XP Power pleased with 'robust' performance in 2019

Critical power control supplier XP Power said it saw “robust” order intake and revenues in its technology, industrial electronics and healthcare sectors in its full-year results on Tuesday, which offset cyclical weakness in the semiconductor equipment manufacturing sector.

The London-listed firm reported order intake of £214.9m for the year ended 31 December, which was an increase of 8%, or 4% in constant currency and 2% on a like-for-like basis.

Full-year revenues rose 2% to £199.9m, but declined 2% in constant currency and fell 4% on a like-for-like basis, which XP Power said reflected the cyclical weakness in the semiconductor equipment manufacturing sector, as well as a short-term delay to shipments during its enterprise resource planning implementation in the final quarter.

Its gross margin reduced to 45.1% from 47.3%, which it put down to a combination of the impact of section 301 trade tariffs imposed by the United States on goods imported from China, as well as an adverse product and geographic mix.

Free cash flow was 136% higher at £26.2m, as a result of improved working capital management, particularly around inventory.

XP Power’s adjusted operating profit was down 16% at £35.9m, and its reported operating profit fell 32% to £26.7m.

Operationally, the company noted that the expansion of its Vietnam manufacturing facility was completed in the first quarter, which more than doubled its capacity in the country.

The group now had the capability to manufacture more than 2,000 different products in Vietnam, up from less than 300 at the beginning of 2018.

It said good progress was made with the restructuring of low-power, high-voltage DC-DC manufacturing, with the transfer of production from Nevada to Vietnam, resulting in annual savings of around £4m from July 2020.

The company cautioned that the Covid-19 coronavirus outbreak was bringing with it caution and uncertainty, but said it entered 2020 on the back of strong fourth quarter orders across all sectors, signs of a recovery in the semiconductor equipment manufacturing sector, and with section 301 tariffs now being recovered from US customers.

“We delivered a resilient performance in 2019 despite facing a number of challenges,” said chairman James Peters.

“While growth in our healthcare, industrial electronics and technology markets remained robust, this was offset by a cyclical slowdown in the semiconductor equipment manufacturing market and pressure on gross margins, resulting from the increase in US trade tariffs on Chinese manufactured goods and changes in product mix.

“Despite these headwinds we grew order intake and revenues over prior years, continued to win new designs and made good strategic progress.”

Peters said trading conditions in the early months of 2020 gave the company grounds for optimism.

“Signs of a recovery in the semiconductor equipment manufacturing sector are reflected in our strong order intake in the fourth quarter of 2019 and are finding good opportunities for the products brought into the group portfolio through the acquisitions of Comdel and Glassman.

“We also expect benefits from the transfer of production from Minden to Vietnam in the second half of 2020.”

However, Peters noted that the company was affected by certain external events, such as the impact the outbreak of the Covid-19 virus had on its supply chain.

“This introduces some caution into our outlook, but we remain encouraged by our healthy order book.”

At 1515 GMT, shares in XP Power were 7.88% higher at 3,236.5p.