Last close As at 05/08/2026
GBP17.92
▲ 6.00 (0.34%)
Market capitalisation
GBP501m
XP Power |
Strong orders support FY16 outlook |
Trading update |
Tech hardware & equipment |
7 October 2016 |
Share price performance
Business description
Next events
Analysts
XP Power is a research client of Edison Investment Research Limited |
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XP has seen an improving order trend through the course of Q316, with orders 44% above the Q315 intake and 9% above the record level reported in Q216 providing a strong backlog going into Q4. Management expects trading to be in line with expectations for FY16 and we leave our estimates unchanged.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
101.1 |
24.3 |
101.1 |
61.0 |
16.3 |
3.7 |
12/15 |
109.7 |
25.7 |
104.3 |
66.0 |
15.8 |
4.0 |
12/16e |
127.2 |
27.4 |
107.3 |
69.0 |
15.4 |
4.2 |
12/17e |
136.4 |
30.5 |
119.5 |
73.0 |
13.8 |
4.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q3 sees record order intake
XP saw a 13% y-o-y increase in revenues for the nine months to 30 September 2016 (+5% constant currency). This implies Q316 revenues of £32.3m (+16% y-o-y, +3% q-o-q). Nine-month order intake increased 19% y-o-y (+11% constant currency). Order intake for Q316 of £34.2m was 9% higher q-o-q and 44% higher
y-o-y, resulting in a book-to-bill for Q3 of 1.06x. Orders increased through the quarter, with the company seeing orders pulled in from Q416 and notably a pick-up in North American demand. The Brexit vote does not appear to have affected demand. XP ended Q316 with a net debt position of £2.2m, down from £6.0m at the end of H116. The company announced a Q3 dividend of 16p (in line with our forecast) to be paid on 12 January 2017 to shareholders on the register on 16 December 2016.
Outlook: estimates unchanged
The Board expects trading to be in line with expectations for FY16. We leave our estimates unchanged – we are forecasting revenue growth of 15.9% for FY16 from a combination of a full year of the EMCO acquisition and the strong dollar versus the pound. For the longer term, the company is seeing an increasing level of design wins with key customers; as customers move into production this should lead to volume orders and market share gains.
Valuation: Trading at a discount
Although the economic outlook is mixed, we believe that XP should benefit from its recent investment in engineering and sales resource, as well as acquisitions in the US and South Korea. Strong forecast cash generation should enable the company to invest in further growth, either through internal product development or through the bolt-on acquisitions it continues to evaluate. XP now trades on a P/E of 15.4x FY16e and 13.8x FY17e normalised EPS, with a forecast dividend yield of 4.2% in FY16. Competitor power converter companies are trading at around 23x FY16e EPS on EBITDA margins of c 16% versus XP’s 25% forecast EBITDA margin. The UK distributors are trading on c 20x FY16e EPS, on c 9% EBITDA margins. Based on XP’s superior margins, the company is undervalued versus peers, and is further supported by its dividend yield.
Exhibit 1: Financial summary
£'m |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
93.9 |
101.1 |
101.1 |
109.7 |
127.2 |
136.4 |
Cost of Sales |
(49.0) |
(51.5) |
(51.0) |
(55.1) |
(64.5) |
(69.1) |
||
Gross Profit |
44.9 |
49.6 |
50.1 |
54.6 |
62.6 |
67.4 |
||
EBITDA |
|
|
23.3 |
26.0 |
27.6 |
29.7 |
32.0 |
35.3 |
Normalised operating profit |
|
|
21.0 |
23.3 |
24.5 |
25.9 |
27.7 |
30.8 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
(0.2) |
(0.2) |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
(0.3) |
(0.1) |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
21.0 |
23.3 |
24.5 |
25.6 |
27.4 |
30.6 |
||
Net Interest |
(0.8) |
(0.4) |
(0.2) |
(0.2) |
(0.3) |
(0.3) |
||
Joint ventures & associates (post tax) |
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 |
||
Profit Before Tax (norm) |
|
|
20.2 |
22.9 |
24.3 |
25.7 |
27.4 |
30.5 |
Profit Before Tax (reported) |
|
|
20.2 |
22.9 |
24.3 |
25.4 |
27.1 |
30.3 |
Reported tax |
(4.5) |
(4.5) |
(4.8) |
(5.5) |
(6.5) |
(7.3) |
||
Profit After Tax (norm) |
15.7 |
18.4 |
19.5 |
20.2 |
20.9 |
23.2 |
||
Profit After Tax (reported) |
15.7 |
18.4 |
19.5 |
19.9 |
20.6 |
23.0 |
||
Minority interests |
(0.2) |
(0.2) |
(0.1) |
(0.2) |
(0.3) |
(0.3) |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
15.5 |
18.2 |
19.4 |
20.0 |
20.6 |
22.9 |
||
Net income (reported) |
15.5 |
18.2 |
19.4 |
19.7 |
20.3 |
22.7 |
||
Basic average number of shares outstanding (m) |
19 |
19 |
19 |
19 |
19 |
19 |
||
EPS - basic normalised (p) |
|
|
81.67 |
95.84 |
102.12 |
105.28 |
108.39 |
120.80 |
EPS - diluted normalised (p) |
|
|
81.35 |
95.05 |
101.07 |
104.32 |
107.26 |
119.54 |
EPS - basic reported (p) |
|
|
81.67 |
95.84 |
102.12 |
103.70 |
106.81 |
119.74 |
Dividend (p) |
50 |
55 |
61 |
66 |
69 |
73 |
||
Revenue growth (%) |
(9.4) |
7.7 |
0.0 |
8.5 |
15.9 |
7.3 |
||
Gross Margin (%) |
47.8 |
49.1 |
49.6 |
49.8 |
49.2 |
49.4 |
||
EBITDA Margin (%) |
24.8 |
25.7 |
27.3 |
27.0 |
25.1 |
25.9 |
||
Normalised Operating Margin |
22.4 |
23.0 |
24.2 |
23.6 |
21.8 |
22.6 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
52.8 |
53.3 |
56.1 |
65.4 |
66.9 |
67.7 |
Intangible Assets |
38.1 |
39.1 |
40.5 |
48.2 |
49.4 |
50.5 |
||
Tangible Assets |
13.2 |
12.7 |
14.4 |
16.1 |
16.4 |
16.1 |
||
Investments & other |
1.5 |
1.5 |
1.2 |
1.1 |
1.1 |
1.1 |
||
Current Assets |
|
|
39.3 |
42.2 |
47.0 |
53.5 |
58.4 |
63.1 |
Stocks |
19.8 |
20.4 |
25.2 |
28.7 |
32.7 |
35.0 |
||
Debtors |
14.2 |
15.4 |
16.0 |
17.5 |
20.2 |
21.7 |
||
Cash & cash equivalents |
4.1 |
5.0 |
3.8 |
4.9 |
3.1 |
4.0 |
||
Other |
1.2 |
1.4 |
2.0 |
2.4 |
2.4 |
2.4 |
||
Current Liabilities |
|
|
(20.2) |
(22.4) |
(18.6) |
(19.8) |
(23.3) |
(19.5) |
Creditors |
(11.1) |
(12.7) |
(14.4) |
(14.6) |
(16.9) |
(18.2) |
||
Tax and social security |
(1.6) |
(1.1) |
(1.7) |
(1.2) |
(1.2) |
(1.2) |
||
Short term borrowings |
(7.3) |
(8.5) |
(2.5) |
(4.0) |
(5.2) |
(0.1) |
||
Other |
(0.2) |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(10.6) |
(3.7) |
(4.2) |
(10.0) |
(5.4) |
(5.4) |
Long term borrowings |
(7.4) |
0.0 |
0.0 |
(4.6) |
0.0 |
0.0 |
||
Other long term liabilities |
(3.2) |
(3.7) |
(4.2) |
(5.4) |
(5.4) |
(5.4) |
||
Net Assets |
|
|
61.3 |
69.4 |
80.3 |
89.1 |
96.5 |
105.9 |
Minority interests |
(0.2) |
(0.2) |
(0.1) |
(0.8) |
(0.9) |
(1.0) |
||
Shareholders' equity |
|
|
61.1 |
69.2 |
80.2 |
88.3 |
95.6 |
104.9 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
23.3 |
26.0 |
27.6 |
29.7 |
32.0 |
35.3 |
||
Working capital |
4.2 |
(0.3) |
(4.1) |
(4.6) |
(4.4) |
(2.5) |
||
Exceptional & other |
0.4 |
(0.5) |
1.9 |
0.6 |
(0.1) |
0.0 |
||
Tax |
(4.3) |
(5.0) |
(3.6) |
(4.7) |
(6.5) |
(7.3) |
||
Net operating cash flow |
|
|
23.6 |
20.2 |
21.8 |
21.0 |
21.0 |
25.5 |
Capex |
(4.7) |
(3.2) |
(5.8) |
(5.4) |
(6.0) |
(5.5) |
||
Acquisitions/disposals |
(1.6) |
0.1 |
0.1 |
(8.3) |
0.0 |
0.0 |
||
Net interest |
(0.5) |
(0.3) |
(0.1) |
(0.1) |
(0.3) |
(0.3) |
||
Equity financing |
(0.5) |
0.1 |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Dividends |
(9.1) |
(10.1) |
(11.0) |
(12.2) |
(13.1) |
(13.7) |
||
Other |
0.5 |
0.2 |
0.1 |
0.2 |
0.0 |
0.0 |
||
Net Cash Flow |
7.7 |
7.0 |
4.9 |
(4.8) |
1.6 |
6.0 |
||
Opening net debt/(cash) |
|
|
18.6 |
10.6 |
3.5 |
(1.3) |
3.7 |
2.1 |
FX |
0.3 |
0.1 |
(0.1) |
(0.2) |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.1 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
10.6 |
3.5 |
(1.3) |
3.7 |
2.1 |
(3.9) |
Source: XP Power, Edison Investment Research
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