Don't be too concerned about XP Power's first-half fall in profits – profits in the second half are expected to be significantly higher, and better than last year's, too. In fact, analysts at Investec Securities reckon that pre-tax profits will jump to £22.5m for the whole of the year, giving an estimated EPS of 93.2p – that growth profile leaves the shares looking attractive.
XP Power makes control units that convert mains power into the correct form required by specialist electrical equipment, and turnover and profits fell in the period due to a weaker order intake late last year. Operating margins also fell from 23.9 per cent to 21.3 per cent, dragged lower by start-up costs associated with a new manufacturing facility in Vietnam – now fully operational – and expenses relating to developing more own-manufactured products. But own-design products rose from 55 per cent to 61 per cent of total revenue, while in-house production is expected to rise significantly from the current 25 per cent. Moreover, renewed confidence helped to boost first-half orders by 16 per cent compared with the second half of 2011, and the much higher level of orders are expected to extend into the second half.
| XP POWER (XPP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,013p | MARKET VALUE: | £194m | |
| TOUCH: | 1,006-1,015p | 12-MONTH HIGH: | 1,570p | LOW: 770p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 305p* | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 51.9 | 11.9 | 53.4 | 19.0 |
| 2012 | 46.5 | 9.6 | 40.6 | 21.0 |
| % change | -10 | -19 | -24 | +11 |
Ex-div: 5 Sep** Payment11 Oct** *Includes intangible assets of £38.5m, or 201p a share **First-quarter dividend of 10p paid on 10 July | ||||
