Press release

Lenovo Achieves Record Revenue for FY18/19 Driven by Success of Intelligent Transformation Strategy and Strong Operational Performance

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Lenovo Group (HKSE: 0992) (PINK SHEETS: LNVGY) today announced
strong results delivering on the company’s Intelligent Transformation
strategy and highlighting its leadership across all segments. For the
first time, the global company delivered full-year revenue exceeding
US$50 billion, up 12.5% to a record-breaking US$51 billion.

The significant increase in profitability includes full-year pre-tax
income up four and a half times (459%) year-on-year at US$856 million
and net income at US$597 million, up US$786 million from negative US$189
million last year.

The full-year performance included a notably strong fourth quarter
characterized by improving revenue and profit across all businesses.
Revenue grew by 10% year-on-year and reached US$11.7 billion. Pre-tax
income was US$180 million, up almost four times year-on-year (US$143
million, +389%) and net income was US$118 million (up US$85 million,
+261%).

Basic earnings per share for the full year were 5.01 US cents or 39.2 HK
cents, and for the fourth quarter the figure was 1.00 US cents or 7.85
HK cents. Lenovo’s Board of Directors declared a final dividend of 2.78
US cents or 21.8 HK cents per share for the fiscal year ended March 31,
2019.

“Lenovo’s solid financial performance is the result of persistent
execution of our transformation strategy. At a time of great global
change – economically, socially and environmentally – we continue to
focus on how we ‘intelligently transform’ ourselves and enable our many
customers around the world successfully to do the same. I am proud of
our strong results and confident in how we will climb to new heights in
the future,” said Yang Yuanqing, Lenovo Chairman and CEO.

Business Group Overview

The Intelligent Devices Group (IDG) continues to lead the
industry. Driven by Lenovo’s Smart IoT strategy, it saw revenue grow by
almost double digits for the full year (up 9.9%) and pre-tax income more
than doubled (109%) year-on-year to US$1,843 million for the same period.

The PC and Smart Devices group (PCSD), one of IDG’s two business
units, delivered a record full year revenue of US$38.5 billion, with
pre-tax income of US$1.98 billion. Through customer innovation, Lenovo
is the #1 PC company in the world (according to IDC) with record market
share of 23.4% for the fiscal year and remains the fastest growing among
the top five players (+9.5% year-on-year). Challenging the status quo
and rethinking form factors and user experiences have resulted in
numerous technology breakthroughs in the past fiscal year, notably and
most recently the May 13 announcement of the world’s first PC with a
foldable screen.

The second IDG business unit, the Mobile Business Group (MBG),
improved pre-tax income by US$464 million year-on-year and was
profitable starting from the second half of the year thanks to a clear
focus on selected markets, a competitive product portfolio and expense
control.

Prioritized regions saw rapid growth, including a record share of 17.6%
in Latin America. In North America, volume outgrew the market by 59.2
points and in China by 185.8 points premium to market. In the rest of
the world inventory was cleared with notable profit improved – paving
the way for a return to growth.

The Data Center Group (DCG) achieved the fastest year-on-year
growth since the acquisition of the x86 server business, growing 37%
with record full year revenue of US$6.02 billion. This was led by strong
growth of the Hyperscale and Software Defined Infrastructure, which had
revenue growth of 240% and 96% year-on-year respectively.

Lenovo remains #1 in the world in performance with 139 world records, #1
in x86 reliability and customer satisfaction according to ITIC
(Information Technology Intelligence Consulting), TBR (Technology
Business Research) and other industry benchmarks, and the #1 provider of
supercomputers in the TOP500 list.

Additional Highlights

During the course of the year, the Lenovo Capital and Incubator Group
successfully divested interests in three investments and contributed
US$107 million to the group’s pre-tax income. For the full fiscal year,
revenue from Software & Services reached US$2.4 billion, up
18.9% year-on-year.

Q4 highlights:

  • PCSD revenue grew 10.3% year-on-year; in PC volume grew 9%
    year-on-year, 12 points premium to market. The business regained #1 in
    consumer and strengthened its #1 leadership position in Commercial
    Notebook PCs over the US$800 price range with 34% year-on-year growth.
  • MBG was profitable for the second consecutive quarter, improving
    pre-tax income by US$146 million year-on-year; revenue returned to
    year-on-year growth for the first time after five quarters, at 15.1%
    year-on-year and outgrew the market by 26.8 points. The quarter also
    saw the company bring the world’s first 5G mobile product to stores.
  • DCG business revenue and profit continue to improve year-on-year
    despite tough market conditions. The joint venture with NetApp in
    China is now operational and showing early signs of success

About Lenovo

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$50 billion Fortune Global 500
company, with 57,000 employees and operating in 180 markets around the
world. Focused on a bold vision to deliver smarter technology for all,
we are developing world-changing technologies that create a more
inclusive, trustworthy and sustainable digital society. By designing,
engineering and building the world’s most complete portfolio of smart
devices and infrastructure, we are also leading an Intelligent
Transformation – to create better experiences and opportunities for
millions of customers around the world. To find out more visit https://www.lenovo.com,
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LENOVO GROUP

FINANCIAL SUMMARY

For the fiscal quarter and full year ended March 31, 2019

(in US$ millions, except per share data)

   

Q4 FY18/19

Q4 FY17/18


Y/Y CHG
 
FY18/19

Y/Y CHG
Revenue 11,710 10,638 10% 51,038 13%
Gross profit 1,895 1,544 23% 7,371 18%
Gross profit margin 16.2% 14.5% 1.7pts 14.4% 0.6pts
Operating expenses (1,622) (1,443) 12% (6,193) 5%
Expensesto-revenue ratio 13.9% 13.6% 0.3pts 12.1% -0.9pts
Operating profit 273 101 172% 1,178 205%
Other non-operating expenses – net (93) (64) 46% (322) 38%
Pre-tax income 180 37 389% 856 459%
Taxation (46) 12 N/A (199) -29%
Profit for the period/year 134 49 176% 657 N/A
Non-controlling interests (16) (16) -2% (60) -3%
Profit attributable to equity holders 118 33 261% 597 N/A
Earnings per share (US cents)
Basic
Diluted

1.00

0.96

0.28

0.28

0.72

0.68

5.01

4.96

N/A

N/A