76767 COVER 28/2/08 15:05 Page 2
XP Power
Annual Report & Financial Statements
for the year ended 31 December 2007
XP Power Limited
Annual report and financial statements 2007
Contents
Page
Advisors
Chairman’s Statement
Background to the Group and its Products and Markets
Chief Executive’s Review
Financial Review
The Board of Directors
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Statement by Directors
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Company Balance Sheet
Notes to the Company Financial Statements
Five Year Review
1
2
3
6
10
15
17
19
23
29
30
31
32
33
34
35
81
82
87
XP Power Limited
Advisors
Advisors
Company Brokers
Investec
2 Gresham Street
London
EC2V 7QP
United Kingdom
Principal Bankers
Bank of Scotland
Uberior House
61 Grassmarket
Edinburgh
EH1 2JF
United Kingdom
Solicitors
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol
BS1 6EG
United Kingdom
Registrars
Capita IRG Plc
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0LA
United Kingdom
Company Secretary
M & C Services Private Limited
138 Robinson Road #17-00
The Corporate Office
Singapore 068906
Auditors
PricewaterhouseCoopers
8 Cross Street,
PWC Building, #17-00
Singapore 048424
1
XP Power Limited
Chairman’s Statement
The year at a glance
HIGHLIGHTS
(cid:131) Gross margin improves by 5.1% to 42.2% (2006: 37.1%) resulting from an increased amount
of XP Power intellectual property
Improved competitive position due to move to Asia
(cid:131) Own brand sales now represent 73% of revenues (2006: 66%)
(cid:131)
(cid:131) Transition of the Company to a manufacturer enables penetration of larger customers
(cid:131) Dividend to be increased by 11% to 20p per share
Chairman’s statement
Business Performance
XP’s revenues declined from £78.7 million in 2006 to £66.3 million in 2007. This reduction of
16% is disappointing. The discontinued third party business accounted for 12% of the reduction
and the weakness of the US Dollar reduced revenues on translation by 4%. Our ongoing
business was flat for the year with growth in the first half being offset by a decline in the second
half. We continue to believe that our new product pipeline will result in revenue growth once the
current macro economic climate for capital equipment improves.
Adjusted earnings per share of 31.4 pence is down by 4% from 2006 (2006: 32.8 pence).
Strategy
In 2003 we set ourselves the goal of achieving gross margins in excess of 40% by 2007. This
goal was achieved during the year. Further modest improvement is expected as we have now
bought out our joint venture manufacturing partner in Kunshan, China. More of the Group’s
resources are now in Asia and the move of our headquarters to Singapore was completed in
spring 2007.
The change to producing our own I.P. products in our wholly owned manufacturing facility is
attractive to our target customer base. This enhances the medium term revenue prospects for
XP Power.
Dividend
Despite the reduction in earnings we are proposing a final dividend of 11 pence per share at the
annual general meeting on 26 March 2008. The total dividend for 2007 of 20 pence represents
an 11% increase on the 2006 payment (2006: 18 pence).
Outlook
Our customers produce capital equipment and any downturn in global demand for their products
affects our potential revenue. We believe that our competitive position is strong and that should
enable us to take market share and increase revenues when the economic climate improves.
Larry Tracey – Executive Chairman
2
XP Power Limited
Background to the Group and its Products and Markets
Background to the Group and its products and markets
The Group
The Group provides power supply solutions to the electronics industry. Power supplies take the
relatively high voltage alternating current output from the electricity supply and convert it into
various lower voltage, stable direct current outputs that are required to drive electronic
equipment. All electronic equipment requires some form of power supply.
The Market
The market is highly fragmented and made up of hundreds of thousands of customers and
thousands of competitors. Our target geographic coverage for design-in is North America,
Europe and Asia. We estimate that our available market is $2.6 billion.
Our Customers and Industry Segmentation
in
their particular vertical market, whether
Our customers are Original Equipment Manufacturers (OEMs) who can be characterised as
having expertise
it be medical devices,
communications or industrial automation but who generally do not have in-house power supply
expertise. XP provides this expertise and assists our customers to design-in a suitable power
supply from our extensive range of products that meet the customer’s cost and technical
requirements. Technical requirements often involve helping the customer meet the relevant
equipment safety standards that operate in their particular industry such as Medical or Telecom
standards as well as Electro Magnetic Compatibility (EMC).
We segment our customer base into the following industries:
• Communications;
• Defence and Avionics;
•
• Medical.
Industrial; and
We have industry specialists who are versed in technical requirements and power supply
legislation applicable to each of these different sectors. This way our people not only add
genuine value to our customers during the design-in phase but can also use the knowledge they
gain from these customers to develop new products to meet the future needs of the market.
3
XP Power Limited
Background to the Group and its Products and Markets
Products
The need for our customers to differentiate their product from that of their competitors gives rise
to a vast number of power supply requirements to satisfy the endlessly increasing combinations
of voltages at different power levels and different mechanical formats.
While many of our competitors address this market using custom or highly modified solutions XP
addresses the market by offering standard and modified standard solutions only using custom
solutions in exceptional circumstances. The products range from AC to DC power supplies, DC
to DC converters necessary for battery powered and industrial applications, through to Power
Protection Products.
Engineering Services
Equipment design involves meeting the relevant safety standards that apply to a particular
industry as well as EMC legislation and thermal performance. Our customers may also require
non standard output voltages or require the power supply in a format that makes it easier and
therefore more cost effective to integrate into their equipment. This may involve incorporating
several power supplies into one chassis, adding signals, special housings, thermal and EMC
management and specific cable harnesses or connectors.
Our engineering services group has centres throughout Europe and North America. They offer
EMC pre-compliance facilities, thermal management advice and general pre and post application
support. They also offer next day delivery of customer specific AC-DC power solutions with full
safety agency approvals from our range of configurable power supplies. For a fully integrated
solution the use of 3D computer modelling allows us to quickly generate a proposal with no
commitment from the customer.
Product Development
Our model is to design the power supply using one of our design engineering groups around the
world and to manufacture the power supply in our Asian manufacturing facility. Our product
range is supplemented by products from key third parties. Going forward we expect the mix of
our business to be approximately 80% own product and 20% third party product.
We have design engineering teams in Europe, North America and Asia.
Manufacturing
All of our new product releases are manufactured in our factory in Kunshan, China. This low
cost, high volume, ISO 9001 facility allows us to meet the price demands seen in the market
whilst being able to manage the quality and component selection.
4
XP Power Limited
Background to the Group and its Products and Markets
Competition
Our competition ranges from numerous small custom manufacturers, mid-tier manufacturers and
distributors of Asian manufacturers. Consolidation continues to occur in the industry as scale,
time to market, shorter product life cycles, keeping pace with legislation and design costs make
it harder for the small custom manufacturers to compete.
Our aim is to be the leading provider of power supplies in our target market, the mid-tier of the
power supply industry.
Our Mission
To inspire our people to be The Experts in Power delivering genuine value to our customers.
5
XP Power Limited
Chief Executive’s Review
Chief executive’s review
The Chief Executive’s Review is prepared solely to provide additional information to
shareholders to assess the Company’s strategy and the potential for that strategy to succeed,
and should not be relied on by any other party or for any other purpose.
The Chief Executive’s Review contains certain forward-looking statements and (a) these
statements are made in good faith based on the information available up to the time of the
approval of this report and (b) these statements should be treated with caution due to the
inherent uncertainties, including both economic and business risk factors, underlying any such
forward looking information.
Landmark Year
2007 has been a landmark year in the Group’s history. On 24 April 2007 the Company
completed its Scheme of Arrangement to move the domicile of the parent company to
Singapore. We are rapidly becoming a much more Asian centric organisation. In parallel with this
fundamental change we also announced the buy out of our manufacturing joint venture with
Fortron Source. From 1 January 2008 XP became a “fully fledged” Asian manufacturer.
Since our London Stock Exchange Listing in 2000, XP has transformed itself from a specialist
distributor to a successful designer, seller and now manufacturer of electronic power supplies.
This strategy is enabling us to make inroads into much larger customers. We have also realised
a steady and dramatic increase in our gross margins from 28.0% in 2000 to 42.2% in 2007
reflecting the resources we have deployed in product development to increase the proportion of
revenues generated from our own intellectual property.
Our business model today has developed substantially since 2000 and we consider that we are
excellently positioned for the time when greater confidence returns to our markets.
Asia
Asia is increasingly important to our industry and to our own internal operations. For some time
we have seen a trend where our customers, who generally perform their product development
and design work in Europe and North America, are increasingly manufacturing and selling their
end products in Asia. It has been essential for us to put resource in place in Asia to support
these customers technically and logistically. More companies, and in particular our larger
customers, are now building product design teams in Asia. It is clear that Asia will no longer just
be the place where electronic products are manufactured but also increasingly where they are
designed and the intellectual property is created.
In conjunction with these changes we are observing that within our customers, our supply chain
has become dominated by Asian manufacturers. The majority of the product we sell is
manufactured in Asia and we have put in place various supply chain operations across Asia to
support our manufacturing activities whether they be within our own facilities or outsourced. It is
important that our purchasing people are in the same time zone and speak the same language
as our component suppliers.
We also believe that our future competition will emerge from Asia rather than Europe or North
America. In order to compete in this climate we will need to have the same low cost structure as
these emerging companies and access to the plentiful and talented work force in Asia.
6
XP Power Limited
Chief Executive’s Review
For the reasons set out above we concluded that we needed to not only build resource in Asia
but locate our headquarters there so we could view the world from an Asian perspective to take
advantage of the opportunities as they present themselves.
Asia is rapidly changing the shape of the world economy and we are determined to take
advantage and be a part of this.
Manufacturing
At the end of 2005 we announced a 50:50 manufacturing joint venture in Kunshan, close to
Shanghai in China, in association with Fortron Source, a leading power supply manufacturer.
Fortron Source has been an excellent contract manufacturing partner of XP for many years and
operates a number of power supply manufacturing facilities in China. Fortron Source is
renowned in the industry for excellent quality and cost efficiency.
This manufacturing joint venture has been extremely beneficial to XP. By moving closer to the
manufacturing end of the supply chain we have been able to transfer knowledge into our design
centres to assist designing in components that are lower cost and/or easier to source in Asia.
This has helped us drive down our product cost. More significantly the manufacturing joint
venture has enabled us to target a whole new group of customers who will only do business
directly with a manufacturer. As we engaged with this new group of customers it became clear
that the quality standards they demand from their suppliers require us to have complete control
of the manufacturing facilities and processes. For this reason we needed to become a “fully
fledged” manufacturer. Consequently, in November 2007 we announced an agreement to buy
out the joint venture for US$2.5 million (approximately £1.2 million) in cash and take complete
control from 1 January 2008.
We expect that our new product families will be manufactured in our Kunshan facility.
Product Strategy
In April 2006 we made a decision to discontinue selling a number of third party product lines in
order to focus on our own product lines. These lines were generally low margin and contributed
little compared to the resource they consumed. We stopped taking orders for these third party
product lines from 1 July 2006. Later in 2006 two other third party lines decided to terminate their
relationship with XP as a result of our product strategy. Our 2006 revenues included
approximately £9.0 million from the discontinued product lines, which is approximately £12.0
million on an annualised basis. Despite the resultant decline in revenue in 2007 we believe it
was the right approach as it has allowed us to increase our emphasis on our larger target
customers.
Approximately a quarter of our revenues are still generated from selling third party lines. The
remaining partnerships are important to our success as they allow us to meet our customers’
needs in areas where we do not have suitable product of our own. We share product roadmaps
with these partners to avoid conflict between our respective product lines.
7
XP Power Limited
Chief Executive’s Review
Financial Performance
Our financial performance has been impacted by three main factors during 2007:
(cid:131) The deliberate termination of certain third party lines during 2006 which is discussed
above;
(cid:131) Softer end markets in North America and the UK in the second half of 2007; and
(cid:131) The marked weakening of the US Dollar versus Sterling resulting in significant
translational effects when converting our US Dollar revenues and earnings to Sterling for
reporting purposes.
The average exchange rate used to translate our US Dollar earnings in 2007 was approximately
2.00 US Dollars to Sterling compared with approximately 1.83 in 2006. If the average rate of
1.83 experienced in 2006 had continued in 2007 we would have reported additional revenues of
£3.3 million in the year to 31 December 2007.
Overall revenues decreased by 15.8% to £66.3 million (2006: £78.7 million). As set out above,
£9.0 million of this decrease can be attributed to termination of the third party lines and £3.3
million to the translation effect of the weaker US Dollar. Of the product shipped in 2007, 73%
was our own XP brand, up from 66% in the same period a year ago. This helped drive a
significant increase in gross margin to 42.2% (2006: 37.1%). This is our eighth successive year
of gross margin improvement and justifies our strategy.
The Group made a profit before tax of £5.0 million compared to a profit before tax of £8.0 million
in the prior year. The profit before tax includes a charge of £0.3 million (2006: £0.3 million) for
the amortisation of intangibles resulting from the acquisition of Powersolve Electronics Limited
(Powersolve) and £2.4 million of charges relating to the Scheme of Arrangement and costs
associated with the move to Singapore (2006: £1.0 million relating to the termination of third
party lines as discussed above). After adding back these items the adjusted profit before tax was
therefore £7.7 million in 2007 compared with £9.3 million in 2006. The basic earnings per share
for the year ended 31 December 2007 was 17.9p (2006: 27.9p). The diluted earnings per share
for the year ended 31 December 2007 was 17.8p (2006: 27.5 p). After adjusting for the charges
relating to the Scheme of Arrangement and costs associated with the move to Singapore and
the amortisation of intangibles associated with acquisitions, the diluted earnings per share was
31.4 pence (2006: 32.8 pence). The 2006 earnings per share have been adjusted by £0.8
million, or 4.2 pence per share, relating to dividends paid to minority shareholders in 2006.
Continued strong margins allowed us to generate free cash flow of £5.9 million during 2007
(2006: £3.4 million). After returning £3.6 million to shareholders in the form of dividends, net debt
(cash of £3.6 million less borrowings of £23.0 million) at 31 December 2007 was £19.4 million
compared with £17.8 million at 31 December 2006. Free cash flow is defined as net cash flow
from operating activities plus dividends from associates; less net purchases of property, plant
and equipment; less capitalised development costs; plus exceptional charges; less interest paid.
8
XP Power Limited
Chief Executive’s Review
Customers and Industry Segmentation
We target customers in the communications, defence and avionics, industrial and medical end
user markets. We have senior strategic teams driving these sectors in both North America and
Europe. These teams identify the customers with whom we consider we should be working in
each of these sectors, support the sales people to penetrate these accounts and work with the
product development organisation to specify future product requirements.
This structure has served us well and should help to drive future revenue growth. As our
business grows in terms of scale and breadth of product offering, we are increasingly able to add
value to the larger customers in the market sectors we serve. Accordingly, we will be focusing
more resource on winning programmes with larger customers.
Markets
As reported in our interim statement for the six months to 30 June 2007 and reiterated in our
trading update issued at the end of October 2007 the markets we serve have been soft in the
second half of 2007 particularly in the UK and North America. As noted above, this was
exacerbated by the weakening of the US Dollar. Although our program design-in base and
program identification remains good it is difficult to predict what our customers’ demand is likely
to be in 2008 given the widely reported macro economic concerns in North America. Despite the
current economic uncertainty we have not, as yet, seen any change in pricing pressure in the
market. We do see increased pressure on input costs due to the gradual increase in the strength
of the Chinese currency which is expected to continue plus labour cost increases in China but
these should be offset by improvements in component costing on our new products.
Product Development
Offering our target customers industry leading products is a key component of XP’s strategy,
therefore product development is vital to the long-term success of our business. We continue to
commit more resource to this area in line with our strategy of expanding our own brand product
portfolio. We plan to open a new design centre in Singapore during 2008.
We expect to release a number of important products to the market during 2008.
Duncan Penny – Chief Executive
9
XP Power Limited
Financial Review
Key Performance Indicator
Own brand revenue (£ millions)(1)
48.4
51.9
41.0
(1)
2007
2006
2005
Target
Proportion of own brand revenue (2)
73%
66%
59%
75%
Gross margin (3)
42.2%
37.1%
35.7%
40.0%
Adjusted earnings per share (4)
31.4 p
32.8 p
30.6 p
(4)
Free cash flow (£ millions) (5)
5.9
3.4
5.3
(5)
(1) Own brand revenue = revenue derived from sale of XP products
The Group does not have an absolute long term target for this metric. However, the
Group targets to grow this metric by 20% per annum. Revenue has been significantly
affected by the translation effect from the weakening US Dollar in 2007 together with
weaker end markets.
(2) Proportion of own brand revenue = revenue from sale of XP products as a
percentage of total revenue
Revenue per the consolidated income statement in the financial statements.
The target was set in 2002 to achieve 75% by the end of 2007.
(3) Gross margin = Gross profit as a percentage of revenue
Gross profit and revenue both per the consolidated income statement in the financial
statements.
The target was set in 2002 to achieve 40% by the end of 2007.
10
XP Power Limited
Financial Review
ia
(4) Adjusted earnings per share = earnings per share adjusted for amortisation of
intangibles associated with acquisitions, exceptional charges or profits, and
diluted for the effect of the outstanding share options
Diluted earnings per share is per the consolidated financial statements.
Adjustments to the earnings per share are set out in note 11.
There is no absolute long term target set for this metric but the Group targets to grow this
metric by 20% per annum. The compound growth rate for this metric over the last four
years has been 26%.
(5) Free cash flow = Net cash flow from operating activities plus dividends from
associates; less net purchases of property, plant and equipment; less capitalised
development costs; plus exceptional charges; less interest paid.
All figures are derived from the consolidated cash flow statement as set out in the
consolidated financial statements.
There is no long term target set for this metric but the Group considers it is important that
the business model produces positive free cash flow.
We met our internal targets for only two of our five performance indicators as set out above.
Each of our financial objectives is discussed in the Chief Executive’s Review. Whilst other
performance measures are discussed in this Annual Report, it is the above five measures that
the directors use as the Group’s key performance indicators.
Risks Specific to the Industry in which the Group Operates
Fluctuations in foreign currency
The Group deals in many currencies for both its purchases and sales. In particular, North
America represents an important geographic market for the Group where virtually all the
revenues are denominated in US Dollars. The Group therefore has an exposure to foreign
currency fluctuations, most notably the US Dollar. This could lead to material adverse
movements in reported earnings.
Competition
The power supply market is diverse and competitive in Europe, North America and Asia. The
Directors believe that the development of new technologies could give rise to significant new
competition to the Group, which may have a material effect on its business. At the lower end of
the Group’s target market the barriers to entry are low and there is, therefore, a risk that
competition could quickly increase.
Risks Specific to the Group
Dependence on key personnel
The future success of the Group is substantially dependent on the continued services and
continuing contributions of its Directors, senior management and other key personnel. The loss
of the services of any of their respective executive officers or other key employees could have a
material adverse effect on their businesses.
11
XP Power Limited
Financial Review
Loss of key customers/suppliers
The Group is dependent on retaining its key customers and suppliers. Should the Group lose a
number of its key customers or a key supplier this could have a material impact on the Group’s
business financial condition and results of operations. However, for the year ended 31
December 2007, no one customer accounted for more than 5% of revenue.
Shortage, non-availability or technical fault with regard to key electronic components
The Group is reliant on the supply, availability and reliability of key electronic components. If
there is a shortage, non availability or technical fault with any of the key electronic components
this may impair the Group’s ability to operate its business efficiently and lead to potential
disruption to its operations and revenues.
Fluctuations of revenues, expenses and operating results
The revenues, expenses and operating results of the Group could vary significantly from period
to period as a result of a variety of factors, some of which are outside its control. These factors
include general economic conditions, adverse movements in interest rates, conditions specific to
the market, seasonal trends in revenues, capital expenditure and other costs, the introduction of
new products or services by the Group, or by their competitors. In response to a changing
competitive environment, the Group may elect from time to time to make certain pricing, service,
marketing decisions or acquisitions that could have a material adverse effect on the Group's
revenues, results of operations and financial condition.
Management stretch
The management team is likely to be faced with increased challenges associated with running a
manufacturing facility following the buyout of its manufacturing joint venture with effect from 1
January 2008. Issues associated with manufacturing could adversely affect the Group if the
management team is not able successfully to cope with these new challenges.
Information Technology Systems
The business of the Group relies to a significant extent on IT systems used in the daily
operations of its operating subsidiaries. Any failure or impairment of those systems or any
inability to transfer data onto any new systems introduced could cause a loss of business and/or
damage to the reputation of the Group together with significant remedial costs.
Risks relating to taxation of the Group
The Group is exposed to corporation tax payable in many jurisdictions including the USA where
the effective rate can be as high as 40.0%, the UK where the corporation tax rate is 30.0% and a
number of European jurisdictions where the rates vary between 25.5% and 38.7%. In addition,
the Group has manufacturing activities in Hong Kong where the corporation tax rate is 17.5%
and sales companies in Singapore and Switzerland where the corporation tax rates are 18.0%
and 20.0% respectively.
The effective tax rate of the Group is affected by where its profits fall geographically. The Group
effective tax rate could therefore fluctuate over time. This could have an impact on earnings and
potentially its share price.
12
XP Power Limited
Financial Review
Further, the Group’s tax position includes judgments about past and future events and relies on
estimates and assumptions. Although we believe that the estimates and assumptions
supporting our positions are reasonable and are supported by external advice, our ultimate
liability in connection with these matters will depend upon the assessments raised and the result
of any negotiations with the relevant tax authorities. If the actual taxes and penalties imposed
exceed the amounts we have accrued, it could adversely affect our financial position, results and
cash flows.
Cash Flow
Our operating profit allowed us to generate free cash flow of £5.9 million during 2007 (2006: £3.4
million) and we returned £3.6 million (2006: £3.2 million) to shareholders in the form of
dividends.
Income and Expenditure Account
Revenues decreased 15.8% to £66.3 million from £78.7 million in 2006. The decrease in
revenue can be attributed to the deliberate termination of third party lines in 2006 (£9.0 million)
and the further weakening of the US Dollar versus Sterling. During 2007 the US Dollar to Sterling
exchange rate decreased from 1.83 US Dollars to Sterling in 2006 to 2.00 US Dollars to Sterling
in 2007 resulting in a £3.3 million reduction in US Dollar sales when translated to Sterling.
Gross margins increased over five percent points to 42.2% in 2007 from 37.1% in 2006 due to a
greater proportion of own brand sales. Own brand product revenues were £48.4 million or 73.0%
of total revenue in 2007 versus £51.9 million or 65.9% of total revenue in 2006.
Operating expenses were £19.0 million in the year before restructuring costs of £2.4 million as
compared with £19.0 million in 2006. In accordance with the requirements of IAS 38, during
2007 £1.0 million of product development expenditure was capitalised (2006: £0.9 million) and
£0.1 million was amortised (2006: £0.2). Gross expenditure on product development was £2.7
million, or 4.1% of revenue, compared to £2.6 million, or 3.3% of revenue, in 2006.
Financial Control and Reporting
One of the many challenges when combining and acquiring companies is providing accurate,
relevant, and timely financial reporting both externally to the market and our shareholders and
internally to manage the business. We consider that we have efficient processes and systems in
place to allow us to monitor the business on a continual basis by the review of monthly accounts
at monthly management meetings, and ensure that we provide timely information to our
shareholders.
Derivatives and Other Financial Instruments
The Group’s financial instruments consist of cash, money market deposits, overdrafts, and
various other items such as trade receivables and trade payables that arise directly from its
business operations.
13
XP Power Limited
Financial Review
Due to the rapid weakening of the US Dollar versus Sterling and the Euro, in December 2006 the
Group took the decision to hedge its expected US Dollar short position in Europe for all of 2007
of approximately $17.6 million via forward currency exchange contracts. As of the end of 2007,
the Group has a total notional principal amount of outstanding forward foreign exchange
contracts of £0.9 million.
Financing Costs
In September 2007 the Group renewed its annual working capital facility and increased the limit
to £10.0 million from £4.0 million. In December 2007 the Group converted the outstanding £16.0
million committed term loan to US$31.9 million, in order to reduce its borrowing costs. The term
loan is repayable over 4 years with US$4.99 million due in 2009, US$4.99 million due in 2010
and the balance of US$21.96 million due in 2011. The £5.0 million multicurrency revolving credit
facility remains unchanged. All of these facilities are with Halifax Bank of Scotland and are
priced at LIBOR plus a margin linked to certain covenants, which ranges from 1.0% to 1.5%.
As set out in note 25, the Group entered into an Interest Rate Swap on 6 February 2008 to fix
the interest payable on its US$31.9 million term loan.
Dividends
Our dividend policy is to pay dividends to our shareholders when legally and commercially able
to do so. This year’s increased free cash flow has enabled us to increase the 2007 dividend
(including final proposed) by 11.1% to 20p per share.
Substantial Interests
Other than the directors’ interests (see Directors’ Remuneration Report), at 31 December 2007
the Company was aware of the following interests in three per cent or more of the issued
ordinary share capital of the Company:
Number of shares
%
Aberdeen Asset Managers
Lion Trust Asset Management
2,182,489
1,415,233
Credit Suisse Asset Management
772,038
Brewin Dolphin
591,088
11.34
7.35
4.01
3.07
J. Mickey Lynch – Finance Director
14
XP Power Limited
The Board of Directors
Larry Tracey – Executive Chairman (age 60)
Larry co-founded Powerline plc (“Powerline”) in 1979, where he focused on the strategic
direction of the business. In March 1984, he was responsible for the flotation of Powerline on the
Unlisted Securities Market of the London Stock Exchange and earnings grew 220 per cent in its
three years as a quoted company. Larry headed Powerline’s expansion into Germany and the
US. Powerline was acquired by Chloride plc in September 1987.
In May 1990, Larry joined the Board of XP as an Executive Director. In April 2000, he was
appointed as Chief Executive Officer of the Group, and in April 2002 he was appointed as
Executive Chairman. On 3 February 2003 he stepped down from the role of Chief Executive and
continued in the role of Executive Chairman.
James Peters – Deputy Chairman (age 49)
James has over 25 years experience in the power supply industry and trained with Marconi
Space and Defence Systems, prior to joining Coutant Lambda, one of the UK’s major power
supply companies, as an internal sales engineer. He joined Powerline shortly after its formation
in 1980 and was involved in all aspects of the business.
In November 1988, he founded XP. In April 2000, he was appointed as European Managing
Director of the Group and was responsible for the overall management of the Group’s European
businesses. On 3 February 2003, James was appointed as Deputy Chairman.
Duncan Penny – Chief Executive (age 45)
Between October 1998 and March 2000, Duncan was the controller for the European, Middle
Eastern and African regions for Dell Computer Corporation, prior to which he spent eight years
working for LSI Logic Corporation where he held senior financial positions in both Europe and
Silicon Valley. From 1985 to 1990, Duncan spent five years at Coopers & Lybrand in general
practice and corporate finance.
He joined XP in April 2000 as Group Finance Director. On 3 February 2003, he was appointed
as Chief Executive.
Mike Laver – President North America (age 45)
Mike has 19 years experience in the power supply industry. After completing his degree in
Electrical Engineering at UC Santa Barbara, Mike held sales and technical positions with Power
Systems Distributors, Compumech and Delta Lu Research. He joined ForeSight Electronics in
1991 and carried out various senior roles.
Mike is currently responsible for the US sales and value added engineering organisations. He
joined the Board on 20 August 2002.
15
XP Power Limited
The Board of Directors
Mickey Lynch – Finance Director (age 55)
Mickey joined the Group in April 2001 as Vice President of Finance for XP’s North America
operations and since February 2003 he has headed the finance team for the Group.
Prior to joining XP, Mickey spent 10 years at Atari Games Corporation the last five of which were
in the role of Chief Financial Officer. Prior to that, he spent 12 years with ITT Corporation,
holding various financial controllership roles. In June 2004 he was appointed Finance Director.
Andy Sng – General Manager, Asia (age 38)
Andy joined the Group in July 2005 as General Manager for Asia to start and head up our
Shanghai operations. He joined the Board in April 2007.
Prior to joining XP, Andy has worked in the power supply industry for eight years in various
technical and commercial roles with companies such as Silicon Systems (Singapore) and
Advanced Micro Devices (Singapore).
John Dyson – Senior Non-Executive Director (age 59)
John was appointed Chief Executive of Pace Micro Technology plc in May 2003, prior to which
he had been Finance Director since November 1997. John retired from Pace Micro Technology
plc during 2006 and has co-founded a new business called Telehealth Solutions Ltd which has
developed communications technology to remotely monitor medical devices. Before Pace, he
held senior positions in both Silicon Valley and Europe for LSI Logic Corporation from June 1990
to November 1997. From September 1988 to June 1990 John was co-founder and Managing
Director of Modacom Limited, prior to which he was Finance Director of Norbain Electronics plc
(1986 -1988) and Case Group plc from 1977 to 1986.
He joined the Board of XP in June 2000. He is the senior non-executive director and chairman of
the Audit and Remuneration Committees.
Michael Hafferty – Non-Executive Director (age 59)
On 24 April 2007 Michael Hafferty was appointed as a non-executive director of XP. Michael has
been the founder and CEO of several technology companies, including Tricom, Vegastream and
Arkstream. He was a director of Case Communications plc and played a significant role in its
IPO on the London Stock Exchange and as its Sales and Marketing Director built a worldwide
sales and services organisation. Michael is the founder of the consulting company Arkbridge Pte
Limited based in Singapore and as a result of that position was appointed Vice President, Asia
Pac for the international software company iTRACS Corporation.
16
XP Power Limited
Directors’ Report
For the financial year ended 31 December 2007
The Directors present their annual report to the members together with the audited financial
statements of the Group for the financial year ended 31 December 2007 and the balance sheet
of the Company as at 31 December 2007.
Directors
The directors of the Company in office at the date of this report are as follows:
Larry Tracey (appointed on 24 April 2007)
James Peters (appointed on 24 April 2007)
Duncan Penny (appointed on 24 April 2007)
Mickey Lynch (appointed on 12 February 2007)
Michael Laver (appointed on 12 February 2007)
Andy Sng (appointed on 12 February 2007)
John Dyson (appointed on 24 April 2007)
Michael Hafferty (appointed on 24 April 2007)
Prior to the Company’s Scheme of Arrangement becoming effective on 24 April 2007, Larry
Tracey, James Peters, Duncan Penny, Mickey Lynch, Michael Laver and John Dyson were on
the Board of XP Power plc. On 24 April 2007, the Board of Directors of XP Power Limited
appointed Larry Tracey, James Peters and Duncan Penny as Executive Directors and John
Dyson together with Michael Hafferty as the Non-Executive Directors.
In accordance with the Company’s Articles of Association Larry Tracey, James Peters, Duncan
Penny, Mickey Lynch, Michael Laver, Andy Sng, John Dyson, and Michael Hafferty retire and,
being eligible, offer themselves for re-election at the Annual General Meeting.
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the financial year was the Company a party to any
arrangement whose object was to enable the directors of the Company to acquire benefits by
means of the acquisition of shares in, or debentures of, the Company or any other body
corporate, other than as disclosed in the Director’s Remuneration Report on pages 23 to 28 of
this report.
Directors’ Interests in Shares or Share Options
The interests of the Directors in the shares of XP Power Limited are set out in the Directors’
Remuneration Report.
Directors’ contractual benefits
Since the end of the previous financial year, no director has received or become entitled to
receive a benefit by reason of a contract made by the Company or a related corporation with the
director or with a firm of which he is a member or with a company in which he has a substantial
financial interest, except as disclosed in the accompanying financial statements and in this
report.
17
XP Power Limited
Directors’ Report
For the financial year ended 31 December 2007
Dividends
An interim dividend of 9.0p per share was paid on 3 October 2007 (2006: 8p). We are proposing
a final dividend of 11.0p per share (2006: 10.0p) which would be payable to members on the
register on 28 March 2008 and will be paid on 4 April 2008. This would make the total dividend
for the year 20.0p (2006: 18.0p).
Audit Committee
The members of the Audit Committee at the end of the financial year were as follows:
John Dyson (Chairman)
Michael Hafferty
All members of the Audit Committee were non-executive directors.
The Audit Committee carried out its functions in accordance with Section 201B (5) of the
Singapore Companies Act. In performing those functions, the Committee reviewed:
(cid:131) The audit plan of the Company’s independent auditor and its report on the weakness of
internal accounting controls arising from the statutory audit;
(cid:131) The assistance given by the Company’s management to the independent auditor; and
(cid:131) The balance sheet of the Company and the consolidated financial statements of the Group
for the financial year ended 31 December 2007 before their submission to the Board of
Directors, as well as the independent auditor’s report on the balance sheet of the Company
and the consolidated financial statements of the Group.
The Audit Committee has recommended
independent auditor,
to
PricewaterhouseCoopers, be nominated for re-appointment at the forthcoming Annual General
Meeting of the Company.
the Board
that
the
Independent Auditor
The independent auditor, PricewaterhouseCoopers, has expressed its willingness to accept re-
appointment.
On behalf of the directors
Larry Tracey
Executive Chairman
3 March 2008
Duncan Penny
Chief Executive
18
XP Power Limited
Corporate Governance Report
For the financial year ended 31 December 2007
Under the Singapore Companies Act, Chapter 50, the Company is not required to follow the
Singapore Corporate Governance Code. The Company has voluntarily agreed to the principles
of corporate governance contained in the Combined Code on Corporate Governance which is
appended to the Listing Rules of the Financial Services Authority.
Statement of Compliance with the Code of Best Practice
Throughout the year ended 31 December 2007 the Company has been in compliance with the
Code provisions set out in Section 1 of the July 2003 FRC Combined Code on Corporate
Governance except for the following matters:
(cid:131) Larry Tracey and James Peters, Executive Directors, are members of the Remuneration
Committee and the Nominations Committee, in contravention with A4.1 and B2.1 of the
Combined Code. They are the two main shareholders and consider that any decisions they
make will be aligned to the interests of the shareholders.
(cid:131) There has been no formal evaluation of the performance of the Board, its Committees and
the Directors during the year, as required by the Combined Code (A6.1)
Notwithstanding the above departures from the Combined Code, the directors consider that the
current structure and function of the Board is appropriate for the present size and composition of
the Group.
The Board is responsible for the proper management of the Group and for its system of
corporate governance. It receives information on at least a monthly basis to enable it to review
trading performance, forecasts and strategy. The following matters are specifically reserved for
its decision:
changes to the structure, size and composition of the Board
consideration of the independence of Non-Executive Directors
review of management structure and senior management responsibilities
-
-
-
- with the assistance of the Remuneration Committee, approval of remuneration policies
across the Group
- approval of strategic plans, profit plans and budgets and any material changes to them
- oversight of the Group’s operations, ensuring competent and prudent management,
sound planning, an adequate system of internal control and adequate accounting and
other records
final approval of annual accounts and accounting policies
-
- approval of the dividend policy
- approval of the acquisition or disposal of subsidiaries and major investments and capital
projects
- delegation of the Board’s powers and authorities including the division of responsibilities
between the Chairman, Chief Executive and the other Executive Directors.
Internal
19
XP Power Limited
Corporate Governance Report
For the financial year ended 31 December 2007
The Board acknowledges that it is responsible for the Group’s internal control and for reviewing
its effectiveness.
The Group’s internal controls are designed to manage rather than eliminate the risk of failure to
meet business objectives, and can only provide reasonable not absolute assurance against
material misstatement or loss.
An ongoing process for identifying, evaluating and managing the significant risks faced by the
Group was in place during the entire financial year and has remained in place up to the approval
date of the annual report and accounts. That process is regularly reviewed by the board and
Audit Committee and in accordance with the Internal Control guidance for directors on the
Combined Code produced by the Turnbull working party.
The Board keeps its risk control procedures under constant review and deals with areas of
improvement which come to its attention.
As might be expected in a Group of this size, a key control procedure is the day to day
supervision of the business by the executive directors supported by managers within the Group
companies.
The Board has considered the need for an internal audit function, but has decided that, because
of the size of the Group and the systems and controls in place, it is not appropriate at present.
The Board reviews this on a regular basis.
Board Meetings
There were 12 Board Meetings during the year, 6 before the Scheme of Arrangement for XP
Power plc and 6 after for XP Power Limited. The attendees were as follows:
Date
Roger
Bartlett
Paul
Dolan Dyson Hafferty
John Michael Mike Mickey Duncan
Penny
Laver
Lynch
James Andy
Sng
Peters
Larry
Tracey
12 February 2007
20 February 2007
21 March 2007
26 March 2007
13 April 2007
18 April 2007
XP Power plc
24 April 2007
26 June 2007
6 August 2007
29 October 2007
14 November 2007
18 December 2007
XP Power Limited
1
1
1
-
-
-
3
-
-
-
-
-
-
1
1
1
-
-
1
4
-
-
-
-
-
-
Total
3
4
1
1
1
-
1
1
5
1
-
1
-
1
-
3
8
-
-
-
-
-
-
0
1
1
1
-
1
1
5
5
1
1
1
1
-
-
4
1
1
1
1
1
1
6
1
1
1
1
-
1
5
1
1
1
1
1
1
6
1
1
1
1
1
1
6
1
1
1
1
1
1
6
10
11
12
1
1
1
-
1
1
5
1
-
1
1
1
-
4
9
-
-
-
-
-
-
-
1
1
1
-
1
1
5
5
1
1
-
1
1
1
5
1
1
1
1
1
-
5
10
20
XP Power Limited
Corporate Governance Report
For the financial year ended 31 December 2007
Audit Committee
The Audit Committee consists of the non-executive directors John Dyson (chairman) and
Michael Hafferty (replaced Roger Bartlett as from 24 April 2007). The Audit Committee met
seven times during 2007, the attendees were as follows:
Date
6 February 2007
15 February 2007
18 April 2007
24 April 2007
25 June 2007
2 August 2007
13 November 2007
Attendees
All except Roger Bartlett
All
All except Roger Bartlett
All
All
All
All
The Committee is responsible for, amongst other things, ensuring that the financial performance
of the Group is properly reported and monitored focusing particularly on compliance with legal
requirements, accounting standards, and the requirements of the UK Listing Authority. The
Committee also meets with the auditors and reviews the reports from the auditors without
executive board members present.
As part of its remit, the Audit Committee also keeps under review the nature and extent of audit
and non-audit services provided to the Group by the auditors. During the year the Committee
formalised its policy and approved a set of procedures in relation to the appointment of external
auditors to undertake audit and non-audit work. Under this policy:
•
•
•
the award of audit-related services to the auditors in excess of £50,000 must first be
approved by the Chairman of the Audit Committee, who in his decision to approve will take
into account the aggregate of audit-related revenue already earned by the Group Auditor in
that year. Audit related services include formalities relating to borrowing, shareholder and
other circulars, regulatory reports, work relating to disposals and acquisitions, tax assurance
work and advice on accounting policies;
the award of tax consulting services to the auditors in excess of £100,000 must first be
approved by the Chairman of the Audit Committee;
the award of other non-audit related services to the auditors in excess of £20,000 must first
be approved by the Chairman of the Audit Committee;
• and the auditors will be required to make a formal report to the Audit Committee annually on
the safeguards that are in place to maintain their independence and the internal safeguards
in place to ensure their objectivity.
21
XP Power Limited
Corporate Governance Report
For the financial year ended 31 December 2007
Nomination Committee
The Nomination Committee consists of Larry Tracey, James Peters and the non-executive
directors. It is chaired by Larry Tracey and it reviews and considers the appointment of new
directors. Any appointment of a new director is voted on by the whole Board. The Nomination
Committee met once during the year on 12 February 2007. During the year, the Nomination
Committee oversaw the appointment of Andy Sng, as an additional Executive Director and
Michael Hafferty as an additional Non-Executive Director.
Relations with Shareholders
The Group engages in two-way communication with both its institutional and private investors
and responds quickly to all queries received. The Group uses its website www.xppower.com to
give private investors access to the same information that institutional investors receive.
Interested parties are able to register for the Group’s email alert service on this website to
receive timely announcements and other information published from time to time. The Annual
General Meeting is also an opportunity to communicate with shareholders where Directors are
available for questions.
Going Concern
The directors, after making enquiries, are of the view, as at the time of approving the accounts,
that there is a reasonable expectation that it will have adequate resources to continue operating
for the foreseeable future and therefore the going concern basis has been adopted in preparing
these accounts.
22
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
Introduction
This report meets the relevant requirements of the Listing Rules of the Financial Services
Authority and describes how the Board has applied the Principles of Good Governance relating
to Directors’ remuneration.
The members of the Remuneration Committee during 2007 were John Dyson, Roger Bartlett
(both Non-Executive Directors), James Peters and Larry Tracey up to the date of the Scheme of
Arrangement on 24 April 2007. After that date the Remuneration Committee members were
John Dyson, Michael Hafferty (both Non-Executive Directors), James Peters and Larry Tracey.
The committee is chaired by John Dyson.
The Group considers it appropriate that Larry Tracey and James Peters are members of the
Remuneration Committee as they are both major shareholders and would therefore act in the
interests of shareholders as a whole even though this is recognised as a breach of the UK
(see page 20). The Committee makes
Combined Code on Corporate Governance
recommendations to the Board. No Director plays a part in any discussion regarding his own
remuneration.
There were 3 Remuneration Committee Meetings during the year, the attendees being as
follows:
Date
20 February 2007
24 April 2007
14 November 2007
Attendees
All
All
All
Remuneration Policy for the Executive Directors
Executive remuneration packages are prudently designed to attract, motivate and retain
Directors of the high calibre needed to maintain the Group’s position and to reward them for
enhancing value to shareholders. The performance measurement of the Executive Directors
and key members of senior management and the determination of their annual remuneration
package are undertaken by the Committee.
The Committee consider the experience and value the individual directors contribute to the
Group in assessing their level of pay
There are five main elements of the remuneration package for Executive Directors and senior
management:
• basic annual salary;
• benefits-in-kind;
• annual profit share payments;
• share incentives; and
• pension arrangements.
The Company’s policy is that a proportion of the remuneration of the Executive Directors should
be performance-related. As described below, Executive Directors may earn annual profit shares
together with the benefits of participation in share option schemes.
23
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
Basic salary
An Executive Director’s basic salary is generally reviewed by the Committee each year and
when an individual changes position or responsibility. Basic salaries for Executive Directors have
been reviewed as follows:
Executive
Larry Tracey
Mike Laver
Mickey Lynch
Duncan Penny
James Peters
Andy Sng
Date of last review
Effective date of last increase
20 February 2007
1 January 2005
20 February 2007
1 January 2007
20 February 2007
1 January 2007
20 February 2007
1 February 2006
20 February 2007
1 January 2005
14 November 2007
1 January 2008
Executive Directors’ contracts of service which include details of remuneration will be available
for inspection at the Annual General Meeting.
Benefits-in-kind
The Executive Directors receive certain benefits-in-kind, principally life assurance and private
medical insurance. In additional Duncan Penny received a housing allowance relating to his
relocation to Singapore and Andy Sng received a housing allowance relating to his relocation to
Shanghai.
Annual bonus payments
The Committee establishes the profit thresholds that must be met for each financial year before
a cash bonus is to be paid. The Committee believes that any incentive compensation awarded
should be tied to the interests of the Company’s shareholders and that the principal measure of
those interests is growth in operating profit. Account is also taken of the relative success of the
different parts of the business for which the Executive Directors are responsible. The profit
share that an Executive Director can be paid is uncapped.
Share options
The Group operates a number of share incentive schemes. The IFX Power plc Share Option
Plan as approved by the shareholders in April 2001 allows the Company to grant options over up
to 2,113,711 shares representing 10% of the issued share capital at the time the Plan was set
up with or without performance conditions. Due to the Scheme of Arrangement, the IFX Power
plc Share Option Plan has been continued by XP Power Limited under the same conditions.
Andy Sng received options over 30,000 shares on his appointment to the Board. Prior to that, no
options under this scheme have been awarded to Executive Directors since 2002.
24
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
Pension arrangements
In the USA, the Group operates a defined contribution “401K Plan”. The Group matches the
director’s contribution to this plan up to a maximum of 2% of salary.
The Group does not operate a pension scheme for the Singapore based directors but does
make a payment to them of 3% of base salary in order for them to invest in a pension plan of
their choosing.
Performance graph
The following graph shows the Company’s performance, compared with the performance of the
FTSE 350 Electronic and Electrical Equipment Price Index.
600
500
400
300
200
100
0
7
0
0
2
1
1
/
/
7
0
0
2
2
1
/
/
7
0
0
2
3
1
/
/
7
0
0
2
4
1
/
/
7
0
0
2
5
1
/
/
7
0
0
2
6
1
/
/
7
0
0
2
7
1
/
/
7
0
0
2
8
1
/
/
7
0
0
2
9
1
/
/
7
0
0
2
0
1
1
/
/
7
0
0
2
1
1
1
/
/
7
0
0
2
2
1
1
/
/
XP POWER (DI)
FTSE 350 ELTRO/ELEC EQ£ - PRICE INDEX
Directors’ contracts
The Executive Directors’ contracts run for an indefinite period, with the Company being able to
terminate the contracts without cause giving 12-months notice. When a director is terminated
without cause, the director is entitled to a termination payment of 12 months of basic pay.
Source: Datastream
Non-Executive Directors
Non-Executive Directors’ contracts run for an initial 12 month period, renewable each year.
They are not entitled to any termination payments. Non-Executive Directors are not entitled to
share options or pensions.
All Non-Executive Directors have specific terms of engagement and their remuneration is
determined by the Board within the limits set by the Articles of Association. Under the terms and
conditions of appointment of Non-Executive Directors, the annual fee paid to each Non-
Executive Director is currently S$50,000 (£17,000).
25
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
Aggregate directors’ remuneration
The total amounts for directors’ remuneration were as follows:
£
Basic salaries
Benefits in kind
Profit share
Fees to related parties
Money purchase pension contributions
Non-executive fees
Contractual severance payments
Relocation payments
Total remuneration
Directors’ emoluments
2007
2006
648,946
517,968
84,231
16,902
15,000
17,137
33,917
-
1,000,000
72,720
133,840
60,000
8,411
40,000
334,769
-
1,816,133 1,167,708
Name of Director
Salary
and fees
Relocation
payments
Pension Benefits
Profit
share
2007 Total
2006 Total
£
Executive
Larry Tracey (v)
Mike Laver
Mickey Lynch
Duncan Penny
James Peters
Andy Sng (iv)
138,125
115,017
92,514
153,125
123,125
42,040
250,000
-
-
500,000
250,000
-
2,869
2,300
1,850
4,594
3,769
1,755
4,647
3,925
4,987
43,359
4,561
22,753
-
11,902
-
-
-
5,000
395,641
133,144
99,351
701,078
381,455
71,548
112,140
155,394
128,106
187,459
156,442
-
Non-Executive
Roger Bartlett (i)
John Dyson
Paul Dolan (ii)
Michael
(iii)
Hafferty
3,750
15,083
3,750
11,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,750
15,083
3,750
11,333
15,000
15,000
10,000
-
(i) Resigned 24 April 2007.
(ii) Appointed 19 March 2006; resigned 24 April 2007.
(iii) Appointed 24 April 2007.
(iv) Appointed 24 April 2007.
(v) Larry Tracey’s salary and fees includes £15,000 paid to Corryann Limited, a company
100% owned by Larry Tracey, under an agreement to provide the Group with the services
of Larry Tracey. This arrangement was ended on 1 April 2007.
26
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
Directors’ interests in ordinary shares of XP Power Limited
Executive
Larry Tracey (a)
Mike Laver (b)
Mickey Lynch (c)
Duncan Penny (d)
James Peters (e)
Andy Sng (appointed 12 February 2007)
Non-executive
John Dyson
Michael Hafferty (appointed 24 April 2007)
As at 31
December
2007
As at 1
January
2007
2,791,779
184,500
75,000
400,000
2,899,779
-
2,829,779
154,750
50,000
300,000
3,149,779
-
15,000
-
15,000
-
(a) Larry Tracey sold 300,000 shares at a price of 511p on 26 February 2007 and purchased
262,000 at an average price of 263.34p on 21 December 2007.
(b) Mike Laver sold 3,750 shares at a price of 480p on 18 June 2007, purchased 6,000
shares at a price of 246p on 31 October 2007 and purchased 2,500 shares at a price of
280p on 21 December 2007. On 24 April 2007 Mike Laver also purchased 25,000 shares
at a price of 507.25p under the Company’s deferred payment share scheme. Under this
scheme payment is deferred until the shares are sold. As at 31 December 2007, the
outstanding balance of the deferred payment share scheme is £350,813. The shares
cannot be sold until four years from the date of acquisition.
(c) Mickey Lynch purchased 25,000 shares 24 April 2007 at a price of 507.25p under the
Company’s deferred payment share scheme. Under this scheme payment is deferred
until the shares are sold. As at 31 December 2007, the outstanding balance of the
deferred payment share scheme is £310,562. The shares cannot be sold until four years
from the date of acquisition.
(d) Duncan Penny purchased 100,000 shares at a price of 249.34p on 31 October 2007.
Duncan Penny participated in the deferred payment share scheme and as at 31
December 2007, the outstanding balance is £366,000.
(e) James Peters sold 300,000 shares at a price of 511p on 26 February 2007 and
purchased 50,000 shares at a price of 250p on 31 October 2007.
27
XP Power Limited
Directors’ Remuneration Report
For the financial year ended 31 December 2007
In addition to the directors’ interests in the ordinary shares of the Company, the following
directors have interests in share options:
Executive
Date of grant
Exercise
price
As at 31
December
2007
As at 1
January
2007
Number of
shares
Number of
shares
Mike Laver (a)
24 August 2001
342.5p
21 August 2002
175.0p
Mickey Lynch (b)
24 August 2001
342.5p
21 August 2002
175.0p
24,000
25,000
15,000
10,000
24,000
50,000
15,000
20,000
Duncan Penny
24 August 2001
342.5p
25,000
25,000
Andy Sng (appointed 24 April 2007)
21 April 2005
26 April 2007
411.0p
507.2p
20,000
30,000
20,000
-
Options become exercisable over 4 years in equal annual instalments from the date of grant.
All options expire 10 years after the date of grant.
(a) Mike Laver exercised options over 25,000 shares which had been granted at a price of
175p on 21 August 2002 and sold them at a price of 511p on 26 February 2007.
(b) Mickey Lynch exercised options over 10,000 shares which had been granted at a price
of 175p on 21 August 2002 and sold them at a price of 511p on 26 February 2007.
The highest and lowest mid market prices of the shares of XP Power Limited during 2007 were
528.4p and 235.3p per share respectively. The mid-market price on 31 December 2007 closed
at 284.0p per share.
Approval
This report was approved by the Board of Directors on 3 March 2008 and signed on its behalf
by:
John Dyson - Remuneration Committee Chairman
28
XP Power Limited
Statement by Directors
For the financial year ended 31 December 2007
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated financial statements of the Group as
set out on pages 31 to 86 are drawn up so as to give a true and fair view of the state of affairs of
the Company and of the Group as at 31 December 2007 and of the results of the business,
changes in equity and cash flows of the Group for the financial year then ended; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they fall due.
On behalf of the directors
Larry Tracey
Executive Chairman
3 March 2008
Duncan Penny
Chief Executive
29
XP Power Limited
Independent Auditor’s Report
We have audited the accompanying financial statements of XP Power Limited (the “Company”) and
its subsidiaries (the “Group”) set out on pages 31 to 86, which comprise the balance sheets of the
Company and of the Group as at 31 December 2007, and the consolidated income statement,
consolidated statement of changes in equity and consolidated cash flow statement of the Group for
the year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ Responsibility for the Financial Statements
The Company’s directors are responsible for the preparation and fair presentation of these financial
statements in accordance with the provisions of the Singapore Companies Act and International
Financial Reporting Standards. This responsibility includes designing, implementing and maintaining
internal control relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those Standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion,
(a)
(b)
the balance sheet of the Company and the consolidated financial statements of the Group
are properly drawn up in accordance with the provisions of the Singapore Companies Act
(the “Act”) and International Financial Reporting Standards so as to give a true and fair view
of the state of affairs of the Company and of the Group as at 31 December 2007, and the
results, changes in equity and cash flows of the Group for the financial year ended on that
date; and
the accounting and other records required by the Act to be kept by the Company and by
those subsidiaries incorporated in Singapore of which we are the auditor, have been properly
kept in accordance with the provisions of the Act.
PricewaterhouseCoopers
Certified Public Accountants
Singapore, 3 March 2008
30
XP Power Limited
Consolidated Income Statement
For the financial year ended 31 December 2007
£ Millions
Sales
Cost of sales
Gross profit
Expenses
Distribution and marketing
Administrative
Research and development cost
Reorganisation costs
Other operating income
Operating profit
Finance cost
Profit before tax
Income tax expense
Total profit
Attributable to:
Equity holders of the Company (restated)
Minority interests (restated)
Total profit
Note
2007
2006
Restated
4
5
7
9
4
27
27
66.3
(38.3)
28.0
(16.4)
(0.8)
(1.8)
(2.4)
0.1
6.7
(1.7)
5.0
(1.4)
3.6
3.4
0.2
3.6
78.7
(49.5)
29.2
(16.4)
(0.7)
(1.9)
(1.0)
0.1
9.3
(1.3)
8.0
(2.0)
6.0
5.2
0.8
6.0
Earnings per share for profit from continuing operations
attributable to equity holders of the Company (pence per share)
- Basic
- Diluted
11
11
17.9
17.8
27.9
27.5
31
XP Power Limited
Consolidated Balance Sheet
For the financial year ended 31 December 2007
Note
2007
2006
Restated
£ Millions
ASSETS
Current Assets
Cash and cash equivalents
Derivative financial instruments
Trade and other receivables
Other current assets
Inventories
Total current assets
Non-current assets
Interest in associates
Property, plant and equipment
Long leasehold building
Goodwill
Intangible assets
ESOP loans to employees
Deferred income tax assets
Total non-current
assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current income tax liabilities
Bank loans and overdraft
Provisions for other liabilities and charges
Total current liabilities
Non-current liabilities
Borrowings
Deferred income tax liabilities
Provision for other liabilities and charges
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital
Share premium account
Merger reserve
Own shares (as restated)
Translation reserve (as restated)
Retained earnings (as restated)
27
27
27
27
27
27
Minority interest
TOTAL EQUITY
18
25
20
29
19
17
14
30
12
13
31
26
21
9
24
21
24
26
23
3.6
-
11.4
1.8
10.5
27.3
0.1
2.4
1.0
29.6
3.2
3.0
0.4
39.7
67.0
8.0
2.4
2.7
0.1
13.2
20.3
1.4
2.3
24.0
37.2
29.8
27.2
-
0.2
(0.3)
(2.5)
5.0
29.6
0.2
29.8
4.2
0.1
13.6
1.0
11.1
30.0
0.1
2.2
1.0
30.1
2.6
2.6
0.6
39.2
69.2
10.1
2.4
7.6
1.4
21.5
14.4
1.4
2.5
18.3
39.8
29.4
0.2
27.0
0.2
(6.3)
(2.3)
10.6
29.4
-
29.4
32
XP Power Limited
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2007
Share
capital
Share
premium
account
Company
treasury
shares
Merger
reserve
Translation
reserve
Retained
earnings
Total
attributable
to equity
holders of
the parent
Minority
interest
Total
Equity
£ Millions
Restated
Balance at 1 January 2006
0.2
27.0
(6.8)
0.2
(2.1)
8.7
27.2
(3.2)
(3.2)
(0.8)
(4.0)
Exchange differences on
translation of foreign
operations
Loss on treasury shares
Tax on items taken directly
to equity
Net income recognised
directly in equity
Profit for the year
Total recognized income
Sale of treasury shares
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.8
-
-
-
-
-
-
-
-
-
Purchase of own shares
-
-
(0.3)
-
Restated balance at
(0.2)
-
-
-
(0.5)
(0.2)
(0.5)
0.1
0.1
(0.2)
(0.4)
(0.6)
-
(0.2)
-
-
-
5.2
4.8
-
5.2
4.6
0.8
0.3
-
31 December 2006
0.2
27.0
(6.3)
0.2
(2.3)
10.6
29.4
Exchange differences on
translation of foreign
operations
Loss on treasury shares
Tax on items taken directly
to equity
Net income recognised
directly in equity
Profit for the year
Total recognized income
-
-
-
-
-
-
-
-
-
-
-
-
Transfer of share premium
on Scheme of Arrangement
27.0
(27.0)
Cancellation of treasury
Shares
Sale of treasury shares
Dividends paid
-
-
-
Balance at 31 December
2007
27.2
-
-
-
-
-
-
-
-
-
-
-
5.2
0.8
-
-
-
-
-
-
-
-
-
-
-
(0.2)
-
-
-
(0.3)
(0.2)
(0.3)
0.1
0.1
(0.2)
(0.2)
(0.4)
-
(0.2)
-
-
-
-
3.4
3.2
-
(5.2)
3.4
3.0
-
-
0.8
(3.6)
(3.6)
-
-
-
-
-
0.8
0.8
-
27.2
(0.2)
(0.5)
0.1
(0.6)
6.0
5.4
0.8
-
-
-
-
-
-
0.2
0.2
-
-
-
-
-
29.4
(0.2)
(0.3)
0.1
(0.4)
3.6
3.2
-
-
0.8
(3.6)
(0.3)
0.2
(2.5)
5.0
29.6
0.2
29.8
33
XP Power Limited
Consolidated Cash Flow Statement
For the financial year ended 31 December 2007
£ Millions
Cash flows from operating activities
Total profit
Adjustments for
- Income tax expense
- Amortisation, depreciation and impairment
- Finance expenses
- Loss on fair valuation of derivative financial instruments
- Unrealised translation losses
Change in the working capital, net effects from acquisition
and disposal of subsidiaries
- Inventories
- Trade and other receivables
- Trade and other payables
- Provisions for liabilities and other charges
Cash generated from operations
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of a subsidiary, net of cash acquired
Purchases and construction of the property, plant and equipment
Purchases of intangible assets (R&D)
ESOP loan issued
Payment of deferred consideration
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Sale of treasury shares
Interest paid
Dividends paid to equity holders of the Company
Dividends paid to minority shareholders
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of currency translation on cash and cash equivalents
Cash and cash equivalents at end of financial year
2007
2006
Restated
3.6
1.4
1.1
1.7
0.1
-
0.6
1.8
(2.5)
0.5
(1.4)
6.9
(0.4)
(0.9)
(1.0)
(0.4)
(1.4)
(4.1)
5.9
0.5
(1.5)
(3.6)
-
1.3
4.1
(3.4)
0.2
0.9
6.0
2.0
1.2
1.3
-
0.5
(2.9)
0.1
0.1
-
(2.5)
5.8
(0.8)
(1.2)
(0.9)
0.3
(1.0)
(3.6)
3.2
0.4
(1.3)
(3.2)
(0.8)
(1.7)
0.5
(3.9)
-
(3.4)
34
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
1. General Information
XP Power Limited (the “Company”) is listed on the London Stock Exchange and
incorporated and domiciled in Singapore. The address of its registered office is 138
Robinson Road #17-00, The Corporate Office, Singapore 068906.
The nature of the Group’s operations and its principal activities are set out in the
Background to the Group and its Products and Markets on page 4.
These financial statements are presented in Pounds Sterling.
Reverse acquisition
The Company was incorporated on 12 February 2007. On 24 April 2007 the Company
became the holding company of XP Power plc pursuant to a scheme of arrangement
under section 425 of the Companies Act 1985 of the United Kingdom (‘the Scheme of
Arrangement’).
Under International Financial Reporting Standard (“IFRS”) 3, Business Combinations, this
Group reconstruction effected by the Scheme of Arrangement has been accounted for as
a reverse acquisition of the Company by XP Power plc. This consolidated financial
information issued in the name of the legal parent, the Company, accordingly has been
prepared and presented in substance as a continuation of the financial information of the
legal subsidiary, XP Power plc. The following accounting treatment has been applied in
respect of the reverse acquisition:
At Group level:
a) the assets and liabilities of the legal subsidiary, XP Power plc, are recognized and
measured in the consolidated financial information at the pre-combination carrying
amounts, without restatement to fair values;
b) the retained earnings and other equity balances recognized in the consolidated
financial information reflect the retained earnings and other equity balances of XP
Power plc immediately before the business combination. The results of the period from
1 January 2007 to the date of the business combination are those of XP Power plc, as
the Company did not trade prior to the transaction. However, the equity structure
appearing in the consolidated financial statements (i.e. the number and type of equity
issued) reflects the equity structure of the Company, being the legal parent to effect
the combination; and
c) The comparative figures of the Group have not been audited. However they were
prepared based on the audited consolidated financial statements of the legal
subsidiary, XP Power plc, for the year ended 31 December 2006.
The Company had no significant assets, liabilities or contingent liabilities of its own at the
time that the Scheme of Arrangement took effect, and no cash consideration was paid in
respect of the business combination. Under the Scheme of Arrangement the Company
issued to the same shareholders the same number of shares in place of their
shareholdings in XP Power plc. Therefore no additional shares were deemed to be issued
by XP Power plc, the legal subsidiary, for the reverse acquisition. Hence, the cost of
combination is deemed to be nil.
35
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
1. General Information (cont’d)
At the Company level
Reverse acquisition accounting only applies in the consolidated financial statements.
Therefore, in the legal parent’s separate financial statements, the investment in the legal
subsidiary is accounted for at cost less accumulated impairment losses in the Company’s
balance sheet.
2.
Basis of accounting policies
2.1 Basis of preparation
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS).
The financial statements have been prepared on the historical cost basis. The principal
accounting policies are set out below.
The preparation of financial statements in conformity with IFRS requires management to
make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying amounts of assets and liabilities that are not
readily apparent from other sources.
On 1 January 2007, the Group adopted the new standards, amendments and
interpretations that are mandatory for application from that date. Changes to the Group’s
accounting policies have been made as required, in accordance with the transitional
provisions in the respective standards, amendments and interpretations.
The following are the new or amended IFRS and interpretations that are relevant to the
Group:
Amendments to IFRS 1
IFRS 7
IFRIC 8
IFRIC 10
Presentation of Financial Statements – Capital Disclosures
Financial Instruments: Disclosures
Scope of IFRS 2
Interim Financial Reporting and Impairment
The adoption of the above IFRS interpretations did not result in any substantial changes to
the Group’s accounting policies or any significant impact on the disclosures in this
Earnings’ Release. IFRS 7 and the complementary amended IFRS 1 introduce new
disclosures relating to financial instruments and capital respectively which will be reflected
in the audited financial statements.
The Group has not applied early adoption of any new Standards or interpretations.
36
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.2 Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using
the currency of the primary economic environment in which the entity operates (“functional
currency”). The financial statements are presented in Pounds Sterling, which is different
from the Company’s functional currency. The Company’s functional currency is the United
States Dollar.
The financial statements are being presented in Pounds Sterling, as the majority of the
Company’s shareholders are based in the UK and the Company is listed on the London
Stock Exchange. It is the currency that the directors of the Group use when controlling and
monitoring the performance and financial position of the Group.
(b) Foreign currency transactions and balances
Transactions in foreign currencies are translated into the functional currency at the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognized in the income statement, except when deferred in equity as qualifying cash
flow hedges and qualifying net investment hedges.
(c) Group companies
The assets and liabilities of the Group’s foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the period unless exchange rates fluctuate significantly.
Exchange differences arising, if any, are classified as equity and transferred into the
Group’s translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing rate. The
Group has elected to treat goodwill and fair value adjustments arising on the acquisitions
before the date of transition to IFRS as Pound Sterling denominated assets and liabilities
converted using the exchange rates at the dates of acquisition.
2.3 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and
represents amounts receivable for goods provided in the normal course of business, net of
discounts, Value Added Tax/Goods and Services Tax and other sales related taxes.
a) Sales of goods are recognised when a Group entity has shipped the goods to locations
specified by its customers in accordance with the sales contract and the collectability of
the related receivable is reasonably assured.
b) Interest income is recognised using the effective interest method.
37
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.4 Group accounting
(c) Subsidiaries
The consolidated financial statements incorporate the financial statements of the
Company and entities controlled by the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
The acquisition of subsidiaries is accounted for using the purchase method. The cost of
the acquisition is measured at the aggregate of the fair values, at the date of exchange, of
assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree, plus any costs directly attributable to the business
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 are recognised at their fair value at the
acquisition date, except for non-current assets (or disposal groups) that are classified as
held for resale in accordance with IFRS 5 Non Current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair value less costs to
sell.
In preparing the consolidated financial statements, transactions, balances and unrealised
gains on transactions between Group entities are eliminated. Unrealised losses are also
eliminated but are considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group.
Minority interests are that part of net results of operations and of net assets of a subsidiary
attributable to the interests, which are not owned directly, or indirectly by the Group. They
are measured at the minorities’ share of fair value of the subsidiaries’ identifiable assets
and liabilities at the date of acquisition by the Group and the minorities’ share of changes
in equity since the date of acquisition, except when the minorities’ share of losses in a
subsidiary exceeds its interests in the equity of that subsidiary. In such cases, the excess
and further losses applicable to the minorities are attributed to the equity holders of the
Company, unless the minorities have a binding obligation to, and are able to, make good
the losses. When that subsidiary subsequently reports profits, the profits applicable to the
minority interests are attributed to the equity holders of the Company until the minorities’
share of losses previously absorbed by the equity holders of the Company are fully
recovered.
The results of subsidiaries acquired or disposed of in the year are included in the
consolidated income statement from the effective date of acquisition or up to the effective
date of disposal as appropriate.
(d) Transactions with minority interests
The Group applies a policy of treating transactions with minority interests as transactions
with parties external to the Group. Disposals to minority interests result in gains and losses
for the Group that are recognised in the income statement.
Purchases from minority interests result in goodwill, being the difference between any
consideration paid and the Group’s incremental share of the carrying value of identifiable
net assets of the subsidiary.
38
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.4 Group accounting (cont’d)
(c) Associated companies
Associated companies are entities over which the Group has significant influence, but not
control, generally accompanied by a shareholding giving rise to between and including
20% and 50% of the voting rights. Investments in associated companies are accounted for
in the consolidated financial statements using the equity method of accounting.
Investments in associated companies in the consolidated balance sheet include goodwill
(net of any accumulated impairment losses) identified on acquisition.
Investments in associated companies are initially recognised at cost. The cost of an
acquisition is measured at the fair value of the assets given, equity instruments issued or
liabilities incurred or assumed at the date of exchange, plus costs directly attributable to
the acquisition.
In applying the equity method of accounting, the Group’s share of its associated
companies’ post-acquisition profits or losses is recognised in the income statement and its
share of post-acquisition movements in reserves is recognised in equity directly. These
post-acquisition movements are adjusted against the carrying amount of the investment.
When the Group’s share of losses in an associated company equals or exceeds its
including any other unsecured non-current
interest
receivables, the Group does not recognise further losses, unless it has obligations or has
made payments on behalf of the associated company.
the associated company,
in
Unrealised gains on transactions between the Group and its associated companies are
eliminated to the extent of the Group’s interest in the associated companies.
Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associated companies have
been changed where necessary to ensure consistency with the accounting policies
adopted by the Group.
(d) Joint ventures
joint ventures are entities over which
The Group’s
the Group has contractual
arrangements to jointly share the control over the economic activity of the entities with one
or more parties. The Group’s interest in joint ventures is accounted for in the consolidated
financial statements using proportionate consolidation.
Proportionate consolidation involves combining the Group’s share of the joint venture’s
income and expenses, assets and liabilities and cash flows of the jointly controlled entities
on a line-by-line basis with similar items in the Group’s financial statements.
When the Group sells assets to a joint venture, the Group recognises only the portion of
unrealised gains or losses on the sale of assets that is attributable to the interest of the
other ventures. The Group recognises the full amount of any loss when the sale provides
evidence of a reduction in the net realisable value of current assets or an impairment loss.
39
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.4 Group accounting (cont’d)
When the Group purchases assets from a joint venture, it does not recognise its share of
the profits of the joint ventures arising from the Group’s purchase of assets until it resells
the assets to an independently party. However, a loss on the transaction is recognised
immediately if the loss provides evidence of a reduction in the net realisable value of
current assets or an impairment loss.
The Group has changed accounting policies of joint ventures where necessary to ensure
consistency with the accounting policies adopted.
2.5 Property, plant and equipment
Items of property, plant and equipment, including land and buildings, are stated at cost
less accumulated depreciation and any recognised impairment losses.
The cost of an item of property, plant and equipment initially recognised includes its
purchase price and any cost that is directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management.
Depreciation is charged so as to write off the cost or valuation of the assets over their
estimated useful lives, using the straight-line method, on the following bases:
Plant and machinery
Motor vehicles
Office equipment
Leasehold improvements
-
-
-
-
25 – 33%
25%
25 – 33%
10% or over the life of the lease if shorter
The residual values, estimated useful lives and depreciation method of property, plant
and equipment are reviewed, and adjusted as appropriate, at each balance sheet date.
The effects of any revision are recognised in the income statement when the changes
arise.
Subsequent expenditure relating to property, plant and equipment that has already been
recognised is added to the carrying amount of the asset only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. All other repair and maintenance expense is
recognised in the income statement when incurred.
The gain or loss arising on the disposal or retirement of an asset is determined as the
difference between the sale proceeds and the carrying amount of the asset, and is
recognised in the income statement.
2.6
Intangible assets
(a) Goodwill on acquisitions
Goodwill arising on consolidation represents the excess of the cost of acquisition over the
Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary,
associate or jointly controlled entity at the date of acquisition.
40
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.6
Intangible assets (cont’d)
Goodwill is recognised as an asset and reviewed for impairment at least annually. For the
purpose of impairment testing, goodwill is allocated to each of the Group’s cash-
generating-units (“CGU”) expected to benefit from synergies arising from the business
combination. An impairment loss is recognised when the carrying amount of a CGU,
including the goodwill, exceeds the recoverable amount of the CGU. Recoverable
amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of
goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the
basis of the carrying amount of each asset in the CGU.
Any impairment is recognised immediately in profit or loss and is not subsequently
reversed.
On disposal of a subsidiary, associate or joint venture, the attributable amount of goodwill
is included in the determination of the profit or loss on disposal.
(b) Internally generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is
incurred.
An internally generated intangible asset arising from the Group’s product development is
recognised only if all of the following conditions are met:
(cid:131) An asset is created that can be separately identified;
(cid:131)
(cid:131) The development cost of the asset can be measured reliably.
It is probable that the asset created will generate future economic benefits; and
Internally generated intangible assets are amortised on a straight-line basis over their
useful lives, which vary between 4 and 7 years depending on the exact nature of the
project undertaken. Where no internally generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period in which it is incurred.
2.7
Impairment – non-financial assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where
the asset does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated cash flows are discounted to their present value
using a pre-tax discount rate of 9.9% (2006: 11.2%) that reflects current market
assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
41
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.7
Impairment – non-financial assets (con’td)
If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset is
increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset in prior years. A reversal of the
impairment loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is treated as a
revaluation increase.
2.8 Borrowing costs
All borrowing costs are recognised in profit or loss using the effective interest method.
2.9 Financial assets
(a) Classification
The Group classifies its financial assets depending on the purpose for which the assets
were acquired. Management determines the classification of its financial assets at initial
recognition. The Group’s financial assets comprise loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are presented as current assets,
except for those maturing later than 12 months after the balance sheet date, which are
presented as non-current assets. Loans and receivables are presented as “trade and
other receivables” and “cash and cash equivalents” on the balance sheet.
(b) Recognition/derecognition
Purchases and sales of financial assets are recognised on the trade-date – the date on
which the Group commits to purchase or sell the asset. Financial assets are
derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all risks and
rewards of ownership. On disposal of a financial asset, the difference between the
carrying amount and the sale proceeds is recognised in the income statement. Any
amount in the fair value reserve relating to that asset is transferred to the income
statement.
(c) Measurement
Loans and receivables are initially recognised at fair value plus transaction costs and
subsequently at amortised cost using the effective interest method.
42
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.9 Financial assets (cont’d)
(d)
Impairment
The Group assesses at each balance sheet date whether there is objective evidence that
a loan or receivable is impaired and recognises an allowance for impairment when such
evidence exists. Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy, and default or significant delay in payments are objective evidence
that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment
allowance account, which is calculated as the difference between the carrying amount
and the present value of estimated future cash flows, discounted at the original effective
interest rate. When the asset becomes uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are recognised against
the same line item in the income statement.
The allowance for impairment loss account is reduced through the income statement in a
subsequent period when the amount of impairment loss decreases and the related
decrease can be objectively measured. The carrying amount of the asset previously
impaired is increased to the extent that the new carrying amount does not exceed the
amortised cost had no impairment been recognised in prior periods.
2.10 Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at
amortized cost using the effective interest method.
2.11 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as
a result of past events, it is more likely than not that an outflow of resources will be required
to settle the obligation and the amount has been reliably estimated.
Provisions are measured at the present value of the expenditure expected to be required
to settle the obligation using a pre-tax discount rate that reflects the current market
assessment of the time value of money and the risks specific to the obligation. The
increase in the provision due to the passage of time is recognised in the income
statement as finance expense. Changes in the estimated timing or amount of the
expenditure or discount rate are recognised in the income statement when the changes
arise.
2.12 Borrowings
Interest-bearing bank loans and overdrafts are recorded at their fair value (net of direct
issue costs), normally the proceeds received. Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are accounted for on an
accrual basis to the income statement and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
43
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.13 Leases
Leases where substantially all risks and rewards incidental to ownership are retained by
the lessors are classified as operating leases. Payments made under operating leases
(net of any incentives received from the lessors) are recognised in the income statement
on a straight-line basis over the period of the lease.
2.14 Derivative financial instruments and hedging activities
The Group’s activities expose it primarily to the financial risks of changes in foreign
currency exchange rates and interest rates. The Group periodically uses foreign exchange
forward contracts to hedge the foreign currency exposures. The Group does not use
derivative financial instruments for speculative purposes.
The fair value changes of the currency forward contracts are recognized in the income
statement directly. The Group does not apply hedge accounting.
2.15 Fair value estimation of financial assets and liabilities
The fair values of financial instruments that are not traded in an active market are
determined by using valuation techniques. The Group uses a variety of methods and
makes assumptions that are based on market conditions existing at each balance sheet
date. Where appropriate, quoted market prices or dealer quotes for similar instruments are
used. Valuation techniques, such as discounted cash flow analyses, are also used to
determine the fair values of the financial instruments. The Group does not have any
financial instruments traded in an active market.
The fair values of currency forwards are determined using actively quoted forward
exchange rates.
The fair values of current financial assets and liabilities carried at amortised cost
approximate their carrying amounts.
2.16 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct
materials and, where applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and condition. Cost is
calculated using the weighted average method. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution and reductions for estimated irrecoverable amounts.
44
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.17 Income taxes
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs
from net profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited directly to equity in which
case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its current tax assets
and liabilities on a net basis.
2.18 Cash and cash equivalents
For the purpose of presentation in the consolidated cash flow statement, cash and cash
equivalents include cash on hand, deposits with financial institutions and bank overdrafts.
Bank overdrafts are presented as current borrowings on the balance sheet.
45
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.19 Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance
with transitional provisions, IFRS 2 has been applied to all grants of equity instruments
after 7 November 2002 that were unvested as of 1 January 2005.
The Group issues equity-settled share-based payments to certain employees. Equity-
settled share-based payments are measured at fair value at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate
of shares that will eventually vest. At each balance sheet date, the Group revises its
estimates of the number of shares under options that are expected to become exercisable
on the vesting date and recognises the impact of the revision of the estimates in the
income statement, with a corresponding adjustment to the share option reserve over the
remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) and the
related balance previously recognised in the share option reserve are credited to share
capital account, when new ordinary shares are issued, or to the “treasury shares” account,
when treasury shares are re-issued to employees.
2.20 Retirement benefit costs
The Group operates several defined contribution plans. Payments to defined contribution
retirement benefit schemes are charged as an expense as they fall due. The Group has no
further payment obligations once the contributions have been paid.
2.21 Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees.
A provision is made for the estimated liability for leave as a result of services rendered
by employees up to the balance sheet date.
2.22 Share capital and treasury shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the
issuance of new ordinary shares are deducted against the share capital account.
When any entity within the Group purchases the Company’s ordinary shares (‘treasury
share’), the consideration paid including any directly attributable incremental cost is
presented as a component within equity attributable to the Company’s equity holders, until
they are cancelled, sold or reissued.
When treasury shares are subsequently cancelled, the cost of treasury shares are
deducted against the share capital account if the shares are purchased out of capital of
the Company, or against the retained earnings of the Company if the shares are
purchased out of earnings of the Company.
46
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
2.22 Share capital and treasury shares (cont’d)
When treasury shares are subsequently sold or reissued pursuant to the employee share
option scheme, the cost of treasury shares is reversed from the treasury share account
and the realised gain or loss on sale or reissue, net of any directly attributable incremental
transaction costs and related income tax, is recognised in the retained earnings of the
Company.
2.23 Dividends to Company’s shareholders
Dividends to the Company’s shareholders are recognised when the dividends are
approved for payment.
2.24 Investments in subsidiaries, joint ventures and associated companies
Investments in subsidiaries, joint ventures and associated companies are carried at cost
less accumulated impairment losses in the Company’s balance sheet. On disposal of
investments in subsidiaries, joint ventures and associated companies, the difference
between disposal proceeds and the carrying amounts of the investments are recognised in
the income statement.
2.25 Segment reporting
A business segment is a distinguishable component of the Group engaged in providing
products or services that are subject to risks and returns that are different from those of
other business segments. A geographical segment is a distinguishable component of the
Group engaged in providing products or services within a particular economic environment
that is subject to risks and returns that are different from those of segments operating in
other economic environments.
3. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group’s accounting policies, as described in note 2,
management has made the following judgements and estimations that have the most
significant effect on the amounts recognised in the financial statements.
a) Recoverability of Capitalised R&D
During the year £ 0.9 million of development costs were capitalised bringing the total
amount of development cost capitalised as intangible assets as of 31 December 2007 to
£2.6 million, net of amortisation. Management has reviewed the balances by project,
compared the carrying amount to expected future revenues and profits and is satisfied that
no impairment exists and that the costs capitalised will be fully recovered as the products
are launched to market. New product projects are monitored regularly and should the
technical or market feasibility of a new product be in question, the project would be
cancelled and capitalised costs to date removed from the balance sheet and charged to
the income statement.
47
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
3.
Critical accounting judgements and key sources of estimation uncertainty (cont’d)
(b) Impairment of Goodwill
The Group tests annually for impairment or more frequently if there are indications that
goodwill might be impaired.
The recoverable amount of the goodwill is determined from value in use calculations. The
key assumptions and estimates for the value in use calculations are those regarding the
discount rates, growth rates and expected changes to sales and overheads during the
period. Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the cash
generating units.
The Group prepares cash flow forecasts derived from the most recent financial budgets
approved by management (which take into account past experience and industry growth
forecasts) for the next five years and extrapolates cash flows for the following five years
assuming no growth from that date. The carrying amount of goodwill as at 31 December
2007 was £ 29.6 million with no impairment adjustment required for 2007.
If the management’s estimated revenues decrease between 10% to 15% it will trigger an
impairment adjustment and the carrying amounts of goodwill will be lowered.
(c) Estimation of future deferred consideration payments
As of the 31 December 2007 balance sheet date the Group has recorded estimated future
payments related to the acquisition of the remaining of 30.3% of Powersolve. When
discounted to present value the total of these payments are estimated at £ 2.3 million and
that amount is reflected on the balance sheet as of 2007 year end. Since the final
payments will be dependent on the actual future financial performance of the business an
estimate is required to approximate future business conditions.
If Powersolve’s earning increase or decrease by 10%, the deferred consideration will be
affected by £0.2 million.
(d) Deferred income tax
The Group has an unrecognised deferred tax asset of £ 2.2 million (2006: £2.4 million).
The eventual recognition of this asset is dependent of the assessment of the relevant
subsidiaries tax position by the taxation authority in that jurisdiction. The tax asset will be
brought to account on final acceptance of tax returns filed in the relevant jurisdiction.
4. Segmental reporting
For management purposes, the Group is organised on a geographic basis by location of
where the sales originated. This is the basis on which the Group reports its primary
segment information. The Group's products are essentially a single class of business;
however, from a sales and marketing perspective, the Group's sales activities are
organised by class of customer. The same geographic assets deliver the same class of
products to the different class of customer. The sales information by class of customer has
been provided to assist the user of the accounts; however, since the assets are not
separated by class of business further information on net assets and capital additions by
class of customers has not been provided.
48
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
4. Segmental reporting (cont’d)
Geographical segment
The geographical segmentation is as follows:
£ Millions
Revenue
Europe
North America
Asia
Intercompany elimination
Total Revenue
Segment result
Europe
North America
Asia
Interest, corporate operating costs and associates
Segment result
Tax
Profit after tax
2007
2006
34.2
35.6
9.4
(12.9)
66.3
4.7
5.4
1.1
(6.2)
5.0
(1.4)
3.6
36.3
45.7
0.6
(3.9)
78.7
3.3
6.2
0.4
(1.9)
8.0
(2.0)
6.0
£ Millions
Europe America
Asia
Total
Europe America Asia
Total
Year to 31 December 2007
Year to 31 December 2006
North
North
Other Information
Capital additions
Depreciation
Intangible additions
Amortisation
Balance sheet
Goodwill
Other non-current assets
Inventories
Trade and other receivables
Other current assets
Cash
0.4
0.4
-
0.3
9.3
6.0
1.6
5.3
0.4
2.4
0.2
0.3
1.0
0.1
19.6
3.5
5.2
5.4
0.2
0.8
Segment assets
25.0
34.7
0.3
-
-
-
0.7
0.2
3.7
0.7
1.2
0.4
6.9
Unallocated deferred tax
Consolidated total assets
Trade and other payables
Deferred consideration
Segment liabilities
Unallocated corporate
liabilities
Unallocated deferred and
current tax
Consolidated total liabilities
(2.7)
(2.3)
(5.0)
(2.7)
(2.6)
-
-
(2.7)
(2.6)
(10.3)
(23.1)
(3.8)
(37.2)
0.9
0.7
1.0
0.4
29.6
9.7
10.5
11.4
1.8
3.6
66.6
0.4
67.0
(8.0)
(2.3)
0.6
0.4
1.6
0.3
9.8
8.1
5.9
6.5
0.7
3.0
0.6
0.3
1.5
0.2
19.6
0.4
5.2
6.8
0.3
1.0
34.0
33.3
(5.1)
(3.9)
(9.0)
(5.0)
-
(5.0)
-
-
-
-
0.7
0.1
-
0.3
-
0.2
1.3
-
-
-
1.2
0.7
3.1
0.5
30.1
8.6
11.1
13.6
1.0
4.2
68.6
0.6
69.2
(10.1)
(3.9)
(14.0)
(22.0)
(3.8)
(39.8)
49
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
4. Segmental reporting (cont’d)
Analysis by customer
The revenue by class of customer was as follows:
£ Millions
Europe
America
Asia
Total
Europe America Asia Total
Year to 31 December 2007
Year to 31 December 2006
North
North
Communications
Industrial
Medical
Defence and avionics
7.4
14.6
5.1
3.5
5.4
17.9
8.9
0.8
0.2
2.5
-
-
13.0
35.0
14.0
4.3
7.9
15.4
4.7
6.6
11.5
22.8
8.3
0.9
-
0.6
-
-
19.4
38.8
13.0
7.5
Total
30.6
33.0
2.7
66.3
34.6
43.5
0.6
78.7
5.
Reorganisation costs
The reorganisation costs associated with the Scheme of Arrangement and move of the
parent company and headquarters to Singapore are analysed as follows:
£ Millions
Relocation
Legal fees
Financial advice
Broker fees
Reporting accountants
Stock Exchange, Registrars, printing and other costs
Systems configuration and set up
Total
2007
1.0
0.4
0.3
0.3
0.2
0.1
0.1
2.4
In consideration of relocating themselves and the parent company to Singapore a payment
of £500,000 was made to Duncan Penny and payments of £250,000 made to James Peters
and Larry Tracey. Part of the terms of these payments are that the individuals have to
repay the total amount paid to them should they leave the Company within one year of the
date the Scheme of Arrangement became effective or repay half of the amount paid to
them should they leave the Company within one to two years of the date the Scheme of
Arrangement became effective.
In 2006, there was a total restructuring cost of £ 1.0 million. This is comprised of inventory
write-offs of £0.3 million which is associated with the termination of third party lines and
£0.7 million redundancy costs for the closure of Benelux and reduction of headcount in
various parts of our business.
50
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
6.
Information regarding employees (including Directors)
£ Millions
Employee costs during the year:
Wages and salaries
Social security
Pension
Restructuring costs
Share option costs
Total
2007
2006
10.9
0.9
0.5
1.0
0.1
11.8
1.1
0.3
0.7
-
13.4
13.9
For further information regarding Director's remuneration, refer to the Directors'
Remuneration Report.
7.
Finance costs
£ Millions
Bank loans and overdraft
Unwinding of discount on deferred consideration (see note 23)
Total
No interest was received during the current or prior year.
8.
Expenses by nature
£ Millions
Profit for the year is after charging:
Research and development costs
Amortisation of intangible assets
Depreciation of property, plant and equipment
Staff costs (see note 6)
Foreign exchange loss/(gains)
Loss/(gains) on foreign exchange forward
Cost of inventories recognised as expense*
Charge for doubtful debts
Fees paid to auditors:
Audit
Other services - tax
Rent/lease expense
All other charges
Total
* This includes write - downs of inventories of £0.2 million (2006: £0.6 million)
2007
2006
1.5
0.2
1.1
0.2
1.7
1.3
2007
2006
1.8
0.4
0.7
13.4
(0.1)
0.1
38.2
0.2
0.2
0.5
0.7
5.3
61.4
1.9
0.5
0.7
13.9
0.2
(0.1)
49.5
0.2
0.2
0.1
0.7
3.0
70.8
51
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
9. Tax on profit on ordinary activities
£ Millions
United Kingdom corporation tax - current year
- adjustment in respect of prior year
Double tax relief
Overseas corporation tax - current year
- adjustment in respect of prior year
Total current tax
Deferred tax
Tax charge for the year
2007
2006
0.5
(0.1)
-
1.4
(0.5)
1.3
0.1
0.9
0.2
(0.1)
1.4
(0.3)
2.1
(0.1)
1.4
2.0
Taxation for other jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
The differences between the total tax shown above and the amount calculated by applying
the standard rate of United Kingdom corporate tax to the profit before tax are as follows:
£ Millions
Profit on ordinary activities before tax
Tax on profit on ordinary activities
at standard United Kingdom tax
rate of 30% (2006: 30%)
Higher rates of overseas corporation tax
Utilisation of overseas losses
Non-deductible expenditure
Foreign exchange loss
Tax on USA dividend to UK
Non-taxable income
Prior year adjustments
2007
2006
5.0
8.0
1.5
0.4
-
0.4
(0.6)
0.3
-
(0.6)
2.4
0.3
(0.3)
0.1
-
-
(0.4)
(0.1)
Total tax charge for the year
1.4
2.0
The Group has chosen to use the standard rate of United Kingdom corporate tax as it is a
better presentation of the Group’s tax exposure and charges.
No additional deferred tax beyond what has currently been provided is recognised on the
unremitted earnings of overseas subsidiaries. As these earnings are continually reinvested
by the Group, no tax is expected to be payable on them in the foreseeable future.
52
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
9. Tax on profit on ordinary activities (cont’d)
Movement in current income tax liabilities
£ Millions
At 1 January 2007
Currency translation differences
Income tax paid
Tax expense- current year
Tax expense- previous year
2007
2006
(2.4)
(0.1)
1.4
(1.9)
0.6
(2.8)
-
2.5
(2.2)
0.1
Total at 31 December 2007
(2.4)
(2.4)
10. Dividends
Amounts recognised as distributions to equity holders in the period
2007
2006
Pence
per
share
£
Millions
Pence
per
share
£
Millions
Prior year final dividend paid
Interim paid
Total
*
^
10.0
9.0
19.0
1.9
1.7
3.6
*
9.0
8.0
17.0
1.7
1.5
3.2
* Dividends in respect of 2006 (18.0p)
^ Dividends in respect of 2007 (20.0p)
The proposed final dividend for 2007 is subject to approval by shareholders at the Annual
General Meeting scheduled for 26 March 2008 and has not been included as a liability in
these financial statements. It is proposed that the final dividend be paid on 4 April 2008 to
members on the register as at 28 March 2008.
53
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
11. Earnings per share
The calculations of the basic and diluted earnings per share attributable to the ordinary
equity holders of the parent are based on the following data
Earnings
Earnings for the purposes of basic and diluted earnings per share
(profit for the year attributable to equity shareholders of the parent)
Amortisation of intangibles associated with acquisitions
Reorganisation costs (note 5)
Tax effect of restructuring
Earnings for adjusted earnings per share
Number of shares
Weighted average number of shares for the purposes of basic
earnings per share (thousands)
2007
2006
Restated
£ Millions £ Millions
3.4
0.3
2.4
(0.1)
6.0
5.2
0.3
1.0
(0.3)
6.2
No.
No.
18,946
18,627
Effect of potentially dilutive share options (thousands)
184
270
Weighted average number of shares for the purposes of
dilutive earnings per share (thousands)
19,130
18,897
Earnings per share from operations
Basic
Diluted
Diluted adjusted
17.9p
17.8p
31.4p
27.9p
27.5p
32.8p
The minority shareholders are entitled to their share of any dividend declared. The
dividend payable to minority shareholders in 2007 was £0.2 million. In 2006 the dividend
paid to minority shareholders was £0.8 million. This amount was not reflected in the 2006
income statement but has now been restated as a prior year adjustment.
The 2006 restatement resulted in the basic earnings per share changing from 32.2p to
27.9p and the adjusted diluted earnings per share changing from 37.0p to 32.8p.
54
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
12. Goodwill
Cost and net book value
At 1 January 2006
Recognised on acquisition of subsidiaries
At 1 January 2007
Change in deferred contingent consideration
Foreign currency translation
At 31 December 2007
2007
£ Millions
28.0
2.1
30.1
(0.4)
(0.1)
29.6
Accumulated impairment losses
At 1 January 2006, 1 January 2007 and 31 December 2007
-
Carrying Amount
At 31 December 2007
At 31 December 2006
29.6
30.1
Goodwill arises on the consolidation of subsidiary undertakings.
The reduction of £0.4 million was due to a revaluation of the deferred contingent
consideration related to the Powersolve acquisition. The final amount due in 2012 is
related to the prior three year's earnings the estimates for which, based on 2007
performance, were revised downward.
The Cash Generating Units are defined based on the countries of operations.
The recoverable amount of the goodwill is determined from value in use calculations. The
key assumptions and estimates for the value in use calculations are those regarding the
discount rates, growth rates and expected changes to sales and overheads during the
period. Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the cash
generating units (a rate of 9.9% was used for 2007 and for 2006, the rate was 11.2%).
The Group prepares cash flow forecasts derived from the most recent financial budgets
approved by management which take into account past experience and industry growth
forecasts, an average growth rate of 5% and a gross margin varying for the different
countries between 29% and 50%, for the next five years and extrapolates cash flows for
the following five years assuming no growth from that date. The carrying amount of
goodwill as at 31 December 2007 was £ 29.6 million with no impairment adjustment
required for 2007.
55
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
13. Other Intangible assets
Development
cost
Trade marks
Non-
contractual
customer
relationships
Total
£ Millions
Cost
At 1 January 2006
Additions
At 1 January 2007
Additions
1.0
0.9
1.9
1.0
1.0
-
1.0
-
At 31 December 2007
2.9
1.0
Amortisation
At 1 January 2006
Charge in the year
At 1 January 2007
Charge in the year
-
0.2
0.2
0.1
0.1
0.2
0.3
0.2
At 31 December 2007
0.3
0.5
Carrying Amount
At 31 December 2007
At 31 December 2006
2.6
0.5
1.7
0.7
0.3
-
0.3
-
0.3
-
0.1
0.1
0.1
0.2
0.1
0.2
2.3
0.9
3.2
1.0
4.2
0.1
0.5
0.6
0.4
1.0
3.2
2.6
The amortisation period for development costs incurred on the Group's products varies
between four and seven years according to the expected useful life of the products being
developed.
Amortisation commences when the asset is available for use.
The separately identifiable intangible assets acquired with the Powersolve business have
an expected useful life of five years and amortisation of £0.3 million has been incurred
during the period.
56
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
14. Property, plant and equipment
Plant and
machinery
Motor
vehicles
Office
equipment
Building
improvements
Total
£ Millions
Cost
At 1 January 2006
Additions
Disposals
Foreign currency translation
At 1 January 2007
Additions
Disposals
Foreign currency translation
3.2
0.5
(0.1)
(0.5)
3.1
0.4
-
(0.6)
0.6
0.1
(0.2)
-
0.5
0.1
(0.1)
-
1.7
0.4
(0.7)
-
1.4
0.3
(0.1)
0.4
At 31 December 2007
2.9
0.5
2.0
Depreciation
At 1 January 2006
Charge in the year
Disposals
Foreign currency translation
At 1 January 2007
Charge for the year
Disposals
Foreign currency translation
1.9
0.4
(0.1)
(0.2)
2.0
0.3
-
(0.2)
0.4
0.1
(0.2)
-
0.3
0.1
-
(0.1)
At 31 December 2007
2.1
0.3
Carrying Amount
At 31 December 2007
At 31 December 2006
0.8
1.1
0.2
0.2
1.4
0.1
(0.7)
-
0.8
0.2
-
0.2
1.2
0.8
0.6
0.7
0.2
-
-
0.9
0.1
-
0.2
1.2
0.5
0.1
-
0.0
0.6
0.1
-
(0.1)
6.2
1.2
(1.0)
(0.5)
5.9
0.9
(0.2)
-
6.6
4.2
0.7
(1.0)
(0.2)
3.7
0.7
-
(0.2)
0.6
4.2
0.6
0.3
2.4
2.2
57
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
15. Subsidiaries
Details of principal subsidiaries at 31 December 2007, all of which are consolidated are as
follows:
Place of
Proportion Proportion
incorporation
of voting
of
ownership
(or
registration)
and operation
power
Ownership Auditor of subsidiaries
held (%)
(%)
Name of Subsidiary
XP Power AG
Switzerland
XP Power, Inc (California)
USA
XP Power, Inc (Massachusetts) USA
XP PLC
XP Power ApS
XP Power GmbH
XP Power Norway AS
XP Power SA
XP Power Sweden AB
UK
Denmark
Germany
Norway
France
Sweden
Powersolve Electronics Limited UK
XP Power (Shanghai) Co Ltd
China
Mieltec XP Power Srl
Italy
XP Power (S) Pte Limited
Singapore
XP Energy Systems Limited
UK
96
100
100
100
100
100
100
100
100
70
100
80
100
100
96
100
100
100
100
100
100
100
100
100
100
80
100
100
Karpf Treuhand & Revisions AG
Exempted to be audited by local statutory law
Exempted to be audited by local statutory law
PricewaterhouseCoopers
Deloitte
Exempted to be audited by local statutory law
Inter Revisjon Oslo AS
Deloitte
Deloitte
PricewaterhouseCoopers
Shanghai JunFu PCZ/Jiahua CPA
Exempted to be audited by local statutory law
PricewaterhouseCoopers
PricewaterhouseCoopers
16.
Interest in joint ventures
The Group has had a 50% shareholding in Fortron XP Power (Hong Kong) Limited, a
company incorporated in Hong Kong.
The Group accounts for its jointly controlled entities on a proportional consolidation basis.
The Group’s share of the joint ventures’ assets and liabilities and income and expenses is
shown below.
58
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
16.
Interest in joint ventures (cont’d)
Aggregate amounts relating to joint ventures:
£ Millions
Current assets
Non-current assets
Current liabilities
Total
Income
Expenses
Profit before tax
2007
2006
0.8
0.4
(0.4)
0.6
0.4
(0.2)
0.8
0.8
1.3
(1.3)
0.8
(0.8)
-
-
On 1 January 2008 the Group acquired the remaining 50% of the issued share capital of
Fortron XP Power (Hong Kong) Limited for a consideration of US$2.5 million in cash.
Therefore with effect from 1 January 2008 XP had full control of the manufacturing facility
in Kunshan and operations office in Hong Kong.
17.
Interest in associates
The Group has a 20% stake in Safety Power, a company incorporated in the United
Kingdom.
Aggregate amounts relating to associates:
£ Millions
Total assets
Total liabilities
Total
Income
Expenses
2007
2006
0.1
-
0.1
0.1
(0.1)
0.1
-
0.1
0.1
(0.1)
Profit before tax
-
-
59
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
18. Cash and cash equivalents
£ Millions
2007
2006
Cash at bank and on hand
Total
3.6
3.6
4.2
4.2
For the purpose of presenting the consolidated cash flow statement, the consolidated cash
and cash equivalents comprise the following:
£ Millions
Cash and bank balances (as above)
Less: bank overdrafts (Note 24)
Cash and cash equivalents per
consolidated cash flow statement
Reconciliation to free cash flow
£ Millions
Net cash inflow from operating activities
Purchase of property, plant and
equipment
Development expenses
capitalised
Restructuring cost
Interest expense
2007
2006
3.6
(2.7)
4.2
(7.6)
0.9
(3.4)
2007
2006
6.9
(0.9)
(1.0)
2.4
(1.5)
5.8
(1.2)
(0.9)
1.0
(1.3)
Free cash flow
5.9
3.4
19.
Inventories
£ Millions
Goods for resale
2007
2006
10.5
11.1
60
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
20. Trade and other receivables
£ Millions
2007
2006
Trade receivables
Total
11.4
13.6
11.4
13.6
The average credit period taken on sales of goods is 63 days. No interest is charged on the
outstanding receivable balance. An allowance has been made for estimated irrecoverable
amounts from the sale of goods of £0.2 million (2006: £0.3 million). This allowance has
been determined by reference to past default experience.
The Directors consider that the carrying amounts of trade and other receivables
approximate their fair value.
21. Current liabilities
£ Millions
2007
2006
Trade and other payables
Social security
Current income tax liabilities
Bank loans and overdrafts (see note 24)
Current portion of deferred consideration
Other provisions
7.0
1.0
2.4
2.7
-
0.1
9.6
0.5
2.4
7.6
1.4
-
Total
13.2
21.5
The bank loans and overdrafts are secured on the assets of the Group.
Trade creditors and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The Directors consider that the carrying amount of trade
and other payables approximates their fair value.
The deferred consideration of £1.4 million in 2006 related to the payment made in 2007 for
a further of 30.3% of the share capital of Powersolve Electronics Limited.
61
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
22. Non-current liabilities
£ Millions
Bank loans
Provisions - deferred contingent consideration
Deferred tax
Total
2007
2006
20.3
2.3
1.4
14.4
2.5
1.4
24.0
18.3
The deferred consideration is the discounted net present value of expected payments
related to the acquisition of the remaining 30.3% of the share capital of Powersolve
Electronics Limited which the Group will pay in 2012.
23. Provisions – Deferred contingent consideration
£ Millions
2007
2006
At 1 January 2007
Additional provision in the year
Payment
Adjustment for unwinding of discount rate
At 31 December 2007
Current portion of deferred consideration
Deferred contingent consideration
3.9
(0.4)
(1.4)
0.2
2.3
-
2.3
3.3
0.9
(0.5)
0.2
3.9
(1.4)
2.5
The Group owns 69.7% of the shares of Powersolve Electronics Limited (Powersolve) and
is committed to purchase the remaining 30.3% of the shares in January 2012. The
commitment to purchase the remaining ownership has been accounted for as deferred
consideration and is calculated based on the expected future payment which will be based
on a predefined multiple of the earnings of 2009, 2010 and 2011.
The future payment is discounted to the present value, with the discount amortised to
interest expense each period as the payment draws nearer. At each reporting period, the
anticipated future payment is recalculated and an adjustment made accordingly. As a
result of the purchase commitment and the amount of control XP Power Limited exerts
over Powersolve, the Powersolve results are fully consolidated in the Group with a
minority interest charge made in the amount of dividends that will be payable for that year
to the minority shareholders.
62
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
24. Bank loans and overdrafts
The borrowings are repayable as follows:
£ Millions
On demand or within one year
In the second year
In the third year
In the fourth year
Less: amounts due for settlement
within 12 months (shown under
current liabilities)
Total
2007
2006
2.7
5.1
4.2
11.0
23.0
7.6
-
6.9
7.5
22.0
(2.7)
(7.6)
20.3
14.4
The carrying amounts of the Group's borrowings are denominated in the following
currencies:
December 2007
£ Millions
Bank overdrafts
Bank loans
GBP
USD EUR NOK JPY CHF SGD SEK
TOTAL
(1.6)
-
3.7
18.4
0.1
-
(0.1)
-
0.7
-
0.1
0.9
0.1
1.0
(0.3)
-
2.7
20.3
Total
(1.6)
22.1
0.1
(0.1)
0.7
1.0
1.1
(0.3)
23.0
December 2006
£ Millions
Bank overdrafts
Bank loans
GBP
USD EUR NOK
JPY CHF SGD SEK
TOTAL
1.0
10.0
2.4
2.6
1.3
-
0.1
-
0.9
-
1.9
0.8
-
1.0
Total
11.0
5.0
1.3
0.1
0.9
2.7
1.0
The average interest rates paid were as follows:
Bank overdrafts
Bank loans
-
-
-
7.6
14.4
22.0
2007
5.4%
6.8%
2006
5.2%
6.1%
The fair value of the Group’s loans and overdrafts is the same as the book value.
The positive overdraft balances are considered an offset against our net liability to our
bank. They form part of the same working capital facility with Bank of Scotland.
63
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
24. Bank loans and overdrafts (cont’d)
The other principal features of the Group's borrowings are as follows:
1. Bank overdrafts are repayable on demand. The bank overdrafts are secured on the
assets of the Group. At 31 December 2007, the Group had an overdraft of £2.7
million. In September 2007 the Group renewed its annual working capital facility and
increased the limit to £10.0 million from £4.0 million. The overdraft interest rate ranges
from 1.0% to 1.5% above LIBOR depending on covenant performance.
2. The bank loan at 31 December 2007 of £20.3 million represents the amount drawn
down under the multi-currency revolving credit facility and the senior debt facility from
Halifax Bank of Scotland. The non-utilisation fee on this facility of 0.5% is calculated
on a daily basis and payable quarterly in arrears. In December 2007, the Group
converted from the outstanding of £16.0 million committed term loan to US$31.9
million, in order to reduce its borrowing costs. The term loan is repayable over 4 years
with US$4.99 million due in 2009, US$4.99 million due in 2010 and the balance of
US$21.96 million due in 2011.
3. The £5.0 million multicurrency revolving credit facility remains unchanged.
4. The Group has pledged all assets as collateral to secure banking facilities granted to
the Group.
25. Derivative financial instruments
The Group utilised currency derivatives to hedge significant future transactions and cash
flows. The instruments purchased were denominated in the currencies of the Group's
principal markets.
At the balance sheet date, the total notional amount of outstanding forward foreign
exchange contracts that the Group has committed are as below.
£ Millions
Forward foreign exchange contracts
2007
2006
0.9
8.9
These contracts are to hedge against exchange movements on future purchases of goods.
The forward exchange contracts do not qualify for hedge accounting. Therefore, changes
in the fair value of the currency derivatives amounting to £0.1 million have been debited to
income in the year (2006: £0.1 million credited) (see note 8).
The fair value of the forward exchange asset at 31 December 2007 was less than £0.1
million (2006: £0.1 million).
64
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
25. Derivative financial instruments (cont’d)
On 6 February 2008 the Group entered into a three year interest rate swap agreement to
swap its variable US$ LIBOR interest rate on US$31.9 million (£16.0 million) for a fixed
rate of interest of 3.23% in order to manage exposure to interest rate movements. The
Group pays its normal borrowing margin of 1.0% to 1.5% above LIBOR depending on
covenant performance on top of its fixed rate of 3.23%.
26. Deferred tax
The following are the major deferred tax assets and (liabilities) recognised by the Group
and movements thereon during the current and prior reporting period.
Accelerated
tax
depreciation
Goodwill
amortisation
Share
based
payment
Capitalised
development
costs
Other
intangible
assets
Other
timing
differences
Total
£ Millions
At 1 January 2006
Charge to income
At 1 January 2007
Charge to income
0.1
0.1
0.2
0.1
(0.4)
-
(0.4)
0.1
0.2
0.1
0.3
-
(0.4)
(0.3)
(0.7)
(0.3)
Charge to equity
-
-
(0.1)
-
0.3
(0.3)
0.2
(1.0)
Total
£ Millions
Deferred tax
liabilities
Deferred tax assets
(0.4)
-
(0.9)
0.1
0.1
0.1
(0.3)
0.1
-
(0.2)
0.1
(0.1)
-
-
2007
(1.4)
0.4
(1.0)
(0.8)
(0.1)
(0.1)
(1.0)
2006
(1.4)
0.6
(0.8)
The Group has an unrecognised deferred tax asset of £ 2.2 million (2006: £2.4 million).
The eventual recognition of this asset is dependent of the assessment of the relevant
subsidiaries tax position by the taxation authority in that jurisdiction. The tax asset will be
brought to account on final acceptance of tax returns filed in the relevant jurisdiction.
27. Share capital and reserves
Called up share capital
£ Millions
2007
2006
Allotted and fully paid 19,242,296 ordinary shares (2006: 20,704,621)
27.2
0.2
65
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
27. Share capital and reserves (cont’d)
Called up share capital (cont’d)
Under the Singapore Companies Act Chapter 50, the concepts of par value and
authorised share capital do not exist. Therefore, the share premium previously disclosed
now forms part of the issued share capital.
The Company has one class of ordinary shares which carry no right to fixed income.
During the year, the movement relates to the cancellation of 1,462,325 treasury shares.
Share Premium
£ Millions
Balance at 31 December
Merger reserve
£ Millions
Balance at 31 December
Own shares
£ Millions
Balance at 1 January
Cancellation
Purchase of shares
Sale of shares
Balance at 31 December
2007
2006
-
27.0
2007
2006
0.2
0.2
2007
2006
(6.3)
5.2
-
0.8
(6.8)
-
(0.3)
0.8
(0.3)
(6.3)
As at 31 December 2007, the Group's Employee Share Ownership Plan (ESOP) held
219,331 (2006: 393,051) shares carrying a value of £327,134 (2006: £387,940) owned by
the Trust. During the year, the movement relates to new issuance of shares, resulted a
gain of £0.5 million and repayment of loans by the employees.
In the 2006 audited financial statements, the opening balance for the own shares was £6.7
million. A transfer of £0.1 million has been made from retained earnings to own shares for
the shares owned by the Trust for the ESOP which was misclassified. During the financial
year 2006, the Group purchases of £0.3 million shares resulted to an ending balance of
£6.3 million.
Prior to the Company's Scheme of Arrangement becoming effective on 24 April 2007 the
Company held 1,462,325 shares in treasury. It was not possible for these shares to
participate in the Scheme of Arrangement. Therefore these 1,462,325 treasury shares
were cancelled on 19 April 2007.
66
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
27. Share capital and reserves (cont’d)
Translation reserve
£ Millions
Restated balance at 1 January
Exchange differences on translation of foreign operations
Balance at 31 December
Retained earnings
£ Millions
Restated balance at 1 January
Tax on items taken directly to equity
Loss on treasury shares
Profit for the year
Cancellation of treasury shares
Purchase of own shares
Dividends paid
2007
(2.3)
(0.2)
2006
Restated
(2.1)
(0.2)
(2.5)
(2.3)
2007
10.6
0.1
(0.3)
3.4
(5.2)
-
(3.6)
2006
Restated
8.7
0.1
(0.5)
5.2
-
0.3
(3.2)
Balance at 31 December
5.0
10.6
In the 2006 audited financial statements, the opening balance for the translation reserve
and retained earnings was £1.5 million and £5.0 million respectively. A transfer of £3.6
million has been made from the translation reserve to retained earnings. This amount
relates to the misclassification between these two reserve accounts on the implementation
of IFRS in 2005. Prior to the implementation of IFRS there was no requirement to disclose
the translation reserve separately to the retained earnings figure. Included in this £3.6
million is £0.5 million of exchange difference which should have been charged to the
income statement but was charged to the translation reserve in 2004 in error.
The minority shareholders are entitled to their share of any dividend declared. The
dividend payable to Powersolve minority shareholders in 2007 was £0.2 million. In 2006
the dividend paid to minority shareholders of Powersolve was £0.5 million and MPI was
£0.3 million. These amounts were not reflected in the 2006 income statement but have
now been charged as a prior year adjustment.
In the 2006 audited financial statements, a transfer of £0.1 million has been made from the
opening balance of retained earnings to own shares for the shares owned by the Trust
which was misclassified.
28. Operating leases and other commitments
£ Millions
Minimum lease payments under operating lease
recognised as an expense in the year
2007
2006
1.1
1.1
67
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
28. Operating leases and other commitments (cont’d)
At the balance sheet date, the Group had outstanding commitments for future minimum
lease payments under non-operating leases which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
Total
2007
2006
1.1
1.5
0.2
2.8
1.1
2.5
0.5
4.1
Operating lease payments represent rentals payable by the Group for certain of its office
properties and warehouses.
On 1 November 2007 the Group entered into an agreement to acquire the remaining 50%
of the issued share capital of its joint venture, Fortron XP Power (Hong Kong) Limited for a
consideration of US$2.5 million in cash with effect from 1 January 2008. US$0.8 million
(£0.4 million) has been paid on 1st November 2007 when the agreement was signed.
US$1.7 million is the remaining commitment as at 31 December 2007.
On 6 December 2007 the Group entered into an agreement for the purchase of freehold
land in Germany. The commitment under this agreement is approximately £0.2 million. As
part of this agreement, the Group has committed itself to invest at least EUR1.3 million
within 2 years in the development of the land plot.
29. Other current assets
£ Millions
Prepayments
Total
2007
2006
1.8
1.8
1.0
1.0
68
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
30. Long leasehold building
Long leasehold building
£ Millions
Cost
At 1 January 2007
At 31 December 2007
Amortisation
At 1 January 2007
At 31 December 2007
Carrying Amount
At 31 December 2007
At 31 December 2006
1.1
1.1
0.1
0.1
1.0
1.0
The Group has entered into agreements to lease buildings ranging from 99 years to 999
years. Items of the long leasehold buildings are stated at cost less accumulated
amortisation.
Amortisation is charged so as to write off the cost or valuation of the long term leasehold
over their estimated useful lives using a straight line method at 2% annually.
The residual values, estimated useful lives and amortisation method of long leasehold
buildings lives and amortisation method of long leasehold buildings are reviewed, and
adjusted as appropriate, at each balance sheet date. The effects of any revision are
recognised in the income statement when the changes arise.
31. ESOP loan to employees
£ Millions
ESOP loan to employees
Total
2007
2006
Restated
3.0
3.0
2.6
2.6
The Group offers interest rate free loan to employees to purchase company shares under
the deferred payment scheme. Under this scheme payment is deferred until the shares are
sold. The shares cannot sell until four years from the date of acquisition. However, the
loan becomes interest bearing after 10 years. The Group does not classify a portion of this
loan under the current assets as the Company cannot predict when the employees will
repay their loans.
In the 2006 audited financial statement, the ESOP loan to employees was misclassified
under current assets - other receivables which now presented under non-current assets.
69
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
32. Pensions
The Group operates a defined contribution pension scheme for its employees in the United
Kingdom. Contributions are charged to the profit and loss account as they become
payable.
The total cost charged to income of £0.2 million (2006: £0.2 million) represents
contributions payable to these schemes by the Group at a rate of 3% of salary of all
members. As at 31st December 2007, all contributions for the year had been made.
In the USA the Group operates a defined contribution "401K Plan". The Group contributes
an amount matching the employees’ contribution up to a maximum of 2% of the
employees’ total earnings. The total cost charged to income of £0.1 million (2006: £0.1
million) represents the Group's "matching" contribution which will be paid in 2008.
In Singapore, the Group contributes to the Central Provident Fund, which is a defined
contribution plan regulated and managed by the Singapore government. The Group's
contribution to this defined contribution plan is charged to the profit and loss account in the
period to which the contributions relate and the total cost charged to income was £0.01
million (2006: £nil).
33. Related party transactions
The ultimate controlling party of the Group is XP Power Limited
Transactions between the Company and its subsidiaries, which are related parties of the
Company have been eliminated on consolidation and are not disclosed in this note. Details
of transactions between the Group and other related parties, Fortron XP Hong Kong
Limited, are disclosed below.
The Group has sold goods to the value of £78,293 (2006:£506,000) to and purchased
£1,339,368 (2006: £802,000) from joint ventures. Purchases and sales were made at
market price.
There was no amount payable to associates at 31 December 2007 and 2006. The amount
receivable from joint ventures was £9,509 (2006: £170,000) and payable was £324,928
(2006: £3,000). All transactions were conducted on an arm's length basis.
The Group has paid rent of £15,000 (2006: £5,000) to Corryann Limited, a company of
whom Larry Tracey is a director and 100% shareholder.
The amount outstanding is unsecured and will be settled in cash. No guarantees have
been given or received. No expense has been recognised in the period for bad or doubtful
debts in respect of the amounts owed by related parties.
As at 31 December 2007, the Company has provided interest rate free loan of £1,027,376
to 3 Directors for the deferred payment share scheme. The detailed information is
provided for in the Directors’ Remuneration Report on page 27.
70
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
33. Related party transactions (cont’d)
The remuneration of the Directors, who are the key management personnel of the Group
is set out below for each of the categories specified in IAS 24 Related Party Disclosures.
Further information about the remuneration of the individual Directors is provided in the
Directors' Remuneration Report on pages 23 to 28.
Short-term employee benefits
Post employment benefits
2007
£
2006
£
1,798,996
17,137
1,159,297
8,411
Total directors' remuneration
1,816,133
1,167,708
34. Share based payments
Options have been granted under the Company’s Unapproved and Approved Share
Option Schemes. The numbers outstanding, subscription prices and exercise periods are
as follows:
Number of shares
Exercise
Price
Exercisable from
Expiry
Date
30,000
10,000
71,000
19,000
45,000
39,000
134,750
28,750
2,500
20,000
4,500
48,000
177,000
629,500
£1.15
£1.15
£3.425
£3.20
£2.925
£1.15
£1.75
£2.675
£4.50
£4.11
£3.20
£3.90
£5.073
22 December 2000
21 August 2001*
21 August 2001*
31 January 2002*
1 May 2002*
24 August 2002*
24 August 2002*
2 February 2004*
15 February 2005*
21 April 2005*
14 December 2005*
28 September 2006*
26 April 2007*
22 December 2010
21 August 2011
21 August 2011
31 January 2012
1 May 2012
24 August 2012
24 August 2012
2 February 2014
15 February 2015
21 April 2015
14 December 2015
28 September 2016
26 April 2017
*Approved option schemes, vesting in four equal annual instalments from the exercisable
date.
71
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
34. Share based payments (cont’d)
2007
2006
Weighted
average
exercise
price
(pence)
Weighted
average
exercise
price
(pence)
Number
of share
options
Number
of share
options
Outstanding at beginning of the year
Granted during the
year
Forfeited during the year
Exercised during the year
646,500
236
847,750
182,000
(4,500)
(194,500)
504
397
202
48,000
(16,000)
(233,250)
Outstanding at the end of the year
629,500
323
646,500
Exercisable at the end of the year
395,813
233
561,375
225
390
150
235
236
216
The weighted average share price at the date of exercise for the share options exercised
during the period was 510p. The options outstanding at 31 December 2007 had a
weighted average exercise price of 323p, and a weighted average remaining contractual
life of six years.
In accordance with IFRS 2, Share-based Payment, the Group has taken a charge of £
0.1million to recognize the issuance of all employee share based options through 31
December 2007. The fair value of options was determined using the Black Scholes Model.
The significant inputs into the model were share price of £2.86 and a weighted average
exercise price of £4.72, standard deviation of expected share returns of 0.0223, the option
life shown above and annual risk free interest rate of 3.6%. The volatility measured as the
standard deviation of expected share price returns was based on statistical analysis of
share prices over the last 5 years.
35. Financial risk management
The Group’s activities expose it to capital risk, currency risk (including both transactional
and translational currency risk), interest rate risk, credit risk and liquidity risk. The Group
seeks to minimise adverse effects from the unpredictability of financial markets on the
Group’s financial performance.
Capital risk
The Group manages its capital to ensure that the entities in the Group will be able to
continue as a going concern while maximising the return to shareholders through the
optimisation of the debt and equity balance.
72
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
35. Financial risk management (cont’d)
Capital risk (cont’d)
The capital structure of the Group consists of debt, which includes the borrowings
disclosed in note 24, cash and cash equivalents and equity attributable to equity holders of
the parent, comprising issued capital, reserves and retained earnings as disclosed in note
27.
The Board reviews the capital structure of the business and considers the cost of capital
and risks associated with each class of capital. The Group aims to balance its overall
capital structure through the payment of dividends, new share issues and share buy-backs
as well as the issue of new debt or the redemption of existing debt.
Currency risk
The Group operates in Asia, Europe and North America and its activities expose it to
transactional risks resulting from changes in foreign currency exchange rates. The Group
monitors and manages these transactional foreign exchange risks relating to the
operations of the Group through internal reports analysing major currency exposures.
Where possible the Group seeks to offset exposures by matching monetary asset and
liability exposures in like currencies against each other often using its bank facilities to
square off or reduce exposures. The Group does not deliberately take positions in
currencies in anticipation of foreign exchange movements. On occasion the Group uses
foreign exchange contracts or other financial derivatives to hedge foreign exchange
exposures.
Forward exchange contracts were used in late 2006 to lock in the effects of a rapidly
weakening US Dollar. As of the end of 2007, the Group has a total notional principal
amount of outstanding forward foreign exchange contracts of £0.9 million.
In addition the Group is exposed to translation risk when the results of its various
operations are converted from their local functional currency to Sterling, the Group’s
reporting currency. In particular a significant proportion of the Group’s revenues and
earnings are derived in US Dollars. The Group is therefore exposed to risk when these US
Dollar revenue streams are translated into Sterling for Group reporting purposes. The
Group regards this as a fundamental consequence of operating in markets which are
dominated by US Dollar transactions. The Group does not hedge this translational risk as
there is no underlying mismatch of foreign currencies as the translation is merely
performed for reporting the Group’s results in Sterling.
73
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
35. Financial risk management (cont’d)
Currency risk (cont’d)
The Group's currency exposure based on the information provided to key management is
as follows:
£ Millions
At 31 December 2007
Financial assets
Cash and cash equivalents
Trade and other receivables
Sub-total
Financial liabilities
Borrowings
Other financial liabilities
Sub-total
GBP
EUR
USD
OTHERS
TOTAL
1.0
10.4
11.4
(3.3)
(4.8)
(8.1)
0.5
2.9
3.4
(0.6)
(0.5)
(1.1)
1.2
7.6
8.8
(25.5)
(6.4)
(31.9)
0.9
1.2
2.1
(2.4)
(1.1)
(3.5)
3.6
22.1
25.7
(31.8)
(12.8)
(44.6)
Net financial liabilities
3.3
2.3
(23.1)
(1.4)
(18.9)
Less: financial (liabilities)/assets denominated
in the respective entities' functional currencies
Currency exposure
3.8
(0.5)
0.9
1.4
(19.4)
(3.7)
(1.5)
0.1
(16.2)
(2.7)
The Group has currency exposure on the intercompany transactions with the overseas
subsidiaries. Hence, the management has included these transactions in the above
analysis.
£ Millions
At 31 December 2006
Financial assets
Cash and cash equivalents
Trade and other receivables
Sub-total
Financial liabilities
Borrowings
Other financial liabilities
Sub-total
Net financial liabilities
Less: financial (liabilities)/assets denominated
in the respective entities' functional currencies
(10.7)
Currency exposure
-
GBP
EUR
USD
OTHERS
TOTAL
0.6
7.3
7.9
(11.2)
(7.4)
(18.6)
(10.7)
1.0
1.6
2.6
(1.3)
(0.6)
(1.9)
0.7
2.1
(1.4)
1.2
7.8
9.0
(5.0)
(7.2)
(12.2)
(3.2)
(1.5)
(1.7)
1.3
0.7
2.0
(4.5)
(0.9)
(5.4)
(3.4)
(0.7)
(2.7)
4.1
17.4
21.5
(22.0)
(16.1)
(38.1)
(16.6)
(10.9)
(5.7)
74
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
35. Financial risk management (cont’d)
Currency risk (cont’d)
The Company’s currency exposure based on the information provided to key management
is as follows:
At 31 December 2007
£ Millions
Financial Assets
Cash and cash equivalents
Trade and other receivables
Subtotal
Financial Liabilities
Other financial liabilities
Subtotal
Net financial (liabilities)/assets
Less: financial (liabilities)/assets denominated in
the respective entities’ functional currencies
Currency exposure
GBP
EUR
USD
OTHERS
Total
-
3.5
3.5
(4.5)
(4.5)
(1.0)
-
(1.0)
-
1.9
1.9
(0.5)
(0.5)
1.4
-
1.4
0.3
1.3
1.6
(6.0)
(6.0)
(4.4)
(4.4)
-
0.1
0.7
0.8
(0.4)
(0.4)
0.4
-
0.4
0.4
7.4
7.8
(11.4)
(11.4)
(3.6)
(4.4)
0.8
If the US Dollar and Euro change against Sterling by 10% (2006: 5%) with all other
variables including tax rate being held constant, the effects arising from the net financial
liability/asset position will be as follows:
£ Millions
Group
EUR against GBP
- strengthened
- weakened
USD against GBP
- strengthened
- weakened
2007
Profit after tax
2006
Profit after tax
(0.1)
0.1
0.4
(0.4)
0.1
(0.1)
0.2
(0.2)
75
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
35. Financial risk management (cont’d)
Interest Risk
On 6 February 2008 the Group entered into a three year interest rate swap agreement to
swap its variable US$ LIBOR interest rate on US$31.9 million for a fixed rate of interest of
3.23% in order to manage exposure to interest rate movements. The Group pays a
borrowing margin of 1.0% to 1.5% depending on covenant performance on top of the fixed
rate of 3.23%.
The remainder of the Group’s borrowings are at variable interest rates and are
denominated in a number of currencies including Euros, Singapore Dollars, Sterling, Swiss
Francs and US Dollars.
these borrowings
increase/decrease by 0.5% (2006: 0.5%) with all other variables including tax rate being
held constant, the profit after tax will be lower/higher by £70,000 (2006: £62,000) as a
result of higher/lower interest expense on these borrowings.
the average
rates on
interest
If
Credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations
resulting in a financial loss to the Group. For trade receivables the Group adopts a policy
of only dealing with customers of appropriate credit history or rating. For other financial
assets, the Group adopts the policy of only dealing with high credit quality counterparties.
The Group’s business is highly fragmented reducing the credit exposure to any one
customer. At the balance sheet date no trade receivable represented more than 5% of the
total trade receivable balance.
The Group does not hold any collateral and the maximum exposure to credit risk for each
class of financial instruments is the carrying amount of that class of financial instruments
on the balance sheet.
The credit risk for trade receivables by geographic area is as follows:
£ Millions
By geographical areas
Europe
US
Asia
£ Millions
By type of customers
Non-related parties
2007
2006
5.3
5.4
0.7
11.4
6.5
6.8
0.3
13.6
2007
2006
11.4
11.4
13.6
13.6
76
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
35. Financial risk management (cont’d)
Credit risk (cont’d)
The age analysis of trade receivables past due but not impaired is as follows:
£ Millions
Past due 0 - 2 months
Past due 3 - 4 months
Past due over 4 months
2007
2006
4.2
0.4
0.1
4.7
5.3
0.9
0.6
6.8
The carrying amount of trade receivables individually determined to be impaired and the
movement in the related allowance for impairment are as follows:
£ Millions
Gross amount
Less: Allowance for impairment
Beginning of financial year
Allowance made
Allowance utilised
End of the financial year
Liquidity Risk
2007
0.3
(0.2)
0.1
(0.3)
-
0.1
(0.2)
2006
0.5
(0.3)
0.2
(0.2)
(0.2)
0.2
(0.2)
The table below analyses the maturity profile of the Group and Company’s financial
liabilities at the balance sheet date based on contractual undiscounted cash flows.
£ Millions
Group
At 31 December 2007
Trade and other payables
Borrowings
Total
£ Millions
Group
At 31 December 2006
Trade and other payables
Borrowings
Total
Less than
1 year
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
8.0
2.7
10.7
-
6.6
6.6
-
18.2
18.2
-
-
-
8.0
27.5
35.5
Less than
1 year
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
9.6
7.6
17.2
-
-
-
-
6.9
6.9
-
7.5
7.5
9.6
22.0
31.6
The Group and Company manage the liquidity risk by maintaining sufficient cash and bank
facilities to enable them to meet their normal operating commitments.
77
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
36. Subsequent events
On 6 February 2008 the Group entered into a three year interest rate swap agreement to
swap its variable US$ LIBOR interest rate on US$31.9 million for a fixed rate of interest of
3.23% in order to manage exposure to interest rate movements. The Group pays a normal
borrowing margin of 1.0% to 1.5% depending on covenant performance on top of the fixed
rate of 3.23%.
37. New or revised accounting standards and interpretations
The following standards, amendments and interpretations to existing standards have been
published and are mandatory for the group’s accounting periods beginning on or after 1
January 2008 or later periods, but the group and company have not early adopted them:
IFRS 8, 'Operating segments ' (effective from 1 January 2009). IFRS 8 replaces IAS 14
and aligns segment reporting with the requirements of the US standard SFAS 131,
‘Disclosures about segments of an enterprise and related information’. The new standard
requires a 'management approach', under which segment information is presented on the
same basis as that used for internal reporting purposes. The group will apply IFRS 8 from
1 January 2009. The expected impact is still being assessed in detail by management, but
it appears likely that the number of reportable segments, as well as the manner in which
the segments are reported, will change in a manner that is consistent with the internal
reporting provided to the Board. As the financial report contains both the group
consolidated and parent company financial statements prepared under IFRS, the company
will not be required to present segment information.
IFRS 3 (Revised in 2008), ‘Business Combinations’ (effective for business combinations
occurring on or after annual reporting periods beginning on or after 1 July 2009). The
the accounting of business
revised standard
combinations, affecting the income statement, both at the acquisition date and post
acquisition, and require greater use of fair values. The Group will apply IFRS 3 (Revised)
from 1 January 2010.
introduces significant changes
to
Amendment to IAS 27, ‘Consolidated and Separate Financial Statements’ (effective for
annual periods beginning on or after 1 July 2009). The amended standard requires the
effects of all transactions with non-controlling interests (previously known as minority
interests) to be recorded in equity if there is no change in control after the transaction.
When the transaction results in a lost of control, any remaining interest in the entity is
remeasured to its fair value and a gain/loss is recognised in the income statement. The
Group will apply IAS 27 (Amended) from 1 January 2010. Currently, the Group record the
effects of such transactions in goodwill and gain/loss in the income statement for
acquisitions and disposals of non-controlling interests respectively.
78
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
37. New or revised accounting standards and interpretations (cont’d)
Amendment to IFRS 2 “Share-based Payment” (effective for annual periods beginning on
or after 1 January 2009). This amendment clarifies that vesting conditions are service
conditions and performance conditions only. Other features of a share-based payment are
not vesting conditions and are to be included in the grant date fair value of the share-
based payment transactions. The amendment also specifies that all cancellations,
whether by the entity or by other parties, should receive the same accounting treatment.
i.e., acceleration of the expense based on grant date fair value. The Group will apply the
amended IFRS 2 from 1 January 2009. Currently, the Group operates an employee
share option scheme and the scheme consists mainly of service and performance
conditions. As such, the amended standard is not expected to have any significant impact
to the Group.
The following interpretations to existing standards have been published and are
mandatory for the group and company's accounting periods beginning on or after 1
January 2008 or later periods but are not relevant for the group’s operations:
IFRIC 14, 'IAS 19 – The limit on a defined benefit asset, minimum funding requirements
and their interaction' (effective from 1 January 2008). IFRIC 14 provides guidance on
assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an
asset. It also explains how the pension asset or liability may be affected by a statutory or
contractual minimum funding requirement. The group will apply IFRIC 14 from 1 January
2008, but it is not expected to have any impact on the group or company's accounts.
IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008). IFRIC 12
applies to contractual arrangements whereby a private sector operator participates in the
development, financing, operation and maintenance of infrastructure for public sector
services. IFRIC 12 is not relevant to the group or company's operations because none of
the group’s companies provide for public sector services.
IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008). IFRIC 13 clarifies
that where goods or services are sold together with a customer loyalty incentive (for
example, loyalty points or free products), the arrangement is a multiple-element
arrangement and the consideration receivable from the customer is allocated between the
components of the arrangement using fair values. IFRIC 13 is not relevant to the group or
company's operations because none of the group’s companies operate any loyalty
programmes.
IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). It requires an
entity to capitalise borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial period of time to get ready for
use or sale) as part of the cost of that asset. The option of immediately expensing those
borrowing costs will be removed. The group will apply IAS 23 (Amended) from 1 January
2009 but is currently not applicable to the group or company as there are no qualifying
assets.
79
XP Power Limited
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2007
37. New or revised accounting standards and interpretations (cont’d)
IAS 32 and IAS 1 Amendment “Puttable financial instruments and obligations arising on
liquidation” (effective for annual periods beginning on or after 1 January 2009). The
amendment requires the following to be classified as equity instruments of the issuer: (i)
puttable financial instruments that entitle the holder to a pro rata share of the issuer's net
assets upon liquidation of the issuer; and (ii) financial instruments that include a
contractual obligation for the issuing entity to deliver to another entity a pro rata share of
its net assets on liquidation. The Group will apply the amendment from 1 January 2009.
[As the Group does not have financial instruments that are addressed within the
amendments, the amendment does not have any impact to the Group.
38. Other information
These financial statements were authorised for issue in accordance with a resolution of
the Board of Directors of XP Power Limited on 3 March 2008.
80
XP Power Limited
Company Balance sheet
For the financial year ended 31 December 2007
£ '000
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Inventories
Total current assets
Non-current assets
Investments in subsidiaries
Property, plant and equipment
Deferred income tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Share capital
Retained earnings
TOTAL EQUITY
NOTE
2007
4
5
6
7
3
8
11
444
6,604
814
3,714
11,576
29,786
224
22
30,032
41,608
9
9,877
9,877
10
1,500
1,500
11,377
30,231
12
12
29,786
445
30,231
81
XP Power Limited
Notes to the Company Financial Statements
For the financial year ended 31 December 2007
1. General Information
XP Power Limited (the “Company”) is listed on the London Stock Exchange and
incorporated and domiciled in Singapore. The address of its registered office is 138
Robinson Road #17-00, The Corporate Office, Singapore 068906.
The Company was incorporated on 12 February 2007. On 24 April 2007 the Company
became the holding company of XP Power plc pursuant to a scheme of arrangement
under section 425 of the Companies Act 1985 of the United Kingdom (‘the Scheme of
Arrangement’).
The nature of the Company’s operations and its principal activities are manufacturer,
providing power supply solutions and investment holding company.
2. Basis of accounting policies
The principal accounting policies are set out in Note 2 under the Group Consolidated
Financial Statements
The financial statements are prepared in accordance with International Financial Reporting
Standards (IFRS).
The Company had no significant assets, liabilities or contingent liabilities of its own at the
time that the Scheme of Arrangement took effect, and no cash consideration was paid in
respect of the business combination. The cost of combination is deemed to be nil. As the
Company was incorporated in 2007, no comparative of prior year is presented in the
financial statements.
3.
Investment in Subsidiaries
£ '000
Cost at carrying value
At 1 January 2007
Additions
At 31 December 2007
2007
-
29,786
29,786
82
XP Power Limited
Notes to the Company Financial Statements
For the financial year ended 31 December 2007
3.
Investment in Subsidiaries (cont’d)
Name of
Subsidiary
XP Power Plc
XP Power
Singapore
Holdings Pte Ltd
Place of
incorporation
Ownership (or
registration)
and operation
UK
Singapore
4. Cash and cash equivalents
£ '000
Cash at bank
Total
Proportion Proportion Auditor
of voting
power held Ownership
%
of
subsidiaries
of
%
100
100
100 PricewaterhouseCoopers
100 PricewaterhouseCoopers
2007
444
444
The Company’s cash at bank is denominated into the following currencies:
GBP
£ '000
USD
£ '000
EUR
£ '000
JPY
£ '000
SGD
£ '000
TOTAL
£ '000
Cash at bank
25
340
47
10
22
444
The Group has pledged all assets as collateral to secure banking facilities granted to the
Group.
5. Trade and other receivables
£ '000
Trade receivables
Amount receivable from Group companies
Total
2007
736
5,867
6,603
The average credit period taken on sales of goods is 29 days. No interest is charged on
the outstanding receivable balance.
The Directors consider that the carrying amount of trade and other receivables
approximate their fair value.
The Group has pledged all assets as collateral to secure banking facilities granted to the
Group.
83
XP Power Limited
Notes to the Company Financial Statements
For the financial year ended 31 December 2007
6. Other current assets
£ '000
Deposit
Other receivables
Total
2007
67
748
815
The Group has pledged all assets as collateral to secure banking facilities granted to the
Group.
7.
Inventories
£ '000
Goods for resale
2007
3,714
The Group has pledged all assets as collateral to secure banking facilities granted to the
Group.
8. Property, plant and equipment
£ '000
Cost
At 1 January 2007
Additions
At 31 December 2007
Depreciation
At 1 January 2007
Charge in the year
At 31 December 2007
Carrying Amount
At 31 December 2007
Plant and
machinery
Motor
vehicles
Office
equipment
Buildings
Total
-
83
83
-
6
6
77
-
8
8
-
-
-
8
-
97
97
-
16
16
81
-
76
76
-
18
18
58
-
264
264
-
40
40
224
The Group has pledged all assets as collateral to secure banking facilities granted to the
Group.
84
XP Power Limited
Notes to the Company Financial Statements
For the financial year ended 31 December 2007
9.
Current liabilities
£ '000
Trade payables
Amount payable to Group companies
Other creditors
Total
2007
1,575
7,244
1,058
9,877
Trade and other creditors principally comprise amounts outstanding for trade purchases
and ongoing costs. The Directors consider that the carrying amount of trade and other
payables approximates their fair value.
10. Non-current liabilities
£ '000
Amount payable to Group companies
Total
2007
1,500
1,500
The Company borrows from subsidaries at an interest rate of 1.5% above LIBOR and
repayable by 2011.
11. Taxation
£ '000
Deferred tax asset
Total
2007
22
22
As at 31 December 2007, the Company had unutilised tax losses and capital allowances
of approximately £230,406.
These are available for offset against future taxable profits, subject to agreement of the tax
authorities and compliance with the relevant provisions of the Singapore tax legislation.
85
XP Power Limited
Notes to the Company Financial Statements
For the financial year ended 31 December 2007
12. Share capital
Share capital
£ '000
Allotted and fully paid 19,242,296 ordinary shares
Retained earnings
£ '000
Balance at 1 January
Dividends paid
Profit for the year
Balance at 31 December
2007
29,786
2007
-
(1,712)
2,157
445
86
Five Year Review
IFRS
2007
2006
2005
2004
£ Millions
£ Millions
£ Millions
£ Millions
Restated
Restated
UK
GAAP
2003
£
Millions
Results
Revenue
66.3
Profit from operations
6.7
78.7
9.3
69.5
8.4
66.8
6.5
59.4
2.7
Profit before tax
5.0
8.0
7.6
5.9
2.1
Assets employed
Non-current assets
Current assets
Current liabilities
Non-current liabilities
39.7
27.3
(13.2)
(24.0)
39.2
30.0
(21.5)
(18.3)
33.6
30.1
(32.0)
(4.5)
27.9
23.3
(16.8)
(8.5)
26.4
22.6
(12.0)
(10.6)
Net assets
29.8
29.4
27.2
25.9
26.4
Financed by
Equity
Minority interests
Key statistics
29.6
0.2
29.4
-
27.2
-
25.9
-
26.3
0.1
29.8
29.4
27.2
25.9
26.4
Earnings per share
Diluted earnings per
share
17.9
17.8
27.9
27.5
30.7
30.1
20.5
20.1
5.0
4.9
Share price in the year
High
Low
528.4 p
235.3 p
486.5 p
526.0 p
327.0 p
279.0 p
466.0 p
218.0 p
250.0 p
73.5 p
87
76767 COVER 28/2/08 15:05 Page 1
XP Power
T HE
XP
ERTS
IN
P OWER
XP Power Limited, 401 Commonwealth Drive, Haw Par Technocentre, Lobby B, #02-02, Singapore 149598. Tel:+65 6411 6900 Fax: +65 6479 6305 Website: www.xppower.com