Lenovo Group announced results for its second fiscal quarter ended September 30, 2015. Quarterly revenue was US$12.2 billion, a 16 percent year-over-year increase or 23 percent year-over-year in constant currency. Second quarter run rate pre-tax income**, which excludes restructuring costs, one time charges, and non-cash, M&A-related accounting charges, was US$166 million, up 16 percent quarter-to-quarter, while Lenovo’s official reported Hong Kong Financial Reporting Standards (HKFRS) pre-tax loss was US$842 million**. Second quarter net loss was US$714 million.
Lenovo’s second quarter run rate pre-tax income shows a strong operational performance. The official HKFRS losses were driven by the realignment plans Lenovo disclosed during its Q1 results, including worldwide expense reduction actions across all businesses, the integration of the System x Business, the organization and brand alignment of Motorola and the Lenovo Mobile Business Group and clearance of smartphone inventory. Going forward these actions are intended to drive meaningful run-rate cost savings of about $650 million in the second half of this year and about $1.35 billion on an annual basis. Lenovo’s cost structure, across all of its core businesses, is now among the most competitive in the industry. The company is in a position to invest in new areas, while aggressively attacking competition.
“With strong execution, Lenovo acted swiftly and decisively to address challenges, while still delivering better-than-previous-quarter results,” said Yuanqing Yang, Lenovo chairman and CEO. “Now, not only are we building a more competitive business model, but we are growing. In PC we hit record share with good profitability. In mobile, our strategy to shift our growth focus to outside of China continued to pay off, and we gained share and improved margin. The realignment of our organization and the restructuring of our cost structure will deliver results in the 2nd half of the year. In Enterprise, we reached an important milestone, growing revenue for the first time since our acquisition of System x. Digesting acquisitions and making transformations take time, but I am greatly encouraged by our strong results, and confident in both our near and long-term future.”
LENOVO GROUP
FINANCIAL SUMMARY
For the fiscal quarter ended September 30, 2015
(in US$ millions, except per share data)
Q2 15/16 |
Q214/15 |
Y/Y CHG |
|||
| Revenue | 12,150 | 10,475 | 16% | ||
| Gross profit | 1,575 | 1,457 | 8% | ||
| Gross profit margin | 13.0% | 13.9% | -0.9pts | ||
| Operating expenses | (2,359) | (1,092) | 116% | ||
| Expenses-to-revenue ratio | 19.4% | 10.4% | 9.0pts | ||
| Operating (loss) / profit | (784) | 365 | N/A | ||
| Other non-operating expenses | (58) | (36) | 60% | ||
| Pre-tax (loss) / profit | (842) | 329 | N/A | ||
| Run rate pre-tax income* | 166* | 329* | -50% | ||
| Taxation | 125 | (57) | N/A | ||
| Net profit / (loss) for the period | (717) | 272 | N/A | ||
| Non-controlling interests | 3 | (10) | N/A | ||
| Profit / (loss) attributable to equity holders | (714) | 262 | N/A | ||
| Earnings / (Loss) Per Share (US cents) Basic Diluted |
(6.43) (6.43) |
2.52 2.49
|
(8.95) (8.92)
|
The Company’s gross profit for the second fiscal quarter increased 8 percent year-over-year to US$1.6 billion, while gross margin stood at 13 percent. Operating loss for the quarter was US$784 million. Basic loss per share for the second fiscal quarter was 6.43 US cents, or 49.84 HK cents. Net debt reserves as of September 30, 2015, totaled US$140 million. Lenovo’s Board of Directors declared an interim dividend of 6 HK cents per share, the same level as last year.
