Xp Power Regulatory News (XPP)

25 February 2013XP Power Limited ("XP" or "the Group")

Annual Results for the year ended 31 December 2012

XP, one of the world's leading developers and manufacturers of critical power control components for the electronics industry, today announces its annual results for the year ended 31 December 2012.

Highlights Year ended Year ended 31 December 31 December Change 2012 2011Bookings £96.6m £98.3m -2%Revenue £93.9m £103.6m -9%Gross margin 47.8% 49.1% -130 bpsAdjusted profit before tax £20.2m £24.3m -17%Adjusted profit after tax £15.5m £20.3m -24%Diluted earnings per share adjusted1 81.3p 106.4p -24%Operating cash flow £23.6m £16.2m +46%Net debt £10.6m £18.6m -43%Final dividend per share 17.0p 15.0pTotal dividend per share 50.0p 45.0p +11%

Gross margins reduced to 47.8% (2011: 49.1%) due to short term impact ofstart-up costs of Vietnam facility, low factory loading in the first quarterand costs of bringing third-party manufacturing in-house

XP Power's own design revenues increased to a record 62% of total revenues(2011: 57% of total revenues) despite challenging market conditions throughoutthe year

Sales of high efficiency ("green") products increased by 62% to £8.1 million,representing 9% of revenue (2011: £5.0 million or 5% of revenue)

Chinese manufacturing facility continues to successfully secure new approvedvendor agreements from blue chip customers

Vietnam magnetics facility operational since March 2012 and producing highquality product

100% of own design products now manufactured in-house, ensuring full control ofthe production process and expected to enhance margins in FY2013

Resilient earnings and continued strong cash flows provide basis for anincreased total dividend of 50.0p per share for the year up 11% on the prioryear

Successful repositioning as a designer and manufacturer leaves the Group wellpositioned to continue to take market share

Larry Tracey, Chairman, commented:

"Against a backdrop of continuing macro-economic uncertainty, global capitalgoods markets remain subdued and we are cautious on the revenue outlook, withorders received to date indicating flat or only modestly increased revenuefor2013.While striking this note of caution on current levels of capital equipmentinvestment in our customers' end user markets, we believe XP remains wellplaced for the year ahead. The manufacturing initiatives implemented in 2012should deliver gross margin improvements this year and we believe that ourstrategy of targeting blue chip customers with strong leadership positions intheir respective markets will result in further successful factory audits andcustomer wins in 2013.

We remain confident that our well-established strategy will underpin ourability to take further market share and produce the strong cash flowsnecessary to maintain a progressive attitude to the dividend."

Enquiries:XP Power (25 February 2013)+44 (0)207638 9571Duncan Penny, Chief Executive+44 (0)7776 178018Jonathan Rhodes, Finance Director+44 (0)7500 944614Citigate Dewe Rogerson+44 (0)20 7638 9571Kevin Smith/Jos BienemanXP designs and manufactures power controllers, the essential hardware componentin every piece of electrical equipment that converts power from the electricitygrid into the right form for equipment to function.XP typically designs in power control solutions into the end products of majorblue chip OEMs, with a focus on the industrial (circa 46% of sales), healthcare(circa 28% sales) and technology (circa 26% of sales) sectors. Once designedinto a program, XP has a revenue annuity over the life cycle of the customer'sproduct which is typically 5 to 7 years depending on the industry sector.XP has invested in research and development and its own manufacturing facilityin China, to develop a range of tailored products based on its own intellectualproperty that provide its customers with significantly improved functionalityand efficiency.

Headquartered in Singapore and listed on the Main Market of the London StockExchange since 2000, XP serves a global blue chip customer base from 27locations in Europe, North America and Asia.

For further information, please visit www.xppower.comChairman's Statement

OverviewDespite challenging market conditions for capital equipment, the successfulexecution of our well-established strategy of moving up the value chain in todesign and manufacture, delivered a solid result for the year. Earnings pershare of 81.3p for 2012 (2011: 106.4p) demonstrated the resilience of ourbusiness model. These earnings, combined with strong cash generation, allowedus to increase the dividend by 11% to 50 pence per share (2011: 45 pence pershare) while at the same time reducing our net debt. The compound averagegrowth rate of earnings per share has been 21% over the last 5 years and 28%over the last 10 years.FinancialTotal orders decreased by 2% to £96.6 million (2011: £98.3 million) in theyear. Total revenues decreased by 9% to £93.9 million (2011: £103.6 million).Revenues from XP Power's own designed product were £57.6 million (2011: £59.2million) or 62% of revenue (2011: 57%). As expected, gross margin declinedslightly to 47.8% (2011: 49.1%) due to lower factory loading in the firstquarter of 2012 and the start-up costs of our new Vietnamese manufacturingfacility. Despite the decline in gross margin, operating profit was £21.0million (2011: £25.3 million) or 22.4% of revenue (2011: 24.4%).

Net debt at the year-end was £10.6 million compared to £18.6 million at the endof 2011. Operating cash flow was £23.6 million (2011: £16.2 million)representing 112% of operating income.

Strategic Progress

In mid-2009 the Group achieved a key strategic objective when it beganproduction at its full scale manufacturing facility in China. Our secondmanufacturing facility in Ho Chi Minh City, Vietnam commenced production ofmagnetic components during the first quarter of 2012, significantly enhancingthe value proposition we offer our customers. Combined, these state-of-the-artfactories dramatically enhance the Group's ability to secure preferred supplierstatus with larger customers and increase the proportion of its revenues whichcome from its higher margin, own-designed products.

Dividend

Our continued strong financial performance, strong cash flows and confidence inthe Group's long term prospects have enabled us to consistently increasedividends.

In line with our progressive dividend policy, a final dividend of 17 pence pershare for the fourth quarter of 2012 is proposed. This dividend will be payableto members on the register on 15 March 2013 and will be paid on 10 April 2013.When combined with the interim dividends for the previous quarters, the finalproposed dividend results in a total dividend of 50 pence per share for theyear (2011: 45 pence); an increase of 11%. The compound average growth rate ofour dividend has been 20.1% over the last 5 years and 15.3% over the last 10years.Board ChangesOn 18 December 2012 the Group announced that Michael Hafferty, who had servedas a Non-Executive Director since April 2007, would retire as a Non-ExecutiveDirector with effect from 31 December 2012.

On behalf of the Board, I would like to thank Michael for his contribution toXP Power over many years and wish him well for the future.

OutlookAgainst a backdrop of continuing macro-economic uncertainty, global capitalgoods markets remain subdued and we are cautious on the revenue outlook, withorders received to date indicating flat or only modestly increased revenuefor2013.While striking this note of caution on current levels of capital equipmentinvestment in our customers' end user markets, we believe XP remains wellplaced for the year ahead. The manufacturing initiatives implemented in 2012should deliver gross margin improvements this year and we believe that ourstrategy of targeting blue chip customers with strong leadership positions intheir respective markets will result in further successful factory audits andcustomer wins in 2013.

We remain confident that our well-established strategy will underpin ourability to take further market share and produce the strong cash flowsnecessary to maintain a progressive attitude to the dividend.

Larry TraceyChairmanChief Executive's ReviewOverview

2012 was a challenging but significant year for XP Power. Macro-economicconcerns continued to weigh on the capital equipment markets in which ourcustomers operate and there seems little sign of improvement as we enter into2013.

Notwithstanding the more uncertain economic backdrop, we continued to investfor the future, successfully implementing two key manufacturing initiativesduring the year. Our new magnetics facility in Vietnam is now operational andproducing excellent quality product. We have also brought in-house all themanufacture of our own-design products, which had previously been produced by athird party contract manufacturer. The Group now manufactures 100% of theproducts developed in its design centres, giving it total control overproduction and enhancing margins. Inevitably, the Vietnam start-up costs andthe engineering costs of bringing our own-design product in house, incombination with low factory loading in the first quarter of 2012, did havesome short term impact on our gross margins for the year. However, thesefactors are now behind us and should allow an increase in gross margins in2013.Despite the factors discussed above the Group continued to produce classleading operating income of £21.0 million and excellent free cash flow of £20.9million enabling a reduction in net debt from £18.6 million at the beginning of2012 to £10.6 million at the year-end.The Group continued to make excellent progress in its strategy of increasingpenetration of its key customer accounts. We expect that this continued focuson customers with leadership positions in their respective markets will enableus to continue to gain market share.Our broad and up-to-date portfolio of class leading products, many of which arehighly efficient, combined with excellent engineering support, and the assuredquality and reliability facilitated by our move into manufacturing, isincreasingly making us the power converter provider of choice for many largecustomers.A record 62% of our revenues came from our own designed products in 2012 (2011:57%) and 93% of our total revenues now carry the XP Power brand (2011: 90%).Own designed products generate higher margins, and give XP Power the capabilityto design tailor-made power control solutions for specific customer orders.MarketsXP Power supplies power control solutions to Original Equipment Manufacturers("OEMs") of capital goods, who themselves supply the healthcare, technology andindustrial markets 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 £1.5billion per annum in 2011. Early indications suggest that our markets may havedeclined by approximately 12% in 2012.We estimate XP Power's global marketshare to be around 7% in 2012. Across North America and Europe, XP Powercurrently has around 10% and 12% respectively of our available market, whileacross Asia our share is estimated to be 1%. This illustrates the significantcommercial opportunities that remain open to XP Power, and the Board isconfident that the Group's competitive advantages over many of its peers willallow it to take further share in each of its key markets.The sector split of 2012 revenues was as follows: Industrial declined 7% to £43.8 million (2011: £46.9 million), Healthcare declined 2% to £26.0million(2011: £26.6 million) and Technology declined 20% to £24.1 million (2011: £30.1million). The decline in the Technology sector was primarily attributable toweak demand from our customers in the semiconductor equipment sector.

According to geography our 2012 revenues were split: Asia down 16% to £7.7million (2011: £9.2 million), Europe down 10% to £40.8 million (2011: £45.4million) and North America down 7% to £45.4 million (2011: £49.0 million).

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 customers inthe year, underpinning revenue growth in future years.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.International Network

XP Power's mix of quick response capability and global reach is a majorcompetitive advantage. XP Power maintained a network of 27 sales officesspread over North America, Europe and Asia, with a further 16 distributors,supporting its smaller customers, during the year. The size and scope of thisnetwork is kept under continuous review to ensure the business remains bestplaced to capitalise 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.

Our 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 face supportand rapid response times.

In Europe, the XP Power network consists of eight sales offices and a furthernine distributor offices, providing the same level of customer support as NorthAmerica. In addition, XP Power has engineering services centres in Germanyandthe UK.The Asian sales activities are run from Shanghai and Singapore, where we alsomanage a network of seven distributors serving the region. In the medium termwe expect revenues derived from Asia to be an increasing proportion of XPPower's worldwide revenues.Market Leading TechnologyA long term commitment to invest in research and development of new productshas been the cornerstone of XP Power's growth strategy. We believe that we nowhave the broadest, most up to date portfolio of products in the industry, manywith class leading efficiency.Research and development gross spend was £5.3 million in 2012 (2011: £5.3million), and nineteen new product families were introduced in the year. Aspreviously reported, having established such a broad portfolio, the rate of newproduct 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 have been modifiedfrom the original, standard version.Manufacturing CapabilitiesOur target customers demand extremely high levels of quality control to ensurethe reliability and safety for the life of their equipment. Complete control ofmanufacturing 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 have achieved a further major milestone with the commencement ofproduction at our new magnetics facility in Ho Chi Minh City, Vietnam. TheVietnam facility gives us the capability to produce our own magneticscomponents, which not only enhances our value proposition to our customers - interms of control of the manufacturing process, flexibility and lead times - butalso provides a second geographical base to mitigate the effect of rapidlyincreasing costs in China.

The new Vietnam facility commenced production in the first quarter of 2012 andhas been producing excellent quality magnetics. The start-up losses of thisfacility were approximately £0.5 million during the year and we expect thefacility to be in a breakeven position by the end of 2013.

We also embarked on an additional major initiative during 2012 which was tobring all of our own-design products assembled by contract manufacture inhouse. This was a major engineering challenge for our manufacturing teams andresearch and development centres. Nearly 200 products have been transferredinto our Kunshan facility. While this activity caused a drag on gross marginsin 2012, it is expected to be gross margin enhancing in 2013 as factoryutilisation improves. Full control of manufacturing will also allow us to offermore attractive lead times to our customers. We are currently carrying a bufferinventory of approximately £1.0 million to support our customers during thistransition stage.

The Environment and Sustainability

In 2009 we established an Environmental Committee that immediately set the goalof making XP Power the leader in environmental issues within our industry. Muchhas been achieved since 2009 and our progress will be set out in detail in theEnvironmental Report contained within our 2012 Annual Report.Our new Vietnamese magnetics facility is the most environmentally friendlypower converter manufacturing facility in the world and we incorporated greentechnologies into the plant from the outset. The facility meets the Gold Plusrating of the BCA Green Mark requirements which are the leading standards setby the Singapore Building and Construction Authority for non-residentialbuildings in tropical climates. We are proud that this is not only the mostenvironmentally friendly facility in our industry but is the first BCA GreenMark certified industrial 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 these green products or 9% of revenue, compared with £5.0 million or 5% of revenue in 2011.

Investing in Customer Support

In a competitive market place, excellent customer support and service iscritical. XP Power has developed a network of relationship managers and salesengineers to manage long-term customer relationships across three continents.The Group has worked hard to build a sales culture that can successfully managecomplicated relationships and has developed sophisticated proprietary customerrelationship management tools to manage the sales process effectively.Management regards these tools and their method of utilisation as a significantsource of competitive advantage over the Group's larger competitors.OutlookDesign wins in 2012 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. However, the continued poor macroeconomic backdropis presenting a challenging environment for capital investment as we enter 2013and our customers remain cautious in terms of placing orders.As a supplier to manufacturers of capital goods, we cannot expect to be immunefrom the effects of weak global end-markets, nevertheless, XP's successfulrepositioning as a designer and manufacturer leaves the Group well positionedto respond to these more difficult markets and to continue to take market sharewhile sustaining margins.We remain confident in our strategy of our targeting customers with strongleadership positions in their respective markets. These blue chip customersfind the Group's broad, up to date product offering, and manufacturingcapabilities extremely attractive, especially since they are supported withvery high service levels. We consider that these competitive strengths place XPPower in a strong position to capitalise on its medium term growthambitions.Duncan PennyChief ExecutiveXP Power LimitedConsolidated Statement of Comprehensive IncomeFor the year ended 31 December 2012£ Millions Note 2012 2011Revenue 2 93.9 103.6Cost of sales (49.0) (52.7)Gross profit 44.9 50.9ExpensesDistribution and marketing (19.1) (20.7)Administrative (0.7) (0.7)Research and development (4.1) (4.2)Operating profit 21.0 25.3Finance cost (0.8) (1.0)Profit before income tax 2 20.2 24.3Income tax expense 3 (4.5) (3.6)Profit for the year 15.7 20.7Profit attributable to:Owners of the parent 15.5 20.3Non-controlling interest 0.2 0.4Profit for the year 15.7 20.7 Earnings per share attributable to owners of the parent (pence per share) - Basic 5 81.7 107.1 - Diluted 5 81.3 106.4XP Power LimitedConsolidated Balance Sheet

For the year ended 31 December 2012

£ Millions Note 2012 2011ASSETSCurrent AssetsCash and cash equivalents 4.1 6.3Inventories 19.8 22.0Trade receivables 14.2 16.0Other current assets 1.2 2.6Total current assets 39.3 46.9Non-current assetsGoodwill 30.5 31.3Intangible assets 7.6 6.4Property, plant and equipment 13.2 12.9Investment in associates - 0.1Deferred income tax assets 0.3 0.4ESOP loan to employees 1.2 1.6Total non-current assets 52.8 52.7Total assets 92.1 99.6LIABILITIESCurrent liabilities Current income tax liabilities 1.6 1.3Trade and other payables 11.1 11.4 Provision for deferred contingent consideration 7 - 1.9Borrowings 6 7.3 13.4 Derivative financial instruments 0.2 0.2Total current liabilities 20.2 28.2Non-current liabilities Provision for deferred contingent consideration 7 1.5 2.1Borrowings 6 7.4 11.5 Deferred income tax liabilities 1.7 2.0Total non-current liabilities 10.6 15.6Total liabilities 30.8 43.8NET ASSETS 61.3 55.8EQUITY Equity attributable to owners of the parent Share capital 27.2 27.2Merger reserve 0.2 0.2Treasury shares (1.2) (1.0)Hedging reserve (0.2) -Translation reserve (7.7) (7.1)Retained earnings 42.8 36.3 61.1 55.6Non-controlling interests 0.2 0.2TOTAL EQUITY 61.3 55.8XP Power Limited

Consolidated Statement of Cash Flows

For the year ended 31 December 2012

£ Millions 2012 2011 Cash flows from operating activitiesProfit for the year 15.7 20.7Adjustments for - Income tax expense 4.5 3.6 - Amortisation and depreciation 2.3 2.2 - Finance cost 0.8 1.0 - (Gain)/Loss on fair valuation of derivative financial instruments (0.1) 0.1 - Unrealised currency translationlosses 0.5 0.2Change in the working capital - Inventories 2.2 (1.0) - Trade and other receivables 3.2 (1.5) - Trade and other payables (0.3) (4.1) - Provision for liabilities andother charges (0.9) -Income tax paid (4.3) (5.0)Net cash generated from operating activities 23.6 16.2 Cash flows from investing activitiesAcquisition of a subsidiary, net of cash acquired (0.1) (0.1)Purchases and construction ofproperty, plant and equipment (2.5) (5.7) Research and development expenditure capitalised (2.2) (2.0) Proceeds from disposal of property, plant and equipment 0.4 -ESOP loans repaid 0.5 0.8 Payment of deferred consideration (1.9) -Net cash used in investing activities (5.8) (7.0) Cash flows from financing activities Repayment of borrowings (4.2) (4.1) Net purchase of treasury shares by ESOP (0.5) (0.8)Interest paid (0.5) (0.8) Dividend paid to equity holders of the Company (8.9) (7.4) Dividend paid to non-controlling interests (0.2) (0.4) Net cash used in financing activities (14.3) (13.5) Net increase/(decrease) in cash and cash equivalents 3.5 (4.3)Cash and cash equivalents atbeginning of financial year (3.3) 1.0 Effects of currency translation on cash and cash equivalents 0.3 - Cash and cash equivalents at end of financial year 0.5 (3.3)

Notes to the Annual Results Statement

For the year ended 31 December 2012

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 reportingThe Group is organised on a geographic basis. The Group's products are a singleclass of business; however the Group is also providing sales by end market toassist the readers of this report.

The geographical segmentation is as follows:

£ Millions 2012 2011RevenueEurope 40.8 45.4North America 45.4 49.0Asia 7.7 9.2Total Revenue 93.9 103.6Segment resultEurope 7.4 9.8North America 11.2 12.3Asia 0.9 2.5Segment result 19.5 24.6Research and development costs (4.1) (4.2)Finance income and cost (0.8) (1.0)Corporate recovery from operating segment 5.6 4.9Profit before tax 20.2 24.3Tax (4.5) (3.6)Total Profit 15.7 20.7Analysis by end market

The revenue by end market was as follows:

Year to 31 December 2012 Year to 31 December 2011 North North

£ Millions Europe America Asia Total Europe America Asia Total

Technology 10.4 9.9 3.8 24.1 11.6 12.5 6.0 30.1

Industrial 22.1 18.9 2.8 43.8 24.3 20.7 1.9 46.9

Healthcare 8.3 16.6 1.1 26.0 9.5 15.8 1.3 26.6

Total 40.8 45.4 7.7 93.9 45.4 49.0 9.2 103.63. Income taxes £ Millions 2012 2011 Singapore corporation tax - current 1.0 1.3 year - adjustment in respect of prior year - 0.1 Overseas corporation tax - current year 3.1 2.9 - adjustment in respect of prior year 0.6 (1.3) Total current tax 4.7 3.0 Deferred income tax - current year 0.2 1.3 - adjustment in respect of prior year (0.4) (0.7) Tax charge for the year 4.5 3.6

The differences between the total income tax expense shown above and the amountcalculated by applying the standard rate of Singapore corporate tax to theprofit before tax are as follows:

£ Millions 2012 2011 Profit before tax 20.2 24.3

Tax on profit at standard Singapore tax rate of 17% 3.4 4.1

Tax incentives (0.7) (0.7)Higher rates of overseas corporation tax 1.6 2.4Non-deductible expenditure 0.1 -Deduction for gains on employee share options (0.1) (0.3)Adjustments in respect of prior year 0.2 (1.9)Tax charge for the year 4.5 3.64. Dividends

Amounts recognised as distributions to equity holders in the period

2012 2011 Pence Pence per £ per £ share Millions share Millions Prior year third quarter dividend paid 11.0 * 2.1 8.0 1.5Prior year final dividend paid 15.0 * 2.8 12.0 2.3 First quarter dividend paid 10.0 ^ 1.9 9.0 * 1.7Second quarter dividend paid 11.0 ^ 2.1 10.0 * 1.9Total 47.0 8.9 39.0 7.4

* Dividends in respect of 2011 (45.0p)

^ Dividends in respect of 2012 (50.0p)

A dividend of 12.0p per share was paid in respect of the Third Quarter of 2012on 10 January 2013.

The proposed final dividend for 2012 of 17.0 pence per share is subject toapproval by shareholders at the Annual General Meeting scheduled for 8 April2013 and has not been included as a liability in these financial statements.It is proposed that the final dividend be paid on 10 April 2013 to members onthe register as at 15 March 2013.

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:

2012 2011 £ Millions £ MillionsEarnings Earnings for the purposes of basic and diluted earnings per share(profit for the year attributable to equity shareholders of the parent) 15.5 20.3Number of sharesWeighted average number of shares for the purposes of basic earnings per share(thousands) 18,978 18,946 Effect of potentially dilutive share options (thousands) 76 138 Weighted average number of shares for the purposes of dilutive earnings per share (thousands) 19,054 19,084 Earnings per share from operations Basic 81.7p 107.1pDiluted 81.3p 106.4p6. Borrowings

The borrowings are repayable as follows:

£ Millions 2012 2011On demand or within one year 7.3 13.4In the second year 7.4 3.8In the third year - 7.7 - - 14.7 24.9Less: Amounts due for settlement within 12 months(shown under current liabilities) (7.3) (13.4)Total repayable after 12 months 7.4 11.5

The other principal features of the Group's borrowings are as follows:

Bank overdrafts are repayable on demand. The bank overdrafts are secured on theassets of the Group. At 31 December 2012, the Group had an overdraft of £3.6million (2011: £9.6 million). In October 2012, the Group renewed its annualworking capital facility, which is US$12.5 million (£7.7 million) reduced fromUS$15.0 (£9.2 million) in the prior year, priced at Bank of Scotland's baserate plus a margin of between 2.0% and 3.0% depending on the ratio of Net Debtto EBITDA (2011: priced at the Bank of Scotland's base rate plus a margin of2.5%).The Group has a term debt facility with Bank of Scotland PLC at US$27.0 million(£16.6 million) with quarterly repayment of US$1.5million (£0.9 million) and afinal repayment of US$9.0 million (£5.53 million) due in expiry of the facilityin September 2014. The term loan is priced at LIBOR plus a margin of between1.75% and 2.25% depending on the ratio of Net Debt to EBITDA. (2011: pricedatLIBOR plus a margin of 2.0%).

The Group has pledged all assets as collateral to secure banking facilitiesgranted to the Group.

Deferred consideration

The Group owns 84.0% (2011: 69.7%) of the shares of Powersolve ElectronicsLimited ("Powersolve") and had entered into an agreement on 19 December 2011 topurchase 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 years ending2016.

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.

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.Risks Specific to the Group

Dependence on manufacturing facilities

The Group is dependent on its manufacturing facilities in China and Vietnam forthe production of the majority of its products. Any issues that causedisruption at these production facilities could have a material adverse effecton their businesses.Dependence on key personnelThe 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.

Loss of key customers/suppliers

The Group is dependent on retaining its key customers and suppliers. Should theGroup lose a number of its key customers or a key supplier this could have amaterial impact on the Group's businesses financial condition and results ofoperations. However, for the year ended 31 December 2012, no one customeraccounted for more than 5% of revenue.

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 disruption toits operations and revenues.

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 their competitors.In response to a changing competitive environment, the Group may elect fromtime to time to make certain pricing, service, marketing decisions oracquisitions that could have a short term material adverse effect on theGroup's revenues, results of operations and financial condition.

Management stretch

The management team is likely to be faced with increased challenges associatedwith any sustained adverse macroeconomic conditions. With the financial marketsuncertain, the management team must also be able to adapt to the changingconditions and implement corrective measures as they are needed. It couldadversely affect the Group if the management team is not able to successfullycope with these challenges.

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 damage tothe reputation of the Group together with significant remedial costs.

Risks relating to taxation of the Group

The Group is exposed to corporation tax payable in many jurisdictions includingthe USA where the effective rate can be as high as 40.0%, the UK where thecorporation tax rate is currently 24.0% and a number of European jurisdictionswhere the rates vary between 25.5% and 38.7%. In addition, the Group hasmanufacturing activities in China and Hong Kong where the corporation tax ratesare 25% and 16.5% respectively and sales companies in Singapore and Switzerlandwhere the corporation tax rates are 17.0% and 20.0% 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.

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 2011 or 2012. Thefinancial information for the year ended 31 December 2011 is derived from theXP Power Limited statutory accounts for the year ended 31 December 2011, 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 2012 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the Accounting andCorporate Regulatory Authority in Singapore following the Company's AnnualGeneral 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 25 February 2013.