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992 - Lenovo News Story

HK$4.73 -0.1  -1.5%

Last Trade - 07/08/20

Large Cap
Market Cap £5.58bn
Enterprise Value £7.87bn
Revenue £38.58bn
Position in Universe 231st / 5983

BREAKINGVIEWS-Corona Capital: French cars, Computers, Panties

Wed 20th May, 2020 11:12am
(The authors are Reuters Breakingviews columnists.  The
opinions expressed are their own.)
    By Breakingviews columnists
    LONDON/HONG KONG, May 20 (Reuters Breakingviews) - Corona
Capital is a daily column updated throughout the day by
Breakingviews columnists around the world with short, sharp
pandemic-related insights.
    – Renault
    – Lenovo
    – Marks and Spencer
    PEDAL TO THE METAL. Covid-19 is finally forcing the French
state to act like a regular shareholder. Earlier this month
Finance Minister Bruno Le Maire declared that French automakers
would have to bring more production back home if they wanted
government support. Perhaps Clotilde Delbos, the interim chief
executive of Renault  RENA.PA , in which the government has a
15% stake, didn’t get the “dirigiste” memo.
    On Wednesday, the Clio maker agreed to 5 billion euros in
state-guaranteed loans to bolster liquidity – while also
considering shutting factories in Brittany and Dieppe, according
to a report in Les Echos, as it seeks to cut annual costs by 2
billion euros.
    Le Maire’s boss, ex-investment banker President Emmanuel
Macron, will appreciate the importance of a quid pro quo. His
privatisation programme may be on ice. But if state-backed
companies can properly restructure – even at the cost of French
jobs – then his government stands to gain in the long term. (By
Christopher Thompson)
    POWERED UP. Lenovo  0992.HK , China’s $7 billion maker of
personal computers, posted a 64% fall in net profit for its
fourth quarter, but still beat estimates. Net cash generated
from operating activities was $2.2 billion in the fiscal year,
compared to $1.5 billion a year ago, while net debt was reduced
by 25% year-on-year. Even as the mobile business unit suffered a
hit on the back of factory shutdowns, the company is hoping that
demand for PCs, smart devices and servers will rise as people
telecommute more, even after the pandemic ends.
    Total server volume expanded 14% year-over-year in the
fourth quarter, suggesting rising data consumption could indeed
help fuel a recovery. But optimism about working from home,
which has boosted shares in companies like Zoom Video
Communications  ZM.O , hasn’t helped Lenovo. The stock has
fallen some 17% year-to-date. A telework boom might not be
enough. (By Sharon Lam)
    LOST ITS SPARK. Marks and Spencer  MKS.L  is promising to
“never be the same again”. It’s an odd slogan from a company
that was once a household favourite for its underwear but lost
85% of its market value in the past five years. And its bleak
scenario for the year ahead suggests no return to glory. Unlike
peers that have shied away from offering guidance, Chief
Executive Steve Rowe reckons over the next year clothes sales
could decline by 70%, but crucially its food business could also
see a 20% drop.
    Poor performance amid the coronavirus pandemic is tough for
a grocer to explain. Rivals J Sainsbury  SBRY.L  and Tesco
 TSCO.L  enjoyed record sales in March. M&S’s best hope for
recovery is its partnership with delivery group Ocado  OCDO.L ,
allowing it to compete online. But given it’s only aiming to
sell a third of its clothes that way, investors should take its
latest slogan at face value. (By Aimee Donnellan)
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 (Editing by Neil Unmack and Karen Kwok)
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