Half-yearly Report
29 July 2013
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2013
XP, a world leading developer and manufacturer of critical power control components
for the electronics industry, today announces its interim results for the six-month
period ended 30 June 2013.
Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Highlights
Revenue £49.0m £46.5m
Gross profit £23.8m £21.8m
Gross margin 48.6% 46.9%
Operating margin 21.6% 21.3%
Profit before tax £10.4m £9.6m
Profit after tax £8.0m £7.7m
Diluted earnings per share (see Note 9) 41.8p 40.4p
Interim dividend per share (see Note 8) 23.0p 21.0p
Revenue increased by 5% to £49.0 million (+4% in constant currency)
Gross margin increased to 48.6% (2012: 46.9%) due to higher factory loading and
reduction of Vietnam start-up costs together with improved product mix
New production facility in Vietnam breaking even from June 2013
Own-design XP products now 62% of revenues (2012: 61%)
Order intake for first half of 2013 flat year on year but sequential
improvement of 7% over the second half of 2012.
New product introductions and the development of an industry leading in-house
manufacturing capability continue to generate new program wins to drive future
growth and market share gains
Larry Tracey, Chairman, commented:
"We are encouraged by the progress we are making despite the continued
challenging global environment for capital spending. Our first half
performance, particularly in the healthcare and industrial markets, was
pleasing and we believe that we are continuing to take market share."
"Global capital goods markets remain subdued and we have yet to see any sign of
improvement in the outlook but our greater penetration of a Blue Chip customer
base and significant design win success bode well for the future of XP."
Enquiries:
XP Power
Duncan Penny, Chief Executive +44(0)7776 178018
Jonathan Rhodes, Finance Director +44(0)7500 944614
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
29 July 2013
XP Power Limited
("XP" or "the Group")
Interim Results for the six months ended 30 June 2013
CHAIRMAN'S STATEMENT
Overview
XP Power made encouraging progress during the first half, despite the global
environment for capital spending remaining challenging throughout the period.
The Group continued to benefit from its well-established strategy of moving up
the value chain and establishing its own manufacturing capability, resulting in
further increases in market share.
Revenues increased by 5% over the prior year and our new Vietnam magnetics
manufacturing facility has benefited from further volume growth and is now
breaking even. These factors, together with better factory loading and an
improved product mix, led to an increase in our gross margins to 48.6% from
46.9% in the first half of 2012.
Strategy
The Group has applied a consistent strategy of moving up the value chain,
powered by:
Development of a strong pipeline of leading-edge products
Provision of industry-leading levels of service and support
Targeting new key accounts and increasing the penetration of existing key
accounts
An established pipeline of new class-leading "Green" products which operate at
high efficiency
Enhancing its value proposition to customers by the addition of a manufacturing
capability
Increasing the proportion of high margin own designed/manufactured products
within its revenue mix
Our value proposition to customers is to reduce their overall costs of design,
manufacture and operation. We achieve this by providing excellent sales
engineering support and producing new products that consume less power, take up
less space, reduce installation times and which are highly reliable in service.
Trading and Financial Review
XP Power supplies power control solutions to original equipment manufacturers
("OEMs") who supply the healthcare, industrial and technology markets with high
value, high reliability 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, have all set a strong
foundation for medium term growth in demand for XP Power's products.
Revenues for the period increased by 5% (4% in constant currency) to £49.0
million, compared with £46.5 million in the same period a year ago. Revenues
in Europe were £22.1 million up 9%; those in North America were £23.7 million,
up 8%, and those in Asia were £3.2 million, down 26% largely due to a
particular customer program coming to the end of its life as anticipated. As we
sell to Original Equipment Manufacturers who in turn sell to their end
customers it is difficult to accurately assess whether this geographic split is
representative of the ultimate end destination of our equipment. However, we
believe a significant proportion of the equipment we sell into the industrial
sector is likely to end up in emerging markets.
In terms of sector split revenues from healthcare grew 14% to £14.5 million as
new program wins from larger accounts where we have gained approved or
preferred supplier status began to enter production. Industrial also showed
some growth based on new program wins and grew 11% to £23.5 million. The
technology sector proved to be the most challenging and declined 14% to £11.0
million. In terms of overall revenue for the first half of 2013 healthcare
represented 30% (2012: 27%), industrial 48% (2012: 45%) and technology 22%
(2012: 27%).
Our customer base continues to be highly diversified with the largest customer
accounting for only 4% of revenue, spread over 90 different programs/part
numbers.
Margins
Gross margin in the first half of 2013 increased to 48.6% (2012: 46.9%), with
improved factory loading at our Kunshan facility contributing an improvement of
£0.2 million over the same period a year ago. Losses at the new Vietnamese
manufacturing facility reduced the gross margin by approximately £0.2 million
in the first half (2012: losses of £0.3 million) but the facility has reached
breakeven in June this year. The remainder of the increase in gross margin is
due to improvements in product mix.
Operating expenses were £13.3 million (2012: £11.9 million). The increase came
from a number of different areas, including the effects of currency
translation, but product development expenses including amortisation were the
most significant contributor, increasing by £0.4 million from the same period
in 2012.
Despite challenging market conditions we continue to achieve excellent
operating margins of 21.6% (2012: 21.3%) highlighting the strength of our
business model. We expect further improvement in this metric when market
conditions improve.
Financial Position
Strong margins and modest capital requirements have resulted in a continued
strong cash flow and a reduction in net debt. Net debt reduced significantly to
£8.5 million at 30 June 2013 compared to £15.0 million at 30 June 2012. Using
the exchange rates prevailing at 30 June 2012, net debt at 30 June 2013 would
have been £8.1 million.
Product Development
New products are fundamental to driving our revenue growth. The broader our
product offering, the more opportunity we have to increase our revenues by
expanding our available market. As expected, the number of new product families
introduced over the last three years is yet to have a significant impact on our
revenues, given the time lag from launch to them entering production. This is
due to the lengthy design-in cycles required by customers to qualify the power
converter in their equipment and then gain the necessary safety agency
approvals.
We launched 17 new product families in the first half of 2013 (2012: 10). 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, consume less raw material and incorporate
low stand-by power operation. Gross product development spending increased by
4% to £2.8 million in the first half from £2.7 million in the first half of
2012.
With larger customers continuing to reduce the number of vendors they deal
with, XP Power's broad product offering, excellent global engineering support,
in-house manufacturing capability and industry-leading environmental
credentials leave the Group well-placed to secure further preferred supplier
agreements.
Manufacturing
XP Power's move into manufacturing in 2006 has been instrumental in enabling
the Group to win approved and preferred supplier status with new Blue Chip
customers, who demand that their suppliers have complete control over their
supply chain and product manufacture to ensure the highest levels of quality.
In June 2009, production commenced at our first manufacturing facility at
Kunshan, close to Shanghai, China. The facility, which is certified under
the ISO14001 Environmental Management Standard, delivers manufacturing
capabilities which match or exceed the best of our competitors. The number
of customer audits from key accounts has steadily increased over recent
years and all of these audits have been successful.
Our Vietnamese manufacturing facility, located in Ho Chi Minh City, began
production of its first magnetic components during March 2012 and is currently
producing approximately half of the monthly requirement for magnetic components
at our Chinese factory. The quality of the Vietnamese output has been very
pleasing surpassing that of our third party suppliers.
Producing our own magnetic components in Vietnam is helping us mitigate the
continued rise of Chinese labour costs and the appreciation of the Chinese
Renminbi. In addition, extending vertical integration to the critical magnetic
components used in power converters is seen as an additional value proposition
by many of our customers, notably in the healthcare and high reliability
industrial sectors.
Dividend
Since April 2010 the Company has been making quarterly dividend payments. Our
strong cash flow and confidence in the Group's prospects have enabled us to
increase total dividends for the first half by 10% to 23.0 pence per share
(2012: 21.0 pence per share).
The first quarterly payment of 11 pence per share was made on 10 July 2013. A
second quarterly dividend of 12 pence per share will be paid on 10 October 2013
to shareholders on the register at 6 September 2013.
Dividend growth over the past ten years has exceeded a compound average growth
rate of 15%.
Environmental Impact and "Green XP Power" products
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, as importantly, 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.
We have developed a class leading portfolio of green products with efficiencies
up to 95% and many of these products also have low stand-by power (a feature to
reduce the power consumed while the end equipment is not operational but in
stand-by mode). We now apply our own "Green XP Power" logo to the products we
designate ultra-high efficiency. During the first half of 2013, 11% of our
revenues were generated by "Green XP Power" products compared to 6% in 2012, 5%
in 2011 and 3% in 2010. At present, the uptake of these products by customers
is primarily driven by their improved reliability and the ability to dispense
with mechanical fans to dissipate waste heat, rather than the fact that they
consume less energy in operation. However, we expect this to change as lower
energy consumption becomes a higher priority to end users of capital equipment
and more legislation is introduced.
Outlook
Global capital goods markets remain subdued and we have yet to see any sign of
improvement in the outlook. Against this backdrop, our first half performance,
particularly in the healthcare and industrial markets, was encouraging, and we
believe that we are continuing to take market share.
A broad, up to date product portfolio and the development of an industry
leading in-house manufacturing capability are at the core of our strategy and,
when combined with excellent service and support, are leading to continued new
program wins which should drive our future growth. This greater penetration of
a Blue Chip customer base and significant design win success bode well for the
future of XP.
Larry Tracey
Chairman
29 July 2013
XP Power Limited
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2013
£ Millions Note Six months Six months
ended ended
30 June 30 June
2013 2012
(Unaudited) (Unaudited)
Revenue 5 49.0 46.5
Cost of sales 6 (25.2) (24.7)
Gross profit 23.8 21.8
Operating expenses 6 (13.3) (11.9)
Other operating income 6 0.1 -
Operating profit 10.6 9.9
Finance cost 6 (0.2) (0.3)
Profit before income tax 5 10.4 9.6
Income tax expense 7 (2.3) (1.8)
Net profit 8.1 7.8
Other comprehensive income:
Fair value gains/(losses) on cash 0.1 0.1
flow hedges
Exchange differences on translation
of foreign operations
1.3 (0.1)
Other comprehensive income, net of 1.4 -
tax
Total comprehensive income 9.5 7.8
Profit attributable to:
- owners of the parent 8.0 7.7
- non-controlling interest 0.1 0.1
8.1 7.8
Total comprehensive income
attributable to:
- owners of the parent 9.4 7.7
- non-controlling interest 0.1 0.1
9.5 7.8
Earnings per share attributable to Pence per Pence per
owners of the parent Share Share
Basic 9 42.1 40.6
Diluted 9 41.8 40.4
XP Power Limited
Consolidated Balance Sheet
At 30 June 2013
£ Millions Note At 30 At 31 At 30
June 2013 December June 2012
2012
(Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents 11 4.2 4.1 4.5
Trade receivables 16.1 14.2 14.6
Other current assets 1.0 1.2 1.5
Inventories 20.5 19.8 22.0
Total current assets 41.8 39.3 42.6
Non-current assets
Interests in associates - - 0.1
Property, plant and equipment 13.8 13.2 14.0
Goodwill 30.6 30.5 31.4
Intangible assets 10 8.0 7.6 7.1
ESOP loans to employees 1.1 1.2 1.2
Deferred income tax assets 0.3 0.3 0.3
Total non-current assets 53.8 52.8 54.1
Total assets 95.6 92.1 96.7
Liabilities
Current liabilities
Trade and other payables 12.5 11.1 13.3
Current income tax liabilities 1.4 1.6 0.9
Derivative financial instruments 0.3 0.2 -
Borrowings 12 6.8 7.3 10.0
Total current liabilities 21.0 20.2 24.2
Non-current liabilities
Borrowings 12 5.9 7.4 9.5
Deferred income tax liabilities 1.8 1.7 2.1
Provision for deferred contingent
consideration
1.5 1.5 2.2
Total non-current liabilities 9.2 10.6 13.8
Total liabilities 30.2 30.8 38.0
NET ASSETS 65.4 61.3 58.7
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 (1.1) (1.2) (0.8)
Share option reserve 0.1 - -
Hedging reserve (0.1) (0.2) 0.1
Translation reserve (6.4) (7.7) (7.2)
Retained earnings 45.2 42.8 39.1
65.1 61.1 58.6
Non-controlling interest 0.3 0.2 0.1
Total equity 65.4 61.3 58.7
XP Power Limited
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2013 (Unaudited)
£ Millions
Attributable to equity holders of the company
Share Company treasury Share Merger Hedging Translation Retained Total Non-controlling Total
capital shares option reserve reserve reserve earnings interest Equity
reserve
Balance at 1 (1.0)
January 2012 27.2 - 0.2 - (7.1) 36.3 55.6 0.2 55.8
Sale of
treasury
shares - 0.2 - - - - - 0.2 - 0.2
Dividends
paid - - - - - - (4.9) (4.9) (0.2) (5.1)
Total
comprehensive
income for
the period - - - - 0.1 (0.1) 7.7 7.7 0.1 7.8
Balance at 30
June 2012 27.2 (0.8) - 0.2 0.1 (7.2) 39.1 58.6 0.1 58.7
Balance at 1
January 2013 27.2 (1.2) - 0.2 (0.2) (7.7) 42.8 61.1 0.2 61.3
Sale of
treasury
shares - 0.1 - - - - (0.1) - - -
Employee
share option
scheme - - 0.1 - - - - 0.1 - 0.1
Dividends
paid - - - - - - (5.5) (5.5) - (5.5)
Total
comprehensive
income for
the period - - - - 0.1 1.3 8.0 9.4 0.1 9.5
Balance at 30
June 2013 27.2 (1.1) 0.1 0.2 (0.1) (6.4) 45.2 65.1 0.3 65.4
XP Power Limited
Consolidated Statement of Cash Flows
For the six months ended 30 June 2013
£ Millions Note Six months Six months
ended ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Cash flows from operating activities
Total profit 8.1 7.8
Adjustments for
Income tax expense 2.3 1.8
Amortisation and depreciation 1.3 1.2
Finance cost 0.2 0.3
Loss/(gain) on fair valuation of derivative
financial instruments
0.2 (0.1)
Unrealised currency translation losses/(gain)
0.6 (0.1)
Change in the working capital
Inventories (0.7) -
Trade and other receivables (1.7) 2.5
Trade and other payables 1.5 1.0
Income tax paid (2.5) (2.0)
Net cash provided by operating activities 11 9.3 12.4
Cash flows from investing activities
Acquisition of a subsidiary, net of cash acquired - (1.0)
Purchases and construction of property, plant and
equipment
(0.5) (2.2)
Research and development expenditure capitalised 6 (1.0) (1.2)
Proceeds from disposal of property, plant and - 0.4
equipment
ESOP loan repaid 0.1 0.4
Net cash used in investing activities (1.4) (3.6)
Cash flows from financing activities
Repayment of borrowings (1.2) (2.0)
Sale/(purchase) of treasury shares by ESOP 0.1 0.2
Interest paid (0.2) (0.3)
Dividends paid to equity holders of the Company (5.5) (4.9)
Dividends paid to non-controlling interest - (0.2)
Net cash used in financing activities (6.8) (7.2)
Net increase/(decrease) in cash and cash 1.1 1.6
equivalents
Cash and cash equivalents at start of period 0.5 (3.3)
Effects of currency translation on cash and cash
equivalents
(0.2) -
Cash and cash equivalents at the end of the period 11 1.4 (1.7)
Reconciliation of changes in cash and cash equivalents to movements in net debt
Net increase/(decrease) in cash and cash equivalents 1.1 1.6
Repayment of borrowings 1.2 2.0
Effects on currency translation (0.2) -
Movement in net debt 2.1 3.6
Net debt at start of period (10.6) (18.6)
Net debt at end of period (8.5) (15.0)
XP Power Limited
Notes to the Interim Results for the six months ended 30 June 2013
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 2013 have 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
2012 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 2012.
5. 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 2013 (Unaudited) 30 June 2012 (Unaudited)
Revenue
Asia 3.2 4.3
Europe 22.1 20.3
North America 23.7 21.9
Total revenue 49.0 46.5
5. Segmented analysis (continued)
£ Millions Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Total assets
Asia 30.1 30.9
Europe 26.0 26.3
North America 39.2 39.2
Segment assets 95.3 96.4
Unallocated deferred 0.3 0.3
tax
Total assets 95.6 96.7
Reconciliation of segment results to profit before tax:
£ Millions Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Asia 0.1 0.5
Europe 3.8 3.6
North America 6.0 5.2
Segment result 9.9 9.3
Corporate recovery from 1.2 2.6
operating segment
Research and development cost (0.5) (2.0)
Finance income and cost (0.2) (0.3)
Profit before taxation 10.4 9.6
Tax (2.3) (1.8)
Total profit 8.1 7.8
The Group's three business segments operate in the following countries:
£ Millions Six months ended Six months ended
30 June 2013 (Unaudited) 30 June 2012 (Unaudited)
United States 23.7 21.9
United Kingdom 11.9 11.0
Singapore 3.2 4.3
Germany 4.6 4.5
Switzerland 1.9 1.4
Other countries 3.7 3.4
Total revenue 49.0 46.5
6. Expenses by nature
£ Millions Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Profit for the period is after charging/
(crediting):
Amortisation of other intangible assets 0.6 0.5
Depreciation of property, plant and equipment 0.7 0.7
Foreign exchange loss 0.2 0.2
Foreign exchange (gains) on forward contracts (0.2) (0.1)
Purchase of inventories 23.3 23.5
Changes in inventories 0.7 0.1
Fees paid to auditors:
- Audit 0.2 0.2
- Other services - tax 0.1 0.1
All other charges 13.0 11.7
Total 38.6 36.9
Included in the above is net research and development expenditure as follows:
£ Millions Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Gross research and development expenditure 2.8 2.7
Development expenditure capitalised (1.0) (1.2)
Amortisation of development expenditure 0.6 0.5
capitalised
Net research and development expenditure 2.4 2.0
7. Taxation
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax expected for the full financial year. The estimated effective annual tax rate used for 2013 is 22% (2012: 19%).
£ Millions Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Singapore 0.6 0.6
Other overseas taxation 1.7 1.2
Total taxation 2.3 1.8
8. Dividends
Amounts recognised as distributions to equity holders of the Company in the period:
Six months ended Six months ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Pence per £ Pence per £
share Millions share Millions
Prior year 3rd quarter 12.0 2.3 11.0 2.1
dividend paid
Prior year final dividend 17.0 3.2 15.0 2.8
paid
Total 29.0 5.5 26.0 4.9
The dividends paid recognised in the interim financial statements relate to the third quarter and final dividends for 2012.
The first quarterly dividend of 11 pence per share was paid on 10 July 2013. A second quarterly dividend of 12 pence per share [2012: 11 pence] will be paid on 10 October 2013 to shareholders on the register at 6 September 2013.
9. 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 30 June
2013 2012
(Unaudited) (Unaudited)
Earnings
Earnings for the purposes of basic and diluted earnings
per share (profit for the period attributable to equity
shareholders of the company)
8.0 7.7
Earnings for adjusted earnings per share 8.0 7.7
Number of shares '000 '000
Weighted average number of shares for the purposes of basic
earnings per share (thousands) 18,993 18,977
Effect of potentially dilutive share options (thousands) 136 87
Weighted average number of shares for the purposes of dilutive
earnings per share (thousands) 19,129 19,063
Earnings per share from operations
Basic 42.1p 40.6p
Diluted 41.8p 40.4p
Diluted adjusted 41.8p 40.4p
10. 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.
11. 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 Six months
ended ended
30 June 2013 30 June 2012
(Unaudited) (Unaudited)
Cash and bank balances 4.2 4.5
Less: Bank overdrafts (2.8) (6.2)
Cash and cash equivalents per consolidated
cash flow statement
1.4 (1.7)
Reconciliation to free cash flow:
Net cash inflow from operating activities 9.3 12.5
Development expenses capitalised (1.0) (1.2)
Net interest expense (0.2) (0.3)
Free cash flow 8.1 11.0
12. Borrowings, bank loans and overdraft
£ Millions 30 June 2013 31 December 2012 30 June 2012
(Unaudited) (Unaudited)
Non-Current 5.9 7.4 9.5
Current 6.8 7.3 10.0
Total 12.7 14.7 19.5
13. 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
2013 2012 2013 2012 2012
Change
Average Average Period end Period end Period end
USD/ 1.55 1.57 -1.5% 1.52 1.63 1.57
GBP
EUR/ 1.18 1.21 -2.6% 1.17 1.23 1.24
GBP
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 2012 to the first half of 2013 are summarised as
follows:
£ Millions USD EUR
Impact on revenues 0.5 0.1
Impact on profit before tax 0.1 -
Impact on net debt (0.4) -
14. 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 2013, 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.
15. Directors' responsibility statement
The interim financial statements were approved by the board of directors on 29 July 2013.
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 2012 Annual Report.
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