XP Power - Investor Presentation 2012 Annual Results XP Power - - PowerPoint PPT Presentation

XP Power - Investor Presentation

2012 Annual Results

XP Power

Highlights

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• 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

• f 50p (2011: 45p) and reduction of net debt

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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%

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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

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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)

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Earnings and Dividend Trend

20 40 60 80 100 120 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Pence per share Adjusted EPS* Dividend

• 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

Earnings growth 88% 20% 7% (4%) 11% 17% 105% 28%

• 24%

Dividend growth 17% 14% 12% 11% 5% 5% 50% 36% +11%

Termination of third party lines 2008/9 Recession *Diluted and adjusted for amortisation of intangibles, non-cash foreign exchange gain, and reorganisation costs

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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

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Own Design Revenue Trend

20 40 60 80 100 120

£ Millions

Distribution 17.9 15.2 11.4 11.0 9.9 6.9 Labelled product 24.5 28.5 29.7 36.7 34.5 29.3 Own design product 23.9 25.6 26.2 44.1 59.2 57.7 2007 2008 2009 2010 2011 2012

Average compound annual growth rate of 12% for own brand revenue to 2012 (own design 19%)

Own Design Labelled Own Brand 36% 37% 27% 37% 41% 22% 39% 44% 17% 48% 40% 12% 57% 33% 10% 7% 31% 62%

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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

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Revenue from “Green” Products

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 2010 2011 2012 "Green" Product Revenue (£ Millions) 1 2 3 4 5 6 7 8 9 10 % of Total Revenue 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

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Gross R&D Spend and New Product Introductions

0.0 1.0 2.0 3.0 4.0 5.0 6.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 R&D Spend (£ Millions) 5 10 15 20 25 30 35 40 Number of new product introductions 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

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Selected New Product Introductions

ECE05/10 – board mounted power - smallest 5/10 Watt AC-DC converter in the market CCH400/600 – base plate cooled for harsh environments GCS150 – low cost convection for industrial and medical

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Market Data

£ Millions Size Share Rank Asia 555 2%

• Europe

330 12% 1st (Equal) North America 435 10% 1st Total 1,320 7% £ 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%

Source: Micro-Tech Consultants 2011 figures – assumed to be 12% lower in 2012 from public company data

XP Power’s revenue mix Market size and XP share

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Geographic Split

0.0 10.0 20.0 30.0 40.0 50.0 60.0

Revenue (£ Millions) 2008 3.4 32.2 33.7 2009 4.6 31.9 30.8 2010 5.6 41.4 44.8 2011 9.2 45.4 49.0 2012 7.7 40.8 45.4 Asia Europe North America

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Sector Split

0.0 10.0 20.0 30.0 40.0 50.0

Revenue (£ Millions) 2008 36.1 15.1 18.1 2009 28.7 19.8 18.8 2010 42.2 22.8 26.8 2011 46.9 26.6 30.1 2012 43.7 26.1 24.1 Industrial Healthcare Technology

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

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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%)

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Typical Product Life Cycle

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

Revenue (£ Millions)

Revenue 0.0 0.2 0.9 2.0 3.7 4.6 4.1 6.2 7.4 6.1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

• Substantial revenue annuity
• Design in cycle typically 18 months
• Bodes well for future revenue growth

Dip caused by global recession ECM40/60

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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

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