XP Power swings to loss despite H2 improvement, CFO resigns

Power control specialist XP Power reported a significant improvement in second-half performance in its results on Tuesday, as supply chain conditions stabilised, allowing for increased product shipments.

At the same time, it also announced the resignation of its chief financial officer.

The London-listed firm said that despite the impact of exceptional costs associated with the Comet legal case, which totalled £59.7m, it reported strong demand across the year, with record order intake up 6% to £362.9m, resulting in a book-to-bill ratio of 1.25x.

Its revenue was up 21% on a reported basis, 13% at constant currency and 6% on an organic constant currency basis, with both strong growth sequentially and year-on-year in the second half.

Gross margin decreased by 360-basis points to 41.5%, but improved in the second half to 42.6% as operational leverage, higher pricing and lower freight and logistics costs began to feed through.

XP Power said it was continuing to expect gross margins to recover to historic levels over the medium term.

Despite a 12% decrease in adjusted operating profit to £42.9m on a constant currency basis and down 5% as reported, the company said it saw an encouraging increase of 27.7% year-on-year in the second half to a record level.

The full-year statutory operating loss of £24.1m was a swing from a profit of £29.7m in the prior year, with the majority of the difference between adjusted and statutory results being the costs associated with the ongoing Comet legal case.

XP Power’s net debt of £151m was a significant increase compared to 2021, reflecting the acquisitions of FuG and Guth, an increase in inventory to support delivery of the order backlog, higher capital investment, costs associated with the legal case, and a $44m (£36.9m) collateral payment for a bond held against the damages awarded against the group in the legal action in the US.

The firm said it expected to see net debt reduce during 2023.

XP Power proposed a final dividend for 2022 of 36p per share, making for a total dividend for 2022 of 94p per share.

The company said it had entered 2023 with a record confirmed order book of £308.4m , representing more than 90% of analyst consensus revenue expectations, providing good visibility.

“2022, while challenging, was a year of further strategic progress that positions us well for the long term,” said the company’s chair James Peters.

“Trading improved as the year progressed and we are pleased with our second half performance, which better reflects what we are capable of and is testament to the hard work of our teams.”

Peters said that despite slowing order intake in the semiconductor manufacturing equipment sector, the group started 2023 with a “significant” order book, providing good visibility for the year.

“While we remain mindful of the ongoing uncertainties relating to component supply, inflation, recessionary concerns and the slowdown in semiconductor market, and are continuing to monitor the situation closely, we remain cautiously optimistic on the Group’s prospects for the current year.”

Following the year-end, XP Power also announced that chief financial officer Oskar Zahn had resigned to take up the CFO position at WAG Payment Solutions.

Zahn would leave the group on 31 March, and group finance director David Stibbs would assume the responsibilities on an interim basis while the board conducted a search for a permanent successor.

“On behalf of the board I would like to thank Oskar for his contribution to XP Power over the last two years and wish him well in his new role,” said James Peters.

The board said the search for a new CFO would consider both internal and external candidates.

“XP Power has been a great place to work,” Oskar Zahn added.

“I will continue to be a keen follower of the business and am sure the group will continue to grow as it delivers on its strategy.”

At 0917 GMT, shares in XP Power were down 6.12% at 2,300p.

Reporting by Josh White for Sharecast.com.