Lenovo Group: Second Quarter Results 2022/23

Lenovo Group (HKSE: 992) (ADR: LNVGY) as we speak introduced second quarter outcomes for the Group, with profitability bettering year-on-year for the ten^th consecutive quarter. Second quarter web revenue grew 6% year-on-year to US$541 million and Group income grew to US$17.1 billion, up 3% year-on-year in fixed forex.

All essential companies contributed constructive working revenue, demonstrating additional progress in direction of the Group’s purpose of doubling profitability within the medium-term. Additionally, the diversified development engines continued to drive sturdy efficiency with each the options and companies business, in addition to the infrastructure business, seeing excessive double-digit year-on-year development. Non-PC companies now make up greater than 37% of complete group income. The Group’s wholesome money steadiness means it stays dedicated to doubling investments in Research and Development (R&D) within the medium-term, having grown R&D spending 15% year-on-year within the quarter.

While present exterior challenges persist, Lenovo stays agile and centered on pursuing its technique and making certain ongoing profitability by rebalancing sources in direction of its diversified development engines and driving efficiencies and expense discount via the business. It sees long-term alternatives constructed on its basis of New IT – shopper, edge, cloud, community, and intelligence – as the worldwide tendencies of digitalization and clever transformation speed up. Last quarter’s outcomes, in addition to the previous three years, have demonstrated that the mixture of Lenovo’s technique, sturdy execution, and resilient operations are enabling it to transcend the {industry} cycle. This, mixed with its high-quality and modern portfolio, distinctive hybrid manufacturing and provide chain, world/native precept and functionality, in addition to wholesome liquidity will assist drive additional alternatives to ship sustainable development, and enhance profitability.

Financial Highlights:

Lenovo’s Board of Directors declared an interim dividend of 8.0 HK cents per share.

Chairman and CEO quote – Yuanqing Yang:

“Lenovo once again delivered solid results, even in a challenging global market, achieving year-on-year profitability improvement for the tenth straight quarter and increasing revenue by nearly 3% (in constant currency) year on year. Our non-PC businesses are gaining momentum and now represent more than 37% of our revenue. Both solutions and services business and infrastructure business saw high double-digit revenue growth year on year,” says Yuanqing Yang, Chairman and CEO of Lenovo. “For Lenovo, these results prove that our strategic foresight, operational resilience, and consistent investment in diversified growth engines, have prepared us well for challenging times. Whether our traditional markets are booming or contracting, Lenovo consistently delivers on its commitments and outperforms market expectations.”

Solutions and Services Group (SSG): continued momentum, delivering sturdy development and better profitability for the Group

Opportunity:

The trillion-dollar IT companies market continues to develop steadily, with quicker development to be anticipated in DaaS (Device as a Service), Managed Services for knowledge middle, in addition to Cloud and Edge Environment via 2025. While on the identical time the marketplace for vertical options and companies spending is anticipated to stay sturdy, together with sensible schooling, sensible retail, sensible metropolis, and sensible manufacturing.

Q2 FY22/23 efficiency:

• In the final quarter, SSG income grew by 26% year-on-year, additional bettering its working margin to 21.4%.
• All segments once more delivered excessive profitability and powerful development.
• For the primary time, income from non-hardware-tied options and companies accounts for greater than half of SSG’s business.

Sustainable Growth:

• SSG continues to construct complete horizontal options for vertical industries, for instance, SSG’s Digital Store answer embedded with Lenovo AI Edge Server is now powering one of many world’s largest meals retailers to cut back over 75% of its self-checkout errors with out the necessity for worker intervention.
• Development of SSG’s portfolio of sustainability choices continues, with the CO₂ offset companies prolonged to extra merchandise.
• The newly shaped Lenovo PCCW Solutions, launched in August 2022, has achieved preliminary success with business synergies because it seems to be forward to future alternatives.

Infrastructure Solutions Group (ISG): breakthrough 12 months continues with file income and file profitability

Opportunity:

By 2025, the server market alone is anticipated to achieve US$134 billion. In the identical time-frame, the sting infrastructure market will develop over 21% CAGR to achieve US$47 billion, and the storage market will exceed US$36 billion.

Q2 FY22/23 efficiency:

• Record income of US$2.6 billion, up 33% year-on-year, with working revenue reaching an all-time excessive of US$36 million, marking the 4^th consecutive quarter of profitability.
• The Cloud Service Provider and Enterprise/SMB segments each outgrew the market forecast.
• Revenue from Edge Computing nearly quadrupled and Storage greater than doubled year-on-year, each setting new data.

Sustainable Growth:

• ISG continues to reinforce its complete infrastructure portfolio and put money into innovation, notably in Edge and Services.
• Operational resilience was additional strengthened, as manufacturing ramped up at new factories in China, Hungary, and Mexico.
• ISG stays centered on being one of many quickest rising and in the end the most important end-to-end infrastructure options supplier on the planet, whereas sustaining a sustainable, worthwhile business mannequin.

Intelligent Devices Group (IDG): maintained sturdy profitability, outperforming the competitors

Opportunity:

While the market dimension of PC and tablets declined within the brief time period, as a result of macroeconomic setting, long-term it’s nonetheless anticipated to stay larger than pre-pandemic ranges. Alongside PCs, the scenario-based options market will proceed to develop as Lenovo expands from sensible gadgets to sensible areas.

Q2 FY22/23 efficiency:

• IDG maintained industry-leading profitability of seven.4%, pushed by operational excellence and constant investments in improvements, notably within the excessive value-added premium segments.
• IDG outperformed key rivals and strengthened its world place because the #1 PC firm on the planet. It is now #1 in 4 out of 5 geographies, enlarging the hole with key rivals, and is clearly the undisputed #1 within the industrial phase which represents round 65% of Lenovo’s PC income combine.
• The smartphone business achieved its tenth consecutive quarter of profitability because it continues to complement its portfolio with modern new merchandise, on the identical time defending its sturdy market positions of #2 and #3 in Latin America and North America respectively and reaching hyper-growth in growth markets.
• Lenovo’s scenario-based options continued to show development potential with Smart Collaboration business persevering with to develop at excessive double-digit year-on-year. Revenue from the Gaming situation business set a brand new file.

Sustainable Growth:

• IDG continues to deal with innovation to drive the extension from sensible gadgets to sensible areas.
• The Group is assured that success within the PC market might be replicated to develop the business past PC and win in additional markets, notably the smartphone area.

Operational highlights and investing for the long run

Tech World ’22 – At its annual world innovation occasion, Lenovo shared its imaginative and prescient for the evolution of collaboration throughout customers, areas, and gadgets to unlock limitless potentialities in each real-world functions and the Metaverse. Lenovo unveiled new ideas, options, and rising improvements that can outline the way in which we work, be taught, and interact within the digital world. It additionally unveiled the findings of a world CTO analysis examine that uncovered CTO’s viewpoints on how conventional IT will proceed to evolve right into a ‘New IT’ structure the place shopper gadgets, edge computing, cloud computing, community and AI all work collectively to handle widespread ache factors and supply options that drive additional world digitalization throughout all industries.

Environmental, Social, Governance – Lenovo just lately revealed its annual ESG report outlining its progress, ambitions, and targets for the years forward. At Tech World ’22 Lenovo additional shared its imaginative and prescient for net-zero emissions, and its first step towards that imaginative and prescient with near-term 2030 emissions discount targets. Lenovo is aligning its emissions discount targets to the Science Based Targets initiative in each the close to and long-term to contribute to the targets of the Paris Agreement. External validation continues as Lenovo’s inaugural inexperienced bond that launched in July was included within the Bloomberg MSCI Green Bond Index, some of the essential world benchmarks for institutional ESG funds. Lenovo additionally acquired a prime AA+ score within the 2022 Hang Seng Corporate Sustainability Index, receiving the very best rating within the IT {industry} for the two^nd 12 months in a row.

Innovation – In September Lenovo was ranked one of many world’s most modern firms as a part of Boston Consulting Group’s annual index, rating twenty fourth. At Tech World ’22 the Group demonstrated numerous new modern kind components and concepts, together with its rollable proof of ideas for the smartphone and PC and immersive telepresence know-how ‘Cyber Spaces’. It additionally highlighted the improvements that can assist it notice its imaginative and prescient for net-zero, and the actions the corporate is taking throughout merchandise and manufacturing to decrease its carbon footprint.

[1] non-HKFRS measure was adjusted by excluding web honest worth adjustments on monetary belongings at honest worth via revenue or loss, amortization of intangible belongings ensuing from mergers and acquisitions, mergers and acquisitions associated prices; and the corresponding revenue tax results, if any.

About Lenovo

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$70 billion income world know-how powerhouse, ranked #171 within the Fortune Global 500, using 75,000 folks world wide, and serving hundreds of thousands of shoppers on daily basis in 180 markets. Focused on a daring imaginative and prescient to ship smarter know-how for all, Lenovo has constructed on its success because the world’s largest PC firm by additional increasing into key development areas together with server, storage, cell, options and companies. This transformation along with Lenovo’s world-changing innovation is constructing a extra inclusive, reliable, and sustainable digital society for everybody, in every single place. To discover out extra go to https://www.lenovo.com,and learn in regards to the newest information by way of our StoryHub.

LENOVO GROUP

FINANCIAL SUMMARY

For the quarter ended September 30, 2022

(in US$ hundreds of thousands, besides per share knowledge)

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