XP Power - Investor Presentation 2012 Annual Results
XP Power Highlights • Two key manufacturing initiatives completed: Vietnam operational and producing high quality magnetics 100% of own design products now manufactured in house • Gross margins reduced to 47.8% (2011: 49.1%) due to Vietnam start up and costs of transferring third-party manufacturing in house. This is expected to be margin enhancing in 2013 • Own design revenue 62% of total sales (2011: 57%) despite challenging market conditions • Chinese manufacturing facility continues to secure new approved vendor agreements • Resilient earnings and continued strong cash flow provide basis for increased total dividend of 50p (2011: 45p) and reduction of net debt 2
XP Power Income and Expenditure Statement £ Millions 2012 Margin 2011 Margin Growth GBP/USD average exchange rate 1.58 1.60 Orders 96.6 98.3 -2% Revenue 93.9 100.0% 103.6 100.0% -9% Gross margin 44.9 47.8% 50.9 49.1% -12% Research and development (net) 4.1 4.2 -2% Other operating expenses 19.8 21.4 -7% Operating profit 21.0 22.4% 25.3 24.4% -17% Net interest expense 0.8 1.0 -20% Profit before tax 20.2 21.5% 24.3 23.5% -17% Taxation (Effective tax rate 22.3%/14.8%) 4.5 3.6 +25% Minority interest 0.2 0.4 -50% Profit after tax 15.5 16.5% 20.3 19.6% -24% Adjusted diluted earnings per share 81.3p 106.4p -24% 3
XP Power Summary Balance Sheets £ Millions 2012 2011 GBP/USD year end exchange rate 1.59 1.57 Cash 4.1 6.3 Trade and other receivables 15.4 18.7 Inventories 19.8 22.0 Total current assets 39.3 47.0 Property, plant and equipment 13.2 12.9 Other non-current assets 39.6 39.7 Total non-current assets 52.8 52.6 Trade and other current payables 12.9 14.8 Short term borrowings 7.3 13.4 Total current liabilities 20.2 28.2 Non-current provisions and liabilities 3.2 4.1 Long term borrowings 7.4 11.5 Net assets 61.3 55.8 Net debt 10.6 18.6 4
XP Power Cash Flow Statements £ Millions 2012 2011 Earnings Before Interest and Tax 21.0 25.3 Amortisation of development costs 1.0 0.9 Depreciation 1.3 1.3 Unrealised currency translation losses 0.5 0.2 Change in working capital 4.1 (6.5) Income tax paid (4.3) (5.0) Cash provided by operating activities 23.6 16.2 Capitalised development costs (2.2) (2.0) Interest paid (0.5) (0.8) Free cash flow 20.9 13.4 Opening net debt (18.6) (18.4) Purchase of property and equipment (net of disposals) (2.1) (5.7) Acquisition of subsidiary/payment of deferred consideration (2.0) (0.1) Dividends (9.1) (7.8) Effects of currency translation on cash 0.3 - Closing net debt (10.6) (18.6) 5
XP Power Earnings and Dividend Trend 120 100 80 Pence per share Termination of Adjusted EPS* third party 2008/9 Recession 60 Dividend lines 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Earnings growth 88% 20% 7% (4%) 11% 17% 105% 28% -24% Dividend growth 17% 14% 12% 11% 5% 5% 50% 36% +11% Cash generative business model allows consistent dividend growth Dividend CAGR 20% over last 5 years and 15% over the last 10 years Quarterly dividend payment cycles Earnings CAGR 21% over last 5 years and 27% over the last 10 years *Diluted and adjusted for amortisation of intangibles, non-cash foreign exchange gain, and reorganisation costs 6 6
XP Power Strategy • Target key blue chip accounts • Increase penetration of existing key accounts • Further expansion of high efficiency (“Green”) product offering • Extend manufacturing capacity outside China • Increase high margin contribution of own designed/manufactured products Continue to gain market share 7
XP Power Own Design Revenue Trend 120 100 10% 7% 12% 80 33% Labelled £ Millions 31% 40% 17% 22% 60 27% Own Brand 44% 40 41% 62% 37% Own 57% Design 48% 20 39% 37% 36% 0 2007 2008 2009 2010 2011 2012 17.9 15.2 11.4 11.0 9.9 6.9 Distribution 24.5 28.5 29.7 36.7 34.5 29.3 Labelled product Own design product 23.9 25.6 26.2 44.1 59.2 57.7 Average compound annual growth rate of 12% for own brand revenue to 2012 (own design 19%) 8 8
XP Power Vertical Integration – Vietnam Magnetics Facility • Operations started in Q1 2012 on target • Primarily a magnetics manufacturing facility • Further vertical integration offers an additional value proposition to customers - control of manufacturing, flexibility and lead times • Magnetics are labour intensive - Vietnam helps mitigate high wage inflation in China • Space for an additional facility • Start up losses in 2012 of £0.5M • Break even in 2013 million Mitigates continued rises in China costs from salary inflation and currency appreciation and spreads geopolitical risk 9 9
XP Power Revenue from “Green” Products 10.0 10 9.0 9 "Green" Product Revenue (£ Millions) 8.0 8 7.0 7 % of Total Revenue 6.0 6 5.0 5 4.0 4 3.0 3 2.0 2 1.0 1 0.0 0 2010 2011 2012 Revenue % of Total Revenue • “Green” products are starting to show traction • Reliability is currently the key demand driver for these products • Green products remains a major market opportunity 10 10
XP Power Gross R&D Spend and New Product Introductions 6.0 40 35 5.0 Number of new product introductions 30 R&D Spend (£ Millions) 4.0 25 3.0 20 15 2.0 10 1.0 5 0.0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 R&D Gross Spend New Product Introductions • The success of our new products has led directly to significant gains in new program wins • Market’s largest and freshest product portfolio established by 2011 • Greater focus on modified standards thereafter to address specific customer requirements 11 11
XP Power Selected New Product Introductions CCH400/600 – base plate ECE05/10 – board mounted GCS150 – low cost convection power - smallest 5/10 Watt for industrial and medical cooled for harsh environments AC-DC converter in the market 12
XP Power Market Data Market size and XP share £ Millions Size Share Rank Asia 555 2% - 1 st (Equal) Europe 330 12% 1 st North America 435 10% Total 1,320 7% Source: Micro-Tech Consultants 2011 figures – assumed to be 12% lower in 2012 from public company data XP Power’s revenue mix £ Millions Asia Europe North America Total % Healthcare 1.1 8.4 16.6 26.1 28% Industrial 2.8 22.0 18.9 43.7 47% Technology 3.8 10.4 9.9 24.1 25% Total 7.7 40.8 45.4 93.9 100% 8% 44% 48% 100% 13
XP Power Geographic Split Revenue (£ Millions) 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Asia Europe North America 3.4 32.2 33.7 2008 2009 4.6 31.9 30.8 5.6 41.4 44.8 2010 9.2 45.4 49.0 2011 7.7 40.8 45.4 2012 14
XP Power Sector Split 50.0 Revenue (£ Millions) 40.0 30.0 20.0 10.0 0.0 Industrial Healthcare Technology 36.1 15.1 18.1 2008 28.7 19.8 18.8 2009 42.2 22.8 26.8 2010 2011 46.9 26.6 30.1 43.7 26.1 24.1 2012 15
XP Power Case Study – Major Healthcare Company • Multi-parameter patient monitor • Lifetime and reliability critical so heat is important • Compact design with no fans • Designed in collaboration with the customer • Custom heat sinking for the power converter separated from the heat sinking for other components • Flexibility to modify the standard product to meet exact requirements 16
XP Power Customers – Selection of Top 30 • We do business with over 70% of the S&P 500 Equipment Manufacturers • Top 30 customers account for 40% (2011: 39%) of revenue (largest customer <5%) 17 17
XP Power Typical Product Life Cycle 8.0 Dip caused by 7.0 global recession Revenue (£ Millions) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenue 0.0 0.2 0.9 2.0 3.7 4.6 4.1 6.2 7.4 6.1 • Substantial revenue annuity • Design in cycle typically 18 months • Bodes well for future revenue growth ECM40/60 18 18
XP Power Summary and Outlook • Resilient earnings and continued strong cash flow allow dividend increase • Cautious regarding the markets and therefore revenue outlook for 2013 • Manufacturing initiatives taken in 2012 are expected to lead to improved gross margins in 2013 • Expect to continue to take market share 19
www.xppower.com
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