Half-yearly Report
2 August 2010
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2010
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 2010.
Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Highlights
Revenue £40.7m £33.1m + 23%
Turnover
Gross profit £19.0m £14.9m + 27%
Gross margin 46.7% 45.0% +1.7% points
Operating margin 18.9% 13.0% + 5.9% points
Adjusted (*) profit before tax £7.3m £3.8m + 92%
Adjusted (*) profit after tax £5.9m £3.5m + 69%
Diluted earnings per share 31.1p 18.6p + 67%
adjusted (*) (see Note 11)
Interim dividend per share (see 13.0p 10.0p + 30%
Note 10)
(*) Adjusted for amortisation of intangibles associated with acquisitions of £
0.1 million (2009: £0.2 million)
* Continued evolution of the Group to an own brand/own manufactured business
model delivers a very strong result for the period which sets new records
for revenue, gross margins and earnings per share.
* 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.
* Broad recovery now evident in core Technology, Medical and Industrial
end-user markets.
* Increased gross margins of 46.7% (2009: 45.0%) driven by continued
expansion of in-house developed, XP brand products, which now represent 90%
of revenues (2009: 83%).
* Production volumes at Chinese facility now double those of 2009 and
approaching 50% of capacity, triggering plans for second facility in
Vietnam, on land acquired in 2008.
* Net debt reduced to £19 million at 30 June 2010 (2009: £25 million).
* Current trading remains robust - new program wins underpin prospects in the
second half and beyond.
Larry Tracey, Executive Chairman, commented:
"Our long term strategy of investing in the development and manufacture of our
own products has enabled XP to produce excellent financial results in the first
half of 2010, which set new records in terms of revenue, gross margins and
earnings per share. We entered the second half with record order books and new
business secured to date should produce improved revenue in the second half as
customer orders enter production, underpinning our confidence in prospects for
the full year. We are working hard to ensure that in 2011 and beyond we
continue to improve value to our customers and therefore our shareholders".
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/Ged Brumby
Note to editors
XP designs and manufactures power controllers, the essential hardware component
in every piece of electrical equipment that converts the power from the
electricity grid into the right form for the 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
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2010
CHAIRMAN'S STATEMENT
Overview
The trading environment in the first half has been buoyant. Our long term
strategy of investing in the development of our own products has enabled XP to
weather the economic storm of the last two years and produce excellent
financial results in the first half of 2010, which set new records in terms of
revenue, gross margins and earnings per share.
Further, significant new product introductions 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 take market share.
This strong performance has enabled the Group to reduce net debt further to £19
million at 30 June 2010 compared to £25 million at 30 June 2009. Using the
exchange rates prevailing at 30 June 2009, net debt at 30 June 2010 would have
been £17 million.
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. The increasing importance of energy
efficiency, for both environmental and economic reasons, the necessity for ever
smaller products, the accelerating rate of technological change and the
increasing proliferation of electronic equipment, all underpin the strength of
medium term demand for XP Power's products.
Revenue growth is being driven from the long term investment we have made in
building a broad portfolio of leading edge products. Revenues for the period
were up 23% (28% in constant currency) to £40.7 million compared with £33.1
million in the same period a year ago. Improving demand for the capital
equipment that our products power has been reasonably broad based as the
economic recovery has taken hold. In North America this has been most
pronounced in Technology. In Europe all three sectors have grown with
Industrial leading the field. In Asia all three sectors have grown, led by the
Technology segment.
For the six months ended 30 June 2010, 46% of our revenues were generated from
Industrial (2009: 49%), 26% from Healthcare (2009: 29%) and 28% from Technology
(2009: 22%).
The Group's customer base remains highly diversified. The largest customer was
4% of our 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 and manufactured product has increased, so too have our gross margins.
The 46.7% gross margin achieved in the first half of 2010 is a record (2009:
45.0%). As less than half our revenue at present is both own design and
manufactured there remains plenty of scope for further improvements.
Product Development
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.
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 power control intellect of a
multi-disciplined team of some 200 engineers. This is the essence of the value
we add for our customers.
We launched 14 new product families in the first half of 2010. 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. Product development
spending increased 33% from £1.2 million in the first half of 2009 to £1.6
million in the first half of 2010.
Larger customers are also keen to reduce the number of vendors they deal with
and XP Power's broad product offering, excellent global engineering support and
in-house manufacturing capability make us an ideal candidate as a preferred
supplier.
Supply Chain Dynamics
The decision of some component manufacturers to significantly reduce their
capacity during the recession led to the supply chain for many electronic
components becoming very thin as the recovery commenced, with lead times for
many components - particularly active components and certain capacitors -
increasing dramatically and shortages becoming common. We anticipated this
dynamic which has occurred during other recoveries and acted early to
significantly increase our safety inventories of critical components.
Inventories increased from £10.7 million at the 2009 year end to £15.2 million
at 30 June 2010, with £2.6 million of this increase due to higher safety
inventories of critical components.
Manufacturing
XP Power's products frequently power critical applications and our key
customers demand the ultimate in quality control to ensure reliability for the
life of their equipment. In 2005 the Group recognised an opportunity to take
direct control of its manufacturing activities to strictly manage the
production processes and to reduce its product costs. The evolution of the
Group to this own brand/own manufactured business model is delivering both
higher margins and more rapid customer response times.
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 7 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 launch of the in-house manufacturing
facility was a major milestone in the Group's development and it is playing a
crucial role in driving revenue growth.
The Kunshan factory is now approaching 50% capacity utilisation due to the
increased demand for our latest products which are own manufactured. Output
from the factory is now more than double the volumes experienced in 2009. As
anticipated, we are therefore progressing plans to gain planning consent for an
additional factory in Vietnam to help meet future demand. In 2008 the Group
purchased land on the outskirts of Ho Chi Minh City, with sufficient space for
two new factories which would more than triple our existing production
capacity. We expect to break ground on the first of these new factories on this
site later this year. 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. Adding manufacturing capacity in Vietnam will also
help mitigate the rapid salary inflation in evidence in China as well as the
inevitable appreciation of the Chinese currency over time, although at present
these are a comparatively small constituent of our cost structure. We
anticipate that the more labour intensive manufacturing operations will be
transferred to the new facility in Vietnam within two years.
Capital requirements to expand our manufacturing capacity are very modest
compared to the returns. We expect the site preparation and first building cost
to be approximately $6.0 million and the initial equipment set to be
approximately $2.5 million.
Dividend
In April this year 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. Our strong financial performance and confidence in the Group's prospects
have enabled us to increase dividends for the first half by 30% to 13.0 pence
per share (2009: 10.0 pence per share).
The first quarterly payment of 6.0 pence per share was made on 6 July 2010. A
second quarterly dividend of 7 pence per share will be paid 12 October 2010 to
shareholders on the register at 10 September 2010. These first two quarterly
payments total 13.0 pence per share versus the interim dividend of 10.0 pence
per share paid for the equivalent period in 2009.
A third quarterly dividend will be paid in January 2011 and a final dividend in
April 2011.
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
enormous commercial sense as countries legislate to reduce power wastage,
improve recyclability of manufactured goods and ban the use of harmful
chemicals.
I am therefore pleased to announce that XP Power has been accepted as an
Applicant 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.
In summary, XP Power is on a mission to develop smaller products that waste
less energy, consume less physical material and avoid hazardous substances. I
am confident that these initiatives will not only benefit the environment but
will help us grow our business and increase the value of our Company.
Corporate Governance
The Board has recently reviewed the areas where the Company is not fully
compliant with the Combined Code on Corporate Governance. In accordance with
the Listing Rules these areas are set out in the Corporate Governance Report
contained with the Company's 2009 Annual Report. Action is being taken such
that XP Power expects to be fully compliant with the Combined Code before the
year end.
Outlook
Trading since the period end has continued to be robust, with sustained
momentum in customer orders and production volumes. We entered the second half
with record order books and new business secured to date should produce
improved revenue in the second half 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 2010 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
2 August 2010
XP Power Limited
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2010
£ Millions Note Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Revenue 7 40.7 33.1
Cost of sales 8 (21.7) (18.2)
Gross profit 19.0 14.9
Operating expenses 8 (11.5) (10.6)
Other operating income 8 0.2 -
Operating profit 7.7 4.3
Finance cost 8 (0.5) (0.7)
Profit before taxation 7 7.2 3.6
Tax on profit 9 (1.3) (0.3)
Net profit 5.9 3.3
Other comprehensive income:
Fair value gains/(losses) on cash 0.8 (1.3)
flow hedges
Exchange differences on translation (0.7) 1.3
of foreign operations
Other comprehensive income, net of 0.1 -
tax
Total comprehensive income 6.0 3.3
Profit attributable to:
- equity holders of the company 5.8 3.3
- non-controlling interest 0.1 -
5.9 3.3
Total comprehensive income
attributable to:
- equity holders of the company 5.9 3.3
- non-controlling interest 0.1 -
6.0 3.3
Earnings per share for profit from Pence per Pence per
continuing operations attributable
to equity holders of the Company Share Share
Basic 11 30.8 17.6
Diluted 11 30.6 17.5
XP Power Limited
Consolidated Balance Sheet
At 30 June 2010
£ Millions Note At 30 At 31 At 30
June 2010 December 2009 June 2009
(Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents 7 2.9 4.0 1.8
Derivative financial instruments 7 1.0 - -
Trade and other receivables 7 13.3 11.0 10.0
Other current assets 7 1.4 1.2 1.2
Inventories 6, 7 15.2 10.7 13.6
Total current assets 33.8 26.9 26.6
Non-current assets
Interests in associates 0.1 0.1 0.1
Property, plant and equipment 7.9 7.1 6.8
Goodwill 7 31.0 31.0 30.0
Other intangible assets 12 4.9 4.5 4.0
ESOP loans to employees 2.6 2.6 2.7
Deferred income tax assets 7 0.4 0.3 0.1
Total non-current assets 46.9 45.6 43.7
Total assets 80.7 72.5 70.3
Liabilities
Current liabilities
Trade and other payables 7 14.0 9.1 6.6
Current income tax liabilities 7 2.9 2.5 2.8
Derivative financial instruments 7 0.3 0.3 0.3
Bank loans and overdraft 14 4.0 3.9 6.5
Total current liabilities 21.2 15.8 16.2
Non-current liabilities
Borrowings 14 18.1 18.8 20.3
Deferred income tax liabilities 7 1.7 1.8 1.6
Provision for other liabilities 7 3.7 3.6 2.0
and charges
Total non-current liabilities 23.5 24.2 23.9
Total liabilities 44.7 40.0 40.1
NET ASSETS 36.0 32.5 30.2
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 (0.9) (0.9) (0.8)
Hedging reserve 0.6 (0.2) (0.3)
Translation reserve (8.1) (7.4) (7.2)
Retained earnings 16.8 13.3 10.9
35.8 32.2 30.0
Non-controlling interest 0.2 0.3 0.2
Total equity 36.0 32.5 30.2
XP Power Limited
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2010 (Unaudited)
Share Company Merger Hedging Translation Retained Total Non-controlling Total
capital treasury reserve reserve reserve earnings attributable interest Equity
shares to equity
holders of
the parents
Balance at 1 27.2 (0.8) 0.2 1.0 (8.5) 9.7 28.8 0.2 29.0
January 2009
Dividends - - - - - (2.1) (2.1) - (2.1)
paid
Total - - - (1.3) 1.3 3.3 3.3 - 3.3
comprehensive
income for
the period
Balance at 30 27.2 (0.8) 0.2 (0.3) (7.2) 10.9 30.0 0.2 30.2
June 2009
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
XP Power Limited
Consolidated Cash Flow Statement
For the six months ended 30 June 2010
£ Millions Note Six months Six months
ended ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Cash flows from operating activities
Total profit 5.9 3.3
Adjustments for
* Income tax expense 1.3 0.3
* Amortisation and depreciation 1.1 0.9
* Finance cost 0.5 0.7
* Gain on fair valuation of derivative (0.1) (0.1)
financial instruments
* Research and development expense 1.2 1.0
Change in the working capital
* Inventories (4.5) 3.9
* Trade and other receivables (2.5) 2.7
* Trade and other payables 4.8 (5.6)
* Income tax paid (1.3) (0.3)
Net cash provided by operating 13 6.4 6.8
activities
Cash flows from investing activities
Purchases and construction of property, (1.0) (0.8)
plant and equipment
Research and development expenditure 8 (2.1) (1.8)
Net cash used in investing activities (3.1) (2.6)
Cash flows from financing activities
Repayment of borrowings (0.4) (1.8)
Interest paid (0.4) (0.7)
Dividends paid to equity holders of the (2.3) (2.1)
Company
Dividends paid to non-controlling (0.2) -
interest
Net cash used in financing activities (3.3) (4.6)
Effects of currency translation (1.1) 1.2
Net increase/(decrease) in cash and cash (1.1) 0.8
equivalents
Cash and cash equivalents at start of 3.9 (3.9)
period
Effects of currency translation on cash 0.1 0.2
and cash equivalents
Cash and cash equivalents at the end of 13 2.9 (2.9)
the period
XP Power Limited
Notes to the Interim Results for the six months ended 30 June 2010
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 2010 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
2009 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 IAS 39, "Financial Instruments: Recognition and
Measurement".
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 2009.
On 1 January 2010, the Group adopted the following standards that are mandatory
for application from that date:
IAS 1 (Amendment) Presentation of Financial Statements
IFRS 2 (Amendment) Group cash-settled and share-based payment transactions
IFRS 3 (revised) Business combinations
IFRS 5 (Amendment) Measurement of non-current assets (or disposal groups)
classified as held-for-sale
IFRS 9 Financial Instruments
IFRIC 17 Distribution of non-cash assets to owners
IAS 27 (revised) Consolidated and Separate Financial Statements
IAS 38 (Amendment) Intangible Assets
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 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, net assets, revenue and total group profit before taxation by
geographical region is set out below.
£ Millions Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Revenue
Europe 19.2 16.1
USA 19.6 15.8
Asia 1.9 1.2
Total revenue 40.7 33.1
7. Segmented analysis (continued)
Reconciliation of segment results to profit before tax:
£ Millions Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Europe 3.1 2.1
USA 3.6 2.0
Asia - (0.3)
Segment result 6.7 3.8
Corporate recovery from operating 2.6 1.7
segment
Research and development cost (1.6) (1.2)
Finance income and cost (0.5) (0.7)
Profit before taxation 7.2 3.6
Tax (1.3) (0.3)
Total profit 5.9 3.3
The Group's three business segments operate in the following countries:
£ Millions Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
United States 19.6 15.8
United Kingdom 10.5 8.4
Singapore 1.9 1.2
Germany 3.2 2.4
Switzerland 1.8 1.8
Other countries 3.7 3.5
Total revenue 40.7 33.1
£ Millions At June 2010 (Unaudited) At June 2009 (Unaudited)
Europe USA Asia Total Europe USA Asia Total
Other information
Capital additions 0.2 - 0.8 1.0 - - 0.8 0.8
Depreciation 0.2 0.1 0.3 0.6 0.2 0.1 0.2 0.5
Intangible additions - 0.6 0.3 0.9 - 0.8 - 0.8
Amortisation 0.1 0.4 - 0.5 0.2 0.2 - 0.4
Balance Sheet
Goodwill 10.9 19.4 0.7 31.0 9.3 19.6 1.1 30.0
Other non-current 4.6 5.2 5.7 15.5 5.0 4.2 4.4 13.6
assets
Inventories 1.5 5.0 8.7 15.2 1.6 6.0 6.0 13.6
Trade receivables 6.2 6.0 1.1 13.3 5.0 4.4 0.6 10.0
Derivative financial - - 1.0 1.0 - - - -
instruments
Other current assets 0.3 0.3 0.8 1.4 0.5 0.3 0.4 1.2
Cash and cash 0.9 2.0 - 2.9 1.2 0.2 0.4 1.8
equivalents
Segment assets 24.4 37.9 18.0 80.3 22.6 34.7 12.9 70.2
Unallocated deferred - - - 0.4 - - - 0.1
tax assets
Consolidated total - - - 80.7 - - - 70.3
assets
7. Segmented analysis (continued)
£ Millions At June 2010 (Unaudited) At June 2009 (Unaudited)
Europe USA Asia Total Europe USA Asia Total
Trade and other (2.5) (1.7) (9.8) (14.0) (1.7) (1.4) (3.5) (6.6)
payables
Derivative financial - (0.3) - (0.3) - (0.2) (0.1) (0.3)
instruments
Provision for other (3.7) - - (3.7) (2.0) - - (2.0)
liabilities and
charges
Segment liabilities (6.2) (2.0) (9.8) (18.0) (3.7) (1.6) (3.6) (8.9)
Unallocated - - - (22.1) - - - (26.8)
corporate
liabilities
Unallocated deferred - - - (4.6) - - - (4.4)
and current tax
liabilities
Consolidated total - - - (44.7) - - - (40.1)
liabilities
Operating net assets are defined as net assets adjusted for net borrowings.
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Net assets 36.0 30.2
Net debts 19.2 25.0
Total operating net assets 55.2 55.2
8. Expenses by nature
£ Millions Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Profit for the period is after charging/
(crediting):
Gross research and development expense 2.1 1.8
Development expense capitalised (0.9) (0.8)
Amortisation of development expense 0.4 0.2
capitalised
Net research and development expense 1.6 1.2
Amortisation of other intangible assets 0.1 0.2
Depreciation of property, plant and 0.6 0.5
equipment
Foreign exchange loss - 0.2
Foreign exchange (gains) on forward (0.1) (0.1)
contracts
Cost of inventories recognised as expense 21.7 18.2
Charge for doubtful debts - (0.1)
Fees paid to auditors:
- Audit 0.2 0.2
All other charges 9.4 9.2
Total 33.5 29.5
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 2010 is 17% (2009: 9%). The 2009 rate is reduced by certain factors some of
which will not recur in the future.
£ Millions Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Singapore 0.4 0.2
Other overseas taxation 0.9 0.1
Total taxation 1.3 0.3
10. Dividends
Amounts recognised as distributions to equity holders in the period:
Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Pence per £ Millions Pence £ Millions
share per
share
Prior year final dividend 12.0 2.3 11.0 2.1
paid
The dividend paid recognised in the interim financial statements relates to the
2009 year-end dividend.
Six months ended Six months ended
30 June 2010 30 June 2009
(Unaudited) (Unaudited)
Pence per £ Millions Pence £ Millions
share per
share
Proposed interim dividend 13.0 2.4 10.0 1.9
On 12 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 quarterly payment of 6 pence per share was made on 6 July 2010
to shareholders on the register at 11 June 2010.
A second quarterly dividend of 7 pence per share will be paid 12 October 2010
to shareholders on the register at 10 September 2010.
A third quarterly dividend will be paid in January 2011 and a final dividend in
April 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 2010 30 June 2009
(Unaudited) (Unaudited)
Earnings
Earnings for the purposes of basic and 5.8 3.3
diluted earnings per share (profit for the
period attributable to equity shareholders
of the company)
Amortisation of intangibles associated with 0.1 0.2
acquisitions
Earnings for adjusted earnings per share 5.9 3.5
Number of shares '000 `000
Weighted average number of shares for the 18,803 18,795
purposes of basic earnings per share
(thousands)
Effect of potentially dilutive share options 150 22
(thousands)
Weighted average number of shares for the 18,953 18,817
purposes of dilutive earnings per share
(thousands)
Earnings per share from operations
Basic 30.8p 17.6p
Diluted 30.6p 17.5p
Diluted adjusted 31.1p 18.6p
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 2010 30 June 2009
(Unaudited) (Unaudited)
Cash and bank balances 2.9 1.8
Less: Bank overdrafts - (4.7)
Cash and cash equivalents per 2.9 (2.9)
consolidated cash flow statement
Reconciliation to free cash flow:
Net cash inflow from operating 5.2 5.8
activities
Development expenses capitalised (0.9) (0.8)
Net interest expense (0.4) (0.7)
Free cash flow 3.9 4.3
14. Borrowings, bank loans and overdraft
£ Millions 30 June 2010 31 December 2009 30 June 2009
(Unaudited) (Unaudited)
Non-Current 18.1 18.8 20.3
Current 4.0 3.9 6.5
Total 22.1 22.7 26.8
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
2010 2009 2010 2009 2009
Change
Average Average Period end Period end Period end
USD/GBP 1.54 1.46 5.5% 1.49 1.60 1.63
EUR/GBP 1.14 1.10 3.6% 1.22 1.11 1.17
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 2009 to the first half of 2010 are summarised as
follows:
£ Millions USD EUR
Impact on revenues (1.6) (0.1)
Impact on profit before tax (0.3) -
Impact on net debt (1.7) -
16. Directors' responsibility statement
The interim financial statements were approved by the board of directors on 2
August 2010.
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 month 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 2009 Annual
Report.
ND
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