XP Power Ltd (LON:XPP) reported revenue and order growth in H116, benefiting from the recent EMCO acquisition and the weakness in sterling. Despite Brexit uncertainty, the higher backlog supports management confidence in H216 growth. We have revised our forecasts to reflect the significantly weaker pound versus the dollar, resulting in EPS upgrades of 1.8% in FY16e and 2.6% in FY17e.
H116: Revenue, order and profit growth
After a period of weaker demand from US customers in H215, XP saw good order growth in H116: +9% y-o-y/+14% h-o-h. Revenues grew 11.9% y-o-y (constant currency +7%), helped by the EMCO acquisition last November (£3.1m contribution in H116) and the weaker pound. Normalised operating profit of £13.2m grew 3.9% y-o-y, although the margin declined from 23.6% to 21.9% reflecting the recent investment in sales and engineering headcount and the lower profitability of EMCO. Net debt at the end of H116 increased to £6.0m from £3.7m at the end of FY15.
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