Motorola), China accounted for 59 percent of Lenovo’s smartphone volumes, while markets outside China saw robust 450 percent growth hitting 31 million smartphone devices shipped. In tablets, Lenovo outpaced the market and continued to grow with a total of 12 million units shipped, an increase of 26 percent year-over-year, and 5.1 percent market share. Motorola contributed more than 7.8 million units in the quarter to Lenovo’s total, up 23.6 percent year-over-year, while adding US$1.8 billion to Lenovo’s MBG revenues. Motorola also hit a major operational milestone by re-entering China in January and it remains on track to be profitable within 4-6 quarters of close.
In the Enterprise Business Group or EBG, which includes servers, storage, software and services sold under both the Lenovo ThinkServer brand and the System x business unit, sales were US$1.1 billion. In its second full quarter with System x, EBG delivered positive operational pre-tax income, although its standard PTI – which included non-cash, M&A-related accounting charges – was negative US$45 million. Lenovo continued as #3 in x86 servers, while its ThinkServer brand targeting small and medium sized enterprises saw 49 percent revenue growth year-over-year. EBG remains on track to be a US$5 billion business within one year of close.