Trading Update

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 covering the third quarter, and October to date, as well as detailing the significant actions being undertaken to reduce costs and preserve cash.

Revenue in the third quarter was £75.1m (2022: £79.4m) with operating profit slightly ahead of our prior expectation due to a better outturn in September. Trading in October has been at least in line with our expectation. Our full year expectations are unchanged.

Since the update of 2 October 2023, the Group has undertaken a number of important cost reduction and cash preservation actions that will benefit the remainder of 2023 and 2024. The key actions include:

A significant and wide-ranging operating cost reduction programme has commenced, including initial headcount reductions and restrictions on non-discretionary spend. The full year benefit of these actions in FY2024 is expected to be in a range of £8-10m.

An inventory reduction plan over the period 2023 to 2025 in the range of £10-20m, as surplus stock is progressively unwound in response to supply chain normalisation.

Supplier payment terms standardisation in progress.

Reducing discretionary capital expenditure to maintenance levels.

Suspending the dividend for the time being including cancelling the Q2 2023 payment and any further dividends relating to 2023, as previously announced.

Collectively, these actions form a meaningful part of our wider plan to reduce leverage to within the Group’s previously stated range at an appropriate pace.

The Group is also in advanced and constructive discussions with its lending banks regarding future covenant requirements and other near-term actions to strengthen the balance sheet. These discussions are proceeding as planned and we will provide a further update shortly.

Jamie Pike, Chair, said:

“We have made good progress over recent weeks with our cost mitigation plans to reduce the Group’s leverage. These plans are already well progressed and discussions with our lending banks are on-track and productive.

“Longer term, the Board is confident that XP’s clear strategy leaves the Group well positioned to grow ahead of its end markets, drive further market share gains, improve profitability and deliver strong cash generation.”