Xp Power Regulatory News (XPP)

29 July 2013 XP Power Limited ("XP" or "the Group") Interim Results for the six months ended 30 June 2013 XP, a world leading developer and manufacturer of critical power control componentsfor the electronics industry, today announces its interim results for the six-monthperiod ended 30 June 2013. Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Highlights Revenue £49.0m £46.5m Gross profit £23.8m £21.8m Gross margin 48.6% 46.9% Operating margin 21.6% 21.3% Profit before tax £10.4m £9.6m Profit after tax £8.0m £7.7m Diluted earnings per share (see Note 9) 41.8p 40.4p Interim dividend per share (see Note 8) 23.0p 21.0p Revenue increased by 5% to £49.0 million (+4% in constant currency) Gross margin increased to 48.6% (2012: 46.9%) due to higher factory loading andreduction of Vietnam start-up costs together with improved product mix New production facility in Vietnam breaking even from June 2013 Own-design XP products now 62% of revenues (2012: 61%) Order intake for first half of 2013 flat year on year but sequentialimprovement of 7% over the second half of 2012. New product introductions and the development of an industry leading in-housemanufacturing capability continue to generate new program wins to drive futuregrowth and market share gains Larry Tracey, Chairman, commented: "We are encouraged by the progress we are making despite the continuedchallenging global environment for capital spending. Our first halfperformance, particularly in the healthcare and industrial markets, waspleasing and we believe that we are continuing to take market share." "Global capital goods markets remain subdued and we have yet to see any sign ofimprovement in the outlook but our greater penetration of a Blue Chip customerbase and significant design win success bode well for the future of XP." Enquiries: XP PowerDuncan Penny, Chief Executive +44(0)7776 178018Jonathan Rhodes, Finance Director +44(0)7500 944614 Citigate Dewe Rogerson +44(0)20 7638 9571Kevin Smith/Jos Bieneman Note to editors XP Power is a leading international provider of essential power controlsolutions. Power direct from the electricity grid is unsuitable for theequipment which it supplies. XP Power designs and manufactures powerconverters - components which convert power into the right form for ourindividual customers' needs, allowing their electronic equipment to function.XP Power supplies the healthcare, industrial and technology industries withthis mission critical equipment. Significant, long term investment intoresearch and development means that XP Power's products frequently offersignificantly improved functionality and efficiency. For further information, please visit www.xppower.com 29 July 2013 XP Power Limited ("XP" or "the Group") Interim Results for the six months ended 30 June 2013 CHAIRMAN'S STATEMENT Overview XP Power made encouraging progress during the first half, despite the globalenvironment for capital spending remaining challenging throughout the period.The Group continued to benefit from its well-established strategy of moving upthe value chain and establishing its own manufacturing capability, resulting infurther increases in market share. Revenues increased by 5% over the prior year and our new Vietnam magneticsmanufacturing facility has benefited from further volume growth and is nowbreaking even. These factors, together with better factory loading and animproved product mix, led to an increase in our gross margins to 48.6% from46.9% in the first half of 2012. Strategy The Group has applied a consistent strategy of moving up the value chain,powered by: Development of a strong pipeline of leading-edge products Provision of industry-leading levels of service and support Targeting new key accounts and increasing the penetration of existing keyaccounts An established pipeline of new class-leading "Green" products which operate athigh efficiency Enhancing its value proposition to customers by the addition of a manufacturingcapability Increasing the proportion of high margin own designed/manufactured productswithin its revenue mix Our value proposition to customers is to reduce their overall costs of design,manufacture and operation. We achieve this by providing excellent salesengineering support and producing new products that consume less power, take upless space, reduce installation times and which are highly reliable in service. Trading and Financial Review XP Power supplies power control solutions to original equipment manufacturers("OEMs") who supply the healthcare, industrial and technology markets with highvalue, high reliability products. The increasing importance of energyefficiency for environmental, reliability and economic reasons; the necessityfor ever smaller products; the accelerating rate of technological change; andthe increasing proliferation of electronic equipment, have all set a strongfoundation for medium term growth in demand for XP Power's products. Revenues for the period increased by 5% (4% in constant currency) to £49.0million, compared with £46.5 million in the same period a year ago. Revenuesin Europe were £22.1 million up 9%; those in North America were £23.7 million,up 8%, and those in Asia were £3.2 million, down 26% largely due to aparticular customer program coming to the end of its life as anticipated. As wesell to Original Equipment Manufacturers who in turn sell to their endcustomers it is difficult to accurately assess whether this geographic split isrepresentative of the ultimate end destination of our equipment. However, webelieve a significant proportion of the equipment we sell into the industrialsector is likely to end up in emerging markets. In terms of sector split revenues from healthcare grew 14% to £14.5 million asnew program wins from larger accounts where we have gained approved orpreferred supplier status began to enter production. Industrial also showedsome growth based on new program wins and grew 11% to £23.5 million. Thetechnology sector proved to be the most challenging and declined 14% to £11.0million. In terms of overall revenue for the first half of 2013 healthcarerepresented 30% (2012: 27%), industrial 48% (2012: 45%) and technology 22%(2012: 27%). Our customer base continues to be highly diversified with the largest customeraccounting for only 4% of revenue, spread over 90 different programs/partnumbers. Margins Gross margin in the first half of 2013 increased to 48.6% (2012: 46.9%), withimproved factory loading at our Kunshan facility contributing an improvement of£0.2 million over the same period a year ago. Losses at the new Vietnamesemanufacturing facility reduced the gross margin by approximately £0.2 millionin the first half (2012: losses of £0.3 million) but the facility has reachedbreakeven in June this year. The remainder of the increase in gross margin isdue to improvements in product mix. Operating expenses were £13.3 million (2012: £11.9 million). The increase camefrom a number of different areas, including the effects of currencytranslation, but product development expenses including amortisation were themost significant contributor, increasing by £0.4 million from the same periodin 2012. Despite challenging market conditions we continue to achieve excellentoperating margins of 21.6% (2012: 21.3%) highlighting the strength of ourbusiness model. We expect further improvement in this metric when marketconditions improve. Financial Position Strong margins and modest capital requirements have resulted in a continuedstrong cash flow and a reduction in net debt. Net debt reduced significantly to£8.5 million at 30 June 2013 compared to £15.0 million at 30 June 2012. Usingthe exchange rates prevailing at 30 June 2012, net debt at 30 June 2013 wouldhave been £8.1 million. Product Development New products are fundamental to driving our revenue growth. The broader ourproduct offering, the more opportunity we have to increase our revenues byexpanding our available market. As expected, the number of new product familiesintroduced over the last three years is yet to have a significant impact on ourrevenues, given the time lag from launch to them entering production. This isdue to the lengthy design-in cycles required by customers to qualify the powerconverter in their equipment and then gain the necessary safety agencyapprovals. We launched 17 new product families in the first half of 2013 (2012: 10). Inresponse to customer requirements for improved efficiency and environmentalperformance, our design teams are focusing on developing new products thatreduce power wastage, reduce heat, consume less raw material and incorporatelow stand-by power operation. Gross product development spending increased by4% to £2.8 million in the first half from £2.7 million in the first half of2012. With larger customers continuing to reduce the number of vendors they dealwith, XP Power's broad product offering, excellent global engineering support,in-house manufacturing capability and industry-leading environmentalcredentials leave the Group well-placed to secure further preferred supplieragreements. Manufacturing XP Power's move into manufacturing in 2006 has been instrumental in enablingthe Group to win approved and preferred supplier status with new Blue Chipcustomers, who demand that their suppliers have complete control over theirsupply chain and product manufacture to ensure the highest levels of quality. In June 2009, production commenced at our first manufacturing facility atKunshan, close to Shanghai, China. The facility, which is certified underthe ISO14001 Environmental Management Standard, delivers manufacturingcapabilities which match or exceed the best of our competitors. The numberof customer audits from key accounts has steadily increased over recentyears and all of these audits have been successful. Our Vietnamese manufacturing facility, located in Ho Chi Minh City, beganproduction of its first magnetic components during March 2012 and is currentlyproducing approximately half of the monthly requirement for magnetic componentsat our Chinese factory. The quality of the Vietnamese output has been verypleasing surpassing that of our third party suppliers. Producing our own magnetic components in Vietnam is helping us mitigate thecontinued rise of Chinese labour costs and the appreciation of the ChineseRenminbi. In addition, extending vertical integration to the critical magneticcomponents used in power converters is seen as an additional value propositionby many of our customers, notably in the healthcare and high reliabilityindustrial sectors. Dividend Since April 2010 the Company has been making quarterly dividend payments. Ourstrong cash flow and confidence in the Group's prospects have enabled us toincrease total dividends for the first half by 10% to 23.0 pence per share(2012: 21.0 pence per share). The first quarterly payment of 11 pence per share was made on 10 July 2013. Asecond quarterly dividend of 12 pence per share will be paid on 10 October 2013to shareholders on the register at 6 September 2013. Dividend growth over the past ten years has exceeded a compound average growthrate of 15%. Environmental Impact and "Green XP Power" products XP Power has placed improved environmental performance at the heart of itsoperations both in terms of minimising the impact its activities have on theenvironment and, as importantly, in its product development strategy. Thesepractices and initiatives not only resonate with our customers and employees;they also make significant commercial sense as countries legislate to reducepower wastage, improve recyclability of manufactured goods and ban the use ofharmful chemicals. We have developed a class leading portfolio of green products with efficienciesup to 95% and many of these products also have low stand-by power (a feature toreduce the power consumed while the end equipment is not operational but instand-by mode). We now apply our own "Green XP Power" logo to the products wedesignate ultra-high efficiency. During the first half of 2013, 11% of ourrevenues were generated by "Green XP Power" products compared to 6% in 2012, 5%in 2011 and 3% in 2010. At present, the uptake of these products by customersis primarily driven by their improved reliability and the ability to dispensewith mechanical fans to dissipate waste heat, rather than the fact that theyconsume less energy in operation. However, we expect this to change as lowerenergy consumption becomes a higher priority to end users of capital equipmentand more legislation is introduced. Outlook Global capital goods markets remain subdued and we have yet to see any sign ofimprovement in the outlook. Against this backdrop, our first half performance,particularly in the healthcare and industrial markets, was encouraging, and webelieve that we are continuing to take market share. A broad, up to date product portfolio and the development of an industryleading in-house manufacturing capability are at the core of our strategy and,when combined with excellent service and support, are leading to continued newprogram wins which should drive our future growth. This greater penetration ofa Blue Chip customer base and significant design win success bode well for thefuture of XP. Larry TraceyChairman29 July 2013 XP Power Limited Consolidated Statement of Comprehensive Income For the six months ended 30 June 2013 £ Millions Note Six months Six months ended ended 30 June 30 June 2013 2012 (Unaudited) (Unaudited) Revenue 5 49.0 46.5 Cost of sales 6 (25.2) (24.7) Gross profit 23.8 21.8 Operating expenses 6 (13.3) (11.9) Other operating income 6 0.1 - Operating profit 10.6 9.9 Finance cost 6 (0.2) (0.3) Profit before income tax 5 10.4 9.6 Income tax expense 7 (2.3) (1.8) Net profit 8.1 7.8 Other comprehensive income: Fair value gains/(losses) on cash 0.1 0.1flow hedges Exchange differences on translationof foreign operations 1.3 (0.1) Other comprehensive income, net of 1.4 -tax Total comprehensive income 9.5 7.8 Profit attributable to: - owners of the parent 8.0 7.7 - non-controlling interest 0.1 0.1 8.1 7.8 Total comprehensive incomeattributable to: - owners of the parent 9.4 7.7 - non-controlling interest 0.1 0.1 9.5 7.8 Earnings per share attributable to Pence per Pence perowners of the parent Share Share Basic 9 42.1 40.6 Diluted 9 41.8 40.4 XP Power Limited Consolidated Balance Sheet At 30 June 2013 £ Millions Note At 30 At 31 At 30 June 2013 December June 2012 2012 (Unaudited) (Unaudited) Assets Current assets Cash and cash equivalents 11 4.2 4.1 4.5 Trade receivables 16.1 14.2 14.6 Other current assets 1.0 1.2 1.5 Inventories 20.5 19.8 22.0 Total current assets 41.8 39.3 42.6 Non-current assets Interests in associates - - 0.1 Property, plant and equipment 13.8 13.2 14.0 Goodwill 30.6 30.5 31.4 Intangible assets 10 8.0 7.6 7.1 ESOP loans to employees 1.1 1.2 1.2 Deferred income tax assets 0.3 0.3 0.3 Total non-current assets 53.8 52.8 54.1 Total assets 95.6 92.1 96.7 Liabilities Current liabilities Trade and other payables 12.5 11.1 13.3 Current income tax liabilities 1.4 1.6 0.9 Derivative financial instruments 0.3 0.2 - Borrowings 12 6.8 7.3 10.0 Total current liabilities 21.0 20.2 24.2 Non-current liabilities Borrowings 12 5.9 7.4 9.5 Deferred income tax liabilities 1.8 1.7 2.1 Provision for deferred contingentconsideration 1.5 1.5 2.2 Total non-current liabilities 9.2 10.6 13.8 Total liabilities 30.2 30.8 38.0 NET ASSETS 65.4 61.3 58.7 Capital and reserves attributable toequity holders of the Company Share capital 27.2 27.2 27.2 Merger reserve 0.2 0.2 0.2 Treasury shares (1.1) (1.2) (0.8) Share option reserve 0.1 - - Hedging reserve (0.1) (0.2) 0.1 Translation reserve (6.4) (7.7) (7.2) Retained earnings 45.2 42.8 39.1 65.1 61.1 58.6 Non-controlling interest 0.3 0.2 0.1 Total equity 65.4 61.3 58.7 XP Power Limited Consolidated Statement of Changes in Equity For the six months ended 30 June 2013 (Unaudited) £ Millions Attributable to equity holders of the company Share Company treasury Share Merger Hedging Translation Retained Total Non-controlling Total capital shares option reserve reserve reserve earnings interest Equity reserve Balance at 1 (1.0)January 2012 27.2 - 0.2 - (7.1) 36.3 55.6 0.2 55.8 Sale oftreasuryshares - 0.2 - - - - - 0.2 - 0.2 Dividendspaid - - - - - - (4.9) (4.9) (0.2) (5.1) Totalcomprehensiveincome forthe period - - - - 0.1 (0.1) 7.7 7.7 0.1 7.8 Balance at 30June 2012 27.2 (0.8) - 0.2 0.1 (7.2) 39.1 58.6 0.1 58.7 Balance at 1January 2013 27.2 (1.2) - 0.2 (0.2) (7.7) 42.8 61.1 0.2 61.3 Sale oftreasuryshares - 0.1 - - - - (0.1) - - - Employeeshare optionscheme - - 0.1 - - - - 0.1 - 0.1 Dividendspaid - - - - - - (5.5) (5.5) - (5.5) Totalcomprehensiveincome forthe period - - - - 0.1 1.3 8.0 9.4 0.1 9.5 Balance at 30June 2013 27.2 (1.1) 0.1 0.2 (0.1) (6.4) 45.2 65.1 0.3 65.4 XP Power Limited Consolidated Statement of Cash Flows For the six months ended 30 June 2013 £ Millions Note Six months Six months ended ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Cash flows from operating activities Total profit 8.1 7.8 Adjustments for Income tax expense 2.3 1.8 Amortisation and depreciation 1.3 1.2 Finance cost 0.2 0.3 Loss/(gain) on fair valuation of derivativefinancial instruments 0.2 (0.1)Unrealised currency translation losses/(gain) 0.6 (0.1) Change in the working capital Inventories (0.7) - Trade and other receivables (1.7) 2.5 Trade and other payables 1.5 1.0 Income tax paid (2.5) (2.0) Net cash provided by operating activities 11 9.3 12.4 Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired - (1.0) Purchases and construction of property, plant andequipment (0.5) (2.2) Research and development expenditure capitalised 6 (1.0) (1.2) Proceeds from disposal of property, plant and - 0.4equipment ESOP loan repaid 0.1 0.4 Net cash used in investing activities (1.4) (3.6) Cash flows from financing activities Repayment of borrowings (1.2) (2.0) Sale/(purchase) of treasury shares by ESOP 0.1 0.2 Interest paid (0.2) (0.3) Dividends paid to equity holders of the Company (5.5) (4.9) Dividends paid to non-controlling interest - (0.2) Net cash used in financing activities (6.8) (7.2) Net increase/(decrease) in cash and cash 1.1 1.6equivalents Cash and cash equivalents at start of period 0.5 (3.3) Effects of currency translation on cash and cashequivalents (0.2) - Cash and cash equivalents at the end of the period 11 1.4 (1.7) Reconciliation of changes in cash and cash equivalents to movements in net debt Net increase/(decrease) in cash and cash equivalents 1.1 1.6 Repayment of borrowings 1.2 2.0 Effects on currency translation (0.2) - Movement in net debt 2.1 3.6 Net debt at start of period (10.6) (18.6) Net debt at end of period (8.5) (15.0) XP Power Limited Notes to the Interim Results for the six months ended 30 June 2013 1. General information XP Power Limited (the "Company") is listed on the London Stock Exchange andincorporated and domiciled in Singapore. The address of its registered office is401 Commonwealth Drive, Lobby B #02-02, Haw Par Technocentre, Singapore 149598. The nature of the Group's operations and its principal activities is toprovide power supply solutions to the electronics industry. These condensed consolidated interim financial statements are presented inPounds Sterling (GBP). 2. Basis of preparation The condensed consolidated interim financial statements for the period ended30 June 2013 have been prepared in accordance with the Listing Rules of the FinancialServices Authority and with IAS 34, Interim Financial Reporting as adopted by theEuropean Union. The condensed consolidated interim financial statements should be read inconjunction with the annual financial statements for the year ended 31 December2012 which have been prepared in accordance with International Financial ReportingStandards as adopted by the European Union. 3. Going Concern The directors, after making enquiries, are of the view, as at the time ofapproving the financial statements, that there is a reasonable expectation thatthe Group will have adequate resources to continue operating for theforeseeable future and therefore the going concern basis has been adopted inpreparing these financial statements. 4. Accounting policies The condensed consolidated interim financial statements have been preparedunder the historical cost convention except for the fair value of derivatives inaccordance with IFRS 9, "Financial Instruments". The same accounting policies, presentation and methods of computation arefollowed in these condensed consolidated interim financial statements as were appliedin the presentation of the Group's financial statements for the year ended 31 December 2012. 5. Segmented analysis The Group operates substantially in one class of business, the provision ofpower control solutions to the electronics industry. Analysis of total Group operating profit, total assets, revenue and total group profit before taxation by geographicalregion is set out below. £ Millions Six months ended Six months ended 30 June 2013 (Unaudited) 30 June 2012 (Unaudited) Revenue Asia 3.2 4.3 Europe 22.1 20.3 North America 23.7 21.9 Total revenue 49.0 46.5 5. Segmented analysis (continued) £ Millions Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Total assets Asia 30.1 30.9 Europe 26.0 26.3 North America 39.2 39.2 Segment assets 95.3 96.4 Unallocated deferred 0.3 0.3tax Total assets 95.6 96.7 Reconciliation of segment results to profit before tax: £ Millions Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Asia 0.1 0.5 Europe 3.8 3.6 North America 6.0 5.2 Segment result 9.9 9.3 Corporate recovery from 1.2 2.6operating segment Research and development cost (0.5) (2.0) Finance income and cost (0.2) (0.3) Profit before taxation 10.4 9.6 Tax (2.3) (1.8) Total profit 8.1 7.8 The Group's three business segments operate in the following countries: £ Millions Six months ended Six months ended 30 June 2013 (Unaudited) 30 June 2012 (Unaudited) United States 23.7 21.9 United Kingdom 11.9 11.0 Singapore 3.2 4.3 Germany 4.6 4.5 Switzerland 1.9 1.4 Other countries 3.7 3.4 Total revenue 49.0 46.5 6. Expenses by nature £ Millions Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Profit for the period is after charging/(crediting): Amortisation of other intangible assets 0.6 0.5 Depreciation of property, plant and equipment 0.7 0.7 Foreign exchange loss 0.2 0.2 Foreign exchange (gains) on forward contracts (0.2) (0.1) Purchase of inventories 23.3 23.5 Changes in inventories 0.7 0.1 Fees paid to auditors: - Audit 0.2 0.2 - Other services - tax 0.1 0.1 All other charges 13.0 11.7 Total 38.6 36.9 Included in the above is net research and development expenditure as follows: £ Millions Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Gross research and development expenditure 2.8 2.7 Development expenditure capitalised (1.0) (1.2) Amortisation of development expenditure 0.6 0.5capitalised Net research and development expenditure 2.4 2.0 7. Taxation Income tax expense is recognised based on management's best estimate of the weighted average annual income tax expected for the full financial year. The estimated effective annual tax rate used for 2013 is 22% (2012: 19%). £ Millions Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Singapore 0.6 0.6 Other overseas taxation 1.7 1.2 Total taxation 2.3 1.8 8. Dividends Amounts recognised as distributions to equity holders of the Company in the period: Six months ended Six months ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Pence per £ Pence per £ share Millions share Millions Prior year 3rd quarter 12.0 2.3 11.0 2.1dividend paid Prior year final dividend 17.0 3.2 15.0 2.8paid Total 29.0 5.5 26.0 4.9 The dividends paid recognised in the interim financial statements relate to the third quarter and final dividends for 2012. The first quarterly dividend of 11 pence per share was paid on 10 July 2013. A second quarterly dividend of 12 pence per share [2012: 11 pence] will be paid on 10 October 2013 to shareholders on the register at 6 September 2013. 9. Earnings per share Earnings per share attributable to equity holders of the company arise from continuing operations as follows: £ Millions Six months Six months ended ended 30 June 30 June 2013 2012 (Unaudited) (Unaudited) Earnings Earnings for the purposes of basic and diluted earningsper share (profit for the period attributable to equityshareholders of the company) 8.0 7.7 Earnings for adjusted earnings per share 8.0 7.7 Number of shares '000 '000 Weighted average number of shares for the purposes of basicearnings per share (thousands) 18,993 18,977 Effect of potentially dilutive share options (thousands) 136 87 Weighted average number of shares for the purposes of dilutiveearnings per share (thousands) 19,129 19,063 Earnings per share from operations Basic 42.1p 40.6p Diluted 41.8p 40.4p Diluted adjusted 41.8p 40.4p 10. Other intangible assets Other intangible assets comprises development expenditure capitalised when itmeets the criteria laid out in IAS 38, "Intangible Assets", trademarks andnon-contractual customer relationships. 11. Cash and cash equivalents For the purpose of presenting the consolidated cash flow statement, theconsolidated cash and cash equivalents comprise the following: £ Millions Six months Six months ended ended 30 June 2013 30 June 2012 (Unaudited) (Unaudited) Cash and bank balances 4.2 4.5 Less: Bank overdrafts (2.8) (6.2) Cash and cash equivalents per consolidatedcash flow statement 1.4 (1.7) Reconciliation to free cash flow: Net cash inflow from operating activities 9.3 12.5 Development expenses capitalised (1.0) (1.2) Net interest expense (0.2) (0.3) Free cash flow 8.1 11.0 12. Borrowings, bank loans and overdraft £ Millions 30 June 2013 31 December 2012 30 June 2012 (Unaudited) (Unaudited) Non-Current 5.9 7.4 9.5 Current 6.8 7.3 10.0 Total 12.7 14.7 19.5 13. Currency Impact We report in Pounds Sterling (GBP) but have significant revenues and costs aswell as assets and liabilities that are denominated in United States Dollars(USD). The table below sets out the prevailing exchange rates in the periodsreported. First half First half % 30 June 31 December 30 June 2013 2012 2013 2012 2012 Change Average Average Period end Period end Period end USD/ 1.55 1.57 -1.5% 1.52 1.63 1.57GBP EUR/ 1.18 1.21 -2.6% 1.17 1.23 1.24GBP Approximately 70% of the Group's revenues are invoiced in USD so the change inthe USD to GBP exchange rate has a significant effect on reported revenue inGBP. However, as the majority of our cost of goods sold and operating expensesare also denominated in USD the change in profit before tax with the USD to GBPexchange rate is relatively minor. The impact of changes in the key exchangerates from the first half of 2012 to the first half of 2013 are summarised asfollows: £ Millions USD EUR Impact on revenues 0.5 0.1 Impact on profit before tax 0.1 - Impact on net debt (0.4) - 14. Risks and uncertainties Like many other international businesses the Group is exposed to a number ofrisks and uncertainties which might have a material effect on its financialperformance. These include: Fluctuations in foreign currency The Group has an exposure to foreign currency fluctuations. This could lead tomaterial adverse movements in reported earnings. 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. Loss of key customers/suppliers The Group is dependent on retaining its key customers and suppliers. However,for the six months ended 30 June 2013, no one customer accounted for more than5% 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.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. Theeffective 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.Further, the Group's tax position includes judgments about past and futureevents and relies on estimates and assumptions. 15. Directors' responsibility statement The interim financial statements were approved by the board of directors on 29 July 2013. The directors confirm that to the best of their knowledge that: - This unaudited condensed financial information has been prepared in accordancewith IAS 34 "Interim Reporting" as adopted by the European Union; and - The interim management report includes a fair view of the information requiredby DTR 4.2.7 (indication of important events during the first six months anddescription of principal risks and uncertainties for the remaining six months ofthe year) and DTR 4.2.8 (disclosure of related party transactions and changes therein).

The directors of XP Power Limited are as listed in the Company's 2012 Annual Report.