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 ended |
Six
months ended |
|
|
|
30
June 2021 |
30
June 2020 |
|
|
|
|
|
Change |
|
| Highlights |
|
|
|
|
|
|
|
|
|
| Order intake |
£157.6m |
£145.8m |
+8% |
|
Revenue
Turnover |
£119.9m |
£105.1m |
+14% |
|
| Gross margin |
46.6% |
44.9% |
+170bps |
|
| Interim dividend per
share (Q1 + Q2) |
37.0p |
18.0p |
+106% |
|
| Adjusted |
|
|
|
|
| Adjusted operating
profit1 |
£23.2m |
£18.0m |
+29% |
|
| Adjusted profit before
income tax1 |
£22.5m |
£17.0m |
+32% |
|
| Adjusted cash
generated from operations1 |
£26.4m |
£25.7m |
+3% |
|
Adjusted
diluted earnings per share1
|
93.3p |
70.2p |
+33% |
|
| 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
30 June 2021
(Unaudited) |
Six months ended
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 foreign operations |
|
(1.3) |
6.0 |
|
|
(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 tax |
|
(1.3) |
6.0 |
| 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 holders of the
Company |
|
Pence per
Share |
Pence per
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
June 2021
(Unaudited) |
At
31
December
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 |
|
|
Note |
Share
capital |
Share
option reserve |
Treasury
shares |
Merger
reserve |
Translation
reserve |
Other
reserve |
Retained
earnings |
Total |
Non-controlling interests |
Total
Equity |
Balance at 1 January 2020 |
|
27.2 |
3.9 |
(0.5) |
0.2 |
(0.2) |
(0.8) |
108.4 |
138.2 |
0.7 |
138.9 |
| Sale of treasury shares |
|
- |
- |
0.4 |
- |
- |
- |
1.4 |
1.8 |
- |
1.8 |
| Employee share option plan expenses,
net of tax |
|
- |
0.3 |
- |
- |
- |
- |
- |
0.3 |
- |
0.3 |
| Dividends paid |
7 |
- |
- |
- |
- |
- |
- |
(3.8) |
(3.8) |
* |
(3.8) |
| Further acquisition of
non-controlling interest |
|
- |
- |
- |
- |
- |
0.2 |
- |
0.2 |
(0.2) |
- |
| Exchange difference arising from
translation of financial statements of foreign operations |
|
- |
* |
- |
- |
6.0 |
- |
* |
6.0 |
- |
6.0 |
| Profit for the year |
|
- |
- |
- |
- |
- |
- |
8.1 |
8.1 |
0.1 |
8.2 |
| Total comprehensive income for the
period |
|
- |
* |
- |
- |
6.0 |
- |
8.1 |
14.1 |
0.1 |
14.2 |
Balance at 30 June
2020
(unaudited) |
|
27.2 |
4.2 |
(0.1) |
0.2 |
5.8 |
(0.6) |
114.1 |
150.8 |
0.6 |
151.4 |
Balance at 1 January 2021 |
|
27.2 |
4.1 |
(0.1) |
0.2 |
(3.8) |
3.6 |
132.6 |
163.8 |
0.7 |
164.5 |
| Sale of treasury shares |
|
- |
(0.2) |
* |
- |
- |
0.6 |
* |
0.4 |
- |
0.4 |
| Employee share option plan expenses,
net of tax |
|
- |
1.9 |
- |
- |
- |
- |
- |
1.9 |
- |
1.9 |
| Dividends paid |
7 |
- |
- |
- |
- |
- |
- |
(10.9) |
(10.9) |
(0.2) |
(11.1) |
| Exchange difference arising from
translation of financial statements of foreign operations |
|
- |
(0.1) |
- |
- |
(1.3) |
- |
* |
(1.3) |
* |
(1.3) |
| Net change in cash flow hedges |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
| Profit for the year |
|
- |
- |
- |
- |
- |
- |
13.5 |
13.5 |
0.1 |
13.6 |
| Total comprehensive income for the
period |
|
- |
(0.1) |
- |
- |
(1.3) |
- |
13.5 |
12.2 |
0.1 |
12.3 |
Balance at 30 June
2021
(unaudited) |
|
27.2 |
5.7 |
* |
0.2 |
(5.1) |
4.2 |
135.2 |
167.4 |
0.6 |
168.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
30 June 2021
(Unaudited) |
Six months ended
30 June 2020
(Unaudited) |
| Cash flows from operating
activities |
|
|
|
|
|
|
|
| Profit after income tax |
|
13.6 |
8.2 |
| Adjustments for: |
|
|
|
|
|
|
2.8 |
2.1 |
- Amortisation and depreciation
|
|
6.5 |
7.3 |
|
|
|
0.7 |
1.0 |
|
|
|
1.1 |
0.6 |
- Fair value loss on derivative financial instruments
|
|
0.1 |
0.9 |
- (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: |
|
|
|
|
|
|
(4.8) |
(8.2) |
- Trade and other receivables
|
|
(5.7) |
3.2 |
|
|
|
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 and equipment |
|
(2.2) |
(1.8) |
| Capitalisation of research and
development expenditure |
|
(4.2) |
(4.0) |
| 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 equivalents |
|
(5.2) |
1.1 |
| Cash and cash equivalents at
beginning of financial period |
|
13.9 |
11.2 |
| Effects of currency translation on
cash and cash equivalents |
|
(0.2) |
0.7 |
| Cash and cash equivalents at end
of financial period |
|
8.5 |
13.0 |
* 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 America |
Asia |
Total |
|
| Primary
geographical markets |
|
|
|
|
|
| Semiconductor
Manufacturing Equipment |
1.5 |
36.4 |
6.6 |
44.5 |
|
| 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
America |
Asia |
Total |
| Primary
geographical markets |
|
|
|
|
| Semiconductor
Manufacturing Equipment |
0.6 |
27.2 |
2.5 |
30.3 |
| 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
30 June 2021
(Unaudited) |
Six months ended
30 June 20201 (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
June 2021
(Unaudited) |
At 31
December
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 tax |
4.8 |
6.7 |
| 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.
- Reconciliation of operating profit to adjusted operating
profit:
| £
Millions |
Six
months ended 30 June 2021 (Unaudited) |
Six
months ended 30 June 2020 (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 business
combination |
1.4 |
1.6 |
| 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% |
|
|
|
- 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 business
combination |
1.4 |
1.6 |
| 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
30 June 2021
(Unaudited) |
Six
months ended
30 June 2020
(Unaudited) |
|
Pence per
share |
£ Millions |
Pence
per share |
£ Millions |
|
|
|
|
|
| Prior year third quarter dividend
paid |
20.0 |
3.8 |
20.0 |
3.8 |
| Prior year final dividend paid |
36.0 |
7.1 |
- |
- |
| 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
30 June 2021
(Unaudited) |
Six
months ended
30 June 2020
(Unaudited) |
| Earnings |
|
|
| Earnings for the purposes of basic
and diluted earnings per share (profit for the period attributable
to equity holders of the company) |
13.5 |
8.1 |
| Amortisation of intangibles
associated due to business combinations |
1.4 |
1.6 |
| 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 purposes of basic earnings per share (thousands) |
19,478 |
19,293 |
|
|
|
| Effect of potentially dilutive share
options (thousands) |
355 |
353 |
|
|
|
| Weighted average number of shares
for the purposes of dilutive earnings per share (thousands) |
19,833 |
19,646 |
|
|
|
| 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 costs |
Brand |
Trademarks |
Technology |
Customer relationships |
Customer contracts |
Intangible software |
Intangible software under development |
Total |
| £ Millions |
|
|
|
|
|
|
|
|
|
| Cost |
|
|
|
|
|
|
|
|
|
| At 31 December
2020 |
48.4 |
0.9 |
1.1 |
4.9 |
17.2 |
0.6 |
8.7 |
1.5 |
83.3 |
| Additions |
4.2 |
- |
- |
- |
- |
- |
0.1 |
3.5 |
7.8 |
| Disposal |
(0.1) |
- |
- |
- |
- |
- |
- |
- |
(0.1) |
| Foreign currency
translation |
(0.4) |
* |
* |
(0.1) |
(0.2) |
* |
(0.1) |
0.1 |
(0.7) |
| At 30 June
2021 |
52.1 |
0.9 |
1.1 |
4.8 |
17.0 |
0.6 |
8.7 |
5.1 |
90.3 |
|
Amortisation |
|
|
|
|
|
|
|
|
|
| At 31 December
2020 |
23.3 |
0.3 |
1.0 |
2.0 |
6.8 |
0.6 |
2.7 |
- |
36.7 |
| Charge for the
period |
1.7 |
* |
- |
0.3 |
1.1 |
- |
0.5 |
- |
3.6 |
| Foreign currency
translation |
(0.1) |
* |
- |
(0.1) |
* |
* |
(0.1) |
- |
(0.2) |
| At 30 June
2021 |
24.9 |
0.3 |
1.0 |
2.2 |
7.9 |
0.6 |
3.1 |
- |
40.1 |
Carrying amount |
|
|
|
|
|
|
|
|
|
| At 30 June
2021 |
27.2 |
0.6 |
0.1 |
2.6 |
9.1 |
- |
5.6 |
5.1 |
50.2 |
| At 31 December
2020 |
25.1 |
0.6 |
0.1 |
2.9 |
10.4 |
- |
6.0 |
1.5 |
46.6 |
* 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