Last close As at 05/08/2026
GBP17.86
▲ 86.00 (5.06%)
Market capitalisation
GBP501m
XP Power |
Strong trading in Q4 |
Trading update |
Tech hardware & equipment |
13 January 2017 |
Share price performance
Business description
Next events
Analysts
XP Power is a research client of Edison Investment Research Limited |
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XP Power had a strong finish to 2016, with good order intake in Q416 and underlying revenue growth ahead of our forecast, boosted by the strength of the dollar versus sterling. Year-end net cash was higher than we forecast. The company expects to generate revenue growth in FY17 – we leave our forecasts unchanged pending the company’s FY16 results.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
101.1 |
24.3 |
101.1 |
61.0 |
17.3 |
3.5 |
12/15 |
109.7 |
25.7 |
104.3 |
66.0 |
16.8 |
3.8 |
12/16e |
127.2 |
27.4 |
107.3 |
69.0 |
16.3 |
3.9 |
12/17e |
136.4 |
30.5 |
119.5 |
73.0 |
14.6 |
4.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
2016 revenue and cash ahead of our forecasts
XP generated Q416 revenues of £37.1m (+33% y-o-y) and FY16 revenues of £129.8m (+18% y-o-y, +7% constant currency), £2.6m ahead of our forecast. Taking into account the 18% y-o-y weakening of sterling versus the dollar in Q416, this implies that Q4 revenues saw good underlying growth, helped by the strong order intake in Q316. XP ended FY16 with a net cash position of £3.6m, compared to our forecast for net debt of £2.1m. The company expects to announce a Q4 dividend of at least 25p (versus our 24p forecast), for a total FY16 dividend of at least 70p (+6% y-o-y).
Positive outlook for 2017
Q416 order intake of £37.1m (+24% y-o-y, +6% q-o-q) positions the company well for 2017 – management expects to generate revenue growth; we are forecasting underlying growth of 4%. At this point we leave our forecasts unchanged, pending FY16 results. We note that our FY17 forecasts assume a US$/£ rate of 1.35, but with the further weakening of sterling in Q416, this now looks conservative. Reflecting current rates should have a positive impact at the revenue level, but as the company has a high level of natural hedging, the impact at the operating profit level is likely to be lower.
Valuation: Attractive dividend yield
The share price has gained 18% over the last year, although it has remained relatively flat over the last three months, with the stock now trading on a P/E of 16.3x FY16e and 14.6x FY17e normalised EPS, with a forecast dividend yield of 4.2% in FY17. The limited number of power converter peers trade on an average 19.6x FY17e P/E with EBITDA margins of c 17% versus XP’s 25.7% forecast margin. Other UK electronics manufacturers and distributors trade in a range of 13-23x FY17e EPS on lower profitability. Strong forecast cash generation should enable the company to invest in further growth, either through internal product development or bolt-on acquisitions, while maintaining its high level of profitability.
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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Research: Investment Companies
Standard Life UK Smaller Companies Trust