Half-yearly Report
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 944 614
Citigate Dewe Rogerson +44 (0)20 7638 9571
Kevin 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 intake
reported during the second half of the previous financial year. The combination
of subdued industrial electronics demand, the start-up costs associated with
our Vietnamese manufacturing facility and lower factory loading, have combined
to produce a reduction in earnings in the first half of 2012 versus the same
period a year ago. Against this background, we achieved another strong design
win performance during the period and further improved the proportion of our
revenue which came from our own-design products, which reached 61% in the first
half 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 high
value products. The increasing importance of energy efficiency for
environmental, reliability and economic reasons; the necessity for ever smaller
products; the accelerating rate of technological change; and the increasing
proliferation of electronic equipment, have all set a strong foundation for
medium 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 sales
engineering support and producing new products that consume less power, take up
less space, reduce installation times and which are highly reliable in service.
Revenues for the period decreased by 10% (11% in constant currency) to £46.5
million, compared with £51.9 million in the same period a year ago. Revenues
in Asia were £4.3 million, up 8%; in Europe revenues were £20.3 million, down
13%; and those in North America were £21.9 million, down 11%, all on the same
period a year ago.
Importantly, our customer base remains highly diversified. While we have seen
certain of our existing larger customers show some decrease in demand in 2012
versus 2011, this has been offset in part by new programs and new customers. We
expect demand from the majority of the older existing programs to recover when
end markets improve. There has been no significant change in the revenue mix of
the different industry sectors we target when comparing the first half of 2012
with 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 the
same period a year ago. A combination of reduced factory loading in our China
facility and £0.3 million of start-up costs associated with our new Vietnamese
manufacturing facility contributed to this reduction. On top of this there
were additional costs associated with the transfer of older own-design products
from contract manufacturers into our own factory. We expect an improvement in
gross margins in the second half of 2012 as factory loading improves and the
Vietnam 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 achieved
excellent operating margins of 21.3% (2011: 23.9%) highlighting the strength of
our business model. We expect improvement in this metric in the second half as
the contribution of our own-design products continues to increase.
Product Development
New products are fundamental to driving our revenue growth. The broader our
product offering, the more opportunity we have to increase our revenues by
expanding our available market. As expected, the number of new product families
introduced over the last three years is yet to have a significant impact on our
revenues, given the time lag from launch to production. This is due to the
lengthy design-in cycles required by customers to qualify the power converter
in their equipment and then gain the necessary safety agency approvals.
We launched 10 new product families in the first half of 2012. In response to
customer requirements for improved efficiency and environmental performance,
our design teams are focusing on developing new products that reduce power
wastage, reduce heat, and consume less raw material. Many of our new products
will be environmentally friendly having very high efficiency and incorporating
low stand-by power operation. Gross product development spending increased by
29% to £2.7 million in the first half from £2.1 million in the first half of
2011.
We have a broad array of standard products which are easy to modify to our
diverse customers' specific requirements, avoiding the need for our customers
to embark on an expensive and lengthy custom design process themselves. Use of
a standard platform also reduces the customer's risk. Approximately 57% of our
revenues come from standard products that we have either modified or adapted
from our configurable product lines.
Larger customers are keen to reduce the number of vendors they deal with and XP
Power's broad product offering, excellent global engineering support, in-house
manufacturing capability and environmental credentials make us an ideal
candidate 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 the
continued rise of Chinese labour costs and the appreciation of the Chinese
Renminbi. In addition, extending vertical integration to the critical magnetic
components used in power converters is seen as an additional value proposition
bymany of our customers, notably in the healthcare and high reliability
industrial sectors.
The new Vietnam facility is the world's most environmentally advanced power
converter manufacturing factory and will be the first building in Vietnam to
meet the Singapore Building Construction Authority's Green Mark Gold Plus
certification, a standard applicable to buildings in tropical climates. This
facility embodies our commitment to lead the industry in environmental
performance. Sustainability and sound environmental stewardship are
increasingly important to our customers, employees, suppliers and the
communities 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 October
2012 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 its
operations both in terms of minimising the impact its activities have on the
environment and, as importantly, in its product development strategy. These
practices and initiatives not only resonate with our customers and employees;
they also make significant commercial sense as countries legislate to reduce
power wastage, improve recyclability of manufactured goods and ban the use of
harmful chemicals.
We have developed a class leading portfolio of green products with efficiencies
up to 95% and many of these products also have low stand-by power (a feature to
reduce the power consumed while the end equipment is not operational but in
stand-by mode). We now apply our own "Green Power" logo to the products we
designate ultra-high efficiency. During the first half of 2012, 6% of our
revenues 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 primarily
driven by their improved reliability and the ability to dispense with
mechanical fans to dissipate waste heat, rather than the fact that they consume
less energy in operation. However, we expect this to change as lower energy
consumption becomes a higher priority to end users of capital equipment and
more 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 the
development of an industry leading in-house manufacturing capability are at the
core of our strategy and are leading to multiple new program wins which will
drive our growth as we continue to take market share. While industrial
electronics markets remain subdued at present, we continue to believe that our
greater penetration of a Blue Chip customer base and significant design win
success bode well for the future of XP.
Customers are continuing to place orders at a significantly higher rate than
that 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, we
currently anticipate that second half revenues and earnings will be
substantially higher than those achieved in the first half of the current year.
Larry Tracey
Chairman
23 July 2012
XP Power Limited
Consolidated Statement of Comprehensive Income
For 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 Limited
Consolidated Balance Sheet
At 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 Limited
Consolidated Statement of Changes in Equity
For 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 Limited
Consolidated Statement of Cash Flows
For 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 1.5
dividend paid
Prior year final dividend 15.0 2.8 12.0 2.3
paid
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 3.6
dividends
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 first
quarter payment of 10 pence per share (2011: 9 pence) was made on 10 July 2012
to 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 as
well as assets and liabilities that are denominated in United States Dollars
(USD). The table below sets out the prevailing exchange rates in the periods
reported.
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 in
the USD to GBP exchange rate has a significant effect on reported revenue in
GBP. However, as the majority of our cost of goods sold and operating expenses
are also denominated in USD the change in profit before tax with the USD to GBP
exchange rate is relatively minor. The impact of changes in the key exchange
rates from the first half of 2011 to the first half of 2012 are summarised as
follows:
£ 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 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 key
electronic components. If there is a shortage, non availability or technical
fault with any of the key electronic components this may impair the Group's
ability to operate its business efficiently and lead to potential disruption to
its 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 information
technology systems used in the daily operations of its operating subsidiaries.
Any failure or impairment of those systems or any inability to transfer data
onto any new systems introduced could cause a loss of business and/or damage to
the 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.
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