XP Power Ltd - Trading Update

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FOR IMMEDIATE RELEASE.

XP Power Limited

(`XP Power' or `the Group' or `the Company')

Trading update - initial view on 2024 outlook

XP Power, one of the world's leading developers and manufacturers of critical power control solutions for the Industrial Technology, Healthcare and Semiconductor Manufacturing Equipment sectors, provides an initial view of the outlook for the year ending 31 December 2024 ("2024" or "the year").

2024 outlook

The Board has concluded that there is likely to be a shortfall in revenue in 2024, leaving the outlook for 2024 significantly below market expectations. This is based on recent order intake, revenue performance and discussions with customers, particularly within the Healthcare and Industrial Technology sectors, which confirm unusual, temporarily soft demand conditions and destocking. These softer trends have also emerged within our direct industry peers.

In early 2024, we have seen, as expected, the continuation of the ongoing cyclical slowdown in the Semiconductor Manufacturing Equipment sector and we continue to expect conditions in this sector to improve as the year progresses.

We now expect to also see a slowdown in the Industrial Technology and Healthcare sales, driven particularly by customer inventory movements. These markets are not typically cyclical for us. The slowdown in 2024 is driven by customer stock movements as they reduce their inventory in response to shorter delivery lead times.

In general, we expect the weakness we are currently seeing to be relatively short lived and indeed there have been some more encouraging signals from certain customers, especially for 2025, in recent weeks. The timing and speed of the recovery is hard to predict however. We expect 2024 to be significantly second half weighted with an improvement in trading as the year progresses.

Cost savings

As outlined in January, the cost savings actions previously announced remain on track and the Group has identified additional savings that will be delivered in the first quarter. These combined actions will significantly lower overheads year-on-year while preserving capability to respond to the recovery when it comes.

Balance sheet

The Group's cash generation toward the end of 2023 was ahead of expectations, as reflected in the year-end net debt position of £112.7m, and we expect this to continue in 2024 with net debt below our prior assumption. A trading performance in line with the Board's expectations would leave net debt/EBITDA at 31 December 2024 at or below 2.5x versus a covenant limit of 3.5x. The Group maintains significant levels of liquidity.

2023 full year results

Our year-end financial close processes have identified some capitalised product development costs that needed to be amortised or impaired, adding £4 million to costs. This is a non-cash item. Approximately half of this is one-off in nature. Underlying operating profit for full year 2023 absent these costs was in line with our expectations.

The Group will announce its results for the year ended 31 December 2023 on 5 March 2024.

Medium term outlook

The Board remains confident that the Group has strong medium-term prospects, and significant value, underpinned by our leading market position and broad product portfolio.

Enquiries:

XP Power               

Gavin Griggs, Chief Executive Officer +44 (0)118 976 5155

Matt Webb, Chief Financial Officer      +44 (0)118 976 5155

Citigate Dewe Rogerson 

Kevin Smith/Lucy Gibbs +44 (0)20 7638 9571

XP Power designs and manufactures power controllers, the essential hardware component in every piece of electrical equipment that converts power from the electricity grid into the right form for equipment to function. Power controllers are critical for optimal delivery in challenging environments but are a small part of the overall customer product cost.

XP Power typically designs power control solutions into the end products of major blue-chip OEMs, with a focus on the Semiconductor Manufacturing Equipment (circa 32% of sales),  Industrial Technology (circa 43% of sales) and Healthcare (circa 25% sales) and sectors. Once designed into a programme, XP Power has a revenue annuity over the life cycle of the customer's product which is typically five to seven years depending on the industry sector. 

XP Power has invested in research and development and its own manufacturing facilities in China, North America, and Vietnam, to develop a range of tailored products based on its own intellectual property that provide its customers with significantly improved functionality and efficiency.

Headquartered in Singapore and listed on the Main Market of the London Stock Exchange since 2000, XP Power is a constituent of the FTSE SmallCap Index. XP Power serves a global blue-chip customer base from over 30 locations in Europe, North America, and Asia. 

For further information, please visit xppowerplc.com