Last checked at 23 Jul 2012 07:00
23 July 2012 XP Power Limited ("XP" or "the Group") Interim Results for the six months ended 30 June 2012 XP, a world leading developer and manufacturer of critical power control components for the electronics industry, today announces its interim results for the six-month period ended 30 June 2012. Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Highlights Revenue £46.5m £51.9m Gross profit £21.8m £25.7m Gross margin 46.9% 49.5% Operating margin 21.3% 23.9% Profit before tax £9.6m £11.9m Profit after tax £7.7m £10.1m Diluted earnings per share (see Note 9) 40.4p 52.9p Interim dividend per share (see Note 8) 21.0p 19.0p
- Revenue reduced by 10% to £46.5 million due to weaker order intake in the
latter part of 2011 as industrial electronics demand softened in response to a
weaker macroeconomic outlook
- Gross margin reduced to 46.9% (2011: 49.5%) due to a combination of Vietnam
start-up costs and lower factory loading
- New production facility in Vietnam now operational and expected to break even
by the end of 2012
- Continued expansion of own-design XP products to reach 61% of revenues (2011: 55%)
- New product introductions and the development of an industry leading in-house
manufacturing capability have generated multiple new program wins to drive
future growth and market share gains
- Order intake for first half of 2012 improved significantly, exceeding second
half of 2011 by 16%
- Second half revenues and earnings expected to be substantially higher than
those achieved in the first half of the current year
Larry Tracey, Chairman, commented:
"Whilst the global trading environment is challenging, we are adapting our resource allocation to fit the current market conditions. Looking ahead, we expect that the on-going implementation of our strategy of vertical integration in designing and manufacturing our own products, targeted at servicing the power supply needs of industry leading customers, continues to position the group well for long term earnings growth."
Enquiries:XP Power Duncan Penny, Chief Executive +44 (0)7776 178 018
Jonathan Rhodes, Finance Director +44(0)7500 944
614Citigate Dewe Rogerson +44 (0)20 7638 9571Kevin Smith/Jos Bieneman Note to editors
XP Power is a leading international provider of essential power control solutions. Power direct from the electricity grid is unsuitable for the equipment which it supplies. XP Power designs and manufactures power converters - components which convert power into the right form for our individual customers' needs, allowing their electronic equipment to function. XP Power supplies the healthcare, industrial and technology industries with this mission critical equipment. Significant, long term investment into research and development means that XP Power's products frequently offer significantly improved functionality and efficiency.
For further information, please visit www.xppower.com
23 July 2012 XP Power Limited ("XP" or "the Group") Interim Results for the six months ended 30 June 2012 CHAIRMAN'S STATEMENT Overview
First half revenues declined as expected following the weaker order intakereported during the second half of the previous financial year. The combinationof subdued industrial electronics demand, the start-up costs associated withour Vietnamese manufacturing facility and lower factory loading, have combinedto produce a reduction in earnings in the first half of 2012 versus the sameperiod a year ago. Against this background, we achieved another strong designwin performance during the period and further improved the proportion of ourrevenue which came from our own-design products, which reached 61% in the firsthalf of 2012 (2011: 55%). Markets XP Power supplies power control solutions to original equipment manufacturers("OEMs") who supply the healthcare, industrial and technology markets with highvalue products. The increasing importance of energy efficiency forenvironmental, reliability and economic reasons; the necessity for ever smallerproducts; the accelerating rate of technological change; and the increasingproliferation of electronic equipment, have all set a strong foundation formedium term growth in demand for XP Power's products. 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. Revenues for the period decreased by 10% (11% in constant currency) to £46.5million, compared with £51.9 million in the same period a year ago. Revenuesin Asia were £4.3 million, up 8%; in Europe revenues were £20.3 million, down13%; and those in North America were £21.9 million, down 11%, all on the sameperiod a year ago. Importantly, our customer base remains highly diversified. While we have seencertain of our existing larger customers show some decrease in demand in 2012versus 2011, this has been offset in part by new programs and new customers. Weexpect demand from the majority of the older existing programs to recover whenend markets improve. There has been no significant change in the revenue mix ofthe different industry sectors we target when comparing the first half of 2012with the first half of 2011.
Our largest customer accounts for only 4% of revenue, spread over 71 different programs/part numbers.
Margins
Gross margin in the first half of 2012 was 46.9% compared with 49.5% in thesame period a year ago. A combination of reduced factory loading in our Chinafacility and £0.3 million of start-up costs associated with our new Vietnamesemanufacturing facility contributed to this reduction. On top of this therewere additional costs associated with the transfer of older own-design productsfrom contract manufacturers into our own factory. We expect an improvement ingross margins in the second half of 2012 as factory loading improves and theVietnam facility moves towards the expected breakeven position at year end.
Operating expenses were £11.9 million in the first half (2011: £13.3 million) and have been kept under tight control given the subdued trading environment.
Despite the adverse effects on margin highlighted above we still achievedexcellent operating margins of 21.3% (2011: 23.9%) highlighting the strength ofour business model. We expect improvement in this metric in the second half asthe contribution of our own-design products continues to increase. 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 production. This is due to thelengthy design-in cycles required by customers to qualify the power converterin their equipment and then gain the necessary safety agency approvals.We launched 10 new product families in the first half of 2012. In response tocustomer requirements for improved efficiency and environmental performance,our design teams are focusing on developing new products that reduce powerwastage, reduce heat, and consume less raw material. Many of our new productswill be environmentally friendly having very high efficiency and incorporatinglow stand-by power operation. Gross product development spending increased by29% to £2.7 million in the first half from £2.1 million in the first half of2011. We have a broad array of standard products which are easy to modify to ourdiverse customers' specific requirements, avoiding the need for our customersto embark on an expensive and lengthy custom design process themselves. Use ofa standard platform also reduces the customer's risk. Approximately 57% of ourrevenues come from standard products that we have either modified or adaptedfrom our configurable product lines.Larger customers are keen to reduce the number of vendors they deal with and XPPower's broad product offering, excellent global engineering support, in-housemanufacturing capability and environmental credentials make us an idealcandidate as a preferred supplier. Manufacturing XP Power's move into manufacturing in 2006 has been instrumental in enabling the Group to win approved and preferred supplier status with many new Blue Chip customers, who demand that their suppliers have complete control over their supply chain and product manufacture to ensure the highest levels of quality. In June 2009, production commenced at a new manufacturing facility constructed on our existing site at Kunshan, close to Shanghai, China. The facility, which is certified under the ISO14001 Environmental Management Standard, delivers manufacturing capabilities which match or even exceed the best of our competitors.
Our new Vietnamese manufacturing facility, located in Ho Chi Minh City, was completed on schedule in December 2011 and began production of its first magnetic components during the period. The facility consists of an 8,000m2 manufacturing building and 3,000m2 administration building. There is sufficient space on the site to accommodate a second 8,000m2 manufacturing building as demand dictates.
Producing our own magnetic components in Vietnam will help 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 propositionbymany of our customers, notably in the healthcare and high reliabilityindustrial sectors.The new Vietnam facility is the world's most environmentally advanced powerconverter manufacturing factory and will be the first building in Vietnam tomeet the Singapore Building Construction Authority's Green Mark Gold Pluscertification, a standard applicable to buildings in tropical climates. Thisfacility embodies our commitment to lead the industry in environmentalperformance. Sustainability and sound environmental stewardship areincreasingly important to our customers, employees, suppliers and thecommunities in which we operate.
At present, approximately one quarter of our total revenues are manufactured in-house. This figure will increase significantly as the proportion of own-design business continues to increase and the transfer of the older own-design products from third party to in-house manufacture is completed during 2012.
Dividend
Since April 2010 the Company has been making quarterly dividend payments. Our strong cash flow and confidence in the Group's prospects have enabled us to increase total dividends for the first half by 11% to 21.0 pence per share (2011: 19.0 pence per share).
The first quarterly payment of 10.0 pence per share was made on 10 July 2012.A second quarterly dividend of 11 pence per share will be paid on 11 October2012 to shareholders on the register at 7 September 2012.
Dividend growth over the past ten years has exceeded a compound average growth rate of 15%.
Environmental Impact and "Green 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 Power" logo to the products wedesignate ultra-high efficiency. During the first half of 2012, 6% of ourrevenues were generated by "Green Power" products compared to 5% in 2011 and 3%in 2010. At present, the uptake of these products by customers is primarilydriven by their improved reliability and the ability to dispense withmechanical fans to dissipate waste heat, rather than the fact that they consumeless energy in operation. However, we expect this to change as lower energyconsumption becomes a higher priority to end users of capital equipment andmore legislation is introduced. Outlook
Whilst the global trading environment is challenging, we are adapting our resource allocation to fit the current market conditions. Looking ahead, we expect that the on-going implementation of our strategy of vertical integration in designing and manufacturing our own products, targeted at servicing the power supply needs of industry leading customers, continues to position the group well for long term earnings growth.
An expansive, up to date portfolio of market leading products and thedevelopment of an industry leading in-house manufacturing capability are at thecore of our strategy and are leading to multiple new program wins which willdrive our growth as we continue to take market share. While industrialelectronics markets remain subdued at present, we continue to believe that ourgreater penetration of a Blue Chip customer base and significant design winsuccess bode well for the future of XP. Customers are continuing to place orders at a significantly higher rate thanthat seen in the second half of 2011, with orders in the first half of 2012 16%above those in the second half of the prior year. Against this background, wecurrently anticipate that second half revenues and earnings will besubstantially higher than those achieved in the first half of the current year. Larry TraceyChairman23 July 2012 XP Power LimitedConsolidated Statement of Comprehensive IncomeFor the six months ended 30 June 2012 £ Millions Note Six months Six months ended ended 30 June 30 June 2012 2011 (Unaudited) (Unaudited) Revenue 5 46.5 51.9 Cost of sales 6 (24.7) (26.2) Gross profit 21.8 25.7 Operating expenses 6 (11.9) (13.0) Other operating expense 6 - (0.3) Operating profit 9.9 12.4 Finance cost 6 (0.3) (0.5) 5 Profit before income tax 9.6 11.9 Income tax expense 7 (1.8) (1.6) Net profit 7.8 10.3 Other comprehensive income:
Fair value gains/(losses) on cash 0.1 (0.4)
flow hedges
Exchange differences on translation
of foreign operations (0.1) 0.4
Other comprehensive income, net of - -
tax Total comprehensive income 7.8 10.3 Profit attributable to: - owners of the parent 7.7 10.1 - non-controlling interest 0.1 0.2 7.8 10.3 Total comprehensive income attributable to: - owners of the parent 7.7 10.1 - non-controlling interest 0.1 0.2 7.8 10.3
Earnings per share attributable to Pence per Pence per
owners of the parent Share Share Basic 9 40.6 53.4 Diluted 9 40.4 52.9 XP Power LimitedConsolidated Balance SheetAt 30 June 2012 £ Millions Note At 30 At 31 At 30 June 2012 December June 2011 (Unaudited) 2011 (Unaudited) Assets Current assets Cash and cash equivalents 11 4.5 6.3 4.7 Deferred income tax assets - 0.1 - Trade receivables 14.6 16.0 16.5 Other current assets 1.5 2.6 2.0 Inventories 22.0 22.0 23.3 Total current assets 42.6 47.0 46.5 Non-current assets Interests in associates 0.1 0.1 0.1
Property, plant and equipment 14.0 12.9
9.6 Goodwill 31.4 31.3 30.8 Intangible assets 10 7.1 6.4 5.5 ESOP loans to employees 1.2 1.6 1.9 Deferred income tax assets 0.3 0.3 0.7 Total non-current assets 54.1 52.6 48.6 Total assets 96.7 99.6 95.1 Liabilities Current liabilities Trade and other payables 13.3 11.4 14.3
Current income tax liabilities 0.9 1.3
1.9
Derivative financial instruments - 0.2
0.8 Borrowings 12 10.0 13.4 15.9
Provision for deferred contingent
consideration - 1.9 3.6 Total current liabilities 24.2 28.2 36.5 Non-current liabilities Borrowings 12 9.5 11.5 8.4
Deferred income tax liabilities 2.1 2.0
1.7
Provision for deferred contingent
consideration 2.2 2.1 - Total non-current liabilities 13.8 15.6 10.1 Total liabilities 38.0 43.8 46.6 NET ASSETS 58.7 55.8 48.5
Capital and reserves attributable to
equity holders of the Company Share capital 27.2 27.2 27.2 Merger reserve 0.2 0.2 0.2 Treasury shares (0.8) (1.0) (1.0) Hedging reserve 0.1 - (0.8) Translation reserve (7.2) (7.1) (7.2) Retained earnings 39.1 36.3 29.9 58.6 55.6 48.3 Non-controlling interest 0.1 0.2 0.2 Total equity 58.7 55.8 48.5 XP Power LimitedConsolidated Statement of Changes in EquityFor the six months ended 30 June 2012 (Unaudited) £ Millions Attributable to equity holders of the company Share Company Merger Hedging Translation Retained Total
Non-controlling Total
capital treasury reserve reserve reserve earnings interest Equity shares Balance at 1
January 2011 27.2 (1.0) 0.2 (0.4) (7.6) 24.2 42.6
0.2 42.8 Sale of treasury shares - 1.2 - - - (0.6) 0.6 - 0.6 Purchase of treasury shares - (1.2) - - - - (1.2) - (1.2) Dividends paid - - - - - (3.8) (3.8) (0.2) (4.0) Total comprehensive income for the period - - - (0.4) 0.4 10.1 10.1 0.2 10.3 Balance at 30
June 2011 27.2 (1.0) 0.2 (0.8) (7.2) 29.9 48.3
0.2 48.5 Balance at 1
January 2012 27.2 (1.0) 0.2 - (7.1) 36.3 55.6
0.2 55.8 Saleof treasury shares - 0.2 - - - - 0.2 - 0.2 Dividends paid - - - - - (4.9) (4.9) (0.2) (5.1) Total comprehensive income for the period - - - 0.1 (0.1) 7.7 7.7 0.1 7.8 Balance at 30
June 2012 27.2 (0.8) 0.2 0.1 (7.2) 39.1 58.6
0.1 58.7 XP Power LimitedConsolidated Statement of Cash FlowsFor the six months ended 30 June 2012 £ Millions Note Six months Six months ended ended 30 June 2012 30 June 2011 (Unaudited) ( Unaudited)
Cash flows from operating activities
Total profit 7.8 10.3 Adjustments for Income tax expense 1.8 1.6 Amortisation and depreciation 1.2 1.0 Finance cost 0.3 0.5
Gain on fair valuation of derivative financial
instruments (0.1) -
Change in the working capital
Inventories - (2.3) Trade and other receivables 2.5 (1.3) Trade and other payables 1.0 (1.1) Income tax paid (2.0) (2.9)
Net cash provided by operating activities 11 12.5 5.8
Cash flows from investing activities
Acquisition of a subsidiary, net of cash (1.0) -
acquired
Purchases and construction of property, plant
and equipment (1.8) (2.1)
Research and development expenditure capitalised 6 (1.2) (0.6)
ESOP loan repaid 0.4 0.5
Net cash used in investing activities (3.6) (2.2)
Cash flows from financing activities
Repayment of borrowings (2.0) (2.8)
Sale/(purchase) of treasury shares by ESOP 0.2 (0.6)
Interest paid (0.3) (0.4)
Dividends paid to equity holders of the Company (4.9) (3.8) Dividends paid to non-controlling interest (0.2) (0.2) Net cash used in financing activities (7.2) (7.8)
Effects of currency translation (0.1) 0.3
Net increase/(decrease) in cash and cash 1.6 (3.9)
equivalents
Cash and cash equivalents at start of period (3.3) 1.0 Effects of currency translation on cash and cash
equivalents - 0.1
Cash and cash equivalents at the end of the 11 (1.7) (2.8)
period Reconciliation of changes in cash and cash equivalents to movements in net debt Net increase/(decrease) in cash and cash equivalents 1.6 (3.9) Repayment of borrowings 2.0 2.8 Effects on currency translation - (0.1) Movement in net debt 3.6 (1.2) Net debt at start of period (18.6) (18.4) Net debt at end of period (15.0) (19.6) XP Power Limited
Notes to the Interim Results for the six months ended 30 June 2012
1. General 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 nature of the Group's operations and its principal activities is to provide power
supply solutions to the electronics industry.
These condensed consolidated interim financial statements are presented in Pounds Sterling (GBP).
2. Basis of preparation
The condensed consolidated interim financial statements for the period ended 30 June 2012 have
been prepared in accordance with the Listing Rules of the Financial Services Authority and with
IAS 34, Interim Financial Reporting as adopted by the European Union.
The condensed consolidated interim financial statements should be read in conjunction with the
annual financial statements for the year ended 31 December 2011 which have been prepared in
accordance with International Financial Reporting Standards as adopted by the European Union.
3. Going Concern
The directors, after making enquiries, are of the view, as at the time of
approving the financial statements, that there is a reasonable expectation that
the Group will have adequate resources to continue operating for the
foreseeable future and therefore the going concern basis has been adopted in
preparing these financial statements.
4. Accounting policies
The condensed consolidated interim financial statements have been prepared under the historical
cost convention except for the fair value of derivatives in accordance with IFRS 9, "Financial
Instruments".
The same accounting policies, presentation and methods of computation are followed in these
condensed consolidated interim financial statements as were applied in the presentation of the
Group's financial statements for the year ended 31 December 2011.
5. Segmented analysis
The Group operates substantially in one class of business, the provision of power control
solutions to the electronics industry. Analysis of total Group operating profit, total assets,
revenue and total group profit before taxation by geographical region is set out below.
£ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Revenue Asia 4.3 4.0 Europe 20.3 23.2 North America 21.9 24.7 Total revenue 46.5 51.9
5. Segmented analysis (continued)
£ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Total assets Asia 30.9 27.0 Europe 26.3 28.1 North America 39.2 39.3 Segment assets 96.4 94.4 Unallocated deferred 0.3 0.7 tax Total assets 96.7 95.1 Reconciliation of segment results to profit before tax: £ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Asia 0.5 1.0 Europe 3.6 5.1 North America 5.2 6.0 Segment result 9.3 12.1
Corporate recovery from 2.6 2.2
operating segment Research and development cost (2.0) (1.9)
Finance income and cost (0.3) (0.5) Profit before taxation 9.6 11.9
Tax (1.8) (1.6) Total profit 7.8 10.3 The Group's three business segments operate in the following countries: £ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) United States 21.9 24.7 United Kingdom 11.0 11.8 Singapore 4.3 4.0 Germany 4.5 4.5 Switzerland 1.4 1.8 Other countries 3.4 5.1 Total revenue 46.5 51.9 6. Expenses by nature £ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited)
Profit for the period is after charging/
(crediting):
Depreciation of property, plant and equipment 0.7
0.6 Foreign exchange loss 0.2 0.3
Foreign exchange (gains) on forward contracts (0.1) - Cost of inventories recognised as an expense 24.4
26.2 Fees paid to auditors: - Audit 0.2 0.2 - Other services - tax 0.1 - All other charges 11.4 12.7 Total 36.9 40.0 Included in the above is net research and development expenditure as follows: £ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited)
Gross research and development expenditure 2.7 2.1 Development expenditure capitalised (1.2)
(0.6)
Amortisation of development expenditure 0.5
0.4 capitalised
Net research and development expenditure 2.0
1.9 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. In arriving at the tax expense estimate, consideration for certain tax uncertainties were accounted for. The estimated effective annual tax rate used for 2012 is 19% (2011: 14%). £ Millions Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Singapore 0.6 0.7 Other overseas taxation 1.2 0.9 Total taxation 1.8 1.6 8. Dividends Amounts recognised as distributions to equity holders of the Company in the period: Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Pence per £ Pence per £ share Millions share Millions Prior year 3rd quarter 11.0 2.1 8.0 1.5dividend paid Prior year final dividend 15.0 2.8 12.0 2.3paid Total 26.0 4.9 20.0 3.8
The dividends paid recognised in the interim financial statements relate to the third quarter and final dividends for 2011.
Six months ended Six months ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Pence per £ Millions Pence per £ Millions share share Proposed 21.0 4.0 19.0 3.6dividends
In April 2010 we announced that the Company's dividend payment schedule would change from a halfyearly to a quarterly basis, to increase the attractiveness
of the Group's shares to certain investors and to smooth cash flows. The firstquarter payment of 10 pence per share (2011: 9 pence) was made on 10 July 2012to shareholders on the register at 15 June 2012.
A second quarterly dividend of 11 pence per share (2011: 10 pence) will be paid on 11 October 2012 to shareholders on the register at 7 September 2012.
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 2012 2011 (Unaudited) (Unaudited) Earnings
Earnings for the purposes of basic and diluted earnings per share (profit for the period attributable to equity
shareholders of the company) 7.7 10.1
Earnings for adjusted earnings per share 7.7
10.1 Number of shares '000 '000
Weighted average number of shares for the purposes of basic earnings per share (thousands)
18,977 18,921 Effect of potentially dilutive share options (thousands) 87 162
Weighted average number of shares for the purposes of dilutive earnings per share (thousands)
19,063 19,083
Earnings per share from operations
Basic 40.6p 53.4p Diluted 40.4p 52.9p Diluted adjusted 40.4p 52.9p 10. Other intangible assets
Other intangible assets comprises development expenditure capitalised when it meets the criteria laid out in IAS 38, "Intangible Assets", trademarks and non-contractual customer relationships.
11. Cash and cash equivalents
For the purpose of presenting the consolidated cash flow statement, the consolidated cash and cash equivalents comprise the following:
£ Millions Six months Six months ended ended 30 June 2012 30 June 2011 (Unaudited) (Unaudited) Cash and bank balances 4.5 4.7 Less: Bank overdrafts (6.2) (7.5)
Cash and cash equivalents per consolidated
cash flow statement (1.7) (2.8)
Reconciliation to free cash flow: Net cash inflow from operating activities 12.5 5.8 Development expenses capitalised (1.2) (0.6)
Net interest expense (0.3) (0.4) Free cash flow 11.0 4.8
12. Borrowings, bank loans and overdraft
£ Millions 30 June 2012 31 December 2011 30 June 2011 (Unaudited) (Unaudited) Non-Current 9.5 11.5 8.4 Current 10.0 13.4 15.9 Total 19.5 24.9 24.3 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 2012 2011 Change 2012 2011 2011 Average Average Period end Period end Period end USD/ 1.57 1.60 -1.9% 1.57 1.57 1.61 GBP EUR/ 1.21 1.16 4.3% 1.24 1.20 1.12 GBP
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 2011 to the first half of 2012 are summarised
asfollows: £ Millions USD EUR Impact on revenues 0.7 (0.1)
Impact on profit before tax 0.1 -
Impact on net debt (0.5) (0.1)
14. Risks and uncertainties
Like many other international businesses the Group is exposed to a number of risks and uncertainties which might have a material effect on its financial performance. These include:
Fluctuations in foreign currency
The Group has an exposure to foreign currency fluctuations. This could lead to material adverse movements in reported earnings.
Dependence on key personnel
The future success of the Group is substantially dependent on the continued services and continuing contributions of its Directors, senior management and other 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 2012, no one customer accounted for more than5% 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 vary significantly from period to period as a result of a variety of factors, some of 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. 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 future events and relies on estimates and assumptions.
15. Directors' responsibility statement
The interim financial statements were approved by the board of directors on 23 July 2012.
The directors confirm that to the best of their knowledge that:
- This unaudited condensed financial information has been prepared in accordance with IAS 34
"Interim Reporting" as adopted by the European Union; and
- The interim management report includes a fair view of the information required by DTR 4.2.7
(indication of important events during the first six months and description of principal
risks and uncertainties for the remaining six months of the 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 2011 Annual Report.
XLON