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 |
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% |
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% |
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%).
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.
