Final Results

20 February 2012 XP Power Limited ("XP" or "the Group") Annual Results for the year ended 31 December 2011 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 2011. Highlights Year ended Year ended 31 December 31 December Change 2011 2010 Bookings £98.3m £103.4m -5% Revenue £103.6m £91.8m +13% Gross margin 49.1% 48.0% + 110 bps Adjusted1 profit before tax £24.3m £18.7m + 30% Adjusted1 profit after tax £20.3m £15.9m + 28% Diluted earnings per share adjusted1 106.4p 83.7p + 27% Final dividend per share 15.0p 12.0p Total dividend per share 45.0p 33.0p + 36% 1Adjusted for amortisation of intangibles associated with acquisitions of £nil million (2010: £0.1 million) The Group's well-established strategy of developing and manufacturing its own range of market leading products produced another year of record profits and earnings per share Bookings decreased by 5% to £98.3 million (2010: £103.4 million) and revenues increased by 13% to £103.6 million (2010: £91.8 million) Increased gross margins of 49.1% (2010: 48.0%) driven by continued expansion of XP's own design revenues which represented £59.2 million or 57% of total revenues (2010: £44.1 million or 48% of total revenues) Thirty eight new products introduced in the period, including an extensive range of high efficiency "Green Power" products Chinese manufacturing facility successfully securing new approved vendor agreements from blue chip customers Second manufacturing site in Vietnam completed on schedule in December 2011 and operations have now commenced Robust earnings and strong cash flows provide basis for an increased total dividend of 45.0p per share for the year up 36% on the prior year 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 Successful repositioning as a designer and manufacturer leave the Group well positioned to respond to more difficult markets and to continue to take market share Larry Tracey, Executive Chairman, commented: "Consistent application of our well-established strategy of moving "up the food chain" into design and manufacture produced another year of record profits and earnings, against a backdrop of economic conditions which deteriorated markedly in the later part of the year. Our strategy and its execution resulted in earnings per share of 106.4p in 2011 (2010: 83.7p), an increase of 27% over 2010. This is a fifth successive year of improvement and another record for the Group. The compound average growth rate of earnings per share has been 27% over the last 5 years and 18% over the last 10 years. Under the leadership of our experienced management team, the new products introduced over the past four years, and manufactured in our new production facilities, are now entering customer production and should ensure that we continue to gain market share. This combination should leave us well placed to further grow earnings and dividends over the next five years." Enquiries: XP Power (20 February 2012) +44 (0)20 7638 9571 James Peters, Deputy Chairman +44 (0)7785 353066 Duncan Penny, Chief Executive +65 8322 9520 Jonathan Rhodes, Finance Director +44 (0) 7500 944614 Citigate Dewe Rogerson +44 (0)20 7638 9571 Kevin Smith/Jos Bieneman 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 45% of sales), healthcare (circa 26% sales) and technology (circa 29% 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 Overview Consistent application of our well-established strategy of moving "up the food chain" into design and manufacture produced another year of record profits and earnings, against a backdrop of economic conditions which deteriorated markedly in the later part of the year. Our strategy and its execution resulted in earnings per share of 106.4p in 2011 (2010: 83.7p), an increase of 27% over 2010. This is a fifth successive year of improvement and another record for the Group. The compound average growth rate of earnings per share has been 27% over the last 5 years and 18% over the last 10 years. Financial Total orders decreased by 5% to £98.3 million (2010: £103.4 million) in the year. Total sales increased by 13% to £103.6 million (2009: £91.8 million). Sales of product based on XP Power's own designed product increased by 34% to £ 59.2 million (2010: £44.1 million). Another increase in the proportion of higher margin, own designed/own manufactured products in the sales mix helped to drive a further improvement in gross margins to 49.1% (2010: 48.0%). Operating profit increased to £25.3 million (2010: £19.7 million). Net debt at the year end was £18.6 million compared to £18.4 million at the end of 2010. Operating cash flow was £16.0 million (2010: £10.3 million) representing 63% of operating income. Strategic Progress In mid-2009 the Group achieved a key strategic objective when it began production at its full scale manufacturing facility in China. Our second manufacturing facility in Ho Chi Minh City, Vietnam was completed on schedule in December 2011 and will give us the capability to produce our own magnetic components, significantly enhancing the value proposition we offer our customers. Combined, these state of the art factories dramatically enhance the Group's ability to secure preferred supplier status with larger customers and increase the proportion of its revenues which come from its own-designed products beyond the current level of just below 60%. Dividend Our continued strong financial performance, robust cash flows and confidence in the Group's long term prospects have enabled us to consistently increase dividends throughout the year. In line with our progressive dividend policy, a final dividend of 15.0 pence per share for the fourth quarter of 2011 is proposed. This dividend will be payable to members on the register on 16 March 2012 and will be paid on 4 April 2012. When combined with the interim dividends for the previous quarters, the final proposed dividend results in a total dividend of 45.0 pence per share for the year (2010: 33.0p); an increase of 36%. The compound average growth rate of our dividend has been 20% over the last 5 years and 14% over the last 10 years. Sustainability In 2011 we committed further substantial management and financial resources to reducing our carbon footprint and water usage in line with our goal of becoming the leader in our industry in addressing the effect that our operations have on the environment. These efforts will continue throughout 2012 and beyond as we seek to assist in achieving the national targets set by the countries in which we operate. Our new magnetics facility in Vietnam was completed in December 2011 and is the most environmentally friendly manufacturing facility in the industry. Outlook Under the leadership of an experienced management team, the new products introduced over the past four years, and manufactured in our new production facilities, are now entering customer production and should ensure that we continue to gain market share. This combination should leave us well placed to further grow earnings and dividends over the next five years. Larry Tracey Executive Chairman Chief Executive's Review Overview The strategy that we have been consistently applying over a number of years has produced another set of excellent financial results despite the macroeconomic headwinds we started to experience in the last quarter of the period. 2011 was another record year for XP Power with the previous year's records for own designed revenue, margins, earnings and cash flow beaten yet again. This is the fifth successive year we have increased earnings, underlining what has been achieved as a result of our consistent strategy of moving up the value chain, powered by a strong pipeline of new leading-edge products and our development as an independent manufacturer. This performance is even more pleasing as much of it has been delivered against a backdrop of difficult economic conditions, demonstrating the resilient nature of our business model. Our broad and up-to-date portfolio of class leading products, many of which are highly efficient, combined with excellent engineering support, and the assured quality and reliability facilitated by our move into manufacturing, is increasingly making us the power converter provider of choice for many large customers. In 2011 we achieved a further major milestone with the completion of our new magnetics facility in Vietnam. This new facility is a further step along the road of vertical integration which not only enhances our value proposition to our customers - in terms of control of the manufacturing process, flexibility and lead times - but also provides a second geographical capability to mitigate the effect of increasing costs in China. A record 57% of our revenues came from our own designed products in 2011 (2010: 48%) and 90% of our total revenues now carry the XP Power brand (2010: 88%). Own designed products generate higher margins, and give XP Power the capacity to design tailor-made power control solutions for specific customer orders, making us an increasingly attractive partner for our larger target customers. Markets XP Power supplies power control solutions to Original Equipment Manufacturers ("OEMs") of capital goods who themselves supply the healthcare, technology and industrial markets with high value products. The increasing importance of 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 available market for XP Power's products is estimated to be £1.5 billion per annum and we expect it to grow by approximately 17% in the next four years. We estimate that XP Power's global market share grew to around 7% in 2011 compared with around 6.5% in 2010. Across North America and Europe, XP Power currently has around 10% and 12% respectively of our available market, while across Asia we doubled our share to 2% in the period. This illustrates the significant commercial opportunities that remain open to XP Power, and the Board is confident that the Group's competitive advantages over many of its peers will allow it to take further share in each of its key markets. According to industry sector, 2011 revenues were split: Industrial up 11% to £ 46.9 million (2010: £42.2 million), Healthcare up 17% to £26.6 million (2010: £ 22.8 million) and Technology up 12% to £30.1 million (2010: £26.8 million). Healthcare continued to exhibit excellent growth, reflecting our ongoing focus on that sector and development of a very strong healthcare product offering. Despite good growth in all industry sectors, year on year the Technology sector experienced a marked softness in the later part of 2011; particularly in North America. According to geography our 2011 revenues were split: Asia up 64% to £9.2 million (2010: £5.6 million), Europe up 10% to £45.4 million (2010: £41.4 million) and North America up 9% to £49.0 million (2010: £44.8 million). As noted above, during the later part of 2011 we saw a marked softening in North America, particularly in the Technology sector, but despite Eurozone economic concerns, our European business held up well. Our major blue chip customers continue to demand market leading, highly reliable products. We maintained a consistent investment in research and development throughout the year and our product pipeline remains the broadest and freshest in the industry. The attractions of this continually evolving portfolio of market leading products enabled the Group to win a number of new customers in the year, underpinning revenue growth 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. In response, XP Power has established an international network of offices which offers the necessary customer support across technical sales, design engineering, logistics and operations. This network gives XP Power a strong 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 further increase its market share, and we believe is one of the main reasons for our success in winning new contracts. Expanding the International Network XP Power's mix of quick response capability and global reach is a major competitive advantage. XP Power maintained a network of 27 sales offices spread over North America, Europe and Asia, with a further 16 distributors, supporting its smaller customers, during the year. The size and scope of this network is kept under continuous review to ensure the business remains best placed to 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, making them a "value add" partner to our customers' product development teams. 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 its major customers with local face to face support and rapid response times. In Europe, the XP Power network consists of eight sales offices and a further nine distributor offices, providing the same level of customer support as North America. In addition, XP Power has engineering services centres in Germany and the UK. The Asian sales activities are run from Shanghai and Singapore, where we also manage a network of seven distributors serving the region. 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 long term commitment to invest in research and development of new products has been the cornerstone of XP Power's growth strategy. Research and development gross spend was £5.3 million in 2011 (2010: £4.6 million), and a record thirty eight new product families were introduced in the year, resulting in a number of exciting new customer approvals. Our new range of highly efficient medical external power converters were extremely well received by customers with some encouraging early design wins of significant value. This product family adds to our already extensive range of "Green Power" products. As the large number of new products released over the last few years are now coming to production and being sampled to customers, the Group expects the rate of new product introductions to slow somewhat in the current year compared to the very high numbers of recent years. While new product introductions will remain at the heart of our activities, our development resources will also be focused on producing modifications to existing products to meet the precise requirements of individual customers. Manufacturing Capabilities Our key customers demand the ultimate in terms of quality control to ensure reliability for the life of their equipment. Complete control of manufacturing is therefore critical to ensure strict management of the production processes and components that go into our products, and also gives us opportunities to reduce our product costs. The capability and performance of our Kunshan facility, which was commissioned in 2009, has been instrumental in winning new programs and customers. In December 2011 we completed the construction of our new manufacturing facility in Ho Chi Minh City, Vietnam, on schedule. This new facility will primarily be a magnetics facility and is another major milestone for the Company. This vertical integration enhances our value proposition to key customers who increasingly demand rigorous control of the supply chain. As well as better control over the manufacturing process it will allow us to be more flexible and provide shorter lead times. Furthermore, the new facility will help mitigate the rising wage costs and currency appreciation in China as the production of magnetics is labour intensive. Historically, prior to the Group establishing its own manufacturing facilities, products designed in our own design centres had previously been built by our contract manufacturing partner. Given our major customers' requirements for complete control over the manufacturing process, combined with the softening in market demand we experienced in the final quarter of 2011, we have taken the decision to transfer manufacture of all remaining products to our facility in Kunshan. The transfer process will run throughout 2012 and will necessitate a short term increase in inventories as a buffer during the transfer process. The Environment and Sustainability In 2009 we established an Environmental Committee that immediately set the goal of making XP Power the leader in environmental issues within our industry. Much has been achieved in 2011 and our progress is set out in detail in the Environmental Report contained within our 2011 Annual Report. During 2010 we became an Applicant Member of the Electronic Industry Citizenship Coalition (EICC). The EICC is an industry organisation of leading electronics manufacturers which promotes an industry code of conduct for global electronics supply chains to improve working and environmental conditions. It deals with environmental, health and safety, labour standards and business ethics issues. We have publicly adopted the Code of Conduct of the EICC and are now active members on both its Environmental Sustainability and Water working groups. In March 2011 we succeeded in achieving Full Membership status of the EICC and have been successfully working with our key suppliers to get them to adopt the same rigorous Code of Conduct. As a new build project, our new Vietnamese magnetics facility presented us with an excellent opportunity to establish the most environmentally friendly power converter manufacturing facility in the world and we are incorporating green technologies into the plant from the outset. The facility was completed in December 2011 and will meet the Gold Plus rating of the BCA Green Mark requirements which are the leading standards set by the Singapore Building and Construction Authority for non-residential buildings in tropical climates. This covers not only the energy efficiency of the building but also water efficiency, environmental protection, indoor environmental quality and other green features and innovations. We are proud that this in not only the most environmentally friendly building in our industry but will be the first BCA Green Mark certified industrial facility in Vietnam. We have also continued to expand our ISO14001 Environmental Management certifications around the world and all our key sites representing 92% of our revenues are now covered by ISO14001. The progress XP Power has made on environmental matters was recognised in September 2011 when we were selected for inclusion in the FTSE4Good Index. 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. The Group has worked hard to build a sales culture that can successfully manage complicated relationships and has developed sophisticated proprietary customer relationship management tools to manage the sales process effectively. Management regards these tools and their method of utilisation as a significant source of competitive advantage over the Group's larger competitors. Board Changes We are pleased to welcome Jonathan Rhodes onto the Board following his appointment as Finance Director on 20 December 2011 Jonathan Rhodes joined the finance team of XP Power in July 2008 as European Controller. Prior to joining the Group, Jonathan spent nine years with JCDecaux in various senior financial positions including Head of Financial Reporting and worked in both its UK and North American operations. Prior to that, he spent three years with Mills & Allen. Jonathan takes over from Mickey Lynch who will stay with the Group in the position of Vice President responsible for tax and treasury. This will ensure continuity during this succession and also provide the Group with an enhanced focus on the tax and treasury areas. Outlook Design wins in 2011 have continued to be positive and we are pleased with the further headway that has been made in achieving approved or preferred supplier status at new key accounts. However, increased macroeconomic uncertainty is presenting a challenging environment in 2012. Bookings in the last quarter of 2011 from existing programs were soft and customers are generally cautious and are delaying orders. As a supplier to manufacturers of capital goods, we cannot expect to be immune from the effects of lower global end-market growth, nevertheless, XP's successful repositioning as a designer and manufacturer of its own range of market-leading products and the addition of a magnetics capability at its second manufacturing site, leave the Group well positioned to respond to these more difficult markets and to continue to take market share. We remain confident about the fundamental medium term growth drivers which underpin the markets in which we operate. With the successful transition of its business model to higher margin, own IP product sales and the continued development of a state of the art independent manufacturing capability and further vertical integration, XP Power remains in a strong position to capitalise on its growth ambitions. Duncan Penny Chief Executive Consolidated Income Statement For the year ended 31 December 2011 £ Millions Note 2011 2010 Revenue 2 103.6 91.8 Cost of sales (52.7) (47.7) Gross profit 50.9 44.1 Expenses Distribution and marketing (20.7) (20.0) Administrative (0.7) (0.7) Research and development (4.2) (3.7) Operating profit 25.3 19.7 Finance cost (1.0) (1.1) Profit before income tax 2 24.3 18.6 Income tax expense 3 (3.6) (2.6) Profit for the year 20.7 16.0 Profit attributable to: Owners of the parent 20.3 15.8 Non controlling interests 0.4 0.2 Profit for the year 20.7 16.0 Earnings per share Attributable to owners of the parent (pence per share) - Basic 5 107.1 83.9 - Diluted 5 106.4 83.2 - Diluted adjusted 5 106.4 83.7 Consolidated Balance Sheet At 31 December 2011 £ Millions Note 2011 2010 ASSETS Current Assets Cash and cash equivalents 6.3 5.0 Trade receivables 16.0 15.6 Other current assets 2.6 1.5 Inventories 22.0 21.0 Deferred income tax assets 0.1 - Total current assets 47.0 43.1 Non-current assets Interest in associates 0.1 0.1 Property, plant and equipment 12.9 8.3 Goodwill 31.3 30.8 Intangible assets 6.4 5.3 ESOP loans to employees 1.6 2.4 Deferred income tax assets 0.3 0.8 Total non-current assets 52.6 47.7 Total assets 99.6 90.8 LIABILITIES Current liabilities Trade and other payables 11.4 15.5 Current income tax liabilities 1.3 3.4 Derivative financial instruments 0.2 0.4 Borrowings 6 13.4 12.7 Provision for deferred contingent consideration 7 1.9 - Total current liabilities 28.2 32.0 Non-current liabilities Borrowings 6 11.5 10.7 Deferred income tax liabilities 2.0 1.8 Provision for deferred contingent consideration 7 2.1 3.5 Total non-current liabilities 15.6 16.0 Total liabilities 43.8 48.0 NET ASSETS 55.8 42.8 EQUITY Share capital 27.2 27.2 Merger reserve 0.2 0.2 Treasury shares (1.0) (1.0) Hedging reserve - (0.4) Translation reserve (7.1) (7.6) Retained earnings 36.3 24.2 55.6 42.6 Non-controlling interests 0.2 0.2 TOTAL EQUITY 55.8 42.8 Consolidated Cash Flow Statement For the year ended 31 December 2011 £ Millions 2011 2010 Cash flows from operating activities Profit for the year 20.7 16.0 Adjustments for - Income tax expense 3.6 2.6 - Amortisation and depreciation 2.2 1.9 - Finance cost 1.0 1.1 - Loss on fair valuation of derivative financial instruments 0.1 - Change in the working capital: - Inventories (1.0) (10.3) - Trade and other receivables (1.5) (4.9) - Trade and other payables (4.1) 6.2 Income tax paid (5.0) (2.3) Net cash generated from operating activities 16.0 10.3 Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired (0.1) - Purchases and construction of property, plant and equipment (5.7) (2.1) Research and development expenditure capitalised (2.0) (1.7) ESOP loan repaid 0.8 0.2 Net cash used in investing activities (7.0) (3.6) Cash flows from financing activities Repayment of borrowings (4.1) (3.2) Net purchase of treasury shares by ESOP (0.8) (0.2) Interest paid (0.8) (0.9) Dividends paid to equity holders of the Company (7.4) (4.8) Dividends paid to non-controlling interests (0.4) (0.3) Net cash used in financing activities (13.5) (9.4) Effects of currency translation 0.2 (0.3) Net (decrease)/increase in cash and cash equivalents (4.3) (3.0) Cash and cash equivalents at beginning of financial year 1.0 3.9 Effects of currency translation on cash an cash equivalents - 0.1 Cash and cash equivalents at end of financial year (3.3) 1.0 Notes to the Annual Results Statement For the year ended 31 December 2011 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 2011 2010 Revenue Europe 45.4 41.4 North America 49.0 44.8 Asia 9.2 5.6 Total Revenue 103.6 91.8 Segment result Europe 9.8 7.4 North America 12.3 9.6 Asia 2.5 1.0 Segment result 24.6 18.0 Research and development costs (4.2) (3.7) Finance income and cost (1.0) (1.1) Corporate recovery from operating segment 4.9 5.4 Profit before tax 24.3 18.6 Tax (3.6) (2.6) Total Profit 20.7 16.0 Analysis by end market The revenue by end market was as follows: Year to 31 December 2011 Year to 31 December 2010 North North £ Millions Europe America Asia Total Europe America Asia Total Technology 11.6 12.5 6.0 30.1 10.7 12.6 3.5 26.8 Industrial 24.3 20.7 1.9 46.9 22.1 18.6 1.5 42.2 Healthcare 9.5 15.8 1.3 26.6 8.6 13.6 0.6 22.8 Total 45.4 49.0 9.2 103.6 41.4 44.8 5.6 91.8 3. Income taxes £ Millions 2011 2010 Singapore corporation tax - current 1.3 1.0 year - adjustment in respect of prior year 0.1 (0.1) Overseas corporation tax - current year 2.9 2.4 - adjustment in respect of prior year (1.3) (0.2) Total current tax 3.0 3.1 Deferred income tax - current year 1.3 (0.3) - adjustment in respect of prior year (0.7) (0.2) Tax charge for the year 3.6 2.6 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 2011 2010 Profit before tax 24.3 18.6 Tax on profit on ordinary activities at standard Singapore tax rate of 17% 4.1 3.2 Lower than standard Singapore tax rate (0.7) (0.6) Higher rates of overseas corporation tax 2.4 1.6 Deduction for gains on employee share options (0.3) (1.1) Prior year adjustments (1.9) (0.5) Tax charge for the year 3.6 2.6 4. Dividends Amounts recognised as distributions to equity holders in the period 2011 2010 Pence Pence per £ per £ share Millions share Millions Prior year third quarter dividend paid 8.0 * 1.5 n/a n/a Prior year final dividend paid 12.0 * 2.3 12.0 2.3 First quarter dividend paid 9.0 ^ 1.7 6.0 * 1.2 Second quarter dividend paid 10.0 ^ 1.9 7.0 * 1.3 Total 39.0 7.4 25.0 4.8 * Dividends in respect of 2010 (33.0p) ^ Dividends in respect of 2011 (45.0p) A dividend of 11.0p per share was paid in respect of the Third Quarter of 2011 on 10 January 2012. The proposed final dividend for 2011 of 15.0 pence per share is subject to approval by shareholders at the Annual General Meeting scheduled for 2 April 2012 and has not been included as a liability in these financial statements. It is proposed that the final dividend be paid on 4 April 2012 to members on the register as at 16 March 2012. 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: 2011 2010 £ 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) 20.3 15.8 Amortisation of intangibles associated with acquisitions - 0.1 Earnings for adjusted earnings per share 20.3 15.9 Number of shares Weighted average number of shares for the purposes of basic earnings per share (thousands) 18,946 18,830 Effect of potentially dilutive share options (thousands) 138 170 Weighted average number of shares for the purposes of dilutive earnings per share (thousands) 19,084 19,000 Earnings per share from operations Basic 107.1p 83.9p Diluted 106.4p 83.2p Diluted adjusted 106.4p 83.7p 6. Borrowings The borrowings are repayable as follows: £ Millions 2011 2010 On demand or within one year 13.4 12.7 In the second year 3.8 3.9 In the third year 7.7 3.9 In the fourth year - 2.9 24.9 23.4 Less: Amounts due for settlement within 12 months (shown under current liabilities) (13.4) (12.7) Total repayable after 12 months 11.5 10.7 The other principal features of the Group's borrowings are as follows: 1. Bank overdrafts are repayable on demand. The bank overdrafts are secured on the assets of the Group. At 31 December 2011, the Group had an overdraft of £9.6 million (2010: £4.0 million). In September 2011, the Group renewed its annual working capital facility, which is US Dollar 15 million (£ 9.6 million), priced at LIBOR plus a fixed margin of 2.5%. 2. In September 2011, the Group made a new arrangement with Bank of Scotland Plc to increase its term debt facility to US$27.0 million (£17.2 million) with quarterly repayments remaining at US$1.5 million (£1.0 million) and a US$9.0 million (£5.7 million) final repayment due on expiry on the facility in September 2014. The term loan is priced at LIBOR plus a margin of between 1.75% and 2.25% depending on the ratio of Net Debt to EBITDA. 3. The Group has pledged all assets as collateral to secure banking facilities granted to the Group. 7. Deferred consideration The Group owns 69.7% of the shares of Powersolve Electronics Limited and had entered into an agreement to purchase the remaining 30.3% of the shares in January 2012. On 19th December 2011, the Group entered into a new arrangement under which the purchase of the remaining 30.3% of the shares will now take place in two tranches - 14.3% in early 2012 and the remaining 16% in 2017. The commitment to purchase the remaining ownership has been accounted for as deferred consideration and is calculated based on the expected future payment which will be based on a predefined multiple of the earnings. Principal risks and uncertainties Board Responsibility Like many other international businesses the Group is exposed to a number of risks which may 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 components in US Dollars and the Chinese Yuan. The Group therefore has an exposure to foreign currency fluctuations. This could lead to material adverse movements in reported earnings. Competition The power supply market is diverse and competitive in Asia, Europe and North America. 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 businesses financial condition and results of operations. However, for the year ended 31 December 2011, no one customer accounted for more than 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 adverse macroeconomic conditions. 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 to successfully cope with these challenges. Information Technology Systems The business of the Group relies to a significant extent on information technology systems used in the daily operations of its operating subsidiaries. Any failure or impairment of those systems or any inability to transfer data onto any new systems introduced could cause a loss of business and/or damage to the reputation of the Group together with significant remedial costs. Risks relating to taxation of the Group The Group is exposed to corporation tax payable in many jurisdictions including the USA where the effective rate can be as high as 40.0%, the UK where the corporation tax rate is currently 26.0% 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 25% and 16.5% 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 2011 or 2010. The financial information for the year ended 31 December 2010 is derived from the XP Power Limited statutory accounts for the year ended 31 December 2010, 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 2011 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 20 February 2012.

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XP Power Ltd. (DI) (XPP)
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