XP Power (XPP) H2 2024 earnings summary

Executive summary

• Focused on operational improvements, supply chain efficiency, and cost savings in 2024 amid challenging market conditions and sector-wide destocking across industrial, technology, and healthcare.

• Semiconductor sector showed signs of recovery in H2, with expectations for a stronger second half of 2025, while industrial and healthcare remained impacted by destocking.

• Strategic shift in China due to U.S. export controls and macro/geopolitical headwinds, prioritizing more attractive markets in Asia.

• GBP 40 million share placing and revised banking covenants strengthened the balance sheet and supported refinancing.

• Continued investment in innovation, talent, and sustainability, including a new customer innovation center in Silicon Valley.

Financial highlights

• 2024 revenue was GBP 247.3 million, down 20% year-over-year, mainly due to destocking and the semiconductor sector downcycle.

• Adjusted operating profit fell 32% to GBP 25.1 million, with adjusted operating margin down 190bps to 10.1%.

• Adjusted EPS was 42.9 pence, down 48%; net finance expense remained flat, and tax rate improved to just under 25%.

• Gross margin reduced by 50bps to 41%, reflecting strong cost efficiencies despite lower factory utilization.

• Record adjusted operating cash conversion of 261%, reducing borrowings/net debt to GBP 93.5 million.

Outlook and guidance

• H1 2025 expected to remain weak due to ongoing destocking and China headwinds; improvement anticipated in H2, but timing is uncertain.

• Overhead growth forecast at 5% for 2025, mainly from inflation, with no major headcount additions; CapEx expected between GBP 20–25 million, including Malaysia.

• Committed to returning excess share placing proceeds to shareholders when possible, potentially via buybacks.

• Scenario planning for 2025 includes a wide range of outcomes, from continued destocking to a strong recovery in H2.