XP Power (XPP) H1 2024 earnings summary

Executive summary

• H1 2024 performance exceeded expectations on profit and cash flow despite challenging trading conditions and simultaneous slowdowns across all sectors, with revenue in line and robust management actions taken to address the downturn.

• Internal actions, including significant cost reductions, inventory management, and operational improvements, right-sized the business and created a leaner, more efficient base for future growth.

• Record cash conversion was achieved through inventory reduction, and net debt position improved to 2.2x Net Debt/Adjusted LTM EBITDA.

• Continued investment in innovation, customer relationships, and sustainability supports long-term growth ambitions.

• Well-positioned for recovery with strong customer relationships, new product pipeline, and scalable infrastructure.

Financial highlights

• H1 2024 revenue: £127.1m, down 18–21% year-over-year; order intake: £87.9m, down 22–24%.

• Adjusted operating profit: £13.5m, down 36–38% year-over-year, but ahead of expectations; adjusted EPS: 24.4p, down 59%.

• Gross margin: 40.6%, down 120bps year-over-year; adjusted operating margin: 10.6%, down 300bps.

• Adjusted operating cash conversion reached a record 259%; free cash flow of £11.8m.

• Net debt reduced to £104.2m (2.2x LTM EBITDA), down by £8.5m in H1.

Outlook and guidance

• Full-year profit expectations remain unchanged, with profit more evenly weighted between halves; revenue for Q3 expected to be similar to Q2, with an increase anticipated in Q4 as destocking slows.

• Overhead reduction guidance increased to circa 17% for the full year; full-year effective tax rate guided at circa 25%.

• CapEx for the year expected between £20m and £25m; adjusted operating cash conversion expected to remain above 100% in H2.

• Leverage expected at or below 2.5x by year-end.

• Channel destocking expected to continue until end of Q3 2024, with recovery anticipated as markets stabilize.