Update to full year 2019 expectations, 2020 outlook unchanged
XP Power, one of the world's leading developers and manufacturers of critical power control components to the electronics industry, is today issuing a trading update for the period 1 October 2019 to date.
During the period the Group has experienced some short-term disruption to shipments from the implementation of a new Enterprise Resource Planning (“ERP”) system, which will result in revenues and adjusted profit before tax for 2019 being below current market consensus1. The outlook for 2020 is unchanged against a backdrop of robust order intake in the fourth quarter to date.
New ERP System
In our 2018 Annual Report, we announced a project to implement the latest version of SAP's ERP software across our entire global supply chain. Implementation of this new internal system is an essential step in improving our ability to manage an international business and supply chain with a highly diverse customer base.
We planned to transition to the new SAP ERP system with effect from mid-October. However, during the system migration and in the first few weeks of operation, we experienced some disruption to the implementation which led to shipments temporarily falling behind expected run rates.
Whilst the Group has been shipping at or above normal run rates from mid-November, it is now expected that the lost revenues will not be recovered in full by the year end. Depending on our production and shipment rates during December we estimate that Group revenues for 2019 could be approximately £6 million below our previous internal expectations, with our high operational gearing meaning that adjusted profit before tax for the current year will also be below existing expectations.
Despite these difficulties experienced in the migration, we are confident that the new SAP ERP system will deliver significant long-term benefits to the Group's ability to run its global business and supply chain.
Order intake in the first two months of the fourth quarter has been robust and more than 20% higher than achieved in the same two months of the prior year. The improvement has been seen across all of our sectors.
As a result of current shipment run-rates now tracking at least in-line with our expectations, we expect to recover the fourth quarter revenue shortfall resulting from the ERP system implementation during the first quarter of 2020. Notwithstanding this shortterm issue, we are encouraged by a robust order intake during the first two months of the fourth quarter of 2019 and our expectations for 2020 are unchanged. Given the recent investments we have made in our supply chain, in engineering resources to drive new products and the expansion of our addressable market through acquisition, we remain confident regarding our long-term strategy for growth.
XP Power will issue a trading update for the year ended 31 December 2019 on 13 January 2020.
1 Company compiled consensus expectations for revenue and adjusted profit before tax for the year ended 31 December 2019 are £201.4m and £35.9m, respectively.
|Duncan Penny, Chief Executive Officer||+44 (0)118 984 5515|
|Gavin Griggs, Chief Financial Officer||+44 (0)118 984 5515|
|Citigate Dewe Rogerson||+44(0)20 7638 9571|
|Kevin Smith/Jos Bieneman|
Note to editors
XP Power designs and manufactures power controllers, the essential hardware component in every piece of electrical equipment that converts power from the electricity grid into the right form for equipment to function.
XP Power typically designs power control solutions into the end products of major blue-chip OEMs, with a focus on the Industrial (circa 47% of sales), Healthcare (circa 24% of sales), Semiconductor Equipment Manufacturing (circa 18% of sales) and Technology (circa 11% of sales) sectors. Once designed into a programme, XP Power has a revenue annuity over the life cycle of the customer's product which is typically 5 to 7 years depending on the industry sector.
XP Power has invested in research and development and its own manufacturing facilities in China and Vietnam, to develop a range of tailored products based on its own intellectual property that provide its customers with significantly improved functionality and efficiency.
Headquartered in Singapore and listed on the Main Market of the London Stock Exchange since 2000, XP Power serves a global blue-chip customer base from 29 locations in Europe, North America and Asia.
For further information, please visit xppower.com