LENOVO GROUP(00992)2023-02-17 04:01Revenue and Profit Performance - Revenue for the third quarter decreased by 24% year-over-year to $15.267 billion, with currency exchange contributing a 6% negative impact[3][5] - For the nine months ended December 31, 2022, the company reported total revenue of $49.312 billion, a 10% YoY decrease, with net profit attributable to equity holders at $1.494 billion, down 8% YoY[16] - Q3 2022/23 revenue was $15.27 billion, a 24% decrease YoY, with a gross margin of 17.1%, up 0.4 percentage points[22] - Net profit attributable to equity holders in Q3 2022/23 was $437 million, a 32% decrease YoY, with basic and diluted earnings per share at 3.65 cents and 3.44 cents, respectively[22] - Total revenue for the nine months ended December 31, 2022, was $49.31 billion, with a pre-tax profit of $2.01 billion, down from $2.25 billion in the same period last year[21] - Revenue from the Intelligent Devices Group decreased to $39.58 billion, a 16.9% decline compared to $47.61 billion in the previous year[50] - Operating profit for the Intelligent Devices Group dropped to $2.94 billion, down 18.7% from $3.61 billion in the prior year[50] - Infrastructure Solutions Group revenue increased by 31.8% to $7.56 billion, up from $5.73 billion[50] - Solutions and Services Group revenue grew by 23.9% to $5.01 billion, compared to $4.05 billion in the previous year[50] - Total revenue for the nine months ended December 31, 2022, was $49.31 billion, a 10.2% decrease from $54.92 billion in the same period last year[50] - Revenue from China declined by 15.7% to $12.42 billion, down from $14.74 billion[51] - Americas revenue decreased by 3.9% to $16.80 billion, compared to $17.48 billion in the previous year[51] - The company's revenue for the three months ended December 31, 2022, was $15.266 billion, with a gross profit of $2.612 billion and an operating profit of $749.956 million[40] - The company's revenue for the nine months ended December 31, 2022, was $49.311 billion, with a gross profit of $8.357 billion and an operating profit of $2.378 billion[40] - The company's net profit for the three months ended December 31, 2022, was $481.943 million, with earnings per share of 3.65 cents (basic) and 3.44 cents (diluted)[40] - The company's net profit for the nine months ended December 31, 2022, was $1.575 billion, with earnings per share of 12.57 cents (basic) and 11.68 cents (diluted)[40] - Net profit for the three months ended December 31, 2022, was $481.943 million, compared to $681.708 million for the same period in 2021[41] - Total comprehensive income for the nine months ended December 31, 2022, was $716.664 million, compared to $1.700405 billion for the same period in 2021[41] - The company's profit attributable to equity holders for the three months ended December 31, 2022, was $437.201 million, and $1.494 billion for the nine months ended December 31, 2022[61] Business Group Performance - Non-PC business accounted for 41% of the group's total revenue, with the Solutions and Services Group (SSG) and Infrastructure Solutions Group (ISG) achieving record revenues[3][5] - SSG revenue and operating profit grew by 23% and 12% respectively, driven by service-led transformation and growth opportunities in "as-a-service," hybrid cloud, and ESG[3] - ISG revenue increased by 48%, with profit surging 156%, supported by a growing customer base, product portfolio, and ODM+ business model[3] - Intelligent Devices Group (IDG) sales declined by 34% due to weak market demand, but maintained industry leadership in market share and profitability[3][5] - Smart Devices Business Group revenue and operating profit decreased by 34% and 37% respectively, with PC shipments slowing to pre-pandemic levels due to reduced demand and channel inventory surplus[7] - Smart Devices Business Group maintained a global market share of 23% by shipment volume, leading in three out of four major regional markets in the PC sector[7] - Infrastructure Solutions Business Group revenue grew 48% YoY to a record $2.9 billion, with operating profit surging over 150% to $43 million[8] - Infrastructure Solutions Business Group achieved high double-digit growth in server sales and more than doubled storage revenue YoY[8] - Solutions and Services Business Group revenue and operating profit increased by 23% and 12% respectively to $1.8 billion and $370 million, with an operating margin of 20.2%[9] - Solutions and Services Business Group's maintenance services revenue nearly doubled YoY, while project and solution services revenue grew by 7%[9] - In the Americas, Infrastructure Solutions Business Group revenue grew 1.5 times YoY, while Solutions and Services Business Group maintained stable growth with high penetration rates[10] - In China and Asia Pacific (excluding China), Solutions and Services Business Group revenue grew by high double digits and nearly 50% respectively[10] - In Europe-Middle East-Africa, Solutions and Services Business Group achieved double-digit YoY growth through expanded delivery footprint and product differentiation[11] - Infrastructure Solutions Business Group has established industry-leading end-to-end infrastructure solutions, expanding to include full-stack products such as servers, storage, and software, targeting growth opportunities in AI-driven edge, hybrid cloud, HPC, and telecom/communication solutions[13] - The company's ODM+ business model in cloud service IT infrastructure aims to meet the growing demand for vertically integrated supply chains, balancing general-purpose and customized products to enhance revenue and profitability[13] - Global economic challenges and market demand shifts have increased the need for high-end, TruScale as-a-service, sustainability, and vertical solutions, with a focus on asset lifecycle management and outsourcing services[13] - Smart Devices Business Group revenue was $39.58 billion with an operating profit of $2.94 billion, while Infrastructure Solutions Business Group revenue was $7.56 billion with an operating profit of $90.59 million[21] - Intelligent Devices Group revenue decreased to $11.585682 billion from $17.609684 billion, with operating profit dropping to $848.052 million from $1.351744 billion[26] - Infrastructure Solutions Group revenue increased to $2.855147 billion from $1.928783 billion, with operating profit rising to $43.276 million from $16.884 million[26] - Total revenue decreased to $16.277264 billion from $21.036088 billion, with total operating profit dropping to $1.261781 billion from $1.70078 billion[26] - LPS contributed $219 million in revenue and $22 million in pre-tax profit to the company's performance for the nine months ended December 31, 2022[93] Financial Position and Cash Flow - Net cash increased by $500 million year-over-year to $581 million, with the cash conversion cycle shortened by 13 days[3][5] - Inventory decreased by over $900 million both quarter-over-quarter and year-over-year, reflecting optimized operations[5] - Operating expenses decreased by 11% YoY, driven by a $610 million reduction in employee benefits and a $116 million decrease in advertising and promotional expenses[18] - The company recorded a strategic investment fair value gain of $115 million, reflecting changes in the value of its investment portfolio[18] - R&D expenses increased to $1.645 billion for the nine months ended December 31, 2022, up from $1.497 billion in the same period last year[17] - The company's gross margin improved by 0.2 percentage points to 16.9%, despite a 9% YoY decline in gross profit to $8.358 billion[16] - Financial expenses increased by 65% YoY due to factoring costs, higher market interest rates, and interest on issued notes and convertible bonds, with factoring costs rising by $138 million, bank loan and overdraft interest by $25 million, and note interest by $22 million[20] - Operating expenses in Q3 2022/23 decreased by 23% YoY to $1.86 billion, driven by reductions in employee benefits, advertising, and net exchange losses[23] - Employee benefit costs decreased by $286 million due to lower performance bonuses and sales commissions[23] - Advertising and promotional expenses decreased by $92 million due to budget control and cost-saving strategies[23] - Net exchange losses decreased by $34 million due to currency fluctuations[23] - Property, plant, and equipment depreciation increased to $49.693 million from $42.658 million year-over-year[24] - Employee benefit costs decreased to $949.977 million from $1.23597 billion, with long-term incentive plan costs dropping to $84.83 million from $94.003 million[24] - Advertising and promotional expenses decreased to $229.641 million from $321.343 million[24] - R&D-related laboratory testing, services, and supplies costs decreased to $101.735 million from $165.793 million[24] - Financial expenses increased to $184.809 million from $90.997 million due to higher factoring costs, bank loan interest, and note interest[24] - Headquarter and corporate expenses decreased to $254.39 million from $484.649 million, primarily due to reduced employee benefit costs and lower net exchange losses[26] - Adjusted profit excludes fair value changes of financial assets, amortization of intangible assets from acquisitions, and acquisition-related costs for a more meaningful assessment of current operating performance[27] - Lenovo's capital expenditures for the nine months ended December 31, 2022, amounted to $1.204 billion, primarily used for property, plant, and equipment, new construction projects, and intangible assets, reflecting increased investment in patents, technology, and software[31] - Total assets as of December 31, 2022, were $41.749 billion, with equity attributable to company shareholders at $5.325 billion and total liabilities at $35.945 billion[32] - Cash, cash equivalents, and bank deposits totaled $5.081 billion as of December 31, 2022, with 47.1% in USD, 23.1% in CNY, and 19.2% in other currencies[33] - Lenovo's liquidity ratio improved to 0.90 as of December 31, 2022, compared to 0.89 as of March 31, 2022[32] - Non-Hong Kong Financial Reporting Standards (HKFRS) adjustments for the nine months ended December 31, 2022, included $174.904 million in amortization of intangible assets from acquisitions and $139.030 million in acquisition-related costs[29] - For the three months ended December 31, 2022, Lenovo reported operating profit of $749.956 million, with non-HKFR adjustments including $53.345 million in amortization of intangible assets from acquisitions and $(74.130) million in acquisition-related costs[30] - Lenovo's cash management strategy as of December 31, 2022, allocated 74% of cash to bank deposits and 26% to investment-grade liquid money market funds[33] - The company's total credit facilities as of December 31, 2022, include trade credit facilities of $4.307 billion, short-term money market credit of $1.856 billion, and forward foreign exchange contracts of $11.152 billion[35] - The company's outstanding notes, convertible bonds, and convertible preferred shares as of December 31, 2022, include $487 million in 2023 notes, $220 million in 2024 convertible bonds, $40 million in convertible preferred shares, $1 billion in 2025 notes, $929 million in 2030 notes, $625 million in 2028 notes, $610 million in 2032 notes, and $675 million in 2029 convertible bonds[36] - The company's net cash position as of December 31, 2022, was $581 million, with total equity of $5.803 billion and a loan-to-equity ratio of 0.78[37] - The company's forward foreign exchange contracts for hedging purposes amounted to $11.094 billion as of December 31, 2022, down from $12.447 billion as of March 31, 2022[38] - The company's total credit facilities as of December 31, 2022, include trade credit facilities of $4.307 billion, short-term money market credit of $1.856 billion, and forward foreign exchange contracts of $11.152 billion[35] - The company's outstanding notes, convertible bonds, and convertible preferred shares as of December 31, 2022, include $487 million in 2023 notes, $220 million in 2024 convertible bonds, $40 million in convertible preferred shares, $1 billion in 2025 notes, $929 million in 2030 notes, $625 million in 2028 notes, $610 million in 2032 notes, and $675 million in 2029 convertible bonds[36] - Property, plant, and equipment increased to $1.926875 billion as of December 31, 2022, from $1.636629 billion as of March 31, 2022[42] - Intangible assets rose to $8.184558 billion as of December 31, 2022, from $8.066785 billion as of March 31, 2022[42] - Total assets decreased to $41.748642 billion as of December 31, 2022, from $44.510444 billion as of March 31, 2022[42] - Total equity increased to $5.803451 billion as of December 31, 2022, from $5.394701 billion as of March 31, 2022[43] - Non-current liabilities rose to $7.027958 billion as of December 31, 2022, from $6.357008 billion as of March 31, 2022[43] - Current liabilities decreased to $28.917233 billion as of December 31, 2022, from $32.758735 billion as of March 31, 2022[43] - Total liabilities decreased to $35.945191 billion as of December 31, 2022, from $39.115743 billion as of March 31, 2022[43] - Operating activities generated a net cash flow of $2,557,035 thousand, compared to $2,614,505 thousand in the same period last year[44] - Net cash used in investing activities was $1,601,026 thousand, an increase from $924,270 thousand in the previous year[44] - Net cash generated from financing activities was $315,351 thousand, compared to a net cash outflow of $1,007,247 thousand in the prior year[44] - Cash and cash equivalents increased by $1,271,360 thousand, up from $682,988 thousand in the same period last year[44] - The company paid $578,795 thousand in dividends, compared to $478,822 thousand in the previous year[44] - The company issued $1,250,000 thousand in notes, compared to no issuance in the prior year[44] - The company repaid $9,750,951 thousand in loans, compared to $7,998,980 thousand in the previous year[44] - The company acquired $403,216 thousand in subsidiaries, net of cash acquired, compared to $114,312 thousand in the prior year[44] - The company paid $365,814 thousand for intangible assets, compared to $260,720 thousand in the previous year[44] - The company received $148,765 thousand from the sale of financial assets at fair value through profit or loss, compared to $99,614 thousand in the prior year[44] - The company's net profit for the period was $1,494,115 thousand, with a total comprehensive income of $716,664 thousand[45] - The company acquired subsidiaries and associates for a total of $108,426 thousand ($64,503 thousand for subsidiaries and $13,902 thousand for associates)[45] - The company issued convertible bonds amounting to $138,243 thousand and repurchased convertible bonds worth $102,664 thousand[45] - Dividends paid to shareholders amounted to $578,795 thousand, and dividends paid to non-controlling interests were $29,385 thousand[45] - The company's equity attributable to shareholders at the end of the period was $4,661,444 thousand, compared to $3,803,207 thousand at the beginning of the period[45] - The company's financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and are consistent with the accounting policies of previous fiscal years[47] - The company's financial data is extracted from the consolidated financial statements and is prepared in accordance with the Hong Kong Stock Exchange Listing Rules Appendix 16[47] - Inventory as of December 31, 2022, was $7.502 billion, compared to $8.301 billion as of March 31, 2022[63] - Trade receivables and bills receivable as of December 31, 2022, were $9.288 billion, compared to $11.290 billion as of March 31, 2022[64] - Overdue trade receivables net of impairment allowance as of December 31, 2022, were $1.033 billion, compared to $784.9 million as of March 31, 2022[66] - Trade payables and bills payable as of December 31, 2022, were $10.837 billion, compared to $13.185 billion as of March 31, 2022[67] - Deposits, prepayments, and other receivables as of December 31, 2022, were $3.934 billion, compared to $5.014 billion as of March 31, 2022[69] - Other payables and accrued expenses as of December 31, 2022, were $14.215 billion, compared to $15.745 billion as of March 31, 2022[70] - Warranty provision at the end of December 31, 2022, was $976.122 million, with environmental restoration provision at $3.99 million, totaling $980.112 million[72] - Environmental restoration provision is reviewed at least annually to ensure it adequately covers the company's obligations[73] -