Strong demand drives record performance in H1

XP Power 30 July 2018 Update
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XP Power

Strong demand drives record performance in H1

H118 results

Tech hardware & equipment

30 July 2018

Price

3,570p

Market cap

£682m

$1.32.£1

Net debt (£m) at end H118

46.5

Shares in issue

19.1m

Free float

90%

Code

XPP

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.6

0.6

42.9

Rel (local)

(0.3)

(2.0)

37.7

52-week high/low

3,740p

2,480p

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

8 October

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

XP Power is a research client of Edison Investment Research Limited

XP Power reported strong H1 revenue and earnings growth, despite significant currency headwinds. Order intake remained robust, providing good support going into H218. While management’s expectations for FY18 are unchanged, we have revised our forecasts to reflect currency moves and tightness in the supply chain. This results in normalised EPS upgrades of 0.2% in FY18 and 2.4% in FY19. Post the recent acquisitions, we believe the company’s more comprehensive product range positions it well to grow market share further.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

129.8

28.6

115.3

71.0

31.0

2.0

12/17

166.8

36.1

147.0

78.0

24.3

2.2

12/18e

198.9

42.2

177.6

82.0

20.1

2.3

12/19e

219.4

47.2

198.4

85.0

18.0

2.4

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

H118 sees continuation of strong growth

XP reported revenue growth of 16% y-o-y for H118; taking into account currency headwinds, constant currency growth (cc) reached 25% and cc like-for-like (l-f-l) growth was 13%. This resulted in normalised operating profit growth of 19% and a 50bp increase in the operating margin to 22.2%. Normalised EPS grew 24% y-o-y. XP saw strong demand from all end markets, particularly semiconductor manufacturing, boosted by the contributions from the Comdel and Glassman High Voltage acquisitions.

Outlook still positive; some tightness in supply chain

Order growth of 9% y-o-y (17% cc, 10% cc l-f-l) underlines the strength of demand, and the order backlog at the end of H118 was 6.5% higher h-o-h. The company highlighted that tightness in the component supply chain was likely to have an impact on gross margins from H218. We have revised our forecasts to reflect the stronger dollar in H2 and the impact of more expensive components. While this results in revenue upgrades of 2.6% in FY18 and 4.8% in FY19, normalised EPS only increases 0.2% in FY18 and 2.4% in FY19.

Valuation: Reflects consistently profitable growth

On a P/E basis, XP is trading at a premium to global power converter companies and at a more than 10% discount to UK electronics companies, with a dividend yield at the top end of the range. XP generates EBITDA and EBIT margins at the top end of its peer group. We see scope for upgrades to earnings estimates from cross-selling and further market share gains.

Review of H118 results

Exhibit 1: Half-year results highlights

£m

H118

H117

y-o-y

Revenues

93.2

80.2

16.2%

Gross profit

43.5

37.6

15.7%

Gross margin

46.7%

46.9%

(0.2%)

EBITDA

23.6

19.9

18.6%

EBITDA margin

25.3%

24.8%

0.5%

Normalised operating profit

20.7

17.4

19.0%

Normalised operating margin

22.2%

21.7%

0.5%

Reported operating profit

18.9

14.5

30.3%

Reported operating margin

20.3%

18.1%

2.2%

Normalised PBT

20.3

17.3

17.3%

Normalised PAT

16.6

13.0

27.7%

Reported net income, after MI

14.6

10.9

33.9%

Normalised diluted EPS (p)

83.7

67.3

24.4%

Reported basic EPS (p)

76.4

57.2

33.6%

Net debt/(cash)

46.5

(8.0)

N/A

Source: XP Power

XP reported H118 revenue growth of 16% y-o-y; on a cc basis growth was 25%, and on a cc l-f-l basis growth was 13%. The US$/£ rate was an average of 1.39 for H118 compared to 1.26 in H117; with the vast majority of XP’s revenues priced in dollars, the strengthening of sterling had a material impact on reported revenues in H118. Since the end of H118 it has declined to 1.32, compared to an average of 1.32 in H217, so should have less impact in H2. Demand was generally strong from key end markets, boosted by new designs going into production. Revenues from own-design XP products grew 20% y-o-y, making up 78% of total revenues (vs 75% in H117 and FY17).

Gross profit was 15.7% higher y-o-y, resulting in a 20bp decline in the gross margin to 46.7%. While gross profit benefited from the stronger pound (170bp positive effect), this was offset by tightness in the components market, which is resulting in longer lead times and in some cases price pressure. XP has been trying to counter this by building its level of safety stock for critical components to ensure it can deliver to customers’ schedules.

Operating costs benefited from the stronger pound to the tune of £1.9m; this was offset by the inclusion of costs from the Comdel and Glassman acquisitions. The company noted that it continues to invest in building its engineering teams in all regions to continue to differentiate its products from low-cost Asian competitors.

Normalised operating profit excludes acquired amortisation of £1.0m, £0.4m in acquisition-related costs and £0.4m in charges relating to accounting policy changes. The normalised margin increased 50bp y-o-y to 22.2%.

The company incurred a reported tax charge of 20.5% for H118. On an adjusted basis the rate was 18.7%, higher than our 17% forecast for FY18/19, and the company’s original guidance of 15-17%. It has now amended the range to 17-19%.

The company announced a Q2 dividend of 17p per share, in line with our forecast.

New divisional disclosure reflects acquisitions

The company historically has given a revenue breakdown by end market: technology, industrial and healthcare. To reflect the recent acquisitions (Comdel, Glassman) the company has now removed semiconductor manufacturing from the technology division and reports this as a fourth segment. It now also reports revenues by type of product, reflecting the broadening of the product range to encompass RF power supplies and high voltage/high power products.

Exhibit 2: Revenue by geography and end market

£m

H118

H117

y-o-y

H118

H117

y-o-y

Europe

Asia

Semi manufacturing

0.2

0.1

100.0%

Semi manufacturing

0.5

0.9

-44.4%

Technology

2.9

3.3

-12.1%

Technology

0.5

1.7

-70.6%

Industrial

21.0

21.5

-2.3%

Industrial

4.1

2.3

78.3%

Healthcare

5.6

4.5

24.4%

Healthcare

1.4

2.2

-36.4%

Total

29.7

29.4

1.0%

Total

6.5

7.1

-8.5%

N. America

Group

Semi manufacturing

24.2

11.8

105.1%

Semi manufacturing

24.9

12.8

94.5%

Technology

5.6

3.7

51.4%

Technology

9.0

8.7

3.4%

Industrial

14.0

15.3

-8.5%

Industrial

39.1

39.1

0.0%

Healthcare

13.2

12.9

2.3%

Healthcare

20.2

19.6

3.1%

Total

57.0

43.7

30.4%

Total

93.2

80.2

16.2%

Source: XP Power

Exhibit 3: Revenues by geography and product type

£m

H118

H117

y-o-y

H118

H117

y-o-y

Europe

Asia

AC-DC power supplies

24.0

23.7

1.3%

AC-DC power supplies

5.2

5.6

-7.1%

DC-DC supplies

4.6

4.8

-4.2%

DC-DC supplies

0.5

0.7

-28.6%

High voltage low power

0.9

0.7

28.6%

High voltage low power

0.6

0.3

100.0%

High voltage high power

0.1

0

N/A

High voltage high power

0

0

N/A

RF power supplies

0

0

N/A

RF power supplies

0

0

N/A

Other

0.1

0.2

-0.5

Other

0.2

0.5

-0.6

Total

29.7

29.4

1.0%

Total

6.5

7.1

-11.3%

N. America

Group

AC-DC power supplies

42.2

36.5

15.6%

AC-DC power supplies

71.4

65.8

8.5%

DC-DC supplies

3.1

2.6

19.2%

DC-DC supplies

8.2

8.1

1.2%

High voltage low power

3.1

4.2

-26.2%

High voltage low power

4.6

5.2

-11.5%

High voltage high power

1.0

0

N/A

High voltage high power

1.1

0.0

N/A

RF power supplies

7.6

0

N/A

RF power supplies

7.6

0.0

N/A

Other

0

0.4

-1

Other

0.3

1.1

-72.7%

Total

57.0

43.7

30.4%

Total

93.2

80.2

16.2%

Source: XP Power

All figures above are on a reported basis. The company noted that in US dollar terms, Asia grew 1% y-o-y, Europe 11% and North America 44% (22% organic). The vast majority of Comdel and Glassman revenues are generated in North America, with a large exposure to semiconductor manufacturing. This exposure combined with the strong levels of demand from a buoyant sector drove the 95% growth from semiconductor manufacturing customers. The company noted that it is seeing good demand from all sectors.

Also on a US dollar basis, healthcare revenues grew 14% y-o-y, helped by new design wins going into production. Industrial revenues grew 10% y-o-y, technology revenues grew 13% y-o-y and semiconductor manufacturing revenues grew 115% y-o-y (organic 68%).

Acquisitions expand addressable market

The Glassman acquisition completed in May, contributing just over one month’s revenue (£1.2m) and net profit (£0.3m) in H118. H118 represented the first full period for Comdel (acquired in September 2017), which contributed revenues of $10.4m (£7.5m). XP estimates that the moves via acquisition into the high voltage and RF power markets have expanded its addressable market by 75% ($2bn). The company now believes it has a wide enough product range that customers can come to them for all of their power requirements, which should enable XP to offer a better service and improve customer stickiness. The company continues to consider making further acquisitions, although we expect a pause while it digests the recent deals.

Order intake growth

XP received orders worth £101.4m in H118, up 9% y-o-y, up 17% in cc and 10% on a cc l-f-l basis. On a quarterly basis, Q118 bookings were up 8.9% y-o-y and Q218 bookings were up 8.2% y-o-y, although declined 2% on a q-o-q basis. Book-to-bill for H118 was 1.09x (Q1 1.10, Q2 1.08). Backlog at the end of H118 stood at £85.5m (+6.5% h-o-h).

Manufacturing update: Vietnam II on stream next year

In H118, XP Power produced 70% of its power converters in the Vietnam facility, up from 60% a year ago. The company intends to increase this percentage, reserving its China facility for newer, more complex products.

The company made good progress in constructing the second facility in Vietnam. It is scheduled to be finished by the end of Q418 with production expected to start in H119. Of the $6.5m cost, the company has incurred $1.5m to date. Once complete, the facility will increase the volume that can be manufactured in-house in Asia by $130m to $300m.

Debt facility increased to fund Glassman acquisition

When XP acquired Comdel last year, it entered into a $40m revolving credit facility with HSBC and Fifth Third Bank, with which it also has access to a $20m accordion facility. In May this year, XP increased the revolving facility to $85m to fund the $44.5m Glassman acquisition and retained the $20m accordion facility. XP is paying interest at LIBOR+1% on the drawn amount (£58.6m/$77.9m at the end of H118) and LIBOR+0.4% on the undrawn amount.

Outlook and changes to forecasts

Management anticipates its full-year performance will meet existing expectations, while sounding a note of caution over the tightness in the component supply market.

We have revised our forecasts to reflect the impact of higher component prices on gross margins, as well as the weakening of the pound versus the dollar since the end of H118. We now use an average rate of $1.35/£ for FY18 and $1.32/£ for FY19, down from $1.40/£ for both years. We have increased our tax rate assumption to 18% from 17% for both years.

Exhibit 4: Changes to forecasts

£m

FY18e

FY18e

y-o-y

FY19e

FY19e

y-o-y

Old

New

Change

Old

New

Change

Revenues

193.9

198.9

2.6%

19.2%

209.4

219.4

4.8%

10.3%

Gross profit

89.8

90.8

1.1%

17.0%

97.1

100.4

3.4%

10.6%

Gross margin

46.3%

45.6%

(0.6%)

(0.9%)

46.3%

45.7%

(0.6%)

0.1%

EBITDA

48.5

49.2

1.4%

18.1%

53.1

55.0

3.5%

11.7%

EBITDA margin

25.0%

24.8%

(0.3%)

(0.2%)

25.4%

25.1%

(0.3%)

0.3%

Normalised operating profit

42.8

43.5

1.6%

19.6%

47.1

49.0

3.9%

12.5%

Normalised operating profit margin

22.1%

21.9%

(0.2%)

0.1%

22.5%

22.3%

(0.2%)

0.4%

Reported operating profit

41.4

41.7

0.7%

28.4%

45.9

47.8

4.0%

14.5%

Reported operating margin

21.4%

21.0%

(0.4%)

1.5%

21.9%

21.8%

(0.1%)

0.8%

Normalised PBT

41.7

42.2

1.2%

16.8%

45.6

47.2

3.6%

11.9%

Reported PBT

40.3

40.4

0.2%

25.4%

44.4

46.0

3.7%

14.0%

Normalised net income

34.4

34.4

0.2%

20.8%

37.6

38.5

2.4%

11.7%

Reported net income

33.2

32.9

(1.0%)

16.1%

36.6

37.5

2.5%

14.1%

Normalised basic EPS (p)

180.0

180.4

0.2%

20.8%

196.7

201.5

2.4%

11.7%

Normalised diluted EPS (p)

177.2

177.6

0.2%

20.8%

193.7

198.4

2.4%

11.7%

Reported basic EPS (p)

173.8

172.1

(1.0%)

16.0%

191.5

196.3

2.5%

14.1%

Dividend per share (p)

82.0

82.0

0.0%

5.1%

85.0

85.0

0.0%

3.7%

Net debt/(cash)

38.3

44.8

16.9%

397.8%

25.8

32.7

26.7%

(27.0%)

Source: Edison Investment Research

Valuation

XP generates EBITDA and EBIT margins at the top end of the peer group. Due to acquisitions, revenue growth is higher than the peer group. On a P/E basis, the company is trading at a premium to global power converter companies and at a discount to UK electronics companies, with a dividend yield at the top end of the range. We see scope for upgrades to earnings estimates from cross-selling and further market share gains. In the longer term, we expect to see the company make further acquisitions to drive growth.

Exhibit 5: Peer group financial metrics

Market cap (m)

Share price

Listing ccy

Revenue growth

EBITDA margin

EBIT margin

CY17

CY18e

CY19e

CY17

CY18e

CY19e

CY17

CY18e

CY19e

XP Power

682

3570

GBP

28.5%

19.2%

10.3%

25.0%

24.8%

25.1%

21.8%

21.9%

22.3%

Cosel*

48822

1312

JPY

18.3%

11.1%

4.2%

20.9%

21.4%

21.5%

17.7%

Delta Electronics

268846

103.5

TWD

4.3%

4.3%

5.9%

13.3%

12.5%

12.8%

8.8%

8.2%

9.1%

Advanced Energy Industries

2314

58.83

USD

38.7%

15.7%

6.7%

31.3%

32.7%

32.3%

29.9%

32.0%

32.9%

Comet Holdings

705

90.9

CHF

31.9%

3.7%

2.4%

14.5%

12.2%

15.5%

11.6%

9.9%

12.6%

CML Microsystems**

90

525

GBP

14.2%

5.4%

3.6%

30.7%

32.5%

32.4%

13.9%

14.4%

14.7%

Diploma

1525

1347

GBP

18.1%

5.5%

3.5%

16.2%

18.4%

18.6%

15.2%

17.4%

17.7%

Electrocomponents**

3214

727.4

GBP

12.8%

8.0%

5.6%

11.6%

13.0%

13.6%

10.1%

11.3%

11.8%

Gooch & Housego***

378

1527.5

GBP

30.2%

8.9%

3.8%

17.3%

18.7%

19.0%

11.9%

15.7%

15.8%

TT Electronics

404

248

GBP

-36.8%

14.2%

11.4%

9.1%

10.7%

11.4%

5.6%

6.9%

7.5%

Average power converter companies

23.3%

8.7%

4.8%

20.0%

19.7%

20.5%

17.0%

16.7%

18.2%

Average UK electronics companies

7.7%

8.4%

5.6%

17.0%

18.7%

19.0%

11.3%

13.1%

13.5%

Source: Bloomberg. Note: Priced at 25 July 2018. *CY17=y/e 31 May 2018; **CY17=y/e 31 March 2018; ***CY17=y/e 30 September 2017.

Exhibit 6: Peer valuation multiples

P/E (x)

EV/EBITDA (x)

Div yield

CY17

CY18e

CY19e

CY17

CY18e

CY19e

CY17

CY18e

CY19e

XP Power

24.3

20.1

18.0

16.6

14.0

12.6

2.2%

2.3%

2.4%

Cosel

14.6

13.3

12.6

6.6

5.7

5.5

2.4%

2.7%

2.9%

Delta Electronics

15.0

15.5

13.4

8.2

8.4

7.7

4.8%

4.7%

5.1%

Advanced Energy Industries

13.2

11.4

10.6

9.0

7.5

7.1

0.0%

0.0%

0.0%

Comet Holdings

19.8

22.3

16.8

11.2

12.8

9.8

1.7%

1.7%

2.0%

CML Microsystems

21.9

21.5

20.3

7.8

7.0

6.8

1.5%

1.5%

1.6%

Diploma

27.1

24.6

23.4

20.6

17.2

16.5

1.7%

1.9%

2.0%

Electrocomponents

20.9

20.9

18.8

16.5

13.7

12.4

0.7%

2.0%

2.3%

Gooch & Housego

37.9

27.2

25.7

19.3

16.3

15.5

0.7%

0.7%

0.8%

TT Electronics

18.9

19.5

15.5

11.0

8.2

6.9

2.3%

2.5%

2.8%

Average power converter companies

15.7

15.6

13.4

8.8

8.6

7.5

2.2%

2.3%

2.5%

Average UK electronics companies

25.3

22.7

20.7

15.0

12.5

11.6

1.4%

1.8%

1.9%

Source: Bloomberg. Note: Priced at 25 July 2018.

Exhibit 7: Financial summary

£'m

2012

2013

2014

2015

2016

2017

2018e

2019e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

93.9

101.1

101.1

109.7

129.8

166.8

198.9

219.4

Cost of Sales

(49.0)

(51.5)

(51.0)

(55.1)

(67.8)

(89.2)

(108.1)

(119.0)

Gross Profit

44.9

49.6

50.1

54.6

62.0

77.6

90.8

100.4

EBITDA

 

 

23.3

26.0

27.6

29.7

33.0

41.7

49.2

55.0

Normalised operating profit

 

 

21.0

23.3

24.5

25.9

28.8

36.4

43.5

49.0

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

(0.4)

(0.6)

(1.4)

(1.2)

Exceptionals

0.0

0.0

0.0

(0.3)

(0.4)

(3.3)

(0.4)

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

21.0

23.3

24.5

25.6

28.0

32.5

41.7

47.8

Net Interest

(0.8)

(0.4)

(0.2)

(0.2)

(0.2)

(0.3)

(1.4)

(1.8)

Joint ventures & associates (post tax)

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

Profit Before Tax (norm)

 

 

20.2

22.9

24.3

25.7

28.6

36.1

42.2

47.2

Profit Before Tax (reported)

 

 

20.2

22.9

24.3

25.4

27.8

32.2

40.4

46.0

Reported tax

(4.5)

(4.5)

(4.8)

(5.5)

(6.3)

(3.6)

(7.3)

(8.3)

Profit After Tax (norm)

15.7

18.4

19.5

20.2

22.3

28.8

34.7

38.7

Profit After Tax (reported)

15.7

18.4

19.5

19.9

21.5

28.6

33.1

37.7

Minority interests

(0.2)

(0.2)

(0.1)

(0.2)

(0.2)

(0.3)

(0.3)

(0.3)

Discontinued operations

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

34.4

38.5

Net income (reported)

15.5

18.2

19.4

19.7

21.3

28.3

32.9

37.5

Basic average number of shares outstanding (m)

19

19

19

19

19

19

19

19

EPS - basic normalised (p)

 

 

81.67

95.84

102.12

105.28

116.22

149.36

180.36

201.53

EPS - diluted normalised (p)

 

 

81.35

95.05

101.07

104.32

115.33

147.00

177.57

198.42

EPS - basic reported (p)

 

 

81.67

95.84

102.12

103.70

112.02

148.31

172.08

196.30

Dividend (p)

50

55

61

66

71

78

82

85

Revenue growth (%)

(9.4)

7.7

0.0

8.5

18.3

28.5

19.2

10.3

Gross Margin (%)

47.8

49.1

49.6

49.8

47.8

46.5

45.6

45.7

EBITDA Margin (%)

24.8

25.7

27.3

27.0

25.4

25.0

24.8

25.1

Normalised Operating Margin

22.4

23.0

24.2

23.6

22.2

21.8

21.9

22.3

BALANCE SHEET

Fixed Assets

 

 

52.8

53.3

56.1

65.4

73.2

88.1

127.2

131.2

Intangible Assets

38.1

39.1

40.5

48.2

53.0

63.9

92.3

93.8

Tangible Assets

13.2

12.7

14.4

16.1

19.1

22.5

33.2

35.7

Investments & other

1.5

1.5

1.2

1.1

1.1

1.7

1.7

1.7

Current Assets

 

 

39.3

42.2

47.0

53.5

65.7

83.5

93.2

108.2

Stocks

19.8

20.4

25.2

28.7

32.2

37.8

48.0

52.8

Debtors

14.2

15.4

16.0

17.5

21.5

23.8

30.0

33.1

Cash & cash equivalents

4.1

5.0

3.8

4.9

9.2

15.0

11.2

18.3

Other

1.2

1.4

2.0

2.4

2.8

6.9

4.0

4.0

Current Liabilities

 

 

(20.2)

(22.4)

(18.6)

(19.8)

(25.8)

(25.1)

(29.1)

(31.6)

Creditors

(11.1)

(12.7)

(14.4)

(14.6)

(16.1)

(21.4)

(25.4)

(27.9)

Tax and social security

(1.6)

(1.1)

(1.7)

(1.2)

(3.3)

(3.5)

(3.5)

(3.5)

Short term borrowings

(7.3)

(8.5)

(2.5)

(4.0)

(5.5)

0.0

0.0

0.0

Other

(0.2)

(0.1)

0.0

0.0

(0.9)

(0.2)

(0.2)

(0.2)

Long Term Liabilities

 

 

(10.6)

(3.7)

(4.2)

(10.0)

(6.2)

(29.6)

(61.6)

(56.6)

Long term borrowings

(7.4)

0.0

0.0

(4.6)

0.0

(24.0)

(56.0)

(51.0)

Other long term liabilities

(3.2)

(3.7)

(4.2)

(5.4)

(6.2)

(5.6)

(5.6)

(5.6)

Net Assets

 

 

61.3

69.4

80.3

89.1

106.9

116.9

129.6

151.1

Minority interests

(0.2)

(0.2)

(0.1)

(0.8)

(0.8)

(0.9)

(1.0)

(1.1)

Shareholders' equity

 

 

61.1

69.2

80.2

88.3

106.1

116.0

128.6

150.0

CASH FLOW

Op Cash Flow before WC and tax

23.3

26.0

27.6

29.7

33.0

41.7

49.2

55.0

Working capital

4.2

(0.3)

(4.1)

(4.6)

(6.1)

0.4

(12.3)

(5.4)

Exceptional & other

0.4

(0.5)

1.9

0.6

5.1

(6.3)

(0.4)

0.0

Tax

(4.3)

(5.0)

(3.6)

(4.7)

(4.1)

(6.1)

(4.4)

(8.3)

Net operating cash flow

 

 

23.6

20.2

21.8

21.0

27.9

29.7

32.1

41.3

Capex

(4.7)

(3.2)

(5.8)

(5.4)

(6.8)

(10.1)

(15.5)

(11.2)

Acquisitions/disposals

(1.6)

0.1

0.1

(8.3)

0.1

(18.3)

(35.6)

0.0

Net interest

(0.5)

(0.3)

(0.1)

(0.1)

(0.2)

(0.2)

(1.4)

(1.8)

Equity financing

(0.5)

0.1

(0.2)

0.0

0.2

(0.2)

0.0

0.0

Dividends

(9.1)

(10.1)

(11.0)

(12.2)

(13.1)

(14.2)

(15.5)

(16.2)

Other

0.5

0.2

0.1

0.2

0.0

0.0

0.0

0.0

Net Cash Flow

7.7

7.0

4.9

(4.8)

8.1

(13.3)

(35.8)

12.1

Opening net debt/(cash)

 

 

18.6

10.6

3.5

(1.3)

3.7

(3.7)

9.0

44.8

FX

0.3

0.1

(0.1)

(0.2)

(0.5)

0.7

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.1

(0.2)

(0.1)

0.0

0.0

Closing net debt/(cash)

 

 

10.6

3.5

(1.3)

3.7

(3.7)

9.0

44.8

32.7

Source: XP Power, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by XP Power and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by XP Power and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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