Xp Power Ltd. · LSE:XPP
Xp Power — FY2023 Earnings Presentation
32 slides from Xp Power's earnings presentation, Mar 5, 2024
Slide 1: Full Year Results 2023
Full Year Results 2023 5 March 2024
Slide 2: Highlights
Highlights Gavin Griggs Chief Executive Officer
Slide 3: 2023 Highlights
2023 Highlights • 2023 was a challenging year for the Group • Slower order intake as lead times and customer inventory levels normalised • Revenue of £316m up 9% y-o-y at constant FX. Record level benefiting from shipping backlog • Adjusted operating profit £38.1m, including higher product developme
Slide 4: Financial Review
Financial Review Matt Webb Chief Financial Officer
Slide 5: Key Performance Indicators 2023
Key Performance Indicators 2023 Orders & Revenue Margin Profit & Earnings Cash & Debt GROSS MARGIN ADJUSTED OPERATING ADJUSTED OPERATING ORDER INTAKE PROFIT2 CASH CONVERSION2 £208.8 million 41.5% Down -43%1 No Change £38.1 million 173% Down -3%1 Up from 42% ADJUSTED ADJUSTED DILUTED NET DEBT REVENUE
Slide 6: Income statement
Income statement % change At actual In exchange constant £ million 2023 2022 rates currency Revenue 316.4 290.4 9% 9% ● Healthy revenue growth, with all sectors benefiting from delivery of backlog Gross margin 131.3 120.6 9% ● Gross Margin maintained at 41.5%, Gross margin % 41.5% 41.5% - protected
Slide 7: Order intake trends
Order intake trends Order intake by year 2018-2023 370.6 365.4 ● Order intake normalising after (£ million in constant currency) unprecedented activity in 2021 and 262.0 2022 209.3 225.1 208.8 ● Largest reduction in Semiconductor manufacturing, due to industry-wide cyclical slowdown ● Healthcare and
Slide 8: Revenue trends – H1 vs H2
Revenue trends – H1 vs H2 H1 growth bridge by Sector H2 growth bridge by Sector Change in Change in 5% 26% 59% 24% (22)% 4% 22% (2)% Constant currency Constant currency 13.7 160.2 166.8 14.1 £ million 2.8 7.2 156.2 6.0 (7.1) 123.6 2.6 (13.3) H1 FX Semi Industrial Health H1 H2 FX Semi Industrial Heal
Slide 9: Order book trends
Order book trends Order Book Book (£ million) to Bill 350 2.0 ● Order book reduced by £116m to £192m in 2023 300 ● Four main factors: 1.5 Increased shipments due to 250 o clearance of backlog 200 o Reduced order intake due to 1.0 shorter delivery lead times and 150 overstocking 100 o Some order canc
Slide 10: Adjusted Operating Profit bridge
Adjusted Operating Profit bridge ● Strong operating leverage from volume Adjusted Operating Profit bridge growth ● Residual input cost inflation passed through in pricing, maintaining gross margin 11.2 - at 41.5% ● Operating expenses includes cost inflation and increased variable pay. Overheads redu
Slide 11: Free cash flow
Free cash flow Reported £ million 2023 2022 ● Record operating cash flow of £62.4m, weighted Adjusted Operating profit 38.1 42.9 toward H2 and driven by working capital reduction Depreciation, amortisation & impairment 17.2 13.4 ● Working capital reduced by £1m in H1 and £13m in Adjusted EBITDA 55.3
Slide 12: Net debt and leverage
Net debt and leverage Net debt bridge ● Group started 2023 with elevated leverage due to various one-off factors Net debt leverage: 2.7x ● Market slowdown and extra spend on major (15.1) capex projects in H2 limited scope for (151.0) 6.1 leverage reduction 3.3 ● Funding Plan launched in Q4 2023: 2.0
Slide 13: Funding Plan – update on actions
Funding Plan – update on actions Impact by 31 Dec 2024 (£m) Net Annual Latest Action Type Debt EBITDA Status Latest update • All actions taken EBITDA • Run-rate reduction achieved is in the middle of range Operating cost improvement £8-10 million £8-10 million Done • Further actions being taken in Q
Slide 14: 2024 Modelling Guidance
2024 Modelling Guidance Profit: ● c.35:65 split of Adjusted operating profit between H1 and H2 ● High single digit reduction in overheads ● c.25-30% effective tax rate (remaining elevated in 2024 whilst US tax structure is optimised) Cash: ● Adjusted operating cash conversion > 100% ● Total capital
Slide 15: Business Review
Business Review Gavin Griggs Chief Executive Officer
Slide 16: We have a clear strategy
We have a Market leading product portfolio clear Target & drive penetration in accounts where we can add strategy value Continually enhance our global supply chain Focus on people and talent development Lead our industry on environmental responsibility 16
Slide 17: XP Power long term fundamentals remain intact
XP Power long term fundamentals remain intact High levels of “recurring” revenue due to Long term relationships with key customers….with designed in nature - Flexpower Configurable upside potential from driving wallet share 25 revenue since launch 25 70% XP SHARE OF POWER SPEND 60% YEARS OF CUSTOMER
Slide 18: Overview: Industrial Technology
Overview: Industrial Technology Overview Long term outlook Revenue Split & Products ● XP focuses on subsectors within ● Diverse sector with attractive overall growth Industrial Technology with good, long outlook at 5.8%* per annum over the term growth potential and attractive medium term niches 25%
Slide 19: Overview: Semiconductor Manufacturing Equipment
Overview: Semiconductor Manufacturing Equipment Overview Long term outlook Revenue Split & Products ● An attractive growth opportunity for full portfolio of power products ● Attractive long term growth outlook as semiconductors are the foundation of ● As post-pandemic demand for PCs, smartphones, di
Slide 20: Overview: Healthcare
Overview: Healthcare Overview Long term outlook Revenue Split & Products ● Regulatory and safety critical nature of the ● Medical device market forecast to Healthcare sector means power is critical grow at 7%* CAGR to $800 bn by 2030 Healthcare ● Advances in medical technology means accelerating fro
Slide 21: Strategy in action: Product design and innovation
Strategy in action: Product design and innovation ● Focus on anticipating future product trends/needs through close contact with our customers. We aim to create standard platform products that can be easily customized to solve specific customer power problems ● Our products add value to our customer
Slide 22: Strategy in action: Enabling growth & pace of innovation globally
Strategy in action: Enabling growth & pace of innovation globally ● Keys to Success : Agility & Innovation - Class leading local and Asian high volume manufacturing from prototype to full solution o Fast to Solve – Have the right people and tools to solve challenges o Fast to Prototype – Have the ri
Slide 23: Strategy in action: Leading the industry on sustainability
Strategy in action: ● We have updated XP Power’s Leading the industry on sustainability full carbon footprint including scope 3 o Majority of emissions are outside of our operations – mostly from components we purchase and our products in use o Significant decrease v 2022 mainly from changes in prod
Slide 24: Impact of Strategy Execution: Financial Framework
Impact of Strategy Execution: Financial Framework Through-cycle ● Drivers of sales growth: o GDP & market growth performance o Record new business wins in 2022 and 2023 c.10% Organic Sales Growth o Strong sampling performance post COVID-19 o Market leading NPD ● Drivers of Margin expansion: c.20% Ad
Slide 25: 2024 and medium-term outlook
2024 and medium-term outlook ● Expect recovery in second half order intake with momentum into 2025 ● Focusing on the controllables: o Execution of our strategic priorities o Preparing for customer “ramp”, as little preparation time expected o Working capital improvement as inventory unwinds ● Expect
Slide 26: Q&A
Q&A
Slide 27: Appendices
Appendices
Slide 28: Market data a growing addressable market
Market data a growing addressable market Market Size Share1 XP 2023 Revenue North Share of XP ($ Million) Asia Europe Total (£ Million) America (%) Asia 1,610 1.8% Healthcare 6.6 26.8 44.5 77.9 25% Europe 813 14.6% Industrial Technology 14.7 67.6 54.0 136.3 43% North America 1,258 14.1% Semi Fab 12.
Slide 29: Competitive global manufacturing footprint
Competitive global manufacturing footprint Adding Capacity in all production sites ● In all LV, RF and HV sites ● Added RF and HV manufacturing capability to China, diversifying from US ● ‘Customer value add’ in Vietnam Pangbourne FuG and Guth in Germany expand Kunshan existing HV portfolio San Jose
Slide 30: Strategy in action NPD: HP Series & HPF3K0 Launch
Strategy in action NPD: HP Series & HPF3K0 Launch Customer Problem ● Customer requires dynamic control of the key elements of their application ● Meeting higher efficiency and reliability requirement to achieve sustainability and net-zero goals with relevant industry approvals Market Demand: An attr
Slide 31: Disclaimer
The information contained in this document is for forward-looking statements, and XP Power Limited does background purposes only and does not purport to be not undertake any obligation to update publicly or revise full or complete. No reliance may or should be placed any forward-looking statements.
Slide 32: Powering the world's critical systems
») \) BG Power | . POWERING THE WORLD'S CRITICAL SYSTEMS