XP Power, which makes critical power control components for the electronics industry, appears to have weathered a period of softer demand for its products and is looking forward to a stronger second half of the year, which suggests its shares are back in buying territory.
Shares in XP have shed 40 per cent of their value over the past year as investors have become more wary of its fast-growth story. Those fears came to pass when weak order intake in the final quarter of 2011 led to a weaker performance in the first few months of 2012, resulting in a 10 per cent slide in revenues in the six months to June.
But bookings started to pick up during the first half and are 16 per cent higher on the second half of 2011, which should feed into stronger revenues in the second half. XP designed more of its own products in-house in the first half, accounting for 60 per cent of revenues against 55 per cent last year. This should compensate for reduced gross margins caused by lower factory loading in the first half and costs associated with a new factory in Vietnam.
All this leads XP to confirm that second-half revenues and earnings will be better than the second half of last year and "substantially higher" than those seen in the first half of 2012. Analysts at Edison Investment Research are maintaining their full-year pre-tax profit estimate of £22.3m, giving EPS of 94.6p.
