Join our community of smart investors

XP Power boosted by in-house design

The maker of power control components continues to impress in the face of challenging end markets
March 9, 2017

Trading at XP Power (XPP), which makes power control components, gathered momentum over the second half of 2016 - and strengthened order intake and revenues have continued into 2017. The reported top line looked rosier due to sterling's decline, but sales still grew by 7 per cent at constant currencies.

IC TIP: Hold at 1965p

Conversely, the gross margin came under pressure as most of the input costs for the group's electronics control components are denominated in US dollars, hence the 200 basis point reduction in the - still admittedly healthy - gross margin of 47.8 per cent. The end result: adjusted full-year earnings up 10 per cent to £22.3m and another hike in the dividend, underpinned by a one-third rise in operating cash flows.

High-efficiency XP Green Power products provide a pointer to future growth channels, with sales up 28 per cent through the period. Management identified the products' reliability, rather than their environmental benefits, as the primary sales catalyst. The strategy is still focused on moving into higher-margin markets. This is borne out the growing turnover from in-house designed products, up 15 per cent at constant currencies to £95.3m, representing a record 73 per cent of total revenues.

Investec gives full-year adjusted pre-tax profits and EPS of £30.4m and 119p, respectively, for 2017, from £28.6m and 115p in 2016.

XP POWER (XPP)
ORD PRICE:1,965pMARKET VALUE:£377m
TOUCH:1,940p-1,965p12-MONTH HIGH:1,985pLOW: 1,475p
DIVIDEND YIELD:3.6%PE RATIO:18
NET ASSET VALUE:553p*NET CASH:£3.7m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201293.920.281.750
201310122.995.855
201410124.310261
201511025.410466
201613027.811271
% change+18+9+8+8

Ex-div:16 Mar

Payment:21 Apr

*Includes intangible assets of £53m, or 276p a share