Adapting to tougher trading conditions

XP Power 1 August 2019 Update
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XP Power

Adapting to tougher trading conditions

H119 results

Tech hardware & equipment

1 August 2019

Price

2040p

Market cap

£390m

Net debt (£m) at end H119

56.1

Shares in issue

19.1m

Free float

90%

Code

XPP

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.7)

(21.1)

(41.8)

Rel (local)

(9.9)

(21.2)

(39.9)

52-week high/low

3620p

1965p

Business description

XP Power is a developer and designer of power control solutions with production facilities in China, Vietnam and the US, and design, service and sales teams across Europe, the US and Asia.

Next events

Q3 trading update

10 October

Analyst

Katherine Thompson

+44 (0)20 3077 5730

XP Power is a research client of Edison Investment Research Limited

XP’s performance in H119 was subdued by trade tariffs and the continued downturn in the semiconductor market, which masked the strong demand seen from industrial, healthcare and technology customers. Management is taking action to minimise the effect of trade tariffs and reduce manufacturing costs while ensuring it has access to key components and is preparing for Brexit. Despite short-term pressures, the company is confident that broad-based design wins position it well for future growth.

Year end

Revenue (£m)

PBT*
(£m)

Diluted EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

166.8

36.1

147.0

78.0

13.9

3.8

12/18

195.1

41.2

172.8

85.0

11.8

4.2

12/19e

199.8

36.8

153.7

88.0

13.3

4.3

12/20e

209.0

39.9

166.9

92.0

12.2

4.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Trade tariffs and weak semis market hit Q2 trading

XP reported revenue growth of 6% y-o-y in H119, although revenues were flat in constant currency. Weakness in demand from the semiconductor sector masked strong performance from the three other end markets, which made up 82% of H119 revenues. Trade tariffs and higher component prices weighed on gross and operating margins, with normalised EPS down 17% y-o-y. Reflecting its confidence in the business, the company announced a Q2 dividend of 18p/share (+6% y-o-y).

Managing the supply chain

To avoid US tariffs on Chinese manufactured products, diversify supply and reduce costs, XP has shifted a large proportion of manufacturing to Vietnam, and will continue to do so as customers qualify the facility. XP is also shifting the manufacture of certain products from the US to Vietnam, which should result in cost savings from mid-2020.

Expecting better performance in H2

XP continues to win new design slots at key customers and estimates it is gaining market share. Based on the end H1 order backlog, the company expects to see improved revenue performance in H2. We maintain our revenue forecasts and incorporate IFRS16-related changes as well as higher net finance costs, resulting in normalised EPS reducing by 4.4% in FY19 and 4.0% in FY20.

Valuation: Discount has widened

The stock is now down 24% from the peak in April and down 5% year-to-date. The discount to peers has widened, and XP trades at a more than 30% discount to both power converter and UK electronics peers on a FY20e P/E basis, with a dividend yield at the top end of the range. Key triggers for share price upside from this point include evidence of order growth from the semiconductor equipment sector and a moderation in tariffs between the US and China.

Review of H119 results

Exhibit 1: Half-year results highlights

£m

H119

H118

y-o-y

Revenues

98.9

93.2

6.1%

Gross profit

44.1

43.5

1.4%

Gross margin

44.6%

46.7%

(2.1%)

EBITDA

22.7

23.6

(3.8%)

EBITDA margin

23.0%

25.3%

(9.4%)

Normalised operating profit

18.2

20.7

(12.1%)

Normalised operating margin

18.4%

22.2%

(3.8%)

Reported operating profit

14.5

18.9

(23.3%)

Reported operating margin

14.7%

20.3%

(5.6%)

Normalised PBT

16.6

20.3

(18.2%)

Normalised net income, after minority interest

13.5

16.3

(17.2%)

Reported net income, after minority interest

10.3

14.6

(29.5%)

Normalised diluted EPS (p)

69.2

83.7

(17.3%)

Reported basic EPS (p)

53.8

76.4

(29.6%)

Net debt*

50.4

46.5

8.4%

Source: XP Power *Excludes lease liabilities of £5.7m at the end of H119 resulting from the first time application of IFRS16.

In H119, XP reported a 6.1% revenue increase year-on-year; in constant currency, revenues were flat. Own design revenues also increased 6% y-o-y, making up 78% of total revenues (flat versus H118). On a reported basis, the gross margin declined 210bp and on a constant currency basis 150bp. The margin declined as a result of the tariffs in place between the US and China, adverse product and geographic mix and component price inflation, which started in 2018. The company is working with customers to minimise the impact of the tariffs and hopes to see the benefit in H2.

The company implemented IFRS16 from 1 January 2019, so EBITDA was positively affected by the exclusion of lease expenses. At the adjusted operating profit line, the effect was minimal as this included increased depreciation on right of use assets. The adjusted operating margin decline tracked the decline in gross margin and also felt the impact of higher underlying operating costs (+11.6% y-o-y) as the company increased investment in product development. Gross product development spend of £8.9m increased 35% y-o-y, before the capitalisation of £4.4m of costs, with net spend including amortisation 21% higher y-o-y.

The company reported exceptional items totalling £2.1m: £0.4m relating to acquisitions, £0.5m relating to the ongoing ERP upgrade and £1.2m on a legal dispute in the US (not customer-related) which is currently going through mediation.

The company announced a Q2 dividend of 18p per share (in line with our forecast), which is due to be paid on 10 October. Net debt (excluding £5.7m in lease liabilities) increased y-o-y, but was down from the £52.0m reported at the end of FY18. Net cash from operations of £25.2m benefited from the unwind of some excess inventory (built last year to counter component shortages).

Exhibit 2: Revenues by end market and geography

£m

H119

H118

y-o-y

H119

H118

y-o-y

Europe

Asia

Semi manufacturing

0.2

0.2

0.0%

Semi manufacturing

0.2

0.5

-60.0%

Technology

3.0

2.9

3.4%

Technology

0.5

0.5

0.0%

Industrial

24.1

21.0

14.8%

Industrial

7.7

4.1

87.8%

Healthcare

5.6

5.6

0.0%

Healthcare

1.3

1.4

-7.1%

Total

32.9

29.7

10.8%

Total

9.7

6.5

49.2%

N. America

Group

Semi manufacturing

17.1

24.2

-29.3%

Semi manufacturing

17.5

24.9

-29.7%

Technology

7.3

5.6

30.4%

Technology

10.8

9.0

20.0%

Industrial

15.4

14.0

10.0%

Industrial

47.2

39.1

20.7%

Healthcare

16.5

13.2

25.0%

Healthcare

23.4

20.2

15.8%

Total

56.3

57.0

-1.2%

Total

98.9

93.2

6.1%

Source: XP Power

As already highlighted by the company in its April trading update, XP’s fortunes were mixed in H119. In the semiconductor production equipment (SPE) segment, demand was weak as chip manufacturers continued to work through excess inventory of memory chips. Conversely, all other end markets saw growth on a year-on-year basis. As most SPE customers are based in the US, this region saw a small decline over the period on a reported basis (-8% in constant currency, -14% on an organic basis) whereas all other regions grew.

Revenues from SPE customers were down 29.7% on a reported basis or 34% on a US dollar basis. Excluding the contribution from Glassman ($5.3m in H119, $1.0m in H118), underlying dollar-based revenues declined 48% y-o-y compared to growth of 68% in 2018. The company does not expect a pick-up in demand from this sector until 2020.

Revenues from the Industrial sector were 21% higher on a reported basis and 13% higher on a US dollar basis. Healthcare sector revenues were 16% higher on a reported basis and 8% higher on a US dollar basis. Technology sector revenues were 20% higher on a reported basis and 12% higher on a US dollar basis.

Managing supply chain issues

XP has been hit by the double whammy of reduced demand from SPE suppliers and tariffs on trade between the US and China (in both directions). It has undertaken various measures to mitigate the impact on the business, outlined below.

Transitioning production from China to Vietnam

XP recently expanded its Vietnamese manufacturing facility (completed in Q119) and was already in the process of moving production of less complex power converters (sub 1.5kW) from China to Vietnam. With US tariffs on the import of components manufactured in China rising from 10% to 25% in Q2, XP has accelerated this shift. Over the last 12 months, the Vietnam facility has grown the number of products it is able to manufacture from 282 to 1,819. In H119, 779,800 converters were manufactured across both sites, of which 79% were made in Vietnam. This compares to 716,900 converters in H118, of which 70% were manufactured in Vietnam. We expect the volumes produced in Vietnam to continue to increase as more customers qualify the facility.

The company intends to maintain its China facility, as this is used for some of the more complex converters and is also useful for the production of converters for Chinese customers, who will otherwise incur tariffs of 15% on products imported from the US.

Shifting some US manufacturing to Vietnam

The company has decided to restructure the manufacture of low power, high voltage DC-DC modules from the Minden facility in Nevada to Vietnam. The US facility will be closed by June 2020. XP expects to save c £4m pa once the transition is complete (of which it expects to reinvest £1–2m to expand the new product introduction team), with expected one-off costs of £1–2m.

Excess inventory starting to reduce

In 2018, the company saw lead times lengthen for key components such as MOSFETs and multilayer surface mount capacitors. To counter this, it built up buffer stock of the most important components which were at higher than typical prices. So far this year, it has seen lead times reduce for some, but not all components. The level of safety stock has therefore been reduced (inventory stood at £51.2m at the end of H119 versus £56.5m at the end of FY18), although is still relatively high compared to the level at the end of 2017 (days sales outstanding: FY17 83, FY18 106, H119 94).

Plans underway to limit the impact of Brexit

The company expects Brexit to have limited operational implications. In Q119, it implemented its no-deal Brexit contingency plan which involved transferring inventory for 15 key accounts out of the UK warehouse to XP’s German warehouse. The company believes that some customers may have brought forward orders and increased inventories to prepare for Brexit, but does not estimate that this has had a substantial impact on trading.

Outlook and changes to forecasts

XP received orders worth £100.6m in H119, down 1% y-o-y and down 7% in constant currency. In constant currency on a geographic basis, orders increased 11% y-o-y in Asia, 1% in Europe and declined by 12% in North America (19% organic). Book-to-bill for H119 was 1.02x and the company entered H219 with an order book worth £86.1m, 5.6% higher than at the start of the year. On a quarterly basis, Q119 orders of £54.6m were 6.6% higher y-o-y and 21.1% higher q-o-q. Q219 orders of £46.0m were 8.4% lower y-o-y and 15.8% lower q-o-q.

The company expects to see improved revenue performance in H2. When the SPE sector starts to recover (not expected by XP until 2020), we believe the company is in a good position to receive production orders as it has won recent design slots. Work underway to transfer production to Vietnam, as well as the possibility of clawing back some tariffs from customers, should improve margins in H2, while the closure of the Minden facility in 2020 should boost FY20 margins.

Changes to forecasts

We have left our revenue forecasts unchanged. For FY20, we have reduced our gross margin forecast to reflect the various cost pressures. We have reflected the implementation of IFRS16 – this increases EBITDA (as lease costs are excluded) and increases depreciation (on the newly created £5.5m of right of use assets), but has a minimal impact on operating profit. We have also amended our capex and depreciation and amortisation forecasts to reflect costs incurred in H119. As the net finance cost was £1.6m in H119 (including £0.1m relating to IFRS16), we have increased our net finance cost forecasts from £1.8m to £3.2m in FY19 and £1.8m to £3.0m in FY20. Overall, this results in normalised diluted EPS reducing by 4.4% in FY19 and 4.0% in FY20.

Exhibit 3: Changes to forecasts

£'m

FY19e

FY19e

FY20e

FY20e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

199.8

199.8

0.0%

2.4%

209.0

209.0

0.0%

4.6%

Gross profit

88.9

88.9

0.0%

(3.7%)

96.0

94.9

(1.1%)

6.8%

Gross margin

44.5%

44.5%

0.0%

(2.8%)

45.9%

45.4%

(0.5%)

0.9%

EBITDA

47.4

49.0

3.5%

(0.4%)

51.3

52.5

2.3%

7.1%

EBITDA margin

23.7%

24.5%

0.8%

(0.7%)

24.6%

25.1%

0.6%

0.6%

Normalised operating profit

40.2

40.0

(0.4%)

(6.8%)

43.3

42.9

(1.0%)

7.2%

Normalised operating profit margin

20.1%

20.0%

(0.1%)

(2.0%)

20.7%

20.5%

(0.2%)

0.5%

Reported operating profit

34.3

33.7

(1.6%)

(14.3%)

38.4

39.2

2.0%

16.3%

Reported operating margin

17.1%

16.9%

(0.3%)

(3.3%)

18.4%

18.8%

0.4%

1.9%

Normalised PBT

38.4

36.8

(4.2%)

(10.7%)

41.6

39.9

(4.0%)

8.4%

Reported PBT

32.5

30.5

(6.1%)

(18.9%)

36.7

36.2

(1.3%)

18.7%

Normalised net income

31.3

29.9

(4.4%)

(11.3%)

33.8

32.5

(4.0%)

8.6%

Reported net income

26.4

24.8

(6.2%)

(18.0%)

29.8

29.4

(1.3%)

18.9%

Normalised basic EPS (p)

163.9

156.6

(4.4%)

(11.1%)

177.1

170.1

(4.0%)

8.6%

Normalised diluted EPS (p)

160.8

153.7

(4.4%)

(11.1%)

173.8

166.9

(4.0%)

8.6%

Reported basic EPS (p)

138.2

129.7

(6.2%)

(17.8%)

156.2

154.1

(1.3%)

18.9%

Dividend per share (p)

88.0

88.0

0.0%

3.5%

92.0

92.0

0.0%

4.5%

Net debt/(cash)

49.0

53.0

8.2%

1.9%

37.1

42.5

14.7%

(19.8%)

Source: Edison Investment Research

Valuation

The stock ran up from 2,140p at the end of 2018 to 2,670p in April on the back of the positive Q1 trading update and expectations that the semiconductor sector was close to bottoming out. Since then, S301 tariffs in the US have increased from 10% to 25%, and semiconductor companies have not yet shown sustained signs of recovery. The stock is now down 24% from the peak in April and down 5% year-to-date. The discount to peers has widened and XP trades at a more than 30% discount to both power converter and UK electronics peers on an FY20e P/E basis, with a dividend yield at the top end of the range. With a broad product portfolio focused on structural growth markets, local customer support, control over the manufacturing process and strong cash generation, we view the company as well positioned to grow market share. Work on optimising the supply chain should help the company to grow while generating strong operating margins. Key triggers for share price upside from this point include evidence of order growth from the semiconductor equipment sector and a moderation in tariffs between the US and China.

Exhibit 4: Peer group valuation multiples

Market

Share

Listing

P/E (x)

EV/EBITDA (x)

Div yield

Cap (m)

Price

ccy

LY

CY

NY

LY

CY

NY

LY

CY

NY

XP Power

390

2040

GBp

11.8

13.3

12.2

9.0

9.0

8.4

4.2%

4.3%

4.5%

Cosel

38,926

1090

JPY

18.3

24.7

19.0

6.4

8.5

7.0

2.3%

1.8%

2.0%

Delta Electronics

389,631

150

TWD

21.6

18.1

16.3

12.6

11.1

9.7

3.4%

4.0%

Advanced Energy Industries

2277

59.56

USD

13.6

31.6

16.9

10.2

23.2

11.3

0.0%

0.0%

0.0%

Comet Holdings

726

93.5

CHF

34.3

22.3

13.7

16.0

11.9

1.3%

1.2%

1.8%

CML Microsystems

55

320

GBp

20.4

26.4

5.1

5.0

2.4%

2.4%

Diploma

1697

1499

GBp

26.6

24.0

22.5

19.1

16.9

16.0

1.7%

1.9%

2.0%

Electrocomponents

2702

608.8

GBp

16.6

15.5

14.1

11.4

10.5

9.5

2.2%

2.6%

2.8%

Gooch & Housego

341

1365

GBp

24.2

29.0

24.6

15.6

16.4

14.7

0.8%

0.8%

0.9%

TT Electronics

370

225

GBp

14.3

12.3

11.3

8.1

7.4

6.8

2.7%

3.1%

3.4%

Average power converter companies

17.8

27.2

18.6

10.7

14.7

10.0

1.2%

1.6%

1.9%

Average UK electronics companies

20.4

21.4

18.1

11.9

11.2

11.7

2.0%

2.2%

2.3%

XP vs power converter average

(51%)

(34%)

XP vs UK electronics average

(38%)

(32%)

Source: Edison Investment Research, Refinitiv (as at 29 July)

Exhibit 5: Financial summary

£'m

2012

2013

2014

2015

2016

2017

2018

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

93.9

101.1

101.1

109.7

129.8

166.8

195.1

199.8

209.0

Cost of Sales

(49.0)

(51.5)

(51.0)

(55.1)

(67.8)

(89.2)

(102.8)

(110.9)

(114.1)

Gross Profit

44.9

49.6

50.1

54.6

62.0

77.6

92.3

88.9

94.9

EBITDA

 

 

23.3

26.0

27.6

29.7

33.0

41.7

49.2

49.0

52.5

Normalised operating profit

 

 

21.0

23.3

24.5

25.9

28.8

36.4

42.9

40.0

42.9

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

(0.4)

(0.6)

(2.8)

(3.2)

(3.2)

Exceptionals

0.0

0.0

0.0

(0.3)

(0.4)

(3.3)

(0.8)

(2.6)

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

(0.5)

(0.5)

Reported operating profit

21.0

23.3

24.5

25.6

28.0

32.5

39.3

33.7

39.2

Net Interest

(0.8)

(0.4)

(0.2)

(0.2)

(0.2)

(0.3)

(1.7)

(3.2)

(3.0)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptional & other financial

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

20.2

22.9

24.3

25.7

28.6

36.1

41.2

36.8

39.9

Profit Before Tax (reported)

 

 

20.2

22.9

24.3

25.4

27.8

32.2

37.6

30.5

36.2

Reported tax

(4.5)

(4.5)

(4.8)

(5.5)

(6.3)

(3.6)

(7.2)

(5.5)

(6.5)

Profit After Tax (norm)

15.7

18.4

19.5

20.2

22.3

28.8

33.9

30.2

32.7

Profit After Tax (reported)

15.7

18.4

19.5

19.9

21.5

28.6

30.4

25.0

29.7

Minority interests

(0.2)

(0.2)

(0.1)

(0.2)

(0.2)

(0.3)

(0.2)

(0.3)

(0.3)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

15.5

18.2

19.4

20.0

22.1

28.5

33.7

29.9

32.5

Net income (reported)

15.5

18.2

19.4

19.7

21.3

28.3

30.2

24.8

29.4

Basic ave. number of shares outstanding (m)

19

19

19

19

19

19

19

19

19

EPS - basic normalised (p)

 

 

81.7

95.8

102.1

105.3

116.2

149.4

176.1

156.6

170.1

EPS - diluted normalised (p)

 

 

81.3

95.1

101.1

104.3

115.3

147.0

172.8

153.7

166.9

EPS - basic reported (p)

 

 

81.7

95.8

102.1

103.7

112.0

148.3

157.8

129.7

154.1

Dividend (p)

50

55

61

66

71

78

85

88

92

Revenue growth (%)

(9.4)

7.7

0.0

8.5

18.3

28.5

17.0

2.4

4.6

Gross Margin (%)

47.8

49.1

49.6

49.8

47.8

46.5

47.3

44.5

45.4

EBITDA Margin (%)

24.8

25.7

27.3

27.0

25.4

25.0

25.2

24.5

25.1

Normalised Operating Margin

22.4

23.0

24.2

23.6

22.2

21.8

22.0

20.0

20.5

BALANCE SHEET

Fixed Assets

 

 

52.8

53.3

56.1

65.4

73.2

88.1

129.2

141.7

144.9

Intangible Assets

38.1

39.1

40.5

48.2

53.0

63.9

97.7

103.3

105.1

Tangible Assets

13.2

12.7

14.4

16.1

19.1

22.5

30.7

37.6

39.0

Investments & other

1.5

1.5

1.2

1.1

1.1

1.7

0.8

0.8

0.8

Current Assets

 

 

39.3

42.2

47.0

53.5

65.7

83.5

105.1

105.0

110.5

Stocks

19.8

20.4

25.2

28.7

32.2

37.8

56.5

57.7

56.3

Debtors

14.2

15.4

16.0

17.5

21.5

23.8

33.0

32.8

34.4

Cash & cash equivalents

4.1

5.0

3.8

4.9

9.2

15.0

11.5

10.3

15.8

Other

1.2

1.4

2.0

2.4

2.8

6.9

4.1

4.1

4.1

Current Liabilities

 

 

(20.2)

(22.4)

(18.6)

(19.8)

(25.8)

(25.1)

(26.8)

(31.1)

(32.0)

Creditors

(11.1)

(12.7)

(14.4)

(14.6)

(16.1)

(21.4)

(22.4)

(24.8)

(25.7)

Tax and social security

(1.6)

(1.1)

(1.7)

(1.2)

(3.3)

(3.5)

(4.2)

(4.2)

(4.2)

Short term borrowings

(7.3)

(8.5)

(2.5)

(4.0)

(5.5)

0.0

0.0

(1.9)

(1.9)

Other

(0.2)

(0.1)

0.0

0.0

(0.9)

(0.2)

(0.2)

(0.2)

(0.2)

Long Term Liabilities

 

 

(10.6)

(3.7)

(4.2)

(10.0)

(6.2)

(29.6)

(70.1)

(68.0)

(63.0)

Long term borrowings

(7.4)

0.0

0.0

(4.6)

0.0

(24.0)

(63.5)

(61.4)

(56.4)

Other long term liabilities

(3.2)

(3.7)

(4.2)

(5.4)

(6.2)

(5.6)

(6.6)

(6.6)

(6.6)

Net Assets

 

 

61.3

69.4

80.3

89.1

106.9

116.9

137.4

147.5

160.3

Minority interests

(0.2)

(0.2)

(0.1)

(0.8)

(0.8)

(0.9)

(1.0)

(1.1)

(1.1)

Shareholders' equity

 

 

61.1

69.2

80.2

88.3

106.1

116.0

136.4

146.4

159.2

CASH FLOW

Op Cash Flow before WC and tax

23.3

26.0

27.6

29.7

33.0

41.7

49.2

49.0

52.5

Working capital

4.2

(0.3)

(4.1)

(4.6)

(6.1)

0.4

(21.6)

1.3

0.9

Exceptional & other

0.4

(0.5)

1.9

0.6

5.1

(6.3)

3.2

(2.6)

0.0

Tax

(4.3)

(5.0)

(3.6)

(4.7)

(4.1)

(6.1)

(4.1)

(5.5)

(6.5)

Net operating cash flow

 

 

23.6

20.2

21.8

21.0

27.9

29.7

26.7

42.2

46.9

Capex

(4.7)

(3.2)

(5.8)

(5.4)

(6.8)

(10.1)

(15.0)

(18.4)

(16.0)

Acquisitions/disposals

(1.6)

0.1

0.1

(8.3)

0.1

(18.3)

(35.4)

0.0

0.0

Net interest

(0.5)

(0.3)

(0.1)

(0.1)

(0.2)

(0.2)

(1.5)

(3.2)

(3.0)

Equity financing

(0.5)

0.1

(0.2)

0.0

0.2

(0.2)

0.6

0.0

0.0

Dividends

(9.1)

(10.1)

(11.0)

(12.2)

(13.1)

(14.2)

(15.6)

(16.8)

(17.4)

Other

0.5

0.2

0.1

0.2

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

7.7

7.0

4.9

(4.8)

8.1

(13.3)

(40.2)

3.8

10.5

Opening net debt/(cash)

 

 

18.6

10.6

3.5

(1.3)

3.7

(3.7)

9.0

52.0

53.0

FX

0.3

0.1

(0.1)

(0.2)

(0.5)

0.6

(2.7)

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.1

(0.2)

0.0

(0.1)

(4.8)

0.0

Closing net debt/(cash)

 

 

10.6

3.5

(1.3)

3.7

(3.7)

9.0

52.0

53.0

42.5

Source: XP Power, Edison Investment Research

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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New Zealand

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United Kingdom

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Frankfurt +49 (0)69 78 8076 960

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This report has been commissioned by XP Power and prepared and issued by Edison, in consideration of a fee payable by XP Power. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

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95 Pitt Street, Sydney

NSW 2000, Australia

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