XP Power revenue rises despite slower order intake

The London-listed firm said its book-to-bill ratio dipped to 0.6x in 2023, from 0.59x in 2022, while its order book declined 38% to £192m.

Its adjusted results revealed an 11% decrease in operating profit to £38.1m, while profit before tax declined 30% to £26.6m.

Diluted earnings per share also took a hit on an adjusted basis, dropping 49% to 81.8p.

Reported results, however, showed resilience, with the gross margin maintained at 41.5%.

XP’s reported operating profit surged to £24.5m compared to the prior year's loss of £24.1m, while profit before tax recovered to £11.2m as opposed to the loss of £30.2m recorded a year earlier.

Diluted losses per share stood at 45.3p, a marked improvement from the prior year's loss of 101.6p.

The company generated £62.4m in cash from operations, marking a staggering increase of 2,871%, while net debt narrowed to £112.7m from £151m in 2022.

XP Power attributed its slower order intake to a number of factors, including the normalisation of order patterns after the unprecedented activity during the Covid-19 pandemic and associated supply chain disruptions, along with a cyclical slowdown in the semiconductor industry.

Revenue growth, however, was buoyed by strong performances in the industrial technology and healthcare sectors, offsetting the industry-wide slowdown in semiconductor manufacturing equipment.

XP Power's operational highlights included the launch of 11 new products and notable advancements in strategic areas such as high voltage and power categories.

The company reported improved project sampling activity and record new business wins.

Supply chain performance saw enhancements with increased manufacturing output, reduced delivery lead times, and lower inventory.

Looking ahead, XP Power said it expected a slowdown in revenue for 2024 as the order book normalised and the backlog was cleared.

However, it remained optimistic about medium-term prospects, underpinned by its strong market position and diversified product portfolio.

Cost reduction initiatives were underway, with the company expecting a second-half weighted performance and improved trading as the year progressed.

“2023 was a challenging year for the group,” said chief executive officer Gavin Griggs.

“An industry-wide slowdown in the semiconductor manufacturing equipment market, combined with greater-than-expected spending on major capex projects, led to elevated borrowing levels in the second half of the year.

“We responded by implementing a plan of operational and funding actions to reduce debt levels in the fourth quarter.”

Griggs said it was a difficult period for the group, but added that the actions taken were appropriate to the circumstances and the long-term interests of shareholders, and had lowered borrowings by year-end.

“Whilst the end to the year was disappointing, our leading positions in attractive markets and an improved supply chain performance enabled our order backlog to be delivered, achieving revenue growth for the year as a whole.

“We also made good progress strategically in areas that will sustain our longer-term progress.

“We expect activity levels to reduce in 2024 after our record revenue performance in 2023 and have recently taken further actions to lower our cost base accordingly.”

The reduction in revenue was largely attributable to a normalising order book, Gavin Griggs explained, with backlogs now largely cleared, the tail end of the semiconductor downcycle and destocking by healthcare and industrial technology customers as they responded to greater resilience in the global supply chain.

“We expect trading to improve as 2024 progresses, creating a second-half weighting to performance as channel stock levels reach equilibrium and demand returns to the semiconductor manufacturing equipment market, though it is difficult to be precise about the timing of the improvement.

“We will continue to take decisive action to manage our costs and maximise cash generation during this slower trading period, prioritising debt reduction, whilst preserving our sources of long-term competitive advantage.

“We are confident that our market positions remain strong and that the group remains well positioned to prosper as our key markets resume their trajectory of healthy long-term growth.”

At 1101 GMT, shares in XP Power were up 0.77% at 1,050p.

Reporting by Josh White for Sharecast.com.