Lenovo 2011 Annual Report Download - page 22

MANAGEMENT’S DISCUSSION & ANALYSIS
2010/11 Annual Report Lenovo Group Limited
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CAPITAL EXPENDITURE
The Group incurred capital expenditures of US$148 million (2010: US$108 million) during the year ended March 31, 2011, mainly for
the acquisition of office equipment, completion of construction-in-progress and investments in the Group’s information technology
systems.
LIQUIDITY AND FINANCIAL RESOURCES
At March 31, 2011, total assets of the Group amounted to US$10,706 million (2010: US$8,956 million), which were financed by
equity attributable to owners of the Company of US$1,835 million (2010: US$1,606 million), non-controlling interests of US$179,000
(2010: US$177,000), and total liabilities of US$8,871 million (2010: US$7,350 million). At March 31, 2011, the current ratio of the
Group was 0.99 (2010: 0.97).
The Group had a solid financial position and continued to maintain a strong and steady cash inflow from its operating activities. At
March 31, 2011, bank deposits, cash and cash equivalents totaled US$2,997 million (2010: US$2,439 million), of which 53.9 (2010:
42.9) percent was denominated in US dollars, 37.1 (2010: 46.6) percent in Renminbi, 0.7 (2010: 1.6) percent in Euros, 0.4 (2010:
0.2) percent in Japanese Yen, and 7.9 (2010: 8.7) percent in other currencies.
The Group adopts a conservative policy to invest the surplus cash generated from operations. At March 31, 2011, 75.6 (2010:
78.2) percent of cash are bank deposits, and 24.4 (2010: 21.8) percent of cash are investments in liquid money market funds of
investment grade.
Although the Group has consistently maintained a very liquid position, banking facilities have nevertheless been put in place for
contingency purposes.
The Group had a US$300 million 3-year loan facility with a bank in China. At March 31, 2010 and 2011, it was utilized to the extent
of US$200 million and expires in March 2012.
In addition, the Group has entered into another 5-Year loan facility agreement with a bank of US$300 million on July 17, 2009. The
facility has not been utilized as at March 31, 2011 (2010: Nil).
On February 2, 2011, the Group entered into a 5-Year loan facility agreement for US$500 million. The facility has not been utilized as
at March 31, 2011.
The Group has also arranged other short-term credit facilities. At March 31, 2011, the Group’s total available credit facilities
amounted to US$5,570 million (2010: US$4,936 million), of which US$331 million (2010: US$276 million) was in trade lines, US$475
million (2010: US$485 million) in short-term and revolving money market facilities and US$4,764 million (2010: US$4,175 million) in
forward foreign exchange contracts. At March 31, 2011, the amounts drawn down were US$201 million (2010: US$191 million) in
trade lines, US$3,190 million (2010: US$2,641 million) being used for the forward foreign exchange contracts; and US$72 million
(2010: US$65 million) in short-term bank loans.
At March 31, 2011, the Group’s outstanding bank loans represented the term loans of US$200 million (2010: US$430 million) and
short-term bank loans of US$72 million (2010: US$65 million). At March 31, 2010, short-term bank loans of US$28 million were
secured by the same amount of bank deposits. The security was released following repayment of the loan during the year. When
compared with total equity of US$1,835 million (2010: US$1,606 million), the Group’s gearing ratio was 0.15 (2010: 0.31). The net
cash position of the Group at March 31, 2011 is US$2,725 million (2010: US$1,944 million) of which US$20 million is restricted bank
deposit (2010: Nil).
The Group is confident that all the loan facilities on hand can meet the funding requirements of the Group’s operations and business
development.