XP Power Investor Presentation May 2009 XP Power Agenda 1. The - - PowerPoint PPT Presentation

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XP Power Investor Presentation May 2009 XP Power Agenda 1. The - - PowerPoint PPT Presentation

Jan 25, 2023 284 likes •615 views

XP Power Investor Presentation May 2009 XP Power Agenda 1. The Company and its Markets 2. Sales process and Value Proposition 3. Product development 4. Financial highlights 5. Outlook and Summary Appendices I Industry consolidation

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XP Power – Investor Presentation May 2009

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XP Power

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Agenda

  • 1. The Company and its Markets
  • 2. Sales process and Value Proposition
  • 3. Product development
  • 4. Financial highlights
  • 5. Outlook and Summary

Appendices I Industry consolidation II Detailed financials

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XP Power

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  • 1. The Company and its Markets
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XP Power

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Introduction to XP Power

  • One of the world’s leading developers and manufacturers of mission critical power

control solutions

  • Supplies industrial, healthcare and technology sectors
  • Blue chip client list
  • Zero exposure to consumer products
  • Historic and ongoing investment in R&D has built a market leading product portfolio
  • Focus on higher margin own IP sales
  • Significant manufacturing capacity established to further penetrate blue chip clients
  • Network of 27 offices (and 19 distributors) across North America, Europe and Asia
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XP Power

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XP Power – Strategic Development

Business transformed since Listing in 2000:

  • Listed in 2000 by the existing management team as a specialist distributor of power control components
  • Since then the business has been moved up the value chain to become a designer and manufacturer with

its own IP, growing gross margins from 28% to over 44%;

  • Established a number of design centres which have developed a portfolio of industry leading products

transforming XP into a technology-led business;

  • Established the largest most technical direct sales force in the industry with 27 locations throughout North

America, Europe and Asia;

  • Rolled out a proprietary database across the sales force to capture all key project information for sales

management and product development purposes; and

  • Established a significant manufacturing facility in China to further penetrate a blue chip customer base.

Consistent delivery on this strategy has created genuine value to customers enabling XP to build a blue chip customer base while maintaining profitability and strong cash flow Further penetration of this blue chip customer base underpins future growth potential

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XP Power

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What is a power controller?

A power controller is a piece of electronic hardware that performs the following functions:

  • Converts electrical power from one voltage to another;
  • Converts alternating current (AC) to direct current (DC) or vice versa, or converts one

DC voltage to another DC voltage;

  • Meets the critical safety requirement of shielding the user from the dangerous mains

supply;

  • Filters electrical noise and the spikes and dips in power from the mains supply so it

does not produce undesirable effects in the customer’s equipment;

  • Prevents electrical noise from being transferred into the mains supply by the

customer’s equipment; and

  • Meets the increasingly demanding regulatory, legislative and

environmental requirements. All electronic equipment needs a power controller to function!

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XP Power

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Product Examples

fleXPower Configurable

  • High power healthcare

and technology

ECM140

  • Healthcare/Industrial

“Green power” externals Military grade externals

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Market Size and Share

£ Millions Market 2008 Share Rank Market 2012 Asia 335 1%

  • 524

Europe 314 10% 3rd 467 North America 418 8% 2nd 605 Total 1,067 6.5% 1,596 £ Millions Asia Europe North America Total % Healthcare 0.2 5.0 9.9 15.1 22% Industrial 2.8 18.6 14.7 36.1 52% Technology 0.4 8.6 9.1 18.1 26% Total 3.4 32.2 33.7 69.3 100% 5% 46% 49% 100%

Market forecast to grow 50% in sterling

Source: Micro-Tech Consultants

Industry consolidation continues to take place (see Appendix I)

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XP Power

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Blue Chip Customer Base

American Customers

We do business with the following proportions of the S&P 500 Equipment Manufacturers:

  • Industrial

73%

  • Healthcare

94%

  • Technology

69%

European Customers

Over 6,000 active customers - largest is less than 3% of revenue

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Growth Drivers

  • Penetration - Our Blue Chip customer base provides good opportunities to win

new product programs from their multiple engineering teams

  • Healthcare - Global population growth and ageing is increasing the demand for

medical equipment together with accelerating innovation and sophistication of medical diagnostic equipment

  • Efficiency – growing volume of regulation on efficient power usage and limiting

harmful consequences to the environment

  • Legislation – increasing legislation relating to the amount of energy consumed

by electronic equipment when it is not working but in standby mode

  • New Products – Customers’ new product designs which require less space and

heat generation

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  • 2. Sales Process and Value Proposition
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Sales Process and Value Proposition

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  • 3. Product Development
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New Products Pipeline

Driven by sales experts collecting intelligence from:

  • Pending legislation
  • Global sales offices
  • Industry directors
  • Huge customer database which records

all projects

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Our Product Development Resources

ANAHEIM & SUNNYVALE, CA PANGBOURNE & FYFIELD, UK 5 PARTNERS, TAIWAN 3 PARTNERS, CHINA WAGHUESEL + MTC, GERMANY SINGAPORE

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Product Development

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2004 2005 2006 2007 2008 2009 Forecast R&D Spend (£ Millions) 5 10 15 20 25 30 35 Number of new product introductions R&D Spend New Product Introductions

The success of our new product development programs has directly led to the penetration of new blue chip customers.

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Own IP Revenues Drive Gross Margin Increase

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Gross margin (£ Millions)

30.0 40.0 50.0 60.0 70.0 80.0 90.0

%

Gross margin (£ Millions) 19.9 23.7 24.8 29.2 28.0 30.6 Gross margin % 33.5 35.5 35.7 37.1 42.2 44.2 Own IP % 49 55 59 66 73 78 2003 2004 2005 2006 2007 2008

Record gross margins from growth in own IP sales and own manufacturing

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Kunshan – New Factory

Enables the further penetration of our blue chip customer base

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  • 4. Financials (See Appendix II for detailed financials)
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2008 Financial Highlights – record results

  • Own IP revenue £53.9M

+ 11%

  • Gross margin 44.2%

+5%

  • Earnings per share* 34.8 pence

+11%

  • Operating cash flow

+23%

  • Dividend 21p per share

+5%

* Diluted and adjusted for amortisation of intangibles and non- cash foreign exchange gain

Debt facilities converted to one US$36 term loan running to September 2011

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Currency Movements

Add USD vs GBP chart GBP versus USD

Approximately 65% of our revenues are in USD. The weakening of Sterling provides strong tail winds to our revenues.

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Dividend History

5 10 15 20 25 30 35 40 2001 2002 2003 2004 2005 2006 2007 2008 Pence per share Adjusted EPS* Dividend

  • Cash generative business model allows consistent dividend growth
  • Dividends maintained in prior down turns

* Diluted and adjusted for amortisation of intangibles, non-cash foreign exchange gain, and reorganisation costs

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  • 5. Outlook
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Revenue Outlook

Down turn

Programs ending

Foreign Exchange New Programs We believe the strength of the tail winds in our business are at least as strong as the current economic head winds

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Gross Margin Outlook

Foreign Exchange Competition Lower commodity prices Own IP

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Expenses Outlook

Cost cuts + Tax savings Foreign Exchange

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Summary

  • Exploit market leading sales resource
  • Increase pace of new product releases
  • Improve penetration of top accounts

utilising new production facility and new products

  • New factory to open in Q2
  • Trading year to date is in line with

expectations

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Appendix I - Industry Consolidation

  • XP Power operates in a $2 Billion sector of the power control market.
  • The No. 1 competitor (Lambda) was acquired by TDK of Japan.
  • The No. 3 competitor (Cherokee) was recently acquired by private equity (Gores

Corp).

  • The No. 4 competitor (Astec) is owned by Emerson who have been a serial

acquirer in other sectors of the power control market.

  • Three of the remaining top 30 competitors have been sold in the past 12

months.

  • XP Power has been an active acquirer since 2000 – investing more than £40

Million on 13 acquisitions. The current share price negates further acquisitions.

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Appendix II - Income and Expenditure Statement

2008 2007 £ M % £ M % Revenue 69.3 100% 66.3 100.0% Gross margin 30.6 44.2% 28.0 42.2% Research and Development (net) (2.9) (4.2%) (1.8) (2.7%) Operating expenses (18.1) (26.1%) (16.8) (25.3%) Reorganisation costs

  • (2.4)

(3.6%) Amortisation (0.3) (0.4%) (0.3) (0.5%) Operating profit 9.3 13.4% 6.7 10.1% Non cash FX gain 2.4 3.5%

  • Finance cost

(1.5) (2.1%) (1.7) (2.6%) Profit before tax 10.2 14.7% 5.0 7.5% Tax (1.2) (1.7%) (1.4) (2.1%) Profit after tax 9.0 13.0% 3.6 5.4% Diluted earnings per share 46.5p 17.8p Adjusted diluted earnings per share 34.8p 31.4p

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Summary Balance Sheets

2008 2007 Current assets £ Millions £ Millions Cash 3.4 3.6 Trade and other receivables 14.9 13.2 Inventories 17.5 10.5 Total current assets 35.8 27.3 Non-current assets Property plant and equipment 6.7 3.4 Goodwill 29.9 29.6 Others 6.5 6.7 Total non-current assets 43.1 39.7 Current liabilities Trade and other payables 12.3 8.1 Current income tax liabilities 3.1 2.4 Bank loans and overdrafts 7.3 2.7 Total current liabilities 22.7 13.2 Borrowings 23.9 20.3 Deferred income tax liabilities 1.4 1.4 Provisions for other liabilities 1.9 2.3 Net assets 29.0 29.8

Net debt 27.8 19.4

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Cash Flow Statements

£ Millions 2008 2007 Cash provided by operating activities 8.5 6.9 Capitalised development costs (1.0) (1.0) Interest expense (1.5) (1.5) Free cash flow 6.0 4.4 Opening net debt (19.4) (17.8) Free cash flow 6.0 4.4 Acquisitions/deferred consideration (1.0) (1.8) Purchase of property and equipment (3.5) (0.9) Sale/(purchase) of treasury shares (0.2) 0.1 Dividends (4.2) (3.6) Effects of currency translation on cash (5.5) 0.2 Closing net debt (27.8) (19.4)

Debt facilities converted to one US$36 term loan running to September 2011

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www.xppower.com