REG-XP Power Ltd: Trading Update

XP PowerAnnouncement

12/01/2023 07:15

12 January 2023

XP Power Limited

(“XP Power” the “Group” or the “Company”)

Q4 and Full Year 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 for the fourth quarter and full year ended 31 December 2022.

Trading

The Group’s trading performance improved significantly in the second half of
2022, both sequentially and year-on year, as supply chain conditions improved.
Revenue in Q4 increased to £87.6 million, a record, up 30% year-on-year at
constant currency and 49% as reported. Consequently, full year revenue
increased to £290.6m, up 21% year-on-year on a reported basis and up 5% on an
organic constant currency basis(1).  As a result, and subject to normal audit
adjustments, 2022 adjusted operating profit is expected to be approximately in
the middle of the range of current market expectations(2). We are pleased with
our second half trading performance, which better reflects the Group’s
capability.

As expected, and as previously guided, the strong order intake momentum seen
through Q3 2022 moderated somewhat in Q4 but remained above historic levels.
Q4 orders were down 31% at constant currency and 23% as reported to £68.5
million against a very strong comparator in the prior year. The book to bill
ratio for Q4 was 0.78, reflecting a strong performance in shipments during in
the period. 

On a full year basis, orders of £362.7m were up 6% as reported, down 7% on an
organic constant currency basis, and resulted in a positive book to bill of
1.25 for the year as a whole.

Each business segment has good order book visibility, with Healthcare order
intake the strongest in Q4, and the Group enters 2023 with a greater
visibility than normal with an order book of c. £300 million. We would expect
order book visibility to return to more normal levels during 2023.

 £ Millions       Q4 2022  Q4 2021  Change  Change in constant currency  Like-for-like in constant currency (1) 
 Orders              68.5     88.6    -23%                         -31%                                    -34% 
 Year to date       362.7    343.4     +6%                          -3%                                     -7% 
                                                                                                                
 Revenue             87.6     58.9    +49%                         +30%                                    +24% 
 Year to date       290.6    240.3    +21%                         +11%                                     +5% 
                                                                                                                
 Book to Bill                                                                                                   
 Fourth quarter      0.78     1.51   -0.73                                                                      
 Year to date        1.25     1.43   -0.18                                                                      

(1) Change in constant currency and adjusting for the acquisitions of FuG
Elektronik GmbH and Guth High Voltage GmbH on 31 January 2022.

(2) The current range of analyst expectations for adjusted operating profit
for the year ended 31 December 2022 is £41 million to £46 million.

Financial Position and dividend

Net debt at 31 December 2022 was £152.0 million, compared with £118.7
million at 30 September 2022, reflecting a $44 million collateral payment for
a bond held against the damages awarded against the Group in the Comet Legal
Action in the US, which remains ongoing. Working capital benefited from
inventory beginning to unwind in Q4 and although the pace of that unwind was
slower than expected, it is expected to accelerate in H1 2023 as supply chain
conditions continue to normalise. The Group expects financial leverage to
reduce significantly during 2023.

In addition, XP has recently secured greater banking covenant flexibility from
its lenders with the net debt to EBITDA covenant now required to be less than
3.5x at December 2022, 3.25x in June 2023 and 3.0x in December 2023. The Group
was comfortably within these covenant levels at the 2022 year end and expects
to remain well inside them during 2023 and beyond. The greater flexibility
also highlights the ongoing support from our lending banks.  

The proposed dividend for the fourth quarter of 2022 will be announced with
the 2022 Final Results on 28 February 2023 but is expected to be not less than
36 pence per share, representing a minimum total dividend of 94 pence per
share for the year as a whole.

Outlook

The Group starts the new financial year with a significant order book, which
provides good visibility for 2023, particularly the first half. We remain
mindful of the ongoing uncertainties relating to component supply, China,
inflation and recessionary concerns and are continuing to monitor the
situation closely. That said, we are generally optimistic on the Group’s
prospects for the current year based on our strong H2 2022 trading momentum
and the benefits of price increases coming through our order book to a greater
extent during 2023.  

Longer term, the Board believes XP Power to be very well positioned to grow
ahead of its end markets, supported by its improving cash generation and a
reduced level of debt.

The Group will announce its results for the 12 months to 31 December 2022
results on 28 February 2023.

Enquiries:

XP Power 

Gavin Griggs, Chief Executive Officer  +44 (0)118 984 5515

Oskar Zahn, Chief Financial Officer  +44 (0)118 984 5515

Citigate Dewe Rogerson 

Kevin Smith/Lucy Gibbs  +44 (0)207 638 9571



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