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Well-flagged supply chain issues in Q421 held back revenue despite continued strong order intake. We have trimmed our FY21 forecasts to reflect this (EPS down 2.9%) but note that stronger than expected order intake increases confidence in our unchanged FY22 forecasts.
XP Power |
Record orders in FY21 |
Trading update |
Tech hardware & equipment |
11 January 2022 |
Share price performance
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Analyst
XP Power is a research client of Edison Investment Research Limited |
Well-flagged supply chain issues in Q421 held back revenue despite continued strong order intake. We have trimmed our FY21 forecasts to reflect this (EPS down 2.9%) but note that stronger than expected order intake increases confidence in our unchanged FY22 forecasts.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
199.9 |
32.3 |
141.4 |
55.0 |
34.0 |
1.1 |
12/20 |
233.3 |
44.3 |
198.4 |
74.0 |
24.2 |
1.5 |
12/21e |
240.2 |
43.5 |
179.0 |
95.0 |
26.8 |
2.0 |
12/22e |
257.1 |
49.3 |
203.7 |
98.0 |
23.6 |
2.0 |
Note: *PBT and EPS (diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Supply chain issues weigh on Q421 revenue
XP Power reported Q421 revenue of £58.8m (-1% y-o-y, +4% in constant currency, -5% q-o-q). Previously flagged supply chain issues (production constraints, reduced freight capacity) meant that the company was not able to ship as much product as initially expected, resulting in FY21 revenue of £240.2m (+3% y-o-y, +10% constant currency), below our £243.7m forecast. While a large proportion of FY20 revenue growth of 17% was due to high demand for COVID-19 related healthcare equipment, FY21 constant currency growth of 10% was predominantly driven by semiconductor equipment manufacturers. Lower Q421 revenues flow through to adjusted operating profit, which is expected to be modestly below the current consensus range of £46–48m. We understand that production constraints have since lifted and output is back to normal levels. XP closed the year with net debt of £24.7m (vs our £24.0m forecast) and expects to announce a final dividend of at least 36p per share for a full year dividend of at least 94p (vs our 95p forecast).
Order intake remains strong
While supply chain issues weighed on the production and shipment of product, order intake across all end markets remained strong with orders worth £88.6m received in Q421 (+58% y-o-y, +65% constant currency, -9% q-o-q), resulting in FY21 orders totalling £343.4m, up 33% y-o-y or 43% at constant currency and ahead of our £327.7m forecast. XP closed the year with a record order backlog (we estimate up more than 70% y-o-y), providing good visibility for FY22 revenue. Consistently strong order intake provides evidence of demand across all end markets and should support sustained revenue growth in the short to medium term. We have revised our forecasts to reflect Q421 performance, reducing FY21e normalised diluted EPS by 2.9%. We maintain our FY22 revenue and EPS forecasts and increase our bookings forecast by 14%.
Valuation: Reflects superior profitability
On an FY21e P/E basis, XP is trading at a 12% premium to global power-converter companies and in line with UK electronics companies, with a dividend yield at the upper end of the range. The company generates EBITDA and EBIT margins at the top end of both peer groups.
Changes to forecasts
Exhibit 1: Changes to forecasts
£m |
FY21e |
FY21e |
Change |
y-o-y |
FY22e |
FY22e |
Change |
y-o-y |
Old |
New |
Old |
New |
|||||
Revenues |
243.7 |
240.2 |
(1.4%) |
3.0% |
257.1 |
257.1 |
0.0% |
7.0% |
Gross profit |
112.6 |
111.0 |
(1.4%) |
0.8% |
120.2 |
120.2 |
(0.0%) |
8.3% |
Gross margin |
46.2% |
46.2% |
(0.0%) |
(1.0%) |
46.7% |
46.7% |
(0.0%) |
0.5% |
EBITDA |
57.9 |
56.6 |
(2.2%) |
(0.3%) |
62.8 |
62.8 |
(0.0%) |
10.8% |
EBITDA margin |
23.8% |
23.6% |
(0.2%) |
(0.8%) |
24.4% |
24.4% |
(0.0%) |
0.8% |
Normalised operating profit |
46.3 |
45.0 |
(2.8%) |
(2.1%) |
50.6 |
50.6 |
(0.0%) |
12.3% |
Normalised operating margin |
19.0% |
18.7% |
(0.3%) |
(1.0%) |
19.7% |
19.7% |
(0.0%) |
0.9% |
Reported operating profit |
36.6 |
35.3 |
(3.5%) |
(5.5%) |
47.4 |
47.4 |
(0.0%) |
34.1% |
Reported operating margin |
15.0% |
14.7% |
(0.3%) |
(1.3%) |
18.4% |
18.4% |
(0.0%) |
3.7% |
Normalised PBT |
44.8 |
43.5 |
(2.9%) |
(1.7%) |
49.3 |
49.3 |
(0.0%) |
13.2% |
Reported PBT |
35.1 |
33.8 |
(3.7%) |
(5.2%) |
46.1 |
46.1 |
(0.0%) |
36.2% |
Normalised net income |
36.8 |
35.7 |
(2.9%) |
(8.4%) |
40.7 |
40.7 |
(0.0%) |
13.8% |
Reported net income |
28.9 |
27.8 |
(3.7%) |
(11.7%) |
38.0 |
38.0 |
(0.0%) |
36.5% |
Normalised basic EPS (p) |
187.4 |
182.0 |
(2.9%) |
(9.8%) |
207.1 |
207.1 |
(0.0%) |
13.8% |
Normalised diluted EPS (p) |
184.4 |
179.0 |
(2.9%) |
(9.8%) |
203.7 |
203.7 |
(0.0%) |
13.8% |
Reported basic EPS (p) |
147.2 |
141.7 |
(3.7%) |
(13.1%) |
193.5 |
193.5 |
(0.0%) |
36.5% |
Dividend per share (p) |
95.0 |
95.0 |
0.0% |
28.4% |
98.0 |
98.0 |
0.0% |
3.2% |
Net debt/(cash) |
24.0 |
24.7 |
2.6% |
37.7% |
12.1 |
13.4 |
10.3% |
(45.8%) |
Orders |
327.7 |
343.4 |
4.8% |
33.1% |
282.3 |
322.6 |
14.3% |
(6.1%) |
Source: Edison Investment Research
Exhibit 2: Financial summary
£m |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||||
Revenue |
|
|
109.7 |
129.8 |
166.8 |
195.1 |
199.9 |
233.3 |
240.2 |
257.1 |
Cost of Sales |
(55.1) |
(67.8) |
(89.2) |
(102.8) |
(109.8) |
(123.2) |
(129.3) |
(137.0) |
||
Gross Profit |
54.6 |
62.0 |
77.6 |
92.3 |
90.1 |
110.1 |
111.0 |
120.2 |
||
EBITDA |
|
|
29.7 |
33.0 |
41.7 |
49.2 |
44.5 |
56.8 |
56.6 |
62.8 |
Normalised operating profit |
|
|
25.9 |
28.8 |
36.4 |
42.9 |
35.0 |
46.0 |
45.0 |
50.6 |
Amortisation of acquired intangibles |
0.0 |
(0.4) |
(0.6) |
(2.8) |
(3.2) |
(3.2) |
(3.2) |
(3.2) |
||
Exceptionals |
(0.3) |
(0.4) |
(3.3) |
(0.8) |
(5.1) |
(5.4) |
(6.5) |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
25.6 |
28.0 |
32.5 |
39.3 |
26.7 |
37.4 |
35.3 |
47.4 |
||
Net Interest |
(0.2) |
(0.2) |
(0.3) |
(1.7) |
(2.7) |
(1.7) |
(1.5) |
(1.3) |
||
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) |
|
|
25.7 |
28.6 |
36.1 |
41.2 |
32.3 |
44.3 |
43.5 |
49.3 |
Profit Before Tax (reported) |
|
|
25.4 |
27.8 |
32.2 |
37.6 |
24.0 |
35.7 |
33.8 |
46.1 |
Reported tax |
(5.5) |
(6.3) |
(3.6) |
(7.2) |
(3.2) |
(4.0) |
(5.8) |
(7.8) |
||
Profit After Tax (norm) |
20.2 |
22.3 |
28.8 |
33.9 |
27.9 |
39.2 |
36.0 |
40.9 |
||
Profit After Tax (reported) |
19.9 |
21.5 |
28.6 |
30.4 |
20.8 |
31.7 |
28.1 |
38.2 |
||
Minority interests |
(0.2) |
(0.2) |
(0.3) |
(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 |
||
Net income (normalised) |
20.0 |
22.1 |
28.5 |
33.7 |
27.6 |
39.0 |
35.7 |
40.7 |
||
Net income (reported) |
19.7 |
21.3 |
28.3 |
30.2 |
20.5 |
31.5 |
27.8 |
38.0 |
||
Basic average number of shares outstanding (m) |
19.0 |
19.0 |
19.1 |
19.1 |
19.2 |
19.3 |
19.6 |
19.6 |
||
EPS - basic normalised (p) |
|
|
105.3 |
116.2 |
149.4 |
176.1 |
144.1 |
201.8 |
182.0 |
207.1 |
EPS - diluted normalised (p) |
|
|
104.3 |
115.3 |
147.0 |
172.8 |
141.4 |
198.4 |
179.0 |
203.7 |
EPS - basic reported (p) |
|
|
103.7 |
112.0 |
148.3 |
157.8 |
107.0 |
163.0 |
141.7 |
193.5 |
Dividend (p) |
66 |
71 |
78 |
85 |
55 |
74 |
95 |
98 |
||
Revenue growth (%) |
8.5 |
18.3 |
28.5 |
17.0 |
2.5 |
16.7 |
3.0 |
7.0 |
||
Gross Margin (%) |
49.8 |
47.8 |
46.5 |
47.3 |
45.1 |
47.2 |
46.2 |
46.7 |
||
EBITDA Margin (%) |
27.0 |
25.4 |
25.0 |
25.2 |
22.3 |
24.3 |
23.6 |
24.4 |
||
Normalised Operating Margin |
23.6 |
22.2 |
21.8 |
22.0 |
17.5 |
19.7 |
18.7 |
19.7 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
65.4 |
73.2 |
88.1 |
129.2 |
137.4 |
135.2 |
141.4 |
143.5 |
Intangible Assets |
48.2 |
53.0 |
63.9 |
97.7 |
99.6 |
98.8 |
105.4 |
107.8 |
||
Tangible Assets |
16.1 |
19.1 |
22.5 |
30.7 |
35.9 |
33.5 |
33.1 |
32.8 |
||
Investments & other |
1.1 |
1.1 |
1.7 |
0.8 |
1.9 |
2.9 |
2.9 |
2.9 |
||
Current Assets |
|
|
53.5 |
65.7 |
83.5 |
105.1 |
96.0 |
107.0 |
105.3 |
117.2 |
Stocks |
28.7 |
32.2 |
37.8 |
56.5 |
44.1 |
54.2 |
54.5 |
57.8 |
||
Debtors |
17.5 |
21.5 |
23.8 |
33.0 |
34.8 |
30.2 |
39.9 |
42.3 |
||
Cash & cash equivalents |
4.9 |
9.2 |
15.0 |
11.5 |
11.2 |
13.9 |
2.1 |
8.4 |
||
Other |
2.4 |
2.8 |
6.9 |
4.1 |
5.9 |
8.7 |
8.7 |
8.7 |
||
Current Liabilities |
|
|
(19.8) |
(25.8) |
(25.1) |
(26.8) |
(30.4) |
(34.7) |
(36.1) |
(37.8) |
Creditors |
(14.6) |
(16.1) |
(21.4) |
(22.4) |
(25.2) |
(28.3) |
(29.7) |
(31.4) |
||
Tax and social security |
(1.2) |
(3.3) |
(3.5) |
(4.2) |
(3.1) |
(4.9) |
(4.9) |
(4.9) |
||
Short term borrowings |
(4.0) |
(5.5) |
0.0 |
0.0 |
(1.6) |
(1.5) |
(1.5) |
(1.5) |
||
Other |
0.0 |
(0.9) |
(0.2) |
(0.2) |
(0.5) |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(10.0) |
(6.2) |
(29.6) |
(70.1) |
(64.1) |
(43.0) |
(36.3) |
(29.6) |
Long term borrowings |
(4.6) |
0.0 |
(24.0) |
(63.5) |
(57.3) |
(35.2) |
(28.5) |
(21.8) |
||
Other long term liabilities |
(5.4) |
(6.2) |
(5.6) |
(6.6) |
(6.8) |
(7.8) |
(7.8) |
(7.8) |
||
Net Assets |
|
|
89.1 |
106.9 |
116.9 |
137.4 |
138.9 |
164.5 |
174.2 |
193.2 |
Minority interests |
(0.8) |
(0.8) |
(0.9) |
(1.0) |
(0.7) |
(0.7) |
(0.8) |
(0.8) |
||
Shareholders' equity |
|
|
88.3 |
106.1 |
116.0 |
136.4 |
138.2 |
163.8 |
173.5 |
192.4 |
CASH FLOW |
||||||||||
Op Cash Flow before WC and tax |
29.7 |
33.0 |
41.7 |
49.2 |
44.5 |
56.8 |
56.6 |
62.8 |
||
Working capital |
(4.6) |
(6.1) |
0.4 |
(21.6) |
10.6 |
(6.2) |
(8.6) |
(3.9) |
||
Exceptional & other |
0.6 |
5.1 |
(6.3) |
3.2 |
(4.4) |
(1.7) |
(6.5) |
0.0 |
||
Tax |
(4.7) |
(4.1) |
(6.1) |
(4.1) |
(4.5) |
(3.3) |
(5.8) |
(7.8) |
||
Net operating cash flow |
|
|
21.0 |
27.9 |
29.7 |
26.7 |
46.2 |
45.6 |
35.7 |
51.0 |
Capex |
(5.4) |
(6.8) |
(10.1) |
(15.0) |
(16.3) |
(14.9) |
(21.0) |
(17.5) |
||
Acquisitions/disposals |
(8.3) |
0.1 |
(18.3) |
(35.4) |
0.0 |
(0.5) |
0.0 |
0.0 |
||
Net interest |
(0.1) |
(0.2) |
(0.2) |
(1.5) |
(2.7) |
(1.3) |
(1.5) |
(1.3) |
||
Equity financing |
0.0 |
0.2 |
(0.2) |
0.6 |
0.5 |
3.5 |
0.0 |
0.0 |
||
Dividends |
(12.2) |
(13.1) |
(14.2) |
(15.6) |
(17.2) |
(7.3) |
(18.3) |
(19.2) |
||
Other |
0.2 |
0.0 |
0.0 |
0.0 |
(1.5) |
(1.7) |
(1.7) |
(1.7) |
||
Net Cash Flow |
(4.8) |
8.1 |
(13.3) |
(40.2) |
9.0 |
23.4 |
(6.8) |
11.3 |
||
Opening net debt/(cash) |
|
|
(1.3) |
3.7 |
(3.7) |
9.0 |
52.0 |
41.3 |
17.9 |
24.7 |
FX |
(0.2) |
(0.5) |
0.6 |
(2.7) |
1.7 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.1 |
(0.2) |
0.0 |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
3.7 |
(3.7) |
9.0 |
52.0 |
41.3 |
17.9 |
24.7 |
13.4 |
Source: XP Power, Edison Investment Research
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