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FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN,
INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
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THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF
ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO 596/2014 (AS IT
FORMS PART OF RETAINED EU LAW AS DEFINED IN THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018).
FOR
IMMEDIATE RELEASE.
2 October 2023
XP
Power Limited
(‘XP
Power’ or ‘the Group’ or the ‘Company’)
Trading
Update
XP Power,
one of the world's leading developers and manufacturers of critical
power control components to the electronics industry, is today
issuing a trading update.
Trading
Trading
over the third quarter has been below our expectations as weaker
end-market demand resulted in some customers deferring shipments
into 2024. The economic uncertainty in China has also led to a reduction in demand in
that market. These conditions are likely to continue for the
remainder of the year, leaving the outlook below our prior
expectation, with operating profit for the year ended 31 December 2023 now expected to be broadly
similar to last year.
We expect
Q3 revenue to be c.£75 million, down around 2% year-on-year on a
constant currency basis against a strong comparative. The Group
continues to deliver double digit operating margins. In light of
current trading conditions, we are implementing a wide range of
actions to reduce costs, conserve cash and maximise headroom in the
Group’s borrowing facilities.
The
Group’s current order book is c.£225 million, with an expected book
to bill of c.0.6x in Q3. While we have yet to see a recovery in
orders from the Semiconductor Manufacturing Equipment sector, our
customers’ outlook for 2024 and 2025 is encouraging, although the
timing of the overall economic recovery remains uncertain.
Financial
Position and Dividend
Net debt
is currently around £163 million, including c.£6 million of foreign
exchange impact since the end of the first half (£148 million at H1
2023). We now expect net debt to rise further by the year-end,
reflecting a combination of the higher than planned capital
expenditure on the Californian site relocation which will take
place in late December, lower than expected revenue and
profitability and a less than expected working capital reduction.
In order to conserve cash, we have temporarily suspended the build
for the new Malaysian plant, which will restart when the market
outlook becomes clearer.
The Group
continues to be in compliance with its banking covenants but is now
expecting net debt / Adjusted EBITDA to be close to or above
current covenant limits in the near-term. The Group is initiating
dialogue with its lenders to seek covenant and liquidity
flexibility through the year-end and into 2024. We are also
exploring other near-term options to strengthen the balance sheet,
to bring leverage back to within our target 1-2x net debt/Adjusted
EBITDA range, restoring the flexibility necessary to allow the
Group to take full advantage of the strong organic growth
opportunities across the business.
The second
quarter dividend will be paid on 12
October 2023 to all eligible shareholders, as previously
announced. In light of the current circumstances, the Board intends
that no further dividends will be paid in respect of the 2023
financial year. The Group recognises the importance of dividends to
shareholders and will recommence paying dividends as soon as
appropriate.
Outlook
We are
disappointed by the change in current trading conditions and 2023
outlook, which is largely being driven by weaker market demand
leading to customer shipment deferrals. This will impact the
current full year outlook and we are taking appropriate mitigating
actions to reduce costs and conserve cash.
Notwithstanding
these short-term challenges, the Board believes XP’s clear strategy
leaves the Group well positioned to grow ahead of its end markets,
drive further market share gains, improve profitability and deliver
strong cash generation.
Full
year trading update
The Group
is scheduled to release its Q4 and full year trading update on
Thursday 11 January 2024.
Enquiries:
XP
Power
Gavin Griggs, Chief Executive Officer
+44 (0)118
984 5515
Matt Webb, Chief Financial Officer
+44 (0)118
984 5515
Citigate
Dewe Rogerson
Kevin Smith/Lucy
Gibbs
+44
(0)207 638 9571
Note
to editors
XP Power
designs and manufactures power controllers, the essential hardware
component in every piece of electrical equipment that converts
power from the electricity grid into the right form for equipment
to function. Power controllers are critical for optimal delivery in
challenging environments but are a small part of the overall
customer product cost.
XP Power
typically designs power control solutions into the end products of
major blue-chip OEMs, with a focus on the Industrial Technology
(circa 41% of sales), Healthcare (circa 20% sales) and
Semiconductor Manufacturing Equipment (circa 39% of sales) sectors.
Once designed into a programme, XP Power has a revenue annuity over
the life cycle of the customer’s product which is typically five to
seven years depending on the industry sector. XP Power has invested
in research and development and its own manufacturing facilities in
China, North America, and Vietnam, to develop a range of tailored
products based on its own intellectual property that provide its
customers with significantly improved functionality and
efficiency.
Headquartered
in Singapore and listed on the
Main Market of the London Stock Exchange since 2000, XP Power is a
constituent of the FTSE All Share Index. XP Power serves a global
blue-chip customer base from over 30 locations in Europe, North
America, and Asia.
For
further information, please visit
www.xppowerplc.com