XP Power Limited

Sources: FY2021 [S5]; FY2022 [S3][S4]; FY2023 [S3]; FY2024–FY2025 [S1]. FY2021 gross profit is derived from the 45.1% reported gross margin [S12]. Margins, ratios and growth rates are analyst-computed unless otherwise noted. FY2022–FY2023 adjusted EBITDA is not separately disclosed in the sources reviewed; the disclosed leverage ratios imply about £56m in each year.

Margins

Revenue CAGR: FY2021–FY2025 is -1.1% a year (from £240.3m to £230.1m). FY2020–FY2025 is -0.3% a year (from £233.3m). The company's own ten-year average to 2023 was about 12% a year [S3].

H1 2026 interim snapshot

Source: [S2].

Balance sheet

FY2021 equity is the opening 1 January 2022 balance [S3]. At 30 June 2026 the balance sheet showed:

• total assets £426.4m;

• cash £14.8m;

• borrowings £65.3m;

• leases £51.7m;

• equity £176.4m;

• inventory £73.8m;

• Comet bond receivable £50.4m;

• current provisions £50.9m [S2].

Cash flow

Notes on the cash flow table:

• The FY2021 figure is the headline "operating cash flow" [S5].

• Free cash flow uses the reported basis for FY2022–FY2023 (FY2022 includes the £36.9m bond purchase) and the adjusted basis for FY2024–FY2025.

• No buyback programme is reported in the filings reviewed.

• FY2025 operating cash excludes a £16.4m one-off customer prepayment from the adjusted measure [S1].

Ratios (analyst-computed except where noted)

The cash conversion cycle approximation is inventory days plus receivable days minus payable days, using year-end trade and other payables. FY2025 payables exclude the £16.4m contract liability (prepayment). ROIC on the company's own definition is not disclosed; the company's ROCE target is above 20% through the cycle [S2].

Commentary on trends, inflections and drivers

Revenue. Revenue peaked at £316.4m in FY2023 as a post-COVID backlog (order book £308.4m at the start of 2023) was shipped. Order intake had already collapsed to £208.8m with a 0.66x book-to-bill [S3]. FY2024 revenue then fell 21.8% and FY2025 a further 7.0%. Three factors drove this:

1. Industry-wide OEM destocking in Industrial Technology and Healthcare, which the company dates from late 2023 [S2].

2. The semiconductor equipment downcycle.

3. A weaker US dollar, since most revenue is billed in dollars.

The inflection came on orders. FY2025 intake rose 24% (+28% cc), and H1 2026 intake of £167.2m produced a 1.53x book-to-bill, the highest since H1 2022 [S1][S2]. Revenue lags orders. H1 2026 revenue was flat because of the expiry of RF export licences to China and lower tariff pass-through revenue after the US Supreme Court invalidated IEEPA tariffs. Management put underlying H1 growth in the mid-single digits [S2].

Gross margin. Margin fell from 45.1% (FY2021) to 41.5% (FY2022–FY2023) because of component inflation, freight costs and Vietnam COVID disruption [S12][S3]. It bottomed at 41.0% adjusted in FY2024 on under-absorbed factory overhead. The recovery is structural:

• overhead cuts at US East Coast and China plants;

• about £1m of material savings;

• Lean manufacturing techniques;

• closure of Kunshan;

• transfer of some US production to Vietnam.

The result was 43.9% in H2 2025 and 45.9% in H1 2026, which exceeded the stated "mid-40s" objective [S1][S2]. Management describes the H2 2026 outlook as balanced. Higher utilisation should help, but this is offset by ramp inefficiencies and component inflation as the electronics supply chain tightens [S2].

Operating profit. The adjusted operating margin fell from 18.8% to 7.5% over FY2021–FY2025. This was the combined effect of volume decline, a heavier cost base (FY2023 adjusted opex rose £15.5m including £6.1m of extra product development charges) and FX [S3]. In FY2025 the bridge from £25.1m to £17.3m was:

• volume: -£7.0m;

• gross margin: +£3.9m;

• opex: -£4.7m.

The opex increase was largely non-discretionary: higher amortisation, lower capitalisation, a £1.2m impairment linked to export controls, FX and share-based pay [S1]. The swing from £4.8m in H1 2025 to £12.5m in H2 2025, and £8.6m in H1 2026, demonstrates operating leverage. Adjusted operating expenses in H1 2026 rose 10% in constant currency on variable pay and capitalisation accounting [S2].

Statutory versus adjusted gap. Adjusting items are recurrent and large:

• FY2022: £68.2m, of which the Comet case was £59.7m;

• FY2023: £15.4m;

• FY2024: £21.5m;

• FY2025: £16.8m, including RF exit £8.5m, China closure £4.0m and Comet £2.6m;

• H1 2026: £3.1m.

The group has reported a statutory loss after tax every year from FY2022 to FY2025. The cumulative statutory loss for FY2022–FY2025 is £49.3m. Investors should treat "adjusted" figures with caution, although many items (RF exit, China closure, Comet) are genuinely non-recurring by nature.

Tax. The adjusted effective tax rate was 34.7% in FY2025 because of unrelieved losses and non-deductible FX losses on intercompany balances. FY2023 included a £13.6m reversal of a US deduction previously assumed for the Comet award. Management guides to about 25% in normal conditions [S1][S3].

Balance sheet and cash. Net debt peaked at £151.0m (2.7x) at end-2022. The causes were the FuG/Guth acquisition (£33.0m cash), inventory build (£114.4m) and £36.9m of cash collateral for the Comet bond [S3]. Deleveraging since then has relied on four levers:

1. two equity raises (£44.0m in 2023 and £39.6m in 2025);

2. inventory release from £114.4m to £57.0m;

3. dividend suspension;

4. capex discipline.

Net debt reached £41.5m (1.2x) at end-2025 [S1]. In H1 2026 the business reinvested in working capital (inventory up £16.8m) and capacity (Malaysia and Vietnam), and net debt rose to £47.7m (1.3x). Management expects leverage to approach 1.0x by year-end. This guidance excludes any release of the roughly £50m Comet bond [S2].

Management guidance

FY2026: Expectations are unchanged. £135m of firm orders are scheduled for H2 2026, and over 100% of downside-case H2 revenue is covered by firm orders [S2].

Leverage: Expected to approach 1.0x by year-end, excluding any Comet bond release [S2].

Gross margin: H2 is described as balanced between better utilisation and ramp inefficiency plus component inflation. Further expansion is targeted once the supply chain adapts [S2].

Going-concern scenarios: The base case assumes about 11% revenue growth over the next 12 months; the downside case 6% [S2].

Malaysia: Full production in Q4 2026 [S2].

Media-reported guidance: At least £244m of FY2026 revenue (unconfirmed in RNS text).

Consensus growth expectations

S&P-aggregated consensus implies about 7.3% annual revenue growth and about 64% annual EPS growth over three years from a depressed base, with a 32.8x forward P/E [S13].

Bull case

1. Operating leverage on an upcycle. Profit nearly doubled on flat revenue in H1 2026 (adjusted operating profit from £4.8m to £8.6m), and gross margin is already at 45.9%. If revenue returns to FY2023 levels (£316m) at a mid-40s gross margin, adjusted operating profit could plausibly retrace towards the £38–45m achieved in FY2021–FY2023 [S2][S3][S5].

2. Semiconductor share gains in the WFE expansion. Semiconductor orders rose 116% with a record 1.81x book-to-bill, alongside indicated HVHP share gains, as SEMI projects equipment spending reaching $229.5bn by 2028 [S2][S14].

3. Balance-sheet optionality. About £50m of Comet collateral could be released after the July 2026 reversal. Combined with deleveraging towards 0–1x, this could restore the dividend and lower the cost of equity [S2][S7].

Bear case

1. Valuation already discounts recovery. At about 55x LTM adjusted EPS and about 16–17x LTM adjusted EBITDA, the shares sit near Advanced Energy's 1,950p rejected bid level (in nominal price terms) despite a smaller, statutorily loss-making business. Upside depends on flawless execution [S8][S13].

2. Execution and capacity risk. Management concedes Vietnam's output ramp determines FY2026 revenue. Malaysia must commission on time while component inflation and ramp inefficiency threaten H2 margins [S2].

3. Structural and legal overhangs. China semiconductor and RF revenue is permanently lost. Customer concentration is 21%. The Comet case was remanded for retrial, not dismissed, with a dissenting judge, so liability and a roughly £51m provision remain live [S1][S7].

Key catalysts and monitorables (next 12 months)

Analyst verdict

XP Power is emerging from the deepest downturn in its listed history structurally improved rather than merely cyclically relieved. Between 2023 and 2025 management restored the balance sheet: net debt fell from £151m to £41.5m, helped by two dilutive but necessary equity raises. It cut the China factory, exited a sub-scale RF franchise and rebuilt gross margin to 45.9%, above the level achieved before the downturn. Those actions coincided with an AI-driven wafer-fab equipment upcycle and the end of industrial and medical destocking. The result is the strongest order momentum since 2022: £167.2m of H1 2026 intake, a 1.53x book-to-bill and a £173.9m order book. The July 2026 Ninth Circuit reversal removes, for now, the largest single legal liability and creates a path to roughly £50m of collateral release.

The question is not direction but price. At about 1,980p the market already capitalises much of the recovery. On LTM numbers the shares trade on about 55x adjusted earnings and roughly 16–17x adjusted EBITDA. They are also back near the 1,950p level at which the Board rejected Advanced Energy. The investment case therefore rests on three things: converting the order book through Vietnam and Malaysia without margin slippage; turning a 7.9% adjusted operating margin into something approaching the 20% framework target; and avoiding an adverse Comet retrial. History supports XP's capacity for 18–19% margins (FY2020–FY2021). Its recent record of adjusting items, customer concentration and export-control exposure warrants a risk discount.

The balance of evidence supports a constructive fundamental view of the business: improving quality, recovering end-markets and a delevered balance sheet. Valuation suggests the next leg depends on earnings delivery rather than further re-rating. The key monitorables are the Q3 2026 update, Malaysia's Q4 ramp and the FY2026 dividend decision.

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• FY2021 balance-sheet detail;

• FY2022–FY2023 adjusted EBITDA;

• FY2025 headcount and remuneration;

• the patent portfolio;

• country-level revenue;

• MSCI rating;

• a complete top-10 shareholder register;

• peer valuation multiples;

• 3-year and 5-year total shareholder return;

• exact addresses for some sites.