Xp Power Regulatory News (XPP)

24 February 2014 XP Power Limited ("XP Power" or "the Group") Annual Results for the year ended 31 December 2013 XP Power, one of the world's leading developers and manufacturers of criticalpower control components for the electronics industry, today announces its annualresults for the year ended 31 December 2013. Highlights Year ended Year ended 31 December 31 December Change 2013 2012 Order intake £103.7m £96.6m +7%Revenue £101.1m £93.9m +8%Gross margin 49.1% 47.8% +130 bpsProfit before tax £22.9m £20.2m +13%Profit after tax £18.4m £15.7m +17%Diluted earnings per share adjusted 95.1p 81.3p +17%Operating cash flow £20.2m £23.6m -14%Net debt £3.5m £10.6m -67%Final dividend per share 19.0p 17.0p +12%Total dividend per share 55.0p 50.0p +10% - The Group's well-established strategy of developing and manufacturing itsown range of market leading products produced another year of strong progress - Order intake increased by 7% to £103.7 million (2012: £96.6 million) andrevenues increased by 8% to £101.1 million (2012: £93.9 million) - Gross margins recovered to 49.1% (2012: 47.8%) as the new Vietnam facilitymoved into profit from June 2013 and product mix improved - XP Power's own design revenues increased to a record £64.2 million (2012:£57.6 million) or 64% of total revenues (2012: 62% of total revenues) - Sales of high efficiency ("green") products increased by 16% to £9.4million, representing 9.3% of revenue (2012: £8.1 million or 8.6% of revenue) - Strong earnings and continued strong cash flows resulted in a reduction innet debt to £3.5 million from £10.6 million at the end of 2012 - Full year dividend increased 10% to 55.0 pence per share (2012: 50.0 penceper share), with proposed final dividend of 19.0 pence per share (2012: 17.0pence per share). - Successful repositioning as a designer and manufacturer leaves the Groupwell positioned to continue to take market share Larry Tracey, Chairman, commented: "2013 has been another year of progress where we have again demonstrated thesuccessful execution of our well-established strategy of moving up the valuechain into design and manufacture. We have delivered a solid set of resultsand encouragingly, have again out-paced our competitors and taken marketshare." "XP Power's customers supply capital equipment to numerous markets across theglobe. The macro-economic outlook for these customers has shown gradualimprovement in the second half of 2013, which gives us confidence for furthergrowth in 2014 and beyond." Enquiries: XP PowerDuncan Penny, Chief Executive +44 (0)7776 178018Jonathan Rhodes, Finance Director +44 (0)7500 944614 Citigate Dewe Rogerson +44 (0)20 7638 9571Kevin Smith/Jos Bieneman XP Power designs and manufactures power controllers, the essential hardwarecomponent in every piece of electrical equipment that converts power from theelectricity grid into the right form for equipment to function. XP Power typically designs in power control solutions into the end products ofmajor blue chip OEMs, with a focus on the industrial (circa 45% of sales),healthcare (circa 30% sales) and technology (circa 25% of sales) sectors. Oncedesigned into a program, XP Power has a revenue annuity over the life cycle ofthe customer's product which is typically 5 to 7 years depending on theindustry sector. XP Power has invested in research and development and its own manufacturingfacility in China, to develop a range of tailored products based on its ownintellectual property that provide its customers with significantly improvedfunctionality and efficiency. Headquartered in Singapore and listed on the Main Market of the London StockExchange since 2000, XP Power serves a global blue chip customer base from 27locations in Europe, North America and Asia. For further information, please visit www.xppower.com Chairman's Statement Overview 2013 has been another year of progress where we have again demonstrated thesuccessful execution of our well-established strategy of moving up the valuechain into design and manufacture. We have delivered a solid result and theevidence is that we have again out-paced our competitors and taken marketshare. Earnings per share for 2013 grew by 17% to 95.1 pence (2012: 81.3 pence),demonstrating the effectiveness of our business model. This solid growth inearnings, combined with strong cash generation, allowed us to increase thedividend once again, while at the same time significantly reducing our netdebt. The compound average growth rate of earnings per share has been 22% over thelast 5 years and 23% over the last 10 years. Financial Highlights Order intake increased by 7% to £103.7 million in the year (2012: £96.6million). Revenues increased by 8% to £101.1 million (2012: £93.9 million).Revenues from XP Power's own designed product - a key indicator of ourstrategic progress - grew 11% to £64.2 million (2012: £57.6 million)representing 64% of revenue (2012: 62%) and setting a new record. As expected, gross margin improved to 49.1% (2012: 47.8%) due to product mixand the absence of start-up costs incurred in the prior year from our newVietnam manufacturing facility. Higher revenues, in combination with improvedgross margins, resulted in a healthy operating profit of £23.3 million (2012:£21.0 million) or 23.0% of revenue (2012: 22.4%). Net debt at the year-end was £3.5 million compared to £10.6 million at the endof 2012. Operating cash flow was £20.2 million (2012: £23.6 million)representing 86.7% of operating income. Strategic Progress XP Power has a long-established strategy of targeting blue chip customers withstrong leadership positions in their respective markets, and whose insistenceon vetting their suppliers' design and manufacturing facilities acts as asignificant barrier to entry to many of the Group's potential competitors. Ourstate-of-the-art factories in China and Vietnam are dramatically enhancing theGroup's ability to secure preferred supplier status with these largercustomers and increase the proportion of revenues which come from our highermargin, own-designed products. This strategy remained successful in 2013 andwe believe that it will continue to underpin the Group's progress in thecurrent financial year. Dividend Our continued strong financial performance, strong cash flows and confidencein the Group's long term prospects have enabled us to consistently increasedividends. In line with our progressive dividend policy, a final dividend of 19 pence pershare for the fourth quarter of 2013 is proposed. This dividend will bepayable to members on the register on 14 March 2014 and will be paid on 10April 2014. When combined with the interim dividends for the previous quarters, the finalproposed dividend results in a total dividend of 55 pence per share for theyear (2012: 50 pence); an increase of 10%. The compound average growth rate ofour dividend has been 21% over the last 5 years and 16% over the last 10years. Board Changes On 1 January 2014 the Group announced the appointment of Peter Bucher as anon-executive director. Peter is well known within the power converter industry and I am delighted towelcome him to the Board. He brings a wealth of power experience with him andhe will be extremely valuable to our business. Outlook XP Power's customers supply capital equipment to numerous markets across theglobe. The macro-economic outlook for these customers has shown gradualimprovement in the second half of 2013, which gives us confidence for furthergrowth in 2014 and beyond. If this improvement is sustained we would expect togrow revenues again in 2014. Larry TraceyChairman Chief Executive's Review Overview 2013 was an encouraging year for XP Power. We continued to execute our longterm strategy and evidence suggests we have continued to take market share.Since the summer of 2013 we have seen evidence of a slow but gradualimprovement in the markets we serve and revenue and earnings growth hasresumed following the poor environment for capital equipment spending thatcharacterised 2012. If this improvement is sustained we would expect 2014 tobe another year of growth for the Group. Our new Vietnam manufacturing facility reached levels of production that meantit started to contribute to our gross margins from June 2013. Increasedrevenues of our own designed and manufactured product also contributed to animprovement in gross margins. These positive influences fully offset the rapidwage inflation that we have continued to witness in China. Our strategy and business model once again allowed us to produce class leadingoperating income of £23.3 million or 23.0% of operating margin (2012: £21.0 or22.4%) and excellent free cash flow of £17.7 million (2012: £20.9 million)which enabled net debt to be reduced from £10.6 million at the beginning of2013 to £3.5 million at the year-end. This significant reduction was achievedafter returning £10.0 million to shareholders in the form of dividends. The Group continued to make excellent progress with its strategy of increasingpenetration of its target blue-chip customer accounts. We expect that thissustained focus on customers with leadership positions in their respectivemarkets will enable us to take further market share. Our broad and up-to-date portfolio of class leading products, many of whichare highly efficient, combined with excellent engineering support, and theassured quality and reliability facilitated by our move into manufacturing, isincreasingly making us the power converter provider of choice for many largecustomers. Our own designed product revenues reached a new record and grew 11% to £64.2million, representing 64% of our total revenues (2012: 62%). Own designedproducts generate higher gross margins, and give us the capability to designtailor-made power control solutions for our customers. Key Performance Indicators Aligned With Our Strategy The Group has defined five key performance indicators which are closelyaligned with its strategy, and which demonstrate the significant progress madeover the last five years. Key Strategy points 2009 2010 2011 2012 2013 TargetPerformanceIndicator Number of new - Develop a strong 30 31 38 19 31 Note (1)product pipeline of leadingintroductions edge products "Green" - Expansion of high - £2.8m £5.0m £8.1m £9.4m Note (2)product efficiency "Green"revenues products Own design - Target and £26.2m £44.1m £59.2m £57.6m £64.2m Note (3)product increaserevenues penetration of key accounts - Increase contribution of own design products Proportion of - Manufacture our 39% 48% 57% 62% 63% Note (4)own design own productsproducts Earnings per - Target and 40.8p 83.7p 106.4p 81.3p 95.1p Note (5)share increase penetration of key accounts (1) Number of new product introductions = the number of new product familieslaunched to our sales team and customers during the year including both owndesign and labelled products The Group does not have an absolute long term target for this metric. Also notall products are equal in terms of their complexity and potential futurerevenue. For instance even though the number of products released in 2012reduced, the development teams were working on a large program of productsthat will release in a later period. In assessing new product opportunitiesour development teams consider the potential revenue from a new product familyas well as the total number of product introductions. (2) "Green" product revenues = revenues generated from products which meet thehigh efficiency and low stand-by power requirements set by XP Power to qualifythem to carry the "Green XP Power" logo The Group does not have an absolute long term target for this metric but wewould expect the growth rate of these products to significantly outpace thegrowth rate of total revenues. (3) Own design revenue = revenue derived from products designed by XP Power orwhere XP Power owns the design and outsources manufacture The Group does not have an absolute long term target for this metric. However,the Group targets to grow this metric by a double digit percentage each year. (4) Proportion of own design revenue = revenue from own design products as apercentage of total revenue We are targeting to achieve 75% own design revenue over the course of time. (5) Earnings per share = diluted earnings per share adjusted for amortisationof intangibles associated with acquisitions and exceptional charges or profits There is no absolute long term target set for this metric but the Grouptargets to grow this metric by a double digit percentage each year. Thecompound growth rate for this metric over the last five years has been 22%. We are pleased to report improvements in all our key performance indicators in 2013. Markets XP Power supplies power control solutions to Original Equipment Manufacturers("OEMs") of capital goods, who themselves supply the healthcare, technologyand industrial sectors with high value products. The increasing importance ofenergy efficiency, for both environmental and economic reasons, the necessityfor ever smaller products, the rate of technological change and the increasingproliferation of electronic equipment, all contribute to underpin the strengthof medium term demand for XP Power's power conversion products. The worldwide available market for XP Power's products was estimated to be£1.7 billion per annum in 2013. We estimate XP Power's global market share tobe around 6% in 2013. Across North America and Europe, XP Power currently hasaround 8% and 11% respectively of its available market, while across Asia ourshare is estimated to be 1%. This illustrates the significant commercialopportunities that remain open to XP Power, and the Board is confident thatthe Group's competitive advantages over many of its peers will allow it totake further share in each of its key markets. The sector split of 2013 revenues was as follows: Industrial increased 8% to£47.5 million (2012: £43.8 million), Healthcare increased 16% to £30.2 million(2012: £26.0 million) and Technology declined 3% to £23.4 million (2012: £24.1million). Our healthcare business continued to perform strongly due to its broad and upto date product portfolio, combined with the wholly-owned manufacturingfacilities which are essential to give the quality control that healthcarecustomers demand. Our value proposition has also enabled greater penetrationof the larger customers in the sector. We have seen a broad but gradual recovery in the demand from most of ourcustomers and segments during the second half of 2013; particularly theindustrial sector. We have also made good in-roads into areas such as test andmeasurement and 3D printing which we report under industrial. The technologysector also benefited from a gradual recovery in demand from thesemi-conductor manufacturing equipment makers, which began to take hold in thesecond half of the year. According to geography our 2013 revenues were split: Europe up 7% to £43.8million (2012: £40.8 million), North America up 10% to £50.0 million (2012:£45.4 million) and Asia down 5% to £7.3 million (2012: £7.7 million). Asianrevenues in 2012 and 2013 were, as expected, affected by one unusually largetechnology sector program reaching the end of its lifespan. Our major blue chip customers require market leading, highly reliableproducts. We maintained a consistent investment in research and developmentthroughout the year and our product pipeline remains the broadest and freshestin the industry. The attractions of this continually evolving portfolio ofmarket leading products enabled the Group to win a number of new programs inthe year, underpinning revenue growth in future years. International Network Increasingly, the design and manufacturing process of major international OEMstakes place across different continents, with these blue chip companiesdemanding global support. In response, XP Power has established aninternational network of offices which offers the necessary customer supportacross technical sales, design engineering, logistics and operations. Thisnetwork gives XP Power a strong competitive advantage over both its smallercompetitors, who do not have the scale and geographic reach to serve globalcustomers, and its larger competitors, who often lack the operationalflexibility to provide excellent service and speed. We believe that thisbalance is key to our success in winning new contracts and offers XP Power theopportunity to further increase its market share. XP Power's mix of quick response capability and global reach is a majorcompetitive advantage. XP Power maintains a network of 27 sales offices spreadover North America, Europe and Asia, with a further 16 distributors supportingits smaller customers, during the year. The size and scope of this network iskept under continuous review to ensure the business remains best placed tocapitalise on growth opportunities in each of its geographies. XP Power has the largest, most technically trained sales force in theindustry. Our detailed in-house training programme demands that the salesforce pass numerous technology and customer service modules, making them a"value add" partner to our customers' product development teams. Managementbelieves that this gives the business a competitive edge compared to manywithin its peer group. The North American network consists of 17 sales offices and an extensiveengineering services function, based in Northern California. This networkallows XP Power to provide its major customers with local, face to facesupport and rapid response times. In Europe, the XP Power network consists of 8 sales offices and a further 9distributor offices. In addition, XP Power has engineering services centres inGermany and the UK. The Asian sales activities are run from Shanghai and Singapore, where we alsomanage a network of seven distributors serving the region. We also added adirect sales presence in India during the year. Market Leading Technology A long term commitment to invest in research and development of new productshas been the cornerstone of XP Power's growth strategy. We consider that wenow have the broadest, most up to date portfolio of products in the industry,many with class leading efficiency. Gross research and development spend was £5.3 million in 2013 (2012: £5.3million), and 31 new product families were introduced in the year. Aspreviously reported, having established such a broad portfolio, the rate ofnew product introductions has slowed with more of our engineering resource nowfocused on modifications to existing products to meet the precise requirementsof individual customers. Over half of the products we sell are modified fromthe original standard version in some form or another. Manufacturing Capabilities Our target customers demand the ultimate in terms of quality control to ensurethe reliability and safety for the life of their equipment. Complete controlof manufacturing is therefore critical to ensure strict management of theproduction processes and components that go into our products, and also givesus opportunities to reduce our product costs. The capability and performanceof our Kunshan facility, which was commissioned in 2009, has been instrumentalin winning new programs and customers. In 2012 we commenced production at our new magnetics facility in Ho Chi MinhCity, Vietnam. The Vietnam facility gives us the capability to produce our ownmagnetic components, which not only enhances our value proposition to ourcustomers but also provides a second geographical base to mitigate the effectof rapidly increasing costs in China. Production volumes at the Vietnamfacility increased steadily throughout the year and it has been profitablesince June 2013. The facility is currently providing approximately 60% of ourmagnetics demand. We expect to start production of power converters in Vietnamin the second half of 2014. The Environment and Sustainability In 2009 we established an Environmental Committee that immediately set thegoal of making XP Power the leader in environmental issues within ourindustry. Much has been achieved since 2009 and our progress will be set outin detail in the Environmental Report contained within our 2013 Annual Report. Our new Vietnamese magnetics facility is the most environmentally friendlypower converter manufacturing facility in the world meeting the Gold Plusrating of the BCA Green Mark requirements; the leading standards set by theSingapore Building and Construction Authority for non-residential buildings intropical climates. We are proud that this is not only the most environmentallyfriendly facility in our industry but is the first BCA Green Mark certifiedindustrial facility in Vietnam. The biggest impact XP Power can have on the environment is to promote its highefficiency green products, which consume and waste less energy on an on-goingbasis. Revenues from these green products continue to increase. In 2012 weshipped £8.1 million of green products or 8.6% of revenue, compared with £5.0million or 4.8% of revenue in 2011. In 2013 we have seen further progress,shipping £9.4 million or 9.3% of revenue. We have made this metric one of ourkey performance indicators. We estimate that the green products we shipped in2013 will save approximately 84,000 tonnes of CO2 emissions over theirexpected lifetime compared with a conventional 80% efficient power converter.We expect this to be an increasingly important factor for our customer basewhen choosing their suppliers. Outlook Design wins in 2013 have continued to be positive and we are pleased with thefurther headway that has been made in achieving approved or preferred supplierstatus at new key accounts. We remain confident in our strategy of targetingcustomers with strong leadership positions in their respective markets. Theseblue chip customers find the Group's broad, up to date product offering andin-house manufacturing capabilities extremely attractive, especially as theyare supported with very high service levels. We consider that thesecompetitive strengths allied to an improving macroeconomic backdrop, place XPPower in a strong position to capitalise on its medium term growth ambitions. Duncan PennyChief Executive XP Power LimitedConsolidated Statement of Comprehensive IncomeFor the year ended 31 December 2013 £ Millions Note 2013 2012 Revenue 2 101.1 93.9Cost of sales (51.5) (49.0)Gross profit 49.6 44.9 ExpensesDistribution and marketing (21.2) (19.1)Administrative (0.7) (0.7)Research and development (4.4) (4.1)Operating profit 23.3 21.0 Finance cost (0.4) (0.8)Profit before income tax 2 22.9 20.2 Income tax expense 3 (4.5) (4.5) Profit for the year 18.4 15.7 Profit attributable to:Equity holders of the Company 18.2 15.5Non-controlling interests 0.2 0.2Profit for the year 18.4 15.7 Earnings per share attributableto owners of the parent(pence per share)- Basic 5 95.8 81.7- Diluted 5 95.1 81.3 XP Power LimitedConsolidated Balance SheetAs at 31 December 2013 £ Millions Note 2013 2012 ASSETSCurrent AssetsCash and cash equivalents 5.0 4.1Inventories 20.4 19.8Trade receivables 15.4 14.2Other current assets 1.4 1.2Total current assets 42.2 39.3 Non-current assetsGoodwill 30.6 30.5Intangible assets 8.5 7.6Property, plant and equipment 12.7 13.2Deferred income tax assets 0.5 0.3ESOP loan to employees 1.0 1.2Total non-current assets 53.3 52.8Total assets 95.5 92.1 LIABILITIESCurrent liabilitiesCurrent income tax liabilities 1.1 1.6Trade and other payables 12.7 11.1Borrowings 6 8.5 7.3Derivative financial instruments 0.1 0.2Total current liabilities 22.4 20.2 Non-current liabilitiesProvision for deferred contingent consideration 7 1.7 1.5Borrowings 6 - 7.4Deferred income tax liabilities 2.0 1.7Total non-current liabilities 3.7 10.6Total liabilities 26.1 30.8NET ASSETS 69.4 61.3 EQUITYEquity attributable to owners of the parentShare capital 27.2 27.2Treasury shares (1.0) (1.2)Merger reserve 0.2 0.2Hedging reserve (0.3) (0.2)Translation reserve (8.0) (7.7)Retained earnings 51.1 42.8 69.2 61.1Non-controlling interests 0.2 0.2TOTAL EQUITY 69.4 61.3 XP Power LimitedConsolidated Statement of Cash FlowsFor the year ended 31 December 2013 £ Millions 2013 2012 Cash flows from operating activitiesProfit for the year 18.4 15.7Adjustments for- Income tax expense 4.5 4.5- Amortisation and depreciation 2.7 2.3- Finance cost 0.4 0.8- ESOP expenses 0.1 -- Gain on fair valuation of derivative financialinstruments (0.2) (0.1)- Unrealised currency translation (gain)/ loss (0.4) 0.5 Change in the working capital- Inventories (0.6) 2.2- Trade and other receivables (1.4) 3.2- Trade and other payables 1.6 (0.3)- Provision for liabilities and other charges 0.1 (0.9)Income tax paid (5.0) (4.3)Net cash generated from operating activities 20.2 23.6 Cash flows from investing activitiesAcquisition of a subsidiary, net of cash acquired - (0.1)Purchases and construction of property, plant andequipment (1.0) (2.5)Research and development expenditure capitalised (2.2) (2.2)Proceeds from disposal of property, plant and equipment 0.1 0.4ESOP loans repaid 0.2 0.5Payment of deferred consideration - (1.9)Net cash used in investing activities (2.9) (5.8) Cash flows from financing activitiesRepayment of borrowings (3.8) (4.2)Sale of treasury shares 0.1 -Net purchase of treasury shares by ESOP - (0.5)Interest paid (0.3) (0.5)Dividend paid to equity holders of the Company (9.9) (8.9)Dividend paid to non-controlling interests (0.2) (0.2)Net cash used in financing activities (14.1) (14.3) Net increase in cash and cash equivalents 3.2 3.5Cash and cash equivalents at beginning of financialyear 0.5 (3.3)Effects of currency translation on cash and cashequivalents 0.1 0.3 Cash and cash equivalents at end of financial year 3.8 0.5 Notes to the Annual Results StatementFor the year ended 31 December 2013 1. Basis of preparation These financial statements are presented in Pounds Sterling and have beenprepared using the accounting principles incorporated within InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union. 2. Segmental reporting The Group is organised on a geographic basis. The Group's products are asingle class of business; however the Group is also providing sales by endmarket to assist the readers of this report. The geographical segmentation is as follows: £ Millions 2013 2012 RevenueEurope 43.8 40.8North America 50.0 45.4Asia 7.3 7.7 Total Revenue 101.1 93.9 Segment resultEurope 7.4 7.4North America 13.3 11.2Asia 0.9 0.9Segment result 21.6 19.5 Research and development costs (4.4) (4.1)Finance income and cost (0.4) (0.8)Corporate recovery from operating segment 6.1 5.6Profit before tax 22.9 20.2Tax (4.5) (4.5)Total Profit 18.4 15.7 Analysis by end market The revenue by end market was as follows: Year to 31 December 2013 Year to 31 December 2012 North North£ Millions Europe America Asia Total Europe America Asia Total Technology 9.1 11.3 3.0 23.4 10.4 9.9 3.8 24.1Industrial 25.3 19.0 3.2 47.5 22.1 18.9 2.8 43.8Healthcare 9.4 19.7 1.1 30.2 8.3 16.6 1.1 26.0 Total 43.8 50.0 7.3 101.1 40.8 45.4 7.7 93.9 3. Income taxes £ Millions 2013 2012 Singapore corporation tax- current year 1.2 1.0- adjustment in respect of prior year - - Overseas corporation tax- current year 3.4 3.1- adjustment in respect of prior year (0.2) 0.6 Total current tax 4.4 4.7 Deferred income tax- current year 0.1 0.2- adjustment in respect of prior year - (0.4) Tax charge for the year 4.5 4.5 The differences between the total income tax expense shown above and theamount calculated by applying the standard rate of Singapore corporate tax tothe profit before tax are as follows: £ Millions 2013 2012 Profit before tax 22.9 20.2 Tax on profit at standard Singapore tax rateof 17% 3.9 3.4Tax incentives (0.7) (0.7)Higher rates of overseas corporation tax 1.8 1.6Non-deductible expenditure - 0.1Deduction for gains on employee share options (0.3) (0.1)Adjustments in respect of prior year (0.2) 0.2 Tax charge for the year 4.5 4.5 4. Dividends Amounts recognised as distributions to equity holders in the period 2013 2012 Pence per Pence per share £ Millions share £ Millions Prior year third quarter dividend paid 12.0 * 2.3 11.0 2.1Prior year final dividend paid 17.0 * 3.2 15.0 2.8First quarter dividend paid 11.0 ^ 2.1 10.0 * 1.9Second quarter dividend paid 12.0 ^ 2.3 11.0 * 2.1 Total 52.0 9.9 47.0 8.9 * Dividends in respect of 2012 (50.0p)^ Dividends in respect of 2013 (55.0p) A dividend of 13.0 pence per share was paid in respect of the Third Quarter of2013 on 10 January 2014. The proposed final dividend for 2013 of 19.0 pence per share is subject toapproval by shareholders at the Annual General Meeting scheduled for 8 April2014 and has not been included as a liability in these financial statements.It is proposed that the final dividend be paid on 10 April 2014 to members onthe register as at 14 March 2014. 5. Earnings per share The calculations of the basic and diluted earnings per share attributable tothe ordinary equity holders of the parent are based on the following data: 2013 2012 £ Millions £ MillionsEarningsEarnings for the purposes of basicand diluted earnings per share(profit for the year attributable toequity shareholders of the parent) 18.2 15.5 Number of shares Weighted average number of sharesfor the purposes of basicearnings per share (thousands) 18,990 18,978 Effect of potentially dilutive share options (thousands) 157 76 Weighted average number of shares for the purposes ofdilutive earnings per share (thousands) 19,147 19,054 Earnings per share from operationsBasic 95.8p 81.7pDiluted 95.1p 81.3p 6. Borrowings The borrowings are repayable as follows: £ Millions 2013 2012 On demand or within one year 8.5 7.3In the second year - 7.4 8.5 14.7Less: Amounts due for settlement within 12 months(shown under current liabilities) (8.5) (7.3) Total repayable after 12 months - 7.4 The other principal features of the Group's borrowings are as follows: 1. Bank overdrafts are repayable on demand. The bank overdrafts are secured onthe assets of the Group. At 31 December 2013, the Group had an overdraft of£1.2 million (2012: £3.6 million). In October 2013, the Group renewed itsannual working capital facility, which is reduced from US$12.5 million (£7.7million) to US$10.0 million (£6.1 million) in the prior year, priced at Bankof Scotland's base rate plus a margin of between 2.0% and 3.0% depending onthe ratio of Net Debt to EBITDA. 2. The Group has a term debt facility with Bank of Scotland PLC at US$12.0million (£7.3 million) with quarterly repayment of US$1.5million (£0.9million) and a final repayment of US$9.0 million (£5.5 million) due in expiryof the facility in September 2014. The term loan is priced at LIBOR plus amargin of between 1.75% and 2.25% depending on the ratio of Net Debt toEBITDA. 3. The Group has pledged all assets as collateral to secure banking facilitiesgranted to the Group. 4. Management assessed all loan covenants have been complied with as of 31December 2013. 7. Deferred consideration The Group owns 84.0% (2012: 84.0%) of the shares of Powersolve ElectronicsLimited ("Powersolve") and had entered into an agreement on 19 December 2011to purchase the remaining 16.0% of the shares in 2017. The commitment to purchase the remaining ownership has been accounted for asdeferred consideration and is calculated based on the expected future paymentwhich will be based on a predefined multiple of the earnings for 3 yearsending 2016. 8. Principal risks and uncertainties Board Responsibility Like many other international businesses the Group is exposed to a number ofrisks which may have a material effect on its financial performance. The Boardhas overall responsibility for the management of risk and sets aside time atits meetings to identify and address risks. Risks Specific to the Industry in which the Group Operates Fluctuations in foreign currency The Group deals in many currencies for both its purchases and sales includingUS Dollars, Euro and its reporting currency Pounds Sterling. In particular,North America represents an important geographic market for the Group wherevirtually all the revenues are denominated in US Dollars. The Group alsosources components in US Dollars and the Chinese Yuan. The Group therefore hasan exposure to foreign currency fluctuations. This could lead to materialadverse movements in reported earnings. Risk mitigation - The Group reviews balance sheet and cash flow currencyexposures and where considered appropriate uses forward exchange contracts tohedge these exposures. Any forward contract requires the approval of both theChairman and Chief Executive. Competition The power supply market is diverse and competitive in Asia, Europe and NorthAmerica. The Directors believe that the development of new technologies couldgive rise to significant new competition to the Group, which may have amaterial effect on its business. At the lower end of the Group's target marketthe barriers to entry are low and there is, therefore, a risk that competitioncould quickly increase particularly from emerging low cost manufacturers inAsia. Risk mitigation - The Group reviews activities of its competition, inparticular product releases and stays up to date with new technologicaladvances in our industry especially those relating to new components andmaterials. The Group also tries to keep its cost base competitive by operatingin low cost geographies where appropriate. Risks Specific to the Group Dependence on manufacturing facilities The Group is dependent on its manufacturing facilities in China and Vietnamfor the production of the majority of its products. Any issues that causedisruption at these production facilities could have a material adverse effecton their businesses. Risk mitigation - The Group reviews the risks that may cause a disruption insupply and has developed disaster recovery plans to help cope with unexpectedevents. Dependence on key personnel The future success of the Group is substantially dependent on the continuedservices and continuing contributions of its Directors, senior management andother key personnel. The loss of the services of any of their respectiveexecutive officers or other key employees could have a material adverse effecton their businesses. Risk mitigation - The Group undertakes performance evaluations and reviews tohelp it stay close to its key personnel. Where considered appropriate theGroup also makes use of financial retention tools such as equity awards. Loss of key customers/suppliers The Group is dependent on retaining its key customers and suppliers. Shouldthe Group lose a number of its key customers or a key supplier this could havea material impact on the Group's businesses financial condition and results ofoperations. However, for the year ended 31 December 2013, no one customeraccounted for more than 5% of revenue. Risk mitigation - The Group mitigates this risk by providing excellentservice. Customer complaints and non-conformances are reviewed monthly bymembers of the executive management team. On the supply side we conductregular audits of our key suppliers and in addition keep large amounts ofsafety inventory of key components. Shortage, non-availability or technical fault with regard to key electroniccomponents The Group is reliant on the supply, availability and reliability of keyelectronic components. If there is a shortage, non-availability or technicalfault with any of the key electronic components this may impair the Group'sability to operate its business efficiently and lead to potential disruptionto its operations and revenues. Risk mitigation - The Group mitigates this risk by keeping large safetyinventories of key components. Fluctuations of revenues, expenses and operating results The revenues, expenses and operating results of the Group could varysignificantly from period to period as a result of a variety of factors, someof which are outside its control. These factors include general economicconditions, adverse movements in interest rates, conditions specific to themarket, seasonal trends in revenues, capital expenditure and other costs, theintroduction of new products or services by the Group, or by theircompetitors. In response to a changing competitive environment, the Group mayelect from time to time to make certain pricing, service, marketing decisionsor acquisitions that could have a short term material adverse effect on theGroup's revenues, results of operations and financial condition. Risk mitigation - The Group's profitable and robust business model helpsmitigate risks from the factors set out above. Management stretch The management team is likely to be faced with increased challenges associatedwith any sustained adverse macroeconomic conditions. With the financialmarkets uncertain, the management team must also be able to adapt to thechanging conditions and implement corrective measures as they are needed. Itcould adversely affect the Group if the management team is not able tosuccessfully cope with these challenges. Risk mitigation - Performance against key goals and resourcing of these isreviewed at the executive management team meetings. Information Technology Systems The business of the Group relies to a significant extent on informationtechnology systems used in the daily operations of its operating subsidiaries.Any failure or impairment of those systems or any inability to transfer dataonto any new systems introduced could cause a loss of business and/or damageto the reputation of the Group together with significant remedial costs. Risk mitigation - The Group has disaster recovery plans in place to help dealwith disruption including information technology issues. The Group's key datais replicated on different sites and backed up. In 2014 we will also be movingcertain of our systems into the cloud. Risks relating to taxation of the Group The Group is exposed to corporation tax payable in many jurisdictionsincluding the USA where the effective rate can be as high as 40.0%, the UKwhere the corporation tax rate is currently 23.0% and a number of Europeanjurisdictions where the rates vary between 22.0% and 33.3%. In addition, theGroup has manufacturing activities in China and Hong Kong where thecorporation tax rates are 25% and 16.5% respectively and sales companies inSingapore and Switzerland where the corporation tax rates are 17.0% and 18.0%respectively. The effective tax rate of the Group is affected by where its profits fallgeographically. The Group effective tax rate could therefore fluctuate overtime. This could have an impact on earnings and potentially its share price. Risk mitigation - The Group has a Treasurer who keeps our taxation positionunder review. 8. Responsibility Statement The Directors' confirm to the best of their knowledge and belief that thiscondensed set of financial statements: - gives a fair view of the assets, liabilities, financial position and profitof the Group; and - includes a fair review of the information required by the Disclosure andTransparency Rules. 9. Other information XP Power Limited (the "Company") is listed on the London Stock Exchange andincorporated and domiciled in Singapore. The address of its registered officeis 401 Commonwealth Drive, Lobby B, #02-02, Haw Par Technocentre, Singapore149598. The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2012 or 2013. Thefinancial information for the year ended 31 December 2012 is derived from theXP Power Limited statutory accounts for the year ended 31 December 2012, whichhave been delivered to the Accounting and Corporate Regulatory Authority inSingapore. The auditors reported on those accounts; their report wasunqualified. The statutory accounts for the year ended 31 December 2013 willbe finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theAccounting and Corporate Regulatory Authority in Singapore following theCompany's Annual General Meeting. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company expects to publish full financial statementsthat comply with IFRSs later this month.

This announcement was approved by the directors on 24 February 2014.