Final Results
22 February 2010
XP Power Limited
("XP" or "the Group")
Annual Results for the year ended 31 December 2009
XP, one of the world's leading developers and manufacturers of critical power control
components for the electronics industry, today announces its annual results for the year ended 31 December 2009.
Highlights
Year ended Year ended
31 December 2009 31 December 2008
Revenue £67.3m £69.3m
Gross profit £30.3m £30.6m
Gross margin 45.0% 44.2%
Adjusted (*) profit before tax £8.7m £8.0m
Adjusted (*) profit after tax £7.7m £6.6m
Diluted earnings per share adjusted (*) 40.8p 34.8p
Final dividend per share 12.0p 11.0p
Total dividend per share 22.0p 21.0p
(*) Adjusted for amortisation of intangibles associated with acquisitions of £
0.3 million (2008: £0.2 million) and non-cash foreign exchange gain of nil
(2008: £2.4 million)
The Group's well-established strategy of developing and manufacturing its own
range of market leading products produced record earnings per share for the
year
Increased gross margins of 45.0% (2008: 44.2%) driven by continued expansion of
in-house developed, XP brand products, which now represent 83% of revenues
(2008: 78%)
Revenues from products based on XP's own intellectual property increased to £
55.9 million (£53.9 million)
New Chinese manufacturing facility, successfully securing new approved vendor
agreements from blue chip customers. Production volumes increased rapidly in
Q4 2009
Inventory reduction and strong operating cash flows deliver significant
reduction in net debt to £18.7 million (2008: £27.8 million)
Record earnings and strong cash flows provide basis for an increased final
dividend of 12.0p per share
Record levels of new product investment and product launches in the year to
underpin growth in future years as new customer programmes reach production
phase
Current trading encouraging, with most markets now in recovery
Larry Tracey, Executive Chairman, commented:
"Throughout the past two years of economic turmoil, we have increased the level
of investment in our products, our people and capital equipment. We start the
new decade in a strong position in our industry, which now appears to be
recovering rapidly. XP Power's combination of a market leading product
portfolio and low cost manufacturing capability should allow shareholders to
benefit from above average earnings and dividend growth as the recovery takes
hold."
Enquiries:
XP Power (22 February 2010) +44 (0)20 7638 9571
Larry Tracey, Executive Chairman +44 (0)7785 387142
James Peters, Deputy Chairman +44 (0)7785 353066
Duncan Penny, Chief Executive +65 8322 9520
Citigate Dewe Rogerson+44 (0)20 7638 9571
Kevin Smith/Ged Brumby
XP 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 typically designs in power control solutions into the end products of major
blue chip OEMs, with a focus on the industrial (circa 40% of sales), healthcare
(circa 30% sales) and technology (circa 30% of sales) sectors. Once designed
into a program, XP has a revenue annuity over the life cycle of the customer's
product which is typically 5 to 7 years depending on the industry sector.
XP has invested in research and development and its own manufacturing facility
in China, 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 serves a global blue chip customer base from 27
locations in Europe, North America and Asia.
For further information, please visit www.xppower.com
Chairman's Statement
As expected, the trading environment remained challenging throughout 2009 as a
result of the severe deterioration in world economic conditions. Against this
backdrop, I am pleased to report that XP Power's well established strategy of
moving up the value chain to develop and manufacture its own range of market
leading products has enabled the Group to again report record earnings per
share for the year. Our ongoing commitment to invest in new products was again
rewarded as key customer programs won in prior years entered production phase
and further growth in the proportion of our own XP branded products in the
sales mix drove gross margins to record levels.
The successful commissioning of our second, larger, manufacturing facility and
record levels of both new product investment and product launches, were
essential to seed the ground for future growth as the business looks to build
on this record performance in 2010.
This robust performance along with diligent control of our inventories enabled
the Group to close the year with significantly reduced levels of debt, placing
the Group in a strong position to capitalise on the signs of recovery we are
now seeing in our market.
Financial
Total sales decreased by 3% to £67.3 million (2008: £69.3 million). However,
sales of product based on XP Power's own intellectual property ("IP") increased
by 4% to £55.9 million (2008: £53.9 million), an all time high. Sales based on
XP Power's IP are now 83% of total sales, compared to 78% in 2008 and 73% in
2007 and this underlines the significant and consistent progress achieved, as
six years ago own IP sales were less than 50% of the total. Ongoing improvement
in the sales mix helped to drive a further improvement in gross margins to
45.0% (2008: 44.2%). Operating profit increased to £9.6 million (2008: £9.3
million after excluding £2.4 million of one off non-cash foreign exchange
gains). Adjusted Earnings Per Share increased by 17% to 40.8 pence per share
(2008: 34.8 pence per share), a record for the Group.
Our net debt has reduced from £27.8 million in 2008 to £18.7 million at the end
of 2009. Operating cash flow was up 92% to £16.3 million (2008: £8.5 million)
representing 170% of operating income.
Strategic Progress
XP Power has been successfully repositioning itself since flotation in 2000,
transitioning from a distributor of electronic components to a designer and
manufacturer of best in class power converters based on its own intellectual
property. The addition of a global sales function, and an in-house design
capability that has developed the broadest, freshest product range in its
industry, have enabled the Group to establish a leadership position in its
market while simultaneously delivering a resilient financial performance in
difficult economic conditions. The majority of sales are now from products
based on XP Power's own intellectual property, which generate higher margins
and gives XP Power the ability to deliver power converter solutions which
reduce its customers' overall new product development costs.
In mid-2009 the Group achieved a key strategic objective when its second larger
manufacturing facility in China began production, dramatically enhancing the
Group's ability to secure preferred supplier status with larger customers.
With the Chinese manufacturing facility now fully on stream, XP Power has the
capability to significantly increase the proportion of its revenues which come
from in-house manufactured products from the current level of circa 20%, which
will drive both future sales growth, as we increase our penetration of key
customer programmes, and a further increase in margins.
Dividend
In line with our progressive dividend policy, a final dividend of 12.0p per
share (2008: 11.0p) is proposed, which when combined with the interim dividend
of 10.0p, this gives a total dividend of 22.0p for the year (2008: 21.0p).
Sustainability
XP Power seeks to reduce its impact on the environment both of its own
operations and, crucially, its products. In 2009, we formalised our
environmental responsibility efforts by establishing the Environmental
Committee, the members of which have been selected for their knowledge of and
commitment to sustainability. Their report to shareholders will be set out in
our Annual Report.
Outlook
Throughout the past two years of economic turmoil, we have increased the level
of investment in our products, our people and capital equipment. We start the
new decade in a strong position in our industry, which now appears to be
recovering rapidly. We will continue our drive to introduce industry leading
new products which have both the smaller footprints and the lower levels of
power consumption that our customers seek. XP Power's combination of a market
leading product portfolio and low cost manufacturing capability should allow
shareholders to benefit from above average earnings and dividend growth as the
recovery takes hold.
Larry Tracey
Executive Chairman
Chief Executive's Review
2009 was another record year for XP Power beating the previous records for own
IP revenue, margins, earnings and cash flow set in 2008. This has been
achieved as a result of our consistent strategy of moving up the value chain,
powered by an increasingly strong pipeline of new leading-edge products.
Notably, we achieved this in a period which is being widely referred to as the
"Great Recession". At the same time we have been able to significantly reduce
our inventories which combined with our cash generative business model enabled
us to reduce our net debt to £18.7 million at the end of 2009 compared to £27.8
million at the end of 2008.
Our continued focus on the introduction of new products compensated for the
profound weakness in industrial markets that characterised the period, as new
customer programs featuring products we had introduced in preceding years,
entered the production phase. This was particularly the case in the healthcare
sector, where we have placed great emphasis over the past few years. The
results of new product introductions and our move into manufacturing are now
paying off. Despite the economic downturn, we maintained new product investment
and new product introductions at record levels in the year, underpinning
revenue growth for 2010 and future years.
As the tenth anniversary of our Stock Market listing as a reseller of
electronic components approaches, we have successfully completed the
transformation of XP Power into a technology led business with an independent
manufacturing capability. This transformation of the business model means that
the majority of sales are now generated by products based on our own IP, which
generate significantly higher margins, and gives XP Power the capacity to
design tailor made power control solutions for specific customer orders. A
record 83% of our revenues came from our own brand products in 2009 (2008:
78%).
Markets
XP Power supplies power control solutions to original equipment manufacturers
("OEMs") who themselves supply the healthcare, technology and industrial
markets with high value products. Notwithstanding the current economic
backdrop, the increasing importance of electronic component energy efficiency,
for both environmental and economic reasons, the necessity for ever smaller
products, the rate of technological change and the increasing proliferation of
electronic equipment, all contribute to underpin the strength of medium term
demand for XP Power's power conversion products.
The worldwide market for XP Power's products was estimated to be greater than £
1 billion and we expect it to grow by approximately 17% in the next four
years. Currently, XP Power's global market share is around 6.5%. Across
Europe and North America, XP Power currently has around 10% of the market while
across Asia it has only 1%. This illustrates the number of significant
commercial opportunities open to XP Power, and the Board is confident that the
Group's competitive advantages over many of its peers will allow it to
capitalise on these opportunities.
Our major blue chip customers continue to demand market leading, highly
reliable products. Our consistent investment in research and development has
established the broadest, freshest product pipeline in the industry. This
continually evolving portfolio of market leading products, combined with the
establishment of a manufacturing capacity, has enabled us to penetrate a number
of new customers which will drive our revenues in future years.
Increasingly, the design and manufacturing process of major international OEMs
takes place across different continents, with these blue chip companies
demanding global support. Over the past few years, XP Power has established an
international network of offices which offers this necessary customer support
across technical sales, design engineering, logistics and operations.
This network gives XP Power a competitive advantage over both its smaller
competitors, who do not have the scale and geographic reach to serve global
customers, and its larger competitors who often lack the operational
flexibility to provide excellent service and speed. We believe that this
balance offers XP Power the opportunity to increase its market share, and is
one of the main reasons for our success in winning the new contracts, which
have in part mitigated the effects of the global downturn in 2009.
Expanding the international network
XP Power's mix of quick response capability and global reach is a major
competitive advantage. Currently, XP Power has a network of 27 sales offices
spread over North America, Europe and Asia, with a further 19 distributors,
supporting its customers. The management are constantly reviewing ways in
which they can increase this network of offices to help the business capitalise
on growth opportunities in each of its geographies.
XP Power has the largest, most technically trained sales force in the
industry. Our detailed in-house training programme demands that the sales
force pass numerous technology and customer service modules. This means that
the sales force are value add partners to our customers' product development
teams. The management believes that this gives the business a competitive edge
compared to many within its peer group.
The North American network consists of 17 sales offices and an extensive
engineering services function, based in Northern California. This network
allows XP Power to provide all its major customers with local face to face
support and rapid response times. The central engineering services function has
established XP Power as a value added partner, allowing it to comprehensively
address the demands of its larger customers for complex solutions that can be
efficiently integrated into their end equipment, in turn delivering significant
savings in cost, time to market and engineering resource.
In Europe, the XP Power network consists of nine sales offices and a further
nine distributor offices, providing the same level of customer support as in
North America. In addition, XP Power has engineering services centres in
Germany and the UK, providing some of the largest blue chip conglomerates in
Europe with specialist technical expertise and value added services for market
leading, complex power control solutions.
The Asian sales activities are run from Singapore, where we also manage a
network of seven distributors serving the region. In 2009, XP Power continued
to widen its commercial interests in Asia to capitalise on two important
commercial opportunities. First, it will allow XP Power to continue to enhance
support to the Asian design centres of its major European and North American
customers. Second, it will allow the Group to address demand from Asian
companies for power control components which meet European and North American
legislation. In the medium term we expect revenues derived from Asia to be an
increasing proportion of XP Power's worldwide revenues.
Market leading technology
A consistent and substantial investment in research and development of new
products has been the cornerstone of XP Power's growth strategy. This
investment has established the broadest, most up to date portfolio of products
in the power converter industry. XP Power has a collaborative relationship
with many of its customers and in some cases the design process is started
directly in response to a future customer requirement.
Research and development spend grew to £3.7 million in 2009, its highest level ever, and a record thirty new product introductions were made in the year, resulting in a number of exciting new customer approvals. Of particular note is our CCM250 which at 95% efficiency is considered to be the most efficient power converter of its type available on the market today. This leading edge product has already enabled us to win some significant business with major new customers.
XP Power opened a new design centre in Singapore during 2008, to work alongside
the design centres in North America and the UK. Asia is an increasingly
important growth market for XP Power and establishing a significant research
function in this region has helped the company capitalise on the evolving
demands of this market. The Singapore design centre made a significant
contribution in 2009, introducing two new product families.
The Group expects to maintain this progress with the release of a further 35 new product ranges in 2010, which should underpin revenues in future years.
Reliability and manufacturing capabilities
XP Power's products frequently power critical applications - not least in the
healthcare sector - and reliability is a crucial issue for our customers. Our
key customers demand the ultimate in terms of quality control to ensure
reliability for the life of their equipment. In 2005, the Group recognised an
opportunity to expand its value proposition to key target customers by moving
into manufacturing at a time when many of its competitors were outsourcing
their manufacturing. Having control of manufacturing activities not only allows
us to strictly manage the production processes and components that go into our
products, as demanded by our larger customers, but also gives us opportunities
to reduce our product costs. Our performance in 2009, particularly in the
healthcare sector, is evidence that this strategy is starting to pay off.
To implement this strategy XP Power established a Chinese manufacturing joint
venture with Fortron Source in 2006, before taking 100% control in early 2008.
Since taking over the facility, significant investment has been made in
upgrading the equipment set and manufacturing capacity, and the operational
management team has been strengthened. This culminated in the commissioning of
a brand new state of the art facility on the existing site at Kunshan in June
2009.
Production volumes at the facility increased rapidly in the last quarter of 2009. As well as helping to meet the increasing demand for higher margin products based on XP Power's own IP, the move into manufacturing has enabled XP Power to become an approved vendor to a number of new blue chip customers, which will help drive revenue growth going forward. Our new manufacturing facility achieved a number of successful audit qualifications from both existing and prospective blue chip customers during the period. For more details relating to our class leading manufacturing please refer to our Annual Report.
Investing in customer support
In a competitive market place, excellent customer support and service is
critical. XP Power has developed a network of relationship managers and sales
engineers to manage long-term customer relationships across three continents.
It is not unusual for our sales engineers to be dealing with different
elements of the customer's team across three continents, for just a single
program. The Group has worked hard to build a sales culture that can
successfully manage these complicated relationships and has developed
sophisticated proprietary customer relationship management tools to effectively
manage the sales process.
These tools allow the Group to track the progress of every customer program
from its identification, quotation, sampling, to approval and, finally, its
successful move into production. This allows the Company to coordinate between
different customer sites and share important information, thereby delivering
excellent customer service, as well as being a highly effective tool to manage
a large sales force which is geographically dispersed.
The management regards these tools and their method of utilisation as a
significant source of competitive advantage over the Group's larger
competitors.
Robust Business Model
XP Power's business model exhibits the following characteristics:
- Exposure to a broad cross section of end markets - Technology, Industrial and
Healthcare but with no exposure to consumer electronics.
- A diverse customer base of over 6,000 active customers, with no one customer
accounting for more than 3% of revenue.
- Powerful proprietary customer relationship management tools which allow the
efficient management of our customer base and identification of pricing and
product trends that enable the development of appropriate, innovative new
products.
-Attractive margins and lower capital investment requirements when compared to
other manufacturing industries, resulting in strong free cash flow and gross
margins that are amongst the highest in the industry.
- Although design cycles are often long - typically an average period of 16
months from identifying a program to receiving the first production orders -
once our power converters are approved for use in our customer's end equipment
XP Power enjoys a revenue annuity for the lifetime of the customer's equipment,
which is typically five to seven years.
It is this business model that ultimately allows the Group to grow and change
while at the same time maintaining strong profitability and cash flow to fund
returns to its shareholders.
Legislation
There is an increasing volume of legislation affecting the power converter
industry, driven by a desire to eliminate hazardous chemicals from electronic
products and by the need to reduce the amount of energy these products consume
in use, to reduce or eliminate adverse environmental impacts. We are fully
supportive of these legislative initiatives and in response believe we are
leading the industry in developing more efficient power converters. As noted
above our recently launched CCM250 is considered to be the most efficient power
converter of its type in the market which is an incredible 95% efficient.
Energy efficiency is becoming an increasingly important and topical issue.
This is reflected in the operating standards to which power converters need to
be designed to meet the new and ever expanding regulation and legislation.
Management believe that this increase in regulation is positive for XP Power,
along with some of its larger peers, since many of the smaller players in the
industry do not currently have the scale, resources or expertise to develop
products which satisfy these tighter standards. The significant investment in
research and development made over the past few years means that XP Power
already has many products which adhere to the most demanding of these
operational standards and regulations. Further investment will continue to be
made to preserve the technological edge which XP Power's products enjoy over
many of its competitors.
During 2009 the Board decided to increase the emphasis XP Power places on
environmental issues with the goal of becoming the clear leader in its industry
on environment and sustainability matters. An Environmental Committee has been
established and its report is set out in our Annual Report.
Outlook
XP Power has entered the new financial year in excellent shape - the business
has successfully ridden the economic storm of 2009 successfully and delivered
record margins and earnings for a second successive year. Profits generated by
our industry leading product pipeline and new programs that came on stream in
2009, particularly in the healthcare sector, have meant that unlike many other
companies we have not had to cut costs and headcount in our business to the
detriment of its medium and long term prospects. In fact, we have been able to
increase the level of investment in our products and people, and expand our
manufacturing capabilities while closing the year with lower net debt than when
we entered 2009.
We remain confident about the fundamental medium term growth drivers which
underpin the markets in which we operate. The successful refocus of the
business model on higher margin, own IP product sales and the development of a
state of the art independent manufacturing capacity have placed XP Power in a
strong position to capitalise on its growth ambitions and prosper, even in the
most difficult economic conditions.
Duncan Penny
Chief Executive
Consolidated Income Statement
for the financial year ended 31 December 2009
Note 2009 2008
Revenue 2 67.3 69.3
Cost of sales (37.0) (38.7)
Gross profit 30.3 30.6
Expenses
Distribution and marketing (17.4) (18.5)
Administrative (0.8) (0.8)
Research and development (2.6) (2.9)
Other operating income 0.1 0.9
Operating profit 9.6 9.3
Non-cash foreign exchange gain - 2.4
Finance income - 0.2
Finance cost (1.2) (1.7)
Profit before tax 2 8.4 10.2
Income tax expense 3 (0.8) (1.2)
Profit after tax 7.6 9.0
Profit attributable to:
Equity holders of the Company 7.4 8.8
Minority interests 0.2 0.2
Profit after tax 7.6 9.0
Earnings per share
Attributable to equity holders of the Company (pence per share)
- Basic 5 39.4 46.5
- Diluted 5 39.3 46.4
- Diluted adjusted 5 40.8 34.8
Consolidated Balance Sheet
as at 31 December 2009
£ Millions Note 2009 2008
ASSETS
Current Assets
Cash and cash equivalents 4.0 3.4
Derivative financial instruments - 1.0
Trade and other receivables 11.0 12.1
Other current assets 1.2 1.8
Inventories 10.7 17.5
Total current assets 26.9 35.8
Non-current assets
Interest in associates 0.1 0.1
Property, plant and equipment 7.1 6.7
Goodwill 31.0 29.9
Intangible assets 4.5 3.6
ESOP loans to employees 2.6 2.7
Deferred income tax assets 0.3 0.1
Total non-current assets 45.6 43.1
Total assets 72.5 78.9
LIABILITIES
Current liabilities
Trade and other payables 9.1 12.3
Current income tax liabilities 2.5 3.1
Derivative financial instruments 0.3 -
Bank loans and overdraft 6 3.9 7.3
Total current liabilities 15.8 22.7
Non-current liabilities
Borrowings 6 18.8 23.9
Deferred income tax liabilities 1.8 1.4
Provision for deferred contingent consideration 3.6 1.9
Total non-current liabilities 24.2 27.2
Total liabilities 40.0 49.9
NET ASSETS 32.5 29.0
EQUITY
Share capital 27.2 27.2
Merger reserve 0.2 0.2
Treasury shares (0.9) (0.8)
Hedging reserve (0.2) 1.0
Translation reserve (7.4) (8.5)
Retained earnings 13.3 9.7
32.2 28.8
Minority interests 0.3 0.2
TOTAL EQUITY 32.5 29.0
Consolidated Cash Flow Statement
for the year ended 31 December 2009
£ Millions 2009 2008
Cash flows from operating activities
Profit after tax 7.6 9.0
Adjustments for
- Income tax expense 0.8 1.2
- Amortisation and depreciation 1.6 1.6
- Finance cost 1.2 1.5
Change in the working capital, net effects from
acquisition
of subsidiary
- Inventories 6.9 (6.6)
- Trade and other receivables 1.8 (0.5)
- Trade and other payables (3.1) 3.3
- Income tax paid (0.5) (1.0)
Net cash provided by operating activities 16.3 8.5
Cash flows from investing activities
Acquisition of a subsidiary, net of cash acquired - (1.0)
Purchases and construction of property, plant and
equipment (1.7) (3.6)
Capitalised research and development expenditure (1.5) (1.0)
Proceeds from disposal of plant and equipment - 0.1
ESOP loan repaid 0.1 -
Interest received - 0.1
Net cash used in investing activities (3.1) (5.4)
Cash flows from financing activities
Proceeds from borrowings (1.3) 3.6
Purchase of treasury shares by ESOP - (0.2)
Interest paid (1.1) (1.6)
Dividends paid to equity holders of the Company (4.0) (4.0)
Dividends paid to minority shareholders (0.1) (0.2)
Net cash provided by financing activities (6.5) (2.4)
Effects of currency translation 0.9 (4.6)
Net (decrease)/increase in cash and cash equivalents 7.6 (3.9)
Cash and cash equivalents at beginning of financial year (3.9) 0.9
Effects of currency translation on cash an cash
equivalents 0.2 (0.9)
Cash and cash equivalents at end of financial year 3.9 (3.9)
Notes to the Annual Results Statement
for the year ended 31 December 2009
1. Basis of preparation
These financial statements are presented in Pounds Sterling and have been
prepared using the accounting principles incorporated within International
Financial Reporting Standards (IFRS) as adopted by the European Union.
2. Segmental reporting
The Group is organised on a geographic basis. The Group's products are a single
class of business; however the Group is also providing sales by end market to
assist the readers of this report.
The geographical segmentation is as follows:
£ Millions 2009 2008
Revenue
Europe 31.9 32.2
North America 30.8 33.7
Asia 4.6 3.4
Total Revenue 67.3 69.3
Segment result
Europe 7.9 6.1
North America 7.1 7.2
Asia (0.2) 0.4
Interest, corporate operating costs and associates (6.4) (3.5)
Segment result 8.4 10.2
Tax (0.8) (1.2)
Total Profit 7.6 9.0
Analysis by end market
The revenue by end market was as follows:
Year to 31 December 2009 Year to 31 December 2008
North North
£ Millions Europe America Asia Total Europe America Asia Total
Technology 8.7 8.9 1.2 18.8 8.6 9.1 0.4 18.1
Industrial 15.4 10.2 3.1 28.7 18.6 14.7 2.8 36.1
Healthcare 7.8 11.7 0.3 19.8 5.0 9.9 0.2 15.1
Total 31.9 30.8 4.6 67.3 32.2 33.7 3.4 69.3
3. Income taxes
£ Millions 2008 2008
Singapore corporation tax
- current year 0.5 0.6
- adjustment in respect of prior year - 0.1
Overseas corporation tax
- current year 1.1 0.7
- adjustment in respect of prior year (1.2) (0.4)
Total current tax 0.4 1.0
Deferred tax 0.4 0.2
Tax charge for the year 0.8 1.2
The differences between the total tax shown above and the amount calculated by
applying
the standard rate of Singapore corporate tax to the profit before tax are as
follows:
£ Millions 2009 2008
Profit before tax 8.4 10.2
Tax on profit on ordinary activities at standard Singapore tax
rate of 17% (2008: 18%) 1.4 1.9
Tax incentives (0.3) (0.5)
Higher rates of overseas corporation tax 0.6 0.9
Non-deductible expenditure - 0.1
Exceptional foreign exchange gain not taxable - (0.9)
Adjustment in respect of prior year (0.9) (0.3)
Tax charge for the year 0.8 1.2
4. Dividends
Amounts recognised as distributions to equity holders in the period
2009 2008
Pence Pence
per £ per £
share Millions share Millions
Prior year final dividend paid 11.0 * 2.1 11.0 2.1
Interim paid 10.0 ^ 1.9 10.0 * 1.9
Total 21.0 4.0 21.0 4.0
* Dividends in respect of 2008 (21.0p)
^ Dividends in respect of 2009 (22.0p)
The proposed final dividend for 2009 is subject to approval by shareholders at
the Annual General Meeting scheduled for 29 March 2010 and has not been
included as a liability in these financial statements. It is proposed that the
final dividend be paid on 5 April 2010 to members on the register as at 19
March 2010.
5. Earnings per share
The calculations of the basic and diluted earnings per share attributable to
the ordinary equity holders of the parent are based on the following data:
2009 2008
£ Millions £ Millions
Earnings
Earnings for the purposes of basic and diluted earnings per share
(profit for the year attributable to equity shareholders of the parent) 7.4 8.8
Amortisation of intangibles associated with acquisitions 0.3 0.2
Non-cash foreign exchange gain - (2.4)
Earnings for adjusted earnings per share 7.7 6.6
Number of shares
Weighted average number of shares for the purposes of basic earnings per share
(thousands) 18,788 18,916
Effect of potentially dilutive share options (thousands) 64 59
Weighted average number of shares for the purposes of
dilutive earnings per share (thousands) 18,852 18,975
Earnings per share from operations
Basic 39.4p 46.5p
Diluted 39.3p 46.4p
Diluted adjusted 40.8p 34.8p
6. Borrowings, bank loans and overdrafts
The borrowings are repayable as follows:
£ Millions 2009 2008
On demand or within one year 3.9 7.3
In the second year 18.8 3.2
In the third year - 20.7
In the fourth year - -
22.7 31.2
Less: Amounts due for settlement within 12 months
(shown under current liabilities) (3.9) (7.3)
Total repayable after 12 months 18.8 23.9
The other principal features of the Group's borrowings are as follows:
Bank overdrafts are repayable on demand. The bank overdrafts are secured on the
assets of the Group. At 31 December 2009, the Group had an overdraft of £0.1
million (2008: £7.3 million). The overdraft interest rate is 2.5% above LIBOR.
In January 2009, the Group converted its term debt facility of £16.0 million
and its £5.0 million multicurrency revolving debt facility into a new term loan
of US$36.0 million. The term loan is repayable over 3 years with US$6.0 million
(£3.8 million) due in 2010 and US$30.0 million (£18.8 million) due in 2011 and
is priced at LIBOR plus a fixed margin of 2.0%. 85% of the value of the term
loan is subject to an interest rate swap where floating LIBOR rate has been
swapped to a fixed rate of 1.99%. The overall interest cost on 85% of the term
loan is therefore fixed at 3.99%.
The Group has pledged all assets as collateral to secure banking facilities
granted to the Group.
7. Principal risks and uncertainties
Like many other international businesses the Group is exposed to a number of
risks which might have a material effect on its financial performance. The
Board has overall responsibility for the management of risk and sets aside time
at its meetings to identify and address risks.
Risks Specific to the Industry in which the Group Operates
Fluctuations in foreign currency
The Group deals in many currencies for both its purchases and sales including
US Dollars, Euro and its reporting currency Pounds Sterling. In particular,
North America represents an important geographic market for the Group where
virtually all the revenues are denominated in US Dollars. The Group also
sources the majority of its product in US Dollars. The Group therefore has an
exposure to foreign currency fluctuations. This could lead to material adverse
movements in reported earnings.
Competition
The power supply market is diverse and competitive in Europe, North America and
Asia. 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 the
barriers to entry are low and there is, therefore, a risk that competition
could quickly increase particularly from emerging low cost manufacturers in
Asia.
Risks Specific to the Group
Dependence on key personnel
The future success of the Group is substantially dependent on the continued
services and continuing contributions of its Directors, senior management and
other key personnel. The loss of the services of any of their respective
executive officers or other key employees could have a material adverse effect
on their businesses.
Loss of key customers/suppliers
The Group is dependent on retaining its key customers and suppliers. Should the
Group lose a number of its key customers or a key supplier this could have a
material impact on the Group's business financial condition and results of
operations. However, for the year ended 31 December 2009, no one customer
accounted for more than 2.5% of revenue.
Shortage, non-availability or technical fault with regard to key electronic
components
The Group is reliant on the supply, availability and reliability of key
electronic components. If there is a shortage, non availability or technical
fault with any of the key electronic components this may impair the Group's
ability to operate its business efficiently and lead to potential disruption to
its operations and revenues.
Fluctuations of revenues, expenses and operating results
The revenues, expenses and operating results of the Group could vary
significantly from period to period as a result of a variety of factors, some
of which are outside its control. 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, 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.
Management stretch
The management team is likely to be faced with increased challenges associated
with any sustained macroeconomic recovery. With the financial markets uncertain
the management team must also be able to adapt to the changing conditions and
implement corrective measures as they are needed. It could adversely affect the
Group if the management team is not able successfully to cope with these
challenges.
Information Technology Systems
The business of the Group relies to a significant extent on IT systems used in
the daily operations of its operating subsidiaries. Any failure or impairment
of those systems or any inability to transfer data onto any new systems
introduced could cause a loss of business and/or damage to the reputation of
the Group together with significant remedial costs.
Risks relating to taxation of the Group
The Group is exposed to corporation tax payable in many jurisdictions including
the USA where the effective rate can be as high as 40.0%, the UK where the
corporation tax rate is currently 28.0% and a number of European jurisdictions
where the rates vary between 25.5% and 38.7%. In addition, the Group has
manufacturing activities in China and Hong Kong where the corporation tax rates
are 24% and 17.5% respectively and sales companies in Singapore and
Switzerland where the corporation tax rates are 17.0% and 20.0% respectively.
The effective tax rate of the Group is affected by where its profits fall
geographically. The Group effective tax rate could therefore fluctuate over
time. This could have an impact on earnings and potentially its share price.
Further, the Group's tax position includes judgments about past and future
events and relies on estimates and assumptions. Although we believe that the
estimates and assumptions supporting our positions are reasonable and are
supported by external advice, our ultimate liability in connection with these
matters will depend upon the assessments raised and the result of any
negotiations with the relevant tax authorities. If the actual taxes and
penalties imposed exceed the amounts we have accrued, it could adversely affect
our financial position, results and cash flows.
8 Responsibility Statement
The Directors' confirm to the best of their knowledge and belief that this
condensed set of financial statements:
- gives a fair view of the assets, liabilities, financial position and profit
of the Group; and
- includes a fair review of the information required by the Disclosure and
Transparency Rules .
9. Other 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 financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2009 or 2008. The
financial information for the year ended 31 December 2008 is derived from the
XP Power Limited statutory accounts for the year ended 31 December 2008, which
have been delivered to the Accounting and Corporate Regulatory Authority in
Singapore. The auditors reported on those accounts; their report was
unqualified. The statutory accounts for the year ended 31 December 2009 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Accounting and
Corporate Regulatory Authority in Singapore following the Company's Annual
General Meeting.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The Company expects to publish full financial statements
that comply with IFRSs later this month.
This announcement was approved by the directors on 22 February 2010.
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