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Research: TMT
XP Power closed FY23 with higher-than-expected revenue, benefiting from the delay to relocation of its California facility, which pulled shipments worth c £5m into Q423 and pushed c £12m capex into Q124. Q423 order intake was higher than we forecast, with upside from semiconductor equipment customers partially offset by weaker demand from healthcare and industrial customers. Timing issues and currency resulted in lower-than-expected gearing at end-FY23, although it is expected to rise in H124 before reducing again in H224. Management expects market conditions to improve through 2024, with results weighted to H2. We maintain our forecasts pending FY23 results in March.
XP Power |
Expecting better market conditions in 2024 |
FY23 trading update |
Electronic and electrical equipment |
11 January 2024 |
Share price performance
Business description
Next events
Analyst
XP Power is a research client of Edison Investment Research Limited |
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XP Power closed FY23 with higher-than-expected revenue, benefiting from the delay to relocation of its California facility, which pulled shipments worth c £5m into Q423 and pushed c £12m capex into Q124. Q423 order intake was higher than we forecast, with upside from semiconductor equipment customers partially offset by weaker demand from healthcare and industrial customers. Timing issues and currency resulted in lower-than-expected gearing at end-FY23, although it is expected to rise in H124 before reducing again in H224. Management expects market conditions to improve through 2024, with results weighted to H2. We maintain our forecasts pending FY23 results in March.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/21 |
240.3 |
43.8 |
176.3 |
94 |
7.3 |
7.3 |
12/22 |
290.4 |
38.0 |
160.1 |
94 |
8.1 |
7.3 |
12/23e |
309.8 |
28.3 |
111.2 |
18 |
11.6 |
1.4 |
12/24e |
307.5 |
28.2 |
94.1 |
0 |
13.7 |
N/A |
Note: *PBT and EPS (diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q423/FY23 revenue ahead due to delayed relocation
XP expects to report Q423 revenue of £81.2m (-7% y-o-y, -5% constant currency (cc)) and FY23 revenue of £316.5m (+9% y-o-y, +8% cc). This is c £6.5m ahead of our forecasts, mainly due to the decision to delay the relocation of the California facility from December 2023 to January 2024. The resulting £5m of shipments brought into Q423 will reduce the level of shipments in early Q124. Q423 order intake of £49.1m was 7% ahead of our forecast, resulting in a Q4 book-to-bill ratio of 0.6x. The company noted that semiconductor equipment customers placed orders for high-voltage products, while demand from healthcare and industrial customers was a little weaker. The order book was c £192m at the end of FY23, down from £225m at the end of Q323. Actions taken to reduce costs and borrowings are on track and delivering the expected benefits.
Net debt helped by delay to relocation and currency
Year-end net debt of £112.6m was 21% lower than our £142.2m forecast, mainly due to the combination of a £12m pushout of capex for the US relocation into Q124 and the stronger pound versus the dollar reducing the reported value of dollar-denominated debt. While FY23 profitability has not yet been finalised, the company estimates that year-end net debt/adj. EBITDA was c 2x, substantially lower than our 2.6x forecast, although we believe the majority of this is timing related.
Valuation: Bookings growth the next trigger
The stock is up c 66% from its low in October 2023. On an FY24 P/E basis, XP is trading at a c 40% discount to global power solution companies and c 10% discount to UK electronics companies, with EBIT margins at the upper end of both peer groups. Our 10-year discounted cash flow with conservative growth assumptions values the company at 1,987p, 54% above the current share price.
Exhibit 1: Financial summary
£'m |
2018 |
2019 |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||||
Revenue |
|
|
195.1 |
199.9 |
233.3 |
240.3 |
290.4 |
309.8 |
307.5 |
319.2 |
Cost of Sales |
(102.8) |
(109.8) |
(123.2) |
(132.0) |
(169.8) |
(180.5) |
(179.0) |
(185.2) |
||
Gross Profit |
92.3 |
90.1 |
110.1 |
108.3 |
120.6 |
129.4 |
128.4 |
133.9 |
||
EBITDA |
|
|
49.2 |
44.5 |
56.8 |
55.5 |
56.4 |
58.3 |
59.7 |
63.9 |
Normalised operating profit |
|
|
42.9 |
35.0 |
46.0 |
45.1 |
42.9 |
42.3 |
42.2 |
45.7 |
Amortisation of acquired intangibles |
(2.8) |
(3.2) |
(3.2) |
(2.8) |
(4.1) |
(3.5) |
(3.5) |
(3.5) |
||
Exceptionals |
(0.8) |
(5.1) |
(5.4) |
(12.6) |
(62.9) |
(7.0) |
0.0 |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
39.3 |
26.7 |
37.4 |
29.7 |
(24.1) |
31.8 |
38.7 |
42.2 |
||
Net Interest |
(1.7) |
(2.7) |
(1.7) |
(1.3) |
(4.9) |
(14.0) |
(14.0) |
(13.0) |
||
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 |
(1.2) |
(1.6) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
41.2 |
32.3 |
44.3 |
43.8 |
38.0 |
28.3 |
28.2 |
32.7 |
Profit Before Tax (reported) |
|
|
37.6 |
24.0 |
35.7 |
28.4 |
(30.2) |
16.2 |
24.7 |
29.2 |
Reported tax |
(7.2) |
(3.2) |
(4.0) |
(5.4) |
10.6 |
(3.1) |
(4.9) |
(5.8) |
||
Profit After Tax (norm) |
33.9 |
27.9 |
39.2 |
35.4 |
31.9 |
22.9 |
22.6 |
26.2 |
||
Profit After Tax (reported) |
30.4 |
20.8 |
31.7 |
23.0 |
(19.6) |
13.1 |
19.8 |
23.4 |
||
Minority interests |
(0.2) |
(0.3) |
(0.2) |
(0.4) |
(0.4) |
(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) |
33.7 |
27.6 |
39.0 |
35.0 |
31.5 |
22.7 |
22.3 |
25.9 |
||
Net income (reported) |
30.2 |
20.5 |
31.5 |
22.6 |
(20.0) |
12.9 |
19.5 |
23.1 |
||
Basic average number of shares outstanding (m) |
19.1 |
19.2 |
19.3 |
19.5 |
19.6 |
20.3 |
23.7 |
23.7 |
||
EPS - basic normalised (p) |
|
|
176.1 |
144.1 |
201.8 |
179.4 |
160.6 |
111.6 |
94.3 |
109.5 |
EPS - diluted normalised (p) |
|
|
172.8 |
141.4 |
198.4 |
176.3 |
160.1 |
111.2 |
94.1 |
109.2 |
EPS - basic reported (p) |
|
|
157.8 |
107.0 |
163.0 |
115.8 |
(102.0) |
63.4 |
82.5 |
97.7 |
Dividend (p) |
85 |
55 |
74 |
94 |
94 |
18 |
0 |
58 |
||
Revenue growth (%) |
17.0 |
2.5 |
16.7 |
3.0 |
20.8 |
6.7 |
(-0.8) |
3.8 |
||
Gross Margin (%) |
47.3 |
45.1 |
47.2 |
45.1 |
41.5 |
41.8 |
41.8 |
42.0 |
||
EBITDA Margin (%) |
25.2 |
22.3 |
24.3 |
23.1 |
19.4 |
18.8 |
19.4 |
20.0 |
||
Normalised Operating Margin |
22.0 |
17.5 |
19.7 |
18.8 |
14.8 |
13.7 |
13.7 |
14.3 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
129.2 |
137.4 |
135.2 |
150.5 |
255.1 |
287.1 |
290.6 |
293.4 |
Intangible Assets |
97.7 |
99.6 |
98.8 |
108.8 |
147.4 |
147.9 |
148.9 |
149.7 |
||
Tangible Assets |
30.7 |
35.9 |
33.5 |
38.5 |
91.5 |
123.0 |
125.5 |
127.5 |
||
Investments & other |
0.8 |
1.9 |
2.9 |
3.2 |
16.2 |
16.2 |
16.2 |
16.2 |
||
Current Assets |
|
|
105.1 |
96.0 |
107.0 |
121.7 |
226.6 |
238.3 |
231.8 |
226.4 |
Stocks |
56.5 |
44.1 |
54.2 |
74.0 |
114.4 |
120.1 |
110.4 |
109.1 |
||
Debtors |
33.0 |
34.8 |
30.2 |
30.8 |
42.4 |
42.4 |
42.1 |
43.7 |
||
Cash & cash equivalents |
11.5 |
11.2 |
13.9 |
9.0 |
22.3 |
32.2 |
39.8 |
38.0 |
||
Other |
4.1 |
5.9 |
8.7 |
7.9 |
47.5 |
43.5 |
39.5 |
35.5 |
||
Current Liabilities |
|
|
(26.8) |
(30.4) |
(34.7) |
(49.0) |
(106.2) |
(107.4) |
(106.5) |
(108.3) |
Creditors |
(22.4) |
(25.2) |
(28.3) |
(44.7) |
(52.6) |
(62.0) |
(61.1) |
(62.9) |
||
Tax and social security |
(4.2) |
(3.1) |
(4.9) |
(2.5) |
(4.9) |
(4.9) |
(4.9) |
(4.9) |
||
Short term borrowings |
0.0 |
(1.6) |
(1.5) |
(1.8) |
(2.6) |
(3.4) |
(3.4) |
(3.4) |
||
Other |
(0.2) |
(0.5) |
0.0 |
0.0 |
(46.1) |
(37.1) |
(37.1) |
(37.1) |
||
Long Term Liabilities |
|
|
(70.1) |
(64.1) |
(43.0) |
(50.8) |
(236.0) |
(234.3) |
(212.6) |
(190.9) |
Long term borrowings |
(63.5) |
(57.3) |
(35.2) |
(39.9) |
(223.1) |
(221.4) |
(199.7) |
(178.0) |
||
Other long term liabilities |
(6.6) |
(6.8) |
(7.8) |
(10.9) |
(12.9) |
(12.9) |
(12.9) |
(12.9) |
||
Net Assets |
|
|
137.4 |
138.9 |
164.5 |
172.4 |
139.5 |
183.6 |
203.2 |
220.5 |
Minority interests |
(1.0) |
(0.7) |
(0.7) |
(0.9) |
(0.8) |
(0.9) |
(0.9) |
(1.0) |
||
Shareholders' equity |
|
|
136.4 |
138.2 |
163.8 |
171.5 |
138.7 |
182.8 |
202.3 |
219.5 |
CASH FLOW |
||||||||||
Op Cash Flow before WC and tax |
49.2 |
44.5 |
56.8 |
55.5 |
56.4 |
58.3 |
59.7 |
63.9 |
||
Working capital |
(21.6) |
10.6 |
(6.2) |
(4.0) |
(33.5) |
3.6 |
9.2 |
1.5 |
||
Exceptional & other |
3.2 |
(4.4) |
(1.7) |
(10.9) |
(57.7) |
(16.0) |
0.0 |
0.0 |
||
Tax |
(4.1) |
(4.5) |
(3.3) |
(4.2) |
(4.1) |
0.9 |
(0.9) |
(1.8) |
||
Net operating cash flow |
|
|
26.7 |
46.2 |
45.6 |
36.4 |
(38.9) |
46.9 |
67.9 |
63.6 |
Capex |
(15.0) |
(16.3) |
(14.9) |
(21.9) |
(19.4) |
(50.0) |
(23.0) |
(23.0) |
||
Acquisitions/disposals |
(35.4) |
0.0 |
(0.5) |
0.0 |
(33.0) |
0.0 |
0.0 |
0.0 |
||
Net interest |
(1.5) |
(2.7) |
(1.3) |
(0.9) |
(5.5) |
(14.0) |
(14.0) |
(13.0) |
||
Equity financing |
0.6 |
0.5 |
3.5 |
0.6 |
0.0 |
44.2 |
0.0 |
0.0 |
||
Dividends |
(15.6) |
(17.2) |
(7.3) |
(18.4) |
(19.0) |
(15.0) |
(0.2) |
(6.1) |
||
Other |
0.0 |
(1.5) |
(1.7) |
(1.7) |
(5.8) |
(3.2) |
(3.2) |
(3.2) |
||
Net Cash Flow |
(40.2) |
9.0 |
23.4 |
(5.9) |
(121.6) |
8.8 |
27.5 |
18.3 |
||
Opening net debt/(cash) |
|
|
9.0 |
52.0 |
41.3 |
17.9 |
24.6 |
151.0 |
142.2 |
114.6 |
FX |
(2.7) |
1.7 |
0.0 |
(0.8) |
(4.8) |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
52.0 |
41.3 |
17.9 |
24.6 |
151.0 |
142.2 |
114.6 |
96.4 |
Source: XP Power, Edison Investment Research
|
|
Research: TMT
1Spatial has announced several enterprise contract wins across key geographies, with the group executing on its growth strategy through land and expand, strategic partnerships and investment in sales. Contract extensions with the California Department of Transportation (Caltrans) and a major European utility customer provide further validation of the core enterprise offering, while the new contract with ATKIS-1Gen for cloud-based solutions signifies growing market demand away from on-premise technology towards advanced, cloud-based services. This progress provides strong momentum to the end of FY24 and positions 1Spatial for operationally geared growth in FY25, supported by a maturing pipeline for its SaaS-based applications, 1Streetworks and NG911. Progress supports our forecasts, which show top-line growth and margin expansion.