"Our fortunes are linked to Chinese economic growth," says Duncan Penny, chief executive of XP Power (XPP). That was a problem in 2012, but now the power solutions provider seems to be reaping the rewards of the recovery. Sales in Asia leapt 22 per cent to £3.9m, despite the impact of the strengthening pound, but this probably understates the importance of emerging markets to XP. Management reckons a big slice of the equipment it sells to US and European industrial clients also ends up in the developing world.
The company's first-half results beat analysts' estimates on most metrics. Forex movements held back top-line growth - at constant exchange rates revenues would have been up 9 per cent - but also kept a lid on costs. This currency effect, combined with better factory loading and a ramp up in production at XP's new magnetics manufacturing facility in Vietnam, helped boost the already high gross margin by more than a percentage point to 49.8 per cent.
The company's order intake grew at the same pace as sales, underpinning management's confidence in the second half. With strong cash generation, XP continues to pay down net debt - now at £1.5m, from £8.5m in June 2013. "Our aim is to be net-debt free by the end of this year," says Mr Penny.
Broker Edison expects adjusted pre-tax profit of £24.4m this year, giving EPS of 99.8p (from £22.9m and 95.1p in 2013).
XP POWER (XPP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,520p | MARKET VALUE: | £292m | |
| TOUCH: | 1,511-1,537p | 12-MONTH HIGH: | 1,785p | LOW: 1,300p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 376p* | NET DEBT: | 2% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 49 | 10.4 | 42.1 | 23 |
| 2014 | 50 | 12.2 | 51.1 | 25 |
| % change | +2 | +17 | +21 | +9 |
Ex-div: 3 Sep Payment: 10 Oct *Includes intangible assets of £39.6m, or 206p a share | ||||
