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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,096.00 | 1,092.00 | 1,098.00 | 1,112.00 | 1,072.00 | 1,072.00 | 12,695 | 13:34:38 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Motors And Generators | 316.4M | -9.2M | -0.3885 | -28.21 | 259.55M |
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2 August 2021
XP Power Limited
("XP Power" or "the Group" or the "Company")
Interim Results for the six months ended 30 June 2021
XP Power, one of the world's leading developers and manufacturers of critical
power control solutions for the electronics industry, today announces its
unaudited interim results for the six-month period ended 30 June 2021.
Six months Six months
ended ended
30 June 2021 30 June 2020
Change
Highlights
Order intake £157.6m £145.8m +8%
Revenue £119.9m £105.1m +14%
Turnover
Gross margin 46.6% 44.9% +170bps
Interim dividend per share (Q1 + 37.0p 18.0p +106%
Q2)
Adjusted
Adjusted operating profit1 £23.2m £18.0m +29%
Adjusted profit before income £22.5m £17.0m +32%
tax1
Adjusted cash generated from £26.4m £25.7m +3%
operations1
Adjusted diluted earnings per 93.3p 70.2p +33%
share1
Reported
Operating profit £17.1m £11.3m +51%
Profit before tax £16.4m £10.3m +59%
Diluted earnings per share 68.1p 41.2p +65%
Net debt £20.3m £17.9m2 +13%
1For details on adjusted measures refer to note 5 and note 8 of the condensed
consolidated financial statements
2Net debt as at 31 December 2020
* Record order intake up 17% at constant currency and 8% reported to £157.6
million, with growth driven by continued strength in the Semiconductor
Manufacturing Equipment sector and a recovery in Industrial Technology,
offset by the expected normalisation in Healthcare after exceptional
COVID-19 related performance in 2020.
* Group enters H2 2021 with a record order book of £150.3 million (31
December 2020: £124.1 million).
* Constant currency revenue grew 23%, with reported revenue up 14% to £119.9
million.
* Gross margin increased to 46.6% (H1 2020: 44.9%) driven by favourable
sector and product mix as well as cost savings from transfer of
manufacturing to Asia following the closure of the Nevada, US site in
mid-2020, partially offset by increased freight costs
* Adjusted cash generated from operations up 3% to £26.4 million (H1 2020: £
25.7 million), despite investing in working capital to support customer
demand and to secure supply of crucial components. Maintaining high
operating cash conversion of over 100%.
* Net debt of £20.3 million at period end (December 2020: £17.9 million) with
net debt to EBITDA of just 0.3x. Significant liquidity available - c.£87
million.
* First half dividend for 2021 of 37 pence per share (H1 2020: 18.0 pence per
share), comparative period impacted by COVID-19. The payment reflects the
confidence the Board has in the Group's longer-term prospects.
* The Board expects FY 2021 trading to be modestly ahead of analysts'
consensus expectations, while remaining mindful of certain headwinds.
James Peters, Chairman, commented:
"We maintained our strong momentum in the first half, building on our robust
performance in 2020 to deliver another period of significant revenue and profit
growth. Our progress reflects the consistent application of our strategy, and
we continue to see a positive future for the Group driven by encouraging market
growth dynamics, exposure to secular growth trends related to Big Data,
Artificial Intelligence, the Internet of Things and the Fourth Industrial
Revolution, and the potential for further market share gains as we broaden our
addressable market and product range.
Trading in the period was ahead of our original expectations reflecting the
continued strength of the Semiconductor Manufacturing Equipment sector and a
recovery in Industrial Technology. We expect the momentum to continue,
supported by our strong order book, and while mindful of headwinds including
price and availability pressures within the component supply chain, the Board
expects full year trading to be modestly ahead of current analyst consensus1."
1 The current range of forecasts for adjusted pre-tax profits for the year
ended 31 December 2021 is £41.5 million to £47.0 million with a consensus of £
44.6 million
XP Power is hosting a presentation for analysts this morning at 0900 (BST). A
live webcast of the presentation will be available at
https://www.investis-live.com/xppowerplc/60e414c280fc93100029fae0/ir2021
[investis-live.com] and a recording of the webcast will be available at
www.xppowerplc.com later in the day.
Enquiries:
XP Power
Gavin Griggs, Chief Executive Officer +44 (0)118 984 5515
Oskar Zahn, Chief Financial Officer +44 (0)118 984 5515
Citigate Dewe Rogerson
Kevin Smith/Jos Bieneman +44 (0)207 638 9571
Note 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.
XP Power has invested in research and development and its own manufacturing
facilities in China 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 250 Index. XP Power
serves a global blue-chip customer base from 29 locations in Europe, North
America, and Asia.
For further information, please visit xppower.com
INTERIM STATEMENT
Overview
The Group had a strong start to 2021 and has continued to make good progress
against its strategic objectives.
The Group delivered strong order, revenue, earnings, and cash performance in
the first half of the year, against an uncertain global backdrop due to the
COVID-19 pandemic. The Industrial Technology sector has returned to growth as
economies across the world reopen following the COVID-19 imposed shutdowns in
2020. The Semiconductor Manufacturing Equipment sector has continued its strong
performance through the first half of 2021. As expected, the Healthcare sector
has normalised compared with the first half of 2020, as the exceptional demand
for critical care equipment for the treatment of COVID-19 affected patients did
not repeat.
Our employees' health, safety and wellbeing remain a key priority. COVID-19
continued to be widespread, and our business had to be able to react quickly to
the various local and regional impacts. The most recent example is the
situation in Vietnam where the current lockdown has been expanded to an
additional 19 provinces as cases increase. The Vietnamese government has
imposed a lockdown and closed many facilities around Ho Chi Minh and Binh
Duong, close to where our factory is located. Due to the medical status of some
of our products we can continue operating as a "3 in 1" site (Manufacture/Food/
Rest in one factory) in line with government recommendations, with the factory
essentially operating as a sealed site.
With a proven strategy, exposure to attractive customers and market sectors,
strong design win momentum and an expanded product portfolio, the Board remains
positive regarding the future of the Group.
Sector Performance
XP Power serves three distinct market sectors: Industrial Technology, which
represented 38% of total H1 2021 revenue (H1 2020: 44%); Semiconductor
Manufacturing Equipment 37% (H1 2020: 29%) and Healthcare 25% (H1 2020: 27%).
In each sector we focus our resource on key accounts that value our quality and
high level of service and support, particularly during the critical design in
stage.
The Industrial Technology sector remains very well diversified, with a broad
cross section of accounts and no large individual programmes, even though the
Group works with many blue-chip industrial customers. Orders grew by £22.3
million or 50% on a constant currency basis compared to H1 2020, as the
recovery we started to see in this sector towards the end of 2020 has continued
through the first half of 2021. Industrial Technology revenue grew by 5% on a
constant currency basis to £45.4 million. The reported revenue number decreased
by £1.1 million or 2% due to the appreciation of Pound Sterling against the US
Dollar. Revenue from the distribution channel, which accounts for 9% of Group
revenue, increased by 12% compared to the prior year as we continued to grow
market share with distributors.
Semiconductor Manufacturing Equipment orders increased by £17.9 million or 40%
on a constant currency basis compared to the prior year, as we continued to
benefit from market share gains as well as a buoyant market. Design wins in
this sector have been particularly strong over the last few years aided by our
move up both the power and voltage scale. As previously reported, we regard
this sector as having highly attractive long term growth prospects which are
being driven by the growth of Big Data, Artificial Intelligence, the Internet
of Things (IoT) and the roll out of 5G. The acceleration of digitisation in
many aspects of our world, and the rise in home working catalysed by the
COVID-19 pandemic, are reinforcing our view on the strength of these mega
trends and our presence in the Semiconductor Manufacturing Equipment sector
gives us significant exposure to these exciting growth opportunities. Sector
revenue increased by 62% over the prior year to £44.5 million on a constant
currency basis and by 47% on a reported basis (H1 2020: £30.3 million).
Order intake in the Healthcare sector decreased by £16.8 million or 37% on a
constant currency basis as the exceptional COVID-19 related demand we saw in H1
2020 did not repeat. However, we saw an encouraging increase in demand for
other applications such as robotic surgical tools, medical imaging, and
endoscopy, which led the Healthcare sector to deliver growth over its H1 2019
performance. Revenue from Healthcare customers grew by 14% on a constant
currency basis and 6% on a reported basis over the prior period to £30.0
million (H1 2020: £28.3 million) due to the increased demand in non-COVID-19
related medical applications. Healthcare remains an attractive market for XP
Power given its long-term demand growth dynamics, the safety critical nature of
products, the breadth of our medical product range and the high level of
customer service we offer blue chip medical device manufacturers.
Our customer base remains highly diversified with the largest customer
accounting for only 16% of revenue (H1 2020: 14%), spread over more than 200
different programmes/part numbers.
Regional Performance
Revenue in North America was US$97.4 million (H1 2020: US$77.5 million), up 26%
compared to the same period in the previous year with growth across all
sectors, but with a particularly strong performance in Semiconductor
Manufacturing Equipment.
Revenue in Europe was £34.6 million (H1 2020: £30.1 million), up 15% on a
reported basis from a year ago. We saw strong growth in the Healthcare sector
and a recovery in the Industrial Technology sector.
Revenue in Asia was US$20.6 million (H1 2020: US$16.7 million), up 23% compared
with the same period a year ago, driven by the Semiconductor Manufacturing
Equipment sector.
Our Strategy
Our strategy is clear and delivered consistently. We aim to be the first-choice
power solutions provider for our customers across a diverse range of sectors,
offering a superior product portfolio and customer service. We believe we have
the potential to grow revenue well ahead of our underlying markets over the
long-term driven by our core growth drivers:
* Global GDP growth;
* Growth in the use of electronics requiring a power converter;
* Exposure to 'secular' growth markets e.g., IoT, AI;
* Market share gains - greater penetration of existing blue-chip customers;
and
* Expanding our addressable markets.
The expansion of our addressable market has been driven both organically and by
acquisition, in what remains a highly fragmented sector. Since the end of 2015,
we have completed three acquisitions which have allowed us to expand into the
high voltage and radio frequency (RF) power market sectors increasing the size
of our addressable market by around US$2.0 billion (+75%). Despite our many
years of growth, our overall market share remains low, and we have a relentless
focus on increasing it through a targeted sales and marketing process.
We have an enviable product portfolio of over 300 product families from low
voltage to 500 kilo Volts at power levels up to 200 kilo Watts. This breadth of
range, combined with our excellent customer support and Engineering Services
capabilities makes us the ideal choice of power solutions provider to our
target customers.
Our value proposition to customers is to reduce their overall costs of design,
manufacture and operation and help them get their product to market as quickly
as possible. We achieve this by providing excellent sales engineering support
and producing new highly reliable products that are easy to design into the
customer's system, consume less power, take up less space and reduce
installation times.
We continued to execute well against our strategy in the period, gaining
further design wins from our newer product introductions, particularly in
higher power applications, and from our increased focus on engineering
solutions which provide more value to our customers. The successful
implementation of our strategy continues to drive market share gains and the
strength of our new programme wins is encouraging. We continue to focus our own
engineering resources on high-power applications and address the lower power
applications through third party products.
Sustainability
At XP Power, we recognise that climate change is probably the greatest
challenge of our time. For more than 10 years we have been proactively
progressing our sustainability strategy throughout our entire supply chain. In
2012, we became the first power converter manufacturer to be admitted into the
Responsible Business Alliance, setting high standards for environmental
performance. Wherever possible, we have championed sustainable initiatives as
well as launching a broad range of "green" high-efficiency products. These
"green" products deliver power more efficiently and consume less energy,
thereby reducing the annual CO2 emissions of the equipment. In 2020, we set an
aspiration of achieving carbon neutrality by 2040 and we are developing the
plans to be able to achieve this objective. We recognise the greatest impact we
can have is on developing high-efficiency power supplies and in supporting our
customers on their individual sustainability journeys, and we partner with
vendors who are committed to this journey.
Our Sustainability Strategy is to:
. Produce quality products that are safe and solve our customers' power
problems;
. Minimise the impact the Group and its products have on the environment;
. Adopt responsible sourcing practices considering social and environmental
impacts;
. Make XP Power a workplace where our people can be at their best ensuring
an environment that is safe, diverse, inclusive and which attracts and retains
the best talent; and
. Uphold the highest standard of business ethics and integrity.
In the first half of 2021 we have continued to develop our sustainability
roadmap, which includes proactive investments to reduce our energy consumption;
prioritising the safety and wellbeing of our people during the COVID-19
pandemic; developing action plans from the results of our employee engagement
surveys; developing the plans to achieve carbon neutrality by 2040 and
continuing to enhance our product design processes.
Product Development
New products are fundamental to our revenue growth. The broader our product
offering, the higher the probability that we will have a product which will
work in a customer's application, with, or without, modification by our
engineering team. We believe we have a market leading product range which
provides us with an addressable market of approximately US$5.0 billion. In the
first half of 2021 the Group launched a significant number of new products. We
expect this to continue through H2 2021.
The design-in cycles required by our customers to qualify the power converter
into their equipment and to gain the necessary safety agency approvals are
lengthy. Typically, we see a period of around 18 months, or even longer in
Healthcare, from first identifying a customer opportunity to receiving the
first production order. Revenue will then start to build from this point, often
peaking a few years later. The positive aspect of this characteristic is that
our business has a strong annuity base where programmes typically last seven to
eight years and often significantly longer.
Manufacturing Progress
A key element of our strategy is creating a resilient and flexible supply chain
that balances high efficiency with market-leading customer responsiveness. We
aim to be able to manufacture most of our products in both China and Vietnam to
ensure security of supply and both locations are performing well. Our total
Asian manufacturing capacity is around US$350 million per year. We also have
three manufacturing facilities in North America - a customer focused
Engineering Services facility in California, a site in New Jersey focused on
high voltage products and an RF focused facility in Massachusetts.
The move into Vietnam has enabled our supply chain to manage events, such as
the deterioration in trade relations between China and USA and the subsequent
Section 301 tariffs, more effectively; and allowed us to divert production to
Vietnam when COVID-19 disrupted production at our China operations in 2020.
Several of our customers accelerated their qualification processes to transfer
production from our China facility to our Vietnam facility to address the
impact of Section 301 tariffs and COVID-19.
Vietnam is now qualified to produce a total of 2,688 different low-voltage
products (H1 2020: 2,239), demonstrating our progress with the expansion of our
production capabilities. In addition, the transfer of low-power, high-voltage
DC-DC modules, previously manufactured in Minden, Nevada, was completed in 2020
and all these products are now manufactured in Vietnam.
Financial Review
Order Intake
Order intake of £157.6 million (H1 2020: £145.8 million) was up 8% on a
reported basis. The growth was driven by strongly recovering demand in the
Industrial Technology sector and continued growth of the Semiconductor
Manufacturing Equipment sector, which offset the expected normalisation in
Healthcare sector orders following the exceptional COVID-19 related demand in
2020. Given that most orders are placed in US Dollars, the reported results
reflect the impact of a stronger Sterling: US Dollar exchange rate of 1.38 in
2021, compared to 1.26 in the prior year. In constant currency, 2021 orders
were up 17% compared with the prior period. Compared to the same period a year
ago, Asia orders increased by 51%, European orders were up 27%, while North
America orders grew by 7% on the same constant currency basis.
Order intake in the first half of 2021 significantly exceeded revenue with a
resultant book-to-bill of 1.31 (H1 2020: 1.39). We enter the second half of
the current year with a record order book of £150.3 million (31 December 2020:
£124.1 million).
Income statement
Reported revenue grew by 14% to £119.9 million in the first half compared to £
105.1 million in the same period a year ago. Constant currency revenue grew by
23%.
Gross margin in the first half of 2021 was 46.6% (H1 2020: 44.9%), a 170 bps
increase. The increase in gross margin reflected the benefit of moving some
production from the USA to Vietnam during 2020 following the closure of the
Nevada site in mid-2020, favourable sector and regional mix and higher revenue.
Adjusted operating expenses in the first half were £32.7 million (H1 2020: £
29.5 million) after excluding £6.1 million of specific items (H1 2020: £6.7
million). The increase primarily relates to investment in headcount, mainly in
our engineering teams, and in IT costs as we continue to develop the
infrastructure to support the future growth of the business.
Due to the increased revenue and gross margin adjusted operating profit grew by
29% to £23.2 million from £18.0 million in H1 2020. An adjusted operating
margin of 19.3% was achieved in H1 2021, up 220bps from 17.1% in H1 2020.
Statutory operating profit was £17.1 million (H1 2020: £11.3 million).
Net finance cost decreased to £0.7 million (H1 2020: £1.0 million) due to lower
average borrowings.
The Group generated adjusted profit before tax of £22.5 million (H1 2020: £17.0
million), up 32% year-on-year.
The tax charge for the period was £2.8 million (H1 2020: £2.1 million),
representing an effective tax rate of 17.1% (H1 2020: 20.4%). After adjusting
for specific items, the effective tax rate for the period was 17.3% (H1 2020:
18.2%). The year-on-year decrease is driven by geographic mix with a greater
percentage of profits being realised in lower tax rate jurisdictions. We
currently expect our future effective tax rate to be in the range of 16% to 18%
depending on the geographic distribution of our profits.
Basic earnings per share were 69.3 pence (H1 2020: 42.0 pence), an increase of
65%. Adjusted diluted earnings per share were 93.3p, an increase of 33%
compared to the prior year.
Specific Items
In the first half of 2021, the Group incurred £6.1 million (H1 2020: £6.7
million) of specific items, which consisted of amortisation of intangible
assets due to business combinations of £1.4 million (H1 2020: £1.6 million), £
3.7 million of legal costs (H1 2020: £0.2 million), £0.9 million of ERP system
implementation costs (H1 2020: £1.5 million) and £0.1 million of fair value
loss on cash flow hedges (H1 2020: £0.9 million).
The legal costs relate to the lawsuit filed by Comet Technologies USA Inc.,
Comet AG, and YXLON International (collectively "Comet") against XP Power LLC
in September 2020 as disclosed in the Company's 2020 Final Results
announcement. The Group continues to believe there is no merit to this lawsuit
and will vigorously defend any claims brought against it by Comet.
The Group expects to incur further legal costs until this matter is resolved,
the magnitude of which cannot currently be estimated with any certainty.
Cash Flows and Net Debt
The Group generated adjusted cash from operations of £26.4 million in the
period, up 3% from the £25.7 million generated in the previous year. The Group
continued to deliver cash conversion of adjusted operating profit above 100%,
despite investing in inventory to support customer demand and secure supply of
important components with the increasing lead times in the market.
Capital expenditure was £10.0 million which included £2.2 million investment in
increasing capacity with some ongoing maintenance and £3.6 million on the
development of our ERP system ahead of the roll out of our global system into
our Asian supply chain. There was a further £4.2 million relating to the
capitalisation of development costs for new products.
Net debt was £20.3 million at 30 June 2021, compared with £17.9 million at 31
December 2020. The Group returned £11.1 million (H1 2020: £3.8 million) to
shareholders in the form of dividends during the first half of 2021.
The Group's debt is sourced from a Revolving Credit Facility ("RCF") provided
by HSBC UK Bank PLC, J.P. Morgan Securities PLC, and DBS Bank Ltd. The RCF
expires in November 2024 with a committed facility of US$150 million and a
further US$30 million accordion option.
The Group is subject to two financial covenants, which are tested quarterly in
arears. These covenants relate to the leverage ratio between adjusted EBITDA
and net debt, with a maximum of three times permitted, and an interest cover
ratio between adjusted EBITDA and finance costs with a minimum of four times
required. The Group continued to trade with significant headroom on these
covenants throughout the period; the leverage ratio was a comfortable 0.33
times (H1 2020: 0.74) and interest cover was 66 times (H1 2020: 23 times)
Capital Allocation and Dividend Policy
XP has a proven and cash generative business model and maintains a prudent and
well capitalised balance sheet. This allows the Group to fund its organic
growth plans from existing resources as well as pay a growing dividend to all
shareholders. The Group also retains the financial firepower to make
acquisitions when opportunities become available, assuming they meet our
investment criteria and align with our strategy. The second quarter dividend
for 2021 increased by 5.5% to 19p from 18p in the prior year period. Together
with the first quarter dividend, this brings the total first half dividends
declared to 37 pence per share (H1 2020 total dividends of 18p being disrupted
by COVID-19).
Adjusting items
Throughout this Interim Results statement, adjusted and other alternative
performance measures are used to describe the Group's performance. These are
not recognised under International Financial Reporting Standards ("IFRS") or
other Generally Accepted Accounting Principles ("GAAP").
When reviewing XP Power's performance, the Board and management team focus on
adjusted results rather than statutory results. There are a number of items
included in our statutory results which are considered by the Board to be
one-off in nature or not representative of the Group's performance and are thus
excluded from adjusted results. The tables in note 5 show the full list of
adjustments between statutory operating profit and adjusted operating profit by
business, as well as between statutory profit before tax and adjusted profit
before tax at Group level for both 2021 and 2020.
Outlook
We delivered another period of significant revenue and profit growth in the
first half of 2021 despite ongoing global uncertainty from the COVID-19
pandemic. The pandemic has disrupted global supply chains, leading to shortages
of key components and freight capacity, and with raw material inflation
affecting many industries globally. XP Power has not been immune to these
macroeconomic challenges but has nonetheless been able to deliver a strong set
of results. Our progress reflects the consistent application of our strategy,
and we continue to see a positive future for the Group driven by encouraging
market growth dynamics and the potential for further market share gains as we
broaden our addressable market and product range.
Trading in the period was ahead of our original expectations reflecting the
continued strength of the Semiconductor Manufacturing Equipment sector and a
recovery in Industrial Technology. We enter the second half of 2021 with a
record customer backlog of £150.3 million (31 December 2020: £124.1 million)
and expect the first half momentum to continue. Whilst we remain mindful of
headwinds including price and availability pressures within the component
supply chain, the Boards' expectations are that full year trading will be
modestly ahead of current analyst consensus.
2 August 2021
Independent review report to XP Power Limited
Report on review of interim financial information
Introduction
We have reviewed the accompanying condensed consolidated financial information
of XP Power Limited ("the Company") and its subsidiaries ("the Group") set out
on pages 12 to 21, which comprise the condensed consolidated balance sheet of
the Group as at 30 June 2021, 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 adopted by the United Kingdom and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority. 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 2021, which comprise the "Interim Results" set out
on pages 1 to 3, "Interim Statement" set out on pages 4 to 10 and "Risks and
uncertainties" set out on pages 22 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 adopted by
the United Kingdom and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers LLP
Public Accountants and Chartered Accountants
Singapore,
2 August 2021
XP Power Limited
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2021
£ Millions Note Six months ended Six months
30 June 2021 ended
(Unaudited) 30 June
2020
(Unaudited)
Revenue 5 119.9 105.1
Cost of sales (64.0) (57.9)
Gross profit 55.9 47.2
Other income * 0.3
Expenses
Distribution and marketing (24.9) (24.3)
Administrative (5.4) (3.3)
Research and development (8.5) (8.6)
Operating profit 17.1 11.3
Finance charge (0.7) (1.0)
Profit before income tax 16.4 10.3
Income tax expense 6 (2.8) (2.1)
Profit after income tax 13.6 8.2
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of (1.3) 6.0
foreign operations
(1.3) 6.0
Items that will not be reclassified
subsequently to profit or loss:
Currency translation differences arising * *
from consolidation
Other comprehensive (loss)/income, net of (1.3) 6.0
tax
Total comprehensive income 12.3 14.2
Profit attributable to:
- Equity holders of the Company 13.5 8.1
- Non-controlling interests 0.1 0.1
13.6 8.2
Total comprehensive income attributable to:
- Equity holders of the Company 12.2 14.1
- Non-controlling interests 0.1 0.1
12.3 14.2
Earnings per share attributable to equity Pence per Pence per
holders of the Company Share Share
Basic 8 69.3 42.0
Diluted 8 68.1 41.2
* 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 2021
£ Millions Note At 30 At 31
June 2021 December
(Unaudited) 2020
ASSETS
Current assets
Corporate tax recoverable 1.5 3.8
Cash and cash equivalents 8.5 13.9
Inventories 58.3 54.2
Trade receivables 34.1 30.2
Other current assets 5.8 4.6
Derivative financial instruments 0.1 0.3
Total current assets 108.3 107.0
Non-current assets
Goodwill 51.9 52.2
Intangible assets 9 50.2 46.6
Property, plant and equipment 28.3 28.4
Right-of-use assets 4.6 5.1
Deferred income tax assets 3.3 2.9
ESOP loans to employees * *
Total non-current assets 138.3 135.2
Total assets 246.6 242.2
LIABILITIES
Current liabilities
Current income tax liabilities 2.8 4.9
Trade and other payables 34.5 28.2
Derivative financial instruments * 0.1
Lease liabilities 1.5 1.5
Accrued consideration * -
Total current liabilities 38.8 34.7
Non-current liabilities
Accrued consideration 0.9 1.0
Borrowings 28.8 31.8
Deferred income tax liabilities 7.0 6.7
Provisions 0.1 0.1
Lease liabilities 3.0 3.4
Total non-current liabilities 39.8 43.0
Total liabilities 78.6 77.7
NET ASSETS 168.0 164.5
EQUITY
Equity attributable to equity holders of the
Company
Share capital 27.2 27.2
Merger reserve 0.2 0.2
Share option reserve 5.7 4.1
Treasury shares reserve * (0.1)
Translation reserve (5.1) (3.8)
Other reserve 4.2 (3.6)
Retained earnings 135.2 132.6
167.4 163.8
Non-controlling interests 0.6 0.7
TOTAL EQUITY 168.0 164.5
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 2021
£ Millions
Attributable to equity holders of the Company
Share Share Treasury Merger Translation Other Retained Total Non-controlling Total
capital option shares reserve reserve reserve earnings interests Equity
Note reserve
27.2 3.9 (0.5) 0.2 (0.2) (0.8) 108.4 138.2 0.7 138.9
Balance at 1
January 2020
Sale of - - 0.4 - - - 1.4 1.8 - 1.8
treasury shares
Employee share - 0.3 - - - - - 0.3 - 0.3
option plan
expenses, net
of tax
Dividends paid 7 - - - - - - (3.8) (3.8) * (3.8)
Further - - - - - 0.2 - 0.2 (0.2) -
acquisition of
non-controlling
interest
Exchange - * - - 6.0 - * 6.0 - 6.0
difference
arising from
translation of
financial
statements of
foreign
operations
Profit for the - - - - - - 8.1 8.1 0.1 8.2
year
Total - * - - 6.0 - 8.1 14.1 0.1 14.2
comprehensive
income for the
period
Balance at 30 27.2 4.2 (0.1) 0.2 5.8 (0.6) 114.1 150.8 0.6 151.4
June 2020
(unaudited)
27.2 4.1 (0.1) 0.2 (3.8) 132.6 163.8 0.7 164.5
Balance at 1 3.6
January 2021
Sale of - (0.2) * - - 0.6 * 0.4 - 0.4
treasury shares
Employee share - 1.9 - - - - - 1.9 - 1.9
option plan
expenses, net
of tax
Dividends paid 7 - - - - - - (10.9) (10.9) (0.2) (11.1)
Exchange - (0.1) - - (1.3) - * (1.3) * (1.3)
difference
arising from
translation of
financial
statements of
foreign
operations
Net change in - - - - - - - - - -
cash flow
hedges
Profit for the - - - - - - 13.5 13.5 0.1 13.6
year
Total - (0.1) - - (1.3) - 13.5 12.2 0.1 12.3
comprehensive
income for the
period
Balance at 30 27.2 5.7 * 0.2 (5.1) 4.2 135.2 167.4 0.6 168.0
June 2021
(unaudited)
* Balance is less than £100,000.
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 2021
£ Millions Six months ended Six months ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
Cash flows from operating activities
Profit after income tax 13.6 8.2
Adjustments for:
* Income tax expense 2.8 2.1
* Amortisation and depreciation 6.5 7.3
* Finance charge 0.7 1.0
* Equity award charges 1.1 0.6
* Fair value loss on derivative financial 0.1 0.9
instruments
* (Gain)/loss on disposal of property, plant * *
and equipment
* Loss on disposal of intangible assets 0.1 1.2
* Unrealised currency translation loss/(gain) 0.3 (0.6)
* Provision for doubtful receivables 0.1 *
Change in the working capital, net of effects
from acquisitions:
* Inventories (4.8) (8.2)
* Trade and other receivables (5.7) 3.2
* Trade and other payables 7.0 5.8
* Provision for liabilities and other charges * *
Cash generated from operations 21.8 21.5
Income tax paid (2.1) (0.6)
Net cash provided by operating activities 19.7 20.9
Cash flows from investing activities
Purchases and construction of property, plant (2.2) (1.8)
and equipment
Capitalisation of research and development (4.2) (4.0)
expenditure
Capitalisation of intangible software and
software under development (3.6) (0.8)
Proceeds from disposal of property, plant and * *
equipment
Repayment of ESOP loans * *
Payment of accrued consideration * (0.6)
Net cash used in investing activities (10.0) (7.2)
Cash flows from financing activities
Repayment of borrowings (2.9) (9.0)
Principal payment of lease liabilities (0.8) (0.8)
Sale of treasury shares 0.4 1.8
Interest paid (0.5) (0.8)
Dividends paid to equity holders of the Company (10.9) (3.8)
Dividends paid to non-controlling interests (0.2) *
Net cash used in financing activities (14.9) (12.6)
Net (decrease)/increase in cash and cash (5.2) 1.1
equivalents
Cash and cash equivalents at beginning of 13.9 11.2
financial period
Effects of currency translation on cash and (0.2) 0.7
cash equivalents
Cash and cash equivalents at end of financial 8.5 13.0
period
* 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
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 2021 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
adopted by the United Kingdom.
The condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year ended 31
December 2020 which have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the United Kingdom.
3. 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.
4. 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 2020.
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 2020.
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 product lines and geographical regions.
Analysis by class of customer
The revenue by class of customer is as follows:
Six months ended 30 June 2021
£ Millions
Europe North Asia Total
America
Primary geographical markets
Semiconductor Manufacturing 1.5 36.4 6.6 44.5
Equipment
Industrial Technology 22.1 17.8 5.5 45.4
Healthcare 11.0 16.2 2.8 30.0
34.6 70.4 14.9 119.9
Six months ended 30 June 2020
£ Millions
Europe North Asia Total
America
Primary geographical markets
Semiconductor Manufacturing 0.6 27.2 2.5 30.3
Equipment
Industrial Technology 20.7 17.5 8.3 46.5
Healthcare 8.8 16.9 2.6 28.3
30.1 61.6 13.4 105.1
5. Segmented and revenue information (continued)
Reconciliation of segment results to profit after income tax:
£ Millions Six months ended Six months ended
30 June 2021 30 June 20201
(Unaudited) (Unaudited)
Europe 10.9 8.3
North America 23.2 20.4
Asia 5.0 4.5
Segment results 39.1 33.2
Research and development (7.8) (7.1)
Manufacturing (1.3) (4.0)
Corporate cost from operating segment (6.8) (4.1)
Adjusted operating profit 23.2 18.0
Finance charge (0.7) (1.0)
Specific items (6.1) (6.7)
Profit before income tax 16.4 10.3
Income tax expense (2.8) (2.1)
Profit after income tax 13.6 8.2
1 Prior year comparatives were reclassified to ensure consistency with
2021 segmental presentation
£ Millions At 30 At 31
June 2021 December
(Unaudited) 2020
Total assets
Europe 27.2 29.1
North America 136.5 130.7
Asia 78.1 75.7
Segment assets 241.8 235.5
Unallocated deferred and current income 4.8 6.7
tax
Total assets 246.6 242.2
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 Six months ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
Operating profit 17.1 11.3
Adjusted for:
Acquisition costs - 0.3
Costs related to ERP implementation 0.9 1.5
Amortisation of intangible assets due to 1.4 1.6
business
combination
Legal costs (refer to note 10) 3.7 0.2
Restructuring costs - 2.2
Fair value adjustments on currency hedge 0.1 0.9
6.1 6.7
Adjusted operating profit 23.2 18.0
Adjusted operating margin 19.3% 17.1%
i. Reconciliation of profit before tax to adjusted profit before tax:
Profit before tax ("PBT") 16.4 10.3
Adjusted for:
Acquisition costs - 0.3
Costs related to ERP implementation 0.9 1.5
Amortisation of intangible assets due to 1.4 1.6
business
combination
Legal costs (refer to note 10) 3.7 0.2
Restructuring costs - 2.2
Fair value adjustments on currency hedge 0.1 0.9
6.1 6.7
Adjusted PBT 22.5 17.0
6. 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
effective tax rate on profit before tax as at 30 June 2021 is 17.1% (2020:
20.4%).
7. Dividends
Amounts recognised as distributions to equity holders of the Company in the
period:
Six months ended Six months ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
Pence per £ Millions Pence £ Millions
share per share
Prior year third quarter 20.0 3.8 20.0 3.8
dividend paid
Prior year final dividend 36.0 7.1 - -
paid
Total 56.0 10.9 20.0 3.8
7. Dividends (continued)
The dividends paid recognised in the interim financial statements relate to the
third quarter dividend and final dividend for 2020.
The Board has declared a dividend for the second quarter of 19.0 pence per
share (2020: 18.0 pence per share). The ex-dividend date will be 9 September
2021 and the dividend will be paid on 14 October 2021 to shareholders on the
register at the record date of 10 September 2021. The last date for election
for the share alternative to the dividend under the Company's Dividend
Reinvestment Plan is 24 September 2021.
8. Earnings per share
Earnings per share attributable to equity holders of the company arise from
continuing operations as follows:
£ Millions Six months ended Six months
30 June 2021 ended
(Unaudited) 30 June 2020
(Unaudited)
Earnings
Earnings for the purposes of basic and 13.5 8.1
diluted earnings per share (profit for the
period attributable to equity holders of
the company)
Amortisation of intangibles associated due 1.4 1.6
to business combinations
Acquisition costs - 0.3
Non-recurring tax benefits (1.1) (1.0)
Costs related to ERP implementation 0.9 1.5
Legal costs (refer to note 10) 3.7 0.2
Restructuring costs - 2.2
Fair value adjustments on currency hedge 0.1 0.9
Earnings for adjusted earnings per share 18.5 13.8
Number of shares
Weighted average number of shares for the 19,478 19,293
purposes of basic earnings per share
(thousands)
Effect of potentially dilutive share 355 353
options (thousands)
Weighted average number of shares for the 19,833 19,646
purposes of dilutive earnings per share
(thousands)
Earnings per share from operations
Basic 69.3p 42.0p
Basic adjusted 95.0p 71.5p
Diluted 68.1p 41.2p
Diluted adjusted 93.3p 70.2p
9. Intangible assets
Development Brand Trademarks Technology Customer Customer Intangible Intangible Total
costs relationships contracts software software
under
development
£ Millions
Cost
At 31 48.4 0.9 1.1 4.9 17.2 0.6 8.7 1.5 83.3
December
2020
Additions 4.2 - - - - - 0.1 3.5 7.8
Disposal (0.1) - - - - - - - (0.1)
Foreign (0.4) * * (0.1) (0.2) * (0.1) 0.1 (0.7)
currency
translation
At 30 June 52.1 0.9 1.1 4.8 17.0 0.6 8.7 5.1 90.3
2021
Amortisation
At 31 23.3 0.3 1.0 2.0 6.8 0.6 2.7 - 36.7
December
2020
Charge for 1.7 * - 0.3 1.1 - 0.5 - 3.6
the period
Foreign (0.1) * - (0.1) * * (0.1) - (0.2)
currency
translation
At 30 June 24.9 0.3 1.0 2.2 7.9 0.6 3.1 - 40.1
2021
Carrying
amount
At 30 June 27.2 0.6 0.1 2.6 9.1 - 5.6 5.1 50.2
2021
At 31 25.1 0.6 0.1 2.9 10.4 - 6.0 1.5 46.6
December
2020
* 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
seven years.
10. Comet legal matter
Comet Technologies USA Inc., Comet AG, and YXLON International (collectively
"Comet") filed a lawsuit against XP Power LLC in September 2020, alleging trade
secret misappropriation relating to RF match and generator technology. The
lawsuit is still ongoing, and the Group has incurred legal costs of £3.7
million in the six months ended 30 June 2021. The Group believes there is no
merit to this lawsuit and intend to vigorously defend any claims brought
against it by Comet. The Group expects to incur further legal costs until this
matter is resolved, the magnitude of which cannot currently be estimated with
any certainty. No provision in relation to the dispute has been recognised in
these condensed interim financial statements as it is not probable that an
outflow of economic benefits will occur, and the amount of outflow, if any,
cannot be estimated reliably.
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 2021, taking
specific consideration of the impact of the ongoing COVID-19 pandemic.
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 2021. 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 approximately 80%
of 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.
Fluctuations of revenues, expenses and operating results due to an economic
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; 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 associated with supply chain
The Group is dependent on retaining its key suppliers and ensuring that
deliveries are on time and the materials supplied are of appropriate quality.
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.
Dependence on key customers
The Group is dependent on retaining its key customers. Should the Group lose a
number of its key customers, this could have a material impact on the Group's
financial condition and results of operations. However, for the six months
ended 30 June 2021, no one customer accounted for more than 16% of revenue.
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.
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.
Risks relating to regulation, 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 effective tax rate could therefore fluctuate over time and have an
impact on earnings and potentially its share price.
Risks and uncertainties (continued)
Strategic risk associated with valuing or integrating new acquisitions
The Group may elect from time to time to make 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 have an effect on the Group's
revenues, results of operations and financial condition.
Exposure to exchange rate fluctuations
The Group deals in many currencies for both its purchases and sales including
US Dollars, Euros and its reporting currency Pounds Sterling. In particular,
North America represents an important geographic market for the Group where
nearly all the revenues are denominated in US Dollars. The Group also sources
components in US Dollars and the Chinese Renminbi. The Group therefore has an
exposure to foreign currency fluctuations. This could lead to material adverse
movements in reported earnings.
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.
Directors' responsibility statement
The interim results were approved by the Board of Directors on 30 July 2021.
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 as adopted by the United
Kingdom; 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:
James Peters Non-Executive Chairman
Gavin Griggs Chief Executive Officer
Oskar Zahn Chief Financial Officer
Andy Sng Executive Vice President, Asia
Terry Twigger Senior Non-Executive Director
Polly Williams Non-Executive Director
Pauline Lafferty Non-Executive Director
Signed on behalf of the Board by
James Peters Gavin
Griggs
Non-Executive Chairman Chief
Executive Officer
30 July 2021
END
(END) Dow Jones Newswires
August 02, 2021 02:00 ET (06:00 GMT)
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