1 XP XP Power Interim Results 2020 2020
Interim Results 2020 xp xp power.com 1 XP XP Power Interim Results - - PowerPoint PPT Presentation
Interim Results 2020 xp xp power.com 1 XP XP Power Interim Results - - PowerPoint PPT Presentation
Interim Results 2020 xp xp power.com 1 XP XP Power Interim Results 2020 2020 DISCLAIMER The information contained in this document is for Investors should not place undue reliance on such background purposes only and does not purport to be
2 XP XP Power Interim Results 2020 2020
The information contained in this document is for background purposes only and does not purport to be full
- r complete. No reliance may or should be placed by any
person for any purposes whatsoever on the information contained in this document or on its completeness, accuracy or fairness. The information in this document is subject to change. This document contains statements about XP Power Limited that are or may be forward-looking statements. Forward-looking statements include statements relating to (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of XP Power Limited’s operations and potential synergies; and (iii) the effects of government regulation on business. These forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of XP Power Limited. They involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person to be materially different from any results, performance or achievements expressed or implied by such statements. They are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. All subsequent oral or written forward-looking statements attributable to XP Power Limited or any of its shareholders or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements included in this document speak only as of the date they were made and are based on information then available to XP Power Limited. Investors should not place undue reliance on such forward-looking statements, and XP Power Limited does not undertake any obligation to update publicly or revise any forward-looking statements. This document does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to sell or issue, or any solicitation of any offer to buy or acquire any securities of XP Power Limited or any
- f its subsidiaries in any jurisdiction or an inducement to
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DISCLAIMER
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GROUP HIGHLIGHTS
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- Strong performance in challenging conditions demonstrates robust business
model
- Order intake increases 45% to £145.8m due to recovery in Semifab and
COVID-19 related demand from Healthcare customers
- Revenue increases 6% to £105.1m driven by Semifab recovery
- Expansion of Vietnam manufacturing facility completed in 2019 enabled
Group to show supply chain resilience
- Good free cash flow driven by working capital focus
- Reinstatement of dividend from Q2 2020
- Exposed to sectors that should perform well in a post COVID-19 world
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FINANCIAL HIGHLIGHTS
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PERFORMANCE GROUP FINANCIAL
GROUP PERFORMANCE
H1 2020 H1 2019 Change Change At CER(2)
GBP/USD 1.26 1.29
Orders (£m) 145.8 100.6 +45% +42% Revenue (£m) 105.1 98.9 +6% +4% Gross margin (%) 44.9% 44.6% +30bps
- Adj. Operating Profit (£m) (1)
18.0 18.2 (1)%
- Adj. Profit before tax (£m) (1)
17.0 16.6 +2%
- Adj. ETR (%) (1)(3)
20.4% 19.4% +100bps
- Adj. diluted EPS (p) (1)
70.2p 69.2p +1% DPS (p) 18p 35p (49)%
(1) These adjusted performance measures represent the statutory results excluding specific items. (2) At constant exchange rates (‘CER’) using the prior period’s exchange rates. (3) ETR = Effective tax rate
- Order intake up 45% on prior year
Cyclical recovery in Semifab (+105%) COVID-19 related Healthcare demand (+141%) Industrial softer (-17%), Technology (+19%)
- Reported revenue growth of 6%
Semifab (+61%), Healthcare (+19%) Industrial (-22%), Technology (+12%)
- Gross margin increase despite COVID-19
related costs
- Adjusted Profit before tax growth of 2% with
annualisation of 2019 investments
- ETR impacted by regional profit mix
- Reinstated Q2 dividend of 18p (2019: 18p)
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ORDERS
GROUP SEGMENTAL PERFORMANCE
GROUP PERFORMANCE
YoY change at constant FX +100% +16% (19)% +136% +45%
REVENUE
YoY change at constant FX +56% +10% (24)% +16% +6% 100.6 21.2 1.8 (9.5) 29.3 2.4 145.8 H1 2019 Semi Fab Technology Industrial electronics Healthcare FX H1 2020 £ million 98.9 10.2 1.1 (11.4) 3.9 2.4 105.1 H1 2019 Semi Fab Technology Industrial electronics Healthcare FX H1 2020 £ million
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REVENUE
GROUP REGIONAL PERFORMANCE
GROUP PERFORMANCE
YoY change at constant FX +10% (10)% +15% +6%
ORDERS
+61% +19% +13% +45% YoY change at constant FX 100.6 35.0 6.4 1.4 2.4 145.8 H1 2019 N America Europe Asia Currency H1 2020 £ million 98.9 5.9 (3.6) 1.5 2.4 105.1 H1 2019 N America Europe Asia Currency H1 2020
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PROFIT PERFORMANCE ADJUSTED OPERATING
GROUP PERFORMANCE
Gross margin increase despite COVID-19 related costs
Gross margin at 44.9%, up 30bps Positive regional and segment mix H1 margin impacted by Kunshan COVID-19 shutdown and increased freight costs
Investment in headcount and IT infrastructure
Adjusted operating margin of 17.1%, down 130bps
18.2 2.0 0.8 (0.5) (2.7) 0.2 18.0 H1 2019 Rev drop through GM contribution Covid GM impact Opex investment Currency H1 2020 £ million
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AND NET DEBT CASH FLOW STATEMENT
GROUP PERFORMANCE
£m Net debt bridge
£m H1 20 H1 19 Variance Adjusted Operating Profit 18.0 18.2
- 1%
Amortisation of product development costs 2.2 1.8 Amortisation of computer software 0.4
- Depreciation
2.9 2.6 Change in working capital 2.2 4.2 Adjusted Operating Cash Flow 25.7 26.8
- 4%
Specific items (4.2) (1.6) Cash generated from Operations 21.5 25.2
- 15%
Income tax paid, net of refund (0.6) (2.6) Payment of lease liabilities (0.8) (0.8) Purchase of property and equipment (net of disposals) (1.8) (2.5) Capitalised product development costs (4.0) (4.4) Capitalised software development costs (0.8) (1.9) Interest paid (0.8) (1.4) Sale of treasury shares 1.8 0.4 Free cash flow 14.5 12.0 21% Funding: $120 million + $60m accordion Across 3 Regional banks Leverage at 0.74x Covenant: < 3.0x Interest Cover: 22.9x Covenant: > 4.0x
(41.3) 14.5 (0.5) (3.9) (3.2) (34.4) Opening Net Debt Free Cash Flow Other cash items Dividend Payments FX Closing Net Debt
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APPROXIMATIONS 2020 MODELLING GUIDANCE
OUTLOOK
CAPEX/CAP PROD DEV/CAP IT £6.0m / £8.0m / £2.5m EFFECTIVE TAX RATE 20-22% INTEREST
- c. £1.5m
CASH SPECIFIC ITEMS £4.5 – 5.0m COST SAVINGS
- c. £2-3m
INFLATION
- c. £2-3m
REVENUE H2 weighted – Backlog unwind NET DEBT / EBITDA
- c. 0.5x by 31 December 2020
CASH FLOW Improved EBITDA & Working Capital
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BUSINESS UPDATE
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Managing through the crisis based on clear consistent priorities:
- 1. The safety and wellbeing of our colleagues
- 2. Keeping our customers supported and supplied with
product
- 3. Preserving cash
All production and logistics facilities operating normally and following local epidemic prevention and control measures Evidence is that the business is operating effectively in “work from home” mode Unprecedented demand from Healthcare customers resulting in record order backlog at 30 June 2020 XP Power’s supply chain has recovered and capacity increased in China and Vietnam to deliver customer backlog in the second half of 2020
UPDATE AS AT 3 AUGUST 2020 COVID-19
COVID-19
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The pandemic has accelerated many trends:
Sales processes (digital marketing) Working from home (communications, video conferencing, collaboration tools) Realisation of under provision of healthcare services and equipment throughout the world Online shopping (IT, robotics)
Polarisation between the performance and medium-term prospects for different sectors:
Winners - Semifab, Healthcare, IT, Telecoms
Customers revisiting their supply chains for resilience and reducing exposure to China
Vietnam and dual manufacturing locations is a strategic advantage valued by key customers
ESG and health and safety come into focus
ACCELERATION OF TRENDS COVID-19
COVID-19
XP Power expected to be a long-term beneficiary of the acceleration of trends caused by COVID-19 as we are already exposed to sectors and customers that will benefit
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ü Develop a market leading range of competitive products ü Target accounts where we can add value ü Vertical penetration of target accounts ü Build a Global Supply Chain which balances high efficiency with market leading customer responsiveness ü Lead our industry on environmental matters ü Make selective acquisitions in identified strategic markets to expand our product offering
IS DELIVERING OUR STRATEGY
STRATEGY IN ACTION
Consistent application of a winning strategy has meant that XP has been able to continue to invest in product development, hiring talent and expanding manufacturing capacity during the COVID-19 pandemic
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- 35% of revenue
- Declined 24% (constant currency
YoY)
- Distribution channel destocking
- Most diverse sector with high level
- f innovation
- 3D printing
- Robotics
- Analytical instruments
- Industrial printing
- Industrial LED lighting
- 27% of revenue
- Grew 56% (constant currency
YoY) with market recovery and share gains
- RF and high voltage facilitating
greater penetration
- Attractive long-term growth
drivers (big data, AI, 5G, IoT)
- Design win pipeline very strong
- n next generation tools
- 26% of revenue
- Grew 16% (constant currency YoY)
- Building a leading position, strong
- rder performance
- High efficiency products well
received due to high reliability
- Corporate approvals with all the
major players
- COVID-19 impact in H1 2020 expect
recovery in non-COVID demand in H2 2020
- 12% of revenue
- Grew 9% (constant currency
YoY)
- Broadcast
- Communications – Satellite,
secure, harsh environments
- Projection technology
- Recovery expected in H2
2020
SECTOR DYNAMICS
STRATEGY IN ACTION
COVID-19 will accelerate digitization and long-term demand for healthcare equipment. Areas to which XP is favourably exposed
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Revenue (£ Millions)
CAGR +42.1%
BY SECTOR REVENUE
STRATEGY IN ACTION
CAGR +4.9% CAGR +14.6% CAGR +10.6%
Note: 2020 is annualised H1 2020 performance
High level Trends
- Increased connectivity of
the power converter to the customer's equipment
- Higher power
- Higher engineering
services content (customisation)
- Industrial revolution 4.0
- Increased legislation
56.8 10.0 28.4 14.5 70.2 15.1 30.7 13.7 78.6 28.3 41.4 18.4 83.6 47.5 43.6 20.4 89.2 37.4 45.9 27.4 73.8 56.4 55.8 24.2 Industrial Electronics Semi Fab Healthcare Technology 2015 2016 2017 2018 2019 2020
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Phase II completed in Q1 2019 - significant capacity increase (>75%) Over 2,200 different low voltage and 350 high voltage products now approved for production Cost competitiveness advantage over China COVID-19 is resulting in expedited transfers from China to Vietnam and helps mitigate Section 301 Tariffs and provides a competitive advantage over competitors with Chinese based manufacturing Supply chain resilience highly valued by customers Focused on increasing capacity in both locations – lean initiatives, capex and headcount Will have capability to produce broad product range delivering flexibility and savings
LVLP, HVLP, RF, Engineering Services (ES)
A COMPETITIVE ADVANTAGE VIETNAM
SUPPLY CHAIN Revenue Capacity ($m) 2020 Est. Utilisation China ~100 50% Vietnam I ~150 70% Vietnam II ~150
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Transfer of the manufacture of our low power/high voltage DC-DC modules from Minden, Nevada to Vietnam announced in August 2019 Minden facility expected to be closed by mid-August 2020 (previously 30 June 2020 but delays due to COVID-19) Expect annualised cost savings of approximately £4 million
TRANSFER TO VIETNAM SUPPLY CHAIN RE-ENGINEERING
SUPPLY CHAIN
- £1-2 million of the savings to be invested back
into the business to expand and strengthen our new product introduction team
- Charges associated with the site closure of
approximately £1 million taken over the 14 months to August 2020
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BUILDING OUR ESG CREDENTIALS
LEADING ON ENVIRONMENTAL MATTERS
ESG
Area What we have done Our Environment
- “Green” XP Power produces ongoing CO2 savings
- CO2 emissions savings from solar PV in Vietnam
- Vietnam rainfall water recycled
- Third party verification of environmental metrics
Our People’s Health and Safety • Incident rates below industry benchmarks Our Communities
- XP Power events benefitting the local communities in which we work
Our Standards
- Member of the Responsible Business Alliance
- Aligned with 8 of 17 of the UN Sustainable Development Goals (SDG’s)
- Diversity & Inclusion – high employee survey rating
Our strong ESG credentials are highly valued as COVID-19 brings ESG and health and safety into particular focus
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- Entering second half of 2020 with a record order backlog due to strength
in Semiconductor Equipment Manufacturing and Healthcare demand
- Expect sequential revenue growth in the second half of 2020
- Increased Vietnam production capacity brings cost competitive supply
chain advantage and highly valued resiliency
- Larger addressable market; the expanding product range, engineering
support and customer reach will enable XP to take further market share
- Exposed to sectors that will benefit from the long-term trends caused by
the COVID-19 pandemic
GROUP OUTLOOK
HIGHLIGHTS
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QUESTIONS AND ANSWERS
HIGHLIGHTS
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xp xppower.com
Interim Results 2020 - Appendices
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Market 2018 ($ Millions) Size Share Asia 1,303 1.6% Europe 679 12.0% North America 1,098 12.0% Total 3,080 7.6% RF Power 1,200 1.8% High power/high voltage 500 3.6% Grand total 4,780 5.5%
Source: Micro-Tech Consultants and XP Power Management
XP H1 2020 Revenue (£ Millions) Asia Europe North America Total Share of XP (%) Healthcare 2.5 8.8 16.6 27.9 26% Industrial Electronics 3.8 17.3 15.8 36.9 35% Semifab 0.4 0.4 27.4 28.2 27% Technology 4.6 3.4 4.1 12.1 12% Total 11.3 29.9 63.9 105.1 100% Share of XP (%) 11% 28% 61% 100%
DATA MARKET
COMPANY OPERATIONS
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Acquisitions in high voltage (EMCO and Glassman) and Radio Frequency (RF) power expand our addressable market from $2.7Bn to $4.7Bn One of few companies in the world who can provide solutions right across the power and voltage spectrum Can use our engineering services capabilities to combine different products to give the customer a complete solution Presents significant long-term growth
- pportunity
STRATEGY IN ACTION
SIGNIFICANT GROWTH OPPORTUNITY PRODUCT PORTFOLIO
PRODUCT
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Healthcare
- Imaging
- Patient monitoring
- Life science
- Surgical tools
- Home healthcare
Technology
- High end computing
- Broadcast
- Displays
- Communications
- Security
Semifab
- Deposition
- Etch
- Wafer handling
- Ion implantation
- Semiconductor test
Industrial
- 3D printing
- Process control
- Test and measurement
- Smart grid
- Transport
CONVERTERS EVERYHERE XP POWER
STRATEGY IN ACTION
Trends
- Higher power
- Higher engineering
services content
- Increased
connectivity of the power converter to the customer's equipment
26 XP XP Power Interim Results 2020 2020 0.2 0.9 2 3.7 4.6 4.1 6.2 7.4 6.1 6.7 7.1 5.4 4.8 5.4 5.2 4.1 4.7 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
REVENUE HISTORY ECM40/60 SERIES (£ MILLIONS)
LIFE CYCLE TYPICAL PRODUCT
COMPANY OPERATIONS
- Substantial revenue
annuity
- Design in cycle typically
18 months (longer in healthcare)
- 2009 and 2012 dips due
to market downturn and not typical
*2020 annualised
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Service and Support
- Large technical sales
team
- Significant support at
the design-in stage allowing customer faster time to market
- Flexibility in terms of
product modifications and logistics
- Speed and agility
Quality
- Quality is a given and
paramount for mission critical solutions
Product Offering
- Product has to solve
the customer’s power problem and work in their application
- XP Power breadth of
product is a competitive advantage
- Customers prefer
standard/modified standards over custom solutions
Cost
- Not the customers’ top
priority but product needs to be cost competitive
- Low cost Asian
manufacturing an advantage against local/smaller in competition
- Vietnam expansion
timely given Section 301 tariffs in the USA
XP POWER SUCCESSFUL? WHAT MAKES
STRATEGY IN ACTION
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