Half-yearly Report
1 August 2011
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2011
XP, one of the world's leading developers and manufacturers of critical power
control components for the electronics industry, today announces its interim
results for the six-month period ended 30 June 2011.
Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Highlights
Revenue £51.9m £40.7m + 28%
Turnover
Gross profit £25.7m £19.0m + 35%
Gross margin 49.5% 46.7% +2.8% points
Operating margin 23.9% 18.9% + 5.0% points
Adjusted* profit before tax £11.9m £7.3m + 63%
Adjusted* profit after tax £10.1m £5.9m + 71%
Diluted earnings per share 52.9p 31.1p + 70%
adjusted* (see Note 11)
Interim dividend per share (see 19.0p 13.0p + 46%
Note 10)
* Adjusted for amortisation of intangibles associated with acquisitions of nil
(2010: £0.1 million)
* Strategic repositioning of the Group to an own design/own manufactured
business model now complete
* Further new product introductions and the development of an industry
leading in-house manufacturing capability have generated multiple new
program wins which are driving growth as market share gains gather pace.
* Increased gross margins of 49.5% (2010: 46.7%) driven by continued
expansion of own design, XP products, which now represent 55% of revenues
(2010: 46%) have combined with revenue growth to drive operating margins to
23.9% (2010: 18.9%).
* Construction of new production facility in Vietnam is on track and expected
to be operational in the first quarter of 2012.
* Current trading remains robust - order backlog and new program wins
underpin prospects in the second half and beyond.
Larry Tracey, Executive Chairman, commented:
"Our long term strategy of investing in our own product development and
manufacturing capabilities has enabled XP to deliver excellent financial
results in the first half of 2011, which, once again, set new records in terms
of revenue, gross margins and earnings per share. Trading conditions remain
robust and we entered the second half with a solid order book which should
produce improved revenue in the second half as customer orders enter
production, underpinning our confidence in prospects for the full year. We are
focused on ensuring continued earnings and dividend growth over the next five
years."
Enquiries:
XP Power
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/Jos Bieneman
Note to editors
XP Power is a leading international provider of essential power control
solutions. Power direct from the electricity grid is unsuitable for the
equipment which it supplies. XP Power designs and manufactures power
converters - components which convert power into the right form for our
individual customers' needs, allowing their electronic equipment to function.
XP Power supplies the healthcare, industrial and technology industries with
this mission critical equipment. Significant, long term investment into
research and development means that XP Power's products frequently offer
significantly improved functionality and efficiency.
For further information, please visit www.xppower.com
1 August 2011
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2011
CHAIRMAN'S STATEMENT
Overview
The broad based recovery that took hold in 2010 has continued into 2011. The
trading environment in the first half remained robust, building on the "V"
shaped recovery in 2010. Against this background, our long term strategy of
investing in the development of our own designed and manufactured products has
enabled XP to deliver another set of excellent financial results in the first
half of 2011, which again set new records in terms of revenue, margins and
earnings per share.
An expansive, up to date portfolio of market leading products and the
development of an industry leading in-house manufacturing capability are at the
core of our strategy and are leading to multiple new program wins which are
driving our growth as we continue to take market share.
Markets
XP Power supplies power control solutions to original equipment manufacturers
("OEMs") who supply the healthcare, industrial and technology markets with high
value products. The increasing importance of energy efficiency for
environmental, reliability and economic reasons; the necessity for ever smaller
products; the accelerating rate of technological change; and the increasing
proliferation of electronic equipment, all set a strong foundation for medium
term growth in demand for XP Power's products.
Revenue growth is being driven by the long term investment we have made in
building a broad portfolio of leading edge products. Revenues for the period
were up 28% (32% in constant currency) to £51.9 million, compared with £40.7
million in the same period a year ago. Revenues in Asia were £4.0 million, up
111%, in Europe revenues were £23.2 million up 21%, and those in North America
were £24.7 million up 26%, all on the same period a year ago.
There has been no significant change in the revenue mix of the different
industry sectors we target when comparing the first half of 2011 with the first
half of 2010. Healthcare grew 21%, Industrial grew 26% and Technology grew 36%.
Growth in Technology was most pronounced in Asia and North America, whereas the
growth in Industrial was strongest in North America. For the six months ended
30 June 2011, 45% of our revenues were generated from Industrial (2010: 46%),
25% from Healthcare (2010: 26%) and 30% from Technology (2010: 28%).
The Group's customer base remains highly diversified, with our largest customer
accounting for only 4% of revenue, spread over 68 different programs/part
numbers.
Margins
Our value proposition to our customers is to reduce their costs of manufacture
and operation. We achieve this by producing new products that consume less
power, take up less space, reduce installation times and which are highly
reliable in service. As the proportion of revenue generated from our own
designed product has increased to 55% (2010: 46%), so too have our gross
margins. The 49.5% gross margin achieved in the first half of 2011 is another
record (2010: 46.7%) and there remains scope for further improvements as the
proportion of own design revenue grows.
At present, approximately one quarter of our total revenues are manufactured
in-house. This figure is expected to increase significantly as all future new
products designed by our design centres will also be manufactured by us. We are
adding additional manufacturing capacity to address the combination of overall
revenue growth and this higher mix of own manufactured products.
The increase in gross margins in conjunction with our revenue growth is
resulting in a substantial improvement in operating margins. Our operating
margin in the first half of 2011 was 23.9% (2010: 18.9%) which is now among the
best performers in our industry.
Product Development
XP Power helps its customers reduce their own production costs and lower the
operating costs of their equipment when in service. Materials, space and energy
consumption savings are achieved by applying the combined power control
intellect of a multi-disciplined team of some 200 engineers. This is the
essence of the value we add for our customers.
New products are fundamental to driving our revenue growth. The markets we
serve and the customer requirements we identify are numerous and diverse. The
broader our product offering the more opportunity we have to increase our
revenues by expanding our available market. The investment we have made in
product development in the past few years means that our portfolio of products
is now materially complete and the primary focus has shifted to refreshing
product families that were released some seven or eight years ago.
It is significant that the acceleration in the number of new product families
introduced over the last three years is yet to have a significant impact on our
revenues. This is due to the lengthy design-in cycles determined by customers
to qualify the power converter in their equipment and then gain the necessary
safety agency approvals. This bodes well for future revenue growth.
We launched 13 new product families in the first half of 2011. In response to
customer requirements for improved efficiency and environmental performance,
our design teams are focusing on developing new products that reduce power
wastage, reduce heat, and consume less raw material. As anticipated, with our
ranges now largely complete, the number of new product introductions is likely
to decline this year from the 32 product families introduced in 2010 to around
25 in 2011. Our design engineering teams are now spending more time on
modifications to standard products required to address live sales opportunities
from our key customers. Many of these new products will be environmentally
friendly having very high efficiency and incorporating low stand-by power
operation. Net product development spending increased by 19% from £1.6 million
in the first half of 2010 to £1.9 million in the first half of 2011.
Our philosophy is to develop a broad array of standard products which are easy
to modify to the customer's specific requirements. This avoids the need for our
customers to embark on an expensive and lengthy custom design process, saving
them engineering costs and reducing their time to market. Use of a standard
platform also reduces the customer's risk. Approximately 60% of our revenues
come from standard products that we have modified in some way or from our
configurable product lines.
Larger customers are keen to reduce the number of vendors they deal with and XP
Power's broad product offering, excellent global engineering support, in-house
manufacturing capability and environmental credentials make us an ideal
candidate as a preferred supplier.
Supply Chain Dynamics
Lead times for electronic components have more or less reverted back to normal
following the severe component shortages and lead time increases experienced
during 2010. Since the end of 2009 we have significantly increased our
inventories of critical components in order to continue to offer short lead
times to our customers and to protect us from future shortages and external
supply chain stocks such as the earthquake that occurred in Japan during March
of this year. Inventories increased from £21.0 million at the 2010 year end to
£23.3 million at 30 June 2011, with £0.6 million of this increase due to higher
safety inventories of critical components.
Manufacturing
XP Power's move into manufacturing in 2006 has been instrumental in enabling
the Group to win approved and preferred supplier status at many new Blue Chip
customers. The results of this success are now beginning to manifest themselves
in our revenue growth.
In June 2009 production commenced at a new manufacturing facility constructed
on our existing site at Kunshan, close to Shanghai, China. This new facility
has enabled us to win more of the available business from our existing Blue
Chip customer base and to attract new larger customers where we have yet to
gain preferred supplier status. These customers demand that their suppliers
have complete control over their supply chain and product manufacture to ensure
the highest levels of quality. The facility, which is certified under the
ISO14001 Environmental Management Standard, delivers manufacturing capabilities
which match the best of our competitors.
The facility underwent seven customer inspections during the period and all
were successful, paving the way for XP to secure approved and/or preferred
supplier status with further new key customers.
The Kunshan factory is now running at over 50% capacity utilisation due to the
increased demand for our latest products which are own-manufactured. In
December 2010 work started on an additional factory in Vietnam on the outskirts
of Ho Chi Minh City to help meet future demand. The Vietnam site has sufficient
space for us to build two factories equivalent to the size of our existing
China factory in a phased approach as demand dictates. Construction work is
progressing to schedule and we expect to be operational in the first of these
new factories during the first quarter of 2012.
Capital requirements to expand our manufacturing capacity are modest compared
to the returns. We expect the site preparation and first building cost to be
approximately £5.5 million.
Dividend
Since April 2010 the Company has been making quarterly dividend payments. Our
strong financial performance and confidence in the Group's prospects have
enabled us to increase dividends for the first half by 46% to 19.0 pence per
share (2010: 13.0 pence per share).
The first quarterly payment of 9.0 pence per share was made on 7 July 2011. A
second quarterly dividend of 10 pence per share will be paid on 12 October 2011
to shareholders on the register at 9 September 2011. These first two quarterly
payments total 19.0 pence per share versus the first two quarterly payments of
13.0 pence per share paid for the equivalent period in 2010.
Dividend growth over the past ten years has exceeded a compound average growth
rate of 15%.
Environmental Impact
XP Power has placed improved environmental performance at the heart of its
operations both in terms of minimising the impact its activities have on the
environment and in its product development strategy. These practices and
initiatives not only resonate with our customers and employees; they also make
significant commercial sense as countries legislate to reduce power wastage,
improve recyclability of manufactured goods and ban the use of harmful
chemicals.
The Group was therefore pleased to announce in March that it had been accepted
as a Full Member of the Electronic Industry Citizenship Coalition ("EICC"). The
EICC is a collaboration of leading electronics companies that promotes an
industry code of conduct for global supply chains to improve working and
environmental conditions. XP's successful membership application reflects the
major progress achieved by the Group in enhancing the energy efficiency of its
power converters in recent years and its ongoing commitment to improving its
environmental performance.
Acquisition of the 20% minority interest in XP Power Srl (Italy)
In July we announced the acquisition of the outstanding 20% of the issued share
capital of XP Power Srl, the Group's sales distribution company in Italy, for a
maximum consideration of €225,000 (approximately £203,000) in cash. The
transaction completed on 12 July 2011 and brings the Group's total holding in
XP Power Srl to 100%.
We believe that 100% ownership of XP Power Srl will allow more control over the
sales operations in Italy which will, in turn, help drive the strategy of
targeting key accounts with the Group's own-designed product portfolio.
Management Succession
As reported in our June trading update, having held executive roles on the XP
Board since the public listing in 2000 and with the Group's strategic
transformation from distributor to designer and manufacturer of its own range
of products now complete, I, along with my Board colleague James Peters, Deputy
Chairman, have indicated our intention to relinquish our executive duties in
April 2012, at which point we will become non-executive directors.
Duncan Penny, Chief Executive, will assume full responsibility for the day to
day management of the business from this point, with Mike Laver, North American
President and Executive Director, assuming responsibility for global sales and
marketing. Our top 19 managers below Board level have an average age of 41 and
average length of service of over 11 years. James and I will effect a
progressive transition of our responsibilities over the coming months to ensure
an orderly handover. There is a strong and stable second tier of management
below Board level.
Outlook
We entered the second half with a solid order book and new business secured to
date should produce improved revenue in the remainder of the current year as
customer orders enter production, underpinning our confidence in prospects for
the full year.
Our challenge is to ensure that the exceptional results achieved in 2011 are
progressively improved over the next five years to the benefit of customers,
employees and shareholders. I believe the Group is well placed to execute these
objectives.
Larry Tracey
Executive Chairman
1 August 2011
XP Power Limited
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2011
£ Millions
Six months ended Six months ended
30 June 2011 30 June 2010
Note (Unaudited) (Unaudited)
Revenue 7 51.9 40.7
Cost of sales 8 (26.2) (21.7)
Gross profit 25.7 19.0
Operating expenses 8 (13.0) (11.5)
Other operating (expense)/income 8 (0.3) 0.2
Operating profit 12.4 7.7
Finance cost 8 (0.5) (0.5)
Profit before income tax 7 11.9 7.2
Income tax expense 9 (1.6) (1.3)
Net profit 10.3 5.9
Other comprehensive income:
Fair value (losses)/gains on cash (0.4) 0.8
flow hedges
Exchange differences on translation 0.4 (0.7)
of foreign operations
Other comprehensive income, net of - 0.1
tax
Total comprehensive income 10.3 6.0
Profit attributable to:
- equity holders of the company 10.1 5.8
- non-controlling interest 0.2 0.1
10.3 5.9
Total comprehensive income
attributable to:
- equity holders of the company 10.1 5.9
- non-controlling interest 0.2 0.1
10.3 6.0
Earnings per share for profit from Pence per Pence per
continuing operations attributable
to equity holders of the Company Share Share
Basic 11 53.4 30.8
Diluted 11 52.9 30.6
XP Power Limited
Consolidated Balance Sheet
At 30 June 2011
£ Millions Note At 30 At 31 At 30
June 2011 December 2010 June 2010
(Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents 7 4.7 5.0 2.9
Derivative financial instruments 7 - - 1.0
Trade receivables 7 16.5 15.6 13.3
Other current assets 7 2.0 1.5 1.4
Inventories 6, 7 23.3 21.0 15.2
Total current assets 46.5 43.1 33.8
Non-current assets
Interests in associates 0.1 0.1 0.1
Property, plant and equipment 9.6 8.3 7.9
Goodwill 7 30.8 30.8 31.0
Intangible assets 12 5.5 5.3 4.9
ESOP loans to employees 1.9 2.4 2.6
Deferred income tax assets 7 0.7 0.8 0.4
Total non-current assets 48.6 47.7 46.9
Total assets 95.1 90.8 80.7
Liabilities
Current liabilities
Trade and other payables 7 14.3 15.5 14.0
Current income tax liabilities 7 1.9 3.4 2.9
Derivative financial instruments 7 0.8 0.4 0.3
Borrowings 14 15.9 12.7 4.0
Provision for deferred 3.6 - -
contingent consideration
Total current liabilities 36.5 32.0 21.2
Non-current liabilities
Borrowings 14 8.4 10.7 18.1
Deferred income tax liabilities 7 1.7 1.8 1.7
Provision for deferred 7 - 3.5 3.7
contingent consideration
Total non-current liabilities 10.1 16.0 23.5
Total liabilities 46.6 48.0 44.7
NET ASSETS 48.5 42.8 36.0
Capital and reserves
attributable to equity holders
of the Company
Share capital 27.2 27.2 27.2
Merger reserve 0.2 0.2 0.2
Treasury shares (1.0) (1.0) (0.9)
Hedging reserve (0.8) (0.4) 0.6
Translation reserve (7.2) (7.6) (8.1)
Retained earnings 29.9 24.2 16.8
48.3 42.6 35.8
Non-controlling interest 0.2 0.2 0.2
Total equity 48.5 42.8 36.0
XP Power Limited
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2011 (Unaudited)
Share Company Merger Hedging Translation Retained Total Total
capital treasury reserve reserve reserve earnings attributable Equity
shares to equity Non-
holders of controlling
the parents interest
Balance at 1 27.2 (0.9) 0.2 (0.2) (7.4) 13.3 32.2 0.3 32.5
January 2010
Dividends - - - - - (2.3) (2.3) (0.2) (2.5)
paid
Total - - - 0.8 (0.7) 5.8 5.9 0.1 6.0
comprehensive
income for
the period
Balance at 30 27.2 (0.9) 0.2 0.6 (8.1) 16.8 35.8 0.2 36.0
June 2010
Balance at 1 27.2 (1.0) 0.2 (0.4) (7.6) 24.2 42.6 0.2 42.8
January 2011
Sale of - 1.2 - - - (0.6) 0.6 - 0.6
treasury
shares
Purchase of - (1.2) - - - - (1.2) - (1.2)
treasury
shares
Dividends - - - - - (3.8) (3.8) (0.2) (4.0)
paid
Total - - - (0.4) 0.4 10.1 10.1 0.2 10.3
comprehensive
income for
the period
Balance at 30 27.2 (1.0) 0.2 (0.8) (7.2) 29.9 48.3 0.2 48.5
June 2011
XP Power Limited
Consolidated Statement of Cash Flows
For the six months ended 30 June 2011
£ Millions Note Six months Six months
ended ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Cash flows from operating activities
Total profit 10.3 5.9
Adjustments for
* Income tax expense 1.6 1.3
* Amortisation and depreciation 1.0 1.1
* Finance cost 0.5 0.5
* Gain on fair valuation of derivative - (0.1)
financial instruments
Change in the working capital
* Inventories (2.3) (4.5)
* Trade and other receivables (1.3) (2.5)
* Trade and other payables (1.1) 4.8
* Income tax paid (2.9) (1.3)
Net cash provided by operating 13 5.8 5.2
activities
Cash flows from investing activities
Purchases and construction of property, (2.1) (1.0)
plant and equipment
Research and development expenditure 8 (0.6) (0.9)
paid
ESOP loan repaid 0.5 -
Net cash used in investing activities (2.2) (1.9)
Cash flows from financing activities
Repayment of borrowings (2.8) (0.4)
Purchase of treasury shares by ESOP (0.6) -
Interest paid (0.4) (0.4)
Dividends paid to equity holders of the (3.8) (2.3)
Company
Dividends paid to non-controlling (0.2) (0.2)
interest
Net cash used in financing activities (7.8) (3.3)
Effects of currency translation 0.3 (1.1)
Net decrease in cash and cash (3.9) (1.1)
equivalents
Cash and cash equivalents at start of 1.0 3.9
period
Effects of currency translation on cash 0.1 0.1
and cash equivalents
Cash and cash equivalents at the end of 13 (2.8) 2.9
the period
XP Power Limited
Notes to the Interim Results for the six months ended 30 June 2011
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 2011 has been prepared in accordance with the Listing Rules of the
Financial Services Authority and with IAS 34, Interim Financial Reporting as
adopted by the European Union.
The condensed consolidated interim financial statements should be read in
conjunction with the annual financial statements for the year ended 31 December
2010 which have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union.
3. Going Concern
The directors, after making enquiries, are of the view, as at the time of
approving the financial statements, that there is a reasonable expectation that
the Group will have adequate resources to continue operating for the
foreseeable future and therefore the going concern basis has been adopted in
preparing these financial statements.
4. Accounting policies
The condensed consolidated interim financial statements have been prepared
under the historical cost convention except for the fair value of derivatives
in accordance with IFRS 9, "Financial Instruments".
The same accounting policies, presentation and methods of computation are
followed in these condensed consolidated interim financial statements as were
applied in the presentation of the Group's financial statements for the year
ended 31 December 2010.
On 1 January 2011, the Group adopted the following standards that are mandatory
for application from that date:
IAS 24 (revised) Related party disclosures
IAS 32 (Amendment) Classification of rights issues
IFRIC 14 (Amendment) Prepayments of a minimum funding requirement
IFRIC 19 Extinguishing financial liabilities with equity instruments
The adoption of the above standards did not result in any substantial changes
to the Group's accounting policies or any significant impact on these financial
statements.
5. Property, plant and equipment
Items of property, plant and equipment, including leasehold land and buildings,
are stated at cost less accumulated depreciation and any recognised impairment
losses.
The cost of an item of property, plant and equipment initially recognised
includes its purchase price and any cost that is directly attributable to
bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by management.
Freehold land and property under development are not depreciated. Depreciation
on other items of property, plant and equipment is charged so as to write off
the cost or valuation of the assets over their estimated useful lives, using
the straight line method, on the following bases:
Plant and equipment 10 - 33%
Motor vehicles 20 - 25%
Building improvements 10% or over the life of the lease if shorter
Buildings 2 - 5%
Leasehold land 2% or over the life of the lease if shorter
The residual values, estimated useful lives and depreciation method of
property, plant and equipment are reviewed, and adjusted as appropriate, at
each balance sheet date. The effects of any revision are recognised in the
income statement when the changes arise.
6. Inventories
Inventories are stated at the lower of cost and net realisable value. The cost
of finished goods and work-in-progress comprises raw materials, direct labour,
other direct costs and related production overheads (based on normal operating
capacity) but excludes borrowing costs.
Cost is calculated using the weighted average method. Net realisable value
represents the estimated selling price less all estimated costs of completion
and costs to be incurred in marketing, selling and distribution.
7. Segmented analysis
The Group operates substantially in one class of business, the provision of
power control solutions to the electronics industry. Analysis of total Group
operating profit, total assets, revenue and total group profit before taxation
by geographical region is set out below.
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Revenue
Asia 4.0 1.9
Europe 23.2 19.2
North America 24.7 19.6
Total revenue 51.9 40.7
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Total assets
Asia 27.0 18.0
Europe 28.1 24.4
North America 39.3 37.9
Segment assets 94.4 80.3
Unallocated deferred tax 0.7 0.4
Total assets 95.1 80.7
7. Segmented analysis (continued)
Reconciliation of segment results to profit before tax:
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Asia 1.0 -
Europe 5.1 3.1
North America 6.0 3.6
Segment result 12.1 6.7
Corporate recovery from operating 2.2 2.6
segment
Research and development cost (1.9) (1.6)
Finance income and cost (0.5) (0.5)
Profit before taxation 11.9 7.2
Tax (1.6) (1.3)
Total profit 10.3 5.9
The Group's three business segments operate in the following countries:
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
United States 24.7 19.6
United Kingdom 11.8 10.5
Singapore 4.0 1.9
Germany 4.5 3.2
Switzerland 1.8 1.8
Other countries 5.1 3.7
Total revenue 51.9 40.7
8. Expenses by nature
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Profit for the period is after charging/
(crediting):
Gross research and development expense 2.1 2.1
Development expense capitalised (0.6) (0.9)
Amortisation of development expense 0.4 0.4
capitalised
Net research and development expense 1.9 1.6
Amortisation of other intangible assets - 0.1
Depreciation of property, plant and 0.6 0.6
equipment
Foreign exchange loss 0.3 -
Foreign exchange (gains) on forward - (0.1)
contracts
Cost of inventories recognised as an 26.2 21.7
expense
Fees paid to auditors:
- Audit 0.2 0.2
All other charges 10.8 9.4
Total 40.0 33.5
9. 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. In
arriving at the tax expense estimate, consideration for certain tax
uncertainties were accounted for. The estimated effective annual tax rate used
for 2011 is 14% (2010: 17%). The 2011 rate is reduced by certain factors some
of which will not recur in the future.
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Singapore 0.7 0.4
Other overseas taxation 0.9 0.9
Total taxation 1.6 1.3
10. Dividends
Amounts recognised as distributions to equity holders in the period:
Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Pence per £ Millions Pence £ Millions
share per
share
Prior year 3rd quarter 8.0 1.5 - -
dividend paid
Prior year final dividend 12.0 2.3 12.0 2.3
paid
Total 20.0 3.8 12.0 2.3
The dividends paid recognised in the interim financial statements relate to the
third quarter and final dividends for 2010.
Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Pence per £ Millions Pence £ Millions
share per
share
Proposed dividends 19.0 3.6 13.0 2.4
In April 2010 we announced that the Company's dividend payment schedule would
change from a half yearly to a quarterly basis, to increase the attractiveness
of the Group's shares to certain investors and to smooth cash flows. The first
quarter payment of 9 pence per share (2010: 6 pence) was made on 7 July 2011 to
shareholders on the register at 10 June 2011.
A second quarterly dividend of 10 pence per share (2010: 7 pence) will be paid
on 12 October 2011 to shareholders on the register at 9 September 2011.
11. Earnings per share
Earnings per share attributable to equity holders of the company arise from
continuing operations as follows:
£ Millions Six months Six months
ended ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Earnings
Earnings for the purposes of basic and 10.1 5.8
diluted earnings per share (profit for the
period attributable to equity shareholders
of the company)
Amortisation of intangibles associated with - 0.1
acquisitions
Earnings for adjusted earnings per share 10.1 5.9
Number of shares '000 `000
Weighted average number of shares for the 18,921 18,803
purposes of basic earnings per share
(thousands)
Effect of potentially dilutive share options 162 150
(thousands)
Weighted average number of shares for the 19,083 18,953
purposes of dilutive earnings per share
(thousands)
Earnings per share from operations
Basic 53.4p 30.8p
Diluted 52.9p 30.6p
Diluted adjusted 52.9p 31.1p
12. Other intangible assets
Other intangible assets comprises development expenditure capitalised when it
meets the criteria laid out in IAS 38, "Intangible Assets", trademarks and
non-contractual customer relationships.
13. Cash and cash equivalents
For the purpose of presenting the consolidated cash flow statement, the
consolidated cash and cash equivalents comprise the following:
£ Millions Six months ended Six months ended
30 June 2011 30 June 2010
(Unaudited) (Unaudited)
Cash and bank balances 4.7 2.9
Less: Bank overdrafts (7.5) -
Cash and cash equivalents per (2.8) 2.9
consolidated cash flow statement
Reconciliation to free cash flow:
Net cash inflow from operating 5.8 5.2
activities
Development expenses capitalised (0.6) (0.9)
Net interest expense (0.4) (0.4)
Free cash flow 4.8 3.9
14. Borrowings, bank loans and overdraft
£ Millions 30 June 2011 31 December 2010 30 June 2010
(Unaudited) (Unaudited)
Non-Current 8.4 10.7 18.1
Current 15.9 12.7 4.0
Total 24.3 23.4 22.1
15. Currency Impact
We report in Pounds Sterling (GBP) but have significant revenues and costs as
well as assets and liabilities that are denominated in United States Dollars
(USD). The table below sets out the prevailing exchange rates in the periods
reported.
First half First half % 30 June 31 December 30 June
2011 2010 2011 2010 2010
Change
Average Average Period end Period end Period end
USD/GBP 1.60 1.54 3.9% 1.61 1.54 1.49
EUR/GBP 1.16 1.14 1.8% 1.12 1.18 1.22
Approximately 70% of the Group's revenues are invoiced in USD so the change in
the USD to GBP exchange rate has a significant effect on reported revenue in
GBP. However, as the majority of our cost of goods sold and operating expenses
are also denominated in USD the change in profit before tax with the USD to GBP
exchange rate is relatively minor. The impact of changes in the key exchange
rates from the first half of 2010 to the first half of 2011 are summarised as
follows:
£ Millions USD EUR
Impact on revenues (1.5) (0.1)
Impact on profit before tax (0.3) -
Impact on net debt 1.9 -
16. Risks and uncertainties
Like many other international businesses the Group is exposed to a number of
risks and uncertainties which might have a material effect on its financial
performance. These include:
Fluctuations in foreign currency
The Group has an exposure to foreign currency fluctuations. This could lead to
material adverse movements in reported earnings.
Dependence on key personnel
The future success of the Group is substantially dependent on the continued
services and continuing contributions of its Directors, senior management and
other key personnel.
Loss of key customers/suppliers
The Group is dependent on retaining its key customers and suppliers. However,
for the six months ended 30 June 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.
Information Technology Systems
The business of the Group relies to a significant extent on information
technology systems used in the daily operations of its operating subsidiaries.
Any failure or impairment of those systems or any inability to transfer data
onto any new systems introduced could cause a loss of business and/or damage to
the reputation of the Group together with significant remedial costs.
Risks relating to taxation of the Group
The Group is exposed to corporation tax payable in many jurisdictions. The
effective tax rate of the Group is affected by where its profits fall
geographically. The Group effective tax rate could therefore fluctuate over
time. This could have an impact on earnings and potentially its share price.
Further, the Group's tax position includes judgments about past and future
events and relies on estimates and assumptions.
17. Directors' responsibility statement
The interim financial statements were approved by the board of directors on 1
August 2011.
The directors confirm that to the best of their knowledge that:
* This unaudited condensed financial information has been prepared in
accordance with IAS 34 "Interim Reporting" as adopted by the European
Union; and
* The interim management report includes a fair view of the information
required by DTR 4.2.7 (indication of important events during the first six
months and description of principal risks and uncertainties for the
remaining six months of the year) and DTR 4.2.8 (disclosure of related
party transactions and changes therein).
The directors of XP Power Limited are as listed in the Company's 2010 Annual
Report.
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