1 August 2023
XP
Power Limited
Interim
Results for the six months ended 30 June
2023
Significantly
improved performance, full year outlook unchanged, longer term
outlook continues to be very strong
XP Power,
one of the world's leading developers and manufacturers of critical
power control solutions for the Industrial Technology, Healthcare
and Semiconductor Manufacturing Equipment sectors, today announces
its interim results for the six months ended 30 June 2023.
|
Six months
ended 30 June 2023
|
Six months
ended 30 June 2022
|
% change
actual exchange rate
|
% change
constant exchange rate
|
Order
intake
|
£115.6m
|
£193.1m
|
(40)%
|
(44)%
|
Revenue
|
£160.2m
|
£123.6m
|
30%
|
24%
|
Gross
margin
|
41.8%
|
40.2%
|
160bps
|
160bps
|
Total
dividend per share
|
37.0p
|
37.0p
|
-%
|
|
Adjusted
|
|
|
|
|
Adjusted
operating profit1
|
£21.8m
|
£15.0m
|
45%
|
36%
|
Adjusted
profit before tax1
|
£15.8m
|
£13.8m
|
14%
|
-%
|
Adjusted
diluted earnings per share1
|
59.1p
|
52.2p
|
13%
|
|
Reported
|
|
|
|
|
Operating
profit/(loss)
|
£17.3m
|
£(45.2)m
|
138%
|
|
Profit/(loss)
before tax
|
£10.9m
|
£(47.4)m
|
123%
|
|
Diluted
earnings/(loss) per share
|
38.7p
|
(180.6)p
|
121%
|
|
Operating
cash flow
|
£27.5m
|
£(13.1)m
|
310%
|
|
Net
debt
|
£148.4m
|
£102.0m
|
45%
|
|
1For
details on adjusted measures refer to note 5 and note 8 of the
consolidated financial statements.
Highlights:
-
The trading performance in
the last four quarters to June 2023
was much improved as supply chain conditions stabilised, and better
reflects the Group’s capability.
-
Revenue in the first half
grew 30% compared to the prior year on a reported basis and 24% at
constant currency, with good performances in all sectors and
improving run rate momentum during the first
half.
-
The Group had an order
book of circa £250 million at the end of the period, which remains
well above historic levels and provides good full year
visibility.
-
As previously highlighted,
and consistent with the end of 2022, order intake was below
revenue, with a book to bill of 0.72x. Customers moderated ordering
from the unprecedented levels seen in 2021 and the first half of
2022, reflecting an easing of supply chain constraints and a
softening of end market demand.
-
Gross margin
increased by
160bps to 41.8%, benefiting from supply chain stabilisation,
operational leverage and prior year price increases. This is
expected to improve further in H2 and recover to historic levels
over the medium term.
-
Adjusted operating profit
of £21.8 million, a margin of 13.6%, was 36% higher on a constant
currency basis and 45% as reported. There is still a level of
disruption caused by availability of key components, but we are
seeing improvement.
-
Net debt of £148.4 million
was as expected, and represents a modest reduction from the end of
2022. The reduction reflects improved profitability and the start
of the unwind of working capital which is expected to continue
through 2023 and 2024 as inventory levels
normalise.
-
Net debt/EBITDA leverage
reduced to 2.3x at the end of H1, down from 2.7x at prior year end,
and we continue to expect progress towards 2x by
year-end.
-
The dividend for the
second quarter of 19.0 pence per
share is in line with the prior year and together with the first
quarter dividend of 18.0 pence per
share, brings the total first half dividends declared to
37.0 pence per share (H1 2022: total
dividends 37.0
pence).
-
Our first Net Zero
Transition Plan is being published today. The Plan details how we
will meet our 2040 net zero commitment, and includes key actions,
metrics, and policies in areas such as product R&D, operations
and waste management.
-
The appointment of
Matt Webb as Chief Financial Officer
with effect from 4 September 2023, is
being announced separately today. Matt will be appointed as an
Executive Director of the Board at the Board meeting currently
scheduled for 5 October
2023.
-
The Comet legal action in
the US remains ongoing. An appeal against the damages awarded
against the Group was filed in April
2023 and is expected to be considered in the next 12-18
months. The damages and an estimate of fees were provided for in
2022. As our first half performance demonstrates, it is not
distracting the wider business from the continuing delivery of its
strategy.
-
Full year expectations are
unchanged with, as guided, a modest second half
weighting.
Jamie Pike, Chair, commented:
“We are
encouraged by our improving trading performance over the last 12
months but are working hard to drive further progress. While the
supply chain picture has improved, some residual issues persist and
we have seen some softening of end market demand. Despite the short
term challenges, the Group continues to invest in its future
through ongoing product development and a significant increase in
manufacturing capacity in Asia. We
anticipate strong revenue growth over the medium to long term as we
take advantage of the robust growth trends across our
markets.
For the
second half of 2023, we have a good order book and significant
visibility, and while mindful of the ongoing challenges, our full
year outlook is unchanged. XP is a strong business with a clear
strategic focus and we remain excited about the growth
opportunities in front of us.”
Enquiries:
XP
Power
Gavin Griggs, Chief Executive Officer +44
(0)118 976 5155
David Stibbs, Interim Chief Financial
Officer
+44 (0)118
976 5155
Citigate
Dewe Rogerson
Kevin Smith/ Lucy
Gibbs +44
(0)20 7638 9571
Notes to editors:
XP
Power designs and manufactures power controllers, the essential
hardware component in every piece of electrical equipment that
converts power from the electricity grid into the right form for
equipment to function. Power controllers are critical for optimal
delivery in challenging environments but are a small part of the
overall customer product cost.
XP
Power typically designs power control solutions into the end
products of major blue-chip OEMs, with a focus on the Industrial
Technology (circa 43% of sales in H1 2023), Healthcare (circa 23%
sales in H1 2023) and Semiconductor Manufacturing Equipment (circa
34% of sales in H1 2023) sectors. Once designed into a programme,
XP Power has a revenue annuity over the life cycle of the
customer’s product which is typically five to seven years depending
on the industry sector. XP Power has invested in research and
development and its own manufacturing facilities in China, North
America, and Vietnam, to
develop a range of tailored products based on its own intellectual
property that provide its customers with significantly improved
functionality and efficiency.
Headquartered
in Singapore and listed on the
Main Market of the London Stock Exchange since 2000, XP Power is a
constituent of the FTSE All Share Index. XP Power serves a global
blue-chip customer base from over 30 locations in Europe, North
America, and Asia.
For
further information, please visit xppowerplc.com
INTERIM
STATEMENT
H1
Overview
We are
pleased with our first half performance, which continues the
improving trend established in the second half of the previous
year. Whilst we are encouraged by the headway we have made, we
believe we can do better and are working hard to deliver further
progress in the balance of the year.
The Group
delivered strong revenue growth across all sectors as supply chain
conditions eased, allowing us to increase production and begin to
deliver on our order backlog. As expected, revenue growth improved
sequentially in the second quarter, partly due to normal seasonal
factors but also reflecting growing operational momentum across the
period. Our growth also benefited from price increases that were
implemented in 2022 working through as orders entered production
phase. Revenue for the period was £160.2 million (2022: £123.6
million).
The higher
revenue combined with, as expected, lower order intake saw our
backlog reduce to circa £250 million. Our order book remains well
above historic levels, at around 9 to 10 months, and we would
expect a further reduction in the second half of 2023. The lower
order intake of £115.6 million reflects two factors; an expected
moderation of demand from certain customers who had ordered at
unprecedented levels in 2021 and 2022 but who are now reducing
their own inventory as supply chains ease; and lower demand in the
Industrial Technology and Semiconductor Manufacturing Equipment
sectors. We continue to expect order intake to improve during the
latter part of 2023 and into 2024, even if macroeconomic conditions
are challenging, supported by recovery of the semiconductor
market.
Adjusted
operating profit of £21.8 million for the first half was much
improved on the soft prior year comparator of £15.0 million,
largely driven by operational leverage, but below the very strong
second half performance in 2022, as expected. Our operational
performance continues to trend positively as supply chain issues
ease but there is room for further improvement as conditions become
more predictable. We estimate that prior year price increases have
largely offset inflation in the period and expect margin to improve
further in the second half of the year as costs normalise and we
see further benefit from the price increases we have passed on to
our customers.
Improving
cash generation remains a priority for the Group. We made modest
progress in the first half of 2023 with work still to do,
especially on inventory, and further benefits to come. Inventory
remains above historic levels, with upside to come from a reduction
in safety stocks on the assumption that supply chains continue to
stabilise.
While our
period end financial leverage at 2.3x net debt/EBITDA remains above
our target range of 1-2x it has reduced from the 2022 full year,
and remains well within our banking covenants. We continue to
invest to support our long term growth ambitions and we have
increased capital expenditure meaningfully, as guided, to
facilitate the construction of the new Malaysian factory and to
relocate to new, larger facilities in California. These investments reflect the
Board’s confidence in our prospects and are part of our detailed
business growth plans.
Sector
performance
XP
Power serves
three distinct market sectors:
-
Industrial Technology,
which represented 43% of total H1 2023 revenue (H1 2022:
40%)
-
Semiconductor
Manufacturing Equipment 34% (H1 2022: 41%) and;
-
Healthcare 23% (H1 2022:
19%)
In each
sector we focus our resource on key accounts where customers value
our quality and high level of service and support, particularly
during the critical design-in stage. The addressable market in
these sectors is significant and we have leading positions in each
of them. We have a proven track record of outperforming the overall
sector growth rate and gaining market share.
Industrial
Technology
The
Industrial Technology sector saw a continued normalisation of order
intake in the period, combined with some destocking at our direct
and distribution customers. Orders were £51.2 million, 38% below
the prior year, an exceptional period when supply chain issues
temporarily drove orders to unprecedented levels. Revenue was £68.7
million up 30% as reported on the equivalent prior year period as
we made excellent progress with the delivery of our backlog. The
sector also benefited from improved availability of components in
the supply chain. We are bringing on a new ‘design-in’ distributor
to target new areas within the key European markets with increased
on the ground resources and expect good revenue performance and
improving order trends in the second half of the year.
Semiconductor
Manufacturing Equipment
As
expected, orders in Semiconductor Manufacturing Equipment were
weaker as a result of the global semiconductor market slowdown, but
we have seen areas of continued demand strength with some of our
key customers. Revenue was £54.4 million, 13% ahead of the prior
year as reported. Order intake was £28.1 million giving a book to
bill of 0.52. Demand has held up with some of our US based
customers but has been weaker with some of our Asian customers. We
believe we saw the trough in demand in the first half of the year
and expect to see a similar performance in the second half of the
year. We continue to win new design-ins in this sector, which will
underpin our future growth, and we remain confident in the medium
and long term market outlook. Most semiconductor market
commentators expect the next market upswing to start between Q4
2023 and Q3 2024 and the Group remain very well-placed to take
advantage of this. The longer term outlook for this sector is very
attractive and we expect to continue to grow ahead of the overall
market. Market growth will be driven by multiple factors including
AI, Big Data and Machine Learning, with automotive, smart
manufacturing and smart MedTech being some of the key application
areas.
Healthcare
The
Healthcare market continues to be an attractive sector for the
Group driven by the growing global demand for healthcare
infrastructure and the pace of innovation. Order momentum was
sustained in the period and we saw a continued recovery in revenue
as component availability improved. Order intake was £36.3 million
and revenue was £37.1 million, up 65% on the prior year as
reported. The outlook remains positive and we expect to make
further progress in the second half of the year.
Regional
Performance
Revenue
in North
America was US$109.2
million (H1
2022: US$91.6
million), up 19% compared to the same period in the previous
year, with growth in each sector. The strongest growth was seen in
Healthcare reflecting the soft comparator in 2022.
Revenue
in Europe was
£52.2 million (H1 2022: £38.9 million), up 35% on a constant
currency basis from a year ago, driven again by all
sectors.
Revenue
in Asia was US$23.6
million (H1
2022: US$20.0
million), up 18% at constant currency compared with the same
period a year ago.
Strategy
overview
Our
strategy is clear and has been delivered consistently.
We are one
of a few power companies in the world with a comprehensive product
portfolio spanning the power and voltage spectrum. We remain
focused on growth, primarily organically but also inorganically
over the medium term, and despite decades of strong performance our
expanded addressable market and the opportunity to further grow our
market share in the markets in which we operate and the sectors we
focus on remains exciting. Looking ahead, we will continue to use
our product portfolio and engineering services capabilities to
provide customers with a broader range of power solutions and to
continue to increase our market share.
We are
confident of delivering strong organic revenue growth, driven by
our core growth drivers:
-
Growth in the use of
electronics requiring a power converter – this is an accelerating
trend
-
Exposure to long term
‘secular’ growth markets e.g., semiconductor manufacturing
equipment and healthcare – while orders in this sector are
currently lower, the long term opportunity is
significant
-
Market share gains –
greater penetration of existing blue-chip customers. We still have
the potential to gain a greater share of our customers’
‘wallet’
-
Expanding our addressable
markets, including through distribution
-
Underpinned by global GDP
growth
We
continue to make progress delivering our power strategy
by:
-
Developing a market
leading range of competitive products – we have further enhanced
our product offering in the first half of the year and have an
exciting pipeline of new products
-
Targeting accounts where
we can add value – the share of revenue from our top 30 customers
continues to account for the majority of total Group revenue and
the long term nature of these relationships provides a solid base
to grow from
-
Further enhancing our
global supply chain through investment in capacity, systems and
capability
-
Leading our industry in
environmental matters
-
When appropriate, making
selective acquisitions in identified strategic markets to expand
our product offering and addressable markets, as we did with FuG
and Guth in 2022
Successful
implementation of our strategy has enabled the Group to build a
presence across the whole range of power and voltage applications,
with well-performing acquisitions in more recent years adding
capabilities in the high power and high voltage applications, which
are suited to XP’s direct service model and where growth
opportunities are exciting. In parallel, the Group has
significantly expanded its low cost Asian manufacturing base,
investing in new capacity in Vietnam and
from late 2024 in Malaysia,
to support significant future growth in production volumes. In
combination, the Board believes these two strategic initiatives
underpin a significant medium term growth opportunity for the
Group.
We remain
focused on developing product platforms that are easy to modify and
which can be used over multiple sectors and applications. The
‘designed-in’, recurring nature of the portfolio creates long term,
committed relationships with our customers for the lifetime of
their products, typically seven years, but often longer.
We believe
the continued execution of our strategy will create significant
long term value through a combination of organic revenue growth of
circa 10% on average through the cycle, supported by strong long
term growth drivers and attractive gross margins, to deliver an
adjusted operating margin of around 20%. While
our adjusted operating margins were below 20% in the last 12
months, we have achieved this target for short periods over more
recent months, which underpins our confidence that the business can
operate consistent with this guidance for a full year when supply
chain conditions ease fully. Our operating model, combined with
operating cash conversion above 90%, will deliver attractive long
term returns.
Manufacturing
Control of
our own, low cost, high quality and geographically well-diversified
manufacturing assets remains an important component of XP’s
competitive advantage. In 2022 the Group commenced construction of
a new manufacturing facility in north-west Malaysia to increase capacity to meet the
growing demand across the Group. The new facility remains on track
for commission in H2 2024. The project is part of a global supply
chain transformation, as we scale our operations and establish a
network supply chain model which will provide greater resilience.
We expect this important strategic capability of having production
facilities in Vietnam,
China and Malaysia, to enable us to win more design
mandates from key customers. These investments are expected to
generate strong returns, supporting both our future growth and
improved margins.
Our
People and
Our Values
The
success of any organisation is
dependent on its culture and the people and talent within it. The
Board engages regularly with the Executive Leadership Team and
colleagues throughout the Group to ensure we are continuing to
identify and develop our key people and bringing new talent and
capabilities into the business to help underpin our growth
ambitions. We continue to make key hires in engineering, supply
chain, manufacturing and product management as we look to further
enhance our capabilities in these critical areas and to support the
growth ambitions we have for the Group over the longer
term.
ESG
The Group
continues to take an industry lead in environmental and social
matters. In the period, we have scoped and filed our near- and
long-term company-wide emission
reductions targets in line with the
Science Based
Targets initiative (SBTi) Net-Zero Standard. These are awaiting
validation from the SBTi. We are also publishing our first Net Zero
Transition Plan today, developed using the guidance from
the Transition
Plan Taskforce (TPT) which was set up by the UK government
to develop the ‘Gold Standard’ in this area. Our
transition plan details
how our 2040 net zero commitment will be
delivered, spelling
out the key actions, metrics, policies and procedures
that support the ambition in areas such as product R&D,
operations and waste management. The
financial impact of our transition plan is accommodated in our
existing strategy and growth projections.
The Group
also has appointed supply chain and health and safety executives to
strengthen and develop further in these areas, including their
impact on ESG.
Comet
Legal Action
Following
a further hearing in March 2023, the
Group is awaiting a ruling from the Judge relating to the legal
fees to be awarded in the case. In April
2023 the Group filed an appeal against the damages awarded
against it in the case. The appeal is expected to be considered in
the next 12-18 months.
Despite
the Comet legal action remaining ongoing, our first half
performance demonstrates that it is not distracting the wider
business from the continuing delivery of its stated and successful
strategy . The Group has the financial resources to invest in
further growth and development despite the judgement.
Board
Update
As
planned, Jamie Pike, Non-Executive
Director, was appointed Chair on 18 April
2023.
Matt Webb will join as Chief Financial Officer with effect
from 4 September 2023 and he will be
appointed as an Executive Director of the Board at the Board
meeting currently scheduled for 5 October
2023. Matt brings with him over 25 years’ experience of
working within international businesses at Group and Divisional
level, giving him a broad strategic and operational skillset. Most
recently he was Chief Financial Officer at Luceco plc, a FTSE Main
Market supplier of multiple LED lighting, EV charging and
electrical accessories.
Outlook
The Group
has seen much improved trading over the last 12 months and we
expect this to continue through the second half based on our
current momentum and strong order book. Our full year outlook is
unchanged, albeit we remain aware of a range of macroeconomic
risks. We continue to expect our financial leverage to progress
towards 2x by year-end.
Longer
term, the Board believes XP’s clear strategy and financial
framework leave the Group well positioned to grow ahead of its end
markets, drive further market share gains, improve profitability
and deliver strong cash generation.
Financial Performance Review
Trading in
the first half of 2023 has been in line with our expectations.
While order intake softened, as customers moderated ordering from
the unprecedented levels in 2021 and first half of 2022, our strong
revenue growth reflects the easing of supply chain constraints as
we started to work through the enlarged order backlog.
Total
order intake was £115.6 million (H1 2022: £193.1 million), down 44%
at constant currency basis and 40% as reported, with book-to-bill
of 0.72 (H1 2022: 1.56). The order book of circa £250 million
continues to give excellent visibility, that extends well into
2024. As a reminder, the Group has booked orders in the last three
years (to the end of June 2023) of
£930 million.
Delivery
of our strong order book and improved consistency in the supply
chain saw revenue grow by 30% on a reported basis to £160.2 million
in the first half compared to £123.6 million in the same period a
year ago, an increase of 24% on a constant currency basis. Revenue
growth improved sequentially in Q2 2023 from Q1, which included the
normal impact of new year and associated holidays in Asia and provides good momentum heading into
H2.
Gross
margin of 41.8% was a 160bps increase from the prior year (H1 2022:
40.2%), as operational leverage improved, in particular during Q2,
with increased factory output translating to better overhead
absorption, along with the impact of price increases and reduced
freight and logistics costs. We would expect higher gross margins
in H2 2023.
Adjusted
operating expenses (excluding the impact of one-offs) increased to
£45.2 million (H1 2022: £34.7 million), reflecting investment in
key roles, people and other cost inflation along with the impact of
FX.
The
resulting adjusted operating profit of £21.8 million was a 45%
increase, from £15.0 million in H1 2022, up 36% at constant
currency.
The prior
year included the impact of challenges from component shortages and
increased lead times for key components, which limited the Group’s
manufacturing output, combined with a five-week long COVID-19
imposed lockdown in China. The
improvement in H1 2023 was in line with our expectations and
demonstrated a recovery that began in H2 2022. While supply chains
continue to stabilise, we continue to be impacted by a level of
disruption that in time should alleviate and further improve our
performance.
Interest
rate rises and the higher level of gross debt, held by the Group in
US Dollars, contributed to net finance costs increasing to £6.0
million (H1 2022: £1.2 million), resulting in adjusted profit
before tax of £15.8 million (H1 2022: £13.8 million), an increase
of 14%, as reported.
The tax
charge after adjusting for non-recurring tax benefits of £0.9
million on adjusted profit before tax was £4.0 million, an
effective tax rate of 25.3% (H1 2022: 23.9%), driven by the mix of
profits across our regions in the first half. We expect the full
year tax rate to be within our guidance range of approximately
18-20%, below the H1 % , consistent with prior years.
Adjusted
diluted earnings per share was 59.1p, an increase of 13% compared
to the prior year.
Net
debt and cash flow
Net debt
at 30 June 2023 was £148.4 million, a
moderate reduction from £151.0 million at 31
December 2022 which reflects improved trading profits and
the start of the expected working capital unwind (£1.2 million).
This was offset by a significant increase in capital investment
(£9.1 million) and capitalised product development costs (£4.6
million), dividends (£11.2 million) and finance costs (£7.6
million) incurred in the half. There was also a benefit from FX
movements (£7.7 million) as gross debt is held in US
Dollars.
Within
working capital, inventory reductions results in a £2.5 million
cash flow benefit. This was driven by a reduction in raw materials
and WIP, partially offset by the timing of delivery of finished
goods which were manufactured in Q2 and will ship in Q3. This
follows a significant increase in 2022 to address exceptional
ordering patterns and as industry-wide lead times increased. The
working capital unwind is
expected to continue in H2 2023 and into 2024 as inventory levels
normalise, aiding
our cash generation for the foreseeable future.
As
planned, work has continued at our new manufacturing facility in
Malaysia and relocation of our
customer design centres in California which were key drivers of the £8.8m
capital investment in H1, (H1 2022: £4.2 million) and are critical
to increase capacity and resilience in our Asian supply chain to
meet our long term revenue growth ambitions and support growth in
North America. We still expect to
spend c.£30 million in 2023.
Free cash
flow, before acquisitions, dividends and borrowings, was an inflow
of £6.3 million (H1 2022: £25.5 million outflow) and the Group
finished the first half with net debt of £148.4 million (FY 2022:
£151.0 million), comprising cash and cash equivalents of £26.9
million and gross debt of £175.3 million.
XP secured
greater banking covenant flexibility from its lenders in Q4 2022
with the net debt to EBITDA covenant required to be less than 3.25x
in June 2023 and then 3.0x in
December 2023. The Group Net debt to
EBITDA leverage of 2.30x was comfortably within this ratio at
30 June 2023, and was reduced from
2.68x at December 2022.
The Group
continues to expect progress towards leverage of 2x in the full
year. As inventory and capital expenditure return to lower levels
during 2024 following completion of the growth investment projects
in Malaysia and North America, the Group expects strong
operating cash conversion to drive a return to net debt/EBITDA
leverage of 1-2x in the medium term.
Statutory
Profit
As set out
in note 5, in H1 2023, the Group incurred £4.5 million of specific
items impacting statutory operating profit and £4.9 million
impacting profit before tax (H1 2022: £60.2 million and £61.2
million).
The £4.5
million impacting statutory operating profit includes legal fees
and costs relating to the Comet legal case (£1.4 million). Damages
were fully provided for in 2022, and the Group awaits a ruling on
opposition fees (for which an estimate was also provided in the
prior year). It also includes restructuring costs of £0.8m relating
to supply chain transformation as we get ready for transferring
business to the new site in Malaysia and £0.7 million in respect of the
IFRS 16 amortisation incurred during the fit out and construction
of leased buildings in North
America whilst the business is still operating from its
current locations. Acquisition related amortisation was £1.6
million. In addition to the items impacting statutory operating
profit, finance charges, which impacts profit before tax, includes
£1.0 million in respect of the IFRS 16 interest on the leased
buildings reported above and a £0.6 million gain on the
modification of RCF borrowings.
Statutory
profit before tax was £10.9 million (H1 2022: statutory loss before
tax £47.4 million), with a tax charge of £3.1 million (H1 2022: tax
credit of £12.0 million) and profit after tax of £7.8 million (H1
2022: loss after tax of £35.4 million).
Basic
earnings per share were 38.9 pence
(H1 2022: 181.4 pence loss per
share).
Capital
Allocation and Dividend Policy
The Group
improved operating cash flow in H1 2023 and continues to expect net
debt to adjusted EBITDA leverage to progress towards 2x in the full
year as benefits are realised from the ongoing unwind of working
capital and as profitability improves.
Dividend
policy remains unchanged, and the Board has declared a dividend for
the second quarter of 19.0 pence per
share (2022: 19.0 pence per share).
Together with the first quarter dividend, this brings the total
first half dividends declared to 37.0
pence per share (H1 2022: total dividends 37.0 pence).
The
ex-dividend date for the second quarter dividend will be
7th September 2023 and the dividend
will be paid on 12th October 2023 to
shareholders on the register at the record date of 8th September 2023. The last date for election
for the share alternative to the dividend under the Company’s
Dividend Reinvestment Plan is 21st September
2023.
Foreign
Exchange
The Group
reports its results in sterling, but the US dollar continues to be
its principal trading currency, with approximately 82% (2022: 85%)
of our revenue denominated in US dollars. The translation effect on
Adjusted Operating Profit comparing H1 2023 average rates with H1
2022 average rates is an improvement of £1.4
million. Translational
exchange rate losses in the Income Statement in H1 2023 were £1.0
million, a period-on-period adverse impact of £3.5
million. This
results in a net exchange rate impact on Adjusted Operating Profit
for H1 2023 of £2.1 million adverse when compared to H1
2022.
1 August 2023
Independent
review report to XP Power Limited
Report
on review of interim financial information
We have
reviewed the accompanying condensed consolidated financial
information of XP Power Limited (“the Company”) and its
subsidiaries (“the Group”) set out on pages 11 to 20, which
comprise the condensed consolidated balance sheet of the Group as
at 30 June 2023, the condensed
consolidated statements of comprehensive income, changes in equity
and cash flows for the 6-month period then ended and the other
explanatory notes. Management is responsible for the preparation
and presentation of this condensed consolidated interim financial
information in accordance with International Accounting Standard 34
Interim Financial Reporting as issued by the International
Standards Board. Our responsibility is to express a conclusion on
this condensed consolidated interim financial information based on
our review.
Scope
of Review
We
conducted our review in accordance with International Standard on
Review Engagements 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. A review of
interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review
procedures.
A review
is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit
opinion.
We have
read the other information contained in the interim report for the
6-month period ended 30 June 2023,
which comprise the “Interim Results” set out on pages 1 to 3,
“Interim Statement” set out on pages 4 to 9 and “Risks and
uncertainties” set out on pages 21 to 23 and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed consolidated interim
financial information.
Conclusion
Based on
our review, nothing has come to our attention that causes us to
believe that the accompanying condensed consolidated interim
financial information is not prepared, in all material respects, in
accordance with International Accounting Standard 34 Interim
Financial Reporting as issued by the International Accounting
Standards Board.
Restriction
on Distribution and Use
This
report has been prepared solely for the Company in accordance with
the letter of engagement between us and the Company. To the fullest
extent permitted by law, we do not accept or assume liability or
responsibility to anyone other than the Company for our work or
this report.
PricewaterhouseCoopers
LLP
Public
Accountants and Chartered Accountants
Singapore,
1 August 2023
XP
Power Limited
Condensed
Consolidated Statement of Comprehensive Income
For
the six months ended 30 June
2023
£
Millions
|
Note
|
Six
months ended
30
June 2023
(Unaudited)
|
Six months
ended
30 June
2022
(Unaudited)
|
|
|
|
|
Revenue
|
5
|
160.2
|
123.6
|
Cost of
sales
|
|
(93.2)
|
(73.9)
|
Gross
profit
|
|
67.0
|
49.7
|
|
|
|
|
Other
income
|
|
-
|
*
|
Expenses
|
|
|
|
Distribution
and marketing
|
|
(33.6)
|
(26.4)
|
Administrative
|
|
(4.7)
|
(51.3)
|
Research
and development
|
|
(11.4)
|
(17.2)
|
Operating
profit/(loss)
|
|
17.3
|
(45.2)
|
|
|
|
|
Finance
charge
|
|
(6.4)
|
(2.2)
|
Profit/(loss)
before income tax
|
|
10.9
|
(47.4)
|
|
|
|
|
Income tax
(expense)/credit
|
6
|
(3.1)
|
12.0
|
Profit/(loss)
after
income tax
|
|
7.8
|
(35.4)
|
|
|
|
|
Other
comprehensive income/(loss):
|
|
|
|
|
|
|
|
Items
that may be reclassified subsequently to profit or
loss:
|
|
|
|
Exchange
differences on translation of foreign operations
|
|
(3.8)
|
5.8
|
|
|
(3.8)
|
5.8
|
Items
that will not be reclassified subsequently to profit or
loss:
|
|
|
|
Currency
translation differences arising from consolidation
|
|
*
|
*
|
Other
comprehensive (loss)/income, net of tax
|
|
(3.8)
|
5.8
|
Total
comprehensive income/(loss)
|
|
4.0
|
(29.6)
|
|
|
|
|
Profit/(loss)
attributable to:
|
|
|
|
- Equity
holders of the Company
|
|
7.6
|
(35.6)
|
-
Non-controlling interests
|
|
0.2
|
0.2
|
|
|
7.8
|
(35.4)
|
|
|
|
|
Total
comprehensive income/(loss) attributable
to:
|
|
|
|
- Equity
holders of the Company
|
|
3.9
|
(29.8)
|
-
Non-controlling interests
|
|
0.1
|
0.2
|
|
|
4.0
|
(29.6)
|
Earnings/(Loss)
per share attributable to equity holders of the Company
|
|
Pence
per
Share
|
Pence
per
Share
|
|
|
|
|
Basic
|
8
|
38.9
|
(181.4)
|
Diluted
|
8
|
38.7
|
(180.6)
|
|
|
|
|
* Balance
is less than £100,000.
The
above condensed consolidated statement of comprehensive income
should be read in conjunction with the accompanying
notes.
XP
Power Limited
Condensed
Consolidated Balance Sheet
As
at 30 June 2023
£
Millions
|
Note
|
At
30
June
2023
(Unaudited)
|
At
31
December
2022
(Unaudited)
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and
cash equivalents
|
|
25.5
|
22.3
|
Inventories
|
|
106.5
|
114.4
|
Trade
receivables
|
|
44.8
|
42.4
|
Bond
receivables
|
|
35.7
|
37.0
|
Other
current assets
|
|
5.6
|
8.0
|
Derivative
financial instruments
|
|
0.1
|
*
|
Corporate
tax recoverable
|
|
2.2
|
2.5
|
Total
current assets
|
|
220.4
|
226.6
|
Non-current
assets
|
|
|
|
Cash and
bank balances
|
|
1.4
|
1.1
|
Goodwill
|
|
75.5
|
77.5
|
Intangible
assets
|
9
|
67.3
|
69.9
|
Property,
plant and equipment
|
|
40.5
|
36.6
|
Right-of-use
assets
|
|
56.8
|
54.9
|
Deferred
income tax assets
|
|
13.9
|
15.1
|
ESOP loans
to employees
|
|
0.1
|
*
|
Other
investment
|
|
*
|
*
|
Total
non-current assets
|
|
255.5
|
255.1
|
Total
assets
|
|
475.9
|
481.7
|
LIABILITIES
|
|
|
|
Current
liabilities
|
|
|
|
Current
income tax liabilities
|
|
5.8
|
4.8
|
Trade and
other payables
|
|
50.8
|
52.6
|
Derivative
financial instruments
|
|
*
|
0.1
|
Lease
liabilities
|
|
2.0
|
2.4
|
Borrowings
|
|
0.7
|
0.2
|
Provisions
|
|
44.0
|
46.1
|
Total
current liabilities
|
|
103.3
|
106.2
|
Non-current
liabilities
|
|
|
|
Accrued
consideration
|
|
1.7
|
1.5
|
Borrowings
|
|
174.6
|
174.2
|
Deferred
income tax liabilities
|
|
10.0
|
10.5
|
Provisions
|
|
0.8
|
0.9
|
Lease
liabilities
|
|
53.3
|
48.9
|
Total
non-current liabilities
|
|
240.4
|
236.0
|
Total
liabilities
|
|
343.7
|
342.2
|
NET
ASSETS
|
|
132.2
|
139.5
|
EQUITY
|
|
|
|
Equity
attributable to equity holders of the Company
|
|
|
|
Share
capital
|
|
27.2
|
27.2
|
Merger
reserve
|
|
0.2
|
0.2
|
Share-based
payment reserve
|
|
1.4
|
2.5
|
Treasury
shares reserve
|
|
*
|
*
|
Translation
reserve
|
|
0.6
|
4.2
|
Other
reserve
|
|
7.1
|
6.1
|
Retained
earnings
|
|
94.8
|
98.4
|
|
|
131.3
|
138.6
|
Non-controlling
interests
|
|
0.9
|
0.9
|
TOTAL
EQUITY
|
|
132.2
|
139.5
|
The
above condensed consolidated balance sheet should be read in
conjunction with the accompanying notes.
XP
Power Limited
Condensed
Consolidated Statement of Changes in Equity
For
the six months ended 30 June
2023
|
|
Attributable
to equity holders of the Company
|
|
|
|
Note
|
Share
capital
|
Share-based
payment reserve
|
Treasury
shares reserve
|
Merger
reserve
|
Translation
reserve
|
Other
reserve
|
Retained
earnings
|
Total
|
Non-controlling
interests
|
Total
Equity
|
Balance at
1 January 2022
|
|
27.2
|
5.6
|
*
|
0.2
|
(2.9)
|
4.4
|
137.0
|
171.5
|
0.9
|
172.4
|
Exercise of
share-based payment awards
|
|
-
|
(0.9)
|
*
|
-
|
-
|
0.9
|
*
|
*
|
-
|
*
|
Employee
share-based payment expenses, net of tax
|
|
-
|
(1.1)
|
-
|
-
|
-
|
-
|
-
|
(1.1)
|
-
|
(1.1)
|
Dividends
paid
|
7
|
-
|
-
|
-
|
-
|
-
|
-
|
(11.2)
|
(11.2)
|
(0.3)
|
(11.5)
|
Future
acquisitions of non-controlling interests
|
|
-
|
-
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
-
|
0.1
|
Exchange
difference arising from translation of financial statements of
foreign operations
|
|
-
|
0.1
|
-
|
-
|
5.7
|
-
|
*
|
5.8
|
*
|
5.8
|
Profit for
the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(35.6)
|
(35.6)
|
0.2
|
(35.4)
|
Total
comprehensive income for the period
|
|
-
|
0.1
|
-
|
-
|
5.7
|
-
|
(35.6)
|
(29.8)
|
0.2
|
(29.6)
|
Balance
at 30 June 2022
(unaudited)
|
|
27.2
|
3.7
|
*
|
0.2
|
2.8
|
5.4
|
90.2
|
129.5
|
0.7#
|
130.2#
|
Balance at
1 January 2023
|
|
27.2
|
2.5
|
*
|
0.2
|
4.2
|
6.1
|
98.4
|
138.6
|
0.9
|
139.5
|
Exercise of
share-based payment awards
|
|
-
|
(1.1)
|
*
|
-
|
-
|
1.1
|
*
|
*
|
-
|
*
|
Employee
share-based payment expenses, net of tax
|
|
-
|
0.1
|
-
|
-
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
Dividends
paid
|
7
|
-
|
-
|
-
|
-
|
-
|
-
|
(11.2)
|
(11.2)
|
(0.1)
|
(11.3)
|
Future
acquisitions of non-controlling interests
|
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
-
|
(0.1)
|
Exchange
difference arising from translation of financial statements of
foreign operations
|
|
-
|
(0.1)
|
-
|
-
|
(3.6)
|
-
|
-
|
(3.7)
|
(0.1)
|
(3.8)
|
Profit for
the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
7.6
|
7.6
|
0.2
|
7.8
|
Total
comprehensive income for the period
|
|
-
|
(0.1)
|
*
|
-
|
(3.6)
|
-
|
7.6
|
3.9
|
0.1
|
4.0
|
Balance
at 30 June 2023
(unaudited)
|
|
27.2
|
1.4
|
*
|
0.2
|
0.6
|
7.1
|
94.8
|
131.3
|
0.9
|
132.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Balance
is less than £100,000.
# This amount
is different from the summation of the vertical movements due to
rounding differences.
The
above condensed consolidated statement of changes in equity should
be read in conjunction with the accompanying notes.
XP
Power Limited
Condensed
Consolidated Statement of Cash Flows
For
the six months ended 30 June
2023
£
Millions
|
|
Six
months ended
30
June 2023
(Unaudited)
|
Six months
ended
30 June
2022
(Unaudited)
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Profit/(loss)
after income tax
|
|
7.8
|
(35.4)
|
Adjustments
for:
|
|
|
|
-
Income tax
expense/(credit)
|
|
3.1
|
(12.0)
|
-
Amortisation
and depreciation
|
|
9.2
|
7.7
|
-
Finance
charge
|
|
6.4
|
2.2
|
-
Share-based
payment expenses
|
|
0.2
|
0.5
|
-
Fair value
(gain)/loss on derivative financial instruments
|
|
(0.2)
|
0.3
|
-
(Gain)/loss
on disposal of property, plant and equipment
|
|
*
|
*
|
-
Impairment
loss on intangible assets
|
|
0.1
|
7.5
|
-
Unrealised
currency translation loss/(gain)
|
|
1.0
|
(4.2)
|
-
Provision
for doubtful debts
|
|
*
|
*
|
|
|
|
|
Change in
the working capital, net of effects from acquisition of
subsidiaries:
|
|
-
Inventories
|
|
2.5
|
(20.1)
|
-
Trade and
other receivables
|
|
(2.9)
|
(2.4)
|
-
Trade and
other payables
|
|
1.4
|
43.2
|
-
Provision
for liabilities and other charges
|
|
0.2
|
1.0
|
Cash
generated from/(used in) operations
|
|
28.8
|
(11.7)
|
Income tax
paid
|
|
(1.3)
|
(1.4)
|
Net
cash provided by/(used in) operating activities
|
|
27.5
|
(13.1)
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Acquisition
of subsidiaries, net of cash acquired
|
|
-
|
(32.3)
|
Additions
to property, plant and equipment
|
|
(8.8)
|
(4.2)
|
Additions
to development costs
|
|
(4.6)
|
(3.7)
|
Additions
to software and software under development
|
|
(0.3)
|
(2.4)
|
Proceeds
from disposal of property, plant and equipment
|
|
*
|
*
|
Proceeds
from repayment of ESOP loans
|
|
*
|
*
|
Payment of
accrued consideration
|
|
*
|
*
|
Interest
received
|
|
0.8
|
*
|
Net
cash used in investing activities
|
|
(12.9)
|
(42.6)
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
9.7
|
82.9
|
Repayment
of borrowings
|
|
*
|
(1.5)
|
Principal
payment of lease liabilities
|
|
(0.6)
|
(1.2)
|
Proceeds
from exercise of share-based payment awards
|
|
*
|
-
|
Interest
paid
|
|
(7.6)
|
(1.0)
|
Dividends
paid to equity holders of the Company
|
|
(11.2)
|
(11.2)
|
Dividends
paid to non-controlling interests
|
|
(0.1)
|
(0.3)
|
Bank
deposits pledged
|
|
(0.4)
|
-
|
Net
cash (used in)/generated from financing
activities
|
|
(10.2)
|
67.7
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
4.4
|
12.0
|
Cash and
cash equivalents at beginning of financial period
|
|
22.1
|
8.8
|
Effects of
currency translation on cash and cash equivalents
|
|
(1.0)
|
1.7
|
Cash
and cash equivalents at end of financial period
|
|
25.5
|
22.5
|
* Balance
is less than £100,000.
The
above condensed consolidated statement of cash flows should be read
in conjunction with the accompanying notes.
XP
Power Limited
Notes
to the condensed consolidated financial
statements
-
General
information
XP Power
Limited (the ’Company’) is listed on the London Stock Exchange and
incorporated and domiciled in Singapore. The address of its registered
office is 19 Tai Seng Avenue, #07-01, Singapore 534054.
The nature
of the Group’s operations and its principal activities is to
provide power supply solutions to Semiconductor, Industrial
Technology and Healthcare markets across the globe.
These
condensed consolidated interim financial statements are presented
in Pounds Sterling (GBP).
-
Basis of
preparation
The
condensed consolidated interim financial statements for the period
ended 30 June 2023 have been prepared
in accordance with the Disclosure and Transparency Rules of the
United Kingdom’s Financial Conduct Authority and with International
Accounting Standards (‘IAS’) 34 Interim
Financial Reporting as issued
by the International Accounting Standards Board.
The
condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year
ended 31 December 2022 which have
been prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) as issued by the International Accounting
Standards Board (IFRS as issued by the IASB) and Singapore
Financial Reporting Standards (International)
(SFRS(I)s’).
-
Going
concern
The
Directors reviewed budgets and forecasts to assess the cash
requirements of the Group to continue in operational existence for
a minimum period of 12 months from the date of the approval of
these interim financial statements.
The
Directors also reviewed downside scenarios to the budgets and
forecasts, which reflect the possible impact of risks identified in
the risk management framework. The greatest consideration was given
to those risks with the highest potential impact if they occurred
and those with the highest probability of occurring. Throughout
these downside scenarios, the Group continues to have significant
headroom on its financial debt covenants.
Therefore,
after making the above enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in preparing
its consolidated financial statements.
-
Accounting
policies
The
condensed consolidated interim financial statements have been
prepared under the historical cost convention except as disclosed
in the accounting policies within the Group financial statements
for the year ended 31 December
2022.
The same
accounting policies, presentation and methods of computation are
followed in these condensed consolidated interim financial
statements as were applied in the presentation of the Group’s
financial statements for the year ended 31
December 2022.
A number
of new or amended standards became applicable for the current
reporting period. The adoption of these new or amended standards
did not result in substantial changes to the Group’s accounting
policies and had no material effect on the amounts reported for the
current or prior financial years.
5. Segmented
and revenue information
The Board
of Directors considers and manages the business on a geographic
basis. Management manages and monitors the business based on the
three primary geographical areas: North
America, Europe and
Asia. All geographic locations
market the same class of products to their respective customer
base.
Revenue
The Group
derives revenue from the transfer of goods at a point in time in
the following major business lines and geographical
regions.
Analysis
by class of customer
The
revenue by class of customer is as follows:
Six
months ended 30 June 2023
|
|
|
|
|
£
Millions
|
|
|
|
|
|
Europe
|
North
America
|
Asia
|
Total
|
Primary
geographical markets
|
|
|
|
|
Semiconductor
Manufacturing Equipment
|
2.5
|
43.7
|
8.2
|
54.4
|
Industrial
Technology
|
35.4
|
25.5
|
7.8
|
68.7
|
Healthcare
|
14.3
|
19.6
|
3.2
|
37.1
|
|
52.2
|
88.8
|
19.2
|
160.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended 30 June 2022
|
|
|
|
|
£
Millions
|
|
|
|
|
|
Europe
|
North
America
|
Asia
|
Total
|
Primary
geographical markets
|
|
|
|
|
Semiconductor
Manufacturing Equipment
|
1.4
|
40.0
|
6.9
|
48.3
|
Industrial
Technology
|
28.2
|
19.0
|
5.7
|
52.9
|
Healthcare
|
9.3
|
10.5
|
2.6
|
22.4
|
|
38.9
|
69.5
|
15.2
|
123.6
|
|
|
|
|
|
5. Segmented
and revenue information (continued)
Reconciliation
of segment results to profit after income tax/(loss):
£
Millions
|
Six
months
ended
30
June 2023
(Unaudited)
|
Six
months
ended
30 June
2022 (Unaudited)
|
Europe
|
12.3
|
10.4
|
North
America
|
28.4
|
18.3
|
Asia
|
6.8
|
3.3
|
Segment
results
|
47.5
|
32.0
|
Research
and development
|
(11.0)
|
(9.7)
|
Manufacturing
|
(5.3)
|
(3.0)
|
Corporate
cost from operating segment
|
(9.4)
|
(4.3)
|
Adjusted
operating profit
|
21.8
|
15.0
|
Finance
expenses
|
(6.4)
|
(2.2)
|
Specific
items
|
(4.5)
|
(60.2)
|
Profit/(loss)
before tax
|
10.9
|
(47.4)
|
Income tax
(expenses)/credit
|
(3.1)
|
12.0
|
Profit/(loss)
after tax
|
7.8
|
(35.4)
|
£
Millions
|
At
30
June
2023
(Unaudited)
|
At
31
December
2022
|
Total
assets
|
|
|
Europe
|
88.7
|
85.5
|
North
America
|
239.7
|
237.1
|
Asia
|
131.4
|
141.5
|
Segment
assets
|
459.8
|
464.1
|
Unallocated
deferred and current income tax
|
16.1
|
17.6
|
Total
assets
|
475.9
|
481.7
|
Reconciliation
of adjusted measures
The Group
presents adjusted operating profit and adjusted profit before tax
by adjusting for costs and profits which management believes to be
significant by virtue of their size, nature or incidence or which
have a distortive effect on current year earnings. Such items may
include, but are not limited to, costs associated with business
combinations, amortisation of intangible assets arising from
business combinations, reorganisation costs, and ERP implementation
costs.
In
addition, the Group presents an adjusted profit after tax measure
by adjusting for certain tax charges and credits which management
believe to be significant by virtue of their size, nature, or
incidence or which have a distortive effect.
5. Segmented
and revenue information (continued)
Reconciliation
of adjusted measures (continued)
The Group
uses these adjusted measures to evaluate performance and as a
method to provide shareholders with clear and consistent reporting.
See below for a reconciliation of operating profit to adjusted
operating profit and a reconciliation of profit before tax to
adjusted profit before tax.
(i)
Reconciliation
of operating profit to adjusted operating profit:
£
Millions
|
Six
months ended
30
June 2023 (Unaudited)
|
Six months
ended
30 June
2022
(Unaudited)
|
Operating
profit/(loss)
|
17.3
|
(45.2)
|
|
|
|
Adjusted
for:
|
|
|
Comet
legal costs (refer to note 10)
|
1.4
|
47.8
|
Impairment
loss on intangible assets re:Comet
|
-
|
7.5
|
Amortisation
of intangible assets due to business combination
|
1.6
|
2.1
|
Restructuring
costs
|
1.5
|
-
|
Costs
related to ERP implementation
|
0.2
|
3.6
|
Fair value
(gain)/loss on derivative financial instruments
|
(0.2)
|
0.3
|
Acquisition
costs
|
*
|
0.9
|
Foreign
exchange impact on EUR-denominated loan drawn down to finance the
acquisition
|
-
|
(2.4)
|
RCF
fees
|
*
|
0.4
|
|
4.5
|
60.2
|
Adjusted
operating profit
|
21.8
|
15.0
|
|
|
|
Adjusted
operating margin
|
13.6%
|
12.1%
|
|
|
|
(ii)
Reconciliation
of profit before tax to adjusted profit before tax:
Profit/(Loss)
before tax
|
10.9
|
(47.4)
|
|
|
|
Adjusted
for:
|
|
|
Comet
legal fees (refer to note 10)
|
1.4
|
47.8
|
Impairment
loss on intangible assets re:Comet
|
-
|
7.5
|
Amortisation
of intangible assets due to business combination
|
1.6
|
2.1
|
Restructuring
costs
|
2.5
|
-
|
Costs
related to ERP implementation
|
0.2
|
3.6
|
Fair value
(gain)/loss on derivatives financial instruments
|
(0.2)
|
0.3
|
Acquisition
costs
|
*
|
0.9
|
Foreign
exchange impact on EUR-denominated loan drawn down to finance the
acquisition
|
-
|
(2.4)
|
RCF
fees
|
*
|
0.4
|
(Gain)/Loss
on modification of RCF borrowings
|
(0.6)
|
1.0
|
|
4.9
|
61.2
|
Adjusted
profit before tax
|
15.8
|
13.8
|
6. Taxation
The
effective tax rate on statutory profit before tax as at
30 June 2023 is 28.4% (2022: 25.3%).
This is an estimate based largely on local statutory rates. The
full year rate is expected to be approximately 20%.
7. Dividends
Amounts
recognised as distributions to equity holders of the Company in the
period:
|
Six
months ended
30
June 2023
(Unaudited)
|
Six months
ended
30 June
2022
(Unaudited)
|
|
Pence
per share
|
£
Millions
|
Pence
per
share
|
£
Millions
|
|
|
|
|
|
Prior year
third quarter dividend paid
|
21.0
|
4.1
|
21.0
|
4.1
|
Prior year
final dividend paid
|
36.0
|
7.1
|
36.0
|
7.1
|
Total
|
57.0
|
11.2
|
57.0
|
11.2
|
The
dividends paid recognised in the interim financial statements
relate to the third quarter dividend and final dividend for
2022.
A second
quarterly dividend of 19.0 pence per
share (2022: 19.0 pence per share)
will be paid on 12 October 2023 to
shareholders on the register at 8 September
2023.
8. Earnings
per share
Earnings
per share attributable to equity holders of the company arise from
continuing operations as follows:
£
Millions
|
Six
months ended
30
June 2023
(Unaudited)
|
Six months
ended
30 June
2022
(Unaudited)
|
Earnings/(loss)
|
|
|
Earnings/(loss)
for the purposes of basic and diluted earnings per share (profit
for the period attributable to equity holders of the
company)
|
7.6
|
(35.6)
|
Amortisation
of intangibles due to business combinations
|
1.6
|
2.1
|
Acquisition
costs
|
*
|
0.9
|
Foreign
exchange impact on EUR-denominated loan drawn down to finance the
acquisition
|
-
|
(2.4)
|
Non-recurring
tax benefits
|
(0.9)
|
(15.3)
|
Costs
related to ERP implementation
|
0.2
|
3.6
|
Legal
costs (refer to note 10)
|
1.4
|
47.8
|
Impairment
loss on intangible assets
|
-
|
7.5
|
RCF
fees
|
*
|
0.4
|
(Gain)/loss
on modification of RCF
|
(0.6)
|
1.0
|
Fair value
loss on derivative financial instruments
|
(0.2)
|
0.3
|
Restructuring
costs
|
2.5
|
-
|
Earnings
for adjusted earnings per share
|
11.6
|
10.3
|
Number
of shares
|
|
|
Weighted
average number of shares for the purposes of basic earnings per
share (thousands)
|
19,555
|
19,625
|
|
|
|
Effect of
potentially dilutive share options (thousands)
|
58
|
90
|
|
|
|
Weighted
average number of shares for the purposes of dilutive earnings per
share (thousands)
|
19,613
|
19,715
|
|
|
|
Earnings/(loss)
per share from operations
|
|
|
Basic
|
38.9p
|
(181.4p)
|
Basic
adjusted
|
59.3p
|
52.5p
|
Diluted
|
38.7p
|
(180.6p)
|
Diluted
adjusted
|
59.1p
|
52.2p
|
9. Intangible
assets
|
Product
Development costs
|
Brand
|
Trademarks
|
Technology
|
Customer
relationships
|
Customer
contracts
|
Intangible
software
|
Assets
under development
|
Total
|
£
Millions
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
At 31
December 2022
|
43.9
|
1.8
|
1.1
|
8.3
|
26.0
|
2.7
|
23.7
|
28.3
|
135.8
|
Additions
|
0.3
|
-
|
-
|
-
|
-
|
-
|
0.4
|
4.2
|
4.9
|
Transfer
|
0.2
|
-
|
-
|
-
|
-
|
-
|
1.6
|
(1.8)
|
-
|
Foreign
currency translation
|
(1.6)
|
(0.1)
|
*
|
(0.4)
|
(1.2)
|
(0.1)
|
(1.1)
|
(1.4)
|
(5.9)
|
At
30 June 2023
|
42.8
|
1.7
|
1.1
|
7.9
|
24.8
|
2.6
|
24.6
|
29.3
|
134.8
|
Accumulated
amortisation and impairment losses
|
|
|
|
|
|
At 31
December 2022
|
32.0
|
0.6
|
1.0
|
3.8
|
12.7
|
1.4
|
6.4
|
8.0
|
65.9
|
Amortisation
charge for the year
|
1.4
|
0.1
|
*
|
0.4
|
0.8
|
0.3
|
1.1
|
-
|
4.1
|
Impairment
loss for the year
|
*
|
-
|
-
|
-
|
-
|
-
|
-
|
0.1
|
0.1
|
Foreign
currency translation
|
(1.0)
|
*
|
*
|
(0.2)
|
(0.7)
|
(0.1)
|
(0.2)
|
(0.4)
|
(2.6)
|
At
30 June 2023
|
32.4
|
0.7
|
1.0
|
4.0
|
12.8
|
1.6
|
7.3
|
7.7
|
67.5
|
Carrying
amount
|
|
|
|
|
|
|
|
|
|
At
30 June 2023
|
10.4
|
1.0
|
0.1
|
3.9
|
12.0
|
1.0
|
17.3
|
21.6
|
67.3
|
At 31
December 2022
|
11.9
|
1.2
|
0.1
|
4.5
|
13.3
|
1.3
|
17.3
|
20.3
|
69.9
|
* Balance
is less than £100,000.
The
amortisation period for development costs incurred on the Group’s
products varies between three and seven years according to the
expected useful life of the products being developed.
Amortisation
commences when the product is ready and available for
use.
The
remaining amortisation period for customer relationships ranges
from one to ten years.
10.
Comet legal matter
Full
details in respect of the Comet legal matter were provided in the
31 December 2022 Annual Report and
Accounts. There have been no developments of note since then. The
US $ denominated provision amounts established and the appeal bond
receivable are unchanged from 31 December
2022 other than for the impact of exchange rate. £1.4m of
legal fees were incurred during the 6 months to 30 June 2023 and these have been reported as
Adjusting Items consistent with prior year (see note
5).
Risks
and uncertainties
The Board
has continued to review the Group’s existing and emerging risks and
the mitigating actions and processes in place in the first half of
2023. Following this review the Board believes there has been no
material change to the relative importance or quantum of the
Group’s principal risks in the first half of 2023. The risk
assessment and review are an ongoing process, and the Board will
continue to monitor risks and the mitigating actions in place. The
principal risks are summarised below.
An event that causes a disruption to one of our
manufacturing facilities
An event
that results in the temporary or permanent loss of a manufacturing
facility would be a serious issue. As the Group manufactures the
majority of its revenues, this would undoubtedly cause at least a
short-term loss of revenues and profits and disruption to our
customers and therefore damage to reputation.
Risk mitigation – We now have two facilities (China and Vietnam) where we are able to manufacture the
majority of our power converters and we have disaster recovery
plans in place for both facilities. Not all power converter series
can be produced in both facilities, but we continue to identify
opportunities to transfer capability and increase flexibility and
resilience in our supply chain. We have commenced construction of a
new manufacturing facility in Malaysia in 2022 to increase flexibility and
our capacity to meet the demand from across the Group.
We have undertaken a risk review with manufacturing management to
identify and assess risks which could cause a serious disruption to
manufacturing, and then identified and implemented actions to
reduce or mitigate these risks where possible.
Fluctuations of revenues, expenses, and operating
results due to an economic downturn or external
shock
The revenues, expenses and operating results of the Group could
vary significantly from period to period because of a variety of
factors, some of which are outside its control. These factors
include general economic conditions; adverse movements in interest
rates; inflation, conditions specific to the market; seasonal
trends in revenues, capital expenditure and other costs; and the
introduction of new products or services by the Group, or by their
competitors. In response to a changing competitive environment, the
Group may elect from time to time to make certain pricing, service,
marketing decisions or acquisitions that could have a short-term
material adverse effect on the Group’s revenues, results of
operations and financial condition.
Risk mitigation – Although not immune from an economic shock or the
cyclicality of the capital equipment markets, the Group’s diverse
customer base, geographic spread and revenue annuities reduces
exposure to this risk.
The Group’s business model is not capital intensive and the strong
profit margins lead to healthy cash generation which also helps
mitigate risks from these external factors.
The Group benefits from good order exposure 12 months out allowing
it to recognise market changes and mitigate the impact.
Cyber security / Information systems
failure
The Group is reliant on information technology in multiple aspects
of the business from communications to data storage. Assets
accessible online are potentially vulnerable to theft and customer
channels are vulnerable to disruption. Any failure or downtime of
these systems or any data theft could have a significant adverse
impact on the Group’s reputation or on the results of
operations.
Risk mitigation – The Group has a defined Business Impact
Assessment which identifies the key information assets; replication
of data on different systems or in the Cloud; an established backup
process in place as well as a robust anti-malware solution on our
networks.
Internally produced training materials are used to educate users
regarding good IT security practice and to promote the Group’s IT
policy.
A cyber assessment carried out by the outsourced internal auditor
resulted in recommendations that are being implemented to further
mitigate cyber risk and safeguard the Group’s assets.
Dependence on key customers
The Group is dependent on retaining its key customers. Should the
Group lose a number of its key customers or key suppliers, this
could have a material impact on the Group’s financial condition and
results of operations. However, for the period ended 30 June 2023, no single customer accounted for
more than 18% of revenue and on the largest accounts the Group will
be working on many individual programmes.
Risk mitigation – The Group mitigates this risk by providing
excellent service. Customer complaints and non-conformances are
reviewed monthly by members of the Executive Leadership
team.
Product recall
A product recall due to a quality or safety issue would have
serious repercussions to the business in terms of potential cost
and reputational damage as a supplier to critical
systems.
Risk mitigation – We perform 100% functional testing on all
own-manufactured products and 100% hi-pot testing, which determines
the adequacy of electrical insulation, on own-manufactured
products. This ensures the integrity of the isolation barrier
between the mains supply and the end user of the equipment. We also
test all the medical products we manufacture to ensure the leakage
current is within the medical specifications.
Where we have contracts with customers, we always limit our
contractual liability regarding recall costs.
Competition from new market entrants and new
technologies
The power supply market is diverse and competitive. The Directors
believe that the development of new technologies could give rise to
significant new competition to the Group, which may have a material
effect on its business. At the lower end of the Group’s target
market, in terms of both power range and programme size, the
barriers to entry are lower and there is, therefore, a risk that
competition could quickly increase, particularly from emerging
low-cost manufacturers in Asia.
Risk mitigation – The Group reviews activities of its competition,
in particular product releases, and stays up to date with new
technological advances in our industry, especially those relating
to new components and materials. The Group also tries to keep its
cost base competitive by operating in low-cost geographies where
appropriate.
The general direction of our product roadmap is to move away from
lower complexity products and to increase our engineering solutions
capabilities so reducing the inherent market
competitiveness.
The Group ensures own and external intellectual properties are
protected.
Risks relating to legal, compliance and
taxation
The Group
operates in multiple jurisdictions with applicable trade and tax
regulations that vary. Failing to comply with local regulations or
a change in legislation could impact the profits of the Group. In
addition, the effective tax rate of the Group is affected by where
its profits fall geographically. The Group’s effective tax rate
could therefore fluctuate over time and have an impact on earnings
and potentially its share price.
Risk
mitigation – An outsourced internal audit function has been
introduced to provide risk assurance in targeted areas of the
business and recommendations for improvement. The scope of these
reviews includes behaviour, culture, and ethics.
The Group
hires employees with relevant skills and uses external advisers to
keep up to date with changes in regulations and to remain
compliant.
The Group
establishes clear healthy and safety policy and
procedures.
Strategic risk associated with valuing or integrating
new acquisitions
The Group
may elect from time to time to make strategic acquisitions. A
degree of uncertainty exists in valuation and in particular in
evaluating potential synergies. Post-acquisition risks arise in the
form of change of control and integration challenges. Any of these
could influence the Group’s revenues, results of operations and
financial condition.
Risk
mitigation – Preparation of robust business plans and cash
projections with sensitivity analysis and the help of professional
advisers if appropriate.
Post-acquisition
reviews are performed to extract ‘lessons learned’.
Loss of key personnel or failure to attract new
personnel
The future success of the Group is substantially dependent on the
continued services and continuing contributions of its Directors,
senior management, and other key personnel. The loss of the
services of key employees could have a material adverse effect on
own business.
Risk mitigation – The Group undertakes performance evaluations and
reviews to help it stay close to its key personnel as well as
annual employee engagement surveys. Where considered appropriate,
the Group also makes use of financial retention tools such as
equity awards.
Exposure to exchange rate
fluctuations
The Group deals in many currencies for both its purchases and sales
including US Dollars, Euro, and its reporting currency Pounds
Sterling. In particular, North
America represents an important geographic market for the
Group where virtually all the revenues are denominated in US
Dollars. The Group also sources components in US Dollars and the
Chinese Yuan. The Group therefore has an exposure to foreign
currency fluctuations. This could lead to material adverse
movements in reported earnings.
Risk mitigation – The Group reviews balance sheet and cash flow
currency exposures and where considered appropriate, uses forward
exchange contracts to hedge these exposures.
The Group does not hedge any translation of its subsidiaries’
results to Sterling for reporting purposes.
Risk associated with Supply
Chain
The Group
is dependent on retaining its key suppliers and on their ability to
meet their obligations to the Group. Global supply chains continued
to be under pressure mainly due to component shortages and global
logistics.
As the proportion of our own-manufactured products has increased,
the reliance on suppliers for third party product has been
mitigated proportionally. There has been a shift from a finished
goods risk to a raw materials risk.
Risk Mitigation - We conduct regular audits of our key suppliers
and in addition keep large amounts of safety inventory of key
components, which we also regularly review. We also dual source our
components where possible to minimise dependency on any single
supplier.
Climate related risks
The Group is exposed to climate related risks that can have a
negative impact on the business. Extreme weather events or local
power supply robustness can cause disruptions to our manufacturing
sites and supply chain.
Failure to meet the defined net zero targets may cause reputational
damage, dissuade potential investors, or result in greater costs
from any introduction of carbon pricing.
Risk Mitigation - The Group operates with flexibility in capacity
across sites and can also respond to temporary outages with changes
in working patterns to compensate. We are also currently
constructing a third major site in Malaysia, which will provide further
manufacturing flexibility and reduce reliance on the Vietnam site.
We perform regular review on relevant policies and KPIs to ensure
set targets are deliverable.
Directors’
responsibility statement
The
Directors confirm to the best of their knowledge that:
-
the unaudited interim
results have been prepared in accordance with IAS 34
Interim
Financial Reporting issued by International
Accounting Standards Board; and
-
the interim results
include a fair view of the information required by DTR 4.2.7
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year) and DTR 4.2.8 (disclosure of related party
transactions and changes therein).
The
Directors of XP Power Limited are as follows:
Jamie
Pike
|
Non-Executive
Chair
|
Gavin
Griggs
|
Chief
Executive Officer
|
Andy
Sng
|
Executive
Vice President, Asia
|
Polly
Williams
|
Senior
Independent Director
|
Pauline
Lafferty
|
Non-Executive
Director
|
Sandra
Breene
|
Non-Executive
Director
|
Amina
Hamidi
|
Non-Executive
Director
|
Signed on
behalf of the Board by
Jamie Pike Gavin
Griggs
Non-Executive
Chair Chief
Executive Officer
1 August 2023