Interim Results
August 05 2003 - 3:01AM
UK Regulatory
RNS Number:3149O
XP Power PLC
05 August 2003
Embargoed until 0700 5 August 2003
XP Power plc
("XP" or "the Group")
Interim Results for the six months ended 30 June 2003
XP, one of the world's leading providers of power supply
solutions to the mid-tier of the electronics industry, today
announces its interim results for the six-month period ended
30 June 2003.
Highlights
Six months Six months
ended ended
30 June 2003 30 June 2002
Profit and loss (refer
to page 4 of 9)
Turnover #29.1M #33.0M
Turnover
Gross profit #9.7M #10.2M
Gross margin 33.3% 30.9%
Profit before tax #0.9M #0.2M
Profit before tax and
goodwill amortisation #1.7M #0.9M
Basic and diluted
earnings per share 2.0p (1.0)p
Diluted earnings per
share adjusted for
goodwill amortisation 5.9p 2.9p
Interim dividend per share 5.0p 5.0p
Cash flow (refer to
page 6 of 9 )
Cash inflow #0.7M #2.8M
Free cash flow #3.0M #4.4M
- Profit before tax and amortisation of goodwill up 89% to
#1.7 million
- Third successive half year period of earnings per share
improvement
- Sixth successive half year period of improvement in gross
margin percentage due to further development of XP own brand
product range
- Continental European operations now at break even
- Free cash flow of #3.0 million generated in the period
Larry Tracey, Executive Chairman commented: "XP is soundly
positioned in this tough environment. Costs have been
vigorously managed and efficiency gains achieved whilst we
have simultaneously expanded our geographical sales presence
and product offering. Our expectation is for the current
challenging market conditions to persist for the immediate
future. However, we continue to outperform the competition and
we believe that the benefits of focusing on our own XP brand
will put us in a strong position to further increase gross
margins and benefit from an upturn."
Enquiries:
XP Power plc 0118 976 5028
Larry Tracey, Executive Chairman
James Peters, Deputy Chairman
Duncan Penny, Chief Executive Officer
Weber Shandwick Square Mile 020 7067 0700
Kevin Smith or Sally Lewis
Notes to editors:
XP Power plc, formerly IFX Power plc, provides power supply
solutions to the mid-tier market of the electronics industry.
All electronic equipment needs a power supply. Power supplies
convert the incoming AC supply into various levels of DC
voltages to drive electronic components and sub-assemblies
within the end user's equipment. By servicing this market XP
Power provides investors with access to technology and
industrial markets through its 8,000 strong customers in the
profitable, high margin, mid-tier sector of the North American
and European markets.
The mid-tier of the market is highly fragmented and made up of
a large number of small to medium sized Original Equipment
Manufacturers who source standard and modified standard power
supplies from several hundred power supply companies.
For further information, please visit www.xppower.com
Embargoed until 0700 5 August 2003
XP Power plc
("XP" or "the Group" formerly IFX Power plc)
Interim Results for the six months ended 30 June 2003
CHAIRMAN'S STATEMENT
Trading conditions in the first half have remained difficult
but against this background I am pleased to report that XP has
once again improved its profitability and gross margin as well
as generated free cash flow.
Financial Performance
Like many other businesses operating in the electronics
industry, we continue to experience weak demand in the end
markets we serve. Our response to this prolonged period of
depressed market conditions has been to seek out new
geographic markets in both Europe and North America and a
continued focus on gross margin enhancement.
The development of our own XP branded products has been
crucial to the process of generating higher gross margins on
product sales. Gross margins improved to 33.3% in the first
half of 2003 compared with 30.9% in the same period a year
ago. This is the sixth successive half yearly report where we
have demonstrated an improvement in the gross margin
percentage and has been achieved during a period of
unprecedented price pressure in the industry. The improvement
in gross margins is the result of our strategy of moving up
the value chain. In the first half of 2003 49% of our revenues
came from our own branded product compared to 43% in the same
period a year ago. The main driver of the Group's gross margin
performance has been its ability to deliver power supply
solutions which meet the needs of our customers, either
through our own XP branded products or our value added and
design engineering capabilities.
As we rapidly expanded our own XP branded product offering
certain manufacturers who we had traditionally represented in
the market place as a distributor increasingly began to see XP
as a competitor. As expected, implementation of this strategy
has brought a number of these relationships to an end in the
past year. This factor, as well as the further decline in
demand from the technology end markets in the second half of
2002, contributed to a decline in revenues compared to the
same period a year ago, particularly in the US. However,
despite reduced revenues, I am pleased to report our third
successive period of increased earnings per share resulting
from an improvement in gross margins and the cost reductions
which were made in Continental Europe during the second half
of 2002.
European revenues were flat at #11.0 million compared to the
same period a year ago, however our Continental European
operations are now making a small operating profit compared
with an operating loss of #0.8 million in the same period a
year ago. Again, this is due to cost reduction initiatives
which were taken in the second half of 2002 together with
improved gross margins in that region.
The overall result is that profit before tax and #0.8 million
of goodwill amortisation was #1.7 million, up from #0.9
million in the same period a year ago (refer to profit and
loss account on page 4). Basic earnings per share were 2.0
pence compared with a loss of 1.0 pence in the same period a
year ago. Earnings per share before amortisation of goodwill
were 5.9 pence compared with 2.9 pence in the same period a
year ago.
Dividend
The Group has declared an interim dividend of 5.0 pence per
share for the six months ended 30 June 2003 (2002: 5.0 pence
per share). The interim dividend will be paid on 8 October
2003 to shareholders on the register at 5 September 2003.
Cash Flow and Share Buy Back
The net cash inflow for the six months to June 2003 was #0.7
million compared with #2.8 million in the same period a year
ago (refer to cash flow on page 6). The period under review is
XP's fourth successive half yearly period of free cash flow
generation (cash flow before acquisitions, dividends and
financing). The Group generated #3.0 million of free cash flow
in the six months to June 2003, illustrating the benefits of
our cash generative business model.
In early May we purchased 470,000 of our own shares in the
market at an average price of 108.5 pence per share. In view
of the high yield on our own shares and the absence of
suitable acquisition targets, we considered a share buy back
to be the best use of the cash resources available to us at
this time.
Net debt was #6.7 million at the end of June 2003 compared to
#7.8 million at the end of December 2002. It is pleasing to
report a #1.1 million improvement in our net debt position
despite returning #1.9 million pounds to shareholders in the
same period in the form of our final dividend for 2002 of #1.4
million and a share buy back of #0.5 million.
Change of Name
Having standardised on "XP" as the Group's global brand, the
Group changed its name to XP Power plc with effect from 2 May
2003. The change gives greater consistency between the parent
and the operating businesses and eliminates confusion when
interfacing with our customers and manufacturing partners.
New Product Development and Moving up the Value Chain
Over the past two years the Group has placed great emphasis on
the release of new products to expand its own XP branded
product line. A record 37 new product families were
introduced during 2002 in addition to the 30 new product
families introduced in 2001. We consider that the Group now
has the broadest product offering of any company in the
industry. Furthermore, these products have been specifically
developed to meet the needs of the customers we serve in the
mid-tier of the market. In June this year we launched our new
219 page XPiQ catalogue in the US. These new products are
gradually making up an ever increasing proportion of our
revenues and contributing to the consequent increase in our
gross margins.
Having rapidly expanded our own product line we are now
focusing our engineering resources on the development of the
next generation of our configurable power supply offering.
Outlook
The electronics market remains a tough environment in which to
operate. Many of our customers still lack the business
confidence to launch new programmes into which our power
supplies are designed. Furthermore, some customers are
continuing to manage their inventory levels very tightly, such
that they will often only place orders when they have orders
from their customers.
Against this backdrop I am pleased that XP Power has remained
profitable, one of the few power supply companies in the world
to do so, while at the same time expanding its geographical
sales presence and product offering. The Group's resilient
performance comes at a time when many of our competitors face
financial difficulties and are cutting back both their sales
forces and product development capabilities. These actions can
only strengthen XP's relative market position in the medium
term.
While we can see no quantum change in the underlying markets
XP serves, we believe that the strategy we have adopted should
result in gradually improving revenues and margins in the
medium term.
Larry Tracey
Executive Chairman
5 August 2003
XP Power plc
XP Power plc
Consolidated Profit and Loss Account (Unaudited)
For the six months ended 30 June 2003
# Millions Note Six months Six months
ended ended
30 June 2003 30 June 2002
Turnover 2 29.1 33.0
Cost of sales (19.4) (22.8)
___________________________
Gross Profit 9.7 10.2
___________________________
Amortisation of goodwill (0.8) (0.7)
Depreciation (0.3) (0.3)
Other operating expenses (7.5) (8.8)
___________________________
Total operating expenses (8.6) (9.8)
___________________________
Group operating profit 2 1.1 0.4
Earnings before interest, tax,
depreciation and amortisation 2.2 1.4
Share of associates' operating
profit 0.1 0.0
___________________________
Total operating profit 1.2 0.4
___________________________
Interest payable and similar
charges (0.3) (0.2)
___________________________
Profit on ordinary activities
before taxation 0.9 0.2
___________________________
Tax on profit on ordinary
activities 3 (0.5) (0.3)
___________________________
Profit/(loss) on ordinary
activities after taxation 0.4 (0.1)
___________________________
Equity minority interests - (0.1)
___________________________
Profit/(loss) for the period
attributable to XP shareholders 0.4 (0.2)
___________________________
Dividends payable 4 (1.0) (1.0)
___________________________
Retained loss for the period (0.6) (1.2)
___________________________
Basic and diluted
earnings/(loss) per share 5 2.0p (1.0)p
Basic and diluted earnings per
share adjusted for goodwill
amortisation 5 5.9p 2.9p
Statement of total recognised
gains and losses
Profit attributable to XP
shareholders 0.4 (0.2)
Dividends (1.0) (1.0)
Currency translation
differences (0.5) (0.9)
Total recognised losses
related to the period (1.1) (2.1)
XP Power plc
Consolidated Balance Sheet (Unaudited)
At 30 June 2003
# Millions At 30 June At 31 December At 30 June
2003 2002 2002
Fixed assets
Intangible assets 22.2 23.0 23.6
Tangible assets 3.2 3.4 3.6
Own shares 0.4 0.4 0.5
Investments 0.8 0.8 0.4
______________________________________
26.6 27.6 28.1
______________________________________
Total fixed assets
Current assets
Stock 7.4 7.7 9.3
Debtors 10.6 10.8 13.6
Cash at bank and in hand 5.1 4.4 4.3
______________________________________
Total current assets 23.1 22.9 27.2
______________________________________
Creditors: amounts falling due
within one year (13.0) (12.6) (14.3)
Net current
assets/(liabilities) 10.1 10.3 12.9
______________________________________
Total assets less current
liabilities 36.7 37.9 41.0
______________________________________
Creditors: amounts falling due
after more than one year (8.6) (8.2) (9.5)
______________________________________
Net assets 28.1 29.7 31.5
______________________________________
Capital and reserves
Called up share capital 0.2 0.2 0.2
Share premium account 27.0 27.0 27.0
Merger reserve 0.2 0.2 0.2
Profit and loss account 0.1 1.7 3.8
Total equity shareholders' funds 27.5 29.1 31.2
Minority interests 0.6 0.6 0.3
______________________________________
Total capital and reserves 28.1 29.7 31.5
______________________________________
These financial statements were approved by the Board of
Directors on 4 August 2003.
XP Power plc
Consolidated Cash Flow (Unaudited)
For the six months ended 30 June 2003
# Millions Note Six months Six months
ended ended
30 June 2003 30 June 2002
Net cash flow from operating
activities 6 3.5 5.5
Returns on investments and
servicing of finance
Interest paid (0.3) (0.3)
Net cash outflow from returns
on investments and servicing
of finance (0.3) (0.3)
Taxation
Tax paid (0.1) (0.4)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (0.1) (0.4)
Net cash outflow from capital
expenditure (0.1) (0.4)
Free cash flow 3.0 4.4
Acquisitions and disposals
Purchase of subsidiaries and
associated undertakings - (5.4)
Share buy back (0.5) -
Cash outflow from acquisitions
and disposals (0.5) (5.4)
Equity dividends paid (1.4) (1.4)
Cash inflow/(outflow) before
financing 1.1 (2.4)
Financing
New borrowings 0.5 5.2
Repayment of borrowings (0.9) -
Net cash (outflow)/inflow from
financing (0.4) 5.2
________________________
Cash inflow 7 0.7 2.8
________________________
XP Power plc
Notes to the Interim Results for the six months ended 30 June
2003
1. Basis of preparation
Accounting convention
The financial statements have been prepared under the
historical cost convention and in accordance with applicable
United Kingdom accounting standards.
Basis of consolidation
The Group has accounted for the acquisition of XP PLC and Forx
Inc. using the merger method of accounting and all other
acquisitions have been accounted for using the acquisition
method of accounting in accordance with Financial Reporting
Standard 6, "Acquisitions and Mergers".
Goodwill and intangible fixed assets
For acquisitions of a business, where the acquisition method
of accounting is adopted, purchased goodwill is capitalised in
the year in which it arises and amortised over its estimated
useful life up to a maximum of 20 years. The directors regard
20 years as a reasonable maximum for the estimated useful life
of goodwill. Capitalised purchased goodwill in respect of
subsidiaries is included within intangible fixed assets.
Tangible fixed assets
Depreciation is provided on cost in equal annual instalments
over the estimated useful lives of the assets. The rates of
depreciation are as follows:
Plant and machinery - 25-33%
Motor vehicles - 25%
Office equipment - 25-33%
Leasehold improvements - 10% or over the life of the
lease if shorter
Long leasehold land and buildings - Term of the lease
Investments
Investments held as fixed assets are stated at cost less
provision for impairment if applicable.
Stocks
Stocks are stated at the lower of cost and net realisable
value. Cost represents materials and appropriate overheads
based on the normal levels of activity.
Deferred taxation
Deferred taxation is provided in full on timing differences
that result in an obligation at the balance sheet date to pay
more tax, or a right to pay less tax, at a future date, at
rates expected to apply when they crystallise based on current
tax rates and law. Timing differences arise from the
inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in financial statements. Deferred tax assets are
recognised to the extent that it is regarded as more likely
than not that they will be recovered. Deferred tax assets and
liabilities are not discounted.
Foreign exchange
Transactions denominated in foreign currencies are translated
at the rates ruling at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at
the balance sheet date are translated at the rates ruling at
that date. These translation differences are dealt with in the
profit and loss account.
The results of overseas subsidiary undertakings are translated
in sterling at average rates for the period. The exchange
differences arising as a result of restating retained profits
to closing rates are dealt with as a movement on reserves.
Leases
Rental costs under operating leases are charged to the profit
and loss account in equal instalments over the period of the
leases.
2. Segmental analysis
The Group operates substantially in one class of business, the
provision of power supply solutions to the electronics
industry. Analysis of total Group operating profit, net
assets, turnover and total Group operating profit by
geographical region is set out below.
# Millions Six months Six months
ended ended
30 June 2003 30 June 2002
Turnover
Europe 11.0 11.0
United States 18.1 22.0
____________ ____________
Total turnover 29.1 33.0
____________ ____________
Group operating profit
Europe 1.0 (0.2)
United States 0.1 0.6
____________ ____________
Total Group operating profit 1.1 0.4
____________ ____________
At 30 June At 30 June
2003 2002
Operating Net Assets
Europe 7.5 8.2
United States 28.3 32.9
____________ ____________
Total Operating Net Assets 35.8 41.1
____________ ____________
Operating net assets are defined as net assets adjusted for
net borrowings and the proposed dividend.
3. Taxation
# Millions Six months Six months
ended ended
30 June 2003 30 June 2002
Europe 0.2 0.2
United States 0.3 0.1
____________ ____________
Total taxation 0.5 0.3
____________ ____________
4. Equity dividends
An interim dividend of 5p (2002: 5p) per share will be paid on
8 October 2003 to shareholders on the register of members on 5
September 2003.
5. Earnings per share
# Millions Six months Six months
to to
30 June 2003 30 June 2002
Profit/(loss) attributable to XP
shareholders for the financial
period for basic earnings per
share 0.4 (0.2)
Amortisation of goodwill 0.8 0.7
Earnings for adjusted earnings
per share 1.2 0.5
Weighted average number of
shares (thousands) (basic) 20,370 20,514
Weighted average number of
shares (thousands) (diluted) 20,370 20,632
Supplementary earnings per share figures are presented to
exclude the effect of goodwill amortisation as the board
regards this to be more meaningful.
6. Reconciliation of operating profit to net cash inflow from
operating activities
# Millions Six months Six months
ended ended
30 June 2003 30 June 2002
Operating profit 1.1 0.4
Depreciation and
amortisation 1.1 1.0
Decrease in stocks 0.3 2.2
Decrease in debtors 0.2 0.8
Increase in creditors 0.8 1.1
____________ ____________
Net cash inflow from
operating activities 3.5 5.5
____________ ____________
7. Reconciliation of net debt
# Millions Six months Six months
ended ended
30 June 2003 30 June 2002
Net debt at 1 January (7.8) (6.2)
Increase in cash 0.7 2.8
Cash outflow/(inflow) from
decrease/(increase) in debt 0.4 (5.2)
____________ ____________
Net debt at 30 June (6.7) (8.6)
____________ ____________
Represented by
Cash at bank and in hand 5.1 4.3
Overdraft/Revolving Credit
Facility (11.8) (12.9)
____________ ____________
Net debt at 30 June (6.7) (8.6)
____________ ____________
8. Borrowings
In August 2001 the Group agreed a working capital facility of
#10 million and a revolving credit facility for acquisitions
of #20 million committed for three years from the Bank of
Scotland.
9. Commitments
The Group is committed to acquiring the remaining 75% of the
issued share capital of MPI-XP Power AG that it does not
already own in 2006. The consideration will be a minimum of
4.9 million Swiss Francs (approximately #2.2 million).
10. Share buy back
During May 2003 the company repurchased 470,000 of its own
shares at an average price of 108.5 pence per share. These
shares were cancelled and accordingly a transfer of #0.5
million was made from retained earnings.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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