Final Results

XP Power PLC 01 February 2005 XP Power plc ('XP' or 'the Group') Preliminary Results for the Year Ended 31 December 2004 XP Power, one of the world's leading providers of power supply solutions to the mid-tier of the electronics industry, today announces its Preliminary Results for the year ended 31 December 2004. FINANCIAL HIGHLIGHTS £ Millions Year ended Year ended 31 December 31 December Change 2004 2003 Profit and loss (page 7) Turnover 66.8 59.4 + 12% Gross margin 23.7 19.9 + 19% Gross margin % 35.5% 33.5% Profit before tax, amortisation of goodwill and profit on sale of own shares 6.5 3.6 + 81% Profit before tax 5.1 2.5 + 104% Cash flow (page 9) (Decrease)/increase in cash (3.6) 1.3 Free cash flow 3.4 4.3 Basic earnings per share 16.9p 7.0p + 141% Diluted earnings per share 16.4p 6.9p + 145% Diluted earnings per share adjusted for goodwill amortisation and profit on the sale of own shares 23.6p 12.4p + 90% Final dividend per share 8.0p 7.0p + 14% Total dividend per share 14.0p 12.0p + 17% KEY ACHIEVEMENTS • Diluted earnings per share adjusted for goodwill amortisation and profit on sale of own shares grew by 90% • Revenue growth of 12% (20% at constant US dollar exchange rates) • Gross margins improved by a further 2.0% points to 35.5% - the fifth year of successive improvement - driven by a further increase in own brand products in sales mix • Strong free cash flow (cash flow before acquisitions and disposals, dividend payments and financing) • Dividend to be increased by 17% to 14p per share Larry Tracey, Executive Chairman said: 'We are expecting our market to continue its growth in 2005 and XP's position is strong within our market. Whilst revenue growth is forecast to be skewed towards the second half of the year, improving margins and firm control of costs should enable earnings to improve throughout the year.' Enquiries: XP Power plc www.xppower.com Larry Tracey, Executive Chairman 0118 984 5515 James Peters, Deputy Chairman Duncan Penny, Chief Executive Weber Shandwick Square Mile 020 7067 0700 Kevin Smith/Nick Dibden Notes to editors: XP Power plc provides power supply solutions to the electronics industry. All electronic equipment needs a power supply. Power supplies convert the incoming AC supply into various levels of DC voltages to drive electronic components and sub-assemblies within the end user's equipment. XP Power segments its business into Communications, Defence and Avionics, Industrial and Medical. By servicing these markets XP Power provides investors with access to technology and industrial sectors of the North American and European electronics market. The market is highly fragmented and made up of a large number of small to medium sized Original Equipment Manufacturers who source standard and modified standard power supplies from several hundred power supply companies. For further information, please visit www.xppower.com XP Power plc ('XP' or 'the Group') Preliminary Results for the Year Ended 31 December 2004 CHAIRMAN'S STATEMENT Business Performance XP is moving from strength to strength. The recovery evident in our key markets early in 2004 continued into the second half, producing a strong performance for the year as a whole, with sales, profits and gross margin all advancing significantly ahead of the prior year. The resultant increase in the share price over the year culminated in XP joining the FTSE All Share Index in December 2004. Overall, the business delivered a 90% increase in earnings per share, adjusted for goodwill amortisation and the profit on the sale of own shares made in 2003, to 23.6p per share. Basic earnings per share increased to 16.9p from 7.0p in the prior year, an increase of 141% (refer to note 5 on page 12). This has been achieved as a result of our geographic expansion over the last few years and the continued increase in the proportion of our own intellectual property contained in the products we sell. Dividend The continued increase in profitability, together with strong free cash flow, has enabled us to increase the dividend payable to shareholders. We will be proposing a final dividend of 8 pence per share at the Annual General Meeting on 20 April 2005, making the total dividend for 2004 14 pence per share (2003: 12 pence per share), an increase of 17%. Strategy As we move into 2005 we will continue to develop the strategy we began to implement in 2000: • To have the largest and most technical sales force in the industry covering our target geographic markets of Europe and North America • To focus on our key customers in the communications, defence and avionics, industrial and medical sectors • To offer the largest array of power supply products from any one source to our customers by offering our own products alongside the products of our key third party partners • To expand the level of our own intellectual property in our product offering using our various design engineering teams across the world People Our success is a tribute to the professionalism of our people. We believe that our sales force is the best trained, most technical and the largest in our industry. Our design teams across the globe are producing world class products which are creating real excitement within our customer base. Behind these two teams, our operations people are delivering the backbone of the systems and processes that enable us to deliver genuine value to our customers. Outlook The improvement in capital equipment spending in 2004 is forecast by market analysts to continue through 2005, and since this capital equipment incorporates our products, we can expect to benefit from this trend. However, the weakness of the US Dollar reduces our reported growth when translated to Sterling. Our gross margins are expected to continue to improve as our own XP designed products grow as a proportion of our overall business. The benefits of geographic expansion in North America and Europe are also now bearing fruit. These factors should mean that we will grow earnings at a healthy rate in 2005 subject to any external economic shocks. Larry Tracey Executive Chairman OPERATIONAL REVIEW Financial In the year under review XP continued to develop and expand its portfolio of own brand products and increase its geographic coverage. As a result, we have achieved a further substantial improvement in earnings and strong free cash flow. Revenues increased 12% to £66.8 million (2003: £59.4 million). This performance was achieved against a backdrop of an average US Dollar to Sterling exchange rate for 2004 of approximately 1.81 which is some 12% weaker than the average rate in 2003. If the same US Dollar to Sterling exchange rates had prevailed in 2004 as they did in 2003, XP would have reported revenues approximately £4.7 million higher and underlying growth in revenues of 20%. Of the product shipped in 2004, 55% was our own XP brand, up from 49% in the same period a year ago. This increase was the primary factor contributing to a further 2.0% increase in gross margins to 35.5%. This is our fifth successive year of gross margin improvement and we expect to make further improvements in gross margin as a higher proportion of our products contain XP intellectual property. Operating expenses excluding goodwill amortisation (of £1.4 million; 2003: £1.5 million) were £17.0 million in the year compared with £16.2 million in 2003. Product development expenditure increased to £2.3 million, or 3.4% of revenue, from £1.9 million, or 3.2% of revenue, in 2003. Profit before tax increased to £5.1 million from £2.5 million in the prior year. Profit before tax, goodwill amortisation (£1.4 million; 2003: £1.5 million) and the exceptional profit from the sale of shares in the Group's Employee Benefit Trust during 2003 (£0.4 million) was up 81% to £6.5 million compared to £3.6 million in 2003. This resulted in diluted earnings per share adjusted for goodwill amortisation and the exceptional profit on sale of shares (refer to note 5) of 23.6p compared with 12.4p in 2003, an increase of 90%. Our strong margins allowed us to generate free cash flow (cash flow before acquisitions and disposals, dividend payments and financing) of £3.4 million during 2004 even though our underlying growth was 20%. After returning £6.0 million to shareholders in the form of dividends and a share buy back, net debt at 31 December 2004 was £10.1 million compared with £6.5 million at 31 December 2003. Customers and Industry Segmentation We segment our business into communications, defence and avionics, industrial and medical end user markets. We have senior strategic teams driving these sectors in both North America and Europe, to identify the customers we should be targeting in each of these sectors, support the sales people to penetrate these accounts and work with the product development organisation to determine what products we should develop. This structure has served us well and should help to drive further growth as we move forward. As our business grows in terms of scale and breadth of product offering, we are increasingly able to add value to the larger customers in the market sectors we serve. We are focusing more resource on winning programs with larger customers during 2005. In December 2004 we were pleased to announce that XP was the first power supply company to sign a global supply agreement with Premier Farnell plc, the global marketer and distributor of electronic and MRO specialist products and services. The three-year agreement will see the Group's power supply products listed exclusively in Premier Farnell's catalogues, expanding XP's market presence significantly and further improving brand awareness. This partnership with Premier Farnell will allow XP to enhance its ability of focusing directly on its largest target customers whilst providing a higher level of service to our smaller customers through the catalogue sales channel. Quality We remain committed to quality, from design of our product, through to manufacturing and our customer facing processes. Our North American sales organisation gained ISO9001:2000 certification in the summer of 2004. This means all our key sites and activities are now ISO9001:2000 certified. The quality of our product and service was recognised by Siemens Automation and Drives during 2004 when we were awarded best performing supplier. Partnerships Partnerships are an important element of our business model. XP focuses on its core competencies of market knowledge, design engineering and technical sales. For high volume, low cost manufacturing we partner with a select number of Far Eastern manufacturers. Due to the diversity and scale of our customer base, we do not always have the internal capacity to develop all the products our customers require. We therefore also partner with a small number of other organisations who design and manufacture products to our specification. In recent years the proportion of our sales derived from our own products has increased dramatically in line with our strategy of repositioning the business as a virtual manufacturer. We expect this trend to continue and that by 2007 75% of our revenues will come from products containing XP intellectual property. In order to provide the broad array of products our customers require, we will continue to partner with a number of third party manufacturers for the remaining 25%. Each of these partnerships is vital to the health of our business and we invest much time and resource in nurturing these relationships. Geographic Markets It is clear that there has been more life in the markets for capital equipment, into which our products are incorporated, during 2004 when compared to 2003. This is particularly the case in North America. However, as well as the improvements in the underlying markets, we consider that we have taken additional market share in 2004. Revenues from the US business increased by 20% to $71 million in 2004 from $59 million in 2003. Our US operations have been particularly successful in designing in our new branded product and this should bear fruit over the next two years as many of these projects move into production. Our customers' projects take on average 14 months from identification to producing their first production revenues. Our more mature UK business performed well; revenues increased by 12% to £17.8 million in 2004 from £15.9 million in 2003 and operating profit improved to £3.0 million from £2.6 million in the same period. We consider that we have clearly outpaced the growth in the overall market in the UK. We were particularly successful in adding new customers in the defence and avionics markets and have had success with wireless infrastructure. The industrial sector, however, remains the core of the UK business. The investment in our sales channel in Continental Europe is now paying off with European revenues growing 30% to £9.4 million in 2004 from £7.2 million in 2003. We believe we are taking market share principally from the small custom manufacturers which operate in these markets. We have considerable cost advantages over these local suppliers and the added advantage of being able to offer a standard or modified standard product which is available much more quickly than the custom designs we often compete with. Product Development Offering our customers the widest product range in the marketplace is a key component of XP's strategy and product development is vital to the long-term success of our business. We continue to commit more resource to this area in line with our strategy of expanding our own brand product portfolio. Our design engineering team was strengthened in February 2004 by the acquisition of the remaining 80% of the issued share capital of XP Electronics that we did not already own. Acquisition of this business has enabled XP to expand its proprietary product range, added new low volume manufacturing capability to our European operation and expanded our capability to develop new leading edge products. The XP Electronics design team is now an integrated part of our worldwide product development effort and is focused on designing new standard products that will be manufactured at low cost in the Far East by XP's existing manufacturing partners for volume applications. At the same time, lower volume production runs and modified standard product will continue to be manufactured in the UK. XP's Anaheim design team was recognised by Electronic Engineering Times in North America in their Best Development Teams special feature in November 2004 for their development of the ECM40 and ECM60 product families which were launched in 2004. We believe that this award demonstrates our ability to lead the field in design. New products allow us to win more of the available business in our sector of the market and to make significantly higher gross margins as we own more of the intellectual property in the product. At the same time as delivering higher gross margins, and therefore earnings to our shareholders, we are delivering cost savings to our customers. We are working ever closer with our manufacturing partners in the Far East. Our design engineers interface with our manufacturing partners throughout the product development cycle to ensure that cost is optimised at every stage of the design process. Furthermore, because we designed these products ourselves, it is straightforward for us to modify them to meet our customers' requirements. Our product offering to our customers covers the whole range of options from standard product, to modified standard, through configurable to complete custom build if required. In addition, we continue to partner with other manufacturers who we consider to be the best in their specific areas of expertise. We will continue to sell other manufacturers' products where it makes sense for our customers. We expect to spend approximately 3.5% of revenues on product development in 2005. Share Buy Back During May 2004 we purchased 910,000 of our own shares on market at an average price of 377.2 pence per share. These shares are held in treasury to use for funding the Company's various share option schemes or for other appropriate purposes such as funding small acquisitions. At the year end there were 888,750 shares remaining in treasury. People We strive to inspire all of our people to become experts in power to fulfil our aim of delivering genuine value to our customers. The role of our field sales engineers, who interface directly with our customers' engineering teams to design our power supplies into their systems, is crucial and we believe that we have not only the largest direct sales force in our industry sector, but also the best trained and the most technical. We rolled out an extensive technical training program for all sales people during 2004 to ensure we maintain and develop their technical skills. The Group needs to attract and retain the best people in the industry - people who will continue to drive the business forward and who, above all, act in our customers' interests. XP has a culture that rewards excellent performance with profit sharing, sales commissions and equity participation. Over 100 of our 290 employees have some sort of equity interest in the Group. The competence of our management team and dedication of our people was recognised by the Investors In People award in the UK. We will continue to invest in our people, in particular by providing technical and commercial training to continue to ensure they are recognised as experts in power by our customers. In June this year we were pleased to announce the appointment of Mickey Lynch as Finance Director. Mickey joined XP in April 2001 as Vice President of Finance in North America. Prior to joining the Group, Mickey was Chief Financial Officer of Atari Games. Prospects We remain on track to achieve our target gross margin of 40% in 2007 with a product mix of approximately 75% XP intellectual property and 25% from our third party partners. We should also expect further improvements in our operational gearing as our investment in the geographic expansion of our sales channel bears fruit. XP Power plc Consolidated Profit and Loss Account For the Year Ended 31 December 2004 £ Millions 2004 2003 Turnover Note 2 66.8 59.4 Cost of sales (43.1) (39.5) --------- --------- Gross profit 23.7 19.9 --------- --------- Selling and distribution costs (11.8) (11.4) Administrative expenses Research and development (2.3) (1.9) Goodwill amortisation (1.4) (1.5) Other administration expenses (2.9) (2.9) --------- --------- Total administrative expenses (6.6) (6.3) --------- --------- Other operating income - 0.2 --------- --------- Group operating profit 5.3 2.4 --------- --------- Share of associates' operating profit 0.4 0.3 --------- --------- Total operating profit 5.7 2.7 --------- --------- Profit on the sale of own shares - 0.4 Interest payable and similar charges (0.6) (0.6) --------- --------- Profit on ordinary activities before taxation Note 2 5.1 2.5 --------- --------- Taxation on profit on ordinary activities Note 3 (1.8) (0.9) --------- --------- Profit on ordinary activities after taxation 3.3 1.6 --------- --------- Minority interests - (0.2) --------- --------- Profit attributable to XP shareholders 3.3 1.4 --------- --------- Dividends payable Note 4 (2.6) (2.5) --------- --------- Retained profit/(loss) for the period 0.7 (1.1) --------- --------- Basic earnings per share Note 5 16.9p 7.0p Diluted earnings per share Note 5 16.4p 6.9p Diluted earnings per share adjusted for goodwill amortisation and exceptional gain Note 5 23.6p 12.4p The turnover and results of the acquired operations have not been shown on the face of the profit and loss account because they are not considered material. The third party sales and operating profit of acquired operations were £0.3m and £0.1m for the year. Statement of Recognised Gains and Losses £ Millions 2004 2003 Profit attributable to XP shareholders 3.3 1.4 Currency translation difference on foreign currency net investments (0.2) (1.2) ------- --------- Total recognised gains relating to the year 3.1 0.2 ------- --------- XP Power plc Consolidated Balance Sheet At 31 December 2004 £ Millions 2004 2003 (As restated refer to note 9) Fixed assets Intangible assets - Goodwill 21.7 22.4 Tangible assets 2.5 2.9 Investments 1.3 1.1 ------------ ------------ Total fixed assets 25.5 26.4 ------------ ------------ Current assets Stocks 7.5 6.6 Debtors 13.7 11.5 Cash at bank and in hand 2.7 4.5 ------------ ------------ Total current assets 23.9 22.6 ------------ ------------ Creditors: amounts falling due within one year (18.0) (12.0) Net current assets 5.9 10.6 ------------ ------------ Total assets less current liabilities 31.4 37.0 ------------ ------------ Creditors: amounts falling due after more than one year (8.1) (10.6) ------------ ------------ Net assets 23.3 26.4 ------------ ------------ Capital and reserves Called up share capital 0.2 0.2 Share premium account 27.0 27.0 Merger reserve 0.2 0.2 Profit and loss account (0.7) (1.1) Own shares (3.4) - ------------ ------------ Total equity shareholders' funds 23.3 26.3 ------------ ------------ Minority interests - 0.1 ------------ ------------ Total capital and reserves 23.3 26.4 ------------ ------------ XP Power plc Consolidated Cash Flow for the Year Ended 31 December 2004 £ Millions 2004 2003 Net cash inflow from operating activities Note 6 4.9 5.3 Dividends received from associates 0.2 - Returns on investments and servicing of finance Interest paid (0.6) (0.6) Dividends paid to minority shareholders (0.1) - ----------- ------------ Net cash outflow from returns on investments and the servicing of finance (0.7) (0.6) Tax paid (0.8) (0.1) Capital expenditure Purchase of tangible fixed assets (0.3) (0.4) Sale of tangible fixed assets 0.1 0.1 ----------- ------------ Net cash outflow from capital expenditure (0.2) (0.3) -------------------------------------------------------------------------------- Free cash flow 3.4 4.3 -------------------------------------------------------------------------------- Acquisitions and disposals Note 12 Purchase of subsidiary undertakings (0.8) - Loan to majority shareholder of associated undertaking (0.5) - ----------- ------------ Net cash outflow from acquisitions and disposals (1.3) - Equity dividends paid (2.5) (2.5) ----------- ------------ Cash (outflow)/inflow before financing (0.4) 1.8 ----------- ------------ Financing Share buy back (3.5) (0.5) Sale of shares 0.1 ----------- ------------ Net cash flow from financing (3.4) (0.5) ----------- ------------ (Decrease)/increase in cash (3.8) 1.3 ----------- ------------ Notes to the Preliminary Results for the Year Ended 31 December 2004 1. Basis of preparation The financial statements are prepared in accordance with applicable United Kingdom accounting standards. The particular accounting policies adopted, which have been consistently applied throughout the current and prior year, are described below. Accounting convention The financial statements are prepared under the historical cost convention. Basis of consolidation The Group has accounted for the acquisition of XP and Forx using the merger method of accounting and all other subsidiaries using the acquisition method of accounting in accordance with Financial Reporting Standard 6, 'Acquisitions and Mergers'. Goodwill and intangible fixed assets For acquisitions of a business, where the acquisition method of accounting is adopted, purchased goodwill is capitalised in the year in which it arises and amortised over its estimated useful life up to a maximum of 20 years. The directors regard 20 years as a reasonable maximum for the estimated useful life of goodwill. Capitalised purchased goodwill in respect of subsidiaries is included within intangible fixed assets. Tangible fixed assets Depreciation is provided on cost in equal annual instalments over the estimated lives of the assets. The rates of depreciation are as follows: Plant and machinery - 25 - 33% Motor vehicles - 25% Office equipment - 25 - 33% Leasehold improvements - 10% or over the life of the lease if shorter Long leasehold land and buildings - Term of the lease Investments Investments held as fixed assets are stated at cost less provision for impairment. Associates In the Group financial statements investments in associates are accounted for using the equity method. The consolidated profit and loss account includes the Group's share of associates' profits less losses, while the Group's share of the net assets of the associates is shown in the consolidated balance sheet. Goodwill arising on the acquisition of associates is accounted for in accordance with the policy set out above. Any unamortised balance of goodwill is included in the carrying value of the investment in associates. Stocks Stocks are stated at the lower of cost and net realisable value. Cost represents material and appropriate overheads based on normal levels of activity. Deferred taxation Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. Foreign currency Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. These translation differences are dealt with in the profit and loss account. The results of overseas subsidiary undertakings are translated into sterling at the average rates for the period. The exchange differences arising as a result of restating retained profits to closing rates are dealt with as a movement on reserves. Leases Rental costs under operating leases are charged to the profit and loss account in equal annual instalments over the period of the leases. Pension costs The Group operates defined contribution pension schemes for its employees. Contributions are charged to the profit and loss account as they become payable. Research and development Expenditure on research and development is charged to the profit and loss account in the year in which it is incurred. 2. Segmental analysis The Group operates substantially in one class of business, providing power supply solutions to the electronics industry. Analysis of total Group operating profit, net assets, turnover and total Group operating profit by geographical region is set out below. £ Millions Year to 31 Year to 31 December 2004 December 2003 Turnover Europe 27.3 23.0 United States 39.5 36.4 ---------- --------- Total turnover 66.8 59.4 ---------- --------- Profit on ordinary activities before taxation Europe 4.0 2.9 United States 2.3 0.8 Interest, corporate operating costs and associates (1.2) (1.2) ---------- --------- Profit on ordinary activities before taxation 5.1 2.5 ---------- --------- Operating net assets Europe 10.3 9.3 United States 24.6 25.0 ---------- --------- Total operating net assets 34.9 34.3 ---------- --------- Operating net assets are defined as net assets adjusted for net borrowings and the proposed dividend. At 31 December 2004 At 31 December 2003 Net assets 23.3 26.4 Net debt 10.1 6.5 Proposed dividend 1.5 1.4 ---------- --------- Total operating net assets 34.9 34.3 ---------- --------- 3. Taxation £ Millions Year to 31 Year to 31 December 2004 December 2003 United Kingdom taxation: Group undertakings 0.5 0.4 Share of associate taxation 0.1 - ------------ ------------- 0.6 0.4 International taxation: Subsidiary undertakings 1.2 0.5 ------------ ------------- Total taxation 1.8 0.9 ------------ ------------- 4. Equity Dividends An interim dividend of 6p (2003 - 5p) per share was paid on 6 October 2004. A final dividend of 8p (2003 - 7p) is proposed for approval at the forthcoming Annual General Meeting to be paid on 17 May 2005 to shareholders on the register of members at 29 April 2005. 5. Earnings per share Year to 31 Year to 31 December 2004 December 2003 £ millions EPS £ millions EPS Earnings for the financial period for basic earnings per share 3.3 16.9p 1.4 7.0p Exceptional gain - - (0.4) (2.0p) Amortisation of goodwill 1.4 7.2p 1.5 7.5p Earnings for adjusted earnings per share 4.7 24.1p 2.5 12.5p Weighted average number of shares (thousands) - basic 19,510 24.1p 20,046 12.5p Impact of share options 411 (0.5)p 55 (0.1)p Weighted average number of shares (thousands) - diluted 19,921 23.6p 20,101 12.4p The weighted average number of shares excludes 692,388 ESOP shares (2003 - 781,737) and 495,769 (2003 - nil) treasury shares. Supplementary earnings per share are presented to exclude the effect of goodwill amortisation and the exceptional gain on the ESOP shares in the periods as the board regards this as more meaningful. 6. Reconciliation of operating profit to net cash inflow from operating activities £ Millions Year to 31 Year to 31 December 2004 December 2003 Operating profit 5.3 2.4 Depreciation and amortisation 2.0 2.2 (Increase)/decrease in stocks (1.0) 0.6 (Increase) in debtors (1.3) (1.3) (Decrease)/increase in creditors (0.1) 1.4 ------------- ------------ Net cash inflow from operating activities 4.9 5.3 ------------- ------------ 7. Reconciliation of net debt £ Millions Year to 31 Year to 31 December 2004 December 2003 Net debt at 1 January (6.5) (7.8) (Decrease)/increase in cash per cash flow statement (3.8) 1.3 Cash acquired with subsidiaries 0.2 ------------- ------------ Net debt at 31 December (10.1) (6.5) ------------- ------------ Represented by Cash at bank and in hand 2.7 4.5 Overdrafts (4.7) (2.6) Loan (8.1) (8.4) ------------- ------------ Net debt at 31 December (10.1) (6.5) ------------- ------------ 8. Borrowings On 12 December 2003, the Group renewed its multi-currency revolving credit facility with Bank of Scotland. The new facility is £10 million and is committed for three years at an interest rate of 1.5% above LIBOR and is provided for the purpose of financing acquisitions. At 31 December 2004, £8.1 million (2003: £8.4 million) had been drawn down under this facility. In addition to this, the Group has a £10 million (2003: £10 million) working capital facility which is repayable on demand. Both facilities are secured on the assets of the Group. 9. Own shares Own shares includes 656,251 (2003 - 774,851) shares in the Group's employee share ownership plan (ESOP). These shares are carried at the lower of cost and market value. The treatment of ESOP shares has changed following the adoption of Urgent Issues Task Force (UITF) Abstract 38 Accounting for ESOP trusts. However, the carrying value was less than £100,000 at 31 December 2003, therefore the adjustment does not result in a change to shareholders' funds in the current or prior year. Own shares also includes 888,750 (2003 - nil) treasury shares (refer to note 11 below). 10. Shareholders' funds £ Share Share Merger Own Profit Total equity Millions capital premium reserve shares and shareholders' loss funds At 31 December 2003 0.2 27.0 0.2 - (1.1) 26.3 Purchase of own shares - - - (3.5) - (3.5) Sale of own shares - - - 0.1 (0.1) - Retained profit for the period - - - - 0.7 0.7 Currency translation difference - - - - (0.2) (0.2) -------- -------- --------- ------- -------- --------- At 31 December 2004 0.2 27.0 0.2 (3.4) (0.7) 23.3 -------- -------- --------- ------- -------- --------- 11. Share buy back During June 2004, the Company repurchased 910,000 of its own shares at an average price of 377.2 pence per share. These shares will be held in treasury and will be used to fund the Company's existing employee share option schemes or for other appropriate purposes such as small acquisitions. At 31 December 2004, 21,250 of these shares had been sold. 12. Acquisitions On 26 February 2004, the Group acquired the remaining 80% of the issued share capital of XP Electronics Limited that it did not already own for a mixture of cash and shares for £930,000. £ Millions Year to 31 Year to 31 December 2004 December 2003 Cash 0.8 - Shares 0.1 - Total consideration 0.9 - It is expected that the consideration due on the remaining 75% of MPI-XP Power AG will be paid in December 2005. The final consideration is based on the earnings of MPI-XP Power AG and is estimated to be in the region of 5.5 million Swiss Francs (£2.5 million). The liability for this is included within creditors. The Group has options to acquire the remaining 60% of the shares of Powersolve Electronics Limited between 2007 and 2012. The current best estimate of the consideration payable is £6 million. A loan of £0.5 million has been made to the majority shareholder during the year which is repayable in full in 2007 on the exercise date of the first option. 13. General The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2004 or 2003. The financial information for the year ended 31 December 2003 is derived from the XP Power plc statutory accounts for the year ended 31 December 2003 which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This announcement was approved by the directors on 31 January 2005. This information is provided by RNS The company news service from the London Stock Exchange XEFBXBBL

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