Last close As at 05/08/2026
GBP17.86
▲ 86.00 (5.06%)
Market capitalisation
GBP501m
Research: TMT
XP saw a strong finish to the year, with Q4 revenue growth of 16% y-o-y and order growth of 24% y-o-y, resulting in FY17 revenues slightly ahead of our forecast. Good demand across all sectors and geographies was boosted by a strong contribution from the recent Comdel acquisition. Management expects continued growth in FY18; we maintain our forecasts which, based on current momentum, could prove conservative.
XP Power |
Strong demand continues into Q4 |
FY17 trading update |
Tech hardware & equipment |
12 January 2018 |
Share price performance
Business description
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Analysts
XP Power is a research client of Edison Investment Research Limited |
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XP saw a strong finish to the year, with Q4 revenue growth of 16% y-o-y and order growth of 24% y-o-y, resulting in FY17 revenues slightly ahead of our forecast. Good demand across all sectors and geographies was boosted by a strong contribution from the recent Comdel acquisition. Management expects continued growth in FY18; we maintain our forecasts which, based on current momentum, could prove conservative.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
109.7 |
25.7 |
104.3 |
66.0 |
34.8 |
1.8 |
12/16 |
129.8 |
28.6 |
115.3 |
71.0 |
31.5 |
2.0 |
12/17e |
166.7 |
35.5 |
142.9 |
76.0 |
25.4 |
2.1 |
12/18e |
179.1 |
38.4 |
147.9 |
79.0 |
24.6 |
2.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Positive momentum continues into Q4
XP generated revenues of £43.2m in Q4, +16% y-o-y and +23% in constant currency. Stripping out the contribution from Comdel, revenues grew 5% y-o-y. FY17 revenues of £167m were 29% higher y-o-y (+22% constant currency) and were marginally ahead of our £166.7m forecast. Q4 order intake of £46.8m was 24% higher y-o-y (+32% constant currency) and 11% ahead on an organic basis. Book-to-bill stood at 1.08x for Q4 and 1.11x for FY17. Net debt at year-end stood at £10.1m, below our £12.6m forecast. XP expects to declare a Q4 dividend of at least 28p per share, ahead of our 27p forecast. With the strong backlog in place at year-end and positive momentum during H217, management expects continued order and revenue growth in FY18. We make no changes to our forecasts pending preliminary results on 1 March.
Comdel integration off to a good start
Recently acquired Comdel (29 September 2017) generated revenues of £4.1m/$5.4m in Q417 (+30% y-o-y reported and constant currency), ahead of our $4.4m forecast. Bookings of £5.8m/$7.7m were significantly higher than a year ago (+101% y-o-y and +114% in constant currency) driven by strong demand from Comdel’s existing customer base. Integration of the business is underway and proceeding as planned.
Valuation: Factoring in strong growth
The stock is up 107% over the year and 12% in the last three months, reflecting multiple earnings upgrades over the course of the year. XP is currently trading on 24.6x FY18e EPS. This is at a premium to both its UK electronics peer group and versus international power supply peers, and is also at a historic high. In part we believe this is justified by XP’s superior profitability and in our view, the valuation is likely to be factoring in higher growth than our conservative 7.4% revenue growth forecast for FY18. Cross-selling and a reduction in manufacturing costs for Comdel could provide another source of upside to our forecasts.
Exhibit 1: Financial summary
£m |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
93.9 |
101.1 |
101.1 |
109.7 |
129.8 |
166.7 |
179.1 |
Cost of Sales |
(49.0) |
(51.5) |
(51.0) |
(55.1) |
(67.8) |
(89.0) |
(97.2) |
||
Gross Profit |
44.9 |
49.6 |
50.1 |
54.6 |
62.0 |
77.8 |
81.9 |
||
EBITDA |
|
|
23.3 |
26.0 |
27.6 |
29.7 |
33.0 |
41.0 |
44.7 |
Normalised operating profit |
|
|
21.0 |
23.3 |
24.5 |
25.9 |
28.8 |
35.9 |
39.0 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
(0.4) |
(0.4) |
(0.4) |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
(0.3) |
(0.4) |
(2.8) |
0.0 |
||
Share-based payments |
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 |
32.7 |
38.6 |
||
Net Interest |
(0.8) |
(0.4) |
(0.2) |
(0.2) |
(0.2) |
(0.4) |
(0.6) |
||
Joint ventures & associates (post tax) |
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 |
||
Profit Before Tax (norm) |
|
|
20.2 |
22.9 |
24.3 |
25.7 |
28.6 |
35.5 |
38.4 |
Profit Before Tax (reported) |
|
|
20.2 |
22.9 |
24.3 |
25.4 |
27.8 |
32.3 |
38.0 |
Reported tax |
(4.5) |
(4.5) |
(4.8) |
(5.5) |
(6.3) |
(7.8) |
(9.7) |
||
Profit After Tax (norm) |
15.7 |
18.4 |
19.5 |
20.2 |
22.3 |
27.7 |
28.6 |
||
Profit After Tax (reported) |
15.7 |
18.4 |
19.5 |
19.9 |
21.5 |
24.6 |
28.3 |
||
Minority interests |
(0.2) |
(0.2) |
(0.1) |
(0.2) |
(0.2) |
(0.3) |
(0.3) |
||
Discontinued operations |
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 |
27.4 |
28.4 |
||
Net income (reported) |
15.5 |
18.2 |
19.4 |
19.7 |
21.3 |
24.3 |
28.1 |
||
Basic average number of shares outstanding (m) |
19 |
19 |
19 |
19 |
19 |
19 |
19 |
||
EPS - basic normalised (p) |
|
|
81.67 |
95.84 |
102.12 |
105.28 |
116.22 |
144.38 |
149.41 |
EPS - diluted normalised (p) |
|
|
81.35 |
95.05 |
101.07 |
104.32 |
115.33 |
142.88 |
147.86 |
EPS - basic reported (p) |
|
|
81.67 |
95.84 |
102.12 |
103.70 |
112.02 |
128.05 |
147.83 |
Dividend (p) |
50 |
55 |
61 |
66 |
71 |
76 |
79 |
||
Revenue growth (%) |
(9.4) |
7.7 |
0.0 |
8.5 |
18.3 |
28.5 |
7.4 |
||
Gross Margin (%) |
47.8 |
49.1 |
49.6 |
49.8 |
47.8 |
46.6 |
45.7 |
||
EBITDA Margin (%) |
24.8 |
25.7 |
27.3 |
27.0 |
25.4 |
24.6 |
24.9 |
||
Normalised Operating Margin |
22.4 |
23.0 |
24.2 |
23.6 |
22.2 |
21.5 |
21.7 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
52.8 |
53.3 |
56.1 |
65.4 |
73.2 |
93.8 |
97.8 |
Intangible Assets |
38.1 |
39.1 |
40.5 |
48.2 |
53.0 |
71.2 |
72.2 |
||
Tangible Assets |
13.2 |
12.7 |
14.4 |
16.1 |
19.1 |
21.5 |
24.5 |
||
Investments & other |
1.5 |
1.5 |
1.2 |
1.1 |
1.1 |
1.1 |
1.1 |
||
Current Assets |
|
|
39.3 |
42.2 |
47.0 |
53.5 |
65.7 |
75.5 |
84.7 |
Stocks |
19.8 |
20.4 |
25.2 |
28.7 |
32.2 |
41.4 |
45.3 |
||
Debtors |
14.2 |
15.4 |
16.0 |
17.5 |
21.5 |
26.5 |
28.5 |
||
Cash & cash equivalents |
4.1 |
5.0 |
3.8 |
4.9 |
9.2 |
4.8 |
8.1 |
||
Other |
1.2 |
1.4 |
2.0 |
2.4 |
2.8 |
2.8 |
2.8 |
||
Current Liabilities |
|
|
(20.2) |
(22.4) |
(18.6) |
(19.8) |
(25.7) |
(45.2) |
(45.0) |
Creditors |
(11.1) |
(12.7) |
(14.4) |
(14.6) |
(16.0) |
(24.1) |
(23.9) |
||
Tax and social security |
(1.6) |
(1.1) |
(1.7) |
(1.2) |
(3.3) |
(3.3) |
(3.3) |
||
Short term borrowings |
(7.3) |
(8.5) |
(2.5) |
(4.0) |
(5.5) |
(17.4) |
(17.4) |
||
Other |
(0.2) |
(0.1) |
0.0 |
0.0 |
(0.9) |
(0.4) |
(0.4) |
||
Long Term Liabilities |
|
|
(10.6) |
(3.7) |
(4.2) |
(10.0) |
(6.2) |
(6.2) |
(6.2) |
Long term borrowings |
(7.4) |
0.0 |
0.0 |
(4.6) |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(3.2) |
(3.7) |
(4.2) |
(5.4) |
(6.2) |
(6.2) |
(6.2) |
||
Net Assets |
|
|
61.3 |
69.4 |
80.3 |
89.1 |
107.0 |
117.9 |
131.2 |
Minority interests |
(0.2) |
(0.2) |
(0.1) |
(0.8) |
(0.9) |
(1.0) |
(1.1) |
||
Shareholders' equity |
|
|
61.1 |
69.2 |
80.2 |
88.3 |
106.1 |
116.9 |
130.1 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
23.3 |
26.0 |
27.6 |
29.7 |
33.0 |
41.0 |
44.7 |
||
Working capital |
4.2 |
(0.3) |
(4.1) |
(4.6) |
(6.2) |
(6.1) |
(6.0) |
||
Exceptional & other |
0.4 |
(0.5) |
1.9 |
0.6 |
5.2 |
(2.8) |
0.0 |
||
Tax |
(4.3) |
(5.0) |
(3.6) |
(4.7) |
(4.1) |
(7.8) |
(9.7) |
||
Net operating cash flow |
|
|
23.6 |
20.2 |
21.8 |
21.0 |
27.9 |
24.3 |
29.0 |
Capex |
(4.7) |
(3.2) |
(5.8) |
(5.4) |
(6.8) |
(9.2) |
(10.1) |
||
Acquisitions/disposals |
(1.6) |
0.1 |
0.1 |
(8.3) |
0.1 |
(17.5) |
0.0 |
||
Net interest |
(0.5) |
(0.3) |
(0.1) |
(0.1) |
(0.2) |
(0.4) |
(0.6) |
||
Equity financing |
(0.5) |
0.1 |
(0.2) |
0.0 |
0.2 |
0.5 |
0.0 |
||
Dividends |
(9.1) |
(10.1) |
(11.0) |
(12.2) |
(13.1) |
(14.1) |
(15.0) |
||
Other |
0.5 |
0.2 |
0.1 |
0.2 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
7.7 |
7.0 |
4.9 |
(4.8) |
8.1 |
(16.3) |
3.3 |
||
Opening net debt/(cash) |
|
|
18.6 |
10.6 |
3.5 |
(1.3) |
3.7 |
(3.7) |
12.6 |
FX |
0.3 |
0.1 |
(0.1) |
(0.2) |
(0.5) |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.1 |
(0.2) |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
10.6 |
3.5 |
(1.3) |
3.7 |
(3.7) |
12.6 |
9.3 |
Source: XP Power, Edison Investment Research
|
|
Sea Lion Phase 1 continues to progress towards project sanction, targeted for end 2018. Focus remains on financing the $1.5bn gross capex required to achieve first oil. A mix of senior debt financing ($800m), vendor financing ($400m) and equity ($300m) was assumed in our last published valuation ranging from a core NAV of 44p/share (Phase 1 risked at 20% COS) to 81p/share (Phase 1 at 50% COS). The recent rise in oil price should increase the JV’s confidence in project risked returns, which we estimate at 30% IRR based on a $70/bbl long-term Brent crude assumption.