Xp Power Regulatory News (XPP)

1 Feb 2005 07:00

XP Power PLC01 February 2005 XP Power plc ("XP" or "the Group") Preliminary Results for the Year Ended 31 December 2004 XP Power, one of the world's leading providers of power supply solutions to themid-tier of the electronics industry, today announces its Preliminary Resultsfor the year ended 31 December 2004. FINANCIAL HIGHLIGHTS £ Millions Year ended Year ended 31 December 31 December Change 2004 2003 Profit and loss (page 7)Turnover 66.8 59.4 + 12% Gross margin 23.7 19.9 + 19%Gross margin % 35.5% 33.5% Profit before tax, amortisation of goodwill and profit on sale of own shares 6.5 3.6 + 81% Profit before tax 5.1 2.5 + 104% Cash flow (page 9)(Decrease)/increase in cash (3.6) 1.3Free cash flow 3.4 4.3 Basic earnings per share 16.9p 7.0p + 141% Diluted earnings per share 16.4p 6.9p + 145%Diluted earnings per share adjusted for goodwill amortisation and profit on the sale of own shares 23.6p 12.4p + 90% Final dividend per share 8.0p 7.0p + 14% Total dividend per share 14.0p 12.0p + 17% KEY ACHIEVEMENTS • Diluted earnings per share adjusted for goodwill amortisation and profit on sale of own shares grew by 90% • Revenue growth of 12% (20% at constant US dollar exchange rates) • Gross margins improved by a further 2.0% points to 35.5% - the fifth year of successive improvement - driven by a further increase in own brand products in sales mix • Strong free cash flow (cash flow before acquisitions and disposals, dividend payments and financing) • Dividend to be increased by 17% to 14p per share Larry Tracey, Executive Chairman said: "We are expecting our market to continue its growth in 2005 and XP's position isstrong within our market. Whilst revenue growth is forecast to be skewed towardsthe second half of the year, improving margins and firm control of costs shouldenable earnings to improve throughout the year." Enquiries: XP Power plc www.xppower.comLarry Tracey, Executive Chairman 0118 984 5515James Peters, Deputy ChairmanDuncan Penny, Chief Executive Weber Shandwick Square Mile 020 7067 0700Kevin Smith/Nick DibdenNotes to editors: XP Power plc provides power supply solutions to the electronics industry. All electronic equipment needs a power supply. Power supplies convert theincoming AC supply into various levels of DC voltages to drive electroniccomponents and sub-assemblies within the end user's equipment. XP Power segmentsits business into Communications, Defence and Avionics, Industrial and Medical.By servicing these markets XP Power provides investors with access to technologyand industrial sectors of the North American and European electronics market. The market is highly fragmented and made up of a large number of small to mediumsized Original Equipment Manufacturers who source standard and modified standardpower supplies from several hundred power supply companies. For further information, please visit www.xppower.com XP Power plc ("XP" or "the Group") Preliminary Results for the Year Ended 31 December 2004 CHAIRMAN'S STATEMENT Business Performance XP is moving from strength to strength. The recovery evident in our key marketsearly in 2004 continued into the second half, producing a strong performance forthe year as a whole, with sales, profits and gross margin all advancingsignificantly ahead of the prior year. The resultant increase in the share priceover the year culminated in XP joining the FTSE All Share Index in December2004. Overall, the business delivered a 90% increase in earnings per share, adjustedfor goodwill amortisation and the profit on the sale of own shares made in 2003,to 23.6p per share. Basic earnings per share increased to 16.9p from 7.0p in theprior year, an increase of 141% (refer to note 5 on page 12). This has beenachieved as a result of our geographic expansion over the last few years and thecontinued increase in the proportion of our own intellectual property containedin the products we sell. Dividend The continued increase in profitability, together with strong free cash flow,has enabled us to increase the dividend payable to shareholders. We will beproposing a final dividend of 8 pence per share at the Annual General Meeting on20 April 2005, making the total dividend for 2004 14 pence per share (2003: 12pence per share), an increase of 17%. Strategy As we move into 2005 we will continue to develop the strategy we began toimplement in 2000: • To have the largest and most technical sales force in the industry covering our target geographic markets of Europe and North America • To focus on our key customers in the communications, defence and avionics, industrial and medical sectors • To offer the largest array of power supply products from any one source to our customers by offering our own products alongside the products of our key third party partners • To expand the level of our own intellectual property in our product offering using our various design engineering teams across the world People Our success is a tribute to the professionalism of our people. We believe thatour sales force is the best trained, most technical and the largest in ourindustry. Our design teams across the globe are producing world class productswhich are creating real excitement within our customer base. Behind these twoteams, our operations people are delivering the backbone of the systems andprocesses that enable us to deliver genuine value to our customers. Outlook The improvement in capital equipment spending in 2004 is forecast by marketanalysts to continue through 2005, and since this capital equipment incorporatesour products, we can expect to benefit from this trend. However, the weakness ofthe US Dollar reduces our reported growth when translated to Sterling. Our grossmargins are expected to continue to improve as our own XP designed products growas a proportion of our overall business. The benefits of geographic expansion inNorth America and Europe are also now bearing fruit. These factors should meanthat we will grow earnings at a healthy rate in 2005 subject to any externaleconomic shocks. Larry TraceyExecutive Chairman OPERATIONAL REVIEW Financial In the year under review XP continued to develop and expand its portfolio of ownbrand products and increase its geographic coverage. As a result, we haveachieved a further substantial improvement in earnings and strong free cashflow. Revenues increased 12% to £66.8 million (2003: £59.4 million). This performancewas achieved against a backdrop of an average US Dollar to Sterling exchangerate for 2004 of approximately 1.81 which is some 12% weaker than the averagerate in 2003. If the same US Dollar to Sterling exchange rates had prevailed in2004 as they did in 2003, XP would have reported revenues approximately £4.7million higher and underlying growth in revenues of 20%. Of the product shipped in 2004, 55% was our own XP brand, up from 49% in thesame period a year ago. This increase was the primary factor contributing to afurther 2.0% increase in gross margins to 35.5%. This is our fifth successiveyear of gross margin improvement and we expect to make further improvements ingross margin as a higher proportion of our products contain XP intellectualproperty. Operating expenses excluding goodwill amortisation (of £1.4 million; 2003: £1.5million) were £17.0 million in the year compared with £16.2 million in 2003.Product development expenditure increased to £2.3 million, or 3.4% of revenue,from £1.9 million, or 3.2% of revenue, in 2003. Profit before tax increased to £5.1 million from £2.5 million in the prior year.Profit before tax, goodwill amortisation (£1.4 million; 2003: £1.5 million) andthe exceptional profit from the sale of shares in the Group's Employee BenefitTrust during 2003 (£0.4 million) was up 81% to £6.5 million compared to £3.6million in 2003. This resulted in diluted earnings per share adjusted forgoodwill amortisation and the exceptional profit on sale of shares (refer tonote 5) of 23.6p compared with 12.4p in 2003, an increase of 90%. Our strong margins allowed us to generate free cash flow (cash flow beforeacquisitions and disposals, dividend payments and financing) of £3.4 millionduring 2004 even though our underlying growth was 20%. After returning £6.0million to shareholders in the form of dividends and a share buy back, net debtat 31 December 2004 was £10.1 million compared with £6.5 million at 31 December2003. Customers and Industry Segmentation We segment our business into communications, defence and avionics, industrialand medical end user markets. We have senior strategic teams driving thesesectors in both North America and Europe, to identify the customers we should betargeting in each of these sectors, support the sales people to penetrate theseaccounts and work with the product development organisation to determine whatproducts we should develop. This structure has served us well and should help todrive further growth as we move forward. As our business grows in terms of scaleand breadth of product offering, we are increasingly able to add value to thelarger customers in the market sectors we serve. We are focusing more resourceon winning programs with larger customers during 2005. In December 2004 we were pleased to announce that XP was the first power supplycompany to sign a global supply agreement with Premier Farnell plc, the globalmarketer and distributor of electronic and MRO specialist products and services. The three-year agreement will see the Group's power supply products listedexclusively in Premier Farnell's catalogues, expanding XP's market presencesignificantly and further improving brand awareness. This partnership with Premier Farnell will allow XP to enhance its ability offocusing directly on its largest target customers whilst providing a higherlevel of service to our smaller customers through the catalogue sales channel. Quality We remain committed to quality, from design of our product, through tomanufacturing and our customer facing processes. Our North American salesorganisation gained ISO9001:2000 certification in the summer of 2004. This meansall our key sites and activities are now ISO9001:2000 certified. The quality of our product and service was recognised by Siemens Automation andDrives during 2004 when we were awarded best performing supplier. Partnerships Partnerships are an important element of our business model. XP focuses on itscore competencies of market knowledge, design engineering and technical sales.For high volume, low cost manufacturing we partner with a select number of FarEastern manufacturers. Due to the diversity and scale of our customer base, we do not always have theinternal capacity to develop all the products our customers require. Wetherefore also partner with a small number of other organisations who design andmanufacture products to our specification. In recent years the proportion of our sales derived from our own products hasincreased dramatically in line with our strategy of repositioning the businessas a virtual manufacturer. We expect this trend to continue and that by 2007 75%of our revenues will come from products containing XP intellectual property. Inorder to provide the broad array of products our customers require, we willcontinue to partner with a number of third party manufacturers for the remaining25%. Each of these partnerships is vital to the health of our business and we investmuch time and resource in nurturing these relationships. Geographic Markets It is clear that there has been more life in the markets for capital equipment,into which our products are incorporated, during 2004 when compared to 2003.This is particularly the case in North America. However, as well as theimprovements in the underlying markets, we consider that we have takenadditional market share in 2004. Revenues from the US business increased by 20% to $71 million in 2004 from $59million in 2003. Our US operations have been particularly successful indesigning in our new branded product and this should bear fruit over the nexttwo years as many of these projects move into production. Our customers'projects take on average 14 months from identification to producing their firstproduction revenues. Our more mature UK business performed well; revenues increased by 12% to £17.8million in 2004 from £15.9 million in 2003 and operating profit improved to £3.0million from £2.6 million in the same period. We consider that we have clearlyoutpaced the growth in the overall market in the UK. We were particularlysuccessful in adding new customers in the defence and avionics markets and havehad success with wireless infrastructure. The industrial sector, however,remains the core of the UK business. The investment in our sales channel in Continental Europe is now paying off withEuropean revenues growing 30% to £9.4 million in 2004 from £7.2 million in 2003.We believe we are taking market share principally from the small custommanufacturers which operate in these markets. We have considerable costadvantages over these local suppliers and the added advantage of being able tooffer a standard or modified standard product which is available much morequickly than the custom designs we often compete with. Product Development Offering our customers the widest product range in the marketplace is a keycomponent of XP's strategy and product development is vital to the long-termsuccess of our business. We continue to commit more resource to this area inline with our strategy of expanding our own brand product portfolio. Our designengineering team was strengthened in February 2004 by the acquisition of theremaining 80% of the issued share capital of XP Electronics that we did notalready own. Acquisition of this business has enabled XP to expand itsproprietary product range, added new low volume manufacturing capability to ourEuropean operation and expanded our capability to develop new leading edgeproducts. The XP Electronics design team is now an integrated part of our worldwideproduct development effort and is focused on designing new standard productsthat will be manufactured at low cost in the Far East by XP's existingmanufacturing partners for volume applications. At the same time, lower volumeproduction runs and modified standard product will continue to be manufacturedin the UK. XP's Anaheim design team was recognised by Electronic Engineering Times in NorthAmerica in their Best Development Teams special feature in November 2004 fortheir development of the ECM40 and ECM60 product families which were launched in2004. We believe that this award demonstrates our ability to lead the field indesign. New products allow us to win more of the available business in our sector of themarket and to make significantly higher gross margins as we own more of theintellectual property in the product. At the same time as delivering highergross margins, and therefore earnings to our shareholders, we are deliveringcost savings to our customers. We are working ever closer with our manufacturing partners in the Far East. Ourdesign engineers interface with our manufacturing partners throughout theproduct development cycle to ensure that cost is optimised at every stage of thedesign process. Furthermore, because we designed these products ourselves, it isstraightforward for us to modify them to meet our customers' requirements. Our product offering to our customers covers the whole range of options fromstandard product, to modified standard, through configurable to complete custombuild if required. In addition, we continue to partner with other manufacturerswho we consider to be the best in their specific areas of expertise. We willcontinue to sell other manufacturers' products where it makes sense for ourcustomers. We expect to spend approximately 3.5% of revenues on product development in2005. Share Buy Back During May 2004 we purchased 910,000 of our own shares on market at an averageprice of 377.2 pence per share. These shares are held in treasury to use forfunding the Company's various share option schemes or for other appropriatepurposes such as funding small acquisitions. At the year end there were 888,750shares remaining in treasury. People We strive to inspire all of our people to become experts in power to fulfil ouraim of delivering genuine value to our customers. The role of our field salesengineers, who interface directly with our customers' engineering teams todesign our power supplies into their systems, is crucial and we believe that wehave not only the largest direct sales force in our industry sector, but alsothe best trained and the most technical. We rolled out an extensive technicaltraining program for all sales people during 2004 to ensure we maintain anddevelop their technical skills. The Group needs to attract and retain the best people in the industry - peoplewho will continue to drive the business forward and who, above all, act in ourcustomers' interests. XP has a culture that rewards excellent performance withprofit sharing, sales commissions and equity participation. Over 100 of our 290employees have some sort of equity interest in the Group. The competence of our management team and dedication of our people wasrecognised by the Investors In People award in the UK. We will continue toinvest in our people, in particular by providing technical and commercialtraining to continue to ensure they are recognised as experts in power by ourcustomers. In June this year we were pleased to announce the appointment of Mickey Lynch asFinance Director. Mickey joined XP in April 2001 as Vice President of Finance inNorth America. Prior to joining the Group, Mickey was Chief Financial Officer ofAtari Games. Prospects We remain on track to achieve our target gross margin of 40% in 2007 with aproduct mix of approximately 75% XP intellectual property and 25% from our thirdparty partners. We should also expect further improvements in our operationalgearing as our investment in the geographic expansion of our sales channel bearsfruit. XP Power plc Consolidated Profit and Loss Account For the Year Ended 31 December 2004 £ Millions 2004 2003 Turnover Note 2 66.8 59.4Cost of sales (43.1) (39.5) --------- ---------Gross profit 23.7 19.9 --------- --------- Selling and distribution costs (11.8) (11.4) Administrative expenses Research and development (2.3) (1.9) Goodwill amortisation (1.4) (1.5) Other administration expenses (2.9) (2.9) --------- ---------Total administrative expenses (6.6) (6.3) --------- ---------Other operating income - 0.2 --------- ---------Group operating profit 5.3 2.4 --------- ---------Share of associates' operating profit 0.4 0.3 --------- ---------Total operating profit 5.7 2.7 --------- --------- Profit on the sale of own shares - 0.4Interest payable and similar charges (0.6) (0.6) --------- ---------Profit on ordinary activities before taxation Note 2 5.1 2.5 --------- --------- Taxation on profit on ordinary activities Note 3 (1.8) (0.9) --------- --------- Profit on ordinary activities after taxation 3.3 1.6 --------- --------- Minority interests - (0.2) --------- ---------Profit attributable to XP shareholders 3.3 1.4 --------- --------- Dividends payable Note 4 (2.6) (2.5) --------- ---------Retained profit/(loss) for the period 0.7 (1.1) --------- --------- Basic earnings per share Note 5 16.9p 7.0pDiluted earnings per share Note 5 16.4p 6.9pDiluted earnings per share adjusted for goodwill amortisation and exceptional gain Note 5 23.6p 12.4p The turnover and results of the acquired operations have not been shown on theface of the profit and loss account because they are not considered material. The third party sales and operating profit of acquired operations were £0.3m and £0.1m for the year. Statement of Recognised Gains and Losses £ Millions 2004 2003 Profit attributable to XP shareholders 3.3 1.4Currency translation difference on foreign currency net investments (0.2) (1.2) ------- ---------Total recognised gains relating to the year 3.1 0.2 ------- --------- XP Power plc Consolidated Balance Sheet At 31 December 2004 £ Millions 2004 2003 (As restated refer to note 9)Fixed assetsIntangible assets - Goodwill 21.7 22.4Tangible assets 2.5 2.9Investments 1.3 1.1 ------------ ------------Total fixed assets 25.5 26.4 ------------ ------------ Current assetsStocks 7.5 6.6Debtors 13.7 11.5Cash at bank and in hand 2.7 4.5 ------------ ------------Total current assets 23.9 22.6 ------------ ------------ Creditors: amounts falling due within one year (18.0) (12.0) Net current assets 5.9 10.6 ------------ ------------Total assets less current liabilities 31.4 37.0 ------------ ------------ Creditors: amounts falling due after more than one year (8.1) (10.6) ------------ ------------Net assets 23.3 26.4 ------------ ------------ Capital and reservesCalled up share capital 0.2 0.2Share premium account 27.0 27.0Merger reserve 0.2 0.2Profit and loss account (0.7) (1.1)Own shares (3.4) - ------------ ------------Total equity shareholders' funds 23.3 26.3 ------------ ------------Minority interests - 0.1 ------------ ------------Total capital and reserves 23.3 26.4 ------------ ------------ XP Power plc Consolidated Cash Flow for the Year Ended 31 December 2004 £ Millions 2004 2003 Net cash inflow from operating activities Note 6 4.9 5.3 Dividends received from associates 0.2 - Returns on investments and servicing of financeInterest paid (0.6) (0.6)Dividends paid to minority shareholders (0.1) - ----------- ------------ Net cash outflow from returns on investments and the servicing of finance (0.7) (0.6) Tax paid (0.8) (0.1) Capital expenditurePurchase of tangible fixed assets (0.3) (0.4)Sale of tangible fixed assets 0.1 0.1 ----------- ------------ Net cash outflow from capital expenditure (0.2) (0.3) --------------------------------------------------------------------------------Free cash flow 3.4 4.3-------------------------------------------------------------------------------- Acquisitions and disposals Note 12Purchase of subsidiary undertakings (0.8) -Loan to majority shareholder of associated undertaking (0.5) - ----------- ------------Net cash outflow from acquisitions and disposals (1.3) -Equity dividends paid (2.5) (2.5) ----------- ------------Cash (outflow)/inflow before financing (0.4) 1.8 ----------- ------------FinancingShare buy back (3.5) (0.5)Sale of shares 0.1 ----------- ------------Net cash flow from financing (3.4) (0.5) ----------- ------------ (Decrease)/increase in cash (3.8) 1.3 ----------- ------------ Notes to the Preliminary Results for the Year Ended 31 December 2004 1. Basis of preparation The financial statements are prepared in accordance with applicable UnitedKingdom accounting standards. The particular accounting policies adopted, whichhave been consistently applied throughout the current and prior year, aredescribed below. Accounting convention The financial statements are prepared under the historical cost convention. Basis of consolidation The Group has accounted for the acquisition of XP and Forx using the mergermethod of accounting and all other subsidiaries using the acquisition method ofaccounting in accordance with Financial Reporting Standard 6, 'Acquisitions andMergers'. Goodwill and intangible fixed assets For acquisitions of a business, where the acquisition method of accounting isadopted, purchased goodwill is capitalised in the year in which it arises andamortised over its estimated useful life up to a maximum of 20 years. Thedirectors regard 20 years as a reasonable maximum for the estimated useful lifeof goodwill. Capitalised purchased goodwill in respect of subsidiaries isincluded within intangible fixed assets. Tangible fixed assets Depreciation is provided on cost in equal annual instalments over the estimatedlives of the assets. The rates of depreciation are as follows: Plant and machinery - 25 - 33%Motor vehicles - 25%Office equipment - 25 - 33%Leasehold improvements - 10% or over the life of the lease if shorterLong leasehold land and buildings - Term of the lease Investments Investments held as fixed assets are stated at cost less provision forimpairment. Associates In the Group financial statements investments in associates are accounted forusing the equity method. The consolidated profit and loss account includes theGroup's share of associates' profits less losses, while the Group's share of thenet assets of the associates is shown in the consolidated balance sheet.Goodwill arising on the acquisition of associates is accounted for in accordancewith the policy set out above. Any unamortised balance of goodwill is includedin the carrying value of the investment in associates. Stocks Stocks are stated at the lower of cost and net realisable value. Cost representsmaterial and appropriate overheads based on normal levels of activity. Deferred taxation Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in the financial statements. Deferred taxassets are recognised to the extent that it is regarded as more likely than notthat they will be recovered. Deferred tax assets and liabilities are notdiscounted. Foreign currency Transactions denominated in foreign currencies are translated into sterling atthe rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balancesheet date are translated at the rates ruling at that date. These translationdifferences are dealt with in the profit and loss account. The results of overseas subsidiary undertakings are translated into sterling atthe average rates for the period. The exchange differences arising as a resultof restating retained profits to closing rates are dealt with as a movement onreserves. Leases Rental costs under operating leases are charged to the profit and loss accountin equal annual instalments over the period of the leases. Pension costs The Group operates defined contribution pension schemes for its employees.Contributions are charged to the profit and loss account as they become payable. Research and development Expenditure on research and development is charged to the profit and lossaccount in the year in which it is incurred. 2. Segmental analysis The Group operates substantially in one class of business, providing powersupply solutions to the electronics industry. Analysis of total Group operatingprofit, net assets, turnover and total Group operating profit by geographicalregion is set out below. £ Millions Year to 31 Year to 31 December 2004 December 2003TurnoverEurope 27.3 23.0United States 39.5 36.4 ---------- ---------Total turnover 66.8 59.4 ---------- --------- Profit on ordinary activities before taxationEurope 4.0 2.9United States 2.3 0.8Interest, corporate operating costs and associates (1.2) (1.2) ---------- ---------Profit on ordinary activities before taxation 5.1 2.5 ---------- ---------Operating net assetsEurope 10.3 9.3United States 24.6 25.0 ---------- ---------Total operating net assets 34.9 34.3 ---------- --------- Operating net assets are defined as net assets adjusted for net borrowings andthe proposed dividend. At 31 December 2004 At 31 December 2003 Net assets 23.3 26.4Net debt 10.1 6.5Proposed dividend 1.5 1.4 ---------- ---------Total operating net assets 34.9 34.3 ---------- --------- 3. Taxation £ Millions Year to 31 Year to 31 December 2004 December 2003 United Kingdom taxation:Group undertakings 0.5 0.4Share of associate taxation 0.1 - ------------ ------------- 0.6 0.4International taxation: Subsidiary undertakings 1.2 0.5 ------------ -------------Total taxation 1.8 0.9 ------------ ------------- 4. Equity Dividends An interim dividend of 6p (2003 - 5p) per share was paid on 6 October 2004. Afinal dividend of 8p (2003 - 7p) is proposed for approval at the forthcomingAnnual General Meeting to be paid on 17 May 2005 to shareholders on the registerof members at 29 April 2005. 5. Earnings per share Year to 31 Year to 31 December 2004 December 2003 £ millions EPS £ millions EPS Earnings for the financial period for basic earnings per share 3.3 16.9p 1.4 7.0p Exceptional gain - - (0.4) (2.0p)Amortisation of goodwill 1.4 7.2p 1.5 7.5p Earnings for adjusted earnings per share 4.7 24.1p 2.5 12.5p Weighted average number of shares (thousands) - basic 19,510 24.1p 20,046 12.5pImpact of share options 411 (0.5)p 55 (0.1)p Weighted average number of shares (thousands) - diluted 19,921 23.6p 20,101 12.4p The weighted average number of shares excludes 692,388 ESOP shares (2003 - 781,737) and 495,769 (2003 - nil) treasury shares. Supplementary earnings per share are presented to exclude the effect of goodwill amortisation and the exceptional gain on the ESOP shares in the periods as the board regards this as more meaningful. 6. Reconciliation of operating profit to net cash inflow from operating activities £ Millions Year to 31 Year to 31 December 2004 December 2003 Operating profit 5.3 2.4Depreciation and amortisation 2.0 2.2(Increase)/decrease in stocks (1.0) 0.6(Increase) in debtors (1.3) (1.3)(Decrease)/increase in creditors (0.1) 1.4 ------------- ------------Net cash inflow from operating activities 4.9 5.3 ------------- ------------ 7. Reconciliation of net debt £ Millions Year to 31 Year to 31 December 2004 December 2003 Net debt at 1 January (6.5) (7.8)(Decrease)/increase in cash per cash flow statement (3.8) 1.3Cash acquired with subsidiaries 0.2 ------------- ------------Net debt at 31 December (10.1) (6.5) ------------- ------------ Represented byCash at bank and in hand 2.7 4.5Overdrafts (4.7) (2.6)Loan (8.1) (8.4) ------------- ------------Net debt at 31 December (10.1) (6.5) ------------- ------------ 8. Borrowings On 12 December 2003, the Group renewed its multi-currency revolving creditfacility with Bank of Scotland. The new facility is £10 million and is committedfor three years at an interest rate of 1.5% above LIBOR and is provided for thepurpose of financing acquisitions. At 31 December 2004, £8.1 million (2003: £8.4million) had been drawn down under this facility. In addition to this, the Grouphas a £10 million (2003: £10 million) working capital facility which isrepayable on demand. Both facilities are secured on the assets of the Group. 9. Own shares Own shares includes 656,251 (2003 - 774,851) shares in the Group's employeeshare ownership plan (ESOP). These shares are carried at the lower of cost andmarket value. The treatment of ESOP shares has changed following the adoption of Urgent IssuesTask Force (UITF) Abstract 38 Accounting for ESOP trusts. However, the carryingvalue was less than £100,000 at 31 December 2003, therefore the adjustment doesnot result in a change to shareholders' funds in the current or prior year. Own shares also includes 888,750 (2003 - nil) treasury shares (refer to note 11below). 10. Shareholders' funds £ Share Share Merger Own Profit Total equityMillions capital premium reserve shares and shareholders' loss funds At 31 December 2003 0.2 27.0 0.2 - (1.1) 26.3 Purchase of own shares - - - (3.5) - (3.5)Sale of own shares - - - 0.1 (0.1) - Retained profit for the period - - - - 0.7 0.7 Currency translation difference - - - - (0.2) (0.2) -------- -------- --------- ------- -------- ---------At 31 December 2004 0.2 27.0 0.2 (3.4) (0.7) 23.3 -------- -------- --------- ------- -------- --------- 11. Share buy back During June 2004, the Company repurchased 910,000 of its own shares at anaverage price of 377.2 pence per share. These shares will be held in treasuryand will be used to fund the Company's existing employee share option schemes orfor other appropriate purposes such as small acquisitions. At 31 December 2004,21,250 of these shares had been sold. 12. Acquisitions On 26 February 2004, the Group acquired the remaining 80% of the issued sharecapital of XP Electronics Limited that it did not already own for a mixture ofcash and shares for £930,000. £ Millions Year to 31 Year to 31 December 2004 December 2003Cash 0.8 -Shares 0.1 -Total consideration 0.9 - It is expected that the consideration due on the remaining 75% of MPI-XP PowerAG will be paid in December 2005. The final consideration is based on theearnings of MPI-XP Power AG and is estimated to be in the region of 5.5 millionSwiss Francs (£2.5 million). The liability for this is included withincreditors. The Group has options to acquire the remaining 60% of the shares of PowersolveElectronics Limited between 2007 and 2012. The current best estimate of theconsideration payable is £6 million. A loan of £0.5 million has been made to themajority shareholder during the year which is repayable in full in 2007 on theexercise date of the first option. 13. General The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2004 or 2003. Thefinancial information for the year ended 31 December 2003 is derived from the XPPower plc statutory accounts for the year ended 31 December 2003 which have beendelivered to the Registrar of Companies. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 31December 2004 will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement and will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. This announcement was approved by the directors on 31 January 2005. This information is provided by RNS The company news service from the London Stock Exchange