Last close As at 05/08/2026
GBP17.86
▲ 86.00 (5.06%)
Market capitalisation
GBP501m
Research: TMT
As previously flagged, a drop in demand from XP’s semiconductor customers had a negative impact on Q4 revenues and orders. Conversely, demand from all other end-markets remained strong. With FY18 revenues likely to be 2% lower than we had expected, we have revised our forecasts to reflect this and expected weaker demand from the semiconductor sector in FY19. Despite the resulting 5% cut in EPS forecasts for FY19, the stock is trading at a discount to peers, with a superior dividend yield.
XP Power |
Revising forecasts to reflect weaker semis sector |
Trading update |
Tech hardware & equipment |
14 January 2019 |
Share price performance
Business description
Next events
Analysts
XP Power is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
As previously flagged, a drop in demand from XP’s semiconductor customers had a negative impact on Q4 revenues and orders. Conversely, demand from all other end-markets remained strong. With FY18 revenues likely to be 2% lower than we had expected, we have revised our forecasts to reflect this and expected weaker demand from the semiconductor sector in FY19. Despite the resulting 5% cut in EPS forecasts for FY19, the stock is trading at a discount to peers, with a superior dividend yield.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
129.8 |
28.6 |
115.3 |
71.0 |
19.4 |
3.2 |
12/17 |
166.8 |
36.1 |
147.0 |
78.0 |
15.2 |
3.5 |
12/18e |
194.8 |
40.7 |
170.5 |
84.0 |
13.1 |
3.8 |
12/19e |
210.3 |
43.9 |
187.9 |
87.0 |
11.9 |
3.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q418 revenues and orders see sequential decline
XP expects to report Q4 revenues of £48.9m (+14% y-o-y/+12% constant currency/ -8% q-o-q) and orders of £45.1m (-4% y-o-y/-6% cc/-13% q-o-q). Weakness from the semiconductor sector (c 25% of revenues) had already been flagged, and this continued during Q4. Year-end net debt was £52.5m, versus our £44.8m forecast. XP expects to announce a Q4 dividend of at least 32p (ahead of our 30p forecast). Despite the dip in demand from semiconductor production equipment customers (SPE), XP expects to generate growth in FY19, including the effect of a full year of Glassman revenues.
Estimates revised to reflect bookings and currency
After several years of strong growth, industry association SEMI is forecasting a c 8% decline in global semiconductor capex in CY19 as chip manufacturers respond to weaker memory prices. We have revised our estimates to factor in declining SPE revenues in FY19, with the remaining business forecast to grow at mid-single digits. We have also factored in the stronger dollar (from $1.32/£1 to $1.30/£1 for FY19). We have revised our working capital forecast, assuming that inventory grew faster due to slower revenues in Q4 and the impact of the stronger dollar. We reduce our normalised EPS forecasts by 4.0% for FY18e and 5.3% for FY19e.
Valuation: Semis weakness factored in
Since its peak of 3,620p at the end of July, the stock has declined nearly 40%, we believe due to concerns over weakening demand from SPE customers. XP is now trading at 11.9x revised FY19 EPS estimates, compared to 18.9x in July. We estimate that XP currently generates c 25% of revenues from the SPE sector so is not immune to weakening sector demand, but market share gains as well as robust demand in its other end-markets should reduce the potential exposure. On an FY19e P/E basis, XP is trading at c 22% discount to global power converter companies and 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.
Changes to estimates
Exhibit 1: Changes to estimates
£'m |
FY18e |
FY18e |
y-o-y |
FY19e |
FY19e |
y-o-y |
|||
Old |
New |
Change |
Old |
New |
Change |
||||
Revenues |
198.9 |
194.8 |
(2.1%) |
16.8% |
219.4 |
210.3 |
(4.2%) |
8.0% |
|
Gross profit |
90.8 |
89.6 |
(1.3%) |
15.4% |
100.4 |
97.0 |
(3.4%) |
8.3% |
|
Gross margin |
45.6% |
46.0% |
0.4% |
(0.5%) |
45.7% |
46.1% |
0.4% |
0.1% |
|
EBITDA |
49.2 |
48.2 |
(2.0%) |
15.7% |
55.0 |
52.7 |
(4.2%) |
9.2% |
|
EBITDA margin |
24.8% |
24.8% |
0.0% |
(0.2%) |
25.1% |
25.1% |
(0.0%) |
0.3% |
|
Normalised operating profit |
43.5 |
42.1 |
(3.2%) |
15.8% |
49.0 |
45.7 |
(6.7%) |
8.4% |
|
Normalised operating profit margin |
21.9% |
21.6% |
(0.3%) |
(0.2%) |
22.3% |
21.7% |
(0.6%) |
0.1% |
|
Reported operating profit |
41.7 |
39.7 |
(4.8%) |
22.3% |
47.8 |
37.7 |
(21.1%) |
(5.2%) |
|
Reported operating margin |
21.0% |
20.4% |
(0.6%) |
0.9% |
21.8% |
17.9% |
(3.9%) |
(2.5%) |
|
Normalised PBT |
42.2 |
40.7 |
(3.5%) |
12.7% |
47.2 |
43.9 |
(7.0%) |
8.0% |
|
Reported PBT |
40.4 |
38.3 |
(5.2%) |
18.9% |
46.0 |
35.9 |
(21.9%) |
(6.1%) |
|
Normalised net income |
34.4 |
33.3 |
(3.3%) |
16.9% |
38.5 |
37.0 |
(3.8%) |
11.1% |
|
Reported net income |
32.9 |
31.1 |
(5.2%) |
10.0% |
37.5 |
29.2 |
(22.1%) |
(6.2%) |
|
Normalised basic EPS (p) |
180.4 |
173.1 |
(4.0%) |
15.9% |
201.5 |
190.8 |
(5.3%) |
10.2% |
|
Normalised diluted EPS (p) |
177.6 |
170.5 |
(4.0%) |
16.0% |
198.4 |
187.9 |
(5.3%) |
10.2% |
|
Reported basic EPS (p) |
172.1 |
161.8 |
(6.0%) |
9.1% |
196.3 |
150.6 |
(23.3%) |
(6.9%) |
|
Dividend per share (p) |
82.0 |
84.0 |
2.4% |
7.7% |
85.0 |
87.0 |
2.4% |
3.6% |
|
Net debt/(cash) |
44.8 |
52.5 |
17.2% |
483.3% |
32.7 |
45.0 |
37.4% |
(14.3%) |
Source: Edison Investment Research
Exhibit 2: 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 |
194.8 |
210.3 |
Cost of Sales |
(49.0) |
(51.5) |
(51.0) |
(55.1) |
(67.8) |
(89.2) |
(105.2) |
(113.3) |
||
Gross Profit |
44.9 |
49.6 |
50.1 |
54.6 |
62.0 |
77.6 |
89.6 |
97.0 |
||
EBITDA |
|
|
23.3 |
26.0 |
27.6 |
29.7 |
33.0 |
41.7 |
48.2 |
52.7 |
Normalised operating profit |
|
|
21.0 |
23.3 |
24.5 |
25.9 |
28.8 |
36.4 |
42.1 |
45.7 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
(0.4) |
(0.6) |
(2.0) |
(2.5) |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
(0.3) |
(0.4) |
(3.3) |
(0.4) |
(5.0) |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(0.5) |
||
Reported operating profit |
21.0 |
23.3 |
24.5 |
25.6 |
28.0 |
32.5 |
39.7 |
37.7 |
||
Net Interest |
(0.8) |
(0.4) |
(0.2) |
(0.2) |
(0.2) |
(0.3) |
(1.5) |
(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 |
40.7 |
43.9 |
Profit Before Tax (reported) |
|
|
20.2 |
22.9 |
24.3 |
25.4 |
27.8 |
32.2 |
38.3 |
35.9 |
Reported tax |
(4.5) |
(4.5) |
(4.8) |
(5.5) |
(6.3) |
(3.6) |
(6.9) |
(6.5) |
||
Profit After Tax (norm) |
15.7 |
18.4 |
19.5 |
20.2 |
22.3 |
28.8 |
33.6 |
37.3 |
||
Profit After Tax (reported) |
15.7 |
18.4 |
19.5 |
19.9 |
21.5 |
28.6 |
31.4 |
29.5 |
||
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 |
33.3 |
37.0 |
||
Net income (reported) |
15.5 |
18.2 |
19.4 |
19.7 |
21.3 |
28.3 |
31.1 |
29.2 |
||
Basic average number of shares outstanding (m) |
19 |
19 |
19 |
19 |
19 |
19 |
19 |
19 |
||
EPS - basic normalised (p) |
|
|
81.7 |
95.8 |
102.1 |
105.3 |
116.2 |
149.4 |
173.1 |
190.8 |
EPS - diluted normalised (p) |
|
|
81.3 |
95.1 |
101.1 |
104.3 |
115.3 |
147.0 |
170.5 |
187.9 |
EPS - basic reported (p) |
|
|
81.7 |
95.8 |
102.1 |
103.7 |
112.0 |
148.3 |
161.8 |
150.6 |
Dividend (p) |
50 |
55 |
61 |
66 |
71 |
78 |
84 |
87 |
||
Revenue growth (%) |
(9.4) |
7.7 |
0.0 |
8.5 |
18.3 |
28.5 |
16.8 |
8.0 |
||
Gross Margin (%) |
47.8 |
49.1 |
49.6 |
49.8 |
47.8 |
46.5 |
46.0 |
46.1 |
||
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 |
21.6 |
21.7 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
52.8 |
53.3 |
56.1 |
65.4 |
73.2 |
88.1 |
126.2 |
132.4 |
Intangible Assets |
38.1 |
39.1 |
40.5 |
48.2 |
53.0 |
63.9 |
91.6 |
91.3 |
||
Tangible Assets |
13.2 |
12.7 |
14.4 |
16.1 |
19.1 |
22.5 |
32.9 |
39.4 |
||
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 |
96.7 |
100.5 |
Stocks |
19.8 |
20.4 |
25.2 |
28.7 |
32.2 |
37.8 |
53.3 |
52.8 |
||
Debtors |
14.2 |
15.4 |
16.0 |
17.5 |
21.5 |
23.8 |
29.9 |
31.7 |
||
Cash & cash equivalents |
4.1 |
5.0 |
3.8 |
4.9 |
9.2 |
15.0 |
9.5 |
12.0 |
||
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) |
(27.8) |
(29.6) |
Creditors |
(11.1) |
(12.7) |
(14.4) |
(14.6) |
(16.1) |
(21.4) |
(24.1) |
(25.9) |
||
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) |
(67.6) |
(62.6) |
Long term borrowings |
(7.4) |
0.0 |
0.0 |
(4.6) |
0.0 |
(24.0) |
(62.0) |
(57.0) |
||
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 |
127.6 |
140.8 |
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 |
126.5 |
139.5 |
CASH FLOW |
||||||||||
Op Cash Flow before WC and tax |
23.3 |
26.0 |
27.6 |
29.7 |
33.0 |
41.7 |
48.2 |
52.7 |
||
Working capital |
4.2 |
(0.3) |
(4.1) |
(4.6) |
(6.1) |
0.4 |
(18.9) |
0.6 |
||
Exceptional & other |
0.4 |
(0.5) |
1.9 |
0.6 |
5.1 |
(6.3) |
(0.4) |
(5.0) |
||
Tax |
(4.3) |
(5.0) |
(3.6) |
(4.7) |
(4.1) |
(6.1) |
(4.0) |
(6.5) |
||
Net operating cash flow |
|
|
23.6 |
20.2 |
21.8 |
21.0 |
27.9 |
29.7 |
24.9 |
41.8 |
Capex |
(4.7) |
(3.2) |
(5.8) |
(5.4) |
(6.8) |
(10.1) |
(15.5) |
(15.7) |
||
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) |
(1.5) |
(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) |
(16.8) |
||
Other |
0.5 |
0.2 |
0.1 |
0.2 |
0.0 |
0.0 |
(0.4) |
0.0 |
||
Net Cash Flow |
7.7 |
7.0 |
4.9 |
(4.8) |
8.1 |
(13.3) |
(43.5) |
7.5 |
||
Opening net debt/(cash) |
|
|
18.6 |
10.6 |
3.5 |
(1.3) |
3.7 |
(3.7) |
9.0 |
52.5 |
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 |
52.5 |
45.0 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
Pixium announced on 8 January 2019 that its Prima wireless photovoltaic sub-retinal implant successfully met the endpoints of the EU feasibility study at interim six months follow-up after implantation, in patients with advanced dry age-related macular degeneration (Dry-ARMD). Results are in line with preliminary data points reported in our 17 December 2018 note, and may also attract eligible candidates for its ongoing US feasibility study. Pixium believes the interim safety data could be used to enable the design of the protocol for a larger, multi-centre, CE Mark-enabling European pivotal study. The EU pivotal study may start recruitment in Q319, potentially resulting in initial implantations before YE19.