XP Power Q4 Earnings Call Highlights

Core Insights - The company reported a full-year operating profit of GBP 17.3 million, with a significant increase in the second half, attributed to cost actions and easing foreign exchange headwinds [2] - Revenue for the year was GBP 230.1 million, reflecting a 4% decline in constant currency, but order intake grew 28% in constant currency, indicating strong demand across market sectors [5][4] - Management expects profit growth in 2026, driven by improving market conditions, particularly in the semiconductor sector, despite initial headwinds from export license expiries [15] Financial Performance - Operating expenses increased by 6% to GBP 80.9 million, primarily due to foreign exchange movements and inflation, while discretionary spending was tightly controlled [1] - Adjusted gross margin improved to 42.7%, up 170 basis points year-on-year, indicating effective cost management during a revenue decline [3] - Cash conversion remained strong at 225%, with operating cash generation of nearly GBP 39 million from GBP 17.3 million of operating profit [7] Market and Order Insights - The company experienced a narrowing revenue decline from 11% at the half-year to 4% by year-end, with a return to modest growth in constant currency in the second half [4] - Order growth was strongest in industrial technology and healthcare, with semiconductor equipment orders increasing by approximately 2%-10% [11] - The company plans to exit the RF market due to reduced financial contributions and will focus on low- and high-voltage markets [12] Capital Expenditure and Future Outlook - Capital spending totaled GBP 7.3 million, including GBP 6.3 million for the new Malaysia manufacturing facility, which is expected to start production in the second half of 2026 [9][14] - For 2026, total CapEx is expected to be around GBP 20 million, with operating expenses projected to grow around 5% [17] - Management anticipates a reduction in the effective tax rate to around 25% as profits recover [17]