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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Xp Power Limited | LSE:XPP | London | Ordinary Share | SG9999003735 | ORD 1P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -10.00 | -0.94% | 1,050.00 | 1,052.00 | 1,056.00 | 1,060.00 | 1,042.00 | 1,060.00 | 28,655 | 16:35:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Motors And Generators | 316.4M | -9.2M | -0.3885 | -27.18 | 250.08M |
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25 July 2016
XP Power Limited
("XP", "XP Power" or "the Group")
Interim Results for the six months ended 30 June 2016
XP, a world leading developer and manufacturer of critical power control
components for the electronics industry, today announces its interim results
for the six-month period ended 30 June 2016.
Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Highlights
Orders GBP61.6m GBP56.5m
Revenue GBP60.3m GBP53.9m
Turnover
Gross margin 49.0% 49.4%
Adjusted operating margin1 21.9% 23.6%
Adjusted profit before tax1 GBP13.1m GBP12.6m
Adjusted profit after tax1 GBP10.2m GBP9.6m
Adjusted diluted earnings per share (see Note 52.2p 50.1p
9) 1
Interim dividend per share (see Note 8) 29.0p 27.0p
1 Adjusted for intangibles amortisation of GBP0.1 million and GBP0.1 million of
costs associated with abortive acquisitions
· Order intake increased by 9% to GBP61.6 million (+4% in constant currency)
· Revenue increased by 12% to GBP60.3 million (+7% in constant currency)
· Gross margin decreased slightly to 49% (1H 2015: 49.4%) due to Euro
exchange rate effects
· Own-design XP product revenues increased 20% to a record GBP43.4 million
(1H 2015: GBP36.2) , and now represent 72% of total revenues (1H 2015: 67.2%)
· Revenues for ultra-high efficiency "Green XP Power" products continue to
grow and are up by 28% to GBP14.2 million (1H 2015: GBP11.1 million) now
representing 24% of total revenue (1H 2015: 21%)
· EMCO, the high voltage specialist acquired in November 2015, performing
well with order intake US$5.8 million (GBP4.0 million) and revenues of US$4.5
million (GBP3.1 million)
· Manufacturing progress in our lower cost Vietnam facility - 140,000
power converters manufactured during the first half of 2016 (1H 2015: 24,000)
· New product introductions and the development of an industry leading
in-house manufacturing capability continue to generate new program wins to
drive future growth and market share gains
James Peters, Chairman, commented:
"The Group has had an encouraging first half. Reported order intake and
revenues for the first six months of 2016 all set new records, assisted by a
stronger US Dollar and the acquisition of EMCO last year. Our balance sheet is
strong and we are in an excellent position to make selective acquisitions to
further broaden our product offering and engineering capabilities."
"Although the global economic outlook remains uncertain, particularly following
the United Kingdom's decision to leave the EU and the resultant weakness of
Sterling, we are encouraged by our order intake and strong backlog. While not
immune from any global economic slowdown, these give us confidence that we
should be able to continue to grow revenues in the second half of 2016 as
designs won in 2015 and prior years enter their production phase."
Enquiries:
XP Power
Duncan Penny, Chief Executive +44(0)7776 178
018
Jonathan Rhodes, Finance Director +44(0)7500 944 614
Citigate Dewe Rogerson +44(0)20 7638 9571
Kevin Smith/Jos Bieneman
Note to editors
XP Power is a leading international provider of essential power control
solutions. Power direct from the electricity grid is unsuitable for the
equipment which it supplies. XP Power designs and manufactures power
converters - components which convert power into the right form for our
individual customers' needs, allowing their electronic equipment to function.
XP Power supplies the healthcare, industrial and technology industries with
this mission critical equipment. Significant, long term investment into
research and development means that XP Power's products frequently offer
significantly improved functionality and efficiency.
For further information, please visit www.xppower.com
25 July 2016
XP Power Limited
("XP", "XP Power" or "the Group")
Interim Results for the six months ended 30 June 2016
INTERIM STATEMENT
Overview
The Group has had an encouraging first half of 2016. Our reported order intake
and revenues for the first six months of 2016 were aided by the strength of the
US Dollar and our acquisition of EMCO in November last year. The resulting
solid earnings and cashflow support a further increase in the dividend.
Order intake in the first half of 2016 surpassed revenues with a book to bill
ratio of 1.02 (1H 2015: 1.05) and ahead of the 0.97 book to bill experienced in
the second half of 2015 due to weakness in the North America industrial sector.
Consequently, overall momentum has built in our business and we enter the
second half of the current year with an increased order backlog of GBP50.0
million (December 2015: GBP48.0 million).
We have continued to execute well against our strategy even though the capital
goods markets we serve have remained somewhat subdued. The successful
implementation of our strategy continues to drive market share gains and we are
encouraged both by the strength of our order backlog and new programs wins.
Our strategy and value proposition
The Group has applied a consistent strategy of moving up the value chain. Our
growth derives from targeting key account customers. Once we are approved to
supply these larger customers, we have proven success in gaining a higher share
of their business. We also continue to expand the breadth of our product
portfolio, both organically and by acquisition, in what remains a highly
fragmented sector, therefore enabling us to increase our available market.
Our value proposition to customers is to reduce their overall costs of design,
manufacture and operation. We achieve this by providing excellent sales
engineering support and producing new products that are easy to design into the
customer's system, consume less power, take up less space and reduce
installation times, and which are highly reliable in service.
We aim to be the first choice power solutions provider, both for our customers
and as a place to work.
Trading and Financial Review
XP Power supplies power control solutions to original equipment manufacturers
("OEMs") who supply the healthcare, industrial and technology markets with high
value, high reliability products. The increasing importance of energy
efficiency for environmental, reliability and economic reasons; the necessity
for ever smaller products; the accelerating rate of technological change; and
the increasing proliferation of electronic equipment, have established a strong
foundation for growth in demand for XP Power's products.
Order intake of GBP61.6 million (1H 2015: GBP56.5 million) was up 9% (4% in
constant currency) and set a new record for the Group. Compared to the same
period a year ago, Asia increased by 5%, Europe increased by 1% and North
America increased by 17%. The average US Dollar to Sterling exchange rate was
1.52 in the first half of 2015 compared with 1.44 in the first half of 2016
representing a 5% strengthening. This increased the reported order intake
compared to the first half of 2015 as did orders of US$5.8 million (GBP4.0
million) from EMCO, the specialist in high voltage modules acquired in November
2015.
Reported revenues grew 12% to GBP60.3 million in the six months to 30 June 2016
compared to GBP53.9 million in the same period a year ago. When adjusting to
constant currency the underlying growth was 7% in the first half of the year
compared to the same period a year ago. EMCO contributed US$4.5 million (GBP3.1
million).
Revenues in North America were GBP30.8 million (1H 2015: GBP26.9 million), up 14%
compared to the same period a year ago. Revenues in Europe were GBP24.6 million
(1H 2015: GBP23.2 million), up 6% on the same period a year ago. Revenues in Asia
were GBP4.9 million (1H 2015: GBP3.8 million), up 29% compared with the same period
a year ago.
On a sector basis, industrial increased by 20% to GBP28.8 million (1H 2015: GBP24.0
million) driven largely by a strong performance in Europe but also from some
recovery after the weakness seen in the industrial sector in North American
accounts in the prior year. The technology sector grew by 11% compared with the
first half of 2015 to GBP14.0 million (1H 2015: GBP12.6 million) driven by
semiconductor manufacturing and broadcast customers. Revenues from healthcare
grew more modestly by 1% to GBP17.5 million (1H 2015: GBP17.3 million). We expect
growth in healthcare to improve over the medium term as new healthcare programs
enter the production stage. In terms of overall revenue for the first half of
2016, industrial represented 48% (1H 2015: 45%), technology represented 23% (1H
2015: 23%) and healthcare represented 29% (1H 2015: 32%).
Our customer base remains highly diversified with the largest customer
accounting for 5% of revenue, spread over 120 different programs/part numbers.
Margins
We continue to generate industry leading margins. Gross margin in the first
half of 2016 was 49% (1H 2015: 49.4%). The small decline from 2015 was
primarily due to reduced margins on revenues invoiced in Euro. In 2015 we were
able to raise our Euro pricing as the Euro weakened versus the US Dollar (on
which our input costs are based) while still taking advantage of our Euro
exchange rate hedges. In 2016 we had the benefit of the previous raised prices
but not the gains from the hedging program.
Operating expenses in the first half were GBP16.3 million (1H 2015: GBP13.9
million) after adding back GBP0.1 million of intangibles amortisation (1H 2015:
nil) and GBP0.1 million of abortive acquisition costs (1H 2015: nil). Again there
is a significant translation effect from the strengthening US Dollar versus
Sterling which we estimate increased reported operating expenses by
approximately GBP0.5 million. In addition we had the full year cost impact of the
additional sales and engineering resources added in 2015 to drive future
revenue growth, which added approximately GBP0.7 million to operating expenses
over the first half of 2015. The additional operating expenses from the
acquisition of EMCO added a further GBP1.2 million. Gross product development
spend was GBP3.8 million (1H 2015: GBP3.1 million), GBP2.0 million of which was
capitalised (1H 2015: GBP1.4 million), and GBP1.0 million amortised (1H 2015: GBP0.9
million).
Notwithstanding our investment in additional sales and engineering resources to
support future growth and the acquisition of EMCO in November 2015 we continue
to achieve excellent adjusted operating margins of 21.9% (1H 2015: 23.6%)
highlighting the strength of our business model. We expect further improvement
in this metric as market conditions improve.
Taxation
The tax charge for the period was GBP2.9 million (1H 2015: GBP3.0 million) which
represents an effective tax rate of 22.5% (1H 2015: 23.8%). We maintain our
guidance range for our future tax rate of 23.0% to 24.5% depending on how
profits fall geographically.
Acquisitions
In November 2015 we announced the acquisition of the business and assets of
EMCO High Voltage Corporation ("EMCO"), a designer and manufacturer of high
voltage power modules, for a total consideration of US$11.7 million (GBP7.7
million) in cash.
EMCO, based in Northern California and with manufacturing operations in Nevada,
supplies the healthcare, industrial and technology sectors with a broad range
of standard, modified and custom high voltage products. The integration of the
EMCO business has progressed well and in the six months ended 30 June 2016 we
received orders of US$5.8 million (GBP4.0 million) for EMCO products and we
shipped US$4.5 million (GBP3.1 million).
As well as a product offering suitable for an array of applications used by
some of our existing customer base, EMCO brought with it a number of new
customers to XP Power.
Financial Position
Class-leading gross and operating margins and modest capital requirements have
resulted in continued strong cash flow. After payment of the 2015 final
dividend our net debt was GBP6.0 million at the end of the period. This compares
with net debt of GBP3.7 million at 31 December 2015 and GBP0.4 million at 30 June
2015.
Product Development
New products are fundamental to our revenue growth. The broader our product
offering, the more opportunity we have to increase revenues by expanding our
available market. As expected, the significant number of new product families
introduced over the last three years is yet to have a material impact on our
revenues, given the time lag from launch to them entering production. This is
due to the lengthy design-in cycles required by customers to qualify the power
converter in their equipment and then gain the necessary safety agency
approvals.
XP launched 27 new product families in the first half of 2016 (1H 2015: 13).
The relatively high number of new product introductions was aided by the
introduction of a new labelled product supplier to increase our offering of
DC-DC converters. We continue to lead our industry on the introduction of high
efficiency, "green" products, with 18 of those new products released in the
first half of 2016 being of high efficiency design.
Examples of products released in the period which demonstrate the diversity of
our product portfolio include the ALM65 family and the XT16 three phase input
version of our configurable fleXPower range.
The ALM65 family is an external 65 Watt AC-DC power converter that complies
with the latest Level VI energy efficiency standard, which was only introduced
in February 2016. This new standard ensures that much less power is consumed
when the end-unit is switched off or not connected, and seeks to increase
average efficiency to reduce waste power when the load is connected. The ALM65
family of products also meets the latest medical standards so can be designed
into healthcare applications.
By contrast the XT16 is an addition to our existing modular fleXPower series
which can be configured into a bespoke solution for quick delivery of samples,
prototypes and production, with up to 1,600 Watts of output power. The product
can be populated with up to seven output modules chosen from 44 single output
and 16 dual output modules, ranging from 3.3V at 66W to 60V at 750W. Introduced
in response to customer demand, the XT16 is the first three phase input version
we have introduced to the fleXPower family.
Revenue from own design products was GBP43.4 million (1H 2015: GBP36.2 million) up
20% from the same period in 2015 and now represents 72% (1H 2015: 67.2%) of
total revenue.
With larger customers continuing to reduce the number of vendors they deal
with, XP Power's broad product offering, excellent global engineering support,
in-house manufacturing capability and industry-leading environmental
credentials leave the Group well-placed to secure further preferred supplier
agreements.
Manufacturing Progress
XP Power's move into manufacturing in 2006 has been instrumental in enabling
the Group to win approved and preferred supplier status with new Blue Chip
customers, who demand that their suppliers have complete control over their
supply chain and product manufacture to ensure the highest levels of quality.
In addition to our Chinese manufacturing facility located in Kunshan near
Shanghai, our Vietnamese manufacturing facility, located in Ho Chi Minh City,
began production of its first magnetic components in March 2012 and is now
producing the majority of the Group's requirement for magnetics.
Producing our own magnetic components in Vietnam is helping us mitigate the
continued rise of Chinese labour costs and the appreciation of the Chinese
Renminbi. In addition, extending vertical integration to the critical magnetic
components used in power converters is seen as an additional value proposition
by many of our customers, notably in the healthcare and high reliability
industrial sectors.
In the fourth quarter of 2014 we began production of the first complete power
converters in Vietnam. We now have 113 part numbers approved for production in
Vietnam with many more in the pipeline. XP manufactured 550,000 power
converters in total during the first half of 2016 and 140,000 of these were
produced in the Vietnamese facility. We expect the proportion of power
converters produced in Vietnam to increase as we transfer more products to that
facility.
We continue to build on our manufacturing capabilities and are currently
undertaking a project to introduce lean manufacturing principles in both our
Chinese and Vietnamese facilities to reduce costs and improve cycle times.
Dividend
Since April 2010 the Company has been making quarterly dividend payments. Our
strong cash flow and confidence in the Group's prospects have enabled us to
increase total dividends for the first half by 7% to 29.0 pence per share (1H
2015: 27.0 pence per share).
The first quarter dividend payment of 14 pence per share was made on 8 July
2016. The second quarter dividend of 15 pence per share will be paid on 13
October 2016 to shareholders on the register at 16 September 2016.
The compound average growth rate in dividends over the last 10 years has been
15%.
Environmental Impact and "Green XP Power" products
XP Power has placed improved environmental performance at the heart of its
operations both in terms of minimising the impact its activities have on the
environment and, as importantly, in its product development strategy. These
practices and initiatives not only resonate with our customers and employees;
they also make significant commercial sense as countries legislate to reduce
power wastage, improve recyclability of manufactured goods and ban the use of
harmful chemicals.
We have developed a class leading portfolio of green products with efficiencies
up to 95% and many of these products also have low stand-by power (a feature to
reduce the power consumed while the end equipment is not operational but in
stand-by mode). We now apply our own "Green XP Power" logo to the products we
designate ultra-high efficiency. During the first half of 2016 24% of our
revenues were generated by "Green XP Power" products compared to 21% in 2015,
17% in 2014, 11% in 2013, 6% in 2012 and 5% in 2011.
At present, the uptake of these products by customers is primarily driven by
their improved reliability and the ability to dispense with mechanical fans to
dissipate waste heat, rather than the fact that they consume less energy in
operation. However, we expect this to change as lower energy consumption
becomes a higher priority to end users of capital equipment and more
legislation is introduced.
Board Changes
On 1 January 2016 Polly Williams joined our Board as a Non-Executive Director.
Polly, a chartered accountant, is a former partner at KPMG LLP and holds a
number of Non-Executive Directorship roles, including at Jupiter Fund
Management plc, TSB Group plc and Daiwa Capital Markets Europe Ltd. Polly
chairs XP Power's Remuneration Committee and is a member of the Audit
Committee. Polly has a wealth of public company experience and adds significant
strength to our Board.
John Dyson stepped down from the Board following this year's Annual General
Meeting after many years of excellent service to the Company.
Outlook
The decision of the United Kingdom to leave the European Union has resulted in
a significant weakening of Sterling versus the US Dollar and a degree of
economic uncertainty. Approximately 20% of our revenues derive from UK
customers. It is difficult to judge how our business in the UK will be affected
at this point in terms of whether we will see a slow down in this market or
whether our customers might actually benefit in export markets from the
depreciation of Sterling. What we can say is that if current exchange rates
persist in the second half of the year it will have a favourable translation
affect on our reported revenues, as over 76% of our world wide revenues are
derived in US Dollars, but a slightly adverse affect on United Kingdom margins
if we cannot pass on price increases to the circa 67% of our UK customers who
we currently invoice in Sterling.
The Group continues to have a strong balance sheet position which places us in
an excellent position to make selective acquisitions to further broaden our
product offerings and engineering capabilities.
While the global economic outlook remains uncertain and exchange rates are
volatile, we are encouraged by our record order intake and strong backlog.
This, together with new program wins gives us confidence that we should be able
to continue to grow revenues in the second half of 2016 as designs won in 2015
and prior years enter their production phase.
XP Power Limited
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016
GBP Millions Note Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Revenue 5 60.3 53.9
Cost of sales 6 (30.8) (27.3)
Gross profit 29.5 26.6
Operating expenses 6 (16.5) (13.9)
Operating profit 13.0
12.7
Finance cost 6 (0.1) (0.1)
Profit before income tax 12.9 12.6
Income tax expense 7 (2.9) (3.0)
10.0
Profit after income tax 9.6
Other comprehensive income:
Exchange differences on translation 6.8
of foreign operations (0.5)
Other comprehensive income, net of 6.8 (0.5)
tax
Total comprehensive income 16.8 9.1
Profit attributable to:
- Equity holders of the Company 9.8 9.6
- Non-controlling interests 0.2 -
10.0 9.6
Total comprehensive income
attributable to:
- Equity holders of the Company 16.6 9.1
- Non-controlling interests 0.2 -
16.8 9.1
Earnings per share attributable to Pence per Pence per
equity holders of the Company Share Share
Basic 9 51.6 50.5
Diluted 9 51.1 50.1
XP Power Limited
Consolidated Balance Sheet
At 30 June 2016
GBP Millions Note At 30 At 31 At 30
June 2016 December 2015 June 2015
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 11 5.8 4.9 3.9
Trade receivables 21.3 17.5 18.3
Other current assets 2.0 2.4 2.2
Inventories 33.6 28.7 25.8
Derivative financial instruments - - 0.9
Total current assets 62.7 53.5 51.1
Non-current assets
Property, plant and equipment 17.9 16.1 15.0
Goodwill 38.6 36.3 30.5
Intangible assets 10 13.3 11.9 10.4
Other Investment - - 0.1
Deferred income tax assets 0.4 0.4 0.3
ESOP loans to employees 0.7 0.7 0.8
Total non-current assets 70.9 65.4 57.1
Total assets 133.6 118.9 108.2
LIABILITIES
Current liabilities
Trade and other payables 14.9 14.6 14.4
Current income tax liabilities 2.3 1.2 2.1
Derivative financial instruments 0.3 - -
Borrowings 12 9.2 4.0 4.3
Total current liabilities 26.7 19.8 20.8
Non-current liabilities
Deferred income tax liabilities 4.3 3.9 2.6
Provision for deferred contingent 1.5
consideration 1.5 1.8
Borrowings 12 2.6 4.6 -
Total non-current liabilities 8.4 10.0 4.4
Total liabilities 35.1 29.8 25.2
NET ASSETS 98.5 89.1 83.0
Equity
Equity attributable to equity
holders of the Company
Share capital 27.2 27.2 27.2
Merger reserve 0.2 0.2 0.2
Treasury shares (0.8) (1.0) (1.1)
Hedging reserve 0.1 0.1 0.6
Translation reserve 1.5 (5.3) (6.8)
Retained earnings 69.4 67.1 62.2
97.6 88.3 82.3
Non-controlling interest 0.9 0.8 0.7
TOTAL EQUITY 98.5 89.1 83.0
XP Power Limited
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2016 (Unaudited)
GBP Millions
Attributable to equity holders of the company
Share Treasury Merger Hedging Translation Retained Total Non-controlling Total
capital shares reserve reserve reserve earnings interest Equity
27.2 (1.1) 0.2 0.6 (6.3) 59.6 80.2 0.1 80.3
Balance at 1
January 2015
Sale of treasury - - - - - (0.2) (0.2) - (0.2)
shares
Purchase of - (0.1) - - - - (0.1) - (0.1)
treasury shares
Employee share - 0.1 - - - - 0.1 - 0.1
option plan
expenses
Dividends paid - - - - - (6.8) (6.8) (0.1) (6.9)
Acquisition of - - - - - - - 0.7 0.7
subsidiary
Total - - - - (0.5) 9.6 9.1 - 9.1
comprehensive
income for the
period
Balance at 30 27.2 (1.1) 0.2 0.6 (6.8) 62.2 82.3 0.7 83.0
June 2015
27.2 (1.0) 0.2 0.1 (5.3) 67.1 88.3 0.8 89.1
Balance at 1
January 2016
Sale of treasury - 0.1 - - - (0.1) - - -
shares
Purchase of - - - - - - - - -
treasury shares
Employee share - 0.1 - - - - 0.1 - 0.1
option plan
expenses
Dividends paid - - - - - (7.4) (7.4) (0.1) (7.5)
Acquisition of - - - - - - - - -
subsidiary
Total - - - - 6.8 9.8 16.6 0.2 16.8
comprehensive
income for the
period
Balance at 30 27.2 (0.8) 0.2 0.1 1.5 69.4 97.6 0.9 98.5
June 2016
XP Power Limited
Consolidated Statement of Cash Flows
For the six months ended 30 June 2016
GBP Millions Note Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Cash flows from operating activities
Total profit 10.0 9.6
Adjustments for
- Income tax expense 2.9 3.0
- Amortisation and depreciation 2.2 1.8
- Finance cost 0.1 0.1
- Loss/(gain) on fair valuation of 0.3
derivative financial instruments (0.6)
- ESOP expenses 0.1 0.1
- Unrealised currency translation loss 2.4 0.3
Change in the working capital
- Inventories (4.9) (0.6)
- Trade and other receivables (3.4) (2.8)
- Trade and other payables 0.3 -
- Income tax paid (1.8) (2.4)
Net cash generated from operating 8.2 8.5
activities
Cash flows from investing activities
Acquisition of a subsidiary, net of cash - (0.6)
acqured
Purchases and construction of property, (1.2) (1.3)
plant and equipment
Research and development expenditure 6 (2.0) (1.4)
capitalised
ESOP loan repaid - 0.1
Net cash used in investing activities (3.2) (3.2)
Cash flows from financing activities
Repayment of borrowings (1.2) -
Sale of treasury shares by ESOP 0.1 -
Purchase of treasury shares by ESOP - (0.1)
Interest paid (0.1) (0.1)
Dividends paid to equity holders of the (7.4) (6.8)
Company
Dividends paid to non-controlling interest (0.1) (0.1)
Net cash used in financing activities (8.7) (7.1)
Net (decrease)/increase in cash and cash (3.7) (1.8)
equivalents
Cash and cash equivalents at start of 4.3 1.3
period
Effects of currency translation on cash and 0.2
cash equivalents 0.1
Effects of currency translation on loan and 1.0 -
borrowings
Cash and cash equivalents at the end of the 11 1.8 (0.4)
period
Reconciliation of changes in cash and cash equivalents to movements in net debt
Net (decrease)/increase in cash and cash (3.7) (1.8)
equivalents
Repayment of borrowings 1.2 -
Effects on currency translation-cash and 0.2 0.1
cash equivalents
Movement in net debt (2.3) (1.7)
Net debt at start of period (3.7) 1.3
Net debt at end of period (6.0) (0.4)
XP Power Limited
Notes to the Interim Results for the six months ended 30 June 2016
1. 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 401 Commonwealth Drive, Lobby B #02-02, Haw Par Technocentre,
Singapore 149598.
The nature of the Group's operations and its principal activities is to
provide power supply solutions to the electronics industry.
These condensed consolidated interim financial statements are presented
in Pounds Sterling (GBP).
2. Basis of preparation
The condensed consolidated interim financial statements for the period
ended 30 June 2016 have been prepared in accordance with the Listing Rules of
the Financial Services Authority and with IAS 34, Interim Financial Reporting
as adopted by the European Union.
The condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year ended 31
December 2015 which have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union.
3. Going Concern
The directors, after making enquiries, are of the view, as at the time of
approving the financial statements, that there is a reasonable expectation that
the Group will have adequate resources to continue operating for the
foreseeable future and therefore the going concern basis has been adopted in
preparing these financial statements.
4. Accounting policies
The condensed consolidated interim financial statements have been
prepared under the historical cost convention except for the fair value of
derivatives in accordance with IFRS 9, "Financial Instruments".
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 2015.
5. Segmented analysis
The Group operates substantially in one class of business, the provision
of power control solutions to the electronics industry. Analysis of total
Group operating profit, total assets, revenue and total group profit before
taxation by geographical region is set out below.
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Revenue
Asia 4.9 3.8
Europe 24.6 23.2
North America 30.8 26.9
Total revenue 60.3 53.9
5. Segmented analysis (continued)
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Total assets
Asia 43.0 35.6
Europe 26.7 24.6
North America 63.5 47.7
Segment assets 133.2 107.9
Unallocated deferred tax 0.4 0.3
Total assets 133.6 108.2
Reconciliation of segment results to profit after income tax:
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Asia 1.1 -
Europe 6.0 3.8
North America 10.4 7.4
Segment result 17.5 11.2
Corporate recovery from operating (1.7) 4.1
segment
Research and development cost (2.8) (2.6)
Finance cost (0.1) (0.1)
Profit before income tax 12.9 12.6
Income tax expense (2.9) (3.0)
Profit after income tax 10.0 9.6
The Group operates in the following regions and countries:
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Revenue
North America 30.8 26.9
United Kingdom 13.0 12.4
Singapore 4.4 3.8
Germany 5.5 5.1
Switzerland 2.1 1.7
Other countries 4.5 4.0
Total revenue 60.3 53.9
6. Expenses by nature
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Profit for the period is after charging/
(crediting):
Amortisation of intangible assets 1.1 0.9
Depreciation of property, plant and 1.1 0.9
equipment
Foreign exchange loss/(gain) 0.2 (0.8)
(Gain)/Loss on foreign exchange forward (0.2) 0.7
Purchases of inventories 19.3 22.6
Changes in inventories 4.9 0.6
Audit fee payable to Group's auditor for 0.2 0.2
audit of the Group's annual account
Audit fee payable to other audit firm for - -
audit related services
Tax fees payable to Group's auditor for - 0.1
services provided to the Group
Tax fees payable to other firms for - -
services provided to the Group
Other charges 20.8 16.1
Total 47.4 41.3
Included in the above is net research and development expenditure as follows:
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Gross research and development expenditure 3.8 3.1
Development expenditure capitalised (2.0) (1.4)
Amortisation of development expenditure 1.0 0.9
capitalised
Net research and development expenditure 2.8 2.6
7. Taxation
Income tax expense is recognised based on management's best estimate of
the weighted average annual income tax expected for the full financial year.
The estimated effective annual tax rate used for 2016 is 22.5% (2015: 24.1%).
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Singapore corporation tax 1.3 1.0
Overseas corporation tax 1.6 2.0
Total taxation 2.9 3.0
8. Dividends
Amounts recognised as distributions to equity holders of the Company in
the period:
Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Pence per GBP Millions Pence per GBP Millions
share share
Prior year 3rd quarter 15.0 2.8 14.0 2.6
dividend paid
Prior year final dividend 24.0 4.6 22.0 4.2
paid
Total 39.0 7.4 36.0 6.8
The dividends paid recognised in the interim financial statements relate to the
third quarter and final dividends for 2015.
The first quarterly dividend of 14 pence per share (2015: 13 pence) was paid on
8 July 2016. A second quarterly dividend of 15 pence per share (2015: 14 pence)
will be paid on 13 October 2016 to shareholders on the register at 16 September
2016.
9. Earnings per share
Earnings per share attributable to equity holders of the company arise
from continuing operations as follows:
GBP Millions Six months ended Six months
30 June 2016 ended
(Unaudited) 30 June 2015
(Unaudited)
Earnings
Earnings for the purposes of basic 9.8 9.6
and diluted earnings per share
(profit for the period attributable
to equity shareholders of the
company)
Amortisation of intangibles 0.1 -
associated with acquisitions
Cost associated with abortive 0.1 -
acquisitions
Earnings for adjusted earnings per 10.0 9.6
share
Number of shares '000 '000
Weighted average number of shares 19,011
for the purposes of basic earnings 18,998
per share (thousands)
Effect of potentially dilutive 182 177
share options (thousands)
Weighted average number of shares 19,193
for the purposes of dilutive 19,175
earnings per share (thousands)
Earnings per share from operations
Basic 51.6p 50.5p
Diluted 51.1p 50.1p
Adjusted 52.2p 50.1p
10. Intangible assets
Intangible assets comprises development expenditure capitalised when it meets
the criteria laid out in IAS 38, "Intangible Assets", trademarks, brand and
technology, customer contracts and non-contractual customer relationships.
11. Cash and cash equivalents
For the purpose of presenting the consolidated cash flow statement, the
consolidated cash and cash equivalents comprise the following:
GBP Millions Six months ended Six months ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
Cash and bank balances 5.8 3.9
Less: Bank overdrafts (4.0) (4.3)
Cash and cash equivalents per 1.8
consolidated cash flow statement (0.4)
Reconciliation to free cash flow:
Net cash inflow from operating 8.2 8.5
activities
Development expenses capitalised (2.0) (1.4)
Finance cost (0.1) (0.1)
Free cash flow 6.1 7.0
12. Borrowings, bank loans and overdraft
GBP Millions 30 June 2016 31 December 2015 30 June 2015
(Unaudited) (Unaudited)
Non-current 2.6 4.0 -
Current 9.2 4.6 4.3
Total 11.8 8.6 4.3
13. Currency Impact
We report in Pounds Sterling (GBP) but have significant revenues and costs as
well as assets and liabilities that are denominated in United States Dollars
(USD). The table below sets out the prevailing exchange rates in the periods
reported.
First half First half % 30 June 31 December 30 June
2016 2015 Change 2016 2015 2015
Average Average Period end Period end Period end
USD/GBP 1.44 1.52 -5.3% 1.33 1.50 1.57
EUR/GBP 1.30 1.35 -3.7% 1.20 1.37 1.40
Approximately 76% of the Group's revenues are invoiced in USD so the change in
the USD to GBP exchange rate has a significant effect on reported revenue in
GBP. However, as the majority of our cost of goods sold and operating expenses
are also denominated in USD, the change in profit before tax with the USD to
GBP exchange rate is relatively minor. The impact of changes in the key
exchange rates from the first half of 2015 to the first half of 2016 are
summarised as follows:
GBP Millions USD EUR
Impact on revenues 2.3 0.2
Impact on profit before tax 0.5 0.1
Impact on net debt (1.4) 0.1
14. Risks and uncertainties
Like many other international businesses the Group is exposed to a number of
risks and uncertainties which might have a material effect on its financial
performance. These include:
Fluctuations in foreign currency
The Group has an exposure to foreign currency fluctuations. This could lead to
material adverse movements in reported earnings.
Dependence on key 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.
Loss of key customers/suppliers
The Group is dependent on retaining its key customers and suppliers. However,
for the six months ended 30 June 2016, no one customer accounted for more than
6% of revenue.
Shortage, non-availability or technical fault with regard to key electronic
components
The Group is reliant on the supply, availability and reliability of key
electronic components. If there is a shortage, non availability or technical
fault with any of the key electronic components this may impair the Group's
ability to operate its business efficiently and lead to potential disruption to
its operations and revenues.
Fluctuations of revenues, expenses and operating results
The revenues, expenses and operating results of the Group could vary
significantly from period to period as a result of a variety of factors, some
of which are outside its control.
Information Technology Systems
The business of the Group relies to a significant extent on information
technology systems used in the daily operations of its operating subsidiaries.
Any failure or impairment of those systems or any inability to transfer data
onto any new systems introduced could cause a loss of business and/or damage to
the reputation of the Group together with significant remedial costs.
Risks relating to taxation of the Group
The Group is exposed to corporation tax payable in many jurisdictions. The
effective tax rate of the Group is affected by where its profits fall
geographically. The Group effective tax rate could therefore fluctuate over
time. This could have an impact on earnings and potentially its share price.
Further, the Group's tax position includes judgments about past and future
events and relies on estimates and assumptions.
15. Directors' responsibility statement
The interim results were approved by the board of directors on 25 July
2016.
The directors confirm that to the best of their knowledge that:
· The unaudited interim results have been prepared in accordance with IAS
34 "Interim Reporting" as adopted by the European Union; 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 listed in the Company's 2015
Annual Report.
END
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