Strategy evolution
XP Power Ltd (LON:XPP) has successfully transitioned its business and now designs and manufactures the majority of the products it sells. To reflect this achievement, management has refined its strategy to focus on maintaining its competitive position, increasing penetration of its existing customer base and targeting new high-value customers. With strong cash flow generation, the company has the resources to fund growth, whether through internal product development or via acquisition.
Strong performance in FY16
FY16 results beat our forecasts, with normalised EPS 7.5% ahead of our estimate (EPS +10.6% y-o-y). Revenue growth of 18% was boosted by currency (constant currency growth 7%) and the EMCO acquisition (c 6% of revenues). XP saw good order intake in H216, providing a strong backlog entering 2017. The company plans to expand the Vietnamese manufacturing facility with the addition of a second phase – the target is to break ground in Q417.