Last checked at 20 Feb 2012 07:00
20 February 2012 XP Power Limited ("XP" or "the Group")
Annual Results for the year ended 31 December 2011
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 2011.
Highlights Year ended Year ended 31 December 31 December Change 2011 2010 Bookings £98.3m £103.4m -5% Revenue £103.6m £91.8m +13% Gross margin 49.1% 48.0% + 110 bps Adjusted1 profit before tax £24.3m £18.7m + 30% Adjusted1 profit after tax £20.3m £15.9m + 28% Diluted earnings per share adjusted1 106.4p 83.7p + 27% Final dividend per share 15.0p 12.0p Total dividend per share 45.0p 33.0p + 36%
1Adjusted for amortisation of intangibles associated with acquisitions of £nil million (2010: £0.1 million)
The Group's well-established strategy of developing and manufacturing its ownrange of market leading products produced another year of record profits andearnings per share
Bookings decreased by 5% to £98.3 million (2010: £103.4 million) and revenues increased by 13% to £103.6 million (2010: £91.8 million)
Increased gross margins of 49.1% (2010: 48.0%) driven by continued expansion of XP's own design revenues which represented £59.2 million or 57% of total revenues (2010: £44.1 million or 48% of total revenues)
Thirty eight new products introduced in the period, including an extensive range of high efficiency "Green Power" products
Chinese manufacturing facility successfully securing new approved vendor agreements from blue chip customers
Second manufacturing site in Vietnam completed on schedule in December 2011 and operations have now commenced
Robust earnings and strong cash flows provide basis for an increased total dividend of 45.0p per share for the year up 36% on the prior year
Record levels of new product investment and product launches in the year to underpin growth in future years as new customer programmes reach production phase
Successful repositioning as a designer and manufacturer leave the Group wellpositioned to respond to more difficult markets and to continue to take marketshare
Larry Tracey, Executive Chairman, commented:
"Consistent application of our well-established strategy of moving "up the foodchain" into design and manufacture produced another year of record profits andearnings, against a backdrop of economic conditions which deteriorated markedlyin the later part of the year. Our strategy and its execution resulted in earnings per share of 106.4p in 2011(2010: 83.7p), an increase of 27% over 2010. This is a fifth successive year ofimprovement and another record for the Group. The compound average growth rateof earnings per share has been 27% over the last 5 years and 18% over the last10 years.
Under the leadership of our experienced management team, the new products introduced over the past four years, and manufactured in our new production facilities, are now entering customer production and should ensure that we continue to gain market share. This combination should leave us well placed to further grow earnings and dividends over the next five years."
Enquiries: XP Power (20 February 2012) +44 (0)207638 9571James Peters, Deputy Chairman +44 (0)7785 353066Duncan Penny, Chief Executive +65 8322 9520Jonathan Rhodes, FinanceDirector +44 (0)7500 944614Citigate DeweRogerson +44 (0)20 7638 9571Kevin Smith/Jos Bieneman XP 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 45% of sales), healthcare(circa 26% sales) and technology (circa 29% 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 Stock Exchange since 2000, XP serves a global blue chip customer base from 27 locations in Europe, North America and Asia.
For further information, please visit www.xppower.com
Chairman's Statement Overview Consistent application of our well-established strategy of moving "up the foodchain" into design and manufacture produced another year of record profits andearnings, against a backdrop of economic conditions which deteriorated markedlyin the later part of the year. Our strategy and its execution resulted in earnings per share of 106.4p in 2011(2010: 83.7p), an increase of 27% over 2010. This is a fifth successive year ofimprovement and another record for the Group. The compound average growth rateof earnings per share has been 27% over the last 5 years and 18% over the last10 years. Financial Total orders decreased by 5% to £98.3 million (2010: £103.4 million) in theyear. Total sales increased by 13% to £103.6 million (2009: £91.8 million). Sales of product based on XP Power's own designed product increased by 34% to £59.2 million (2010: £44.1 million). Another increase in the proportion ofhigher margin, own designed/own manufactured products in the sales mix helpedto drive a further improvement in gross margins to 49.1% (2010: 48.0%). Operating profit increased to £25.3 million (2010: £19.7 million).
Net debt at the year end was £18.6 million compared to £18.4 million at the end of 2010. Operating cash flow was £16.0 million (2010: £10.3 million) representing 63% 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 was completed on schedulein December 2011 and will give us the capability to produce our own magneticcomponents, significantly enhancing the value proposition we offer ourcustomers. Combined, these state of the art factories dramatically enhance theGroup's ability to secure preferred supplier status with larger customers andincrease the proportion of its revenues which come from its own-designedproducts beyond the current level of just below 60%. Dividend
Our continued strong financial performance, robust cash flows and confidence in the Group's long term prospects have enabled us to consistently increase dividends throughout the year.
In line with our progressive dividend policy, a final dividend of 15.0 penceper share for the fourth quarter of 2011 is proposed. This dividend will bepayable to members on the register on 16 March 2012 and will be paid on 4 April2012. When combined with the interim dividends for the previous quarters, the finalproposed dividend results in a total dividend of 45.0 pence per share for theyear (2010: 33.0p); an increase of 36%. The compound average growth rate of ourdividend has been 20% over the last 5 years and 14% over the last 10 years.
Sustainability
In 2011 we committed further substantial management and financial resources toreducing our carbon footprint and water usage in line with our goal of becomingthe leader in our industry in addressing the effect that our operations have onthe environment. These efforts will continue throughout 2012 and beyond as weseek to assist in achieving the national targets set by the countries in whichwe operate. Our new magnetics facility in Vietnam was completed in December2011 and is the most environmentally friendly manufacturing facility in the
industry. Outlook
Under the leadership of an experienced management team, the new products introduced over the past four years, and manufactured in our new production facilities, are now entering customer production and should ensure that we continue to gain market share. This combination should leave us well placed to further grow earnings and dividends over the next five years.
Larry TraceyExecutive Chairman Chief Executive's Review Overview
The strategy that we have been consistently applying over a number of years hasproduced another set of excellent financial results despite the macroeconomicheadwinds we started to experience in the last quarter of the period. 2011 wasanother record year for XP Power with the previous year's records for owndesigned revenue, margins, earnings and cash flow beaten yet again. This isthe fifth successive year we have increased earnings, underlining what has beenachieved as a result of our consistent strategy of moving up the value chain,powered by a strong pipeline of new leading-edge products and our developmentas an independent manufacturer. This performance is even more pleasing as muchof it has been delivered against a backdrop of difficult economic conditions,demonstrating the resilient nature of our business model. 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. In 2011 we achieved a further major milestone with the completion of our newmagnetics facility in Vietnam. This new facility is a further step along theroad of vertical integration which not only enhances our value proposition toour customers - in terms of control of the manufacturing process, flexibilityand lead times - but also provides a second geographical capability to mitigatethe effect of increasing costs in China. A record 57% of our revenues came from our own designed products in 2011 (2010:48%) and 90% of our total revenues now carry the XP Power brand (2010: 88%).Own designed products generate higher margins, and give XP Power the capacityto design tailor-made power control solutions for specific customer orders,making us an increasingly attractive partner for our larger target customers. Markets XP 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 is estimated to be £1.5billion per annum and we expect it to grow by approximately 17% in the nextfour years. We estimate that XP Power's global market share grew to around 7%in 2011 compared with around 6.5% in 2010. Across North America and Europe, XPPower currently has around 10% and 12% respectively of our available market,while across Asia we doubled our share to 2% in the period. This illustratesthe significant commercial opportunities that remain open to XP Power, and theBoard is confident that the Group's competitive advantages over many of itspeers will allow it to take further share in each of its key markets. According to industry sector, 2011 revenues were split: Industrial up 11% to £46.9 million (2010: £42.2 million), Healthcare up 17% to £26.6 million (2010: £22.8 million) and Technology up 12% to £30.1 million (2010: £26.8 million).Healthcare continued to exhibit excellent growth, reflecting our ongoing focuson that sector and development of a very strong healthcare product offering.Despite good growth in all industry sectors, year on year the Technology sectorexperienced a marked softness in the later part of 2011; particularly in NorthAmerica. According to geography our 2011 revenues were split: Asia up 64% to £9.2million (2010: £5.6 million), Europe up 10% to £45.4 million (2010: £41.4million) and North America up 9% to £49.0 million (2010: £44.8 million). Asnoted above, during the later part of 2011 we saw a marked softening in NorthAmerica, particularly in the Technology sector, but despite Eurozone economicconcerns, our European business held up well. Our major blue chip customers continue to demand market leading, highlyreliable products. We maintained a consistent investment in research anddevelopment throughout the year and our product pipeline remains the broadestand freshest in the industry. The attractions of this continually evolvingportfolio of market leading products enabled the Group to win a number of newcustomers in the 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 offers XP Power the opportunity to further increase its market share,and we believe is one of the main reasons for our success in winning newcontracts.
Expanding the International Network
XP Power's mix of quick response capability and global reach is a major competitive advantage. XP Power maintained a network of 27 sales offices spread over North America, Europe and Asia, with a further 16 distributors, supporting its smaller customers, during the year. The size and scope of this network is kept under continuous review to ensure the business remains best placed to capitalise on growth opportunities in each of its geographies.
XP Power has the largest, most technically trained sales force in the industry. Our detailed in-house training programme demands that the sales force pass numerous technology and customer service modules, making them a "value add" partner to our customers' product development teams. Management believes that this gives the business a competitive edge compared to many within its peer group.
The North American network consists of 17 sales offices and an extensive engineering services function, based in Northern California. This network allows XP Power to provide its major customers with local face to face support and 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 Germany andthe 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 Technology
A long term commitment to invest in research and development of new products has been the cornerstone of XP Power's growth strategy.
Research and development gross spend was £5.3 million in 2011 (2010: £4.6 million), and a record thirty eight new product families were introduced in the year, resulting in a number of exciting new customer approvals. Our new range of highly efficient medical external power converters were extremely well received by customers with some encouraging early design wins of significant value. This product family adds to our already extensive range of "Green Power" products.
As the large number of new products released over the last few years are now coming to production and being sampled to customers, the Group expects the rate of new product introductions to slow somewhat in the current year compared to the very high numbers of recent years. While new product introductions will remain at the heart of our activities, our development resources will also be focused on producing modifications to existing products to meet the precise requirements of individual customers.
Manufacturing Capabilities
Our key customers demand the ultimate in terms of quality control to ensurereliability for the life of their equipment. Complete control of manufacturingis therefore critical to ensure strict management of the production processesand components that go into our products, and also gives us opportunities toreduce our product costs. The capability and performance of our Kunshanfacility, which was commissioned in 2009, has been instrumental in winning
newprograms and customers. In December 2011 we completed the construction of our new manufacturingfacility in Ho Chi Minh City, Vietnam, on schedule. This new facility willprimarily be a magnetics facility and is another major milestone for theCompany. This vertical integration enhances our value proposition to keycustomers who increasingly demand rigorous control of the supply chain. As wellas better control over the manufacturing process it will allow us to be moreflexible and provide shorter lead times. Furthermore, the new facility willhelp mitigate the rising wage costs and currency appreciation in China as theproduction of magnetics is labour intensive. Historically, prior to the Group establishing its own manufacturing facilities,products designed in our own design centres had previously been built by ourcontract manufacturing partner. Given our major customers' requirements forcomplete control over the manufacturing process, combined with the softening inmarket demand we experienced in the final quarter of 2011, we have taken thedecision to transfer manufacture of all remaining products to our facility inKunshan. The transfer process will run throughout 2012 and will necessitate ashort term increase in inventories as a buffer during the transfer process.
The Environment and Sustainability
In 2009 we established an Environmental Committee that immediately set the goal of making XP Power the leader in environmental issues within our industry. Much has been achieved in 2011 and our progress is set out in detail in the Environmental Report contained within our 2011 Annual Report.
During 2010 we became an Applicant Member of the Electronic Industry Citizenship Coalition (EICC). The EICC is an industry organisation of leading electronics manufacturers which promotes an industry code of conduct for global electronics supply chains to improve working and environmental conditions. It deals with environmental, health and safety, labour standards and business ethics issues. We have publicly adopted the Code of Conduct of the EICC and are now active members on both its Environmental Sustainability and Water working groups. In March 2011 we succeeded in achieving Full Membership status of the EICC and have been successfully working with our key suppliers to get them to adopt the same rigorous Code of Conduct.
As a new build project, our new Vietnamese magnetics facility presented us with an excellent opportunity to establish the most environmentally friendly power converter manufacturing facility in the world and we are incorporating green technologies into the plant from the outset. The facility was completed in December 2011 and will meet the Gold Plus rating of the BCA Green Mark requirements which are the leading standards set by the Singapore Building and Construction Authority for non-residential buildings in tropical climates. This covers not only the energy efficiency of the building but also water efficiency, environmental protection, indoor environmental quality and other green features and innovations. We are proud that this in not only the most environmentally friendly building in our industry but will be the first BCA Green Mark certified industrial facility in Vietnam.
We have also continued to expand our ISO14001 Environmental Management certifications around the world and all our key sites representing 92% of our revenues are now covered by ISO14001.
The progress XP Power has made on environmental matters was recognised in September 2011 when we were selected for inclusion in the FTSE4Good Index.
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. Board Changes
We are pleased to welcome Jonathan Rhodes onto the Board following his appointment as Finance Director on 20 December 2011
Jonathan Rhodes joined the finance team of XP Power in July 2008 as EuropeanController. Prior to joining the Group, Jonathan spent nine years with JCDecauxin various senior financial positions including Head of Financial Reporting andworked in both its UK and North American operations. Prior to that, he spentthree years with Mills & Allen. Jonathan takes over from Mickey Lynch who will stay with the Group in theposition of Vice President responsible for tax and treasury. This will ensurecontinuity during this succession and also provide the Group with an enhancedfocus on the tax and treasury areas. Outlook Design wins in 2011 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, increased macroeconomic uncertainty ispresenting a challenging environment in 2012. Bookings in the last quarter of2011 from existing programs were soft and customers are generally cautious
andare delaying orders. As a supplier to manufacturers of capital goods, we cannot expect to be immunefrom the effects of lower global end-market growth, nevertheless, XP'ssuccessful repositioning as a designer and manufacturer of its own range ofmarket-leading products and the addition of a magnetics capability at itssecond manufacturing site, leave the Group well positioned to respond to thesemore difficult markets and to continue to take market share.
We remain confident about the fundamental medium term growth drivers which underpin the markets in which we operate. With the successful transition of its business model to higher margin, own IP product sales and the continued development of a state of the art independent manufacturing capability and further vertical integration, XP Power remains in a strong position to capitalise on its growth ambitions.
Duncan PennyChief Executive
Consolidated Income Statement
For the year ended 31 December 2011
£ Millions Note 2011 2010 Revenue 2 103.6 91.8 Cost of sales (52.7) (47.7) Gross profit 50.9 44.1 Expenses Distribution and marketing (20.7) (20.0) Administrative (0.7) (0.7) Research and development (4.2) (3.7) Operating profit 25.3 19.7 Finance cost (1.0) (1.1) Profit before income tax 2 24.3 18.6 Income tax expense 3 (3.6) (2.6) Profit for the year 20.7 16.0 Profit attributable to: Owners of the parent 20.3 15.8 Non controlling interests 0.4 0.2 Profit for the year 20.7 16.0 Earnings per share
Attributable to owners of the parent (pence per share)
- Basic 5 107.1 83.9 - Diluted 5 106.4 83.2 - Diluted adjusted 5 106.4 83.7 Consolidated Balance Sheet At 31 December 2011 £ Millions Note 2011 2010 ASSETS Current Assets Cash and cash equivalents 6.3 5.0 Trade receivables 16.0 15.6 Other current assets 2.6 1.5 Inventories 22.0 21.0 Deferred income tax assets 0.1 - Total current assets 47.0 43.1 Non-current assets Interest in associates 0.1 0.1
Property, plant and equipment 12.9 8.3
Goodwill 31.3 30.8 Intangible assets 6.4 5.3 ESOP loans to employees 1.6 2.4 Deferred income tax assets 0.3 0.8 Total non-current assets 52.6 47.7 Total assets 99.6 90.8 LIABILITIES Current liabilities Trade and other payables 11.4 15.5
Current income tax liabilities 1.3 3.4 Derivative financial instruments 0.2 0.4
Borrowings 6 13.4 12.7
Provision for deferred contingent consideration 7 1.9 -
Total current liabilities 28.2 32.0 Non-current liabilities Borrowings 6 11.5 10.7
Deferred income tax liabilities 2.0 1.8 Provision for deferred contingent consideration 7 2.1 3.5
Total non-current liabilities 15.6 16.0 Total liabilities 43.8 48.0 NET ASSETS 55.8 42.8 EQUITY Share capital 27.2 27.2 Merger reserve 0.2 0.2 Treasury shares (1.0) (1.0) Hedging reserve - (0.4) Translation reserve (7.1) (7.6) Retained earnings 36.3 24.2 55.6 42.6 Non-controlling interests 0.2 0.2 TOTAL EQUITY 55.8 42.8
Consolidated Cash Flow Statement For the year ended 31 December 2011
£ Millions 2011 2010
Cash flows from operating activities Profit for the year 20.7 16.0 Adjustments for - Income tax expense 3.6 2.6 - Amortisation and depreciation 2.2 1.9 - Finance cost 1.0 1.1 - Loss on fair valuation of derivative financial instruments 0.1 -
Change in the working capital:
- Inventories (1.0) (10.3) - Trade and other receivables (1.5) (4.9) - Trade and other payables (4.1) 6.2 Income tax paid (5.0) (2.3)
Net cash generated from operating activities 16.0 10.3
Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired (0.1) -
Purchases and construction of property, plant and equipment (5.7) (2.1)
Research and development expenditure capitalised (2.0) (1.7) ESOP loan repaid 0.8 0.2 Net cash used in investing activities (7.0) (3.6)
Cash flows from financing activities
Repayment of borrowings (4.1) (3.2) Net purchase of treasury shares by ESOP (0.8) (0.2) Interest paid (0.8) (0.9) Dividends paid to equity holders of the Company (7.4)
(4.8)
Dividends paid to non-controlling interests (0.4)
(0.3)
Net cash used in financing activities (13.5) (9.4) Effects of currency translation 0.2 (0.3) Net (decrease)/increase in cash and cash equivalents (4.3)
(3.0)
Cash and cash equivalents at beginning of financial year 1.0 3.9 Effects of currency translation on cash an cash equivalents - 0.1
Cash and cash equivalents at end of financial year (3.3) 1.0
Notes to the Annual Results StatementFor the year ended 31 December 2011 Basis of preparation
These financial statements are presented in Pounds Sterling and have been prepared using the accounting principles incorporated within International Financial 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 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 2011 2010 Revenue Europe 45.4 41.4 North America 49.0 44.8 Asia 9.2 5.6 Total Revenue 103.6 91.8 Segment result Europe 9.8 7.4 North America 12.3 9.6 Asia 2.5 1.0 Segment result 24.6 18.0 Research and development costs (4.2) (3.7) Finance income and cost (1.0) (1.1)
Corporate recovery from operating segment 4.9 5.4
Profit before tax 24.3 18.6 Tax (3.6) (2.6) Total Profit 20.7 16.0 Analysis by end market
The revenue by end market was as follows:
Year to 31 December 2011 Year to 31 December 2010 North North
£ Millions Europe America Asia Total Europe America Asia Total
Technology 11.6 12.5 6.0 30.1 10.7 12.6 3.5 26.8 Industrial 24.3 20.7 1.9 46.9 22.1 18.6 1.5 42.2 Healthcare 9.5 15.8 1.3 26.6 8.6 13.6 0.6 22.8 Total 45.4 49.0 9.2 103.6 41.4 44.8 5.6 91.8 3. Income taxes £ Millions 2011 2010 Singapore corporation tax - current 1.3 1.0 year - adjustment in respect of prior year 0.1 (0.1) Overseas corporation tax - current year 2.9 2.4 - adjustment in respect of prior year (1.3) (0.2) Total current tax 3.0 3.1 Deferred income tax - current year 1.3 (0.3) - adjustment in respect of prior year (0.7) (0.2) Tax charge for the year 3.6 2.6
The differences between the total tax shown above and the amount calculated byapplying the standard rate of Singapore corporate tax to the profit before
taxare as follows: £ Millions 2011 2010 Profit before tax 24.3 18.6
Tax on profit on ordinary activities at standard Singapore tax
rate of 17% 4.1 3.2 Lower than standard Singapore tax rate (0.7)
(0.6)
Higher rates of overseas corporation tax 2.4
1.6
Deduction for gains on employee share options (0.3) (1.1) Prior year adjustments (1.9) (0.5) Tax charge for the year 3.6 2.6 4. Dividends
Amounts recognised as distributions to equity holders in the period
2011 2010 Pence Pence per £ per £ share Millions share Millions
Prior year third quarter dividend paid 8.0 * 1.5 n/a n/a Prior year final dividend paid 12.0 * 2.3 12.0 2.3
First quarter dividend paid 9.0 ^ 1.7 6.0 * 1.2 Second quarter dividend paid 10.0 ^ 1.9 7.0 * 1.3 Total 39.0 7.4 25.0 4.8
* Dividends in respect of 2010 (33.0p)
^ Dividends in respect of 2011 (45.0p)
A dividend of 11.0p per share was paid in respect of the Third Quarter of 2011 on 10 January 2012.
The proposed final dividend for 2011 of 15.0 pence per share is subject toapproval by shareholders at the Annual General Meeting scheduled for 2 April2012 and has not been included as a liability in these financial statements. It is proposed that the final dividend be paid on 4 April 2012 to members onthe register as at 16 March 2012.
5. Earnings per share
The calculations of the basic and diluted earnings per share attributable to the ordinary equity holders of the parent are based on the following data:
2011 2010 £ Millions £ Millions Earnings
Earnings for the purposes of basic and diluted earnings per share (profit for the year attributable to equity shareholders of the parent) 20.3 15.8 Amortisation of intangibles associated with acquisitions - 0.1 Earnings for adjusted earnings per share
20.3 15.9 Number of shares Weighted average number of shares for the purposes of basic earnings per share (thousands) 18,946 18,830
Effect of potentially dilutive share options (thousands)
138 170
Weighted average number of shares for the purposes of
dilutive earnings per share (thousands) 19,084 19,000
Earnings per share from operations
Basic 107.1p 83.9p Diluted 106.4p 83.2p Diluted adjusted 106.4p 83.7p 6. Borrowings
The borrowings are repayable as follows:
£ Millions 2011 2010 On demand or within one year 13.4 12.7 In the second year 3.8 3.9 In the third year 7.7 3.9 In the fourth year - 2.9 24.9 23.4 Less: Amounts due for settlement within 12 months (shown under current liabilities) (13.4) (12.7) Total repayable after 12 months 11.5 10.7
The other principal features of the Group's borrowings are as follows:
1. Bank overdrafts are repayable on demand. The bank overdrafts aresecured on the assets of the Group. At 31 December 2011, the Group had anoverdraft of £9.6 million (2010: £4.0 million). In September 2011, the Grouprenewed its annual working capital facility, which is US Dollar 15 million (£9.6 million), priced at LIBOR plus a fixed margin of 2.5%. 2. In September 2011, the Group made a new arrangement with Bank ofScotland Plc to increase its term debt facility to US$27.0 million (£17.2million) with quarterly repayments remaining at US$1.5 million (£1.0 million)and a US$9.0 million (£5.7 million) final repayment due on expiry on thefacility in September 2014. The term loan is priced at LIBOR plus a margin ofbetween 1.75% and 2.25% depending on the ratio of Net Debt to EBITDA. 3. The Group has pledged all assets as collateral to secure bankingfacilities granted to the Group. 7. Deferred consideration The Group owns 69.7% of the shares of Powersolve Electronics Limited and hadentered into an agreement to purchase the remaining 30.3% of the shares inJanuary 2012. On 19th December 2011, the Group entered into a new arrangementunder which the purchase of the remaining 30.3% of the shares will now takeplace in two tranches - 14.3% in early 2012 and the remaining 16% 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.
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 in
Asia. Risks Specific to the Group 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.
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 2011, no one customeraccounted for more than 5% of revenue.
Shortage, non-availability or technical fault with regard to key electronic components
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 26.0% 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 fall geographically. The Group effective tax rate could therefore fluctuate over time. This could have an impact on earnings and potentially its share price.
Further, the Group's tax position includes judgments about past and futureevents and relies on estimates and assumptions. Although we believe that theestimates and assumptions supporting our positions are reasonable and aresupported by external advice, our ultimate liability in connection with thesematters will depend upon the assessments raised and the result of anynegotiations with the relevant tax authorities. If the actual taxes andpenalties imposed exceed the amounts we have accrued, it could adversely affectour financial position, results and cash flows. 8. Responsibility Statement
The Directors' confirm to the best of their knowledge and belief that this condensed set of financial statements:
- gives a fair view of the assets, liabilities, financial position and profit of the Group; and
- includes a fair review of the information required by the Disclosure and Transparency Rules.
9. Other information
XP Power Limited (the "Company") is listed on the London Stock Exchange and incorporated and domiciled in Singapore. The address of its registered office is 401 Commonwealth Drive, Lobby B, #02-02, Haw Par Technocentre, Singapore 149598.
The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2011 or 2010. Thefinancial information for the year ended 31 December 2010 is derived from theXP Power Limited statutory accounts for the year ended 31 December 2010, 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 2011 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 20 February 2012.
XLON