XP Power Annual Report 2022

FY2022 Annual Report · XP Power

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BUILDING RESILIENCE

Growing Sustainably

ANNUAL REPORT & ACCOUNTS

for the year ended 31 December 2022

We provide our customers with solutions
to power the world’s critical systems.

We design and manufacture a diverse portfolio of power converters, with unrivalled customer
service and support. Our enduring relationships are built on a reputation for quality.

Building resilience, growing sustainably – we have:
• continued to strengthen our supply chain throughout a challenging year, and focused on deepening

our relationships with suppliers and customers;

• continued to gain market share in growing markets through our proven business model and acquisitions;
• focused on what matters most to our people and our stakeholders;
• acquired FuG and Guth to complement our existing high voltage product portfolio and accelerate

our strategy in this attractive market; and

• implemented ERP in our Asian manufacturing facilities and in our supply chain giving end-to-end

visibility of our supply chain.

WE HAD A STRONG PERFORMANCE
LAST YEAR AND HAVE GOOD
LONG-TERM PROSPECTS

SUSTAINABILITY IS AT THE HEART
OF XP POWER

SEE OUR CEO Q&A FOR MORE
INFORMATION ON PAGES 16-17

SEE OUR SUSTAINABILITY FOR MORE
INFORMATION ON PAGES 62-79

Find us online at xppower.com

2022 has been a challenging
year for XP Power. I am pleased
that we overcame many of these
challenges in the second half
with a significantly improved
performance. This resulted in
XP delivering strong orders
and growing revenue, whilst
continuing to invest in the
business by adding capacity,
developing new products and
expanding our global workforce.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

CONTENTS

OVERVIEW

XP POWER AT A GLANCE

CHAIR’S STATEMENT

FINANCIAL AND OPERATIONAL HIGHLIGHTS

REASONS TO INVEST

BUILDING RESILIENCE, GROWING SUSTAINABLY

OUR PURPOSE, VISION, STRATEGY, VALUES
AND CULTURE

Q&A WITH CEO

STRATEGIC REPORT

OUR MARKETPLACE

THE MARKET SECTORS WE SERVE

OUR BUSINESS MODEL

OUR STRATEGY

SUSTAINABILITY INTRODUCTION

OUR SUSTAINABILITY STRATEGY

PERFORMANCE: OPERATIONAL REVIEW

KEY PERFORMANCE INDICATORS

PERFORMANCE: FINANCIAL REVIEW

MANAGING OUR RISKS

MANAGING OUR RISKS VIABILITY STATEMENT

SECTION 172(1) STATEMENT:
HOW WE ENGAGE WITH OUR STAKEHOLDERS

OUR SUSTAINABILITY STRATEGY

1. SUSTAINABLE PRODUCTS

2. ENVIRONMENTAL LEADERSHIP

3. PEOPLE AND WORKPLACE

4. ETHICS AND COMPLIANCE

TCFD REPORT

GOVERNANCE

GOVERNANCE AT A GLANCE

BOARD AND COMMITTEE ATTENDANCE

LETTER FROM THE CHAIR

BOARD OF DIRECTORS

CORPORATE GOVERNANCE REPORT

NOMINATION COMMITTEE REPORT

AUDIT COMMITTEE REPORT

REMUNERATION COMMITTEE REPORT

OTHER GOVERNANCE AND STATUTORY DISCLOSURES

STATEMENT BY DIRECTORS

FINANCIALS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

COMPANY BALANCE SHEET

NOTES TO THE COMPANY BALANCE SHEET

FIVE-YEAR REVIEW CONSOLIDATED INFORMATION

ADVISERS

108

114

118

140

141

144

149

150

151

152

153

195

196

205

206

XP POWER AT A GLANCE
WHAT WE DO

We provide our customers with solutions
to power the world’s critical systems.

XP Power has moved up the
value chain over the last 20 years
from a specialist distributor, to
designer, to design manufacturer
of power control systems.

Power control systems are the essential hardware
component in every piece of electrical equipment
that converts power from the electricity grid into the
right form for equipment to function. What makes XP
Power different is we focus on sectors where power is
mission critical and failure is not an option.

XP Power products will either power the electronics,
in the case of our low-voltage products, or processes,
in the case of our high-voltage and radio frequency
(RF) power systems, in critical systems in the
Healthcare, Industrial Technology or Semiconductor
Manufacturing Equipment sectors.

How we differentiate
As one of the world’s leading providers of power
converter solutions, we ensure that critical electrical
and electronic equipment is powered as safely, reliably
and efficiently as possible.

Our customers provide mission-critical systems to
service their relevant sectors. Therefore, our products
need to be reliable, resilient and safe. We have built
a product portfolio of over 250 product families that
give us the broadest product offering in the industry.

Our global network gives us a strong competitive
advantage over both our smaller competitors, who do
not have the scale and geographical reach to serve
global customers, and our larger competitors, who

often lack the operational flexibility to provide the
excellent services and speed that customers seek.

As the capabilities of electronic devices evolve, so
do the complexities of their systems. Instead of
trying to deliver expensive, time-consuming power
solutions from scratch, our engineers are often able
to transform the products and technologies in our
existing portfolio.

Our customers come to us because they know our
solutions are the highest quality – but they also come
to us because they know that if they have a specific
and challenging power problem, we will work to
overcome it.

Our customers
Our customers are original equipment manufacturers
who can be characterised as having expertise in their
field, whether with healthcare devices, fast-growing
industrial technologies or semiconductor equipment
manufacturing, but generally do not have deep in
house power conversion expertise.

We provide this expertise and assist our customers to
design-in a suitable power supply from our extensive
range of products that meet the customers’ cost and
technical requirements. These technical requirements
often involve helping the customer meet the
equipment safety standards that operate in their
industry, such as relevant medical or electrical safety
standards, as well as electromagnetic compatibility
(conducted and radiated electrical noise).

We pride ourselves on our customer focus, providing
rapid response to their technical issues to solve their
power problems and help them get to market as fast
as possible.

READ MORE ABOUT OUR
OUR CUSTOMERS ON
PAGES 23–25

XP Power Annual Report & Accounts for the year ended 31 December 2022
SEMICONDUCTOR
MANUFACTURING EQUIPMENT
Examples of end-user products:

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• Deposition

• Etch

• Semiconductor test

•

Ion implantation

• Lithography

INDUSTRIAL TECHNOLOGY
Examples of end-user products:

• Analytical instrumentation

• 3D and industrial printing

• Test and measurement

• Robotics

• Security

• Wind farms

HEALTHCARE
Examples of end-user products:

• Diagnostics

• Surgical tools

• Patient monitoring

• Analytics and imaging

XP Power Annual Report & Accounts for the year ended 31 December 2022

XP POWER AT A GLANCE
THE POWER OF OUR GLOBAL REACH

Our global reach and target sectors help mitigate market volatility.
Our network of sales, engineering and manufacturing provides us with the flexibility of a global organisation
and the ability to partner with our customers locally.

North America

The North American network
consists of design centres in
Massachusetts, New Jersey and
Southern California, an engineering
solutions group in Silicon Valley, and
an additional 11 sales offices. This
network allows us to provide our
major customers with local, face-
to-face support and rapid response
times. Production facilities are
based in Massachusetts, New Jersey
and Silicon Valley.

$207.0m

OF TOTAL REVENUE

6% CER COMPARED TO FY 21

Europe

In Europe, the network consists of eight direct sales
offices and a further nine distributor offices. In
addition, we have engineering solutions centres in
Germany and the UK, and in January 2022 added
the acquisitions of FuG Elektronik GmbH and Guth
High Voltage GmbH, also in Germany which brought
two facilities with both production and design
capabilities. With good coverage across Europe, we
have the operational flexibility to provide high-
quality and rapid service delivery. We maintain a
small production facility in the UK for customer
modifications.

£86.5m

OF TOTAL REVENUE

4% COMPARED TO FY 21 (LIKE FOR LIKE)

XP Power Annual Report & Accounts for the year ended 31 December 2022Our market sectors
Semiconductor manufacturing
equipment
Connected devices are becoming increasingly
prevalent. From wearable technology that monitors
a patient’s health in real time, to in-vehicle devices
that can help regulate dangerous driving habits,
semiconductors are everywhere and their applications
are transforming the way we live.

We are one of the few global companies able to
provide the complete spectrum of power solutions
that semiconductor equipment manufacturers demand.

Healthcare
We are an attractive partner for healthcare customers
because our engineers understand the nuanced power
needs of a wide range of medical applications required
in healthcare environments from the operating
theatres to intensive care units.

We are one of the largest global providers of medical
power conversion products, with a portfolio that
meets the specific high safety standards that the
sector understandably demands.

We are helping our customers usher in a new
generation of increasingly connected and effective
medical devices.

Industrial technology
We focus on power solutions for sectors with
high-growth potential. Our engineers envision how
the industrial technologies of tomorrow need to be
powered and deliver the solutions to enable them to
come to market today.

From additive manufacturing and robotics to smart
grid infrastructure, our power converters are helping
facilitate a digital future.

Asia

We have five direct sales offices in Asia
operating from Singapore, where we also
manage a network of seven distributors
serving the region. We have design engineering
solutions capability in Singapore and South
Korea to complement our offering to customers
in the region. We have production facilities
in China and Vietnam and are building a third
facility in Malaysia to serve our Asian and
customers globally.

$45.3m

OF TOTAL REVENUE

3% CER COMPARED TO FY 21

KEY

Manufacturing

Warehouse

Sales Offices

Head Offices

READ MORE ABOUT OUR GROWING OUR BUSINESS
ON PAGES 12–13

XP Power Annual Report & Accounts for the year ended 31 December 2022OVERVIEW
CHAIR’S STATEMENT

2022 while challenging was a year
of further strategic progress that
positions us well for the long term.

JAMES PETERS
CHAIR

Our progress in 2022
While demand remained strong throughout the
year, the Group enjoyed mixed fortunes in 2022. A
combination of supply chain factors and inflationary
pressures impacted our performance in the first half,
but conditions improved progressively through the
second half and we ended the year strongly.

In what continued to be a challenging global
environment, we made good strategic progress in the
year. Key developments included the acquisitions of
FuG Elektronik GmbH (FuG) and Guth High Voltage
GmbH (Guth) in January, the ongoing investment in
supply chain capacity and resilience, including further
enhancements of our existing facilities, and the
start of work on a new major manufacturing site in
Malaysia, our third in Asia. Beyond this, we continued
to further develop our product range with design-in
activity levels – a good medium term leading indicator
of customer demand – remaining high.

2022 saw the continuation of ongoing challenges
resulting from COVID-19, with a five-week shutdown
of our Kunshan facility in China when production
was suspended. In addition, labour and component
inflationary pressures, global supply chain and
logistics challenges led to extended lead-times
being faced by the electronics industry worldwide,
particularly in the first half of the year. However, it
was a year of two halves: the first half was severely
impacted by these challenges leading to a delay
in conversion of orders to revenue and inventory
build up. In the second half of the year trading

improved significantly, both sequentially and year-
on-year; supply chain conditions stabilised allowing
manufacturing facilities’ throughput to increase
materially; the impact of higher selling prices began to
work through and logistics and freight costs reduced.
I would like to thank all colleagues for their ongoing
commitment, perseverance and adaptability during
this difficult period.

The clear highlight of the year was our record
revenue, driven by an acceleration in the second half
where we delivered significant growth over the prior
year. The Group enters 2023 with a strong order
book which underlines the strength of demand for
XP Power’s products.

We saw continued momentum in the Semiconductor
Manufacturing Equipment sector, part of a multiyear
upcycle that slowed towards year-end, strong growth
in Industrial Technology and encouraging growth
in Healthcare for the full year. The second half
of 2022 saw very strong growth, versus the prior
year, particularly in the Industrial Technology and
Healthcare sectors.

Although we have seen a material increase in our net
debt year on year reflecting the acquisitions of FuG
and Guth, at the beginning of the year, investment in
inventory to support delivery of the backlog, higher
capital investment, and the collateral payment and
legal fees relating to the ongoing Comet litigation, we
continue to expect the Group’s financial leverage to
reduce in 2023.

£362.9m

ORDER INTAKE AND
MOVEMENT
-2% CER

COMPARED TO FY 21

XP Power Annual Report & Accounts for the year ended 31 December 2022Our confidence in the Group’s long-term prospects
allows the Board to propose a final dividend of 36p
for 2022 (2021: 36p), which would, if approved by
shareholders, brings the total 2022 dividend per share
to 94p (2021: 94p).

Our Board
In March 2022, I announced that I would be retiring
from the Board following the AGM in April 2023, after
almost 35 years with the Group. Our succession plans
were implemented and we were delighted to welcome
Jamie Pike to the Board as Non-Executive Director
and Chair designate in March 2022. Jamie and I
continue to work together closely in this handover
period ahead of the formal transfer of responsibilities.

We were delighted to announce in October
2022 Sandra Breene and Amina Hamidi joining
as Non-Executive Directors, together bringing
deep knowledge of operations, engineering and
international business experience to the Board.

Following the year end Oskar Zahn, Chief Financial
Officer, resigned from the Board to take up the
position of Chief Financial Officer at W.A.G payment
solutions plc. Oskar will leave the group at the end of
March and a further announcement on his departure
is being made separately today. On behalf of the
Board, I would like to thank Oskar for his contribution
to XP over the last two years and wish him well in his
new role.

Our people and our values
The success of any organisation is dependent on its
culture and the people and talent within it. The Board
engages regularly with the Executive Leadership
Team and colleagues throughout the Group to ensure
we are continuing to identify and develop our key
people and bringing new talent and capabilities into
the business to help underpin our growth ambitions.
We made a number of key hires in engineering,
manufacturing and product management during the
year as we looked to further enhance our capabilities
in these critical areas and to support the growth
ambitions we have for the Group.

Strategy review
We recently completed our annual review of our
strategy which confirmed it remains appropriate and
robust. We continue to evolve individual elements to
improve their effectiveness and to ensure they take
account of changes in the operating environment.
Today, we are one of a few power companies in the
world with a broad product portfolio spanning the
power and voltage spectrum. We remain focused
on growth, both organically and inorganically, and
despite many years of strong performance, our
expanded addressable market and the opportunity
to further grow our market share in the markets
in which we operate and the sectors we focus on
remains encouraging. Looking ahead, we will continue
to use our product portfolio and engineering services
capabilities to provide customers with a broader range

READ MORE ABOUT OUR
BUSINESS STRATEGY ON
PAGES 28–29

READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGES 33–34

of power solutions and to continue to increase our
market share.

Our strategy is devised to deliver sustainable long-
term earnings growth through both revenue growth
and market share gains in our target sectors and
customers. This success is demonstrated by our
consistent performance and resilience over the cycle
in the sectors in which we operate. We are confident
we can continue to develop market-leading products
and, encouraged by the potential of our product and
sales backlog and pipeline, to continue to deliver
organic growth.

The acquisitions of FuG and Guth at the beginning
of 2022 are highly complementary to our existing
high voltage portfolio and significantly enhance our
capabilities in this attractive area. In the short term,
our focus is on bedding in these recent acquisitions
and positioning them to deliver upon their full organic
growth potential within the Group. Integration is
progressing well and performance was in line with
expectations in 2022.

I am extremely proud of what XP Power
has achieved in the past 35 years and
excited by the opportunities for the
Company that lie ahead.

Outlook
We delivered a robust performance in the second
half of 2022, particularly Q4, demonstrating the
Group’s potential. Demand remains solid and a record
order book gives excellent visibility into 2023. There
continues to be external factors that could impact on
2023 including the semiconductor market slowdown,
ongoing supply chain challenges, inflationary
cost pressures and recessions in a number of our
operating regions. Longer term, the Board believes
XP remains very well positioned to grow ahead of its
end markets, recover profitability and deliver strong
cash generation.

As I close my last statement as Chair, I am extremely
proud of what XP Power has achieved in the past
35 years and excited by the opportunities for the
Company that lie ahead. I would like to thank all our
stakeholders for their commitment and support over
many years and wish them and the business every
future success.

JAMES PETERS
CHAIR

XP Power Annual Report & Accounts for the year ended 31 December 2022OVERVIEW

FINANCIAL AND OPERATIONAL HIGHLIGHTS

Financial highlights

ORDER INTAKE (£M)

TOTAL REVENUE (£M)

ADJUSTED PROFIT BEFORE TAX (£M)

£362.9m £290.4m £38.0m

2022

2021

2020

2019

2018

362.9

343.4

258.0

214.9

198.4

2022

2021

2020

2019

2018

290.4

2022

38.0

240.3

233.3

199.9

195.1

2021

2020

2019

2018

43.8

44.3

41.2

32.3

LOSS/PROFIT BEFORE TAX (£M)

ADJUSTED EARNINGS PER SHARE (P)

DIVIDEND PER SHARE (P)

£(30.2)m

£160.1p

94p

2022

(30.2)

2021

2020

2019

2018

28.4

35.7

24.0

37.6

2022

2021

2020

2019

2018

160.1p

176.3

198.4

141.4

172.8

2022

2021

2020

2019

2018

Operational highlights

SEE OUR PERFORMANCE
FOR MORE INFORMATION
ON PAGES 36–41

• Record order intake increased by 6% to

£362.9 million, driven by all three sectors that
we focus on – continued momentum in the
semiconductor manufacturing equipment sector, a
strong recovery in industrial technology and strong
demand from our healthcare customers.

• Gross margin decreased to 41.5% due to lower
production volumes in H1 and compounded by
component and wage inflation and global logistics
challenges particularly in the first half of the
year. H1 gross margin of 40.2%, increasing to
42.5% in H2.

• Reported revenue grew 21% to £290.4 million and
6% on an organic constant currency basis, mainly
due to a strong second half of the year as supply
chain conditions stabilised. H2 revenues increased
39% on prior year, a record level.

XP Power Annual Report & Accounts for the year ended 31 December 2022
REASONS TO INVEST

We are driving sustainable growth to create long-term value for all stakeholders.
We have a clear ESG framework, and our talented workforce help us develop the
right products and capability to achieve financial success.

Sustained organic growth
A growing penetration of global, blue-chip
customers has enabled sustained organic
growth and provides exposure to high-
growth markets.

Global supply chain operations
Our robust supply chain operations have
a global footprint that gives us flexible
manufacturing capacity and the ability to
engineer close to our customers.

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SEE MARKETPLACE FOR MORE INFORMATION
ON PAGES 21-25

SEE BUILDING RESILIENCE FOR MORE INFORMATION
ON PAGES 10-11

Attractive margins and cash
generation
More attractive operating margins and
lower capital investment requirements than
other manufacturing industries enable us to
deliver strong free cash flows.

Capital allocation policy

We have a business model that allows
for a progressive dividend, which is paid
quarterly, and continued investment in
capability and capacity.

SEE PAGES 46-49 FOR MORE INFORMATION

Long-term customer relationships
Once our power converters are approved
for use in our customer’s equipment,
XP Power receive revenues over the
lifetime of the customer’s equipment, which
is typically seven years.

Focus on sustainability
We aim to lead the industry on
sustainability by reducing energy
consumption, prioritising our people and
enhancing our product design process.
We aim to reach net zero by 2040.

SEE PAGES 23-25 FOR MORE INFORMATION

SEE SUSTAINABILITY FOR MORE INFORMATION
ON PAGES 33-34

XP Power Annual Report & Accounts for the year ended 31 December 2022

BUILDING RESILIENCE,
GROWING SUSTAINABLY

BUILDING
RESILIENCE

We are building resilience across our
supply chain and continue to strengthen
relationships with our suppliers and
customers. We are also committing to
achieve and maintain high standards of
sustainability across all business activities.

XP Power Annual Report & Accounts for the year ended 31 December 2022

Our customers
Our customers are at the heart of what we do.
We sell directly to our key customers where we
can add genuine value, offering excellent service
and support combined with world-class products.

We build strong and long lasting relationships
with our customers, driven by our large and
technically capable sales engineering teams and
backed up by our highly skilled power systems
engineers and the safety and reliability benefits
of our manufacturing.

This structure was crucial during 2022 as we
continued to navigate the supply chain issues
affected by ongoing global challenges, and had
to provide the same solutions with different
components due to shortages.

Our strong supply chain
Our main production facilities are in China and
Vietnam and we are building a third facility in
Malaysia. We proactively manage these sites to
optimise our supply chain and provide resilience
of supply for our customers. Our total Asian
manufacturing capacity is more than US$350
million per year. We have significantly expanded
our low cost Asian manufacturing base and
continue to do so, investing in new capacity in
Vietnam and, from 2024, in Malaysia, where we
broke ground to begin construction of our new
manufacturing site in 2022.

The new facility in Malaysia will become
approximately twice the size of our existing
Vietnam factory, to complement both Vietnam
and our original China plant to meet the demand
across the world and allow for further expansion.
Our overall objective is to provide a resilient
and flexible supply chain with the capability to
manufacture the majority of products in China,
Vietnam and Malaysia to provide enhanced
business continuity planning.

We also have three smaller, specialist
manufacturing facilities in North America. These
include a customer-focused engineering services

Quality and reliability are paramount to our
customers who often provide critical healthcare
or industrial systems. For that reason, we need
reliable suppliers with high-quality standards.

We have a rigorous approval process that looks
at all aspects of a supplier before we engage with
them. This includes prospective suppliers’ quality
systems and standards, their financial viability,
their environmental performance and treatment
of their people. We are a full member of the
Responsible Business Alliance (RBA) and have
adopted the RBA Code of Conduct throughout
our organisation. This deals with environmental
standards, treatment of people, health and safety,
and business ethics.

facility in California, a site in New Jersey focused
on high-voltage products, and an radio frequency
focused facility in Massachusetts.

Vietnam is now qualified to produce a total of
2,746 different low-voltage products as we
continue the transfer of production capabilities.
In addition, there are now 813 different high-
voltage modules capable of being manufactured
in Vietnam, now that the transfer of low-power,
high-voltage DC-DC modules.

In China, we are also developing capability to
manufacture RF products for the Asia market, and
will continue to invest in this in 2023, supporting
the growth of our RF business overall.

In Europe, the acquisitions of FuG and Guth in
January 2022 added further high voltage capacity
and strengthens the Group’s position in Germany,
the largest market for power solutions in Europe.

Throughout the year, we have seen supply issues
for certain components and increased safety
stocks of key components to manage through any
future supply issues. We monitor market dynamics
closely working with our supply partners. We have
also designed out some particularly problematic
components using our engineering team.

Focus on sustainability
We aim to lead the industry on sustainability and
believe it is fundamental to driving our growth,
managing risk and living our values

We have a clear ESG framework, and in July
2022, we submitted our commitment of net zero
of emissions by 2040 and have registered with
the Science Based Target initiative (SBTi) and
have established a number of initiatives to meet
this target. These include low carbon products,
renewable electricity and responsible supply chain.

Our employees are the heart of our organisation
and we continue to support them through training
and development and promoting a fair working
environment with equal opportunities. We ensure
our workplace is where our people can be at their
best, ensuring an environment that is safe, diverse,
inclusive and attracts and retains the best talent.
We uphold the highest standard of business ethics
and integrity.

READ OUR FULL SUSTAINABILITY REPORT
ON PAGES 62-79

XP Power Annual Report & Accounts for the year ended 31 December 2022OVERVIEW
BUILDING RESILIENCE,
GROWING SUSTAINABLY

GROWING
OUR BUSINESS

Utilising our proven growth
model to grow our business
sustainably and create more
value for our stakeholders.

£362.9m

ORDER INTAKE -2% CER
COMPARED TO FY 21

Maintaining our strong
financial position to
support our growth
Despite short term challenges in 2022, we
expect to return to our long term financial
framework, reflecting a strong balance
sheet with high levels of cash conversion
above 90% that allows us to drive further
growth through organic investment,
including R&D, people, and targeted and
complementary acquisitions.

Our proven growth model: gaining
market share in growing markets
We are exposed to attractive long-term growth markets.

Market growth is driven by increasing global GDP, growth in
the use of electronics all of which require a power converter,
pace of innovation, global shortage of semiconductors driving
investment in capacity, increase in new technologies such as
Internet of Things, smart technology and Artificial Intelligence,
as well as the global population that is both increasing and
ageing, coupled with advances in medical technology.

We have a track record of gaining market share through
greater penetration of existing blue chip customers, providing
power solutions for customers and ongoing product
innovation to build share and expand addressable market.

We deliver operational excellence through supply chain
optimisation, high-quality and highly adaptable operations,
with good operating performance and margins.

READ MORE ABOUT OUR FINANCIAL
POSITION IN OUR STRATEGY ON PAGES 28–29

READ MORE ABOUT OUR PROVEN GROWTH MODEL
IN OUR STRATEGY ON PAGES 28–29

XP Power Annual Report & Accounts for the year ended 31 December 2022

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Growing our product portfolio
New products are fundamental to our revenue growth. Our
teams work closely with our customers to develop the right
products to meet future requirements.

We continue to move our product portfolio up the power
and voltage scale, and away from our historic low-power/
low-voltage offering, to protect our margins and expand our
addressable market. The FuG and Guth acquisitions are highly
complementary to XP Power’s existing high voltage product
portfolio and accelerates our strategy in this attractive market.

We have directed more of our internal product development
resources away from low-power/low-voltage applications, and
are servicing demand in the low-power segment with more
third-party products designed to our specifications and quality
standards. Our design engineers focus on more technically
challenging and complex product opportunities.

We add significant value to our customers through our engineering
solutions groups who work closely with the customer’s
engineering teams to provide customised solutions. Speed and
proximity to the customer are critical as the power solution is
often one of the last parts of the system to be designed.

Building on our competitive
strengths and growth drivers
We focus our development experts and engineers to
capitalise on our strengths and are well positioned to
capitalise on growth drivers:

• Power supplies are increasingly part of the

customer ecosystem, with increased connectivity of
the power converter to the customer's equipment

• Higher power and higher levels of customisation
driving higher engineering services content with
Industry 4.0 accelerating these trends

•

Increased legislation and safety regulations

Increasing environmental demands driving
higher efficiency

READ MORE ABOUT OUR GROWING PORTFOLIO
IN OUR STRATEGY ON PAGES 28–29

READ MORE ABOUT OUR COMPETITIVE STRENGTHS
IN OUR STRATEGY ON PAGES 28–29

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR PURPOSE, VISION, STRATEGY,
VALUES AND CULTURE

Our purpose underpins everything we do and links our vision and values with our strategy.
We link our purpose, vision, strategy, values and culture to clearly communicate to our colleagues and drive our business forward.

Our purpose

Why we exist
We power the world’s critical systems.

Being a purpose-led business
We add genuine value to our
customers, helping them get to
market quickly with complete power
solutions. Our people understand how
we create value for the customer.

Our vision

Where we want to be:
To be the first-choice power
solutions provider, and to deliver
the ultimate experience for our
customers and our people.

Our strategy

How we will deliver our vision:
We have a well-articulated strategy
that we have continued to refine
and consistently execute over a
significant period.

Our sustainability strategy
Our sustainability strategy focuses on
some of the most material issues across
our business, ensuring that the value
we create is for the long term.

XP Power Annual Report & Accounts for the year ended 31 December 2022

O
V
E
R
V

I
E
W

Our core values

Our fundamental beliefs for continued success:
Our core values of Integrity, Knowledge, Flexibility,
Speed and Customer Focus are our DNA and are
fundamental to our continued success.

Integrity

Customer Focus

Speed

Flexibility

Knowledge

Our culture

Our culture places our people and customers at
the heart of the business. Most importantly, it is
driven by our sustainable mindset, which allows us
to amplify our goals across XP Power by developing
our talent and empowering our people to deliver
sustainable value.

XP Power Annual Report & Accounts for the year ended 31 December 2022

What factors have contributed
to XP Power's impressive
order book accomplishment
this year?
XP Power has benefited from the global recovery post
COVID-19 that has driven strong demand for our
products across all sectors.

The global requirements for more electronic
equipment in all aspects of our day to day lives that
are more connected, more resilient and more reliable
plays to the sweet spot of our product capabilities.

The lengthening of the supply chain has also increased
lead times for our raw materials, which has in turn
temporarily extended delivery times for our products.
We expect this to normalise as lead times reduce in
the coming years.

How do XP Power's two
recent acquisitions, FuG and
Guth in Germany, add to its
HV portfolio?
FuG and Guth complement our existing high voltage
portfolio bringing new products and new technologies
that expand our addressable market.

Combining all of XP Power's high voltage technology
brings exciting opportunities across the breadth of a
growing, innovative marketplace.

Q&A WITH CEO

The Group starts 2023 with a
significant order book, which provides
good visibility for the year.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

XP Power Annual Report & Accounts for the year ended 31 December 2022

What would you say about
the short-term market
challenges such as component
shortages and increase in lead
times, as well as the external
environment?
The global supply chain challenges remain, although
have abated in the second half of the year as the
electronics industry comes to terms with working
within this new normal.

The semiconductor shortages that originated during
the pandemic are showing signs of recovery but
supplies of specific components are still inconsistent
and prone to schedule change.

We expect this to continue for some time and we are
highly skilled in operating in this new environment.

Sustainability underpins
the focus for the business.
What have been the stand
out achievements in the past
12 months?
2022 was another year of building on our
sustainability heritage. It was pleasing to receive the
first ESG award from Lam Research, one of our largest
customers, being recognised for our commitment to
strong ESG goals over many years and proactively
aligning with Lam on these priorities.

This follows the PRISM award we received from ASM
in 2021 for sustainability.

We are committed to a sustainable future and have
signed up to the Science Based Targets Initiative
(SBTi).

What's your action plan
on the Comet legal action
judgement?
We are still waiting for the Judges ruling on the case,
and when we receive this the Board will consider our
next steps.

Elaborate on XP Power's
future plans and long-term
prospects?
We are excited by the opportunities we see in front
of us, to work more closely with our customers to
address their power problems.

We continue to view the RF market as an attractive
opportunity and respect the rulings of the Court but
intend to compete in this market within the rules
outlined by the Court.

By doing this and continuing to expand our product
solutions and engineering capability we are confident
we can grow ahead of the market and continue to
deliver strong results to all our stakeholders.

Is the business highly
leveraged?
The net debt to EBITDA leverage is higher than we
have historically operated at as a result of acquisitions,
the legal case and inventory build.

We will manage this carefully but remain confident
that given the well proven, cash generative nature of
the business we can continue to invest in the business
while reducing the leverage levels.

XP Power Annual Report & Accounts for the year ended 31 December 2022OVERVIEWSTRATEGIC
REPORT

XP Power Annual Report & Accounts for the year ended 31 December 2022

CONTENTS

OUR MARKETPLACE

THE MARKET SECTORS WE SERVE

OUR BUSINESS MODEL

OUR STRATEGY

SUSTAINABILITY INTRODUCTION

OUR SUSTAINABILITY STRATEGY

PERFORMANCE: OPERATIONAL REVIEW

KEY PERFORMANCE INDICATORS

PERFORMANCE: FINANCIAL REVIEW

MANAGING OUR RISKS

MANAGING OUR RISKS VIABILITY STATEMENT

SECTION 172(1) STATEMENT:
HOW WE ENGAGE WITH OUR STAKEHOLDERS

OUR SUSTAINABILITY STRATEGY

1. SUSTAINABLE PRODUCTS

2. ENVIRONMENTAL LEADERSHIP

3. PEOPLE AND WORKPLACE

4. ETHICS AND COMPLIANCE

TCFD REPORT

S
T
R
A
T
E
G

R
E
P
O
R
T

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR MARKETPLACE
GROWING OUR ADDRESSABLE MARKETS

We operate in a highly diverse market with great opportunity to grow market share.

US$ BILLIONS

ESTIMATED MARKET

LOW VOLTAGE
3.6

PROCESS POWER
2.8

TOTAL

6.4

XP POWER
ESTIMATED MARKET

LOW VOLTAGE
7.8%

PROCESS POWER
2.9%

TOTAL

5.7%

Source: Microtech
Consultants and XP
Power management
estimates

Overview
Our end markets can be broken down to the low
voltage market, powering electronic systems, and the
high voltage and radio frequency (RF) market, which
powers processes such as the generation of plasmas
or some sort of particle acceleration or ionisation.

The fragmented nature of the market means we have
numerous competitors dependent on the product
type, end application or geographic location with no
particular competitor having a dominant share. We
consider that we have strong relationships with the
leading customers in the higher growth market niches,
which will allow us to continue to grow our market
share. This is particularly true in process power where
our share is currently low.

Low voltage

$3,600m

TOTAL MARKET VALUE

OVERVIEW
The low voltage market principally powers electronic
systems and is highly fragmented globally.

OUR RESPONSE
Our broad, easily modified, up-to-date product
portfolio combined with our engineering capability
allow us to provide effective solutions to diverse
range of applications.

High voltage

$700m

TOTAL MARKET VALUE

OVERVIEW
High voltage high power is an attractive market
where we are finding many new opportunities since
acquiring this product range.

OUR RESPONSE
Our sales force is finding attractive opportunities
in our existing customer base in semiconductor
manufacturing equipment, research, additive
manufacturing and healthcare applications for these
products.

RF power

$2,042m

TOTAL MARKET VALUE

OVERVIEW
The RF Power market is substantial and has attractive
growth prospects. The semiconductor equipment
manufacturers are significant users of this product,
but is also used in healthcare and applications
involving dielectric and induction heating.

OUR RESPONSE
The RF Power market presents an exciting
opportunity for us to grow our revenues with
customers who already value our service and support.

XP Power Annual Report & Accounts for the year ended 31 December 2022THE MARKET SECTORS WE SERVE

Our products serve markets in multiple sectors and across three market regions.

Semiconductor
manufacturing equipment

Industrial
technology

Healthcare

The semiconductor manufacturing equipment
market continued to grow in 2022. This is an
attractive sector for our long-term growth
as the demand for semiconductor devices
is driven by multiple factors such as pace of
innovation, global shortage of semiconductors
driving investment in capacity, artificial
intelligence (AI), big data, smart technology
and autonomous vehicles.

MARKET OVERVIEW
We are one of the few companies in the
world that can offer the whole spectrum
of power and voltage products required
for semiconductor manufacture, and
have capability to combine these into a
complete power solution. This is important
to our customers as the latest generation of
devices become more capital intensive to
manufacture as they become multi-layered
and dimensions continue to shrink.

PERFORMANCE THIS YEAR
We have benefited from ongoing demand and
market share gains as several new programme
wins, driven by technology advances, have
entered production.

The industrial technology market is the
most diversified of our markets. There
are no large individual programmes even
though we are dealing with many blue-
chip industrial customers.

MARKET OVERVIEW
We focus on fast growing niches, such
as robotics, test and measurement, 3D
printing and additive manufacturing, smart
grid and analytical instruments.

PERFORMANCE THIS YEAR
Demand in industrial technology has
remained strong despite supply chain
challenges having a major impact during
2022. Revenue from the distribution
channel has seen a strong increase as
we continue to grow market share with
the high service level distributors we
use to support the mid-tier and smaller
customers of the market.

The healthcare market tends to be less
cyclical than our other sectors, which adds
resilience to our business model. We have
a broad medical power converter offering
with full traceability of components and
high-quality in-house manufacturing.

MARKET OVERVIEW
Healthcare remains an attractive market
for us, given the long-term demand growth
dynamics and the safety critical nature
of products. Our broad medical product
range and high level of customer service
make our value proposition very attractive.

PERFORMANCE THIS YEAR
Demand from our healthcare remains
encouraging as the operation procedures
normalised to pre-COVID-19 levels and a
healthy pipeline of innovation, especially
in robotics.

S
T
R
A
T
E
G

R
E
P
O
R
T

25%

FIVE-YEAR CAGR

REVENUE (£M)
39% total revenue

£113.4m

REVENUE (£M)
41% total revenue

£119.6m

REVENUE (£M)
20% total revenue

£57.4m

113.4

93.3

2022

2021

2020

2019

2018

69.6

37.4

47.4

2022

2021

2020

2019

2018

119.6

92.0

94.4

116.6

104.1

2022

2021

2020

2019

2018

57.4

55.0

69.3

45.9

43.6

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR MARKETPLACE CONTINUED
THE MARKET SECTORS WE SERVE

KEY

Manufacturing

Sales Offices

Warehouse

Head Offices

North America
North America is a significant market
for power electronics with many large
customers, particularly in healthcare and
semiconductor manufacturing equipment.

MARKET OVERVIEW
In general, our customers in North America
are the most innovative and fast moving.
We see this particularly in healthcare.
North America is also the de facto
leader in semiconductor manufacturing
equipment – a sector we consider having
strong long-term growth prospects for
XP Power.

PERFORMANCE THIS YEAR
North America produced strong growth in
2022 as the semiconductor manufacturing
equipment sector continued to grow, and
demand in industrial technology sector
was strong, especially from the distribution
channel. Healthcare performance was
flat mainly due to component shortages
impacting shipments.

Europe
The European market is more fragmented
than North America or Asia, as it
contains numerous smaller industrial
technology companies and several larger
healthcare companies.

MARKET OVERVIEW
Our European customers are principally
involved in industrial technology
with some healthcare, but very little
semiconductor manufacturing equipment.
It is our most diverse market.

PERFORMANCE THIS YEAR
Europe produced strong growth in
industrial technology and healthcare
in 2022.

Europe did not benefit from the
semiconductor manufacturing
equipment exposure that Asia and North
America have.

We successfully completed the
acquisitions of FuG and Guth in January
2022, and performance has been strong
for both businesses.

Asia
Although Asia is a large market, much of
it is not available to XP Power as many
customers value cost over service and
support. Nevertheless, there are several
significant niches where our proposition
is compelling. Asia’s up-and-coming
semiconductor manufacturing equipment
market is particularly attractive.

MARKET OVERVIEW
Markets in Asia are generally growing
faster than in North America and Europe.
There are many attractive areas that we
can service with our more complex high-
power and high-voltage products.

PERFORMANCE THIS YEAR
Asia produced growth across all three
market sectors.

The acquisition of Comdel and Glassman
meant we have benefited from the
addition to the product portfolio –
increased RF and high-voltage high-power
capabilities – which has created new
revenue opportunities.

FIVE-YEAR CAGR

REVENUE (£M)
57% total revenue

£167.2m

REVENUE (£M)
30% total revenue

£86.5m

24%

FIVE-YEAR CAGR

REVENUE (£M)
13% total revenue

£36.7m

167.2

141.2

147.2

115.5

119.1

2022

2021

2020

2019

2018

86.5

67.3

65.0

64.4

61.1

2022

2021

2020

2019

2018

21.1

20.0

14.9

36.7

31.8

2022

2021

2020

2019

2018

XP Power Annual Report & Accounts for the year ended 31 December 2022GROWTH DRIVERS AND MARKET CHALLENGES

We see many opportunities to expand our addressable market and customer base.

Healthcare

A global population that is both
increasing and ageing, coupled with
advances in diagnostic technology and
surgical robotics, is driving the demand
for more healthcare devices. This makes
healthcare an excellent sector for XP
Power.

These customers demand the ultimate
quality and reliability, and appreciate
and value our proposition. COVID-19
has brought into focus that, generally,
the healthcare infrastructure is
inadequate in today’s world.

HOW WE ARE RESPONDING
We have the broadest, most up-to-date
range of medically approved power
converters in our industry, and are the
world’s leading provider of healthcare
power conversion products.

Proliferation of
electronic devices
Electronic devices are becoming
increasingly pervasive in our lives
as new technologies and innovation
develop. This trend is accelerating
by multiple factors such as pace
of innovation, global shortage of
semiconductors driving investment in
capacity, AI, big data, smart technology
and autonomous vehicles.

These devices drive demand for
semiconductor manufacturing
equipment, which is a key focus area for
XP Power.

HOW WE ARE RESPONDING
We have the broadest range of standard
products in our industry, which are
designed to be easily modified to power
the customer’s specific application.
Many of our products are suitable to
power semiconductor manufacturing
equipment processes and electronics,
and these customers value our
engineering services proposition.

Connectivity and
industrial revolution 4.0
Customers’ applications are becoming
more complicated and increasingly
connected, enabling the Industrial
Revolution 4.0. Demand for
communication between customers’
applications and power conversion
solutions are rapidly expanding.

Power supplies are increasingly part of
the customer ecosystem, with increased
connectivity of the power converter to
the customer’s equipment.

HOW WE ARE RESPONDING
Our engineering services groups are
providing complete power solutions
including connectivity between the
customer’s application using firmware
and software and, where required,
connection to the internet.

LINK TO

Strategy

Risks

3, 9

LINK TO

Strategy

Risks

3, 9

LINK TO

Strategy

Risks

2, 4, 5

STRATEGIC KEY

RISKS KEY

Develop a market-leading range of competitive
products

1 An event causes a disruption to our

8 Strategic risk associated with valuing or

manufacturing facilities

integrating new acquisitions

Target accounts where we can add value

2 Product recall

9 Loss of key personnel or failure to attract new

Vertical penetration of focus accounts

3 Competition from new market entrants and new

technologies

10 Exposure to exchange rate fluctuations

Build a global supply chain

Lead our industry on environmental matters

results due to an economic shocks

Make selective acquisitions

5 Dependence on key customers

12 Climate-related risks

4 Fluctuations of revenues, expenses and operating

11 Risk associated with supply chain

personnel

6 Cybersecurity/information systems failure

7 Risks relating to regulation, compliance and

taxation

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR MARKETPLACE CONTINUED
GROWTH DRIVERS AND MARKET CHALLENGES

Customer penetration

Climate change

Our blue-chip customer base provides
opportunities to win additional product
programmes from multiple engineering
teams across the globe.

We have gained corporate approval at
many blue-chip companies over the past
few years. We are capitalising on these
to win more business available to those
customers by expanding our product
offering.

HOW WE ARE RESPONDING
RF and high-voltage power solutions
from previous acquisitions have helped
to increase our available market over
US$6.0 billion. The acquisitions of FuG
and Guth further enhances our ability to
grow in these markets.

Climate change and greenhouse gas
emissions is becoming an increasingly
significant issue as emerging countries
develop and urbanise. We have a
leading role in developing ultra-efficient
products, which consume and waste
less energy, and are suitable for use in
healthcare and industrial applications.

HOW WE ARE RESPONDING
We have developed a portfolio of XP
Green Power products with class-
leading efficiencies and have the most
environmentally friendly manufacturing
facility in our industry.

Energy efficiency and
reliability
The requirement from customers and
legislation for products to consume and
waste less energy is driving demand
for more efficient power converters.
This goes alongside reliability for critical
applications, as ultra-high efficiency
products require reliable fans to cool
them, and cooler systems mean key
components, such as electrolytic
capacitors, have longer lifetimes.

HOW WE ARE RESPONDING
We have developed a portfolio of XP
Green Power products with class-
leading efficiencies and low standby
power, which can operate without
fan cooling.

Legislation

Capital equipment

Innovation

Our industry continues to be subject to

Our products are designed into and

Our customers possess a competitive

increasing legislation from numerous

countries and standards relating to

areas such as environmental impacts,

safety requirements and, above all,

energy efficiency. The compliance

power capital equipment, so are subject

need to launch new products that offer

to capital equipment cycles. We have

found growth niches in new industrial

technologies such as 3D printing,

increased productivity and functionality,

while reducing harmful environmental

impacts. In addition, our customers are

analytical instruments, smart grid and

trying to differentiate their products

costs of keeping up with this legislation

robotics.

is significant. We sizeable enough

to dedicate significant resources

to this area, yet agile enough to

respond quickly with new products or

documentation as required.

HOW WE ARE RESPONDING

We have dedicated resources devoted

to power converter legislation, including

the latest safety regulations, which our

customers value.

New capital investment generally leads

to greater productivity. We consider the

medium and long-term opportunities to

remain positive for capital equipment.

This is particularly the case in emerging

markets as labour costs rise significantly.

HOW WE ARE RESPONDING

We have the largest direct sales force

in our industry, together with the

broadest product portfolio, so are well

positioned to take advantage of growth

in the capital equipment markets. We

are targeting newer and faster growth

industrial sectors such as 3D printing,

analytical instruments, robotics and

smart grid infrastructure.

from their competitors, which frequently

results in different or new power

conversion requirements.

HOW WE ARE RESPONDING

We have five design centres around

the globe that offer a diverse range

of products, and have added new

capability through the acquisitions of

FuG and Guth.

LINK TO

Strategy

Risks

5, 6, 9

LINK TO

Strategy

Risks

1, 4, 7, 9, 11, 12

LINK TO

Strategy

Risks

1, 7, 9, 12

LINK TO

Strategy

Risks

3, 7, 9, 10

LINK TO

Strategy

Risks

2, 5, 11

LINK TO

Strategy

Risks

8, 9

XP Power Annual Report & Accounts for the year ended 31 December 2022Customer penetration

Climate change

Legislation

Capital equipment

Innovation

Energy efficiency and

reliability

Our blue-chip customer base provides

Climate change and greenhouse gas

The requirement from customers and

opportunities to win additional product

emissions is becoming an increasingly

legislation for products to consume and

programmes from multiple engineering

significant issue as emerging countries

teams across the globe.

develop and urbanise. We have a

waste less energy is driving demand

for more efficient power converters.

We have gained corporate approval at

many blue-chip companies over the past

few years. We are capitalising on these

to win more business available to those

customers by expanding our product

offering.

HOW WE ARE RESPONDING

RF and high-voltage power solutions

from previous acquisitions have helped

to increase our available market over

US$6.0 billion. The acquisitions of FuG

and Guth further enhances our ability to

grow in these markets.

leading role in developing ultra-efficient

This goes alongside reliability for critical

products, which consume and waste

less energy, and are suitable for use in

healthcare and industrial applications.

HOW WE ARE RESPONDING

We have developed a portfolio of XP

Green Power products with class-

applications, as ultra-high efficiency

products require reliable fans to cool

them, and cooler systems mean key

components, such as electrolytic

capacitors, have longer lifetimes.

HOW WE ARE RESPONDING

leading efficiencies and have the most

We have developed a portfolio of XP

environmentally friendly manufacturing

Green Power products with class-

facility in our industry.

leading efficiencies and low standby

power, which can operate without

fan cooling.

Our industry continues to be subject to
increasing legislation from numerous
countries and standards relating to
areas such as environmental impacts,
safety requirements and, above all,
energy efficiency. The compliance
costs of keeping up with this legislation
is significant. We sizeable enough
to dedicate significant resources
to this area, yet agile enough to
respond quickly with new products or
documentation as required.

HOW WE ARE RESPONDING
We have dedicated resources devoted
to power converter legislation, including
the latest safety regulations, which our
customers value.

Our products are designed into and
power capital equipment, so are subject
to capital equipment cycles. We have
found growth niches in new industrial
technologies such as 3D printing,
analytical instruments, smart grid and
robotics.

New capital investment generally leads
to greater productivity. We consider the
medium and long-term opportunities to
remain positive for capital equipment.
This is particularly the case in emerging
markets as labour costs rise significantly.

HOW WE ARE RESPONDING
We have the largest direct sales force
in our industry, together with the
broadest product portfolio, so are well
positioned to take advantage of growth
in the capital equipment markets. We
are targeting newer and faster growth
industrial sectors such as 3D printing,
analytical instruments, robotics and
smart grid infrastructure.

Our customers possess a competitive
need to launch new products that offer
increased productivity and functionality,
while reducing harmful environmental
impacts. In addition, our customers are
trying to differentiate their products
from their competitors, which frequently
results in different or new power
conversion requirements.

HOW WE ARE RESPONDING
We have five design centres around
the globe that offer a diverse range
of products, and have added new
capability through the acquisitions of
FuG and Guth.

LINK TO

Strategy

Risks

5, 6, 9

LINK TO

Strategy

Risks

1, 4, 7, 9, 11, 12

Risks

1, 7, 9, 12

LINK TO

Strategy

LINK TO

Strategy

Risks

3, 7, 9, 10

LINK TO

Strategy

Risks

2, 5, 11

LINK TO

Strategy

Risks

8, 9

STRATEGIC KEY

RISKS KEY

Develop a market-leading range of competitive
products

1 An event causes a disruption to our

8 Strategic risk associated with valuing or

manufacturing facilities

integrating new acquisitions

Target accounts where we can add value

2 Product recall

9 Loss of key personnel or failure to attract new

Vertical penetration of focus accounts

3 Competition from new market entrants and new

technologies

10 Exposure to exchange rate fluctuations

Build a global supply chain

Lead our industry on environmental matters

results due to an economic shocks

Make selective acquisitions

5 Dependence on key customers

12 Climate-related risks

4 Fluctuations of revenues, expenses and operating

11 Risk associated with supply chain

personnel

6 Cybersecurity/information systems failure

7 Risks relating to regulation, compliance and

taxation

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR BUSINESS MODEL

Our business model has evolved from that of a specialist distributor,
to designer, to design manufacturer.

Key activities

Our purpose and why we exist:

WE POWER THE
WORLD'S CRITICAL
SYSTEMS

Identify

Our values:

Integrity

Customer
Focus

Speed

Design

Flexibility Knowledge

Our vision and where we
want to be:
To be the first choice power solutions
provider delivering the ultimate experience
for our customers and our people.

Key resources:
STRONG RELATIONSHIP
with our suppliers, employees and
Shareholders.

OUR PEOPLE AND LEADERSHIP
An experienced and committed workforce,
and a strong Executive team with a clear
strategic vision.

TECHNOLOGY
We are investing in our future through our
investment in infrastructure and technology

GLOBAL REACH AND SCALE
Operational flexibility, speed, and the ability to
reach global customers.

RESEARCH AND DEVELOPMENT
We continue to focus on innovation when
developing new products.

Manufacture
and
distribute

Our customers are at the heart of what we do. We
work closely with our key customers to understand
their requirements and sell to them when we can add
genuine value. We offer excellent service and support
combined with class-leading products.

We have carved out a leading position in our industry.
An up-to-date, high-efficiency product offering,
delivered to our customers by the largest and most
technically competent sales engineering team in the
industry, backed up by highly skilled power systems
engineers, combined with the safety and reliability
benefits of world-class manufacturing, provide a
compelling value proposition to our customers.

We have transitioned our business from a specialist
distributor, to designer, to design manufacturer. This
has enabled us to ascend the value chain to grow our
revenues and margins.

Through acquisition, we have moved further
up the power and voltage scale, so we can fulfil
more opportunities presented to us by our target
customers.

We have design engineering teams on three
continents – this allows us to release a high number
of innovative new products required by this highly
diversified market. These products often have
class-leading energy efficiency and small footprints
to meet the ever-increasing demands of our key
customers. Additional engineering service teams in
Germany, North America, Singapore and the UK are
able to provide value-added services close to our key
customers.

The management of our supply chain is critical to our
success. Quality and reliability are paramount to our
customers who often provide critical healthcare or
industrial systems.

For that reason, we need excellent suppliers with
high-quality standards. We have a rigorous approval
process that looks at all aspects of a supplier before
we engage with them. This includes a prospective
suppliers’ quality systems and standards, their
financial viability, their environmental performance,
and treatment of their people.

Our global footprint and robust, multi-site, low cost
manufacturing and our network of sales, engineering
and manufacturing provides us with the flexibility of a
global organisation and the ability to partner with our
customers locally.

OUR APPROACH

A new design programme is identified by

a customer where we are an approved or

preferred vendor. This is typically quite late in

the customer’s development cycle as they will

not usually know the total power requirement

of their system until they have a working

prototype.

OUR APPROACH

We can provide modified product solutions,

which allow the customer to easily integrate

the power converter into their equipment.

OUR APPROACH

We manufacture our own products, and this

provides us with the ability to ensure excellent

quality, and an agile supply chain to meet

customer's needs.

XP Power Annual Report & Accounts for the year ended 31 December 202201

Identify

Design

Manufacture

and

distribute

Our customers are at the heart of what we do. We

work closely with our key customers to understand

their requirements and sell to them when we can add

genuine value. We offer excellent service and support

combined with class-leading products.

We have carved out a leading position in our industry.

An up-to-date, high-efficiency product offering,

delivered to our customers by the largest and most

technically competent sales engineering team in the

industry, backed up by highly skilled power systems

engineers, combined with the safety and reliability

benefits of world-class manufacturing, provide a

compelling value proposition to our customers.

We have transitioned our business from a specialist

distributor, to designer, to design manufacturer. This

has enabled us to ascend the value chain to grow our

revenues and margins.

Through acquisition, we have moved further

up the power and voltage scale, so we can fulfil

more opportunities presented to us by our target

customers.

We have design engineering teams on three

continents – this allows us to release a high number

of innovative new products required by this highly

diversified market. These products often have

class-leading energy efficiency and small footprints

to meet the ever-increasing demands of our key

customers. Additional engineering service teams in

Germany, North America, Singapore and the UK are

able to provide value-added services close to our key

customers.

The management of our supply chain is critical to our

success. Quality and reliability are paramount to our

customers who often provide critical healthcare or

industrial systems.

For that reason, we need excellent suppliers with

high-quality standards. We have a rigorous approval

process that looks at all aspects of a supplier before

we engage with them. This includes a prospective

suppliers’ quality systems and standards, their

financial viability, their environmental performance,

and treatment of their people.

Our global footprint and robust, multi-site, low cost

manufacturing and our network of sales, engineering

and manufacturing provides us with the flexibility of a

global organisation and the ability to partner with our

customers locally.

OUR APPROACH
A new design programme is identified by
a customer where we are an approved or
preferred vendor. This is typically quite late in
the customer’s development cycle as they will
not usually know the total power requirement
of their system until they have a working
prototype.

Our impact and social-economic
contribution

Aligned to the United Nations Sustainable
Development Goals

We have aligned our sustainability
strategy to the United Nations
Sustainable Development Goals
to ensure that as we develop our
strategy we are clear on how our
efforts can be aligned to the wider
sustainability agenda.

Value generated for our stakeholders

OUR APPROACH
We can provide modified product solutions,
which allow the customer to easily integrate
the power converter into their equipment.

OUR PEOPLE

We provide a safe and healthy
working environment that is
stimulating and collegiate. We take
the approach: if we look after our
people, they will look after our
customers.

3.83

EMPLOYEE
ENGAGEMENT
SCORE LAST
YEAR

OUR CUSTOMERS We solve our customers’ power
problems and help them to get
to market quickly. We provide
innovative solutions that are reliable
and reduce the running costs of our
customers’ equipment.

OUR SUPPLIERS We behave ethically and build

OUR APPROACH
We manufacture our own products, and this
provides us with the ability to ensure excellent
quality, and an agile supply chain to meet
customer's needs.

OUR
COMMUNITIES
AND THE
ENVIRONMENT

118

NEW
PRODUCT
FAMILIES
RELEASED
OVER A FIVE-
YEAR PERIOD

long-term relationships with our key
suppliers. We abide by our rigorous
Code of Conduct dealing with
ethics, health and safety employee
relations and environmentally friendly
practices, and require our suppliers to
do the same.

We produce XP Green Power
products that consume less energy
and materials, and avoid the use
of hazardous substances. We have
the most environmentally friendly
manufacturing facility in our
industry, and support our people
with paid leave to contribute in the
communities we operate.

OUR
SHAREHOLDERS

We execute our published strategy
on a consistent basis that has
produced excellent Total Shareholder
Returns over a significant period. We
allocate our capital appropriately and
maintain a dividend policy.

10%

DIVIDEND
INCREASE
OVER A
FIVE-YEAR
PERIOD

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR STRATEGY

We have a clear and consistent strategy of ascending the value chain through
our internally developed products, and adding complementary products through
acquisitions. We target key accounts where we can add genuine value.

Develop a market-leading
range of competitive
products
We need a market-leading range
of products to be attractive to our
customers. This range also needs
to be broad due to the fragmented
nature of the markets we serve, which
have several product requirements.
The broader and more up to date our
product range, the more chance we
will have something that will work
effectively in our target customers’
applications.

TARGET/GOAL
To release sufficient products to achieve
at least 10% organic revenue growth at
attractive margins.

PAST PERFORMANCE
Over the past few years, we have been
expanding our product portfolio and
have developed several highly efficient,
leading-edge products.

PLANNED FUTURE ACTIONS
We are focused on developing product
platforms that are easy to modify and
can be reused over multiple sectors
and applications, and on expanding our
portfolio of XP Green Power products
with class-leading efficiencies and low
standby power.

Target accounts where we
can add value

Vertical penetration of focus
accounts

We pride ourselves in the level of
service and support we offer to our
customers, particularly during the
design-in stage. We have a compelling
proposition where customers expect
excellent quality and reliability to
power their mission-critical equipment,
particularly with a power problem due
to either heat dissipation or electrical
noise. These are our target customers.

TARGET/GOAL
Organic revenue growth 10+%.

PAST PERFORMANCE
We have targeted customers where
reliability is key or where their
equipment is in harsh environments.
These customers value the support and
service our highly trained sales force
and power systems engineers deliver.

PLANNED FUTURE ACTIONS
We are prioritising our resource on
customers that fit our value proposition.
We are de-emphasising customers that
may have significant revenue potential
but where cost is a more critical factor
than quality, reliability or engineering
support during the design phase.

We have a relatively small share of
available business in some accounts
we call on. We continue to expand
our product portfolio to address more
opportunities available to grow our
revenues.

TARGET/GOAL
Organic revenue growth of 10+%.

PAST PERFORMANCE
We have spent the last few years
gaining approved or preferred
supplier status with key customers
in healthcare, industrial technology,
and semiconductor manufacturing
equipment sectors. We are focused on
existing customer bases to grow our
revenues.

PLANNED FUTURE ACTIONS
As we expand our product offering
through continued product development
augmented by acquisitions, we aim to
address our customers’ requirements
with excellent service and support.

Since listing in 2000, we have built a strong brand

Strong corporate social responsibility

Build a global supply chain that

balances high efficiency with market-

leading customer responsiveness

in the power converter market. This, along with

our product portfolio and excellent customer

service, has allowed us to take market share and

grow significantly. As the Company grows, we

need to upgrade our systems and processes,

especially our supply chain processes, to scale

and run a larger business as we continue to grow.

TARGET/GOAL

Reduction in manufacturing costs, freight and

logistics, alongside consistent improvement in

lead time and on-time delivery.

Lead our industry on

environmental matters

is important to our customers,

employees and the communities

we operate in. This incorporates

business ethics.

TARGET/GOAL

and consistent reduction in our

CO2 intensity.

PAST PERFORMANCE

environmental performance, health and

avenue to expand our product offering

safety, treatment of our people and

and addressable market.

Excellent health and safety performance

revenue growth of 5+%.

PAST PERFORMANCE

We are a full member of the Responsible

high voltage to our product range,

We have evolved from a distributor to a

Business Alliance (RBA). The RBA

including through acquisitions of FuG

manufacturer, with manufacturing facilities in

Code of Conduct, to which we comply,

and Guth in January 2022.

China, Vietnam and North America, and we have

addresses all important ethical and

invested to increase capacity and flexibility.

environmental matters, which we

Our new ERP system went live in 2022 and will

strongly endorse.

enable the Company to scale more effectively and

Registered our near and long-term

integrate recent and future acquisitions more easily.

targets with the Science Based Target

Make selective acquisitions

of complementary businesses

to expand our offering

Our strong balance sheet and cash

generative business model allow us

the capacity to pursue complementary

business acquisitions. This is another

TARGET/GOAL

Bolt-on acquisitions driving inorganic

PAST PERFORMANCE

Through recent acquisitions, we have

added both RF power and high power/

PLANNED FUTURE ACTIONS

We will integrate acquisitions into

our global supply chain, product

development and sales structures to

maximise growth opportunities, whilst

continuing to develop a pipeline of

potential acquisitions to expand our

product offering and engineering

capabilities.

We broke ground to begin construction of our

new manufacturing site in Malaysia in 2022.

PLANNED FUTURE ACTIONS

Continue support and optimisation of the ERP

implementation across the Group.

The new facility in Malaysia is expected to be

operational in 2024 and it will complement our

plants in Vietnam and China to meet global

demand and allow for further expansion.

Our overall objective is to provide a resilient

and flexible supply chain with the capability

to manufacture most products in China,

Vietnam and Malaysia and enhanced business

continuity planning.

initiative (SBTi).

Established a Sustainability Council

to meet regularly to ensure our

sustainability targets are met.

PLANNED FUTURE ACTIONS

We will remain a committed member of

the RBA.

We will take the necessary steps in

our carbon transition plan to meet net

zero targets.

LINK TO

Material issues KPIs

1, 3

A, D, E

Risks

3, 5

Material issues KPIs

1, 3, 8, 9, 11

A, B, C

Risks

3, 4, 5

Material issues KPIs

Risks

2, 3, 7, 8

A, B, C

1, 3, 4, 11

Material issues KPIs

1, 3, 7, 8, 11

A, B, C, G

Risks

4, 7, 11

Material issues KPIs

Risks

Material issues KPIs

Risks

1, 2, 3, 8, 11

1, 3, 4, 12

4, 5, 6, 7, 10

A, B, C, F

1, 3, 8

MATERIAL ISSUES KEY

KPI KEY

1 Product responsibility (safety and quality)

7 Ethical conduct and compliance

A Revenue growth

2 Responsible supply chain

3 Product solutions and innovation

8 Energy efficiency

9 Waste management

4 Attracting retaining and rewarding talent

10 Diversity and equal opportunity

5 Employee welfare

11 Emissions

6 Health and safety (inc. occupational)

B Revenue from top 30 customers

C Adjusted operating cash conversion

D Adjusted diluted earnings per share growth

E New product families released

F Employee engagement score

G Lifetime CO2 emission savings from products

XP Power Annual Report & Accounts for the year ended 31 December 2022Develop a market-leading

Target accounts where we

Vertical penetration of focus

range of competitive

can add value

accounts

products

We need a market-leading range

of products to be attractive to our

customers. This range also needs

to be broad due to the fragmented

nature of the markets we serve, which

have several product requirements.

The broader and more up to date our

product range, the more chance we

will have something that will work

effectively in our target customers’

applications.

TARGET/GOAL

To release sufficient products to achieve

at least 10% organic revenue growth at

attractive margins.

PAST PERFORMANCE

Over the past few years, we have been

expanding our product portfolio and

have developed several highly efficient,

leading-edge products.

PLANNED FUTURE ACTIONS

We are focused on developing product

platforms that are easy to modify and

can be reused over multiple sectors

and applications, and on expanding our

portfolio of XP Green Power products

with class-leading efficiencies and low

standby power.

We pride ourselves in the level of

service and support we offer to our

customers, particularly during the

design-in stage. We have a compelling

proposition where customers expect

excellent quality and reliability to

power their mission-critical equipment,

particularly with a power problem due

to either heat dissipation or electrical

noise. These are our target customers.

TARGET/GOAL

Organic revenue growth 10+%.

PAST PERFORMANCE

We have targeted customers where

reliability is key or where their

equipment is in harsh environments.

These customers value the support and

service our highly trained sales force

and power systems engineers deliver.

PLANNED FUTURE ACTIONS

We are prioritising our resource on

customers that fit our value proposition.

We are de-emphasising customers that

may have significant revenue potential

but where cost is a more critical factor

than quality, reliability or engineering

support during the design phase.

We have a relatively small share of

available business in some accounts

we call on. We continue to expand

our product portfolio to address more

opportunities available to grow our

revenues.

TARGET/GOAL

Organic revenue growth of 10+%.

PAST PERFORMANCE

We have spent the last few years

gaining approved or preferred

supplier status with key customers

in healthcare, industrial technology,

and semiconductor manufacturing

equipment sectors. We are focused on

existing customer bases to grow our

revenues.

PLANNED FUTURE ACTIONS

As we expand our product offering

through continued product development

augmented by acquisitions, we aim to

address our customers’ requirements

with excellent service and support.

Build a global supply chain that
balances high efficiency with market-
leading customer responsiveness
Since listing in 2000, we have built a strong brand
in the power converter market. This, along with
our product portfolio and excellent customer
service, has allowed us to take market share and
grow significantly. As the Company grows, we
need to upgrade our systems and processes,
especially our supply chain processes, to scale
and run a larger business as we continue to grow.

TARGET/GOAL
Reduction in manufacturing costs, freight and
logistics, alongside consistent improvement in
lead time and on-time delivery.

PAST PERFORMANCE
We have evolved from a distributor to a
manufacturer, with manufacturing facilities in
China, Vietnam and North America, and we have
invested to increase capacity and flexibility.

Our new ERP system went live in 2022 and will
enable the Company to scale more effectively and
integrate recent and future acquisitions more easily.

We broke ground to begin construction of our
new manufacturing site in Malaysia in 2022.

PLANNED FUTURE ACTIONS
Continue support and optimisation of the ERP
implementation across the Group.

The new facility in Malaysia is expected to be
operational in 2024 and it will complement our
plants in Vietnam and China to meet global
demand and allow for further expansion.
Our overall objective is to provide a resilient
and flexible supply chain with the capability
to manufacture most products in China,
Vietnam and Malaysia and enhanced business
continuity planning.

Lead our industry on
environmental matters

Strong corporate social responsibility
is important to our customers,
employees and the communities
we operate in. This incorporates
environmental performance, health and
safety, treatment of our people and
business ethics.

TARGET/GOAL
Excellent health and safety performance
and consistent reduction in our
CO2 intensity.

PAST PERFORMANCE
We are a full member of the Responsible
Business Alliance (RBA). The RBA
Code of Conduct, to which we comply,
addresses all important ethical and
environmental matters, which we
strongly endorse.

Registered our near and long-term
targets with the Science Based Target
initiative (SBTi).

Established a Sustainability Council
to meet regularly to ensure our
sustainability targets are met.

PLANNED FUTURE ACTIONS
We will remain a committed member of
the RBA.

We will take the necessary steps in
our carbon transition plan to meet net
zero targets.

Make selective acquisitions
of complementary businesses
to expand our offering
Our strong balance sheet and cash
generative business model allow us
the capacity to pursue complementary
business acquisitions. This is another
avenue to expand our product offering
and addressable market.

TARGET/GOAL
Bolt-on acquisitions driving inorganic
revenue growth of 5+%.

PAST PERFORMANCE
Through recent acquisitions, we have
added both RF power and high power/
high voltage to our product range,
including through acquisitions of FuG
and Guth in January 2022.

PLANNED FUTURE ACTIONS
We will integrate acquisitions into
our global supply chain, product
development and sales structures to
maximise growth opportunities, whilst
continuing to develop a pipeline of
potential acquisitions to expand our
product offering and engineering
capabilities.

LINK TO

Material issues KPIs

1, 3

A, D, E

Risks

3, 5

Material issues KPIs

1, 3, 8, 9, 11

A, B, C

Risks

3, 4, 5

Material issues KPIs

Risks

2, 3, 7, 8

A, B, C

1, 3, 4, 11

Material issues KPIs

1, 3, 7, 8, 11

A, B, C, G

Risks

4, 7, 11

Material issues KPIs

Risks

Material issues KPIs

Risks

1, 2, 3, 8, 11

1, 3, 4, 12

4, 5, 6, 7, 10

A, B, C, F

1, 3, 8

RISKS KEY

1 An event causes a disruption to our manufacturing

5 Dependence on key customers

9 Loss of key personnel or failure to attract new

facilities

2 Product recall

6 Cybersecurity/information

systems failure

personnel

10 Exposure to exchange rate fluctuations

3 Competition from new market entrants and new

7 Risks relating to regulation, compliance and

11 Risk associated with supply chain

technologies

taxation

12 Climate-related risks

4 Fluctuations of revenues, expenses

8 Strategic risk associated with valuing or integrating

and operating results due to an economic shocks

new acquisitions

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR STRATEGY IN ACTION:

An important part of our strategy is to make selective acquisitions where we believe
they are complementary to our existing business, expand our product offering and
enhance our capability to provide market-leading solutions for our customers.

What we’ve done this year
In January 2022, we made two acquisitions in
Germany, adding FuG Elektronik GmbH (FuG)
and Guth High Voltage GmbH (Guth) to the XP
Power Group.

The acquisitions significantly enhanced our high
voltage capability and strengthened our position
in strategically important German and European
markets. They have also provided additional design
and manufacturing centres, complementing XP’s
existing footprint.

In 2022, the businesses contributed combined
revenues of €20.0 million and EBITDA of €5.5 million,
and we have integrated c.150 existing employees
whilst retaining the management team and capabilities
that have built these successful businesses.

Together we exhibited at Electronica in 2022, the
world’s leading trade fair for the electronics industry.

Ambitions for 2023
In 2023, we aim to further integrate the businesses
into the XP Power group, and create a platform for
future revenue growth. In the short term, our focus is
on positioning them to deliver upon their full organic
growth potential within the Group.

There are future opportunities from cross-selling
FuG and Guth’s products to the Group’s wider global
customer base through our industry leading sales
teams and distribution network which we will be
able to take advantage of more fully once integration
is complete.

In addition, the wholly new and complementary high
voltage technologies that FuG and Guth bring to
the Group will enable further development of our
new product roadmap, under a newly appointed
Director of High Voltage Technology who will oversee
this globally.

The new higher power and higher voltage products
we now offer also allow us to service considerably
more of the opportunities in the semiconductor
manufacturing equipment sector, significantly
expanding our addressable market, and the
acquisitions of FuG and Guth will further strengthen
our position in this market by adding access to new
sub-sectors including lithography.

Link to sustainability
The businesses operate with a sustainable mindset,
including taking advantage of solar technology,
investing in talent through apprenticeships and
empowering our people as part of the combined
Group. Employee engagement has been a focus of the
integration, including all-employee surveys, English
lessons and technical training.

Link to values and culture
FuG and Guth were businesses that we knew and
admired, and part of our due diligence was ensuring
a good fit with the XP Power values of integrity,
customer focus, speed, flexibility and knowledge. We
have built upon this throughout the integration so
far with both businesses adopting the XP values and
beginning to integrate within regional and leadership
communities across the Group.

READ MORE ABOUT OUR
BUSINESS STRATEGY ON
PAGES 28–29

READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGES 33–34

XP Power Annual Report & Accounts for the year ended 31 December 2022

S
T
R
A
T
E
G

R
E
P
O
R
T

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY REPORT 2022
INTRODUCTION TO SUSTAINABILITY
FROM THE CEO

Sustainability is an integral part of our strategy. We have
invested in our operations, infrastructure, technology,
people and communities, and will continue to do so.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

agenda and supporting customers to reduce their own
carbon footprint. This is a key path to strengthening
our market leadership and building our reputation
with customers. We have invested in our operations,
infrastructure, technology, people and communities,
and will continue to do so. This will help to embed
sustainability into the everyday operational fabric of
our business, influencing all our decisions and actions
across the Group. All our colleagues will have a part
to play and the shared diversity of thoughts, ideas,
experience and skills, in the Group will help embed
sustainability as business as usual.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

28 February 2023

Sustainability is important
to XP Power and all our
stakeholders. We have a
proud legacy on which to
build being the first power
converter manufacturer to be
admitted into the Responsible
Business Alliance, and it
remains an integral part of
our Company strategy.
First and foremost, sustainability is about ‘doing
the right thing’ for our planet and each other. We
have a moral obligation to act now with pace and
purpose. This remains our primary motivator. Our
biggest focus is on dramatically reducing our impact
across the whole value chain from everything we
buy, to everything we do and everything we sell,
with an emphasis on efficiency and achieving net
zero by 2040. To this end, we have signed the letter
of commitment with The Science Based Targets
initiative (SBTi) and have developed targets that we
intend to submit for verification in the first half of
2023. Our net zero pathway will reduce greenhouse
gas emissions from our operations, the raw materials
used to make our products, and our products in use. It
will be an enabler of good business in using resources
more efficiently, to do more with less, and act as a
guiding principle in refreshing our product portfolio.
XP Power has a strong history of innovation and
engineering excellence in creating highly efficient
products. These provide an ongoing commercial
opportunity whilst progressing our own sustainability

READ MORE ABOUT
OUR MARKETPLACE ON
PAGES 21–25

READ MORE ABOUT OUR
STRONG FINANCIAL
POSITION ON
PAGES 46–49

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY STRATEGY IS TO:
01

Produce quality products that are safe and
solve our customers’ power problems
Our power converters are the safety critical element of the end application
providing the isolation barrier between the end user and the relatively high voltage
mains electricity.

LINK TO

Material issues

1, 3

SEE PAGES 62–63 FOR OUR PERFORMANCE
AGAINST THIS STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR NEXT YEAR

Minimise the impact we and our products have
on the environment and adopt responsible
sourcing practices considering social and
environmental impacts
Our sustainable business goal is to be the leader of our industry regarding
environmental matters, and to minimise the impact we and our products have on
the environment.

LINK TO

Material issues

8, 9, 11

SEE PAGES 64-69 FOR OUR PERFORMANCE
AGAINST THIS STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR NEXT YEAR

S
T
R
A
T
E
G

R
E
P
O
R
T

Make XP Power a workplace where our people
can be at their best, ensuring an environment
that is safe, diverse, inclusive and attracts and
retains the best talent
Our sustainable business goal is to improve the physical and mental health of our
employees, provide them with a safe place to work and to create an environment
where our people can be their best.

Uphold the highest standard of business ethics
and integrity
Our sustainable business goal is to have zero breaches of our Code of Conduct and
uphold the highest standard of ethics and integrity.

LINK TO

Material issues

4, 5, 6, 10

SEE PAGES 70–77 FOR OUR PERFORMANCE
AGAINST THIS STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR NEXT YEAR

LINK TO

Material issues

2, 7

SEE PAGES 78–79 FOR OUR PERFORMANCE
AGAINST THIS STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR NEXT YEAR

XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY STRATEGY CONTINUED

Our sustainability strategy is to:

• produce quality products that are safe and efficient, and solve our customers’ power problems;

• minimise the impact we and our products have on the environment;

• adopt responsible sourcing practices while considering social and environmental impacts;

• make XP Power a workplace where our people can be at their best to ensure an environment that is safe,

diverse, inclusive, and attracts and retains the best talent; and

• uphold the highest standard of business ethics and integrity.

We have used our materiality analysis results from 2021, which was conducted in 2020 (Annual Report 2021,
p54) to focus our sustainability strategy on issues that matter most to the Group from a financial and business
purpose perspective, and that impact society and our stakeholders. The material issues we identified shape our
sustainability strategy, priorities, approach and reporting. We group our material issues into four areas, aligned to
the UN Sustainable Development Goals (SDGs) that are supported by each area.

As sustainability is core to the XP Power business strategy, we have a robust structure of sustainability oversight
in place. Responsibilities and reporting lines were enhanced this year through the creation of a Sustainable
Development Working Group, which sits below the Sustainability Council formed in 2021. The Working Group
meets monthly and takes an active role in managing Group sustainability projects and progress. Full details of our
sustainability governance model and its responsibilities are outlined in the task force on climate-related financial
disclosures (TCFD) Report (page 80).

ACHIEVEMENTS IN PAST 12 MONTHS
• Signed a letter of commitment to the Science Based
Targets Initiative (SBTi) and have developed targets
for verification for our long-term target of net zero
across our value chain for 2040 and interim targets
for Scope 1 and 2 and for Scope 3 for 2030 based
off a 2022 base year.

• Creation of the Sustainable Development Working

Group (see TCFD Report).

•

In recognition of our credentials as a responsible and
sustainable business, XP Power has maintained its
position in the FTSE4Good Index.

• Achieved a C grade in CDP Climate Change

(2021: grade D).

• End-to-end carbon footprint methodology

established, which includes a full Scope 3 analysis
for 2022.

• Enhanced our reporting against the TCFD.

• Creation of Group Supply Chain and Biodiversity

policies.

• Received the inaugural ESG award from Lam
Research, one of our largest customers, being
recognised for our long-term commitment to
ESG goals and proactively aligning with Lam on
these priorities. This follows the PRISM award we
received from ASM (another major customer) in
2021 for sustainability.

• Aligned our employees’ default pension option with
our ESG values, with our new scheme switching to
Standard Life’s Sustainable Multi-asset Plan, which
invests in responsible investment strategies.

• Shipped XP Green Power products resulting
in minimum lifetime CO2 emission savings
of 134,000 tonnes.

PRIORITIES FOR 2023
• We intend to submit our emissions reduction
targets for verification by the Science Based
Targets Initiative (SBTi) in the first half of 2023.

• Develop and publish our net zero transition plan
aligned to the Transition Plan Taskforce (TPT)
draft standards.

• Further embed sustainability throughout the

Group's strategic decisions.

• Continue to enhance the Group’s ISO 14001

coverage to include our sites at FuG, Gloucester
and High Bridge.

• All Sustainable Development Working Group

members to complete the Cambridge Institute
for Sustainability Leadership course in 2023.

• Set new performance targets for our

material topics.

Sustainability metrics

XP
Power
Main
Board

Executive team
Chaired by CEO
Monthly

Sustainability Council
Chaired by CEO
Quarterly

Programme team
Led by Sustainability Lead
Monthly

XP Power Annual Report & Accounts for the year ended 31 December 2022

STRATEGIC REPORTPERFORMANCE: OPERATIONAL REVIEW

The Group continued to make strategic
progress in the year despite facing
significant supply chain and inflationary
headwinds, particularly in the first half.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

Review of our year
The Group continued to make strategic progress in
the year despite facing significant supply chain and
inflationary headwinds, particularly in the first half.
The second half saw a much improved performance,
that better reflects the Group’s capabilities, and we
have carried that momentum into the new financial
year. Demand across all sectors was strong and has
resulted in our order book being at high levels as we
entered 2023.

The Semiconductor Manufacturing Equipment
sector performed strongly throughout 2022. The
performance was underpinned by a combination of
increased end market demand and our market share
gains from design wins on new tools. These ongoing
design wins are being supported by the development
of closer relationships with our customers. The
Industrial Technology sector maintained the
momentum we saw at the end of 2021. Demand from
our Healthcare customers steadily improved during
the year, ending with a strong second half.

Our diversified manufacturing footprint and supply
chain is recognised as an important strategic
differentiator by our key customers, many of whom
are otherwise concerned about USA/China trade
relations and general supply chain resilience. In the
last couple of years we have been able to demonstrate
this resilience by maintaining product shipments
throughout very challenging operating conditions.
Continuing shipments to customers remained our
priority in 2022 and the Group faced a variety of
specific challenges as it worked to meet this objective.

In H1 2022, our Chinese factory was impacted by a
five-week long COVID-19 imposed lock-down by the
Chinese Government. This, in turn, resulted in logistics
challenges which impacted the overall supply chain.

Global supply chains continued to be under significant
pressure in 2022 and this impacted both our financial
performance, particularly in the first half of the year,
but also the service we, and our competitors, could
provide to customers. Many components were in
short supply with lead-times exceeding 52 weeks.
As in 2021, supply issues and material shortages
impacted not only semiconductors, but also other
components critical to the manufacture of XP Power’s
products. We continue to manage the situation
proactively; working closely with our suppliers
and customers, redesigning some products where
shortages have been significant, and we continued to
pay premium prices to secure and expedite supply.
The overall supply chain has now stabilised and we
expect this situation to be maintained during 2023.

A second supply chain challenge we faced in H1
2022 related to global logistics, partly related to the
ongoing COVID-19 restrictions in China. This resulted
in disruption around ports, and tight air and sea
freight supply, which led to increased transit times
and significant cost increases. In the second half of
2022 these conditions improved significantly, and we
have seen logistic costs reduce. While our air to sea
freight ratio was higher during 2022 as we strove to
meet customer delivery schedules, we expect to move
to more normalised levels in 2023.

£290.4m

TOTAL REVENUE

13% CER

COMPARED TO FY 21

XP Power Annual Report & Accounts for the year ended 31 December 2022Expansion of our product portfolio by acquisition
remains an important element of our growth strategy.
In January 2022 we completed the acquisitions of
FuG and Guth. The acquisitions have added speciality
high voltage capabilities to our portfolio, strengthened
our position in the important German market and are
an excellent fit with our existing operations, adding
wholly new and highly complementary product
portfolios and technical capabilities to the Group.

Marketplace
The Group delivered revenue growth of 21% in 2022
on a reported basis, with revenue of £290.4 million
(2021: £240.3 million) or 6% growth on an organic
constant currency basis.

Order intake was up 6% on a reported basis to
£362.9 million (2021: £343.4 million). Orders
and revenue for 2022 represent a full year, book-
to-bill ratio of 1.25 (2021: 1.43). The Group had
a record opening order book of £308.4 million
on 31 December 2022 (31 December 2021:
£217.0 million), providing excellent visibility for 2023.

Marketplace: sector dynamics
The Semiconductor Manufacturing Equipment
sector remains an exciting and important area for XP
Power with excellent long-term growth prospects.
Revenue from these customers increased by 22% to
£113.4 million (2021: £93.3 million) or 9% growth at
constant currency. We believe we not only benefited
from ongoing demand but also from market share
gains as a number of new programme wins, driven by
technology advances, entered production. Revenue
from Semiconductor Manufacturing Equipment
sector customers represented 39% of overall revenue
(2021: 39%). The new higher power and higher
voltage products we now offer allow us to service
considerably more of the opportunities in this sector,
significantly expanding our addressable market. The
acquisitions of FuG and Guth further strengthen our
position in this market adding access to new sub-
sectors including lithography.

Investment in semiconductor manufacturing capacity
has been growing rapidly worldwide in recent years as
the industry responds to a structural supply shortage
and to meet demand for ever more technologically
sophisticated semiconductors. Demand for
semiconductor manufacturing equipment remains
strong with c.81 new semiconductor manufacturing
facilities expected to be commissioned by 2025 which
will continue to drive demand as they are equipped
for production, although there is likely to be a global
slowdown in parts of this sector, particularly the
leading edge products in the memory segments in
2023. Given XP’s exposure is more focused on the
deposition and etch segments, its deep penetration in
trailing edge and our backlog, we expect performance
to be more resilient than the market.

Revenue from the Industrial Technology sector
increased by 18% on a constant currency basis
(increase of 30% as reported) to £119.6 million
(2021: £92.0 million) and represented 41% (2021:

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STRATEGY ON
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38%) of overall revenue. Demand in Industrial
Technology remains robust. The sector is extremely
well diversified with only a few customers in our top
30 customer list by revenue. Customer applications in
this sector vary significantly and are principally driven
by new and emerging electronic technologies and
high growth niches rather than traditional areas such
as industrial machinery, automotive or mining. Typical
drivers of our revenue in this sector include analytical
instruments, test and measurement equipment,
robotics, displays, industrial printing, renewable
energy, and smart grid. Industrial Technology is a
resilient, highly diversified, long-term growth market
for XP Power with innovation a key driver of growth.
Our Distribution business, which represents 12%
(2021: 10%) of our overall revenue and has a very
diverse range of end markets, is also included within
our Industrial Technology sector. Distribution remains
an attractive growth market where we have been
increasing market share with existing customers and
adding new distributors to expand our geographic
reach and increase our market penetration of small
and mid-tier customers.

Demand across all sectors was strong and
has resulted in our order book being at high
levels as we entered 2023.

Revenue from Healthcare customers declined by 7%
at constant currency (increased by 4% as reported) to
£57.4 million (2021: £55.0 million) representing 20%
of overall revenue (2021: 23%). The revenue decline
in 2022 was driven by critical component availability.
Demand was steady in the first half but increased
materially in the second half, both sequentially and
year on year, with growth coming from markets such
as robotic surgical tools, dentistry, endoscopy and
medical imaging. Healthcare remains an attractive
market for XP Power given the long-term demand
growth dynamics, the safety critical nature of
products, the breadth of our medical product range
and the high level of customer service required by
blue chip medical device manufacturers. Healthcare
customers are demanding in terms of quality and
reliability, making our value proposition very attractive
to them. We provide mission critical power solutions
for numerous applications in the healthcare arena
and understand the many special requirements and
regulatory approvals that a medical power solution
must meet. In normal circumstances Healthcare
tends to be much less cyclical than the other sectors
we address which adds resilience to our diversified
business model.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

PERFORMANCE: OPERATIONAL REVIEW CONTINUED

Marketplace: North America
Our North America revenue was US$207.0 million
in 2022 (2021: US$194.5 million), an increase of 6%.
North America represented 57% of overall revenue
(2021: 59%).

Order intake in North America was US$276.1 million
(2021: US$270.2 million), an increase of 2% resulting
in a healthy book-to-bill ratio of 1.33x.

Marketplace: Europe
Our European revenue grew by 29% to £86.5 million
(2021: £67.3 million). FuG and Guth contributed
£16.5 million of revenue in 2022, therefore
Europe grew 4% on an organic basis. With the new
acquisitions, Europe’s revenues now account for over
50% of the Industrial Technology sector total and
represented 30% of overall revenues (2021: 28%).

Order intake in Europe was £103.1 million (2021:
£93.1 million), an increase of 11%, resulting in a
strong book-to-bill ratio of 1.20x.

Marketplace: Asia
Asian revenues were US$45.3 million
(2021: US$43.8 million), an increase of 3%,
with growth seen in Industrial Technology. Asia
represented 13% of overall revenue (2021: 13%).

Order intake in Asia was US$50.0 million
(2021: US$74.8 million), a decline of 33% with a
reduction in Semiconductor Manufacturing Equipment
and Healthcare partially offset by higher Industrial
Technology orders, resulting in a book-to-bill ratio
of 1.10x.

Litigation update
On 24 March 2022, a jury in the US legal action
brought by Comet Technologies USA Inc., Comet AG,
and YXLON International (Comet) concerning alleged
trade secret misappropriation by three individuals
found in favour of Comet. The jury awarded damages
of $20 million based on unjust enrichment, and a
further $20 million for punitive damages against
XP Power. On 30 September 2022, the judge ruled
that there should be an injunction upon XP Power in
relation to trade secrets. Since this date, the Group
and our appointed lawyers have been working to
resolve the situation including filing motions with the
Court of the Northern District of California against
the validity and level of the damages imposed and
against the quantum of legal fees claimed by Comet.

As previously announced, XP has not launched any
products based on the Radio Frequency technology
that is the subject of the legal action, and there is
therefore no impact on the Group’s orders or revenue.
The full damages and estimated fees are accounted
for in the 2022 financial statements along with the
impairment of associated product development
assets. The case is ongoing and upon receipt of the
ruling of motions filed the Board will consider next
steps including potentially applying for an appeal with
the Appellate Court. While XP believes it has provided
for the worst case situation, with the pending motions
and potential future appeals there remains a broad
range of potential outcomes. A further update will be
provided in due course.

XP Power Annual Report & Accounts for the year ended 31 December 2022Our strategy and
value proposition
Our vision is to be the first-choice power solutions
provider and deliver the ultimate experience for
our customers and our people. Over time, we have
expanded our product portfolio up the power and
voltage scale to enhance our margins and provide
our customers with a broader offering to solve their
power problems. We have added high voltage and RF
technology and increased our engineering resource
to provide enhanced engineering services capabilities
and deliver a complete power solution to our key
customers. We are now one of very few providers
who can offer customers a complete spectrum of
power and voltage capabilities and package several
power converters into an overall solution customised
to the customer’s specific application. This makes us
an extremely attractive partner to our key customers
and is a key driver of our market share gains.

We have followed a consistent strategy that has
enabled us to produce strong results over a sustained
period. The fundamental element of this strategy
is targeting key accounts where we can add value
and gain more of the customer’s available business,
combined with moving our product line up the
power, voltage, and complexity spectrum. Although
this strategy continues to remain appropriate and
effective, we constantly challenge and refine it, as we
have done so again in 2022.

Our strategy can be summarised as follows:

• Continually develop our market-leading range of

competitive products, both organically and through
selective acquisitions;

• Target customer accounts where we can add value;

•

Increase penetration of those target customers;

• Continually improve our global, end-to-end, supply
chain balancing high efficiency with market-leading
customer responsiveness; and

• Lead our industry on environmental responsibility

We have a clear and compelling financial framework:

• c.10% organic revenue growth through the cycle

• c.20% operating margin supported by a gross

margin >45%

• >20% return on capital employed

• >90% operating cash conversion, a low capital

expenditure model

• 1–2x net debt to EBITDA financial leverage

The industry wide challenges we have faced in recent
years have not diverted us from our strategic path
and we continue to invest for the medium and long
term in new product development, new capabilities
and capacity. We continued to execute well against
our strategy in the period, gaining further design wins
with our newer product introductions, particularly
in higher power applications, and through our
increased focus on engineering solutions. Whilst
gross and operating margins have been temporarily

impacted, principally by industry wide challenges
experienced in the period following the pandemic, by
increasing operational leverage the Group is confident
of its ability to return to historic levels over the
medium term.

Acquisitions have been a key part of our growth
strategy, expanding our product portfolio and
addressable market. The FuG and Guth acquisitions
completed in January 2022 are the latest examples of
this strategy in action.

Our value proposition to customers is to solve their
power problems, reduce their overall cost of design
and manufacture, and help them get their product
to market as quickly as possible. We achieve this
by providing excellent sales engineering support
and producing new highly reliable products that
are easy to design into the customer’s system,
consume less power, take up less space and reduce
installation times.

Looking forward, whilst our strategy is clearly
effective and adding shareholder value, it will continue
to evolve, building further organisational and supply
chain agility to better serve our customers and further
enhance execution. We will also increase our focus
on people and development to ensure we are able to
continue to grow our business.

Manufacturing
Control of our own, low cost, high quality and
geographically well-diversified manufacturing assets
remains an important component of XP’s competitive
advantage and the Group actively reviews and
invests in its network to ensure it remains well-placed
to meet growing customer demand reliably and
cost competitively.

XP Power’s principal production facilities are located
in China and Vietnam. We proactively manage
the sites to optimise our supply chain and provide
resilience of supply for our customers. Our total Asian
manufacturing capacity is more than US$350 million
per year at this time. During 2022, we invested in
additional capacity in Vietnam to meet our current
and future levels of demand and to support the
transfer of more products into Vietnam from China
and our North American manufacturing facilities, as
we seek to benefit from lower production costs and
increase supply chain resilience and flexibility.

The Group commenced construction of a new
manufacturing facility in north-west Malaysia in 2022
to increase capacity to meet the growing demand
across the Group. We expect to commission this
new facility in H2 2024. Our overall objective is to
provide a resilient and flexible supply chain with the
capability to manufacture the majority of products in
China, Vietnam and Malaysia and provide enhanced
business continuity planning. The increased level of
capital expenditure that the Group will incur during
construction of the new third Asian site will be phased
in line with the building of the facility and will be
spread across 2023 and 2024.

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STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

PERFORMANCE: OPERATIONAL REVIEW CONTINUED

£38.0m

ADJUSTED PROFIT
BEFORE TAX
-20% CER

COMPARED TO FY 21

We expect this important strategic capability of
having production facilities in Vietnam, China and,
in time, Malaysia, to enable us to win more design
mandates from key customers. The benefit of dual
supply was highlighted when China was in lockdown
in 2020 and then again in 2022, as when conditions
in Vietnam were restricted in 2021, and we were
able to effectively redirect production to maintain a
continuity of supply for our customers.

We also have three smaller, more technically specialist
manufacturing facilities in North America. These
include a customer focused engineering services
facility in California, a site in New Jersey focused on
high voltage ('HV') products and a radio frequency
('RF') focused facility in Massachusetts. High demand
for RF and HV products has led to some supply
challenges and we are increasing capacity to meet
increased demand levels, including investment
in increased capacity in China. Following the
acquisitions of FuG and Guth, we now also have two
manufacturing facilities in Germany predominantly
focused on high voltage products.

Control of our own, low cost, high quality and
geographically well-diversified manufacturing
assets remains an important component of
XP’s competitive advantage.

We monitor market dynamics intently, working
closely with our supply partners and maintaining a
level of safety stocks of key components. Throughout
the year, we continued to see significant supply
constraints for certain components and increased
our safety stocks to manage through any future
supply issues and also designed out some particularly
problematic components using our engineering team.
Uncertainty in the marketplace, in combination with
long lead times, led us to order higher quantities
than normal to secure supply. Overall supply chain
conditions stabilised late in 2022 but we do expect
some issues to persist in 2023.

Research and development
New products are fundamental to our longer-term
revenue growth. The broader our product offering,
the higher the probability that we will have a product
which will work in the customer’s application with or
without a modification by our engineering team. By
expanding into RF power in 2017 and high voltage
in 2018 and 2022, we estimate that our addressable
market is over US$6.0 billion and growing.

The design-in times required by our customers to
qualify the power converter into their equipment
and to gain the necessary safety agency approvals
are lengthy. Typically, we see a period of around

18 months, or even longer in Healthcare, from first
identifying a customer opportunity to receiving the
first production order. Revenue will then start to build,
often peaking a number of years later through the
product lifecycle, which can typically be c.seven years.
The positive aspect of this characteristic is that our
business has a strong annuity base where programmes
typically last five to seven years but can last much
longer. Another aspect of this model is that the many
new products we have introduced over the last three
years have yet to make a meaningful impact on our
revenue, creating a significant benefit for future years
as they enter production.

We continue to move our product portfolio up the
power and voltage scale and away from our historic
low-power/low voltage offering, to protect our
margins and expand our addressable market. RF
power is a long-term opportunity and is a market
which contains many interesting and significant niches
beyond the Semiconductor Manufacturing Equipment
sector including medical equipment, induction and
dielectric heating, and industrial lasers, and we are
expanding our RF development resources. In tandem,
we have directed more of our internal product
development resources away from low-power/low-
voltage applications and are servicing demand in the
low-power segment with more third-party products
designed to our specifications and quality standards.

Engineering solutions
As well as growing our product offering, we have
continued to expand our engineering solutions
groups, particularly in Asia and North America. As
we continue to move our capabilities up to higher
power and higher voltages, we are becoming an
increasingly attractive partner for customers whose
applications are becoming more and more demanding.
These demands include not only power delivery and
management, but also sophisticated connectivity
involving software and firmware which enables the
customer’s application to control the power solution
and the power solution to communicate back to the
application. As the world becomes more connected
and the fourth industrial revolution gains traction, we
expect this trend to gather pace. Customers place a
high value on our engineering solutions capabilities
which differentiate us from many of our competitors.

Our engineering solutions groups work closely with
the customer’s engineering teams to provide these
customised solutions. Speed and proximity to the
customer are critical as the power solution is often
one of the last parts of the system to be designed, so
it is invariably one of the gating items to get the end
product to market. This is an area where XP Power
adds significant value to its customers, and we are
seeing increasing demand for these services.

We are one of the few power companies that can
offer its customers a full range of solutions across
the voltage and power spectrum and provide the
engineering services to package these together
to provide a complete power solution, including
communication with the customers’ application

XP Power Annual Report & Accounts for the year ended 31 December 2022through firmware. This is a powerful proposition
which makes us an ideal partner for many customers
and greatly expands our addressable market.

Sustainability
We are acutely aware of the increasing concerns
our people, customers, suppliers, governments,
and shareholders have around climate change and
sustainability issues in general. We have taken a
lead in our industry in developing and promoting
high efficiency products which consume less energy
and therefore help reduce carbon emissions over
their lifetime in use. We established a Sustainability
Committee as early as 2009 and set ourselves the
bold goal of becoming the leader in our industry
regarding sustainability matters. We have consistently
incorporated sustainability factors into our decision
making and have adopted environmentally responsible
practices in our facilities. In particular, we believe
that our Vietnamese production facility is the most
environmentally friendly in our industry with its
efficient building envelope, building management
system, water recycling and solar panel array. These
industry-leading practices will also be incorporated
into our new Malaysian facility.

We determined many years ago that one of the
biggest impacts we could have on the environment
was designing and promoting XP Green Power
products which consume, and therefore waste, less
energy over their operational lifetimes. This results in
significant and ongoing reductions in CO2 emissions
generated by our customers’ equipment. XP Green
Power products generated revenues of £59.3 million
in 2022, 21% higher than last year and represented
20% of total revenue.

Sustainability also resonates with our employees.
We have adopted energy and water-saving practices
throughout the Group and have a network of

passionate environmental representatives who
promote best practices and raise awareness of
sustainability issues, including social ones, across our
global workforce.

We have set Company targets to reduce CO2
emissions intensity by a minimum of 3% per annum
over the short and medium term and an aspiration to
achieve net zero by 2040. During 2022 we calculated
XP Power’s full carbon footprint including Scope 1,
2 and 3 emissions. Initial findings show the majority
of emissions are outside of our operations – mostly
from components we purchase and our products in
use. Future product design and efficiency as well as
supplier engagement is key in driving these emissions
down. Also critical is that governments continue
to rapidly decarbonise national electricity grids. XP
Power will be submitting targets in line with Science
Based Targets Initiative (SBTi) in 2023, following our
commitment which was submitted in July 2022.

We continue to support our employees through
training and development, promoting a fair working
environment with equal opportunities, and see mental
health as a priority. Through workforce engagement,
views are heard at Board level.

In 2022, we were delighted to receive the first ESG
award from Lam Research, the leading global supplier
of semiconductor manufacturing equipment and one
of our largest customers, being recognised for our
commitment to strong ESG goals and proactively
aligning with Lam on these priorities. This follows
the PRISM award we received from ASM in 2021 for
sustainability.

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GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

28 February 2023

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STRATEGY ON
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STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

OUR KEY PERFORMANCE INDICATORS

We monitor progress against the delivery of our strategic goals using both financial and non-financial key
performance indicators (KPIs).

Financial KPIs

KPI

PERFORMANCE

DEFINITION

We target revenue
growth of 10% per
annum, measured at
actual exchange rates.
Whether we achieve this
or not can depend on
market cyclicality and
exchange rates.

We expect revenue from
our top 30 customers to
increase as we pursue
our strategy.

Revenue
growth (%)

Revenue
from top 30
customers (%)

Adjusted
operating cash
conversion (%)

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

111

117

132

TARGET
ACHIEVED

Yes

OUR PROGRESS IN 2022

OUR PLANS FOR 2023

LINK TO STRATEGY

VALUES

LINK TO RISKS

LINK TO REMUNERATION

LINK TO CORE

• Revenue growth of 21% was
impacted by exchange rates,
decreasing to 11% on a constant
currency basis.

• Trading performance improved

significantly in H2 as supply chain
conditions improved.

• Strong demand for semiconductor
manufacturing equipment and
industrial technology.

• Continue to utilise our broad

• Target accounts

product offering through all

sales regions.

where we can

add value.

1, 2, 3, 4, 5, 6

7, 8, 9, 10, 11

• Provide increasing support to

our customers through our

engineering solutions group.

• This metric remained at 58% in 2022

(2021: 58%).

• Continue to increase shares of

• Vertical penetration

our large customers.

of focus accounts.

1, 2, 4, 5

Revenue growth drives

the annual growth of our

adjusted profit before tax,

which is a target in our

Group bonus plan.

Placing emphasis on

revenue from our top 30

customers aligns with our

strategy and drives long-

term earnings growth.

Long-term earnings growth

is a performance condition

in the Company’s Long-

Term Incentive Plan (LTIP).

Operating cash conversion

is a metric in our Group

bonus plan.

We target adjusted
operating cash
conversion of 100%.

• Lowered strong cash conversion
performance due to increased
working capital requirement and the
Comet legal case damage payment
partially offset by lower capital
expenditure.

• Focused cash flow forecasting made
better use of available cash to meet
requirements across the Group.

• Continue to seek opportunities

• Build a global supply

1, 2, 4, 5, 11

to reduce working capital

by reducing lead times

and improved inventory

management.

chain that balances

high efficiency

with market-

leading customer

responsiveness.

Adjusted diluted
earnings per
share (EPS)
growth (%)

2022

2021

2020

-9

-11

2019

-16

2018

We aim to grow this
metric by a double-digit
percentage each year.

•

Improved gross margin offset
by one-off legal costs and other
specific items. Improved revenue
driven largely by the semiconductor
manufacturing equipment market.

• Revenue and earning outcome

• Target customers

for 2023 is dependent on

continued demand in the

semiconductor manufacturing

equipment and industrial

technology sectors.

where we can

add value.

• Vertical penetration

of focus accounts.

1, 2, 3, 4, 5, 6

7, 8, 9, 10, 11

Growth in adjusted

EPS is a performance

condition in our Long-Term

Incentive Plan.

XP Power Annual Report & Accounts for the year ended 31 December 2022

We target revenue

growth of 10% per

annum, measured at

actual exchange rates.

Whether we achieve this

or not can depend on

market cyclicality and

exchange rates.

our top 30 customers to

increase as we pursue

our strategy.

operating cash

conversion of 100%.

111

117

132

Financial KPIs

Revenue

growth (%)

Revenue

from top 30

customers (%)

Adjusted

operating cash

conversion (%)

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

2022

2021

2020

2018

-9

-11

TARGET

Yes

• Revenue growth of 21% was

impacted by exchange rates,

decreasing to 11% on a constant

currency basis.

• Trading performance improved

significantly in H2 as supply chain

conditions improved.

• Strong demand for semiconductor

manufacturing equipment and

industrial technology.

performance due to increased

working capital requirement and the

Comet legal case damage payment

partially offset by lower capital

expenditure.

• Focused cash flow forecasting made

better use of available cash to meet

requirements across the Group.

by one-off legal costs and other

specific items. Improved revenue

driven largely by the semiconductor

manufacturing equipment market.

KPI

PERFORMANCE

DEFINITION

ACHIEVED

OUR PROGRESS IN 2022

OUR PLANS FOR 2023

LINK TO STRATEGY

LINK TO CORE
VALUES

LINK TO RISKS

LINK TO REMUNERATION

• Continue to utilise our broad
product offering through all
sales regions.

• Target accounts
where we can
add value.

1, 2, 3, 4, 5, 6

7, 8, 9, 10, 11

• Provide increasing support to
our customers through our
engineering solutions group.

We expect revenue from

• This metric remained at 58% in 2022

(2021: 58%).

• Continue to increase shares of

our large customers.

• Vertical penetration
of focus accounts.

1, 2, 4, 5

We target adjusted

• Lowered strong cash conversion

• Continue to seek opportunities

to reduce working capital
by reducing lead times
and improved inventory
management.

• Build a global supply
chain that balances
high efficiency
with market-
leading customer
responsiveness.

1, 2, 4, 5, 11

Revenue growth drives
the annual growth of our
adjusted profit before tax,
which is a target in our
Group bonus plan.

Placing emphasis on
revenue from our top 30
customers aligns with our
strategy and drives long-
term earnings growth.
Long-term earnings growth
is a performance condition
in the Company’s Long-
Term Incentive Plan (LTIP).

Operating cash conversion
is a metric in our Group
bonus plan.

Adjusted diluted

earnings per

share (EPS)

growth (%)

2019

-16

We aim to grow this

•

Improved gross margin offset

metric by a double-digit

percentage each year.

• Revenue and earning outcome
for 2023 is dependent on
continued demand in the
semiconductor manufacturing
equipment and industrial
technology sectors.

• Target customers
where we can
add value.

• Vertical penetration
of focus accounts.

1, 2, 3, 4, 5, 6

7, 8, 9, 10, 11

Growth in adjusted
EPS is a performance
condition in our Long-Term
Incentive Plan.

CORE VALUES KEY

RISKS KEY

Integrity

Customer Focus

Speed

Flexibility

Knowledge

1 An event causes a disruption to our

8 Strategic risk associated with valuing or

manufacturing facilities

integrating new acquisitions

2 Product recall

9 Loss of key personnel or failure to attract new

3 Competition from new market entrants and new

technologies

10 Exposure to exchange rate fluctuations

personnel

4 Fluctuations of revenues, expenses and operating

11 Risk associated with supply chain

results due to an economic shocks

5 Dependence on key customers

6 Cybersecurity/information systems failure

7 Risks relating to regulation, compliance and

taxation

12 Climate-related risks

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

OUR KEY PERFORMANCE INDICATORS CONTINUED

Non-financial KPIs

KPI

PERFORMANCE

DEFINITION

New product
families released

Employee
management
score

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

Sustainability KPI

Lifetime CO2
emission
savings from
green products
(tonnes)

2022

2021

2020

2019

2018

In assessing new product
opportunities, we
consider the potential
revenue from new
product families and the
absolute number of new
product introductions.
We target 30 new
releases per annum.

We target to improve
this score and be at least
above the benchmark
for similar-sized
international companies.

3.83

4.20

3.97

134,000

128,000

117,000

108,000

We have a target to
increase the lifetime
CO2 emissions savings
from XP Green Power
products by at least 5%
per annum.

TARGET
ACHIEVED

OUR PROGRESS IN 2022

• We released 15 new product families

in 2022 (2021: 24).

• Eight of these can be classified as XP

Green Power products.

OUR PLANS FOR 2023

LINK TO STRATEGY

VALUES

LINK TO RISKS

LINK TO REMUNERATION

• Focus our design engineering

• Develop a broad

on developing product

range of competitive

platforms that are easily shared

products.

and reused over numerous

applications and sectors.

LINK TO CORE

3, 7

• We continue to undertake an annual

• Use the results of the Gallup

• Supports all aspects

6, 7, 9

employee engagement survey
provided by Gallup to identify areas
our people tell us can improve
to deliver the ultimate employee
experience.

survey to enhance employee

morale, increase productivity

and improve communication.

of our strategy.

Yes

• Lifetime emission savings exceeded

target in 2021.

• Continue to release products

• Leading our

with class-leading efficiency.

industry regarding

• Continue to promote

environmental awareness and

adopt environmentally friendly

practices.

sustainability

matters.

XP Power Annual Report & Accounts for the year ended 31 December 2022

opportunities, we

consider the potential

revenue from new

product families and the

absolute number of new

product introductions.

We target 30 new

releases per annum.

this score and be at least

above the benchmark

for similar-sized

international companies.

3.83

4.20

3.97

We target to improve

• We continue to undertake an annual

employee engagement survey

provided by Gallup to identify areas

our people tell us can improve

to deliver the ultimate employee

experience.

Non-financial KPIs

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

2022

2021

2020

2019

2018

Employee

management

score

Sustainability KPI

Lifetime CO2

emission

savings from

green products

(tonnes)

KPI

PERFORMANCE

DEFINITION

ACHIEVED

OUR PROGRESS IN 2022

OUR PLANS FOR 2023

LINK TO STRATEGY

TARGET

LINK TO CORE
VALUES

LINK TO RISKS

LINK TO REMUNERATION

New product

families released

In assessing new product

• We released 15 new product families

• Focus our design engineering

• Develop a broad

3, 7

in 2022 (2021: 24).

• Eight of these can be classified as XP

Green Power products.

on developing product
platforms that are easily shared
and reused over numerous
applications and sectors.

range of competitive
products.

• Use the results of the Gallup
survey to enhance employee
morale, increase productivity
and improve communication.

• Supports all aspects
of our strategy.

6, 7, 9

134,000

128,000

117,000

108,000

We have a target to

increase the lifetime

CO2 emissions savings

from XP Green Power

products by at least 5%

per annum.

Yes

• Lifetime emission savings exceeded

target in 2021.

• Continue to release products
with class-leading efficiency.

• Continue to promote

environmental awareness and
adopt environmentally friendly
practices.

• Leading our

industry regarding
sustainability
matters.

CORE VALUES KEY

RISKS KEY

Integrity

Customer Focus

Speed

Flexibility

Knowledge

1 An event causes a disruption to our

8 Strategic risk associated with valuing or

manufacturing facilities

integrating new acquisitions

2 Product recall

9 Loss of key personnel or failure to attract new

3 Competition from new market entrants and new

technologies

10 Exposure to exchange rate fluctuations

personnel

4 Fluctuations of revenues, expenses and operating

11 Risk associated with supply chain

results due to an economic shocks

5 Dependence on key customers

6 Cybersecurity/information systems failure

7 Risks relating to regulation, compliance and

taxation

12 Climate-related risks

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

PERFORMANCE: FINANCIAL REVIEW

OSKAR ZAHN
CHIEF FINANCIAL OFFICER

The Group’s performance improved significantly in the
second half of the year, after the extreme challenges
of the first half, as supply chain conditions began to
stabilise and we were able to increase production
from our facilities. Our improved trading performance
reflects the hard work of our team and better reflects
the Group’s potential. While we remain aware of
ongoing challenges and economic uncertainty, we
have good momentum into 2023.

Adjusted results
Throughout this results announcement, as is our
normal practice, adjusted and other alternative
performance measures are used to describe the
Group’s performance. These are not recognised under
International Financial Reporting Standards (IFRS)
or other generally accepted accounting principles
(GAAP).

When reviewing XP Power’s performance, the Board
and Management team focus on adjusted results
rather than statutory results. There are a number
of items that are included in statutory results that
are one-off in nature, or not representative of the
Group’s performance, such as the costs relating to
the Comet case and implementation of the new
ERP system. These are therefore excluded from the
adjusted results. The tables in Note 2 show the full
list of adjustments between statutory operating profit
and adjusted operating profit, between statutory
profit before tax and adjusted profit before tax, and
between statutory profit after tax and adjusted profit
after tax at Group level for both 2022 and 2021.

Statutory results
Revenue was £290.4 million (2021: £240.3 million),
representing organic constant currency growth of 6%
or 21% on a reported basis. The statutory operating
loss was £(24.1) million, compared to a profit of
£29.7 million in the prior year, with the loss primarily
driven by the damages and legal costs from the
Comet case.

Net finance costs were £6.1 million
(2021: £1.3 million), resulting in a loss before tax of
£(30.2) million (2021: profit £28.4 million). The higher
net finance cost reflects the higher average gross
debt and increased interest rates. This resulted in
an income tax credit of £10.6 million compared to a
£5.4 million expense in 2021. The basic loss per share
was 102.0 pence whereas in 2021 the Group had
earnings per share of 115.8 pence.

Trading performance
The Group’s revenue growth was primarily driven by
the Semiconductor Manufacturing Equipment and
Industrial Technology sectors, which increased 9% at
constant currency (22% as reported) to £113.4 million,
and 18% at constant currency (30% as reported)
to £119.6 million respectively (Semiconductor
Manufacturing Equipment 2021: £93.3 million;
Industrial Technology 2021: £92.0 million).

The Healthcare sector increased revenue 4% as
reported to £57.4 million (2021: £55.0 million) but
was down 7% at constant currency but with demand
and revenue increasing materially in the second half.

XP Power Annual Report & Accounts for the year ended 31 December 20222022 revenue includes £14.4 million in Industrial
Technology and £2.1 million in Healthcare sectors
from the FuG and Guth businesses acquired at the
end of January.

By region, North America continued to benefit
from the growth in demand for Semiconductor
Manufacturing Equipment along with Industrial
Technology, increasing revenue by 6% to
US$207.0 million from US$194.5 million in 2021.
Europe delivered growth of 4% (like-for-like, excluding
the acquisitions of FuG and Guth) to £70.0 million
(2021: £67.3 million) and Asia revenue grew by 3% to
US$45.3 million (2021: US$43.8 million), both driven
by the Industrial Technology sector.

Gross margin decreased to 41.5% (2021: 45.1%),
reflecting the continued supply chain pressures
impacting overhead absorption in factories
throughout H1, including COVID-19 related
lockdowns in China which reduced manufacturing
output. As management of component shortages
stabilised, Q3 and Q4 manufacturing output grew
significantly, and resulting revenue increased,
delivering improved gross profit in the final months
of 2022.

Higher freight costs during 2022 also impacted
margin, with increased proportion of higher cost air
freight used to support on time customer delivery and
increased underlying cost per Kg, which began to ease
during Q4.

We continue to expect gross margins to recover to
historic levels over the medium term.

Operating costs
Adjusted operating expenses benefitted from
c.£2 million foreign exchange gains in 2022, which
partly offset the additional operating expense from
the acquired FuG and Guth businesses, people
and other cost inflation and, the impact of a return
to travel following the pandemic. Total adjusted
operating expense of £77.7 million was an increase of
16% on a like-for-like basis.

Gross R&D expenditure charged to the income
statement (excluding the impairment of previously
capitalised development costs associated with the
legal case) was £20.4 million (2021: £16.8 million),
representing 7% of revenue; an absolute increase of
21% over the prior year and in line as a proportion
of revenue. Innovation is a key part of the Group’s
strategy and, as a result, R&D investment is expected
to continue to grow as the Group extends its
engineering capabilities with a particular focus on RF
and high-power, high-voltage product development
activities.

The Group capitalised £8.1 million of R&D costs
(2021: £8.3 million), which reflects the development
of new products as the Group expands its product
portfolio. In 2023 we are expecting this investment to
increase to c.£9 million.

READ MORE ABOUT
OUR CONSOLIDATED
STATEMENT OF
COMPREHENSIVE
INCOME ON PAGE 149

READ MORE ABOUT OUR
SEGMENTAL REPORTING
ON PAGES 163–167

Adjusted profits
The resulting adjusted operating profit of £42.9
million was a decrease of 12% at constant currency
(2021: £45.1 million) and translated to adjusted
operating margin of 14.8% (2021: 18.8%). In H2 2022
the adjusted operating margin was 16.7%.

Adjusted net finance costs increased to £4.9 million
on an adjusted basis (2021: £1.3 million) as a result
of increasing external interest rates incurred on the
Group’s US dollar denominated debt, along with
higher levels of total gross debt which climbed to
£174.4 million.

The Group generated adjusted profit before
tax before specific items of £38.0 million
(2021: £43.8 million), which represented a decline of
20% at constant currency (13% as reported) compared
to last year.

The effective tax rate on adjusted profit before tax
was 16.1%, a reduction of 310bps (2021:19.2%)
reflecting the benefit of R&D credits and assessment
of deferred tax assets and liabilities in North America,
more than offsetting the impact of profits from FuG
and Guth, our German businesses, added to the
Group in 2022.

Adjusted basic and adjusted diluted earnings per
share decreased by 10% to 160.6 pence and 9% to
160.1 pence respectively (2021: 179.4 pence and
176.3 pence).

Our improved trading performance reflects the
hard work of our team and better reflects the
Group’s potential. While we remain aware of
ongoing challenges and economic uncertainty,
we have good momentum into 2023.

Specific items
In 2022, the Group incurred £68.2 million
(2021: £15.4 million) of specific items, £67.0 million
of which was excluded from adjusted operating profit
with a further £1.2 million relating to interest costs
and therefore also excluded from adjusted profit
before tax.

The adjusted items were primarily driven by
a provision made for damages of $40 million
(£32.1 million) awarded against the Group following
the Comet legal case, along with other related costs
and an estimate of opposing counsel legal costs
which impact the income statement. Whilst the case
remains ongoing, the Group has placed collateral of
US$44 million (£36.9 million) for a court bond against
the damages, which is reflected in cash flow and
net debt.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

PERFORMANCE: FINANCIAL REVIEW CONTINUED

42%

ADJUSTED
OPERATING CASH
CONVERSION

-62% COMPARED

TO FY 21

Whilst we do not believe we have used any third party
IP in our designs, a conservative approach was taken
to write down previously capitalised development
costs associated with these products of £7.5 million.
This non-cash charge was booked in H1 2022.

Specific items in 2022 also include the costs
to complete the ERP implementation in Asia
manufacturing sites (£3.8 million), acquisition related
costs (£2.4 million) and a credit from FX benefit
on an acquisition loan (£3.2 million). Other specific
items also include acquisition related amortisation of
£4.1 million (non-cash).

Cash flow and net debt
Net debt at 31 December 2022 was £151.0 million,
compared with £24.6 million at 31 December 2021,
including the acquisitions of FuG and Guth in January
2022 (£33.0 million), higher capital expenditure
(£22.9 million, including Malaysia), working capital
investment (£33.5 million), to support revenue
growth, and the impact of a US$44.0 million
(£36.9 million) collateral payment in Q4 for a bond
held against the damages awarded against the
Group in the Comet Legal Action in the US plus legal
fees. The working capital investment represents a
£24.8 million increase in inventory and an £9.5 million
increase in receivables.

Accordingly, cash from operations was significantly
impacted by the investment in inventory and a Q4
increase in receivables because of the increase in
Q4 revenue compared to 2021 (Q4 revenue 2022:
£87.4 million, Q4 2021: £58.9 million). This resulted
in a cash inflow from operations of £2.1 million
(2021: £40.6 million).

The inventory increase was driven by adapting to the
new market dynamics combined with an increase
in raw materials to support the delivery of the
order backlog as logistics disruptions and increased
component lead times led to a delay in conversion of
orders to revenue and subsequent inventory build-up.
Total inventory of £114.4 million was an increase of
£40.4 million, including £8.8 million impact of foreign
exchange on US dollar balances.

Working capital benefited from inventory beginning
to unwind in Q4 2022 and although the pace of that
unwind was slower than expected, it is expected to
accelerate in H1 2023 as supply chain conditions
further stabilise. Inventory is well above historic levels
in absolute and percentage of sales terms and we
are working hard to reduce it even as supply chains
remain challenging.

As planned, capital investment enhanced capacity
and flexibility at our manufacturing sites, and work
commenced at our new manufacturing facility in
Malaysia with plans to go live in H1 2024. The Group
spent £14.9 million in 2022 (2021: £13.6 million),
which included the completion of our ERP system
implementation in £3.9 million of software additions,
and £3.5 million for the land in Malaysia.

XP Power Annual Report & Accounts for the year ended 31 December 2022Outlook
The Group starts the new financial year with a
significant order book, which provides good visibility
for 2023, particularly the first half. We remain mindful
of the ongoing uncertainties relating to component
supply, inflation and recessionary concerns and are
continuing to monitor the situation closely. That said,
we are generally optimistic on the Group’s prospects
for the current year based on our strong H2 2022
trading momentum and the benefits of price increases
coming through our order book to a greater extent
during 2023.

Longer term, the Board believes XP Power to be very
well positioned to grow ahead of its end markets,
supported by its improving cash generation and a
reduced level of debt.

OSKAR ZAHN
CHIEF FINANCIAL OFFICER

28 February 2023

As we continue to build capacity and resilience in our
Asian supply chain and address capital requirements
to support our growth in North America, we expect
2023 to be a year of significantly higher expenditure.
We will invest c.£30 million in 2023, including on
the new manufacturing facility in Malaysia, before
returning to historic levels of c.£10-15 million per
annum in 2024. The expenditure is necessary to
meet our longer-term growth plans and will generate
attractive returns.

Free cash before acquisitions, dividends and
borrowings was an outflow of £69.6 million (2021:
£12.5 million inflow) and the Group finished 2022
with net debt of £151.0 million (2021: £24.6 million),
comprising cash and cash equivalents of £23.4 million
and gross debt of £174.4 million. Net debt to EBITDA
leverage was 2.68x. The Group expects financial
leverage to reduce during 2023.

XP secured greater banking covenant flexibility from
its lenders in Q4 2022 with the net debt to EBITDA
covenant now required to be less than 3.50x in
December 2022, 3.25x in June 2023 and 3.0x in
December 2023. Group expects to remain well inside
these covenants during 2023 and beyond. The greater
flexibility also highlights the ongoing support from our
lending banks.

Capital allocation
In 2023 the Group will prioritise strengthening
the balance sheet whilst also continuing to focus
on investing in the business to drive medium term
organic growth. We expect operating cash flow to
improve in 2023 allowing for organic investment to
be made, which will support our medium term plans,
while de-leveraging the balance sheet. The Group
plans to operate in a range of between 1–2x net debt
to adjusted EBITDA in the medium term.

Our strong confidence in the Group’s long-term
prospects allows the Board to propose a final dividend
of 36.0 pence per share for the fourth quarter of
2022. This dividend will be payable to members on
the register on 24 March 2023 and will be paid on
27 April 2023. When combined with the interim
dividends for the previous three quarters, the total
dividend for the year will be 94.0 pence per share
(2021: 94.0 pence).

Foreign exchange
The Group reports its results in Pounds Sterling,
but the US dollar continues to be our principal
trading currency, with approximately 84% (2021:
87%) of our revenue denominated in US dollars. The
average pounds sterling to US dollar exchange rate
decreased by 10% from 1.38 to 1.25 resulting in
£1.9 million impact to adjusted operating profit. At
current exchange rates there would only be a minimal
impact in 2023.

READ MORE ABOUT OUR
CONSOLIDATED BALANCE
SHEET ON PAGE 150

READ MORE ABOUT
OUR CONSOLIDATED
STATEMENT OF CHANGES
IN EQUITY ON
PAGE 151

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

MANAGING OUR RISK

The Group has well-established risk management processes to
identify and assess risks.
The Group’s principal risks are regularly reviewed by the Board and are mapped onto a risk universe where risk
mitigation or reduction can be tracked and managed. This facilitates further discussions regarding risk appetite
and identifies the risks that require a greater level of attention.

Our risk assessment
Identified key risks and their mitigating actions are summarised as follows, and are classified according to:

• The assessment of their level of impact to the viability of the business if they occurred – ranging from minor

to severe.

• The likelihood of a risk occurring – ranging from low to high.

• The direction they are trending in – risks are classified according to whether they are assessed as becoming

more or less likely to occur, or whether the risk of occurrence remains unchanged.

Although the attributes assigned to the identified risks are judgemental and qualitative in nature, the Board
regards the methodology as useful in determining the focus that should be given to each risk.

This is not an exhaustive list but does include all risks, which are assessed as having a severe or moderate impact
to the business if they occurred.

Our risk management framework

Top down

The Board

A robust risk assessment has been carried out at Board level and actions have been set to mitigate and/or
reduce the identified risk. The Board acknowledges that it is responsible for the Group’s internal controls
and reviewing their effectiveness. We have an ongoing process for identifying, evaluating and managing the
significant risks faced by the Group. These identified risks and processes are documented, reviewed and
updated at regular Board meetings.

Audit Committee and internal audit

The Audit Committee ensures that the Group is effectively managing risk and internal control procedures.
This is achieved through:

• the Audit Committee reviewing the effectiveness of internal controls; and

• an internal audit and risk assurance programme.

Operational level

A key control procedure is the day-to-day supervision of the business. This is supported by managers within
the Group’s companies. These include:

• authority matrices to clearly define who can authorise transactions, transfer funds, commit Company

resources and enter into particular agreements;

• monthly reporting of management accounts and key metrics to senior management, with performance

measured to budget and material variances reported to the Board;

• quality control checks throughout our manufacturing process, burn-in to eliminate early failures, in-circuit
electrical testing, 100% functional testing, hipot testing of isolations barriers and quality inspection; and

• business continuity and disaster recovery plans are in place for all key facilities, and documented and

communicated to key personnel to help cope with unexpected material events.

Existing and emerging
macroeconomic and
business risks that
could seriously affect
performance, future
growth or reputation
are assessed by the
Board to ensure there
is the appropriate
level of oversight,
mitigation and risk
appetite across
the Group.

Bottom up

Day-to-day
operational risks
that influence daily
decision making are
identified, assessed
and mitigated across
functional and
geographic areas.

XP Power Annual Report & Accounts for the year ended 31 December 2022Risk appetite
The Board determines the amount and types of risk
that the Company is willing to take to achieve its
strategic and operational objectives. Our approach
has been refined in the year, with a risk appetite rating
applied to each risk.

A key focus for the Board is minimising the Group’s
exposure to financial, operational, human, legislative
and reputational risks.

The experience and learnings of the pandemic, and
the ongoing impact on the global supply chain, are
reflected in our risk reviews and will enhance our
response to the next disruptive event.

Emerging risks
We continue to monitor and assess emerging risks
throughout our risk processes.

The macroeconomic challenges causing inflationary
pressure, foreign exchange volatility and rapid
increases in interest rates, along with geo-political
events and pressures that impact cross-border
trading, are monitored closely for potential financial
and operational impact.

We also continue to enhance our supply chain
resilience, with multi-site manufacturing in Asia,
where most of our products can now be produced in
either our Chinese or Vietnamese facilities to reduce
dependency on single sources or regions. In addition,
work has started on a new manufacturing facility in
Malaysia, which is expected to be commissioned in
2024 to increase capacity and meet the demand from
across the Group, as well as further strengthen our
supply chain.

The impact of climate-related change and
severe weather events are assessed through our
Sustainability Committee and included in our
Sustainability Report, and are an increased area of
focus for our emerging risks.

Heat map of the identified risks indicating
the likelihood and level of impact

S
T
R
A
T
E
G

R
E
P
O
R
T

Severe

Impact

Minor

Low

Likelihood

High

1 An event causes a disruption to our

manufacturing facilities

2 Product recall

3 Competition from new market entrants and

new technologies

4 Fluctuations of revenues, expenses and operating results due to

an economic shocks

5 Dependence on key customers

6 Cybersecurity/information systems failure

7 Risks relating to regulation, compliance and taxation

8 Strategic risk associated with valuing or integrating

new acquisitions

9 Loss of key personnel or failure to attract new personnel

10 Exposure to exchange rate fluctuations

11 Risk associated with supply chain

12 Climate-related risks

XP Power Annual Report & Accounts for the year ended 31 December 2022

MANAGING OUR RISKS CONTINUED

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

1 An event causes a disruption to our

manufacturing facilities

An event that results in the temporary or
permanent loss of a manufacturing facility
would be a serious issue.

This could include climate-related events
such as severe weather or government-
imposed restrictions.

As the Group manufactures 74% of
revenues, this would undoubtedly cause
at least a short-term loss of revenues and
profits, and disruption to our customers,
and therefore damage to reputation.

• We have two facilities (China and Vietnam)

• Commence construction of a new

where we can produce most of our power

manufacturing facility in Malaysia.

A, B, C, D

• We have disaster recovery plans in place for

China to Vietnam and from North

• Continued transfer of products from

converters.

both facilities.

America.

LINK TO

STRATEGIC

LINK TO

PILLAR

KPI

ASSESSED

TREND

2 Product recall

A product recall due to a quality or
safety issue.

This would have serious repercussions to
the business in terms of potential cost and
reputational damage as a supplier to critical
systems.

• We perform 100% functional testing on all

• Continue to enhance our product design

A, B, C, D

own manufactured products and 100% hipot

processes.

• Expand supplier quality capabilities.

3 Competition from new market entrants

and new technologies

The power supply market is diverse and
competitive. The Directors believe that the
development of new technologies could
encourage significant new competition,
which may have a material effect on the
business.

At the lower end of the Group’s target
market, in terms of both power range and
programme size, the barriers to entry are
lower and there is a risk that competition
could quickly increase, particularly from
emerging low-cost manufacturers in Asia.

Improvements in power conversion
technology have been incremental as more
high-performing components become
available.

• The Group reviews activities of its

• We continue to develop higher power,

A, C, D, E

competition, particularly product releases,

higher voltage and high-complexity

and stays up to date with new technological

product platforms, and de-emphasising

advances in our industry, especially new

low-power, low-voltage low-complexity

components and materials. The Group

tries to keep its cost base competitive by

manufacturing in low-cost geographies

where appropriate.

areas of the market.

• We continue to have a clear recruitment

process, and the code of ethics are well

documented and communicated.

• We have conducted a risk review with the

manufacturing management to identify

and assess risks that could cause a serious

disruption to manufacturing, and identified

and implemented actions to reduce or

mitigate these risks where possible.

testing, which determines the adequacy

of electrical insulation. This ensures the

integrity of the isolation barrier between

the mains supply and the end user of the

equipment. We also test all medical products

we manufacture to ensure the leakage

current is within the medical specifications.

• Where we have contracts with customers,

we limit our contractual liability regarding

recall costs.

• The general direction of our product

roadmap is to move away from lower-

complexity products and to increase our

engineering solutions capabilities to reduce

the inherent market competitiveness.

• The Group ensures its own and external

intellectual properties are protected.

KPI KEY

A Revenue growth

E New product families released

B Revenue from Top 30 customers

F Employee engagement score

C Adjusted operating cash conversion

G Lifetime CO2 emission savings from products

D Adjusted diluted earnings per share growth

TREND KEY

No change to risk

Increase to risk

Decrease to risk

XP Power Annual Report & Accounts for the year ended 31 December 20221 An event causes a disruption to our

manufacturing facilities

An event that results in the temporary or

As the Group manufactures 74% of

permanent loss of a manufacturing facility

revenues, this would undoubtedly cause

would be a serious issue.

This could include climate-related events

such as severe weather or government-

imposed restrictions.

at least a short-term loss of revenues and

profits, and disruption to our customers,

and therefore damage to reputation.

2 Product recall

safety issue.

the business in terms of potential cost and

reputational damage as a supplier to critical

systems.

3 Competition from new market entrants

and new technologies

The power supply market is diverse and

At the lower end of the Group’s target

competitive. The Directors believe that the

market, in terms of both power range and

development of new technologies could

programme size, the barriers to entry are

encourage significant new competition,

lower and there is a risk that competition

which may have a material effect on the

could quickly increase, particularly from

business.

emerging low-cost manufacturers in Asia.

Improvements in power conversion

technology have been incremental as more

high-performing components become

available.

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

• We have two facilities (China and Vietnam)
where we can produce most of our power
converters.

• We have disaster recovery plans in place for

both facilities.

• Commence construction of a new
manufacturing facility in Malaysia.

• Continued transfer of products from
China to Vietnam and from North
America.

• We have conducted a risk review with the
manufacturing management to identify
and assess risks that could cause a serious
disruption to manufacturing, and identified
and implemented actions to reduce or
mitigate these risks where possible.

LINK TO
STRATEGIC
PILLAR

LINK TO
KPI

ASSESSED
TREND

A, B, C, D

A product recall due to a quality or

This would have serious repercussions to

• We perform 100% functional testing on all

• Continue to enhance our product design

A, B, C, D

processes.

• Expand supplier quality capabilities.

• We continue to develop higher power,
higher voltage and high-complexity
product platforms, and de-emphasising
low-power, low-voltage low-complexity
areas of the market.

• We continue to have a clear recruitment
process, and the code of ethics are well
documented and communicated.

A, C, D, E

own manufactured products and 100% hipot
testing, which determines the adequacy
of electrical insulation. This ensures the
integrity of the isolation barrier between
the mains supply and the end user of the
equipment. We also test all medical products
we manufacture to ensure the leakage
current is within the medical specifications.

• Where we have contracts with customers,
we limit our contractual liability regarding
recall costs.

• The Group reviews activities of its

competition, particularly product releases,
and stays up to date with new technological
advances in our industry, especially new
components and materials. The Group
tries to keep its cost base competitive by
manufacturing in low-cost geographies
where appropriate.

• The general direction of our product
roadmap is to move away from lower-
complexity products and to increase our
engineering solutions capabilities to reduce
the inherent market competitiveness.

• The Group ensures its own and external
intellectual properties are protected.

STRATEGIC KEY

Develop a market-leading range of competitive
products

Target accounts where we can add value

Vertical penetration of focus accounts

Lead our industry on environmental matters

Build a global supply chain that
balances high efficiency with market-leading
customer responsiveness

Make selective acquisitions of complementary
businesses to expand our offering

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022MANAGING OUR RISKS CONTINUED

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

LINK TO

STRATEGIC

LINK TO

PILLAR

KPI

ASSESSED

TREND

4 Fluctuations of revenues, expenses
and operating results due to an
economic shocks

The revenues, expenses and operating
results of the Group could vary significantly
from period to period due to several
factors, some outside of our 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; and the
introduction of new products or services by
the Group or its competitors.

In response to a changing competitive
environment, the Group may elect to
make certain pricing, service, marketing
decisions or acquisitions that could have a
short-term material adverse effect on the
Group’s revenues, results of operations and
financial condition.

5 Dependence on key customers

The Group is dependent on retaining its key
customers.

If the Group lost some key customers, this
could have a material impact on its financial
condition and results of operations.
However, for FY 22, no single customer
accounted for more than 17% of revenue,
which was spread over several individual
programmes.

6 Cybersecurity/information

systems failure

The Group is reliant on information
technology in multiple aspects of the
business from communications to data
storage. Assets accessible online are
potentially vulnerable to theft and
customer channels are vulnerable to
disruption.

Any failure or downtime of these systems,
or any data theft, could have a significant
adverse impact on the Group’s reputation
or operations.

7 Risks relating to regulation, compliance

and taxation

The Group operates in multiple jurisdictions
with applicable trade and tax regulations
that vary.

Failing to comply with local regulations
or a change in legislation could impact
the profits of the Group. In addition, the
effective tax rate of the Group is affected
by where its profits fall geographically. The
Group’s effective tax rate could fluctuate
over time and impact earnings, and
potentially share price.

KPI KEY

A Revenue growth

E New product families released

B Revenue from Top 30 customers

F Employee engagement score

C Adjusted operating cash conversion

G Lifetime CO2 emission savings from products

D Adjusted diluted earnings per share growth

TREND KEY

No change to risk

Increase to risk

Decrease to risk

• Although not immune from an economic

• We will transfer the manufacture of

A, B, C, D

shock or the cyclicality of the capital

products from North America to Asia to

equipment markets, the Group’s diverse

reduce costs.

customer base, geographic spread and

revenue annuities reduce exposure to

this risk.

• The Group’s business model is not capital

intensive and the strong profit margins lead

to healthy cash generation, which helps

mitigate risks from these external factors.

• We will extend our product portfolio to

protect against sector-specific shocks.

• We will explore outsourcing of

appropriate products and subassemblies

to reduce our fixed costs.

• We will continue to analyse the cost

benefits of interest rate hedging to

mitigate the interest rate risks.

• The Group mitigates this risk by providing

• Given that a key tenant of the Group’s

A, B

excellent service. Customer complaints and

strategy is to vertically penetrate its key

non-conformances are dealt with the sales

customers, customer concentration is

team and the Executive Leadership team will

likely to increase. However, the Board

be involved if required.

believes that, as each customer revenue

stream is made up of many individual

programmes that are designed in, the

loss of an entire customer is unlikely.

We will continue to ensure we provide

excellent service to our customers at

competitive price points.

• The Group has a defined business impact

• We will continue to enhance our

A, D, F

assessment, which identifies the key

information assets, replication of data

cybersecurity tools and processes,

and continue to promote heightened

on different systems or in the cloud, an

awareness of cybersecurity risks among

established back-up process in place and

our people.

a robust anti-malware solution on our

networks.

•

Internally produced training materials are

used to educate users on good IT security

practice and to promote the Group’s IT

policy.

• All recommendations from an outsourced

internal auditor assessment have been

implemented to further mitigate cyber risk

and safeguard the Group’s assets.

• An outsourced internal audit function

• We will continue to ensure we stay

A, D, E, F

provides risk assurance in targeted areas

of the business and recommendations for

current with the latest legislation

and that we have the necessary

improvement. The scope of these reviews

contemporaneous documentation for

includes behaviour, culture and ethics.

compliance and tax purposes.

• The Group hires employees with relevant

• We will establish a health and safety

skills and uses external advisers to keep up

structure and responsibility matrix

to date with changes in regulations to remain

to ensure the policies are adhered to

compliant.

across the organisation.

• The Group establishes clear health and safety

policies and procedures.

XP Power Annual Report & Accounts for the year ended 31 December 20224 Fluctuations of revenues, expenses

and operating results due to an

economic shocks

The revenues, expenses and operating

In response to a changing competitive

results of the Group could vary significantly

environment, the Group may elect to

from period to period due to several

factors, some outside of our control.

make certain pricing, service, marketing

decisions or acquisitions that could have a

These factors include general economic

short-term material adverse effect on the

conditions; adverse movements in interest

Group’s revenues, results of operations and

rates; conditions specific to the market;

financial condition.

seasonal trends in revenues, capital

expenditure and other costs; and the

introduction of new products or services by

the Group or its competitors.

5 Dependence on key customers

customers.

6 Cybersecurity/information

systems failure

The Group is reliant on information

Any failure or downtime of these systems,

technology in multiple aspects of the

or any data theft, could have a significant

business from communications to data

adverse impact on the Group’s reputation

storage. Assets accessible online are

or operations.

potentially vulnerable to theft and

customer channels are vulnerable to

disruption.

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

• Although not immune from an economic
shock or the cyclicality of the capital
equipment markets, the Group’s diverse
customer base, geographic spread and
revenue annuities reduce exposure to
this risk.

• The Group’s business model is not capital

intensive and the strong profit margins lead
to healthy cash generation, which helps
mitigate risks from these external factors.

• We will transfer the manufacture of

products from North America to Asia to
reduce costs.

• We will extend our product portfolio to
protect against sector-specific shocks.

• We will explore outsourcing of

appropriate products and subassemblies
to reduce our fixed costs.

• We will continue to analyse the cost
benefits of interest rate hedging to
mitigate the interest rate risks.

LINK TO
STRATEGIC
PILLAR

LINK TO
KPI

ASSESSED
TREND

A, B, C, D

The Group is dependent on retaining its key

If the Group lost some key customers, this

• The Group mitigates this risk by providing

• Given that a key tenant of the Group’s

A, B

could have a material impact on its financial

condition and results of operations.

However, for FY 22, no single customer

accounted for more than 17% of revenue,

which was spread over several individual

programmes.

excellent service. Customer complaints and
non-conformances are dealt with the sales
team and the Executive Leadership team will
be involved if required.

• The Group has a defined business impact
assessment, which identifies the key
information assets, replication of data
on different systems or in the cloud, an
established back-up process in place and
a robust anti-malware solution on our
networks.

•

Internally produced training materials are
used to educate users on good IT security
practice and to promote the Group’s IT
policy.

• All recommendations from an outsourced
internal auditor assessment have been
implemented to further mitigate cyber risk
and safeguard the Group’s assets.

strategy is to vertically penetrate its key
customers, customer concentration is
likely to increase. However, the Board
believes that, as each customer revenue
stream is made up of many individual
programmes that are designed in, the
loss of an entire customer is unlikely.
We will continue to ensure we provide
excellent service to our customers at
competitive price points.

• We will continue to enhance our

A, D, F

cybersecurity tools and processes,
and continue to promote heightened
awareness of cybersecurity risks among
our people.

7 Risks relating to regulation, compliance

and taxation

The Group operates in multiple jurisdictions

Failing to comply with local regulations

with applicable trade and tax regulations

or a change in legislation could impact

that vary.

the profits of the Group. In addition, the

effective tax rate of the Group is affected

by where its profits fall geographically. The

Group’s effective tax rate could fluctuate

over time and impact earnings, and

potentially share price.

• An outsourced internal audit function

provides risk assurance in targeted areas
of the business and recommendations for
improvement. The scope of these reviews
includes behaviour, culture and ethics.

• We will continue to ensure we stay
current with the latest legislation
and that we have the necessary
contemporaneous documentation for
compliance and tax purposes.

• The Group hires employees with relevant

skills and uses external advisers to keep up
to date with changes in regulations to remain
compliant.

• We will establish a health and safety
structure and responsibility matrix
to ensure the policies are adhered to
across the organisation.

A, D, E, F

• The Group establishes clear health and safety

policies and procedures.

STRATEGIC KEY

Develop a market-leading range of competitive
products

Target accounts where we can add value

Vertical penetration of focus accounts

Lead our industry on environmental matters

Build a global supply chain that
balances high efficiency with market-leading
customer responsiveness

Make selective acquisitions of complementary
businesses to expand our offering

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022MANAGING OUR RISKS CONTINUED

LINK TO

PILLAR

STRATEGIC

LINK TO

ASSESSED

TREND

KPI

A, D

• Preparation of robust business plans and

• For further acquisitions, we will ensure

cash projections with sensitivity analysis

we have robust integration plans and

and the help of professional advisers if

appropriate.

integrate learnings from post-acquisition

reviews of current integration projects.

• Post-acquisition reviews are performed to

extract “lessons learned”.

• The Group conducts performance

• We will continue to focus on

A, D, F

evaluations and reviews to stay close to its

people management and leadership

key personnel, along with annual employee

development, including the roll out of

engagement surveys. Where appropriate, the

performance management training and

Group makes use of financial retention tools

ongoing reviews of engagement surveys.

such as equity awards.

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

8 Strategic risk associated with valuing or

integrating new acquisitions

The Group may elect to make strategic
acquisitions. A degree of uncertainty exists
in valuation, particularly in evaluating
potential synergies.

Post-acquisition risks arise in the form
of change of control and integration
challenges. Any of these influence the
Group’s revenues, results of operations and
financial condition.

9 Loss of key personnel or failure to

attract new personnel

10 Exposure to exchange rate fluctuations

11 Risk associated with supply chain

The future success of the Group is
substantially dependent on the continuing
services and contributions of its Directors,
senior management and other key
personnel.

The Group deals in many currencies for
both its purchases and sales including US
dollars, euros and its reporting currency
pounds sterling. North America represents
an important geographic market for the
Group where virtually all the revenues are
denominated in US dollars. The Group also
sources components in US dollars and the
Chinese yuan.

The Group is dependent on retaining its
key suppliers and ensuring that deliveries
are on time and materials supplied are of
sufficient quality.

12 Climate-related risks

The Group is exposed to climate-related
risks that can have a negative impact on
the business.

The loss of key employees could have a
material adverse effect on the Group’s
business.

The Group has an exposure to foreign
currency fluctuations. This could lead to
material adverse movements in reported
earnings and cash flows.

• The Group reviews balance sheet and

• We will continue to regularly review our

A, C, D

cash flow currency exposures and, where

balance sheet and cash flow exposures

appropriate, uses forward exchange

contracts to hedge these exposures.

and take action to mitigate exposures as

appropriate.

• The Group does not hedge any translation

of its subsidiaries’ results to sterling for

reporting purposes.

As the proportion of our own-
manufactured products remain high, the
reliance on suppliers for third-party product
has been mitigated proportionally. There
has been a shift from a finished goods risk
to a raw materials risk, particularly where
components have a single source of supply.

Severe weather events could affect the
supply chain operations or suppliers.

Mandated power shutdowns in China could
result in reduced ability to meet demand.

Not meeting net zero targets could result in
reputational damage and reduced revenue.

• We have ongoing contacts of our key

• We will design new products with

A, B, C, D

suppliers and keep large amounts of safety

multiple sources of components where

inventory of key components, which we also

possible.

regularly review.

• We will continue to diversify and

• We dual source our components where

localise our supply chains.

possible to minimise dependency on any

single supplier.

• We will conduct a review of all

approaches to component management

following recent component shortages.

• We will develop outsourced resource

for various subassemblies and finished

goods as appropriate.

• We will conduct regular reviews to

ensure back-up power is available.

• We will set up working groups to ensure

the entire organisation is engaged to

meet the net zero targets.

• We conduct regular reviews of safety

• We will conduct a supply chain review.

inventories to ensure we have sufficient

stocks.

• We ensure resources are in place to

transfer production capability to switch

production sites.

• We implement relevant policies and KPIs to

ensure set targets are deliverable.

KPI KEY

A Revenue growth

E New product families released

B Revenue from Top 30 customers

F Employee engagement score

C Adjusted operating cash conversion

G Lifetime CO2 emission savings from products

D Adjusted diluted earnings per share growth

TREND KEY

No change to risk

Increase to risk

Decrease to risk

XP Power Annual Report & Accounts for the year ended 31 December 20228 Strategic risk associated with valuing or

integrating new acquisitions

The Group may elect to make strategic

Post-acquisition risks arise in the form

acquisitions. A degree of uncertainty exists

of change of control and integration

in valuation, particularly in evaluating

challenges. Any of these influence the

potential synergies.

Group’s revenues, results of operations and

financial condition.

9 Loss of key personnel or failure to

attract new personnel

The future success of the Group is

The loss of key employees could have a

substantially dependent on the continuing

material adverse effect on the Group’s

services and contributions of its Directors,

business.

senior management and other key

personnel.

10 Exposure to exchange rate fluctuations

The Group deals in many currencies for

The Group has an exposure to foreign

both its purchases and sales including US

currency fluctuations. This could lead to

dollars, euros and its reporting currency

material adverse movements in reported

pounds sterling. North America represents

earnings and cash flows.

an important geographic market for the

Group where virtually all the revenues are

denominated in US dollars. The Group also

sources components in US dollars and the

Chinese yuan.

11 Risk associated with supply chain

The Group is dependent on retaining its

As the proportion of our own-

key suppliers and ensuring that deliveries

manufactured products remain high, the

are on time and materials supplied are of

reliance on suppliers for third-party product

sufficient quality.

has been mitigated proportionally. There

has been a shift from a finished goods risk

to a raw materials risk, particularly where

components have a single source of supply.

12 Climate-related risks

The Group is exposed to climate-related

Severe weather events could affect the

risks that can have a negative impact on

supply chain operations or suppliers.

the business.

Mandated power shutdowns in China could

result in reduced ability to meet demand.

Not meeting net zero targets could result in

reputational damage and reduced revenue.

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2023

• Preparation of robust business plans and
cash projections with sensitivity analysis
and the help of professional advisers if
appropriate.

• Post-acquisition reviews are performed to

extract “lessons learned”.

• For further acquisitions, we will ensure
we have robust integration plans and
integrate learnings from post-acquisition
reviews of current integration projects.

LINK TO
STRATEGIC
PILLAR

LINK TO
KPI

ASSESSED
TREND

A, D

• The Group conducts performance

• We will continue to focus on

A, D, F

evaluations and reviews to stay close to its
key personnel, along with annual employee
engagement surveys. Where appropriate, the
Group makes use of financial retention tools
such as equity awards.

people management and leadership
development, including the roll out of
performance management training and
ongoing reviews of engagement surveys.

• The Group reviews balance sheet and

cash flow currency exposures and, where
appropriate, uses forward exchange
contracts to hedge these exposures.

• The Group does not hedge any translation
of its subsidiaries’ results to sterling for
reporting purposes.

• We will continue to regularly review our
balance sheet and cash flow exposures
and take action to mitigate exposures as
appropriate.

A, C, D

• We have ongoing contacts of our key

• We will design new products with

A, B, C, D

suppliers and keep large amounts of safety
inventory of key components, which we also
regularly review.

multiple sources of components where
possible.

• We will continue to diversify and

• We dual source our components where

localise our supply chains.

possible to minimise dependency on any
single supplier.

• We will conduct a review of all

approaches to component management
following recent component shortages.

• We will develop outsourced resource

for various subassemblies and finished
goods as appropriate.

• We conduct regular reviews of safety

• We will conduct a supply chain review.

inventories to ensure we have sufficient
stocks.

• We ensure resources are in place to

transfer production capability to switch
production sites.

• We implement relevant policies and KPIs to

ensure set targets are deliverable.

• We will conduct regular reviews to
ensure back-up power is available.

• We will set up working groups to ensure
the entire organisation is engaged to
meet the net zero targets.

STRATEGIC KEY

Develop a market-leading range of competitive
products

Target accounts where we can add value

Vertical penetration of focus accounts

Lead our industry on environmental matters

Build a global supply chain that
balances high efficiency with market-leading
customer responsiveness

Make selective acquisitions of complementary
businesses to expand our offering

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022MANAGING OUR RISKS
VIABILITY STATEMENT

The financial model was stress-tested with various
downside scenarios. The potential impact of the
principal risks was then considered in the context of
each of these downside scenarios. Certain subjective
assumptions and judgments were made to achieve
this. Given the cash generative nature of the business,
each risk scenario occurring in isolation did not breach
the Group’s theoretical borrowing facility headroom.
The most severe threats occurring in isolation were
found to be a prolonged closure of a manufacturing
facility, or a significant and permanent economic
collapse. A reverse-stress test was also performed,
modelling how long the business could withstand a
period without revenue, to demonstrate the impact
required to breach available headroom.

The unlikely event of more than one risk occurring at
the same time was also considered. A combination
of a temporary or permanent disruption at one of
our facilities, together with a serious and prolonged
economic shock, was considered. The potential impact
of this scenario did not put the Group in breach of its
theoretical borrowing capacity.

Based on this assessment, the Directors confirm that
they have a reasonable expectation that the Group
will continue in operation and meet its liabilities as
they fall due for at least a period of three years to
31 December 2025.

In accordance with provision
4.31 of the 2018 revision of
the UK Corporate Governance
Code, the Directors are required
to assess the prospects of the
Group over a period longer than
the 12 months required by the
'Going Concern' provision.
In making this assessment, the Directors considered
the Group’s current financial position, its recent and
historic financial performance and forecasts, strategy
and business model (pages 23–26), and the principal
risks and uncertainties (page 51).

The Directors have determined the three-year period
to December 2025 to be an appropriate period to
assess the Group’s viability, as this timeframe is within
the Group’s strategic financial planning period used
to evaluate performance and liquidity, and aligns with
the design-in cycle that the Group has visibility of. In
making the assessment, the Directors considered a
three-year financial model including the Group annual
plan for 2023 and strategic financial plan for the
following years.

The Group has a business model where its products
are designed into numerous applications, with
numerous customers, in numerous geographies.
The Group’s products are all designed into capital
equipment, which is generally in production for
several consecutive years, resulting in a revenue
annuity. This diversity and revenue annuity are both
deemed important factors in mitigating many of
the risks that could affect the long-term viability of
the Group.

In determining the viability term, the Board assessed
the conservative scenarios against the controls
in place to prevent or mitigate principal risks of
the Group.

It also considered them against the Group’s current
banking facilities, a revolving credit facility of US$255
million, with an accordion option of US$75 million,
maturing in June 2026 with an option of a further year
to June 2027.

In forming the viability statement, the Directors
carried out an assessment of the principal risks and
uncertainties facing the Group that could impact
the business. 2022 has seen continued impact of
COVID-19, which whilst short term in nature, have
increased uncertainty around supply chain capacity
and logistics. Particular focus has also been given
to the longer-term impact of climate change and
weather-related events, including manufacturing
downtime from natural events such as storms and
wildfire, and the potential economic impact on the
broader economy and our customers.

XP Power Annual Report & Accounts for the year ended 31 December 2022S
T
R
A
T
E
G

R
E
P
O
R
T

XP Power Annual Report & Accounts for the year ended 31 December 2022

SECTION 172(1) STATEMENT:
HOW WE ENGAGE WITH OUR STAKEHOLDERS

Section 172(1) Engaging
with our stakeholders
is fundamental, so we
focus on what matters
Section 172 requires the directors
of a company to act in the way they
consider, in good faith, would be most
likely to promote the success of the
company for the benefit of its members
as a whole and, in doing so, consider:

a. the likely consequences of any

decision in the long term;

b. the interests of the company’s

employees;

c. the need to foster the company’s

business relationships with suppliers,
customers and others;

d. the impact of the company’s

operations on the community and
the environment;

e. the desirability of the company

maintaining a reputation for high
standards of business conduct; and

f. the need to act fairly between
members of the company.

In the process of making key decisions,
the Board and management consider
all stakeholders that are likely to be
impacted.

We have a Code of Conduct that all our
employees and key suppliers sign up
to, which covers our expectations from
those stakeholders on business ethics,
responsible environmental behaviour,
health and safety, and treatment
of people.

Our people

Customers

WHY WE ENGAGE
Our workforce is our most valuable asset,
and their health, safety and wellbeing
are of paramount importance. Having
engaged teams is important to us and we
want our colleagues to be committed to
our vision.

HOW WE ENGAGE
We believe communication is best
from line managers to teams – while
we have regular town halls with senior
management, we work to ensure
messages are cascaded and discussed.
We track our performance with
all-staff surveys and our designated
Non-Executive Director holds several
engagement sessions to gain a view from
the workforce.

The Audit Committee receives updates
on any whistleblowing matters.

KEY TOPICS DISCUSSED
• Diversity at XP Power.

• Health and safety.

• Diversity in engineering.

• Business performance.

• Results from annual Groupwide

engagement survey.

• Relocation of Singapore Head Office.

HOW WE RESPONDED
• Enhanced retention and succession

planning.

• Cascaded the engagement survey
results – we know our colleagues
are happy working at XP Power and
would recommend it as a great place
to work.

• Relocated the Singapore Head Office
based on employees’ needs: the new
office provides a shorter commute
time and better collaboration among
teams in a single location.

WHY WE ENGAGE
Consideration of customer requirements
is a top priority during the new product
development.

Customer needs play a central role in shaping
the design and development process,
enabling our customers to deliver power
products and solutions to enhance their
businesses’ sustainability, while delivering
economic value to all parties in the value
chain.

HOW WE ENGAGE
We focus on two-way engagement to ensure
we have effective partnerships in place and
listen to their technology roadmaps so we
can partner them effectively.

Our sales teams frequently engage with
our focus customers to understand our
performance and their issues.

We use anonymous customer surveys to
further understand our performance.

KEY TOPICS DISCUSSED
• Strategy decision for new factory in

Malaysia.

• Solving power problems and embedding

our power solutions into customer
processes.

• Clear engagement on delivery timing and
how deliveries can be expedited during
the supply chain challenges.

HOW WE RESPONDED
• The Board considered the proximity to
customers as a factor in assessing the
new manufacturing location.

• Working with customers to get the most

effective solution.

•

Increasing development spend.

• Product and technology roadmaps based

on customers’ feedback.

• Tactical used of air freight to improve

delivery time to customers.

FOR MORE INFORMATION SEE
ESG SOCIAL SECTION ON PAGES 70–77

FOR MORE INFORMATION SEE
ESG ENVIRONMENT SECTION ON PAGES 64–69

FOR MORE INFORMATION SEE EMPLOYEE
ENGAGEMENT METRICS ON PAGE 72

FOR MORE INFORMATION SEE PERFORMANCE:
OPERATIONAL REVIEW ON PAGES 36–41

XP Power Annual Report & Accounts for the year ended 31 December 2022

Suppliers

WHY WE ENGAGE
Our suppliers are critical to our
supply chain, and we work in
partnership with them to increase
the strength of the supplier base.

We are committed to maintaining
high standards among our suppliers
to reduce operational risks and
foster long-term partnership
success.

HOW WE ENGAGE
We have ongoing contacts with
our key suppliers to monitor
performance and understand their
concerns.

We conduct supplier audits to
ensure adherence to our standards.

We collaborate with our crucial
suppliers to mitigate supply
shortages caused by the global
challenges.

KEY TOPICS DISCUSSED
• XP Power Code of Conduct.

• Supplier performance.

• Component shortages and
mitigation and expediting.

• Updated supply chain policy.

HOW WE RESPONDED
• Consolidated our supplier base
focusing on quality provision
to give greater confidence in
delivery.

• Used our supplier and customer
networks to address component
shortages.

• Worked with distributors to

secure long-term demand for
key components.

FOR MORE INFORMATION SEE
ESG ENVIRONMENT SECTION
ON PAGES 64–69

Communities and our
environment

WHY WE ENGAGE
We engage with the communities we
operate in to build trust and understand
their important local issues.

Minimising the impact we have on the
environment is a priority as we work
towards our public near-term and long-
term targets registered with the SBTi.

HOW WE ENGAGE
Key areas of focus include how we
can support local causes and issues,
create opportunities to recruit and
develop local people, and help to look
after the environment. The impact of
environmental decisions, both locally and
nationally, is considered, with such issues
as waste management being addressed
wherever possible.

We implement measures to minimise our
environmental impact. Our commitment
to sustainability is long standing and is
detailed in the sustainability report.

KEY TOPICS DISCUSSED
• Strategy decision for new factory in

Malaysia.

• Understanding which local charities
can be supported by our employees
to have the biggest impact.

• Sharing XP Power’s sustainability

strategy.

HOW WE RESPONDED
• The Board considered several

environmental factors as part the
new manufacturing location analysis:
manufacturing sector emphasis, legal
and regulatory systems, physical
infrastructure quality, sustainability
support, geopolitical risks and supply
chain flexibility.

•

Introduction of a biodiversity
policy to identify our approach and
commitments.

• Our people supported their local
communities with charitable
and fundraising initiatives across
the Group.

Shareholders

WHY WE ENGAGE
Engagement with Shareholders and receiving
their support is key to achieving our ambitions.

We are committed to transparent
engagement with Shareholders to ensure
clear understanding of how the Company
performs in all areas, from strategic and
financial performance to environmental, social
and governance.

HOW WE ENGAGE
We engage with Shareholders throughout the
year and are transparent in all areas of the
business.

Our CEO, CFO and IR team have regular
sessions with current and prospective
investors to ensure they understand our
investment proposition, ESG performance and
current performance.

Our Chair and Remuneration Committee
Chair have had discussions with our key
Shareholders regarding executive remuneration
to ensure we can consider their views.

KEY TOPICS DISCUSSED
•

Impact of prevailing market conditions on
the Group.

• Strategic rationale for FuG and Guth

acquisition and its integration.

• Executive remuneration.

• ESG priorities and strategy.

HOW WE RESPONDED
• Due diligence completed for the FuG and

Guth acquisition.

• Engagement to explain our approach
to sustainability to address their ESG
requirements.

• Engagement with top Shareholders on

retaining the existing Remuneration Policy.

FOR MORE INFORMATION SEE
ESG GOVERNANCE ON PAGES 78–79

FOR MORE INFORMATION SEE
KEY PERFORMANCE INDICATORS
ON PAGES 42–45

FOR MORE INFORMATION SEE
ESG ENVIRONMENT SECTION
ON PAGES 64–69

FOR MORE INFORMATION SEE CORPORATE
GOVERNANCE REPORT ON PAGES 96–106

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY STRATEGY
1. SUSTAINABLE PRODUCTS

We have embedded sustainability, specifically carbon
reduction, reduction via efficiency and component
count, into our New Product Introduction (NPI)
processes and will be setting internal targets in
this area this year. Such innovation is by its nature
commercially sensitive and so we will not be
disclosing these specific targets externally, however
they will form a key part of our SBTi commitment to
achieving net zero emissions across the value chain
by 2040.

Estimated lifetime savings
from XP Green Power
products
One of our biggest contributors to reduction in CO2
emissions is from adoption of our XP Green Power
products, which have high efficiency and low standby
power. The CO2 emission savings from these products
consistently exceed our scope 1 and 2 CO2 emissions
combined. XP Green Power products consume less
electricity than the average power converter both
while powering the load and when on standby
and not powering the customers’ applications. A
power converter operating at 90% efficiency wastes
less than half of a power supply operating at 80%
efficiency. Consequently, the savings in energy
and, therefore, CO2 emissions of the lifetime of the
product are very compelling.

To achieve these efficiency gains requires more higher
cost components and complex circuits, but the return
on investment of a higher efficiency product can
be captured in consumption of electricity with full
payback on electricity costs usually within the first
year of use. Therefore, we continue to promote and
encourage the use of these high-efficiency products
and anticipate that the trend for higher efficiency
products will continue in the electronics industry.
These legislative requirements are projected to extend
across various industries from consumer equipment to
the healthcare and industrial markets we serve.

We introduced 8 XP Green Power product families
in 2022. The estimated lifetime savings1 from the XP
Green Power products that we have shipped during
2022 is 134,000 tonnes CO2.

In estimating these savings, we have assumed the following:
• XP Green Power product efficiency of 90% versus average

power converter efficiency of 80%.

• The power converter will run for eight hours a day, five days
a week, 50 weeks a year, for seven years, in the customers’
equipment.

• The customer will run the power converter at 75% of its rated

power; and

• 1kWh of electricity produces 0.418kg of CO2.

Boosting innovation
Our ambition is to be an industry leader on
sustainability – this also includes our products. We
were the first to introduce greener, safer converters
and we believe that we have the broadest product
portfolio in our industry. Product design is our
customers’ top material impact and scored even
higher than customer experience and satisfaction. Our
R&D investment is a key part of the Group’s strategy,
with particular focus on energy efficiency and
delivering to our clients’ needs in RF, High Voltage,
Low Voltage and Low Power.

This year, we undertook a full lifecycle analysis of our
products. This has enabled us to better understand
our carbon footprint and start to look at ways to
reduce our embedded emissions in purchased
goods and use phase emissions, which are the two
biggest sources of our scope 3 emissions. To have a
sustainable business, we need to be more deliberate
in developing low carbon products and solutions that
solve our customers’ power problems, within the
balance of cost and efficiency. Our engineers bring
ideas, skills and innovation to reducing energy usage
for our customers, and we integrate sustainability
into our product design as new materials and
components become available. We consider and
respond to environmental issues throughout every
stage of our product lifecycle, and our high-efficiency
products play a role in helping the economy move to
a low-carbon future. Our new product design process
considers:

• Energy efficiency – We have consistently led the
industry in developing high-efficiency XP Green
Power products, in the industrial and medical
sectors, which consume and therefore use less
electricity in both powering the application or
on standby. This results in significantly reduced
CO2 emissions over the lifetime of the customers’
equipment, which is often seven to ten years.

• Novel materials – Wherever possible, we introduce
novel materials into our higher-end products, like
ultra-efficient silicon carbide devices. We have
also used new semiconductor components for the
control of our power supplies, which allow soft
switching to reach very high-efficiency rates and
low standby power ratings. Future developments
in power transistor technology are expected to
allow significant reduction in the size of power
converters and increase their efficiency in some
applications. We use over 4,000 key materials
and components within our products such as
Power FET, IGBT and ceramic capacitors which
enable us to produce durable and quality products
and will investigate opportunities to reduce
component count.

How this strategic pillar
links to the UN SDGs

This aligns with UN SDG
9 “Industry, innovation
and infrastructure” in
promoting sustainable
industrialisation, and UN
SDG 12 “Responsible
consumption and
production” in the
efficient use of natural
resources.

XP Power Annual Report & Accounts for the year ended 31 December 2022• Product lifecycle management – Our design

processes consider the complete product lifecycle
of our power conversion products from the
outset, and we aim to always extend the useful
product life where possible. The characteristics
of a product that make it more energy efficient
also increases its reliability and useful lifetime
– highly efficient products run cooler, which
increases the lifetime of key components that are
sensitive to heat, such as electrolytic capacitors.
Efficient products also avoid the need for an
electromechanical fan to exhaust the waste heat
– one of the most unreliable components of a
traditional power conversion system.

• Hazardous substances – We avoid the use of

hazardous substances in our products, facilitating
their recycling at the end of their lifetime and
reducing their impact on the environment.

• Low-carbon manufacturing – As well as designing
our products so they are highly efficient, we also
consider the manufacturing process. Traditionally,
products undergo testing (burn-in) after
manufacture to eliminate early failures by running
them under stress. When we burn-in our products,
we recycle the power in the manufacturing facility
to significantly reduce our carbon footprint. Burn-
in cycles are monitored and reduced based on the
defect data, further reducing CO2 emissions.
• Product safety – A power converter is a safety

critical part of any electrical system or application
as it provides the isolation barrier between the
end-user and the potentially lethal high voltage
mains electricity. An example of this is a main
powered drug delivery system which connects
directly to a patient and relies on the safety
isolation within our power supply to keep the
patient safe. All of our products come under the
remit of our ISO 9001 registration.

Responsible sourcing and
supply chain
It is important that our suppliers apply the same
principles of value, transparency and respect as
we do. We require all suppliers to adhere to our
Code of Conduct and our Supply Chain Policy,
which covers diversity, modern slavery and human
trafficking, health and safety, business integrity and
ethics, environment and sustainability. Our supplier
qualification and ongoing audit programme reviews
supplier compliance with our Code of Conduct
and Supply Chain Policy, and we will disengage
with suppliers who do not meet these standards.
XP Power’s Code of Conduct and Supply Chain
Policy are available at corporate.xppower.com/
sustainability/environment. In addition, we will expand
our engagement with suppliers and component
distributors in managing our upstream emissions as
part of our net zero plan.

Conflict minerals
We support initiatives and regulations to avoid the
use of any “conflict minerals”, which originate from
mining operations in the Democratic Republic of the
Congo (DRC) and adjoining countries. These involve
tantalum, tin, tungsten and gold. We only purchase
our electronic components from reputable sources,
and purchases of materials such as solder are only
purchased from vendors who are on the Conformant
Smelter & Refiner Lists. We also obtain information
from our suppliers concerning the origin of the metals
used in the manufacture of our products. This way, we
can assure our stakeholders that we are not knowingly
using conflict minerals in our products. Our supply
chain organisation is responsible for the qualification
and ongoing monitoring of our suppliers. We can
confirm that 100% of our products’ minerals come
from suppliers that have been verified as conflict-free.
XP Power’s policy on conflict minerals is set out at
xppower.com/company/policies.

READ MORE ABOUT OUR
BUSINESS STRATEGY ON
PAGES 28–29

READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGES 33–34

In 2022, XP Power were honoured with the 2022
Supplier Excellence Award by Lam Research.
XP Power was one of 13 receivers of an award this year, for
demonstrated success across four categories: Scaling, Resiliency,
Rapid Prototype Materials Performance, and Environmental, Social
and Governance. We were the sole recipient of Lam Research’s first
Environmental, Social and Governance Award and recognised as
an “extension of Lam’s guiding principle to act with purpose for a
better world”, and “excellence in commitment to strong ESG goals
and proactive aligning with Lam on these priorities”. Lam Research
is a valued customer and a leading global supplier of innovative
wafer fabrication equipment and services to the semiconductor
industry. Like us, they are strong advocates of sustainability and
have enhanced their products and manufacturing operations to help
combat climate change.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY STRATEGY
2. ENVIRONMENTAL LEADERSHIP

XP Power recognises the significance of climate
change, and we aim to reduce our climate impact
across all our operations through managing and
reducing our carbon emissions. In 2021, we
announced our ambition for net zero. Having signed
the letter of commitment with The Science Based
Targets initiative (SBTi) in 2022, we intend to submit
targets for verification in the first half of 2023. This
will reaffirm our long-term target of net zero across
our value chain by 2040 and introduce interim targets
for 2030 which we will publish once validated. Further
details of our pathway to net zero will be included in
our transition plan, which aim to develop following
our target validation.

Our commitment to transparency includes the
regular public disclosure of our carbon emissions,
collaboration with CDP Climate Change, and reporting
against the TCFD recommendations (page 80), which
includes details of our oversight, risk assessment and
strategy of climate-related issues.

Managing environmental
performance
The Group has a comprehensive environmental policy,
as well as an internationally accredited Environmental
Management System (ISO 14001) at seven (58%)
of our 12 sites, which include our main production
centres and accounts for around 84% of the Group’s
employees. The change in coverage of our ISO 14001
certification is due to the closure of our Jackson, CA
site as well as our design centre in Southern California
not supporting certification due to the nature of the
site having a low environmental impact. Amongst
other issues, our ISO 14001 certified management
system includes our handling of waste and hazardous
materials. Compliance is ensured through our internal
audit process together with external assessments by
our registrar, British Standards Institution (BSI). The
Group has not had any environmental fines in the last
12 months (2021: nil).

We will strive to improve our environmental
performance by:

• As a minimum, complying with all relevant

environmental legislation and regulations as they
relate to each location and community we operate.

• Employing best practices to maximise the efficient
use of resources to minimise waste and prevent
pollution.

• Minimising the impact we and our products have

on the environment.

• Focusing on promoting an environment of

continuous improvement and risk mitigation
through identifying objectives and setting
measurable goals.

• Considering and responding to environmental

issues through all phases of our product lifecycle.

• Communicating our environmental policy and

objectives to our suppliers and employees, and
encourage their participation in environmental
best practices. Our environmental policy is
available at corporate.xppower.com/sustainability/
environment.

Energy and greenhouse gas
emissions
We measure our CO2 emissions in accordance with
the internationally recognised Greenhouse Gas
(GHG) Protocol and our metrics include scope 1, 2
and now scope 3 emissions. We have made minor
revisions to our previously reported emissions and
energy use figures and allocation and have revised
certain preliminary grid and emissions factors. All of
our scope 1, scope 2 and scope 3 (Purchased good
and services, Fuel- and energy-related activities,
Upstream Transportation and distribution, Business
travel, Employee commuting and Use of sold
products) Greenhouse Gas (GHG) Emissions have
been verified in accordance with requirements of
'Limited Assurance' procedures by Intertek Assuris for
the fiscal year 2022. The verification was performed
in accordance with the International Standard on
Assurance Engagements (ISAE) 3410.

The table below outlines our emissions and energy
usage across the whole Group accounting for all
XP Power sites. The figures include full year data
for both FuG and Guth sites that were acquired on
31st January 2022, which will enable a year-on-year
comparison for 2023 and future years.

Absolute scope 1 and 2 emissions increased 9% and
absolute energy consumption increased 13%, in part
due to the purchase of FuG and Guth. Excluding
both FuG and Guth sites, our absolute scope 1
and 2 emissions increased 6% and absolute energy
consumption increased 7% due to an increase in
output from our manufacturing sites across the
Group, more employees returning to office spaces to
work following the lifting of remaining restrictions on
COVID-19 and ongoing growth in headcount.

Both emissions and energy intensity are reported
as tonnes CO2e/£m revenue and kWh/£m revenue.
Our overall emissions intensity increased 9% this year.
Our energy intensity has decreased 6% this year on
the back of general energy efficiency measures and
the incorporation of more efficient sites. While no
new projects and improvements were implemented
in the 2022 financial year, XP Power continues to
identify opportunities for energy improvement.

How this strategic pillar
links to the UN SDGs

Taking urgent action to
combat climate change
aligns with UN SDG 13
“Climate action”.

XP Power Annual Report & Accounts for the year ended 31 December 2022Emissions and energy

FY22

Global

FY21

Global

FY20

Global

(excl UK) Group Total

Intensity measure

Group turnover £m

–

290.4

–

240.3

–

233.3

Total Scope 1 (tCO2e)
Scope 2 location based
(tCO2e)
Scope 2 purchased heat
and steam (tCO2e)
Total Scope 2 (tCO2e)
Total scope 1 + 2 (tCO2e)
Upstream Scope 3 (tCO2e)
Downstream Scope 3 (tCO2e)
Total scope 3 (tCO2e)
Total scope 1, 2 & 3 (tCO2e)
Scope 1 + 2 GHG Emissions
Intensity ratio (per Group
turnover) £m

Total renewable fuels
consumption (kWh)
Diesel

Gas

Propane

Total non-renewable fuels
consumption (kWh)

Total fuels consumption
(kWh)
Consumption of purchased
or acquired electricity
renewable

Consumption of
self-generated non-fuel
renewable energy (solar)

Consumption of purchased
or acquired electricity
non-renewable

Total electricity
consumption (kWh)

Consumption of purchased
or acquired heating

Total renewable energy
consumption (kWh)

Total non-renewable energy
consumption (kWh)

Total energy consumption
(kWh)
% renewable electricity
from total electricity

% grid electricity from
total electricity

Energy Intensity ratio
(per Group turnover) £m

25.7

314.5

340.2

1.9

210.4

212.3

2.1

186.5

188.6

GHG Emissions (tCO2e)

26.4

6,442.3

6,468.8

28.7

6,001.2

6,029.9

28.8

5,908.9

5,937.8

–

26.4

52.2
–

–

12.3

6,454.7

6,481.1

6,769.1

6,821.3
– 178,929.9

– 496,038.2

– 674,968.1

– 681,789.4

–

23.5

–

28.7

30.6
–

18.1

6,019.3

6,229.7
–

–

18.1

6,048.0

6,260.3
505.1

–

505.1

6,765.4

21.6

Energy consumption (kWh)

–
117,962

–
–

–
155,906

–

28.8

31.0
–

–

–
–

5.4

5,914.3

6,100.8
–

–

5.4

5,943.1

6,131.7
569.0

–

569.0

6,700.8

–

26.3

–
35,401

142,066 1,135,890 1,277,956

10,672

511,866

522,538

11,710

589,214

600,924

–

376,693

–

374,741

–

374,741

142,066 1,630,545 1,772,612

10,672 1,042,513 1,053,185

11,710

999,356 1,011,066

142,066 1,630,545 1,772,612

10,672 1,042,513 1,053,185

11,710

999,356 1,011,066

–

125,669

–

30,116

34,009

64,125

23,506

37,266

60,772

3,347

39,604

42,951

136,657 11,537,308 11,673,965

135,191 10,749,647 10,884,838

123,725 10,668,213 10,791,938

166,773 11,696,986 11,863,759

158,697 10,786,913 10,945,610

127,072 10,707,817 10,834,889

–

72,266

–

106,030

–

31,221

30,116

159,678

189,794

23,506

37,266

60,772

3,347

39,604

42,951

278,723 13,240,119 13,518,842

145,863 11,898,190 12,044,053

135,435 11,698,790 11,834,225

308,839 13,399,797 13,708,636

169,369 11,935,456 12,104,825

138,782 11,738,394 11,877,176

18%

82%

15%

99%

98%

85%

100%

99%

97%

100%

–

47,206

–

50,374

–

50,909

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR SUSTAINABILITY STRATEGY
2. ENVIRONMENTAL LEADERSHIP CONTINUED

Scope 3 emissions
This year we conducted our first full assessment of our value chain emissions. This evaluation confirmed that
our value chain emissions are many times greater than our operational carbon footprint, with our largest scope
3 category being emissions associated with the use phase of our products, followed by embedded carbon in our
purchased goods with transportation-related emissions being a distant third. The data has helped us identify our
carbon hotspots and we are developing an internal decarbonisation roadmap and scope 3 targets aligned to SBTi
criteria to manage our value chain emissions going forward.

• Use of sold products (73% of scope 3) – For our most material category, the energy “used” by our products

relates to the electrical energy lost by our power units through e.g., heat or noise as defined by their
efficiency profile. We have calculated the lifetime energy waste for our key product ranges, taking into
account sales volume, average power in range, efficiency profile and hours in use. International Energy
Agency (IEA) 2022 emissions factors for our key sales regions were then applied to this data to calculate
emissions across the assumed lifetime of the products.

• Purchased goods and services (25% of scope 3) – We used component level purchase data, by quantity and/
or weight, to map our component categories and then applied lifecycle assessment based emissions factors
for representative components. Spend-based analysis was used for less than 5% of the category’s emissions,
where representative products could not be identified.

• Upstream transportation and distribution (1% of scope 3) – All inbound, intragroup and outbound logistics
under the Group’s control were mapped against mode, weight and transportation distance to calculate
emissions based on Department for Environment Food and Rural Affairs (DEFRA) weight.distance factors.
It is not always possible to distinguish outbound transportation paid for by the Group or by customers, so
categories 4 and 9 should be considered in aggregate.

Category

1. Purchased goods and services

2. Capital goods

Status

Relevant, calculated

Not relevant, immaterial

3. Fuel-and-energy-related activities (not included in Scope 1 or 2) Relevant, calculated

FY22 tCO2e
167,275

n/a

2,190

6,254

n/a

517

2,694

n/a

178,930

n/a

Relevant, calculated

Not relevant, immaterial

Relevant, calculated

Not relevant, not applicable

Not relevant, immaterial

Relevant, calculated

496,038

Not relevant, immaterial

Not relevant, not applicable

n/a

496,038

674,968

4. Upstream transportation and distribution

5. Waste generated in operations

6. Business travel

7. Employee commuting

8. Upstream leased assets

Total Upstream Scope 3
9. Downstream transportation and distribution

10. Processing of sold products

11. Use of sold products

12. End-of-life treatment of sold products

13. Downstream leased assets

14. Franchises

15. Investments

Total Downstream Scope 3

Total Scope 3

XP Power Annual Report & Accounts for the year ended 31 December 2022Water
We have a low water intensity in operations, and water is not used in the design, manufacture or services
of our products. However, in recognition of water being a finite resource, we consider water management
throughout Group activities, and we try to limit water use and employ best practices to reduce its usage in all
our facilities. This includes rainwater capture and reuse in our Vietnam facility, installing water-saving appliances
and deployment of reduced flush toilets in our facilities. Our water withdrawal is tracked and monitored as one
of our key environmental metrics across the business. Although water is not a material issue to XP Power, we
undertook a water risk assessment using the WRI Aqueduct Tool to understand which sites may be at risk of
water stress2. Only our design centre in Southern California is located in an area of extremely high-water stress,
but this site’s activities exclusively pertain to R&D and therefore has minimal water requirements and other
environmental impacts.

Our water policy is to:

• Employ best practices to maximise the efficient use of water and minimise pollution and waste;

• Regularly review and report on the water use of our facilities and activities;

• Commit to continuous improvement in responsible water management through identifying objectives and

setting measurable goals;

•

Involve and educate employees, contractors and customers in our water use programmes;

• Engage with suppliers to encourage their participation in responsible water management best practices; and

• Disengage with any suppliers who may be found to be negligent or non-compliant with responsible water

management and who do not aggressively implement corrective actions. Our water policy is also available at
xppower.com/company/policies.

2 Assessed using the World Resources Institute's (WRI) Aqueduct Water Risk Atlas tool. Areas of extremely high-water stress, according to

the WRI definition, are areas where human demand for water exceeds 80% of resources

Freshwater withdrawal (m3)

Germany

China

USA

Vietnam

Singapore

Global (excl UK)

Group Total
Water Intensity ratio (per Group turnover) £m

Water Intensity ratio (per employee)

FY22

1,024.9

2,268.7

12,785.4

6,529.4

35,887.0

2,084.7

59,555.2

60,580.1

208.6

23.4

FY21

544.5

46.0

9,615.0

5,427.3

37,430.0

–

52,518.3

53,062.8
220.8

23.8

FY20

568.3

46.7

10,930.0

5,743.3

26,141.0

–

42,861.0

43,429.3
186.2

20.6

The table above outlines freshwater withdrawal from all XP Power sites. The figures include full year data for
both FuG and Guth sites that were acquired on 31st January 2022, which will enable a year-on-year comparison
for 2023 and future years.

We aim to reduce our water withdrawal per employee over time, and this year overall freshwater withdrawal per
employee decreased 2%. Absolute freshwater withdrawal increased 14% in 2022. This was in part due to the
Group acquiring two new sites in Germany, Guth and FuG, the first year of reporting of water withdrawal at our
Singapore site and the return to normal production processes in our Chinese sites post COVID-19. Excluding
Guth, FuG and Singapore sites, absolute water consumption increased 7% due to an increase in output from our
manufacturing sites and ongoing growth in headcount.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR SUSTAINABILITY STRATEGY
2. ENVIRONMENTAL LEADERSHIP CONTINUED

Waste management
Our manufacturing processes produce relatively little waste, but we are committed to reducing both non-
hazardous and hazardous waste where possible across all of our operations. One major source of waste is the
excess solder from the wave solder machines, so-called “solder dross”. This is recycled into new solder and
reused by our operations. In 2022, we sent 12.3 tonnes of solder dross for recycling and received back 8.9
tonnes of recycled solder, which is a 72% recovery rate. We use certain chemicals to clean flux from printed
circuit boards, which is cleaned using activated carbon. We dispose of these chemicals and the containers they
are delivered in through a certified, licensed professional third party who safely disposes of these. In 2022 we
had zero reportable spills. Our paper, other packaging and e-waste is collected by recycling providers. The Group
recycled 417 tonnes (2021: 315 tonnes) of paper and packaging during the year.

The tables below outline waste generation and treatment from our sites in China and Vietnam, which account for
72% of the Groups employees.

Waste generation (tonnes)

Hazardous waste

Non-hazardous waste

Total waste
Hazardous waste intensity ratio (per Group
turnover) £m

Waste treatment/disposal (tonnes)

Hazardous waste recycled

Hazardous waste incinerated

Hazardous waste sent to landfill

Non-hazardous waste recycled

Non-hazardous waste incinerated

Non-hazardous waste sent to landfill

Solder sent for internal recycling

Recycled waste (solder) received and used

Internal rate of recovery of solder (%)

Solder dross disposed*

Total waste recycled

Total waste incinerated

Total waste sent to landfill

Total waste non-recycled
Total waste

*transferred to treatment contractor for recycling

FY22

7.0

150.9

157.9

0.02

FY22

–

7.0

–

90.4

–

60.5

12.3

8.9

72%

1.9

90.4

7.0

60.5

67.5

157.9

FY21

7.4

150.8

158.2

FY20

1.9

161.5

163.4

FY19

5.1

99.2

104.2

0.03

0.01

0.52

FY21

–

7.4

–
108.8

–

42.0

8.8

4.7

53%

1.6

108.8

7.4

42.0

49.4

158.2

FY20

–

1.9

–
123.1

–

38.4

9.2

5.6

61%

2.8

123.1

1.9

38.4

40.4

163.4

FY19

–

5.1

–
87.8

–

11.4

6.1

2.5

41%

1.3

87.8

5.1

11.4

16.5

104.2

Total Group paper and packaging recycled
(tonnes)

FY22

FY21

FY20

FY19

416.7

314.7

300.9

269.4

Biodiversity
We understand the importance the natural environment plays in preserving biodiversity and wherever possible
we are committed to protecting the environment. XP Power is committed to protecting biodiversity and
minimising the potential negative impact that our business may have on the natural environment. We recognise
that climate change, deforestation, land degradation and water pollution each pose a severe threat to the
sustainability of important ecosystems, and that business and industry sometimes contribute to these negative
effects. Our biodiversity policy is also available at corporate.xppower.com/sustainability/environment.

XP Power Annual Report & Accounts for the year ended 31 December 2022S
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XP Power Annual Report & Accounts for the year ended 31 December 2022

OUR SUSTAINABILITY STRATEGY
3. PEOPLE AND WORKPLACE

At XP Power, health and safety is of paramount importance to us as a responsible employer. We strive to
safeguard the health, safety and wellbeing of all our people (including contractors), whether working on site or
working from home. Our health and safety programme is driven from the top, with the Board having ultimate
responsibility. Health and safety is managed locally but coordinated globally, benefitting from shared experience.
Our corporate health and safety framework below defines those responsible and accountable for health and
safety at each of our key sites. The procedure also defines the minimum standards required at each key site,
which can be summarised as follows:

• Risk assessments based on the activities performed at each site, which are reviewed and updated annually;

• An annual internal audit of the health and safety processes at each site to ensure they are in line with the

corporate procedure;

• Health and safety metrics are recorded covering incidents and near misses, and these are reported and

analysed. The Board reviews these metrics at each Board meeting;

• Metrics relating to walkthrough safety audits, fire drills and update of risk assessments are recorded and

monitored; and

• Consideration is given at each site to ergonomics, laboratory and electrical safety, legal requirements, use of

chemicals, use of equipment and tools, facility preparedness and evacuation, and slips, trips and falls.

We are committed to maintain a healthy and safe working environment to minimise the number of occupational
accidents, diseases and illnesses, and ultimately achieve an accident-free workplace. We encourage our people
to look out for each other to keep us all safe. We have enhanced health and safety through improved product
racking, use of health and safety consultants, advisers and auditors. XP Power’s Health and Safety Policy is
available on our website at xppower.com/company/policies.

Board
of Directors
Reviews
health and safety
performance

CEO
Responsible for
health and safety
programme at XP Power

Site leaders across 17 diﬀerent sites
Responsible for health and safety at the
site and that appropriate resources are available

Site health and safety representatives
Responsible for day-to-day health and
safety programme through a cross-functional team

We provide all our employees with health and safety training appropriate to their role. The number of employees
trained on health and safety standards within 2022 are:

Europe

Asia

Global

FY22

268

2,030

232

2,530

FY21

1,444

237

1,763

How this strategic pillar
links to the UN SDGs

This aligns with UN
SDG 3 “Good health and
wellbeing”, 5 “Gender
equality”, 8 “Decent
work and economic
growth”, and 10
“Reduced inequalities”.

XP Power Annual Report & Accounts for the year ended 31 December 2022Safety performance
We report all health and safety incidents, including near misses, whether they resulted in lost time, and
we actively encourage the reporting of near misses so we can learn from these events. Our incident rate is
calculated as the total number of incidents divided by the average number of employees expressed as incidents
per 1,000 employees. Our target is to have an incident rate of zero.

In 2022, we had 13 health and safety incidents (2021: 19), including one near misses (2021: 4). Of these, nine
incidents (2021: 9) resulted in lost time, with a total lost time of 48 days (2021: 119 days) resulting in a reduction
in our Lost-time Incident Rate (LTIR)1 to 0.31 (2021: 0.76). Zero incidents resulted in death of any employees or
contractors in 2022 (2021: zero). We continue to review all accidents and near misses to ensure we learn from
them and make improvements to keep all employees safe from harm or injury. The figures in the table below
cover 100% employees and contractors.

Health and safety incidents

Asia

Europe

Global
Average number of permanent
employees

Incident rate per 1,000
employees
LTIR1

FY22

FY21

FY20

FY19

FY18

2,590

2,229

2,108

1,859

1,972

5.02

0.31

8.5

0.76

10.4

0.87

11.3

0.57

8.6

–

1 Lost-time Incident Rate (LTIR) is defined as total number of lost time incidents in a year, divided by the total number of hours worked,
multiplied by 200,000. We define a lost time incident as an incident that occur when a worker sustains a lost time injury that results in
time off from work, or loss of productive work.

Returning to normal post-COVID-19 (2022)
Throughout the year, COVID-19 restrictions have eased and we have returned to more normal working
practices. However, we have continued to monitor the ongoing situation across all our global sites. We have
adapted our business based on learnings from the pandemic to continue with hybrid working in certain locations.
Where relevant, we have considered the recommendations of local authorities where we operate. At our China
sites, the zero-COVID policy presented operational challenges and we worked very closely with local authorities
to ensure that operational disruption was kept to an absolute minimum.

Health and wellbeing
We encourage our employees to have active lifestyles and we provide facilities and programmes designed to
improve their wellbeing. These include the provision of sports facilities (e.g., basketball courts, football pitches
and shower facilities at sites) and the facilitation of group events (e.g., softball leagues, yoga sessions and five-
a-side football leagues). In keeping with our focus to create an environment where people can be their best and
our commitment to improve the mental wellness of our teams, we gave an additional “Wellness”day off for all
employees at a time convenient for each location through the year.

We also operate a comprehensive Employee Assistance Programme (EAP), which provides a complete support
network that offers confidential expert advice and compassionate guidance 24/7, online and by phone, in the
relevant language, covering a wide range of issues and resources for our employees and their families.

Our people
We look after our employees, support their training and development, recognise cultural differences, respect
their human rights and promote a fair working environment with equal opportunities for all. As a global business,
we capitalise on our cultural differences and strive to make XP Power a fulfilling place to work.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022
OUR SUSTAINABILITY STRATEGY
3. PEOPLE AND WORKPLACE CONTINUED

Engagement
Our vision is to deliver the ultimate experience for our stakeholders. Through workforce engagement, the views
of our employees are heard at Board level and are considered in Board discussions and decision making. Pauline
Lafferty is the designated Non-Executive Director responsible for workforce engagement and, as a former Chief
People Officer, is passionate about employee engagement.

We use several methods to engage with our people but derive high value from our Gallup engagement survey,
which was first conducted in 2020 and is used to drive further employee programmes and enhancements to our
engagement and retention. In 2022, we again had excellent survey participation rates across the workforce of
92% (2021: 93%), which we want to maintain. This year, our engagement has decreased albeit to a still strong
score of 3.83 out of 5.00, putting XP Power at the 31st percentile in the Gallup database. We acknowledge
the decrease in our levels of engagement year-on-year which is also reflected in increased voluntary turnover
figures below, particularly in North America. This region has been widely reported as experiencing exceptionally
high attrition, ‘The Great Resignation’ during 2022 and unfortunately XP is among many businesses which have
seen the impact of this. The increase in Asia attrition rate from 2021 to 2022 is a result of rapid expansion of
the Vietnam plant, where some new entrants to manufacturing found initial training to meet our performance
standards challenging. However, the survey still highlighted our organisation remains resilient and has a strong
foundation of engagement across the businesses. We still see a clear sense of respect, ethics and integrity across
employees and we aim to address the issues highlighted in the survey to improve our manager interaction to
enhance our score in future years.

Full-time employee voluntary turnover percentage (%)

Europe

Total average number of employees

Voluntary Leavers

Voluntary Turnover

2022

338

8.0%

2021

154

11.1%

Asia

Total average number of employees

1,781

1,606

Voluntary Leavers

Voluntary Turnover

Total average number of employees

Voluntary Leavers

Voluntary Turnover

Global

Total average number of employees

Voluntary Leavers

Voluntary Turnover

811

45.5%

472

19.3%

602

37.5%

411

11.7%

2,590

2,171

929

35.9%

667

30.7%

Labour
We are committed to fair treatment of our employees, and our goal is to pay competitively and reward
exceptional performance. All employees are paid fair salaries and other terms of conditions of employment
as appropriate. We recognise that a work/life balance is important and, where appropriate, we offer flexible
working arrangements to allow employees to balance their work with their other priorities. As a Group, we also
aim to eliminate excessive working hours and respect national legislation and industry referenced standards on
maximum working hours.

Diversity and inclusion
Becoming a truly diverse and inclusive company is not only the right thing to do, but also crucial to helping us
grow our business, innovate, attract and retain talent, and engage the people who buy our products. Different
experiences, views and opinions allow us to explore more options when considering decisions, which we believe
generates better outcomes for the business and our stakeholders. We operate globally and recognise the cultural
differences that may exist in the countries we do business in. A diverse workforce reflects our markets and will
help us succeed in those markets. We are committed to non-discrimination and offer equal opportunities in all
our employment practices, procedures and policies. We operate an externally hosted whistleblowing hotline,
which enables our employees to report any concerns or violations relating to discrimination or any other aspect
of our Code of Conduct. When we hire or promote someone, we choose the best candidate irrespective of age,
race, national origin, disability, religion, gender, gender reassignment, sexual preference, social background,
political opinion, marital status or membership/non-membership of any trade unions. We apply the same
standards when selecting business partners. The Board has oversight of the Company’s Diversity Policy, which is
also available on our website at corporate.xppower.com/about-us/corporate-governance. Our Diversity Policy is
embedded in our Code of Conduct.

XP Power Annual Report & Accounts for the year ended 31 December 2022We aim to:

• create an environment where individual differences and the contributions of all team members are recognised

and valued;

• create a working environment that promotes dignity and respect for every employee;

• not tolerate any form of intimidation, bullying or harassment, and to discipline those that breach this policy;

• make training, development and progression opportunities available to all employees;

• promote equality in the workplace, which we believe is good management practice and makes sound business

sense;

• encourage anyone who feels they have been subject to discrimination to raise their concerns so we can apply

corrective measures; and

• regularly review all our employment practices and procedures so that fairness is always maintained.

The Group is supportive of flexible working such as working from home, part-time and flexible hours according
to the requirements of the position. The Group employs contract and temporary workers across many locations
to fill local requirements, sometimes for short periods. This is particularly the case in our manufacturing facilities
globally, to ensure we are meeting our customer requirements. Many of our temporary staff choose to become
permanent employees.

Number and percentage (%) of contract or temporary workers to total employees
FY21

FY22

Europe

Total average number of employees

Average number of permanent employees

Average number of temporary or contract employees

Percentage of temporary or contract employees to permanent

Asia

Total average number of employees

Average number of permanent employees

Average number of temporary or contract employees

Percentage of temporary or contract employees to permanent

Total average number of employees

Average number of permanent employees

Average number of temporary or contract employees

Percentage of temporary or contract employees to permanent

Global

Total average number of employees

Average number of permanent employees

Average number of temporary or contract employees

Percentage of temporary or contract employees to permanent

376

338

10.1%

2,706

1,781

925

34.2%

524

472

9.9%

3,605

2,590

1,015

28.2%

169

154

8.9%

2,337

1,606

731

31.3%

450

411

8.7%

2,956

2,171

785

26.6%

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022OUR SUSTAINABILITY STRATEGY
3. PEOPLE AND WORKPLACE CONTINUED

In the UK, for employees with more than two years of service, we pay maternity or adoption leave for three
months at 100% of salary compared to the statutory six weeks at 90% of salary. We also provide two weeks of
paid paternity leave at 100% of salary compared to statutory paternity leave of two weeks at £151 or 90% of
usual pay if lower.

We have undertaken analysis based around gender representation to help understand our gender pay gap,
including an equal pay assessment. We report our UK gender pay gap even though we have fewer than 250
employees in the UK and are, therefore, exempt from gender pay gap reporting. We are committed to eliminating
any form of discrimination.

UK gender pay gap – 2022

FY22

FY21

FY20

Male

Female

Total

Male

Female

Male

Female

Male

Female

Lower quartile pay band

Lower middle quartile pay band

Upper middle quartile pay band

Upper quartile pay band

33%

70%

77%

67%

30%

23%

38%

36%

70%

74%

62%

64%

30%

26%

40%

58%

77%

92%

60%

42%

23%

Employees by gender and region as at 31 December 2022

123

157

Europe
347

224

North
America
494

930

Asia
2,068

337

1,138

Female

Male

Gender diversity statistics

Board

Executive Management

Management

All other

Total

Male

Female

1,403

1,496

1,398

1,422

Total

101

2,801

2,918

Male

56%

71%

82%

50%

51%

Female

44%

29%

18%

50%

49%

XP Power is committed to meeting the recommendations of the FTSE Women Leaders and Parker Review.
Women now make up 44% of our Board, including roles such as chair of the Remuneration Committee, Senior
Independent Director, Chair of Audit Committee and Designated Director for Workforce Engagement. The
composition of our Board meets the recommendations set by the Parker Review Committee and the FTSE
Women Leaders (formerly the Hampton-Alexander review).

XP Power Annual Report & Accounts for the year ended 31 December 2022Talent and career management
With a wealth of talented individuals working across the business, we recognise the importance of supporting
and developing the skills, knowledge and experience of our teams. From a more structured onboarding
process which ensures managers identify a day-one buddy and build a detailed initial training plan, to career
conversations as part of the annual review process, we are committed to promoting training and career
development.

Developing our talent is key to our ongoing success and is a key leadership responsibility, with line managers
identifying their high potential employees, creating opportunities for further development and supporting
internal progression. Talent management and succession planning for the Executive Directors and Senior
Leadership team is reviewed and discussed at Board level. Personalised people and organisation plans aligned
to the attainment of the Group’s strategy are agreed with all our executive leaders, and our people leaders (with
more than four direct reports) receive a people leadership programme with particular emphasis on employee
engagement, and the need for clarity of expectations to drive high performance.

Our online learning management system was rolled out to all employees in 2021 and in 2022 this has allowed us
to roll out further training in new systems and processes, such as S4HANA and Our Management System, as well
as compliance training. This tool is also used for onboarding new employees and for training on new information
technology tools such as our various cybersecurity applications. Our training statistics are outlined below.

It is our policy that all employees receive regular feedback on their performance, captured in an annual
performance review meeting where agreed objectives, aligned with key business priorities are set for the year
ahead. All non-production employees participated in this process during 2022, with those directly employed in
production roles evaluated against standard operating procedures to ensure they continue to deliver to required
quality standards. We operate various bonus schemes and all non-sales commissioned employees are eligible
to participate in either our general or executive bonus scheme. The overall bonus pools are determined by the
level of adjusted profit before tax and operating cash conversion. Individual bonuses are then allocated based on
individual performance. We also have several spot recognition award schemes which are occasionally given to
teams rather than individuals to recognise and promote collaboration. As well as recognition schemes, we also
provide healthcare benefits and life assurance according to the customs in the regions we operate.

We had a total of 20 apprenticeships in 2022 and run apprenticeship programmes in areas such as finance,
human resources, information technology and logistics. We have seen a rise in training time per employee in
2022 due to increased usage of our Learning Management System (Litmos), the provision of English classes every
Monday and Wednesday at our FuG site and a real focus on production and R&D training at our High Bridge site.

Average training time (in days) per employee

Asia

Average number of permanent employees

Total hours worked in year

Hours per employee

Days per employee

Europe

Average number of permanent employees

Total hours worked in year

Hours per employee

Days per employee

Average number of permanent employees

Total hours worked in year

Hours per employee

Days per employee

Global

Average number of permanent employees

Total hours worked in year

Hours per employee

Days per employee

FY22

338

8,192

24.3

3.0

1,781

25,292

14.2

1.8

472

10,318

21.9

2.7

2,590

43,802

16.9

2.1

FY21

154

2,101

13.7

1.7

1,606

14,426

9.0

1.1

411

747

1.8

0.2

2,171

17,273

8.0

1.0

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022
OUR SUSTAINABILITY STRATEGY
3. PEOPLE AND WORKPLACE CONTINUED

Freedom of association
We allow our employees to freely associate with any relevant unions, but only our employees in Vietnam are
members of the local union. The number and percentage of employees covered by collective agreements is:

Asia (Vietnam) Average number of permanent employees
Average number of employees covered by
collective agreements

Percentage of employees covered by
collective agreements

Europe

Average number of permanent employees

Average number of employees covered by
collective agreements

Percentage of employees covered by
collective agreements

Average number of permanent employees

Average number of employees covered by
collective agreements

Percentage of employees covered by
collective agreements

Global

Average number of permanent employees

Average number of employees covered by
collective agreements

Percentage of employees covered by
collective agreements

FY22

FY21

FY20

1,781 (1,495)

1,606 (1,089)

1,483 (1,024)

1,406 (1,406)

1,063 (1,063)

939 (939)

79.0% (94.0%) 66.2% (97.7%) 63.3% (91.6%)

338

0.0%

472

0.0%

2,590

1,406

154

0.0%

411

0.0%

2,171

1,063

153

0.0%

397

0.0%

2,033

939

54.3%

49.0%

46.2%

Community partnerships
We believe that we should give back to the communities we work in as they make up an integral part of our
lives. All employees are encouraged to get involved in environmental and community activities. We allow every
employee to take a day’s paid leave to contribute to a charitable or worthy cause in the community.

Our activities in 2022 included:

• Sunnyvale participated in XP Power's Q4 Community Outreach, with our collection donated to Joey's Toy Drive.

• XPSG Cycling team cycled all round Singapore and raised more than SGD$10,000 for Food Bank Singapore.

•

In aid of the Ukraine crisis, our UK employees donated non-perishable food items.

• We offered our Singapore employees massages from the visually handicapped with donations collected in aid

of the Singapore Association of Visually Handicapped.

• Our Gloucester site held an additional charity event in aid of The Open Door, an organisation that provides
food security and household stability to children, families and seniors in Essex County, MA. Through XP
Power’s support, The Open Door has been able to provide an online ordering system that vastly improves
choice and access to the service, and biodegradable containers to help reduce waste.

The Group and our employees made donations to local charities totalling £8,563.4 in 2022 (2021: £14,291).

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OUR SUSTAINABILITY STRATEGY
4. ETHICS AND COMPLIANCE

A whistleblowing report is automatically distributed to
the Chair of the Audit Committee by the independent
third-party provider, where it is reviewed and assigned
to management or an independent third party for
further investigation and response as required.
Whistleblowing is a scheduled agenda item at Audit
Committee meetings. The Company is committed
to taking appropriate action regarding all qualifying
disclosures that are upheld. In 2022 there was one
whistleblowing reports and in 2021 there were no
whistleblowing reports.

Anti-bribery and corruption
It is our policy to conduct all business in an honest
and ethical manner. We will not accept or give bribes
or other means of inducement to obtain improper
advantage. The Company takes a zero-tolerance
approach to bribery and corruption, and is committed
to acting professionally, fairly and with integrity in
all business dealings and relationships, and enforces
effective systems to counter bribery. Our policy on
anti-bribery and corruption is embedded in our Code
of Conduct, which all employees receive annual
training on. Last year, 100% of employees received
training on anti-bribery and corruption. Our Code
of Conduct’s section on bribery and corruption
is detailed and includes numerous examples, so
employees can clearly understand what is acceptable
and unacceptable. The requirements of our Code of
Conduct are communicated to our suppliers, and they
are required to comply with its provisions. There were
no instances of bribery or corruption in 2022 that
executive management or the Board were aware of.

Modern slavery
We support the Modern Slavery Act 2015, and this is
explicitly included within our Code of Conduct. We do
not engage in any form of slavery or human trafficking
activities, and we are strongly against any offences
of slavery, servitude forced labour and/or human
trafficking. We have also adopted a corporate policy,
which has been communicated to all employees
through our Code of Conduct, and is supported by
all levels of the organisation. The policy can be found
here: corporate.xppower.com/about-us/corporate-
governance. Any abuse of human rights will be acted
upon immediately and appropriate action taken. All
employees are trained on our Modern Slavery Policy
through the annual online Code of Conduct training.

It is the Company’s policy to conduct all business in an
honest and ethical manner. The first of our five core
values is “Integrity” and this is, therefore, embedded
into our culture. It is also embedded into our Code
of Conduct and the policies outlined in the following
sub-sections. To ensure awareness and understanding
of our Code of Conduct, we use our learning
management system to monitor all employees on
their annual training on the Code of Conduct and its
contents. Employee compliance with the annual Code
of Conduct training is 72%. The Group also relies on
its general financial controls, authority matrix, general
management oversight and review of financial and
other reporting. In addition, we have an independent
whistleblowing service available to employees who
do not feel able to raise issues of concern to their line
manager or their superior. The Audit Committee is
responsible for monitoring, and compliance matters
are regularly reviewed by the Board of Directors.

Whistleblowing
XP Power is committed to an environment where
open, honest communications are the expectation.
Employees should feel comfortable bringing forward
any concerns where they believe violations of policies
or standards have occurred, in the secure knowledge
that they will be taken seriously and there will be no
adverse repercussions when they have acted in good
faith. This is embedded into our Code of Conduct.
We operate an internal, well publicised, confidential
whistleblowing programme administered through
an independent third party, which is available 24/7.
“Speak Up” runs in every country we operate in,
and in their chosen language. This guarantees that
employees’ experiences of legal or ethical misconduct
will be heard and acted upon quickly wherever it
occurs within the business. Concerns can be raised
through a website or by phone, on an anonymous
basis and in any chosen local language. The Company
protects employees who are whistleblowers from
any detrimental treatment resulting from any
whistleblowing, providing they acted in good faith.

Our whistleblowing policy encourages our employees
to report issues where they have a reasonable
belief that:

• our Code of Conduct has been breached such as

an incident of discrimination

• a criminal offence has been committed, is being

committed, or is likely to be committed

• a person has failed, is failing, or is likely to fail to

comply with a legal obligation

• a miscarriage of justice has occurred, is occurring,

or is likely to occur

• the health and safety of any individual has been, is

being or is likely to be endangered

• the environment has been, is being or is likely to

be damaged /or

•

information to show any matter falling within any
one of the above categories has been, is being or is
likely to be deliberately concealed

How this strategic pillar
links to the UN SDGs

This aligns with UN
SDG 16 “Peace, justice
and strong institutions”
through internationally
promoting of the rule
of law and reducing
corruption and bribery in
all forms.

XP Power Annual Report & Accounts for the year ended 31 December 2022Human rights
Human rights are at the heart of sustainable business.
We are committed to respecting human rights in
accordance with international human rights principles
including the UN Guiding Principles on Business
and Human Rights, the UN Universal Declaration
of Human Rights, and the International Labour
Organisation’s Declaration on Fundamental Principles
and Rights at Work. We can confirm that there were
no reported incidents of human rights violations
during the past year. The policy can be found here:
corporate.xppower.com/about-us/corporate-
governance. Training on human rights is included in
our annual online Code of Conduct training.

Information systems and
technology
The Group considers that it has appropriately robust
and secure information technology (IT) systems while
acknowledging that no IT system can be absolutely
secure. The Group IT Director is responsible for
the integrity and security of the IT systems and
communications network. The Group has processes
in place for penetration testing, data back-up
and recovery, and there are various processes,
software and hardware in place to prevent data
security breaches and unauthorised access to the
Group’s systems and data. The Group holds regular
cybersecurity training and awareness to ensure that
our employees remain alert to threats.

Tax transparency
The Group is committed to compliance with all
applicable tax laws and regulations in all areas it
operates in or is required to make filings. All required
tax filings are made accurately and on time with
the relevant authorities. It is the Group’s policy to
not engage in any aggressive tax planning or tax
avoidance schemes.

We believe that our tax activities should adhere to
the spirit and the letter of all relevant tax laws and
regulations where we operate. We are committed to
a transparent and open approach to reporting on tax.
Our policy, as part of our governance framework, is to
file all tax returns on time, and to pay tax as it falls due.

The Group has a low-risk tolerance for uncertain tax
positions where it operates. We do not undertake
any aggressive or unreasonable tax planning schemes
for the purpose of tax avoidance, and broadly aim to
align tax payments to revenue generation. We do not
knowingly help others avoid their tax obligations.

We prohibit tax avoidance through transfer pricing.
All intra-group transactions are required to be
priced on an arm’s length basis in accordance with
the Group’s internal transfer pricing policies, which
reflect internationally accepted transfer pricing
standards and local tax laws. We commit to not
transfer value created to low tax jurisdictions and not
use tax structures intended for tax avoidance. We
do not operate in countries considered as partially
compliant or non-compliant according to the OECD
tax transparency report, or in any countries blacklisted
or grey listed by the EU for tax avoidance and harmful
tax practices (as at 14 February 2023), apart from
Vietnam, where our site is based due to availability of
suitable labour and not located to tax purposes.

Our commitments on taxation are implemented
through a system of procedures and controls in place
across the Group. Tax is a regular agenda item for the
Audit Committee, which meets at least four times a
year, and reports to the main Board. Tax compliance
risks are managed through the Group’s governance
framework, overseen by the Audit Committee, and
supported by the CFO.

Government contracts
The Group has no direct relationships where it sells
products or services to any government entity.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022COMMITMENT TO REDUCING CLIMATE CHANGE
TCFD REPORT

In 2021, we announced our ambition for net zero. Having signed the
letter of commitment with The Science Based Targets initiative (SBTi)
in 2022, we intend to submit targets for verification in the first half
of 2023.
This will reaffirm our long-term target of net zero across our value chain by 2040 and introduce interim targets
for 2030 which we will publish once validated. In conjunction with and aligned to our net zero ambition, this
report covers our governance of climate change and demonstrates how we incorporate climate-related risks and
opportunities into our risk management, strategic planning and decision-making processes.

Our climate-related financial disclosure is consistent with all of the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and recommended disclosures as detailed in “Recommendations of the
Task Force on Climate-related Financial Disclosures” (2017) and we have considered the additional guidance
set out in the TCFD 2021 Annex, “Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures”. Further details of our pathway to net zero will be included in our transition plan, which we
aim to develop following our target validation.

RECOMMENDATION

RECOMMENDED DISCLOSURES

REFERENCE

Governance

Disclose the organisation’s
governance around climate-related
risks and opportunities

Strategy

Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information is
material

a) Describe the Board’s oversight of climate-related
risks and opportunities

Page 81

b) Describe management’s role in assessing and
managing climate-related risks and opportunities

Page 81

a) Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium, and long term

Pages 82-86

b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning

Pages 82-86

c) Describe the resilience of the organisation’s
strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario

Pages 82-86

Risk management

Disclose how the organisation
identifies, assesses, and manages
climate-related risks

a) Describe the organisation’s processes for
identifying and assessing climate-related risks

b) Describe the organisation’s processes for
managing climate-related risks

c) Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organisation’s overall risk
management

Page 82

Metrics and targets

Disclose the metrics and targets
used to assess and manage
relevant climate-related risks
and opportunities where such
information is material

a) Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in
line with its strategy and risk management process

Page 87

b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and the
related risks

Pages 65-66

c) Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets

Page 87

XP Power Annual Report & Accounts for the year ended 31 December 2022Governance
XP Power has a robust governance structure to
manage our response to climate-related issues. The
Board of Directors has overall responsibility and
oversight of climate-related risks and opportunities,
all Group policies including the Environmental
policy, and all matters that impact the strategy,
risk management, vision, and values of the Group.
Information flow regarding climate-related issues
occurs within both the strategic and risk channels
of the Group. To ensure climate-related issues are
considered in the review of XP Power’s strategy,
budgets, major capital expenditures and business
the Board monitors progress and performance
of the Group’s sustainability strategy and key
initiatives within the net zero action plan as well as
our reported emissions, energy use, water use and

Board
Overall
Climate Change
Responsibility

Board Level

waste as outlined in Metrics and Targets below. Polly
Williams, Non-Executive Director, Senior Independent
Director and Chair of the Audit Committee, supports
the Board in this function. In the risk channel, the
Audit Committee ensures climate-related issues are
integrated into the Group’s risk management process.
The Audit Committee is also responsible for approving
the content of the Group’s TCFD disclosures.

At the executive level, the Executive Leadership team
meets monthly and monitors progress and key actions
of the sustainability strategy and reports to the Board.
Our Sustainability Council supports the Executive
team through determining the relevant goals and
objectives, reviewing environmental KPIs, resolving
issues, mitigating risks to the plan, and recommending
policies and processes to Executive team and Board.
The Sustainability Council is a cross-functional team
chaired by the CEO which meets quarterly and is
tasked with the formation and successful delivery
of the XP Power sustainability action plan and,
within this, the net zero action plan. The Sustainable
Development Working Group, led by the Group’s
Sustainability Lead, sits below the Sustainability
Council, and meets monthly, with more of an

r
i

operational remit, managing and tracking the
progress of specific sustainability projects.

Polly Williams
Coard Sponsor
for Climate Change

Audit Committee
Reviews risk register
3 times a year

Management Level

Sustainability Council
Cross-functional committee tasked with
delivery of Net Zero action plan

Sustainable Development Working Group
Monitors climate-related risks

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022

TCFD REPORT CONTINUED

Risk management
Relevant climate-related risks and opportunities were identified with the help of external consultants, CEN-ESG,
and refined through consultation with the Sustainability Council and senior management. XP Power considers
climate-related risks and opportunities in all physical and transition risk categories – current and emerging –
whether they occur within our own operations, or upstream and downstream of the Group, and within our short,
medium or long-term time horizons.

The management of climate-related risks is integrated into the XP Power overall risk management framework.
Climate-related risks are assessed in the same manner as other Group risks, so that their relative significance
is comparable. This includes an assessment of likelihood (on a five-point scale, low to high) and impact (on a
five-point scale, minor to severe) and this ensures that the significance of climate-related risks is considered in
relation to risks identified in the standard risk management processes. Climate-related risks are included in the
risk register and reviewed by the Audit Committee at scheduled meetings every four months to incorporate
ongoing refinement and quantification of risks, and to ensure the register reflects any material changes in the
operating environment and business strategy.

Further details on each key risk and opportunity, such as a quantification of the financial impact, the appropriate
strategic response, cost of response and variance of key risks regarding climate-related scenarios have been
developed where possible. Combining this with the impact and likelihood assessment outlined above, helps in
determining the treatment of each risk (e.g. mitigation, acceptance or control) so we can prioritise resources in
managing the most material climate-related impacts, with other risks requiring further analysis or accepted as
being within the Group’s business-as-usual risk appetite.

Strategy
Considering the Group’s commitment to net zero by 2040, the fact that the Group owns some of its key
operating sites, the timeframes required for climate change impacts to manifest and in alignment to overall
strategic planning horizons, the time horizons for our climate-related risk assessment are as follows:

• Short term: 0–3 years

• Medium term: 4–10 years

• Long term: beyond 10 years

The following five key climate-related risks and six key climate-related opportunities that could have a material
financial impact on the organisation have been identified. These are incorporated into our strategic planning:

STORM
AND FLOOD
DISRUPTION

SUPPLY
CHAIN RISKS

Physical (acute)

CARBON
PRICE
IMPACTS IN
THE VALUE
CHAIN

Transition
(policy
and legal)

ROBUSTNESS
OF LOCAL
POWER GRID
SUPPLY

RISK OF NOT
MEETING NET
ZERO TARGET

Transition
(market)

Transition (market
and reputation)

Own
operations

Upstream

Own
operations

Upstream/own
operations

Lost production
and revenue

Higher cost
of inputs

Lost production
and revenue

Lower profit
margins through
increase costs and
lower revenue

Medium term

Short term

Long term

RISK

Type

Area

Primary
potential
financial
impact

Time
horizon

Likelihood

Medium–high

Medium

Low

Magnitude
of impact

Location or
service most
impacted

Moderate

Major

Moderate

US, Vietnam

Group

China, Vietnam Group

Transport,
purchased
goods and
services

FURTHER DETAILS OF
THE GROUP’S RISK
MANAGEMENT PROCESS
ARE ON PAGES 50–51

XP Power Annual Report & Accounts for the year ended 31 December 2022
OPPORTUNITY

SOLAR
POWER

Energy source
and resilience

Type

Area

POWER
PURCHASE
AGREEMENTS
(PPAS)

Energy source

REDUCTION
OF AIR
FREIGHT

LEGISLATION
ON ENERGY
EFFICIENCY

ELECTRIFICATION

Material
efficiency

Products and
services, Market

Market

ENERGY
AND WASTE
SAVINGS

Material
efficiency

Own operations Own operations

Upstream and
downstream

Downstream

Own operations

Primary
potential
financial impact

Time horizon

Reduced
direct cost

Reduced
direct costs

Short-to-
medium term

Reduced costs

Higher revenue

Reduced costs

Short term

Medium term

Likelihood

Medium

Medium–high

High

Medium–high

Magnitude
of impact

Location or
service most
applicable

Major

Moderate

Minor

China, Vietnam

Group

We have also conducted climate-related scenario analysis using three public climate-related scenarios to help us understand the resilience of
our business to climate change:

• Net Zero Emissions by 2050 Scenario (NZE)* – outlining a pathway for the global energy sector to achieve net zero CO2 emissions
by 2050, which limits the global temperatures rise to 1.5°C by 2100, with 50% probability. This scenario is included as it informs
decarbonisation pathways used by the SBTi.

• Stated Policies (STEPS)* – outlining a combination of physical and transitions risk impacts as temperatures rise by 2.6°C by 2100, with 50%

probability. This scenario is included as it represents a midway path with the trajectory implied by today’s policy settings.

• RCP 8.5** – where global temperatures rise between 4.1–4.8°C by 2100. This scenario is included for its extreme physical climate risks.

* IEA (2022), Global Energy and Climate Model, IEA, Paris https://www.iea.org/reports/global-energy-and-climate-model.
** IPCC (2014), Climate Change 2014: https://www.ipcc.ch/report/ar5/syr/ AR5 Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of
the Intergovernmental Panel on Climate Change.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022TCFD REPORT CONTINUED

We have analysed and quantified how each climate-
related risk and opportunity behaves under the
three scenarios. In aggregate, we conclude that our
overall climate risk exposure is Moderate, and the
Group is financially resilient and strategically robust
to climate change. Our current understanding of our
climate-related risks is that any impacts on assets
is limited and risks can be accommodated in our
business-as-usual activity in light of our existing and
planned mitigation strategies and net zero action plan.
No additional fundamental changes to our business
strategy or budgets resulting from climate change are
expected to be required for the foreseeable future.
As a result, there are no effects of climate-related
matters reflected in judgements and estimates applied
in the financial statements.

We will continue to develop our analysis as new data
becomes available, both internally and externally, and
we will continue to monitor our climate exposures and
action plans through the Group’s risk management
framework. The opportunities identified continue to
be developed in line with the Company strategy and
objectives. Further details on our climate-related risks
and opportunities is below:

Climate-related risks
Storm and flood disruption
Extreme weather events are expected to rise in both
frequency and magnitude as an impact of climate
change. Global temperatures are forecast to rise in
all three scenarios we studied, at best peaking below
1.6°C increase above pre-industrial levels by 2040
in NZE and at worse continuing to rise to between
4.1–4.8°C increase above pre-industrial levels by
2100 under RCP 8.5. Under STEPS, extreme rainfall is
expected to occur up to twice as often as today and
be three-to-four-times more intense by 2100. RCP
8.5 is more extreme. Our sites with acute physical
risks identified using geospatial modelling are in the
US at Gloucester, MA, and High Bridge, NJ (both at
risk from hurricanes), and to a lesser degree of risk,
Binh Duong, Vietnam (at risk from inundation). The
two US sites account for 8% of production1 combined
and with Vietnam, 47% of the Group’s production.
These three sites have already experienced some
weather-related disruption, albeit not long lasting and
manageable under business-as-usual. We recognise
the risk of further operational disruption, but do not
forecast any asset risk. The Group operates with a
flexible model in terms of capacity across sites and
can respond to temporary outages with changes
in working patterns to compensate. We are also
currently constructing a third major site in Malaysia,
which will provide further manufacturing flexibility

and reduce reliance on the Vietnam site.

XP Power Annual Report & Accounts for the year ended 31 December 2022Supply chain risks
Physical climate change impacts could result in
disruption to our supply chain, either through supplier
sites being directly affected, or by disruption to
transportation and electricity supply. Our supply of
metals and fabricated items (c.20–30% of purchases)
is flexible, but some electronic components are
specialised, and supply cannot easily be switched
out for alternatives. Exposure to individual suppliers
is reduced as we source components from several
suppliers and distributors. Our ongoing strategic
review of suppliers incorporates analysis of our critical
supplier relationships and options for switching to
alternatives. In addition, we will expand our supplier
assessment process to include supplier resilience and
business continuity plans, alongside engagement on
our upstream emissions as part of our net zero plan.

Carbon price impacts in the value chain
XP Power is exposed to potential carbon price
impacts in the upstream value chain, which may result
in increased cost of transportation and goods sold.
We have quantified our carbon in purchased goods
and services (c.25% scope 3 emissions), down to the
component level, see page 66. This has identified
our carbon intensive inputs to allows us to track this
risk and incorporate scope 3 reduction thinking into
our product and supplier strategy. Components are
subject to customer approval processes and typically
used over a long period without change, which may
make substitution harder to achieve. Any substitution
for lower carbon alternatives will result in step
changes in the embodied carbon in our purchased
goods, as would a reduction in component count.
We are also exposed to potential carbon costs within
transportation (c.1% scope 3 emissions). Air freight
continues to be at a higher proportion than pre-
Covid levels as supply chain disruption and changes
following the pandemic continue to impact lead times.
This materially impacts our transportation emissions
relative to the alternative sea-borne transportation.
We believe customer service is critical and must be
considered alongside cost and emissions rationales
to changing the freight model. Carbon prices are
projected to increase under NZE and STEPS scenarios
but how and whether carbon prices are applied to
purchased goods and transport and our ability to pass
cost increases on is uncertain. In addition, this risk will
be mitigated under our plans for net zero by 2040.

Robustness of local power grid supply
Our energy supply may be disrupted for a prolonged
period due to local supply robustness. XP Power’s
operations in China (28% of production1) experienced
power supply issues during 2021, reportedly
because of a restriction on domestic coal output,
and in 2022 to a lesser extent from a supply/demand
imbalance resulting from heatwaves and drought.
We are encouraged by the rapid pace of renewable
generation capacity addition in China but note that
substantial changes in generation capacity can also
result in grid instability issues due to the transition.
This will happen faster under the NZE scenario. In
Vietnam (39% of production1), our manufacturing

site is sufficiently elevated to be safe from direct
flooding, but extreme weather events may result
in indirect impact to our site from the disruption of
energy supply infrastructure. Our China and Vietnam
sites have back-up generation capacity to allow
continued operations, albeit on a higher emissions
basis which reduces our exposure. Additionally, a new
manufacturing site is being developed in Malaysia,
which should reduce manufacturing reliance on
Vietnam. XP Power also operates with sufficient
manufacturing flexibility to recoup lost time, and
we are investigating renewable self-generation and
measures to improve energy security.

1 Energy use is used as a proxy for site production as the flow of

semi-finished goods between sites in the Group complicates the
measurement of site production by units or revenue. Energy use
is closely correlated with the number of employees by site.

Risk of not meeting net zero target
XP Power has developed science-based targets for
scope 1, 2 and 3 emissions for our commitment to
net zero carbon by 2040 (to be validated by SBTi),
which will be supported by our net zero action plan
against which this risk will be tracked. Delivery against
this plan is partly reliant on third parties and/or
technologies that are yet to be developed, especially
in the long term. Failure to meet the defined net zero
targets may cause reputational damage, dissuade
potential investors, or result in greater costs from
any introduction of carbon pricing. The largest
source of operational emissions for the Group are
within scope 2, where the ability to decarbonise
electricity supply may be hindered by the rate of grid
decarbonisation in the countries XP Power operates
in and the ability of local grids to support renewable
energy tariffs. This is especially material for our
manufacturing sites in China, Vietnam and soon,
Malaysia. In addition, the rate of grid decarbonisation
in the countries XP Power’s customers and suppliers
operate in is also critical to decarbonise downstream
scope 3 emissions. Whilst some countries are
committed to net zero electricity grids by 2040, not all
have made such commitments. Under STEPS, global
grids are expected to decarbonise by 46% to 2040;
under NZE, electricity sectors in advanced economies
reach net zero emissions by 2035, and globally by
2040. The Group factors the NZE scenario into its
outlook. In addition, technical developments would
be required beyond our immediate scope of control
e.g., development of low carbon shipping would be
required to fully decarbonise our transportation-
related scope 3 emissions.

Not all categories of climate-related risk are
applicable or material to the business, and of risks
that we explored, those not material enough to be
incorporated into our analysis included carbon price
impacts on energy (XP Power is not energy intensive),
wildfires (our Californian sites are in industrial areas,
2–3 miles clear of vegetation) and drought risks
(XP Power is not water intensive).

READ MORE ABOUT OUR
OPPORTUNITIES ON
PAGE 86

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022
TCFD REPORT CONTINUED

Legislation on energy efficiency
In the transition to a low carbon economy,
legislation on the efficiency requirements for power
conversion could become more stringent. The Group
expects the standards currently in place for higher
volume consumer applications, such as external
power supplies, will be extended to industrial and
healthcare applications in time. Within NZE, there is
expectation of widespread enforcement of minimum
energy performance standards in the industry. In
addition, mandatory energy management systems
and energy audits are expected, which will increase
customer requirements for energy efficient products.
STEPS outlines no legislation, but we expect there
to be investment programmes in US, UK and EU
designed to support decarbonisation. XP Power is
well positioned to address this customer need with
products offering high efficiency and/or low standby
power. Alongside legislation, general concerns over
climate change should lead to an increasing emphasis
by our customers on efficiency. Product efficiency is a
critical focus of our R&D plans.

Electrification
There is potential of new markets for XP Power on
the back of increased electrification in the global
economy. We monitor areas of interest, such as
wind turbines, 5G infrastructure and mobile network
densification, which could provide new opportunities
for the Group. Some of these opportunities are linked
to the pace of regulation and investment related to
the different scenarios we have analysed.

Energy and waste savings
Actions to improve energy efficiency and reduce
energy consumption will provide incremental
improvements to our emissions profile at limited cost
to implement. We have outlined various efficiency
projects at site level within the net zero action plan
depending on the requirements and opportunities
at each site, as well as having Groupwide initiatives,
such as the reduction in packaging. Certain gains
from behaviour or process change can be achieved
at zero cost. These will be multiyear implementations
and further details will be included within our
transition plan.

Climate-related opportunities
Solar power
The Group is looking to install solar self-generation
where practically possible and economically viable.
Solar installations will reduce reliance on the local
grid, reduce our emissions and may provide operating
cost savings. Our sites in Vietnam and China have the
largest energy use in the Group (c.67% combined)
and draw from grids with the highest emissions
intensity thereby accounting for 88% of the Group’s
scope 2 emissions. In addition to cost savings,
solar self-generation will avoid potential carbon tax
impacts on our own operations by reducing scope
2 emissions. Tracked through scope 2 emissions
and the percentage of renewable electricity from
total electricity.

Power Purchase Agreements (PPAs)
and renewable electricity certificates
PPAs or renewable electricity supply certificates
would allow for reduction in emissions without capital
spend. The prospect for finding renewable electricity
contracts at the European and US sites of the Group
(c.12% of the Group’s scope 2 emissions combined)
is high. Vietnam has made COP26 commitments to
net zero emissions by 2050 and the phase out of coal
power generation by 2040, but the planned direct
PPA pilot scheme flagged last year is yet to take place.
Nevertheless, the IEA expect renewables to provide
46% of the total generation mix in 2025 and about
40% of the demand increases in 2023–25 would be
satisfied by renewables. With the recent net zero/
zero coal commitments and rapid renewable energy
roll out in China, it is anticipated that China will see
renewable contracts being offered with support from
the government to drive investment. Whilst the cost
of electricity under a PPA is uncertain, contracts can
provide fixed costs over several years whilst reducing
our scope 2 emissions potentially to zero. Tracked
through scope 2 emissions and the percentage of
renewable electricity from total electricity.

Reduction of air freight
There are both cost and emissions reasons to move
our freight from air to sea where possible. Our
scenario analysis provides further impetus for this
move given. That said, customer service is critical
and changing the freight model will only occur where
we can ensure supply to customers is not impacted
or where engagement with suppliers assists with
lead times. We have assessed our supply routes to
determine our transportation-related emissions and
to provide a basis for managing these emissions
within the net zero action plan in the future. Tracked
through scope 3 emissions, upstream transportation
and distribution.

XP Power Annual Report & Accounts for the year ended 31 December 2022XP Power has made the public commitment to be
net zero by 2040. We have signed the letter of
commitment with SBTi and intend to submit targets
for scope 1, 2 and 3 emissions for validation to SBTi
in the first half of 2023. These will reaffirm our long-
term target of net zero across our value chain by 2040
and introduce interim targets for 2030 which we will
publish once validated.

Metrics and targets
We have monitored and reported on our scope 1 and
2 greenhouse gas emissions for a number of years
and, this year, we include our full scope 3 emissions
footprint that provides details of our value chain
greenhouse gas emissions. Our carbon footprint
is calculated using methodologies consistent with
the Greenhouse Gas (GHG) Protocol: A Corporate
Accounting and Reporting Standard, with additional
guidance from the GHG Protocol Corporate Value
Chain (Scope 3) Accounting and Reporting Standard
and the GHG Protocol Technical Guidance for
Calculating Scope 3 Emissions, as required. Most
of our emissions are represented by our scope 3
emissions and within that our downstream scope
3 emissions associated with the use phase of our
products. The reduction of our use phase emissions
is heavily dependent on grid decarbonisation, which
is an area of significant uncertainty beyond our direct
control.

Additional environmental metrics we monitor include
emissions intensity, energy use, energy intensity,
renewable solar energy generation, freshwater
withdrawal and waste management, as reported
on page 65 Environmental Leadership. In addition,
we report on our annual launches of XP Green
Power product families, designed for a lower-carbon
economy, and the lifetime emissions savings from the
use of Green Power products (in relation to standard
products) sold in the year.

STRATEGIC REPORTXP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

XP Power Annual Report & Accounts for the year ended 31 December 2022

CONTENTS

GOVERNANCE AT A GLANCE

BOARD AND COMMITTEE ATTENDANCE

LETTER FROM THE CHAIR

BOARD OF DIRECTORS

CORPORATE GOVERNANCE REPORT

NOMINATION COMMITTEE REPORT

AUDIT COMMITTEE REPORT

REMUNERATION COMMITTEE REPORT

OTHER GOVERNANCE AND STATUTORY DISCLOSURES

STATEMENT BY DIRECTORS

108

114

118

140

141

G
O
V
E
R
N
A
N
C
E

XP Power Annual Report & Accounts for the year ended 31 December 2022

GOVERNANCEGOVERNANCE AT A GLANCE

Our Board
How our Board are purposed to deliver long-term sustainable value for us and our stakeholders

BOARD GENDER PROFILE

BOARD TENURE

ETHNICITY

Ethnicity

BOARD AGE PROFILE

Male

Female

< 1 year

1–3 years

4–6 years

7+ years

Asian

North African

White

45–50

51–55

55+

XP Power Annual Report & Accounts for the year ended 31 December 2022

BOARD AND COMMITTEE ATTENDANCE

During 2022, the Board met five times (excluding committee meetings), and all Directors attended every possible
meeting. In addition, there were several meetings with management outside of formal Board meetings to review
strategy, receive updates on new product development, presentations, have discussions with the management
team at FuG and Guth, and Corporate Governance updates.

A description of some areas and activities covered by the Board during the year is detailed on page 100-101.

MEMBERS

MEETINGS

ATTENDANCE

James Peters

Gavin Griggs

Oskar Zahn

Andy Sng

Terry Twigger1

Pauline Lafferty

Polly Williams

Jamie Pike2

Sandra Breene3

Amina Hamidi3

1 stepped down from the Board on 29 April 2022.
2 appointed to the Board on 1 March 2022.
3 appointed to the Board on 11 October 2022.

5/5

1/1

5/5

4/4

1/1

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

LETTER FROM THE CHAIR
INTRODUCTION TO GOVERNANCE

As I hand over the role of Chair
to Jamie Pike, I am confident that
XP Power has a secure future with
exciting long-term prospects.

JAMES PETERS
CHAIR

I am pleased to introduce our Governance Report
for the financial year ended 31 December 2022. This
report details how the Group is managed and the
governance, culture and framework under which XP
Power operates.

The Board remains committed to high standards
of governance across the Group. Our Governance
Report, along with the information in the Strategic
and Committee Reports, explains how we have
applied the principles and provisions of the UK
Corporate Governance Code 2018 (the “Code”) issued
by the Financial Reporting Council. I am pleased to
report that the Company was compliant with the
Code throughout 2022, except for two instances: the
independence of the Chair, which we explain on page
106, and the composition of the Audit Committee for
part of the year, which is explained on page 115.

Purpose and culture
The role of the Board is to promote the long-term
sustainable success of the Company, generating
value for stakeholders. To achieve this, we focus on
our vision: “To be the first-choice power solutions
provider delivering the ultimate experience to
our customers and our people”, and our purpose:
“Powering the world’s critical systems”. In decision
making, the Board considers all of its stakeholders.

We have defined the core values, which shape our
culture and contribute to our success; these values
are: Integrity, Knowledge, Speed, Flexibility and
Customer Focus. The Board reviews our culture
with the Executive Directors and are satisfied that

the Company’s culture and workforce policies and
practices are consistent and align with its purpose,
strategy and values.

Supply chain and
our stakeholders
Despite a challenging backdrop – critical component
shortages and inflationary pressures in the first half of
the year – our underlying demand remained strong.
Our people worked hard to mitigate industry-wide
challenges from a combination of external supply
chain factors that restricted our capacity to deliver to
customers.

We supported the safety and wellbeing of our people
through limitations imposed by COVID-19 restrictions
local to our manufacturing and distribution locations,
enabling us to maintain supply to our customers.
These priorities acted as guiding principles of how we
managed supply chain challenges through 2022 for
the Board and Executive team.

We continue to be very proud of our people and what
they have achieved in challenging circumstances
and with their outstanding efforts. Working with the
support of our suppliers and customers has enabled
significant performance improvement in the second
half of 2022.

I am very pleased that, throughout this difficult
period, we have continued to pay regular dividends to
our Shareholders.

READ MORE ABOUT
OUR THE BOARD OF
DIRECTORS ON
PAGES 94–I95

READ MORE ABOUT OUR
ENGAGING WITH OUR
STAKEHOLDERS ON
PAGES 102–104

XP Power Annual Report & Accounts for the year ended 31 December 2022

and services, energy and manufacturing sectors, and I
am confident he will make a significant contribution to
the Board and the Group’s future success.

The opportunity to have a smooth transition process
throughout 2022 has ensured a successful handover.

Strategy and sustainability
We continue to be consistent with our strategy while
ensuring it evolves as the business continues to grow
and develop, while responding to external factors. An
appropriate level of constructive challenge is provided
by the Board. A review of strategy took place in 2022,
with refinements made where needed.

We are pleased to report on progress made with
our sustainability strategy this year, including a
review of our climate-related risks and opportunities,
and the development of science-based targets for
companywide emission reductions. Our activity
demonstrates XP’s commitment and aligns the
business with our ambition to be net zero by 2040.

With the addition of our two new
Non-Executive Directors, the composition
of the Board is in a strong place with its
experience, skills and diversity.

Future of XP Power
We recognise the uncertainties relating to component
supply, inflation and recessionary concerns and the
impact these can have on our business. We remain
assured in our strategy and business model, and
the ability of the Management team to execute our
strategic plans.

Looking forward, the additional capacity that our new
Malaysian facility will bring gives us confidence to
deliver long-term value for our shareholders.

As I hand over the role of Chair to Jamie Pike, I am
confident that XP Power has a secure future with
exciting long-term prospects.

JAMES PETERS
CHAIR

28 February 2023

Division of responsibilities
It is my responsibility as Chair to manage the Board
and ensure it is effective. A culture of openness and
debate is encouraged to ensure all views are heard
and considered. The CEO and CFO ensure that
Directors receive accurate, timely, clear and relevant
information to discharge their duties.

The roles of Chair, Senior Independent Director
and CEO are formalised, with a clear division of
responsibility between the Chair – responsible for the
management of the Board, and the CEO – responsible
for the day-to-day running of the Company and
execution of our strategy.

Board composition
and diversity
To ensure we have the right balance and
composition with succession plans in place, the
skills and experience of the Board were assessed
throughout 2022.

There were several changes to our Board’s
composition during the year, in addition to Jamie
Pike joining the Board on 1 March 2022. On 29 April
2022, Terry Twigger, Senior Independent Director,
stood down, with Polly Williams becoming Senior
Independent Director and succeeding Terry as Chair of
the Audit Committee.

Following an evaluation of the composition of
the Board, a recruitment process resulted in the
appointment of Sandra Breene and Amina Hamidi as
NEDs on 11 October 2022, bringing key expertise
and improving the gender balance on our Board. The
Nomination Committee Report on pages 108-113
sets out the process for the new appointments,
our commitment to diversity, and succession and
transition planning during 2022.

Board evaluation
I am pleased to report that the externally facilitated
Board evaluation in the year confirmed that we
continue to operate as a very effective Board. With
the addition of our two new Non-Executive Directors,
the composition of the Board is in a strong place
with its experience, skills and diversity, which will be
a great aid in supporting the strategic ambition of
the Group.

Transition of Chair
In last year’s report, I announced the appointment
of Jamie Pike as NED and designate Chair. The
expectation is that, subject to shareholder approval,
Jamie will succeed me as Chair from the conclusion of
the 2023 AGM as I retire from the Board.

After more than three decades with the Group, I
believe the time is right to hand over the role of
Chair to a successor who will steer the Board through
XP Power’s next phase of growth. Jamie is a highly
experienced Board Chair, having had operational and
board level experience across the industrial products

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEBOARD OF DIRECTORS

JAMES PETERS ●
CHAIR

DATE OF APPOINTMENT:
30 June 2014

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
Nomination (Chair)

SKILLS AND EXPERIENCE:
• James founded XP Power in November 1988.

• Appointed European Managing Director in April

2000, responsible for the development of the Group’s
European business.

• Became Deputy Chair in February 2003 and moved to a

Non-Executive role in May 2012, before his appointment
as Non-Executive Chair in June 2014.

EXTERNAL APPOINTMENTS: None

GAVIN GRIGGS ●
CHIEF EXECUTIVE OFFICER

DATE OF APPOINTMENT:
31 October 2017 as CFO.
Appointed CEO from 1 January 2021

EXECUTIVE/NON-EXECUTIVE:
Executive

COMMITTEE MEMBERSHIP:
None

OSKAR ZAHN ●
CHIEF FINANCIAL OFFICER

DATE OF APPOINTMENT:
20 May 2021

EXECUTIVE/NON-EXECUTIVE:
Executive

COMMITTEE MEMBERSHIP:
None

ANDY SNG ●
EXECUTIVE VICE PRESIDENT, ASIA

DATE OF APPOINTMENT:
24 April 2007

EXECUTIVE/NON-EXECUTIVE:
Executive

COMMITTEE MEMBERSHIP:
None

POLLY WILLIAMS ●
SENIOR INDEPENDENT
DIRECTOR

DATE OF APPOINTMENT:
1 January 2016

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
Audit (Chair), Nomination, Remuneration,
Board representative for ESG

SKILLS AND EXPERIENCE:
• Gavin is a CIMA-qualified accountant who has worked in
a range of acquisitive, growth-focused businesses with
an international footprint in several industries.

• Held senior finance and strategy roles at Logica, Sodexo,

PepsiCo and SABMiller.

• Served as CFO of Alternative Networks plc, a listed

information technology provider, prior to its acquisition
by Daisy in December 2016, when he became group
finance director for the Daisy Group.

EXTERNAL APPOINTMENTS: None

SKILLS AND EXPERIENCE:
• Oskar is a chartered accountant who has worked in

large complex international businesses with continuous
improvement and growth- focused cultures.

• Held finance leadership roles at Teleflex, British Airways,

Georgia-Pacific and Spearhead International.

• Served as CFO at Scapa Group plc, a leading global

manufacturer to the healthcare and industrial markets,
from 2018 until its acquisition by SWM International,
Inc. in 2021.

EXTERNAL APPOINTMENTS: None

SKILLS AND EXPERIENCE:
• Andy has over 22 years’ experience in the power

converter industry.

• Graduated from Nanyang Technological University with
a degree in Electrical and Electronic Engineering, and an
MBA from Manchester Business School.

• Prior to joining the Group, held technical and commercial
roles with Silicon Systems (Singapore) and Advanced
Micro Devices (Singapore).

EXTERNAL APPOINTMENTS: None

SKILLS AND EXPERIENCE:
• Polly is a chartered accountant and a former partner
at KPMG LLP. She resigned from her partnership
in 2003 and has since held several non-executive
directorship roles.

EXTERNAL APPOINTMENTS: Polly is currently a
non-executive director at Royal Bank of Canada Europe Ltd,
senior independent director and audit chair at The Rugby
Football Union and chair of the board for Brewin Dolphin
Limited.

XP Power Annual Report & Accounts for the year ended 31 December 2022PAULINE LAFFERTY ●
INDEPENDENT NON-EXECUTIVE
DIRECTOR

DATE OF APPOINTMENT:
3 December 2019

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
Remuneration (Chair), Audit,
Nomination, designated NED for
employee engagement

JAMIE PIKE ●
INDEPENDENT NON-EXECUTIVE
DIRECTOR

DATE OF APPOINTMENT:
1 March 2022

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
Nomination, Remuneration

SANDRA BREENE ●
INDEPENDENT NON-EXECUTIVE
DIRECTOR

DATE OF APPOINTMENT:
11 October 2022

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
Audit

AMINA HAMIDI ●
INDEPENDENT NON-EXECUTIVE
DIRECTOR

DATE OF APPOINTMENT:
11 October 2022

EXECUTIVE/NON-EXECUTIVE:
Non-Executive

COMMITTEE MEMBERSHIP:
None

SKILLS AND EXPERIENCE:
• Pauline was formerly chief people officer at The Weir Group

plc, a position she held between 2011 and 2017.

• Between 1998 to 2011, she worked in executive search for
The Miles Partnership and Russell Reynolds Associates.

• Prior to that, Pauline worked in supply chain roles for Digital

Equipment Corporation and Motorola.

EXTERNAL APPOINTMENTS: Pauline currently holds
non- executive positions at Breedon Group plc and Scottish
Event Campus Limited, where she also acts as chair to their
remuneration committees.

SKILLS AND EXPERIENCE:
• Jamie spent nine years with Burmah Castrol, becoming chief
executive of Burmah Castrol Chemicals, before leading the
buy-out of Foseco in 2001 and its subsequent IPO in 2005.

• Prior to that, he was a partner at Bain & Company.

• Jamie has held the role of Chair at several public companies.

• He holds an MBA from INSEAD and is a Member of the

Institute of Mechanical Engineers.

EXTERNAL APPOINTMENTS: Jamie is currently Chair of the
Board of Spirax-Sarco Engineering plc.

SKILLS AND EXPERIENCE:
• Sandra is currently the president of regional delivery at Croda

International.

• Prior to this, she spent four years as president of the personal

care division and president of Croda in North America.
Sandra has over 30 years’ experience working across Croda’s
market sectors in a variety of commercial roles, giving her an
extensive understanding of customer needs.

• Sandra took an instrumental role on numerous acquisitions
conducted by Croda, which has provided her with valuable
insight into emerging markets and cultural differences.

EXTERNAL APPOINTMENTS: Sandra is currently a trustee
director at Edukos Education Trust.

SKILLS AND EXPERIENCE:
• Amina is currently the managing director of the ABB

Instrumentation Business Line, within the measurement and
analytics division. Her focus is on working with customers to
achieve more sustainable industries.

• Prior to this, Amina served as managing director of ABB’s

global power protection business from 2013 to 2017, and as
CTO for ABB’s electrification business from 2017 to 2022.

• Amina has a Ph.D. in electrical engineering from the French

National Research Institute for Transportation Systems(INRETS),
a bachelor’s degree in mechanical engineering and a master’s
degree in electrical engineering also from INPL, France.

EXTERNAL APPOINTMENTS: None

BOARD ROLE

Chair

Executive Director

CHANGES TO THE BOARD DURING 2022

• Jamie Pike was appointed Non-Executive Director and designate Chair on 1 March 2022.

• Terry Twigger stepped down from the Board on 29 April 2022.

Senior Independent Director

• Sandra Breene was appointed Non-Executive Director on 11 October 2022.

Non-Executive Director

• Amina Hamidi was appointed Non-Executive Director on 11 October 2022.

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCECORPORATE GOVERNANCE REPORT
BUILDING RESILIENCE,
GROWING SUSTAINABLY

Corporate Governance
Statement 2022
The Board of Directors’ primary remit is to provide
direction to shape the Group’s strategy and ensure
this is being executed effectively within a structure
that is well controlled, mitigates risk and is compliant
with corporate and social responsibility. Good
corporate governance emanates from the top, which
is why the Board gives continued prominence to
this area.

XP Power Limited is a Singapore incorporated
Company; under the Singapore Companies Act 1967,
we are not required to follow the Singapore Corporate
Governance Code. The Company has voluntarily
elected to report against the application of the
principles of corporate governance contained in the
UK Corporate Governance Code (the “Code”).

We have clearly laid out how the principles of the
Code have been applied under the areas of:

01 Board leadership and Company purpose;

02 Division of responsibilities;

03 Composition, succession and evaluation;

04 Audit, risk and internal control; and

05 Remuneration.

JAMES PETERS
CHAIR

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

28 February 2023

Our approach to governance

BOARD LEADERSHIP AND COMPANY PURPOSE

A Effective Board (page 94–95)

B Purposes, values and culture (page 101)

C Governance framework and Board resources (page 96–97)

.D Stakeholder engagement (page 104)

E Workforce policies and practices (page 102)

DIVISION OF RESPONSIBILITIES

F Board roles (page 105)

.G Independence (page 106)

.H External commitments and conflicts of interest (page 94–95)

I Key activities of the Board in 2022 (page 100–101)

COMPOSITION, SUCCESSION AND EVALUATION

J Appointments to the Board (page 111–112)

.K Board skills, experience and knowledge (page 94–95)

L Annual Board evaluation (page 112–113)

AUDIT, RISK AND INTERNAL CONTROL

M Financial reporting (page 115–116)

External Auditor and internal audit (page 117)

.N Review of the 2022 Annual Report (page 116–117)

.O Internal financial controls (page 117)

REMUNERATION

P Linking remuneration with purpose and strategy (page 118–121)

.Q Remuneration Policy review (page 132–138)

R Performance outcomes in 2022 and strategic targets (page 125)

XP Power Annual Report & Accounts for the year ended 31 December 2022

Building resilience,
growing sustainably
The Board ensures the long-term success of the Company through
responsible governance, strategy implementation and oversight
of operations.

Developing a first-class culture
The Board is committed to ensuring the Company’s culture is aligned
and supportive of our purpose, vision and strategy to help foster
long-term Shareholder value. It is on the Board’s agenda to ensure
there is a deep understanding so they can reinforce its importance
and values.

SEE PAGE 101 FOR HOW THE BOARD MONITORS CULTURE

Engaging with our stakeholders to ensure we
focus on the most material issues to both us
and them
The Board is committed to an open, two-way dialogue with
all our stakeholders to ensure priorities and key issues are
proactively addressed.

SEE PAGE 102–104
FOR MORE ABOUT OUR STAKEHOLDER ENGAGEMENT

Building resilience across the business to
mitigate any risks or market challenges
The Group’s response to the impact of critical component shortages
and inflationary pressures on our supply chain, and changes in the
semiconductor marketplaces, demonstrates business resilience
as an important cultural characteristic at XP Power. The Board is
committed to proactively build our resilience across the business.

SEE PAGE 103
FOR HOW WE ARE SUPPORTING THE FUTURE OF OUR SUPPLY CHAIN

SEE PAGE 103
FOR HOW WE ADDRESS SIGNIFICANT RISK MATTERS

Board changes: our new Non-Executive Directors
Jamie Pike joined the Board as Non-Executive Director and
designate Chair on 1 March 2022. Following the departure of Terry
Twigger at the end of April, the Board reviewed succession plans and
recruited two Non-Executive Directors: Sandra Breene and Amina
Hamidi in October 2022.

SEE PAGE 111–112
FOR MORE ON THE RECRUITMENT AND INDUCTION PROCESS

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

CORPORATE GOVERNANCE REPORT CONTINUED

Board and Committee information flow

STAGE 1

CHAIR AGREES THE AGENDA WITH THE BOARD
The Chair consults with the CEO and, with support of the Company Secretary, an agenda is proposed that
considers an agreed annual schedule of Board items, with feedback from the Non-Executive Directors.

STAGE 2

MATERIALS ARE CIRCULATED BEFORE MEETINGS
Board papers are distributed via a secure portal, with clearly identified action requested for the agenda item,
as required.

STAGE 3

BOARD AND COMMITTEE MEETINGS
Board and Committee meetings are arranged to occur alongside the decisions that need to be made
throughout the year.

STAGE 4

MINUTES OF MEETINGS
Minutes of each meeting are prepared and circulated to attendees.

STAGE 5

ACTION LISTS
Action lists are monitored and updated to follow key actions to completion.

STAGE 6

NON-FORMAL MEETINGS
Where appropriate, informal discussions take place, with updates and progress reports circulated between
meetings.

SEE PAGE 101 FOR DETAIL
ABOUT HOW THE BOARD
MONITORS CULTURE

XP Power Annual Report & Accounts for the year ended 31 December 2022
Leadership structure

THE BOARD OF DIRECTORS

CHAIR
Manages
and provides
leadership to
the Board

SENIOR
INDEPENDENT
DIRECTOR
Supports the
Chair in their
role and acts as
an intermediary
between other
Directors

NON-
EXECUTIVE
DIRECTORS
Challenges
and supports
the Executive
Directors, and
acts in the best
interests of
the Company’s
stakeholders

DESIGNATED
NON-EXECUTIVE
DIRECTOR
Ensures the views
and concerns of
the workforce are
brought to the
Board and are
considered during
discussions and
decisions

AUDIT COMMITTEE
CHAIR: POLLY WILLIAMS

Provides oversight of the financial
reporting, audit process, Company’s
system of internal controls and
compliance with laws and regulations

REMUNERATION
COMMITTEE
CHAIR: PAULINE LAFFERTY

NOMINATION
COMMITTEE
CHAIR: JAMES PETERS

Sets the remuneration
policy for the Executive
Directors and Executive
Leadership team

Reviews and considers
the appointment of new
Directors, and succession
planning for the Board and
Executive Leadership team

G
O
V
E
R
N
A
N
C
E

CHIEF EXECUTIVE OFFICER
Manages the overall operations and resources of the Company
in accordance with the Board-approved strategy

EXECUTIVE DIRECTORS
Designs, develops and implements strategic plans and
provides leadership to the organisation

XP Power Annual Report & Accounts for the year ended 31 December 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Board activities in 2022

KEY ACTIVITIES AND
DISCUSSIONS

OUTCOMES

FUTURE PRIORITIES

STAKEHOLDERS
CONSIDERED

STAKEHOLDER
ENGAGEMENT

• Reviewed results of

• Created a new role of

employee and stakeholder
surveys, and Shareholder
feedback

• Pauline Lafferty met with

four employee focus groups
to allow direct feedback on
key issues

•

• Consultation with

Shareholders around
renewing the existing
Remuneration Policy

Internal Communications
Manager to develop
internal communication
strategy

Increased visibility of
common policy and
procedures information
to employees via People
Pages for every region

• Review results of 2023
employee engagement
survey and resulting actions
and progress

• Review results of

stakeholder surveys and
resulting actions

• Continue to consult

with Shareholders on
remuneration matters

STRATEGY AND
OPERATIONS

• Reviewed Company strategy
with Executive Directors

BOARD AND
COMMITTEE
MATTERS

FINANCIAL
AND RISK
MANAGEMENT

CUSTOMERS

• Reviewed business

performance and strategic
priorities at each Board
meeting, including strategic
decision to locate a new
manufacturing facility in
Malaysia

• Succession planning and
transition for the Chair of
the Board

• Review of composition of
Board Committees and
position of SID

• Recruitment of two NEDs

• Evolution of the Group’s risk
and compliance framework
and ongoing review of the
new ERP system

• Supporting supply,
inventory and cost
management during strong
demand periods

• Cash and liquidity

management during critical
component shortages and
inflationary pressures

• Keeping customers supplied
with product during supply
chain challenges, where
possible

• Geographical diversification
of supply chain to build
increased resilience

• Confirmed strategy

remains appropriate and
successful

• Continued evolution of
individual elements to
improve effectiveness
and ensure it considers
changes in the operating
environment

• Continued monitoring of
progress against strategic
priorities at each Board
meeting

• Further reviews with senior
managers below Board level

• Annual review of strategy

• Jamie Pike appointed

• Review of Remuneration

NED and Chair designate
in March 2022

Policy during 2023

• Succession planning and

• Membership of all

talent management

• External audit tender

during 2023

Committees updated, and
Polly Williams appointed
as Chair of Audit
Committee and SID

• Sandra Breene and Amina
Hamidi appointed as
NEDs in October 2022

• Drawing further

• Operating cash conversion

committed facilities from
the pre-agreed accordion
facility

• Maintaining and raising

operating margins

• Supply chain strategy

• Complete transfer of

production from North
America to Vietnam to
support future growth costs

• Manage impact of critical
component shortages,
inflationary pressures and
potential downturn in some
markets

• Growth and product

development opportunities

KEY

People

Customers

Investors

Suppliers

Communities

The Environment

100

XP Power Annual Report & Accounts for the year ended 31 December 2022

KEY ACTIVITIES AND
DISCUSSIONS

OUTCOMES

FUTURE PRIORITIES

STAKEHOLDERS
CONSIDERED

SUSTAINABILITY

• Reviewing sustainability

strategy, including agreeing
targets

• Ensuring the health, safety
and wellbeing of our people

• Engaging with our

stakeholders to understand
their sustainability issues to
enhance our strategy

• Maintaining the safety and
wellbeing of our people

• Developing our

sustainability strategy

• Clear sustainability
strategy in place

• Committee targets
agreed under SBTi

• Plan in 2023 to continue
monitoring actions to
proactively reduce scope
1, 2 and 3 emissions

Health and safety
The Board is committed to providing a safe working environment for all employees, contractors and partners across the Group. The CEO
reviews health and safety reports from the Group, and the Board receives a structured update, including statistics on any health and safety
issues. In between Board meetings, an update on health and safety is included as part of the CEO’s Monthly Report to the Board.

The duties of the local health and safety committees – that report to the CEO – include reviewing the health and safety policy, compliance
with applicable legislation, monitoring health and safety statistics including incident rates and near misses, and health and safety audit
findings.

Developing a first-class culture
The Board is responsible for the culture of the Company, upheld by its values of Integrity, Knowledge, Speed, Flexibility and Customer Focus.
Its role is to influence and monitor culture to ensure we are emulating desired beliefs and behaviours in and outside the boardroom, and
identifying areas where it is embedded strongly and where there are gaps. The Board continues to help influence the right culture throughout
the Company, as set out below.

ACTION

DESCRIPTION

Reviewed results and
updates from employee
engagement surveys

Engagement survey

The Board has continued to review the results of cultural and engagement surveys, including monitoring
employee engagement within FuG and Guth as part of their integration following the acquisition. Trends
in employee satisfaction were monitored throughout the business to understand how the Company’s core
values have been embraced.

Gallup engagement surveys, have continued to inform the Board on employee engagement. An additional
pulse survey, focused on FuG and Guth was used during the year to inform on integration progress.
Engagement surveys will continue to be used to assess the views of our employees in the future.

Code of Conduct training

Our Code of Conduct had its annual review. Code of conduct training is required by all employees and
reinforces our core values.

Senior leadership workshops

The Executive Leadership team engaged with organisation leaders at a regional level through regular
leadership meetings. There was a global update in November, which covered strategy and priorities for
2023. Leaders who attended then cascaded the key themes from these sessions to their teams.

Sustainability impact
assessment

The Sustainability Working Group formed in 2022 and includes representatives from all regions and key
business functions. As a forum, it has built on earlier work to identify areas for focus in drive towards
Carbon Neutral targets.

Cultural alignment
To ensure culture is monitored and aligned to our purpose, values and strategy, the Board reviews all employee surveys, receives updates and
presentations from leadership, and seeks to have direct engagement with a broad range of employees. Any potential misalignments to the
company culture are explored to understand how to be best addressed.

The Board visited the FuG site in October to meet employees, receive presentations and tour the factory. The visit allowed the Board to have
more informal discussions with key employees supporting the integration of the businesses. Additional pulse surveys have been important
with monitoring the progress of aligning the cultures of FuG and Guth with XP, after their acquisition.

Pauline Lafferty, the Non-Executive Director responsible for employee engagement, continues to hold several virtual forums, without
Executive management present, to gain direct feedback from a broad section of the workforce.

101

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

CORPORATE GOVERNANCE REPORT CONTINUED

I am grateful for our employees continued
engagement on the wide range of subject
matters they wish to engage on.

PAULINE LAFFERTY
DESIGNATED NON-EXECUTIVE DIRECTOR
FOR WORKFORCE ENGAGEMENT

How we ensured employees’ voices
were heard on the Board in 2022
During the year, I held four virtual engagement
sessions with a diverse cross-section of our workforce
from across the Company's key locations, representing
several different roles. Each meeting was facilitated
to encourage open debate and the view of the
workforce. I was pleased that attendees fully engaged
with these discussions, which resulted in an open
environment for employees to share their views and
ask any questions they have on any topic, including
executive remuneration and wider pay policy.

These sessions covered a wide range of topics,
including our corporate culture and performance,
as well as what would make XP Power a better
place to work at. Of particular focus throughout
these discussions in 2022 were the ongoing
business challenges and the impact of the prevailing
inflationary environment, and how the Company’s
leadership were ensuring we remain well placed
to navigate these. I am grateful for our employees’
continued engagement on the wide range of subject
matters they wish to engage the Board on.

The output and observations from these sessions,
along with the submissions through the anonymous
employee surveys, were discussed at subsequent
Board meetings. I look forward to continuing to
develop our approach to this over time, for example
by leveraging other available communication
channels to engage with our workforce. The Board
agreed that these engagement sessions will continue
throughout 2023.

How we uphold culture across our
workforce and encourage engagement
We have several processes to ensure the views
of employees are solicited and culture monitored.
ll employees complete the Gallup Q12 survey at
least annually. This is benchmarked against a broad
range of other companies to ensure our culture
and engagement are supportive of our strategy and
growth ambitions.

THE BOARD

AUDIT COMMITTEE

ENGAGEMENT WITH THE
WORKFORCE –

Designated Non-Executive Director,
Pauline Lafferty

LIVE COMMUNICATION MEETINGS

SPECIFIC ANONYMOUS EMPLOYEE
SURVEYS

CONFIDENTIAL, INDEPENDENT
WHISTLEBLOWING HOTLINE

4.2/5

EMPLOYEE
ENGAGEMENT
SCORE LAST YEAR
(2021: 4.2)

102

XP Power Annual Report & Accounts for the year ended 31 December 2022Risk management and internal control
The Board has responsibility for the Company’s overall
approach to risk management. It has an ongoing
process for identifying, evaluating and managing
the emerging and principal risks faced by the Group,
which is set out in the Managing Our Risks section on
pages 50-58. The risk management framework and
processes have been in place throughout the year,
with the framework ensuring that risk management
is embedded in the day-to-day operations of the
business.

One of our key control procedures is the day-to-
day supervision of the business, performed by the
Executive Directors, who are supported by managers
within the Group companies. Examples of key controls
with respect to ongoing processes include:

• Authority matrices are used to clearly define who
can authorise particular transactions, transfer
funds, commit Company resources and enter into
particular agreements.

• Monthly reporting of management accounts
and key metrics to senior management, with
performance measured to budget and material
variances reported to the Board.

• Quality control checks throughout our

manufacturing process, burn-in, electrical testing
to detect early failures, 100% functional testing
and quality inspection.

• Disaster recovery and business continuity plans are
in place at all our key facilities, documented and
communicated to key personnel to help cope with
unexpected events.

• An internal audit and risk assurance programme is

in operation.

Details of the internal controls of the Company and
how the Board and the Audit Committee assess the
operational effectiveness of internal controls and risk
management systems during the year and up to the
date of approval of the Annual Report and Accounts,
are set out as part of the Audit Committee Report on
page 117.

Our Board in action: planning
for the future
How we identified where to expand
our manufacturing capability

The initial strategic decision to locate our third Asia
manufacturing site in Malaysia was reached after
a comprehensive global analysis to identify a new
manufacturing location that considered regions
and countries within a criteria framework. The
framework covered skilled workforce availability,
cost competitiveness, proximity to customers,
manufacturing sector emphasis, legal and regulatory
systems, physical infrastructure quality, sustainability
support, geopolitical risk and supply chain flexibility.
We also wanted to ensure we had geographic
resilience so did not consider Vietnam or China.

We have ensured that sustainability has been
designed into the plans for the new facility and are
building the facility to Greenmark Gold Standard.

How our new manufacturing facility
will support the future of our supply
chain
The Malaysia facility, when fully complete, will have
a total floor space of 27,000m2, c.50% larger than
our Vietnam facility. It will effectively double the
Asian manufacturing capacity which we will scale
over time. The intent is that the facility will be able
to manufacture low voltage, high voltage and RF
products ensuring we have no products only being
produced in one facility, so providing manufacturing
and supply resilience. This will provide the Group with
required flexibility and capacity out beyond 2030.

Fair balanced and
understandable
The Board considers that the Annual Report, taken
as a whole, is fair, balanced and understandable. It
provides the information necessary for Shareholders
to assess the Group’s position, performance, business
model and strategy. To get to this position, the Board
relies on the Audit Committee, who recommends the
Annual Report and Accounts to the Board.

The February 2023 Audit Committee meeting
confirmed that the 2022 Annual Report and Accounts
were true and fair, that the work of the external
Auditor was effective, and that the process supporting
the viability statement was robust. The Board asked
the Executive Directors to provide evidence around
the content and process for preparing the 2022
Annual Report and Accounts at our February 2023
Board meeting.

103

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCECORPORATE GOVERNANCE REPORT CONTINUED

Shareholder communication
The Company enables effective engagement with,
and encourages participation from, Shareholders and
stakeholders in several ways. For institutional and
private investors, the Group engages in two- way
communication, responding quickly to all queries
received. The Group uses its website xppowerplc.
com to give private investors access to the same
information that institutional investors receive,
in terms of investor presentations. This includes
video interviews with the CEO and CFO available
in the morning of the interim and annual results
that are scheduled to be published. The Company
has informational videos on its investor relations
website, which cover products, markets, strategy,
business model, growth drivers and its investment
proposition. During the year, the corporate website
was relaunched, with improved navigation to ensure
information is easily accessible for Shareholders.

Interested parties can register for the Group’s
email alert service on this website to receive timely
announcements and other information published from
time to time.

The Chair and Senior Independent Director are
available to meet Shareholders as required. Board
members receive feedback prepared by brokers or
our financial PR company following meetings with
Shareholders to keep in touch with their opinions.

The Remuneration Committee Chair consults with
major Shareholders regarding significant decisions
on Executive remuneration. During the year, our 20
largest shareholders were consulted on our proposed
Directors’ Remuneration Policy that remains largely
unchanged from the current policy, which will be
voted on at the AGM in April 2023.

Constructive use of the AGM
Certain Directors are available at the AGM to answer
any questions from Shareholders. However, given
that we have a Singaporean Parent Company, we
recognise it is not generally convenient for our UK-
based investors to attend this meeting.

The CEO and CFO are, however, available throughout
the year to answer questions from Shareholders.

Substantial Shareholders
We have safeguards to monitor transactions between
major Shareholders of the Company, including
reviewing our major Shareholders’ holdings on
a quarterly basis and monitoring any regulatory
notifications of the acquisition or disposal of major
Shareholders.

Other than the Directors’ interests, as at 31 December
2022, the Company had been notified, pursuant
to DTR5, of the following interests in voting rights,
attached to ordinary shares and financial instruments
relating to the share capital of the Company:

Abrdn plc

Kempen Capital Mgt

Number of
shares

1,949,167

1,190,000

Mawer Investment Mgt

967,699

The Capital Group
Companies, Inc

Montanaro Investment
Managers

861,669

791,131

% of voting
rights

9.88

6.03

4.93

4.47

4.01

104

XP Power Annual Report & Accounts for the year ended 31 December 2022The following changes in the interests disclosed to the Company have been notified between 31 December
2022 and 24 February 2023:

• On 31 January 2023, Abrdn plc disclosed that their percentage interest in the ordinary shares capital of the

Company has increased to 10.22% (2,015,930 ordinary shares).

Division of responsibilities
The Chair leads the Board and is responsible for its overall effectiveness in directing the Company.

The Chair should demonstrate objective judgement throughout their tenure and promote a culture of openness
and debate. In addition, the Chair facilitates constructive Board relations and the effective contribution of all
Non-Executive Directors, and ensures that Directors receive accurate, timely and clear information.

The role of Chair (James Peters) and CEO (Gavin Griggs) are separate and clearly defined. The Chair is responsible
for the running of Board meetings. The CEO is responsible for the day-to-day running of the Company and the
execution of the strategy.

To ensure the Board is effective, we review and monitor the skillset of Directors. We also ensure there is a clear
division of responsibilities, as set out below.

Chair

RESPONSIBILITIES OF THE BOARD

The Chair sets the calendar and agenda of the Board and facilitates the
discussions. The Chair also initiates and coordinates the processes defined
below, which evaluate the effectiveness of the Board and individual
Directors.

How our Chair promotes a culture of openness

The Chair conducts Board meetings so that the views of all Board members
are sought and welcomed. Open discussion is encouraged. An evaluation
of Board effectiveness is conducted each year. A full evaluation by an
independent party was carried out in 2022.

Executive Directors

Other than their normal attendance and participation in discussions at Board
meetings, the Executive Directors are responsible for the day-to-day running
of the Company and the implementation of the agreed strategy.

Senior Independent Director

The Senior Independent Director supports the Chair in their role. The SID
leads the Non-Executive Directors in the annual evaluation of the Chair and
is also available to Shareholders if they have concerns that contact through
the Chair, CEO or CFO has failed to resolve.

Polly Williams is the Senior Independent Director.

Non-Executive Directors

Other than their normal attendance and participation in discussions at Board
meetings, the Non-Executive Directors actively participate in the review and
determination of the Company’s strategy.

Designated Non-Executive
Director

The designated Non-Executive Director is responsible for engaging with
the workforce and ensuring that their views and interests are considered in
Board discussions and decision making.

Pauline Lafferty is the designated Non-Executive Director for employee
engagement.

Polly Williams is the designated Non-Executive Director for ESG matters.

105

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCECORPORATE GOVERNANCE REPORT CONTINUED

Matters reserved for the Board
These matters are specifically reserved for the Board’s
decision:

• Opinion on the Group’s viability and going concern.

• Approval of strategic plans, financial 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.

• 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.

• Final approval of annual financial statements 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 Chair, CEO and other Executive Directors.

Conflicts of interest and time
commitment
The Board considers its Directors’ interests and
any conflicts that these may present at every Board
and Committee meeting. While it is recognised that
the Chair has significant shareholdings, none of the
Board has any conflict of interest with those of the
Company.

It is important that Non-Executive Directors have
sufficient time to meet their Board responsibilities.
The Non-Executive Directors provided constructive
challenge, strategic guidance, specialist advice and
held management to account during 2022.

No Directors had any significant changes to their
outside commitments during 2022, and each
devoted significant time to their XP Power Board
responsibilities during the year.

All Directors attended all Board meetings during
the year.

Following the Chair’s evaluation of each Director, the
Board is satisfied that all Directors remain committed
to the Company and have devoted the appropriate
amount of time and effort to their role.

Change in Directors’ responsibilities
Jamie Pike joined the Board as Non-Executive
Director and designate Chair on 1 March 2022. He
joined the Remuneration Committee on joining the
Board and the Nomination Committee in July 2022.

Polly Williams took over from Terry Twigger, who
stepped down from the Board at the end of April
2022, as our Senior Independent Director and Chair of
the Audit Committee.

Further to these changes, the Board revisited its
succession plans. After a successful process, two
Non-Executive Directors – Sandra Breene and
Amina Hamidi – were appointed to the Board in
October 2022. Sandra joined the Audit Committee in
December 2022.

Board independence
The Board consists of six Non-Executives, including
the Chair, and three Executives. Of the Non-
Executives, five (83%) are considered independent.
There is clear division of responsibilities between the
Executive and Non-Executive Directors.

The Chair, James Peters, is not considered
independent, based on provision 10 of the Code.
However, the Board’s view is that his material
shareholding in the Company aligns his interests
closely with Shareholders as a whole. This, combined
with his knowledge of the business and industry,
and the fact that there are clear divisions of
responsibilities between the Chair and CEO, means
that this is advantageous to Shareholders and does
not present a problem. James will retire from the
Board at the conclusion of the 2023 AGM in April and
be succeeded by Jamie Pike, who is considered to be
independent based on provision 10 of the Code.

James Peters is the beneficial owner of 1,004,279
ordinary shares in the Company, representing 5.09%
of the issued share capital. Jamie Pike is the beneficial
owner of 3,838 ordinary shares in the Company,
representing 0.02%. No other Non-Executive
Directors hold shares in the Company at this time.

Anti-takeover measures
As a policy, we do not have any devices that would
limit the ability to perform a takeover of XP Power.
This includes devices that would limit share ownership
and/or issue new capital for the purpose of limiting or
stopping a takeover.

Voting
Our capital structure is such that one vote is afforded
per common share.

106

XP Power Annual Report & Accounts for the year ended 31 December 2022G
O
V
E
R
N
A
N
C
E

XP Power Annual Report & Accounts for the year ended 31 December 2022

107

NOMINATION COMMITTEE REPORT

The Board and I have worked with
Jamie Pike throughout the year to
enable a smooth transition for the
role of Chair.

JAMES PETERS
NOMINATION COMMITTEE CHAIR

A review of the Board Diversity and Inclusion Policy
also took place during the year, to reflect the new
Listing Rules pertaining to diversity. Mindful of
relevant guidance in its Non-Executive Director
search, along with feedback from major Shareholders,
we were pleased to have made progress with female
representation of 44% on the Board.

Board succession will remain an ongoing discussion
to ensure we proactively manage and look forward.
Following my retirement from the Board, the
Committee, led by Jamie, will continue reviewing
succession plans.

We will continue to review the strength and depth of
the talent within our Board and business to ensure
we have the relevant capabilities to support the
continued growth of the business.

JAMES PETERS
CHAIR

28 February 2023

COMMITTEE MEMBERSHIP

James
Peters
Chair

Polly
Williams

Pauline
Lafferty

Jamie
Pike

Dear Shareholders
I am pleased to present the Nomination Committee
Report for 2022. The year began with the
appointment of Jamie Pike as Non-Executive Director
and designate Chair on 1 March 2022. This followed a
rigorous process led by the then Senior Independent
Director, Terry Twigger, working with executive search
consultancy firm, Russell Reynolds, and involving
all members of the Board. Subject to approval by
Shareholders, he will take the Chair role following the
AGM in April 2023.

The Board and I have worked with Jamie Pike
throughout the year to enable a smooth transition for
the role of Chair.

Terry stepped down from the Board at the end of
April 2022. At this point, the Committee assessed
the Board’s composition and, as part of a thorough
process, reflected on the skillset and qualities of the
candidates. This led to the appointment of Sandra
Breene and Amina Hamidi on 11 October 2022,
improving the gender balance of our Board.

The Committee has worked with management to plan
their induction programmes, which commenced in
October 2022 and is ongoing.

During the year, the Committee also focused on
governance, including a formal and rigorous externally
facilitated board evaluation, which incorporated
a review of the effectiveness of the Nomination
Committee; no material issues were noted.

108

XP Power Annual Report & Accounts for the year ended 31 December 2022Governance
The Nomination Committee consists of James Peters
(Chair), Pauline Lafferty, Polly Williams and Jamie Pike,
and 75% of the committee are independent Non-
Executive Directors. Terry Twigger stepped down from
the Committee on 29 April 2022.

The CEO will attend meetings on request to present
to or consult for the Nomination Committee where
appropriate.

The Committee assesses the appointment of new
Directors, and all Non-Executive Directors are
involved in the appointment of proposed candidates.
Any appointment of a new Director is voted on by the
whole Board.

Responsibilities
The Committee’s main responsibilities are to:

• review the structure, size and composition of the
Board including skills, knowledge and capabilities;

• review succession planning for Directors and other
senior executives, considering skills and expertise
needed on the Board in the future;

• be responsible for identifying and nominating

candidates to fill Board vacancies;

• review the leadership needs of the organisation,

both Executive and Non-Executive, to ensure the
ability of the organisation to effectively compete in
the marketplace; and

• review the results of the Board performance

The Nomination Committee met formally three times
during the year:

evaluation process that relate to the composition
of the Board and succession planning.

Members

Attendance

James Peters (Committee Chair)

Pauline Lafferty

Polly Williams

Terry Twigger*

3/3

2/2

Jamie Pike*
* Terry Twigger stepped down from the committee on 29 April

1/1

2022, and was replaced by Jamie Pike from 29 July 2022.

The Nomination Committee’s terms of reference
are available on the Company’s website at
xppowerplc.com.

109

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCENOMINATION COMMITTEE REPORT CONTINUED

Composition, succession and evaluation
Board succession
The Committee devoted time to the processes
that led to the appointment of Jamie Pike as Non-
Executive Director and designate Chair on 1 March
2022, and Sandra Breene and Amina Hamidi as Non-
Executive Directors on 11 October 2022. The roles
of Senior Independent Director and Audit Committee
Chair were also considered, with Polly Williams
succeeding Terry Twigger from 29 April 2022.

encourage enhanced disclosures regarding gender
and ethnic diversity at Board level on a ‘comply’ or
‘explain’ basis.

Our Board Diversity and Inclusion Policy was
reviewed during the year and measurable objectives
were revised to support the new Listing Rule
guidance on diversity. Our policy also reflects our
commitment to use open advertising or work with
external executive search firms that have signed up to
the Voluntary Code of Conduct for Executive Search
Firms, to ensure that balanced shortlists are reached.

The Committee is pleased to report that the Board
currently comprises nine members: four are woman
(representing 44% of the Board) and two are
ethnically diverse. The spread of nationalities is seven
British, one Singaporean and one French and Algerian.
The Senior Independent Director is also female. At the
end of the year, the Board was fully compliant with
the recent changes to the Listing Rules guidance on
diversity.

On the Board committees, female representation is:
Remuneration Committee – 67%
Audit Committee – 100%
Nomination Committee – 50%.

Our Board and Company Diversity and Inclusion
policies are available on our website at xppower.com.

Diversity is monitored and analysed on a Groupwide
scale and presented within the Sustainability section
on page 74. The gender balance of our most senior
management, along with our Company Secretary, at
year-end was three women and five men, so 38%
were female.

Board skills and experience
We are committed to having the right blend of skills,
expertise, commitment and experience when selecting
suitable candidates.

Updating the composition of the Board provided the
opportunity to target, and benefit from, additional
skills, expertise and experience. We also wanted to
reflect today’s talent based on our markets, chosen
strategy and business model.

Skills and experience of each Director is set out in
their biography on pages 94-95. Skills include specific
industry, as well as non-specific industry skills, such
as strategic human resource management, business
development and managing growth.

The Committee reviewed succession plans for senior
management positions throughout 2022.

Committee evaluation
As with our other Board committees, we performed
an anonymous online evaluation survey using
an external consultant to gain feedback on the
effectiveness of the Nomination Committee. There
were no significant issues identified in the survey,
with positive results that indicated the Committee
was operating effectively.

Board diversity
The Committee considers that diversity and inclusion
of the Board and Company is not only the right thing
to do; it is crucial to grow our business, innovate,
attract and retain talent, and engage the customers
who buy our power solutions. We operate globally
and recognise cultural differences may exist in
countries we operate in. We recognise that a diverse
workforce reflects our markets and will help us
succeed in them. We will not tolerate any form of
discrimination.

We are committed to equal opportunities in all
employment practices, procedures and policies.
When we hire or promote someone, we choose the
best candidate irrespective of age, disability, gender
reassignment, marital status, maternity, pregnancy,
race, national origin, ethnicity, cultural background,
religion or belief, sex or sexual orientation, or
membership/non-membership of any trade unions.
We apply the same standards when selecting business
partners and appointments to the Board.

Diversity and inclusion at Board level was a focal point
for the Committee in 2022. The Board acknowledges
and welcomes recent changes to the Listing Rules
(see LR 9.8.6R(9) and FCA Diversity Targets 2022).
These align with the updated gender diversity targets
set by the FTSE Women Leaders review, and the
ethnic diversity target set by the Parker review, and

110

XP Power Annual Report & Accounts for the year ended 31 December 2022Board composition
We regularly review the size, structure and composition of the Board to ensure it continues to be effective
in executing our strategy and to deliver sustainable profitable growth over the cycle of the markets we
operate in. We consider that the Board has an appropriate structure and balance of skills and diversity, as
demonstrated below.

Board gender profile

Board age profile

Board tenure

Ethnicity

Male
Female

45–50
55+

51–55

<1 year
4–6 years

1–3 years
7+ years

White
North African

Asian

Appointments to the Board
and Director re-election
Each relevant Director offers themselves for re-
election each year. A simple majority vote at AGM
is required for the re-election of each Director. As
previously announced, James Peters will step down
from the Board at the conclusion of the AGM in
April 2023. The appointment to the Board of Sandra
Breene and Amina Hamidi as Non-Executive Directors
was made on 11 October 2022, both of whom will
offer themselves for election at the forthcoming AGM.

Appointing our new Non-Executive
Directors
OVERVIEW OF CANDIDATE SPECIFICATION
AND SEARCH CRITERIA
In May 2022, the Committee began its search for a
new Non-Executive Director and appointed executive
search firm, Russell Reynolds, to lead the search.
Russell Reynolds has no other connection with the
Company.

A detailed candidate specification was developed
encompassing the desired experience and expertise,
leadership capabilities and cultural fit. It was agreed
that the search should focus on female candidates
with significant operational experience in international
industrial/engineering businesses, which ensured that
our diversity policy was considered from the outset.

Candidate profiles included those who may not
have had previous listed company experience but
possessed suitable skills, experiences or attributes
that complemented the future direction and strategy
of the Company.

A long list of candidates was comprised from various
industries and appraised in June. The Chair and Jamie
Pike interviewed the shortlist and identified two
candidates: Sandra Breene and Amina Hamidi. The
Board decided that there was a strong argument to
recruit both, as together they demonstrated highly
relevant but complementary experience. Sandra brings

with her a deep knowledge of operations, emerging
markets and strategic decision making; Amina brings
her engineering background, international experience
and sustainability focus.

This combination is valuable to the Board for its next
phase of Group development; their appointments also
improved gender and cultural diversity.

2022

MAY
Developing a candidate profile
Candidate profile developed in
collaboration with executive search
firm, Russell Reynolds. Search strategy
agreed and long list of candidates
compiled.

JUNE/JULY
Interviews and assessments
Shortlist of five candidates compiled
and interviewed by the Chair and
Non-Executive Director Jamie Pike.
Shortlist reduced to two candidates.
Both candidates then met with the
remaining Non-Executive Directors,
CEO and CFO.

OCT
Final decision
After interviews of final candidates,
the Nomination Committee met to
discuss and recommend to the Board,
resulting in the appointment of Sandra
Breene and Amina Hamidi.

111

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCENOMINATION COMMITTEE REPORT CONTINUED

Board induction and training
Directors receive an induction programme tailored
to their individual needs, which typically includes
meeting the Executive Leadership team and training
on products and markets. Sandra Breene and Amina
Hamidi joined the Board in October 2022. While
both had board-level exposure, this is their first Board
appointment in a listed company. To commence their
induction process, introductory meetings with our
broker and the chair of the Audit and Remuneration
Committee took place. They received an update on
Board strategy, training with our corporate lawyers
and a site visit to FuG. In addition, Amina attended a
two-day NED course.

An example of a Board induction process is outlined in
the infographic opposite.

Board development in 2022
The Board commenced site visits in 2022 and
spent time at the FuG site, receiving a tour of the
factory and presentations from the FuG and Guth
management team. Members from the Executive
Leadership team presented to the Board around the
SAP Go Live, new product development and strategy.

Development talks by outside parties on governance
and market updates on remuneration also formed part
of the Board’s continuing development.

Board evaluation
The Corporate Governance Code discusses the need
to evaluate the Board, which should cover the Board’s
composition and diversity, and how effectively
members work together to achieve objectives.

An external board evaluation process took place
during the year, adhering to the three-year externally
facilitated cycle. The evaluation process was
undertaken by Learnership Ltd, following a selection
process involving three different service providers
that was overseen by the Board. The Board concluded
that Learnership was best able to deliver an effective
evaluation process given their depth, knowledge and
experience with the Company, while considering
service delivery, cost effectiveness and availability.

Board induction process
STAGE 01

Includes an overview of the structure,
history, strategy, Board procedures, listing
requirements and governance.

STAGE 02

Meeting members of the Executive
Leadership team, and external brokers and
advisers as required.

STAGE 03

Visiting sites as appropriate and access to
videos, to understand the operations of the
business and specific functional areas.

STAGE 04

Understanding what knowledge would be
beneficial to enable the Board to function
more effectively.

STAGE 05

Determining how best to train or impart the
knowledge required.

STAGE 06

Implementation by way of training or
specific virtual site visits with presentations
from the functional areas.

112

XP Power Annual Report & Accounts for the year ended 31 December 2022The terms of engagement were clearly set out
and agreed in writing prior to the review process.
The evaluation process included a confidential
online Board effectiveness questionnaire, which
covered all aspects of effectiveness: capabilities
and communication; culture and practice; process
and organisation; meeting rigour and relationships.
Directors were also asked to comment on what it
should stop doing, start doing and continue doing.
A ‘Board Dynamics’ component was included based
on personality preferences. The results from the
questionnaires were collated, analysed and used to
inform structured one-to-one interviews with each of
the seven Directors on the Board at the time. A Board
effectiveness synthesis with conclusions was then
presented in a report, which Learnership discussed
with the Chair.

Overall, the Company achieved an average favourable
score of 92% across all areas (based on Directors’
individual perceptions of the Board’s effectiveness),
acknowledging that the Board is operating effectively
and in accordance with good corporate governance
principles. A few recommendations were made where
changes could assist the Board’s effectiveness and
oversight of management, and these have been
endorsed by the Board, including advancing the
Company’s strategic thinking with selective use of
scenario planning, assessing leadership capabilities
among senior management and optimising the
structure and content of Board papers.

Learnership was given the opportunity to review the
public statement made by the Company regarding the
Board evaluation process prior to publication.

Following the appointment of two NEDs, and knowing
that the Chair is due to retire at the AGM, the Board
felt it would be useful for Learnership to submit the
two new NEDs to the ‘Board Dynamics’ component
that all existing Board members had undertaken,
to assess personality preferences. The results from
the group profile, excluding the incumbent Chair,
enable sufficient forward visibility of the Board’s
characteristics.

The Board’s evaluation of its committees formed
part of the board evaluation process, using online
reviews to capture responses to assess the Audit,
Remuneration and Nomination Committee. The
results were fed back to the respective Committee
Chair. These were reviewed and discussed by
each committee.

The Chair and Non-Executive Directors regularly meet
without the Executive Directors present, to ensure
that there is an opportunity to discuss potentially
sensitive matters. At least annually, the Senior
Independent Director meets with the Non-Executive
Directors, excluding the Chair, to evaluate the
Chair’s performance.

Board evaluation process
STAGE 01

Online assessment completed by each
Board member. Questions were reviewed
and agreed by the Chair, Company Secretary
and Committee Chairs.

STAGE 02

Independent collation and analysis of online
inputs by external consultant.

STAGE 03

One-to-one interviews with each Board
member and the external consultant,
informed by analysis above.

STAGE 04

A report from the external consultant
identifying Board effectiveness synthesis
with conclusions. The results of the
evaluation report are discussed by the
Board and actions for improvement are
determined.

Board evaluation progress
From the 2021 Board evaluation, while there were
no significant issues or concerns raised, the need to
reconnect in person was identified as being an area of
focus in 2022.

The Board addressed this by ensuring that, once travel
restrictions eased, a site visit to meet the FuG and
Guth teams was arranged.

The visit to FuG was over two days, allowing time
for Board members to interact with members of the
management team on a more informal basis, and the
opportunity to engage with all employees on site.

The audit partner also arranged to travel overseas to
spend time with the business and attend the Audit
Committee in person.

113

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEAUDIT COMMITTEE REPORT

The Audit Committee is satisfied that
the Company has maintained adequate
risk management and internal controls
throughout the year.

POLLY WILLIAMS
AUDIT COMMITTEE CHAIR

COMMITTEE MEMBERSHIP

Polly
Williams
Chair

Pauline
Lafferty

Sandra
Breene

114

Dear Shareholder
Following my appointment of Chair of the Audit
Committee in April 2022, I am pleased to present the
2022 Audit Committee Report. This will provide you
with an insight into our work, the matters handled and
focus of our deliberations during 2022.

During the year, we assisted the Board in fulfilling
its oversight responsibilities, in areas such as the
integrity of financial reporting, effectiveness of the risk
management framework and system of internal controls,
while considering ethics and compliance matters.

As detailed throughout the Annual Report, 2022
continued to be dominated by supply chain
challenges, including component shortages, in a
challenging global environment. Strategic progress
was made with the completion of the acquisition of
FuG and Guth at the beginning of the year.

The Committee maintained good oversight of the
Group’s internal controls, risk management framework
and financial reporting, with the support of its
people, who travelled to sites despite the challenges
of quarantine requirements during the year. The
Committee continues to scrutinise the Group’s
internal control framework and maintain a focus on
optimising the internal audit agenda.

The report aims to provide the following information:

• the Audit Committee’s principal responsibilities

and its governance;

• key activities reviewed by the Audit Committee,
including regular annual review items and other
current areas of focus;

• discussions and actions with the external

Auditor and internal Auditors on any significant
judgements and/or issues; and

• details of the ongoing review of the external Auditor

and the amount of non-audit work undertaken.

We welcomed Sandra Breene as a member of the
Committee at the beginning of December 2022,
following her initial appointment to the Board in
October, bringing the Committee back in line with the
Code recommendation of the minimum number of
members.

I believe that the Audit Committee has the necessary
experience, expertise and financial understanding,
supported by the internal and external Auditors, to
fulfil its responsibilities and continue to monitor and
contribute to ongoing initiatives.

The Audit Committee is satisfied that the Company
has maintained adequate risk management and
internal controls throughout the year, and that the
internal audit programme has been planned and
sufficiently resourced to confirm this.

Following the decision to delay the Audit retender due
to challenges brought by the pandemic and limitations
around travel, I am pleased to report that planning for
this has commenced with the retender process to take
place during 2023.

The Audit Committee has recommended to the Board
that the reappointment of PricewaterhouseCoopers
LLP (PwC) should be proposed at the forthcoming
AGM, and I hope you will support me in this resolution.

POLLY WILLIAMS
AUDIT COMMITTEE CHAIR

28 February 2023

XP Power Annual Report & Accounts for the year ended 31 December 2022Governance
The current Audit Committee members are all independent Non-
Executive Directors and have financial and/or related business
experience from senior positions in other diverse organisations. Polly
Williams has been the Audit Committee Chair since 29 April 2022
and the Board is satisfied that Polly has recent and relevant financial
experience, representing 33% of the current committee membership.

The Audit Committee met four times during 2022, with attendance
as follows:

Members

Polly Williams (Committee Chair)

Pauline Lafferty
Terry Twigger*
Sandra Breene*

Attendance

4/4

1/1

0/0

* Terry Twigger stepped down from the committee on 29 April 2022, and was
replaced by Sandra Breene on 5 December 2022.

Committee evaluation
During the year, the Audit Committee reviewed its performance,
which was facilitated by an anonymous online survey managed by
an independent third party as part of the Board’s updated evaluation
process.

The Committee considered it has adequate qualifications and skills
to perform its responsibilities, particularly through Polly Williams’
financial and audit experience.

The Committee noted that between May and December, it had
two members was not compliant with the Code. During this
time, Non-Executive Director, Jamie Pike, attended the Audit
Committee meetings to maintain the presence and oversight of
three independent NEDs. Overall, the Committee concluded that
its performance was effective in 2022 and that it fulfilled its role in
accordance with its Terms of Reference.

Responsibilities
The Committee is responsible for:

• ensuring the financial performance of the Group is properly

reported and monitored;

• advising the Board on whether it believes the Annual Report and
Accounts, taken as a whole, is fair, balanced and understandable;

• compliance with legal requirements;

• adoption and correct implementation of accounting standards;

• meeting the requirements of the FCA’s UK Listing regime;

• assessing the Group’s internal control processes and assurance

framework;

• reviewing any instances of fraud or whistleblowing;

• supervising the relationship and performance of the external and

internal Auditors; and

• reviewing the nature and extent of audit and non-audit services

provided to the Group by the external Auditor.

The Audit Committee’s Terms of Reference are available in the
Corporate Governance section of the Company’s investor relations
website xppowerplc.com.

Activities
The Audit Committee carried out its functions in accordance with
Section 201B(5) of the Singapore Companies Act 1967. In 2022, the
Audit Committee’s activities included:

• Examining the Annual Report and discussing it with management
and the external Auditor to assess whether the reports, taken
as a whole, were fair, balanced and understandable prior to
recommending these to the Board for approval.

• Reviewing the balance sheet of the Company and consolidated

financial statements of the Group before their submission to the
Board of Directors, as well as the independent Auditor’s report.

• Receiving reports from management and the external Auditor

on the key accounting issues and areas of significant judgement,
reviewing and challenging these areas and the level of disclosure.
See “Significant risks and judgements in the financial reporting”
below for the principal matters discussed.

• Reviewing assistance given by the Company’s management to the

independent Auditor.

• Challenging the assumptions and analysis produced by

management on the Group’s going concern basis of preparation,
the long-term viability statement and associated risk assumptions,
the accounting policies and disclosures, financial reporting issues
and assumptions and adjustments made, including those related
to goodwill and capitalised product development.

• Reviewing any dividend flows across Group entities.

• Reviewing and approving the use of alternative performance

measures in the Annual Report.

• Reviewing and recommending viability statement and going

concern statement to the Board.

• Reviewing the half-year report.

• Evolving the Group’s risk and compliance framework by directing
the outsourced internal Auditor, Deloitte LLP, and reviewing the
work scopes of the target areas.

• Reviewing and approving the internal audit plan.

• Reviewing the findings of the internal audit work and follow-up

of previous year’s reviews.

• Ongoing review of the development and implementation of the

Company’s new ERP system.

• Managing and reviewing the external audit plan, including

receiving updates on delivery of the plan.

• Reviewing reports from the external Auditor on the Group’s

financial reporting and their observations on the internal financial
control environment.

• Reviewing controls and processes following the Comet litigation.

• Reviewing the effectiveness of the Group’s internal controls and
disclosures made in the Annual Report and Financial Statements.

• Review approach taken to the Task Force on Climate-Related

Financial Disclosures (TCFD).

• Assessing the accounting principles to be adopted in the

preparation of the statutory accounts.

• Reviewing any material issues of fraud, whistleblowing and

litigation.

The Audit Committee is satisfied that the Company has maintained
adequate risk management and internal controls throughout
the year.

115

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEAUDIT COMMITTEE REPORT CONTINUED

Consideration of significant financial reporting matters
In relation to the 31 December 2022 Financial Statements, in this report on pages 149-194, the Audit Committee considered the following
topics. These areas are considered significant due to the level of materiality and degree of judgement exercised by management. The
Audit Committee questioned the judgements and estimates made on each significant matter detailed below and resolved that they were
appropriate and acceptable.

SIGNIFICANT MATTERS FOR THE YEAR
ENDED 31 DECEMBER 2022

HOW THE AUDIT COMMITTEE
ADDRESSED THESE MATTERS

CONCLUSION

VALUATION OF
GOODWILL

The carrying value of goodwill
is a material item on the Group
balance sheet and may require
impairment if expected future
benefit of cash-generating units
reduces.

CAPITALISED
PRODUCT
DEVELOPMENT

INVENTORY

VIABILITY
STATEMENT
AND GOING
CONCERN

As part of the Group’s product
development process, direct costs
associated with new products are
capitalised and amortised over
their expected useful life.

The carrying value of these costs
is rising in line with increased
product development as the
business has grown, and requires
judgement over future success
and useful lives of these products.

Inventory levels increased during
the year as the Group responded
to increased demand and delays
in the global supply chain.

The risk of obsolescence and
ongoing control over existence
and completeness of inventory
balances is a key focus for
balance sheet accuracy.

Management prepares a going
concern assessment and viability
statement with consideration
of longer-term forecast cash
flows that consider principal
risks including climate-related
considerations.

SPECIFIC
ONE-OFF
ITEMS AND
ADJUSTED
MEASURES

Adjusted measures are not
reported as part of the financial
statements but are used in the
Annual Report and Accounts to
clarify underlying performance
for users of the accounts by
excluding specific one-off items.

116

Impairment assessments are performed at least
annually by management to generate discounted
cash flows for each cash-generating unit (CGU) and
provide comfort over the balance sheet value.

The Committee challenges the appropriateness of
judgements and forecasts used in management’s
impairment assessment, including the calculation of
discount rates and forecast growth rates.

The Committee assesses a regular review of
revenue streams for capitalised products that have
been released for sale, which is performed and
presented by management.

This enables challenge of performance of new
products compared to expectations, and the impact
of significant projects to overall carrying value.

During the year, the Committee has challenged
the nature of the assets within the smaller value
completed projects. Management performed a
review to understand the nature of the assets and
identify any recoverability risk.

Physical inventory across all sites was validated
through a combination of ongoing cycle counts,
wall-to-wall stock counts and, where appropriate,
sample counts held at year-end. The Committee
reviewed the accuracy of ongoing cycle counts and
targets set by management.

Inventory counts and valuations were reviewed
by management and the external Auditor, and the
results reported to the Committee.

Impairment calculations
indicated that there
remains significant
headroom between
the value in use and
the carrying value. The
Committee was satisfied
that there was no
indication of impairment.

The Committee was
satisfied with the
judgements used
and carrying value of
capitalised product
development.

The Committee was
satisfied that the
counts were conducted
appropriately.

The Committee reviewed the period that viability
should be assessed, and reaffirmed that three years
remains appropriate. They also considered how the
Group’s principal risks should be reflected in the
modelling of sensitivity analysis for liquidity and
solvency.

It reviewed the results of management’s scenario
modelling and the reverse stress-testing of these
models, along with consideration of the Group’s
financing facilities, covenant tests and future
funding plans.

Based on this review, the
Committee confirmed
that the application of the
going concern basis for the
preparation of the financial
statements continued
to be appropriate, and
recommended the approval
of the viability statement,
which can be found on
page 58.

The classification of specific items is reviewed
by the Committee and only includes items of
significant income and expense, which, due to
their size, nature or frequency, merit separate
presentation to allow Shareholders to better
understand the elements of financial performance.

The Committee was
satisfied that the
classification of specific
items was appropriate and
in 2022 included Comet
litigation.

The Committee reviewed items to be included
throughout the year to confirm appropriateness.

XP Power Annual Report & Accounts for the year ended 31 December 2022Fair, balanced and understandable
The Committee considered the Annual Report and half-year report,
on behalf of the Board, to be fair, balanced and understandable,
in accordance with requirements of the UK Corporate
Governance Code.

To assist in this process, the Committee considered comments
from the external Auditors. The Committee also considered the
Group’s use of alternative performance measures, including the
appropriateness of their current use and disclosure in the Financial
Statements and Strategic Report. The Committee concluded that
their current use was fair, balanced and understandable.

Internal control
The Board is ultimately responsible for the Group’s system of
internal controls and ongoing assessment of these; further details
are included in our Risk Management Framework on page 50.

In 2022, the Committee, on behalf of the Board and with assistance
of the internal audit function, monitored, reviewed and assessed the
effectiveness of the Group’s internal control systems and principal
financial risks. The Committee regularly reviewed the outcome of
the audits of key financial controls included in the internal audit
programme. Management also provided the Committee with an
update of key accounting issues and financial controls at each
meeting.

The Committee considered the current approach to controls and
assurance in light of potential future governance requirements,
primarily resulting from the proposals contained in the BEIS paper,
and will continue to review management’s plans in 2023.

Internal audit
The internal audit function, performed by Deloitte LLP, provides
independent and objective assurance of the effectiveness of the
Group’s risk management, control and governance processes. The
Committee reviewed the scope and nature of the internal audit work
performed by Deloitte LLP in early 2023.

In 2022, the Committee reviewed updates to the internal audit plan
to ensure that the internal audit framework remains appropriate in
combination with the Board’s risk monitoring process, which used
it to identify areas for risk assurance work and internal audits to be
carried out.

This included an assessment on the procurement maturity process,
and a review of cybersecurity and cloud governance. The Group has
continued with the controls self-assessments programme covering
all sites. The internal Auditor’s recommendations are assessed by
management and addressed within an agreed timeline.

The recommendations and control observations from the reviews
are rated and presented to the Committee for comment or further
action.

The internal Auditor regularly follows up these actions and informs
the Committee of progress against the agreed timeline.

External audit effectiveness and independence
The Committee assesses audit effectiveness throughout the financial
year. This includes reviewing the detailed audit plan and key audit
risks included in it, amount and composition of resources on the
audit and use of specialists, where appropriate. The Committee
reviewed and agreed issues that arose during the audit and agreed
resolutions with the external Auditor.

The Committee also received feedback from management evaluating
the performance of the external audit teams. Consideration was
given to the quality of the audit, communication and interaction with
the finance teams across the Group. Management concluded that
the relationship with the external Auditor continued to be effective.

The Committee has concluded that the external Auditor and audit
process were effective and that audit teams had provided effective
challenge. The Committee has reported to the Board that the
reappointment of PwC should be proposed at the forthcoming AGM.

The current external Auditor, PwC, was appointed in 2007. In line
with best practice, the audit partner rotated off after five years in
2019 when the current audit partner took over the engagement.

In 2022, following easing of pandemic travel restrictions to
Singapore and the go-live of the Group’s new ERP system, the
Committee concluded that an external audit retender process will
commence in 2023.

The Audit Committee reviews the role and independence of the
external Auditor. A formal statement of independence is received
each year, together with a report on the safeguards in place to
maintain their independence, and internal measures to ensure their
objectivity. With the external Auditor, the Committee discusses
areas where they have challenged management and how any
disagreements have been resolved.

The Committee is satisfied that this independence has been
maintained.

The Committee has formalised its policy and continues to operate an
approved a set of procedures regarding the appointment of external
Auditors to conduct audit and non-audit work. Under this policy:

• the award of audit-related services to the Auditor over £50,000
must be approved by the Chair of the Audit Committee, who, in
their decision to approve, will consider the aggregate of audit-
related revenue already earned by the 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 Auditor over £50,000,
subject to compliance with the EU member state restrictions,
must first be approved by the Chair of the Audit Committee; and

• the award of other non-audit-related services to the Auditor

over £20,000 must first be approved by the Chair of the Audit
Committee.

During the year, non-audit fees of £0.02 million representing 2.7%
of total audit fees (2021: £0.02 million representing 4% of total audit
fees) were paid to the Auditor for review of the 30 June 2022 interim
financial statements.

117

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT

The business and its people have
continued to demonstrate courage,
resilience and dedication.

PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR

COMMITTEE MEMBERSHIP

Pauline
Lafferty
Chair

Polly
Williams

Jamie Pike

(from 29
April 2022)

118

Dear Shareholder
This report sets out details of the Directors’
remuneration in 2022 and how the Remuneration
Committee anticipates operating the new Directors’
Remuneration Policy in 2023.

The Remuneration Committee met on four occasions
during the year. The current Remuneration Committee
members are all independent Non-Executive Directors

Members

Attendance

Pauline Lafferty (Committee Chair)

Polly Williams

Jamie Pike*

4/4

2/2

Terry Twigger*
* Terry Twigger stepped down from the committee on 29 April

2/2

2022, and was replaced by Jamie Pike.

Major activities in the year
Although much of the world returned to near normal
in 2022, we continued to face COVID-19 directly
and indirectly throughout 2022, with lockdowns
continuing across a number of our countries. Most
notably, the five-week lockdown in our Kunshan
facility in China impacted not only our production, but
also resulted in disruption around ports, and tight air
and sea freight supply. This disrupted supply chains,
leading to increased transit times and significant cost
increases, and caused delays to shipments particularly
in H1. Trading performance finished strongly in H2
as supply chain conditions improved. Order intake
remained above historic levels, highlighting robust
end market demand and market share gains in recent
years. Dividends were paused in 2020 for two

quarters but were resumed in 2020 and continued to
be maintained throughout 2021 and 2022.

In addition, annual performance was impacted by a
provision for damages awarded against the Group
following the Comet legal case, along with related
legal costs. While litigation remains ongoing, the
Group has placed collateral of $44 million (£37.0
million) for a court bond against the damages, which
is reflected in cash flow and net debt, on top of the
legal cost.

The business and its people have continued to
demonstrate courage, resilience and dedication. We
have supported customers by continuing to operate,
especially in markets most severely affected by the
pandemic throughout the year.

As a result of the ongoing commitment of our
colleagues, our strong performance in the second half
of 2022 positions us well for 2023. It is particularly
pleasing, therefore, to note the sustained focus by
the business on supporting its employees during
another year of uncertainty, not only in relation to the
persisting impact of the pandemic but also the more
recent cost-of-living pressures being faced by our
workforce globally.

Key remuneration decisions for 2022
ANNUAL BONUS
The annual bonus for 2022 was based on adjusted
profit before tax, adjusted operating cash conversion
measured at each quarter end and the attainment of
strategic goals. The details of the financial measures
and targets and the achievement against them is
shown on page 125.

XP Power Annual Report & Accounts for the year ended 31 December 2022No bonuses were earned for the financial metrics as
the thresholds were not met. The Committee assessed
the strategic objectives set for the executive directors
against the targets set at the start of the year, and
determined that many of the objectives had been
achieved. However, in light of the nil pay-out earned
for the financial objectives, the executive directors
volunteered to waive their bonuses, for which the
Committee is appreciative.

The vesting of the 2020 LTIP award
LTIP awards granted in 2020 vested based on three-
year performance through to the end of 2022, with
vesting based on 3-year cumulative adjusted EPS
growth (for 67% of the award) and relative Total
Shareholder Return (for 33%).

• The EPS target range was 523.4p to 586.0p, with

an actual EPS outcome of 534.8p, resulting in 39%
vesting of the EPS portion of the awards.

• Our relative TSR performance was below median,
resulting in zero vesting of the TSR portion of the
awards.

The overall percentage of vested shares was 25.90%
of the total award. The shares vest five years after the
grant date.

The 2023 Directors’
Remuneration Policy
The current Directors’ Remuneration Policy (the
“Policy”) will reach the end of its three-year term at
the 2023 AGM; therefore, the Committee spent time
during 2022 considering potential changes to the
Policy to meet the needs of the business and ensure
that we continue to attract, retain and motivate
talented executives.

The Policy has been shaped by several competing
priorities including the intense labour pressures in
all our markets, our continuing strong growth and
performance, and the successful embedding of our
acquisitions in Germany.

Concurrently, COVID continues to present challenges
and uncertainties for our facilities in Asia, our
continuing investment in production capabilities
coupled with unpredictable supply chains and
escalating production costs.

The changes made to the Policy and pay of Executive
Directors over recent years have been, in our view,
sensible, as well as necessary, as we have performed
and grown. The annual award levels under the LTIP
and the Restricted Share Plan remain below the
Policy maxima for both the CEO and CFO. In addition,
the CEO’s total pay remains below that of CEOs at
companies of a similar size. We think the current
Policy will continue to serve us well and hence are
proposing no substantial changes for 2023.

The Committee’s review process included
consultation with our 20 largest shareholders, whose
feedback helped to inform our final decisions. Most
respondents were supportive of our Policy, with a
couple seeking clarification about the nature and

extent of the shareholding requirements for our
executives. We have ensured that our new Policy
clearly identifies the arrangements that are already in
place – namely, that Executive Directors are required
to build a minimum shareholding equivalent to 200%
of base salary within five years of appointment,
and maintain this shareholding for one-year post-
cessation and half of this shareholding for a further
year. Furthermore, 50% of any bonus achieved is
deferred into a share-based award for two years,
while restricted share-based awards vest after five
years from the date of grant. Though performance
is measured over three years, LTIP awards are also
subject to a five-year overall vesting period from the
grant of award. We believe that, in combination, these
arrangements provide close alignment between the
interests of Executive Directors and Shareholders over
the long term.

One Shareholder, who opposed the Policy in
2020, suggested that they continue to oppose the
combination of performance and time-based equity
awards in our long-term incentive arrangements.
The Committee understands that it is unusual to mix
performance and restricted shares for Executives at
FTSE-listed companies, but continues to feel that this
is the right approach for XP Power, particularly since
the combination of performance and restricted share
awards is for employees at all levels in the US, a major
talent market for XP Power; extending this practice
to our UK-based Executive Directors creates further
alignment between the Executives and below-Board
employees, and ensures that all key management
personnel are treated fairly and encouraged to pull in
the same direction. In this context, the relatively small
size of the restricted award to Executive Directors
(12.5–15% of salary) means that most of their variable
remuneration remains performance based.

Decisions effective from 2023
The Committee has proactively tracked wage inflation
in each of our operating markets throughout 2022;
and used this to inform salary increase proposals
in April 2023 for all employees. In this context, a
tiered approach to salary increases has been adopted
for 2023, with the intention for those on lowest
salaries to receive higher percentage increases,
up to 8%, around an average of 5% (to reflect the
increased pressure the cost-of-living crisis places
on these employees) to 2-4% for our most senior
executives. The Committee has also adopted a
consistent approach in reviewing the base salaries
for the Executive Directors and approved increases
of 0-3.6%, in line with other senior executives and
significantly below the increases awarded to the
majority of employees in the UK and Singapore (5%
on average). The Remuneration Committee felt that
these modest increases were appropriately aligned
with our approach for the wider workforce, recognise
the continued strong leadership of our Executive
Directors, and ensure that our arrangements keep
pace with salaries elsewhere in our highly competitive
talent markets .

119

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

The metrics for the annual bonus will remain broadly
unchanged, with pay-out based on adjusted PBT,
adjusted operating cash flow as a percentage of
adjusted operating income and strategic objectives.

The Committee intends to award performance
shares with a face value of 100% of base salary, and
restricted shares with a face value of 12.5% of base
salary to Gavin Griggs and Oskar Zahn, with awards
to Andy Sng of 75% and 15% of salary respectively.
When determining these award levels, the Committee
considered the number of awards that would be
granted due to the share price. The Committee
decided that it was appropriate to continue granting
at normal levels but will continue to monitor expected
and final outcomes, using its discretion to make
adjustments if necessary. The awards remain subject
to a combination of EPS and relative TSR measures as
set out on page 123.

How we ensured employees’ voices
were heard at Board level in 2022
During the year, I held four virtual engagement
sessions with a diverse group of employees from
across the Company's key locations, in my capacity
as both Chair of the Remuneration Committee and
designated NED for employee engagement. These
sessions allowed employees to share their views and
ask questions they have. Topics covered included
our corporate culture and performance, as well what
would make XP Power a better place to work at. Of
particular focus throughout these discussions in 2022
were the ongoing business challenges and the impact
of the prevailing inflationary environment, and how
the Company’s leadership were ensuring we remain
well placed to navigate these.

This feedback, along with the submissions through
the anonymous employee surveys, were discussed at
subsequent Board meetings. Employees are also able
to ask questions or share perspectives on the subject
of remuneration and, while no specific feedback
was received on this subject in 2022, these would
be considered by the Remuneration Committee and
inform its decision making around executive pay.

Remuneration resolutions at the
2023 AGM
In addition to presenting our proposed Remuneration
Policy (which remains substantially unchanged from
the current Policy) and Report to shareholders at the
AGM in 2023, we are also seeking approval for new
share plan rules applying only to senior managers
below Board level. These remain largely unchanged
from the previous rules, but with added flexibility to
allow awards to vest in tranches, phased over multiple
years, which the Committee considers is important
to enable the Company’s effective recruitment and
retention in various geographic markets; it should
be noted that these rules will not apply to Executive
Directors.

The views of our Shareholders are important to
us, and I hope that you will support all three of
our remuneration-related resolutions. If you have
any questions or comments, I can be reached at
ir@xppower.com.

PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR

28 February 2023

120

XP Power Annual Report & Accounts for the year ended 31 December 2022REMUNERATION AT A GLANCE

Context to major decisions
and activities in the year

Achievements during
the year

Key remuneration decisions
for 2022 and 2023

• Absolute share price performance /
relative TSR against the FTSE 250

• Received record order levels

• no bonus was paid for 2022.

• Completed acquisition of FuG

• 25.90% of shares vested under the

• Profits/revenue performance

and Guth

2020 LTIP.

• Operating cash conversion

• Significant progress in building a more

performance

• Rising wage inflation

robust supply chain

• Executive Directors’ base salaries will
increase between 0% and 3.6% from
1 April 2023.

SEE PAGES 118–119
FOR MORE INFORMATION

SEE PAGE 118
FOR MORE INFORMATION

SEE PAGES 118-120
FOR MORE INFORMATION

Total Remuneration receivable
for Executive Directors (£’000)

Achievement of performance conditions under the
2022 annual bonus

GAVIN GRIGGS

128

730

OSKAR ZAHN

ADJUSTED OPERATING CASH CONVERSION (25%)

ANDY SNG

44
Threshold
33
On-target

Maximum

512

90%

100%

10
10

110%

244

537

Actual

42%

412

179

GAVIN GRIGGS

OSKAR ZAHN

ADJUSTED PROFIT BEFORE TAX (50%)
ANDY SNG

128

730

512

Threshold

On-target

10
10

Maximum

244

£47.2m

£52.4m

£57.6m

537

412

Actual

179

£38.0m

SEE PAGE 125
FOR MORE INFORMATION

GAVIN GRIGGS

OSKAR ZAHN

ANDY SNG

128

730

512

537

412

10
10

244

179

Base salary
Pension

Benefits
Long-term incentives

Andy Sng’s adjusted profit before tax targets are set with
reference to divisional, rather than Group, performance.
Performance against these targets resulted in nil pay-out
of this element as the threshold was not met.

TSR (33%)

Median

Upper
quartile

39th
percentile

50%

70%

39%

SEE PAGE 129
FOR MORE INFORMATION

121

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

REMUNERATION COMMITTEE REPORT CONTINUED

This table summarises the key components of the Directors’ Remuneration Policy set out on pages 132-138, which is subject to approval by
Shareholders at the AGM on 18 April 2023, and how the Committee intends to implement the Policy in 2023.

COMPONENT

SUMMARY OF POLICY

OPERATION IN 2023

Base salary

Base salaries are reviewed annually.
Increases will not normally exceed the
range of increases awarded to other
employees within the Group.

The Remuneration Committee may
also increase a Director’s salary if
there is a change in their role, the
scale or complexity of the business
or if significant changes to market
practice arise.

The Remuneration Committee undertook its regular review of Executive
Directors’ base salaries, with increases due to take effect from 1 April 2023.

• Gavin Griggs’ base salary will increase from £550,000 to £570,000 (an

increase of 3.6%)

• Andy Sng’s base salary will increase from S$312,000 to S$320,000 (an

increase of 2.6%)

• Oskar Zahn’s base salary will not change from £416,000

As set out in the Annual Statement, these modest increases are consistent
with the approach for other senior executives, and significantly lower than
the average increase awarded to the wider workforce. These increases are
considered appropriate in the context of the continued strong leadership of
our Executive Directors and ensuring that our arrangements keep pace with
our highly competitive talent markets.

Benefits

Pensions

Annual bonuses

Benefits are set by the Remuneration
Committee and reviewed annually.

Benefits include life insurance, private medical cover, car, allowance, and
housing allowance in China for Andy Sng.

Executive Directors’ pension
contributions are in line with pension
benefits offered to the wider workforce
in the relevant geography, which is
currently 8% in the UK.

The maximum bonus opportunity is
125% of base salary for the CEO and
100% for other Executive Directors. 50%
of any annual bonus is deferred in shares,
which vest after two years, subject to
continued employment.

Specific targets and weightings may vary
according to strategic priorities and may
include:

• Financial performance; and

Gavin Griggs and Oskar Zahn receive a pension contribution of 8% of base
salary. Andy Sng receives a pension contribution of 6% of salary, in line with
the pension benefits offered to employees in Singapore.

For 2023, the maximum bonus opportunity will be capped at 125% of salary
for the CEO and 100% for other Executive Directors, with on-target pay-outs
of 50% of maximum.

Bonuses will continue to be based on a combination of financial and
strategic performance measures. These targets are considered commercially
sensitive so will not be disclosed prospectively. The targets and performance
achieved against these will be published in next year’s Annual Report on
Remuneration. The performance measures that will apply are:

• Adjusted profit before tax (50%)

• Adjusted operating cash flow as a percentage of adjusted operating

• Attainment of personal and strategic

income (30%)

objectives.

• Strategic objectives (20%)

Andy Sng’s strategic performance objectives are set with reference to
divisional performance and largely reflect the priorities set out for Gavin
Griggs and Oskar Zahn.

122

XP Power Annual Report & Accounts for the year ended 31 December 2022COMPONENT

SUMMARY OF POLICY

OPERATION IN 2023

Share-based
incentives

Share-based incentives are made up of
a Long-Term Incentive Plan (LTIP) and a
Restricted Share Plan (RSP).

The normal maximum award level
under share-based incentives is 150%
of base salary or up to 200% of base
salary in exceptional circumstances. Up
to a maximum of 15% of base salary
may be granted as restricted shares
without performance conditions. In
calculating value against the limit for
share-based incentives, the value of
restricted share awards will be multiplied
by two to reflect that they do not have
performance conditions attached.

LTIP performance is typically measured
over three financial years starting with
the year of grant, and vesting occurs on
the fifth anniversary from the date of
grant.

RSP awards may be granted without
performance conditions.

Non-Executive
Directors' Fees

Fees are set at a level that is sufficient to
attract, motivate and retain quality Non-
Executive Directors. Fees are reviewed
periodically. Non-Executive Directors are
not entitled to participate in the Group’s
incentive plans.

In 2023, the Remuneration Committee anticipates granting the following
awards:

Name

Gavin Griggs

Oskar Zahn

Andy Sng

LTIP award
(% of salary)

RSP award
(% of salary)

100%

75%

12.5%

15.0%

The LTIP awards will vest subject to a combination of (i) cumulative diluted
adjusted EPS performance and (ii) TSR performance compared with the TSR
of companies in the FTSE 250 excluding investment trusts, both measured
over three financial years. The performance targets for the EPS metric were
still being considered by the Committee at the time of publication but will
be disclosed at the time of the awards. The targets for the TSR element
continue to be as below:

TSR vs FTSE 250 ex
investment trusts
(33% of maximum)

Upper quintile
(80th percentile) or above

Median (50th percentile)

Vesting

100%

25%

Below median

No vesting

Vesting between threshold and maximum will be measured on a straight-
line basis.

On 1 March 2022, XP Power announced the appointment of Jamie Pike as
a Non-Executive Director and designate Chair, with the intention that he
would support the transition of the current Chair of the Board and then,
subject to the required approvals, succeed James Peters as Chair from the
conclusion of the Company’s AGM in 2023. From that point onwards, it is
intended that Jamie Pike will receive an all-inclusive annual fee of £220,000.
As discussed in last year’s Annual Report on Remuneration, the fee that
James Peters currently receives is materially below the Chair fees offered
at other UK-listed companies of a similar size; this is due to his significant
shareholding in XP Power, meaning he has elected to receive the same fee as
the Senior Independent Director. Jamie Pike is not a major shareholder in the
Company, and the Committee has therefore set his fee at a more market-
typical level, believing it to be both competitive and reasonable, reflecting
the complexity of the role and time commitment involved.

Chair’s fee

Base fee

Additional fee for chairing a Committee

Additional fee for acting as Senior
Independent Director

Additional fee for extra responsibility*

Fee from
1 April 2022

Fee from
1 April 2023

£60,000

£50,000

£5,000

£220,000

£50,000

£5,000

Fees for the Non-Executive Directors were reviewed by the Chair of the
Board, the designate Chair and the Executive Directors in February 2023,
and no change to the base fee is proposed during 2023. In accordance with
the Singapore Companies Act 1967, a total capped amount of fees for Non-
Executive Directors will be proposed at the forthcoming AGM.

* Extra responsibilities include acting as designated NED for workforce engagement or as

Board representative on an executive committee.

123

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

Annual report on remuneration
Single total figure of remuneration
The table below shows the total remuneration receivable for each Executive Director for the financial year ended 31 December 2022 and
December 2021 respectively.

£’000

Executive Directors
Gavin Griggs

Oskar Zahn1

Andy Sng

2022

2021

2022

2021

2022

2021

Chair and Non-Executive Directors
James Peters

2022

Pauline Lafferty

Polly Williams

Terry Twigger

Jamie Pike6

Sandra Breene

Amina Hamidi

2021

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Salary/fees

Benefits2

Pension

Total fixed
pay

Annual
bonus3

Share-based
incentives4,5

Total
variable pay

537

492

412

267

179

158

–

602

547

468

303

199

196

–

459

–

182

–

105

–

128

205

–

128

664

243

171

–

Total

730

1,211

512

546

244

367

–

1 Oskar Zahn was appointed CFO with effect from 4 May 2021 and to the Board with effect from 20 May 2021. Total remuneration for Oskar in 2021 reflects pay for the

portion of the year that he was an Executive Director.

2 Benefits include life insurance, private medical cover, car allowance, and housing allowance in China for Andy Sng.
3 The value of the annual bonus represents performance over the relevant financial year: 50% of the pay-out is deferred into shares. Further details of the 2022 annual bonus,

including performance measures, actual performance and bonus pay outs, can be found on page 125.

4 The value of share-based incentives for 2022 represents
i.

for Gavin Griggs and Andy Sng, the performance-based LTIP awards granted on 22 April 2020 with performance measured over three financial years to 31 December 2022,
based on the three-month average share price to the year-end of £18.8525 and dividend equivalents payable to this date,

ii.

for Gavin Griggs, Oskar Zahn and Andy Sng, the value at grant of the restricted share awards granted on 8 March 2022 based on a share price of £36.00. The values shown
for Gavin Griggs and Andy Sng include the impact of a decline in the share price and dividend equivalent payments on the April 2020 LTIP equal to £(26,000) and £(8,000)
respectively. The value of the April 2020 LTIP will be updated in next year’s Directors’ Remuneration Report to reflect the updated share price and dividend equivalent
payments. Further details of the LTIP, including performance measures, actual performance and vesting can be found on page 126. Further details of the 2022 RSP can be
found on page 126.

5 The value of share-based incentives for 2021 represents (i) for Gavin Griggs and Andy Sng, the performance-based LTIP awards granted on 16 March 2019 with performance
measured over three financial years to 31 December 2021, and (ii) for Gavin Griggs and Andy Sng, the value at grant of the restricted share awards granted on 3 March 2021
based on a share price of £51.80. The vesting of March 2019 LTIP awards was based on three-year performance to 31 December 2021. 50% of the performance-vested
awards vested on 16 March 2022 and the remaining 50% will vest on 16 March 2023. The value of these awards reflects the share price on vesting of £38.00 for the half of
the award that vested on 16 March 2022; the three-month average share price to 31 December 2022 of £18.8525 to estimate the value at vesting of the remaining 50% of
the award; and dividend equivalents payable to 31 December 2022.

6 Jamie Pike joined the Board on 1 March 2022 as a Non-Executive Director and designate Chair.

124

XP Power Annual Report & Accounts for the year ended 31 December 2022Notes to the single total figure table
BASE SALARY IN THE YEAR ENDED 31 DECEMBER 2022
Executive Directors’ base salaries are reviewed by the Remuneration Committee with effect from 1 April each year and when an individual
changes position or responsibility. Changes in Executive Directors’ base salaries during the year are:

Gavin Griggs
Oskar Zahn1
Andy Sng

Base salary
from 1 April
2021

£500,000

£400,000

Base salary
from 1 April
2022

£550,000

£416,000

S$300,000

S$312,000

Percentage
increase

+10%

+4%

1 Oskar Zahn was appointed as CFO with effect from 4 May 2021, with a base salary of £400,000.

PENSIONS IN THE YEAR ENDED 31 DECEMBER 2022
Executive Directors’ pension contributions are aligned to those offered to all employees in their respective countries of employment. This is
8% of base salary for UK Executive Directors and 6% of base salary for Andy Sng, who is based in Singapore.

ANNUAL BONUS IN THE YEAR ENDED 31 DECEMBER 2022
The maximum annual bonus opportunity in 2022 was 125% of base salary for the CEO and 100% of base salary for other Executive Directors.
The table below summarises performance against the Group performance targets set by the Remuneration Committee for the year.

Adjusted profit before tax1
Adjusted operating cash conversion2
Strategic objectives

Threshold
(25%)

£47.16m

90%

On-target
(50%)

£52.4m

100%

Maximum
(100%)

£57.64m

110%

Weighting

50%

25%

Actual

% achieved

£38.0m

42%

1 Andy Sng’s adjusted profit before tax targets are set with reference to divisional performance, and the targets are commercially sensitive. Performance against these targets

resulted in 0% of maximum becoming payable for this element of his annual bonus.

2 Calculated as adjusted operating cash flow as a percentage of adjusted operating profit measured at the end of each quarter and the average performance taken. This is to

ensure cash conversion is an ongoing focus throughout the year. The full-year adjusted operating cash conversion was 42%.

The Committee assessed the strategic objectives set for the executive directors against the targets set at the start of the year, and determined
that many of the objectives had been achieved. However, in light of the nil pay-out earned for the financial objectives, the executive directors
volunteered to waive their bonuses, for which the Committee is appreciative. The strategic objectives covered several categories, including:
key strategic objectives, ESG, people, supply chain management, finance team efficiencies, and treasury/forecasting improvements; the
Committee prefers not to provide any more disclosure around these objectives, in light of the commercial sensitivities around their precise
description, and the nil payout against them.

125

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE
REMUNERATION COMMITTEE REPORT CONTINUED

Long-term incentive awards vested or due to vest with respect to performance
in the year ended 31 December 2022
2020 LTIP AWARDS
The 2020 LTIP awards granted on 22 April 2020 were measured over three financial years from 1 January 2020, based two-thirds on
compound annual EPS growth and one-third on TSR compared with companies in the FTSE 250 index excluding investment trusts. The table
below summarises performance against the performance targets.

EPS growth

TSR

Total

67%

33%

Weighting Threshold (25%)

523.4p

Maximum
(100%)

586.0p

Actual

534.8p

Median Upper quintile Below median

% achieved

38.66%

25.90%

Shares under this award will vest on 22 April 2025, with performance measured over the three financial years ended 31 December 2022.

Date of grant

Type of award

Number of
shares awarded

% vesting

Dividend
equivalent
payments per
share¹

Number of
shares vested
or due

Value of shares
vested or due to
vest¹

Gavin Griggs

22 April 2020

Andy Sng

22 April 2020

Nominal-cost
options

10,453

25.90%

3,236

25.90%

£2.26

2,708

£57,124

839

£17,684

1 The value of share-based incentives represents LTIP awards that vest with respect to performance periods ending during the year. As these awards were not due to vest until
April 2023, the value of these has been estimated using the average share price in the last three months of 2022, being £18.8525, and an estimate of dividend equivalents.

Scheme interests awarded in the year ended 31 December 2022
The following awards were granted to Executive Directors in 2022:

Face value of
award

Number of
shares awarded

End of
performance
period

Gavin Griggs

8 March 2022

LTIP 2017 Nominal-cost options

Date of grant

Plan¹

Type of award

Oskar Zahn

8 March 2022

LTIP 2017 Nominal-cost options

8 March 2022

RSP 2020 Nominal-cost options

8 March 2022

DBP 2017

Nil-cost options

8 March 2022

RSP 2020 Nominal-cost options

8 March 2022

DBP 2017

Nil-cost options

£549,972

£68,724

£229,356

£415,980

£51,984

£91,044

Andy Sng

8 March 2022

LTIP 2017 Nominal-cost options

£131,004

8 March 2022

RSP 2020 Nominal-cost options

8 March 2022

DBP 2017

Nil-cost options

£26,172

£52,560

15,277

31/12/2024

1,909

6,371

n/a

11,555

31/12/2024

1,444

2,529

3,639

727

1,460

n/a

31/12/2024

n/a

2 2022 awards were granted under the LTIP 2017, RSP 2020 and DBP 2017 based on the mid-market share price for 7 March 2022, being £36.00.

126

XP Power Annual Report & Accounts for the year ended 31 December 2022Long-term incentive measures and targets
The performance targets for the 2021 and 2022 LTIP awards are summarised below.

Earnings per share Operation

Cumulative EPS over three financial years

Threshold (25% vest)

Maximum (100% vest)

576.7p

645.9p

580.5p

650.2p

Total shareholder
return

Operation

Relative TSR compared with that for the
constituents of the FTSE 250 index

2021 award (67% EPS and 33% TSR)

2022 award (67% EPS and 33% TSR)

Threshold (25% vest)

Maximum (100% vest)

(excluding investment trusts)

Median (50th percentile)

Upper quintile (80th percentile)

Awards of restricted shares that were granted to Executive Directors in 2022 are not subject to performance conditions on vesting.

Directors’ shareholding and share interests
A shareholding guideline applies to Executive Directors, which requires them to build and maintain a shareholding equal to 200% of base
salary. The guideline will continue to apply in full for one-year post-cessation, with 50% of the guideline level (100% of base salary) applying
for a second year. Deferred bonus shares, restricted shares, vested share options and LTIP shares that are still in their holding period will be
counted against these requirements on a net of tax basis.

The table below summarises the Directors’ beneficial interests (including that of their connected persons) in the Company’s shares:

Beneficially
owned
shares at
31 December
2021

Beneficially
owned
shares at
31 December
2022

Unvested
Deferred
Bonus shares

Interest in share awards

Unvested RSP
awards and LTIP
awards for which
the performance
period has
completed

Unvested
LTIP awards
for which the
performance
period is in
progress

Vested but
unexercised
Deferred
Bonus, RSP
and LTIP
awards

Executive Directors
Gavin Griggs

Oskar Zahn

Andy Sng

–

24,000

8,252

–

30,723

9,473

2,529

2,786

9,407

2,647

3,074

24,929

19,579

5,569

Chair and Non-Executive Directors
1,004,279
James Peters

Jamie Pike
Terry Twigger1
Polly Williams

Pauline Lafferty
Sandra Breene2
Amina Hamidi2

–

1,004,279

3,838

–

Shareholding
guideline
(% of salary)

Shareholding
guideline met?

200%

Building

Met

n/a

1 Terry Twigger stepped down from the Board with effect from 29 April 2022. The beneficially owned shares shown for Terry represent his shareholding at the 29 April 2022.
2 Sandra Breene and Amina Hamidi joined the Board on 11 October 2022.

127

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

The table below summarises the outstanding share awards for Gavin Griggs:

Date of grant

2017 LTIP
01/11/17

16/03/19

22/04/20

03/03/21

08/03/22

2020 RSP
22/04/20

03/03/21

08/03/22

Deferred Bonus
02/03/18

06/03/19

04/03/20

04/03/21

08/03/22

Exercise
price

Interest as at
31/12/21

Granted
in the year

Forfeited
in the year

Exercised in
the year

Interest as at
31/12/22

Vesting date1

Expiry date

£0.01

–

8,000

13,659

10,453

9,652

–

15,277

1,307

1,206

–

515

4,349

471

3,102

–

1,909

–

6,371

–

(9,106)

(8,000)

(2,276)

–

(515)

(4,349)

(471)

–

2,277

10,453

9,652

15,277

1,307

1,206

1,909

–

3,102

6,371

31/12/20

16/03/22

22/04/25

03/03/26

08/03/27

22/04/25

03/03/26

08/03/27

31/12/19

31/12/20

28/02/22

26/02/23

28/02/24

31/12/22

16/03/24

22/04/26

03/03/27

08/03/28

22/04/26

03/03/27

08/03/28

–

1 LTIP awards granted in 2017 and 2019 vest 50% after three years, and 50% after four years; the vesting date shown in the column reflects the first vest date.

This table summarises the outstanding share awards for Oskar Zahn:

Date of grant

Exercise price

Interest as at
31/12/21

Granted
in the year

Forfeited
in the year

Exercised
in the year

Interest as at
31/12/22

Vesting date

Expiry date

2017 LTIP
10/05/21

08/03/22

2020 RSP
10/05/21

08/03/22

Deferred Bonus
08/03/22

£0.01

–

8,024

–

1,203

–

11,555

–

1,444

2,529

–

8,024

11,555

10/05/26

08/03/27

10/05/27

08/03/28

1,203

1,444

10/05/26

08/03/27

10/05/27

08/03/28

2,529

28/02/24

–

This table summarises the outstanding share awards for Andy Sng:

Date of grant

Exercise price

Interest as at
31/12/21

Granted
in the year

Forfeited
in the year

Exercised
in the year

Interest as at
31/12/22

Vesting date1

Expiry date

2012 Share Options
23/02/16

£15.425

2017 LTIP
16/05/18

16/03/19

22/04/20

03/03/21

08/03/22

2020 RSP

22/04/20

03/03/21

08/03/22

Deferred Bonus
06/03/19

04/03/20

04/03/21

08/03/22

£0.01

–

2,591

4,878

3,236

1,930

–

3,639

405

289

–

1,389

1,931

1,326

–

727

–

1,460

–

(3,252)

–

23/02/20

23/02/26

(2,591)

(812)

–

(1,389)

(1,931)

–

814

3,236

1,930

3,639

405

289

727

–

1,326

1,460

16/05/21

16/03/22

22/04/25

03/03/26

08/03/27

22/04/25

03/03/26

08/03/27

31/12/20

28/02/22

26/02/23

28/02/24

16/05/23

16/03/24

22/04/26

03/03/27

08/03/28

22/04/26

03/03/27

08/03/28

–

1 LTIP awards granted in 2018 and 2019 vest 50% after three years and 50% after four years; the vesting date shown in the column reflects the first vest date.

128

XP Power Annual Report & Accounts for the year ended 31 December 2022The closing share price of the Company’s shares at 31 December 2022 was £20.35 (31 December 2021: £51.00) and the price range
fluctuated between £14.64 and £52.50 over the financial year.

Payments to past directors
Duncan Penny stepped down as CEO on 31 December 2020 and stood down from the Board with effect from 20 April 2021. He ceased to be
an employee at the end of May 2022. The Committee determined that he would be treated as a good leaver and the treatment of unvested
awards is set out below:

LTIP
• The second tranche of his March 2018 LTIP award vested in accordance with the plan rules in May 2022, with options over 5,079 ordinary
shares in the Company becoming exercisable. This award was subject to performance conditions ending 31 December 2020 as previously
disclosed.

• The first tranche of his March 2019 LTIP award vested in accordance with the plan rules in March 2022, with options over 3,170 ordinary

shares in the Company becoming exercisable. The second tranche of this award vested on Duncan Penny’s date of cessation as an
employee at the end of May 2022, with options over 3,171 ordinary shares in the Company becoming exercisable. These awards were
subject to performance conditions ending 31 December 2021 as in last year’s report.

• The 2020 LTIP award, due to vest in April 2025, was assessed against the same performance conditions ending as for other Executive

Directors set out on page 126 and will result in 25.90% options over ordinary shares in the Company becoming exercisable on the original
vesting date. This award is subject to time pro-rating.

RSP
• The 2020 RSP award is due to vest in 2025 and will be subject to a pro-rated reduction and a six-month exercise period, with options over

1,263 ordinary shares in the Company becoming exercisable on the original vesting date.

DBP
• The 2019 DBP award vested in February 2022, with options over 657 ordinary shares in the Company becoming exercisable.

• The 2020 DBP award vested on Duncan Penny’s date of cessation as an employee at the end of May 2022, with options over 4,256

ordinary shares in the Company becoming exercisable within 12 months from the vesting date.

Payments for loss of office
There were no payments for loss of office.

Assessing pay and performance
This chart shows the total shareholder return for XP Power since 31 December 2012 compared with that of the FTSE 250 (excluding
investment trusts), rebased at 100.

800

700

600

500

400

300

200

100

0
0
1
o
t
d
e
s
a
b
e
r

n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S

a
t
o
T

)

(

2
1
0
2
r
e
b
m
e
c
e
D
1
3
t
a

XP Power Ltd

FTSE Mid 250
Excluding Investment Trust Index

2
1
0
2
/
2
1
/
1
3

3
1
0
2
/
2
1
/
1
3

4
1
0
2
/
2
1
/
1
3

5
1
0
2
/
2
1
/
1
3

6
1
0
2
/
2
1
/
1
3

7
1
0
2
/
2
1
/
1
3

8
1
0
2
/
2
1
/
1
3

9
1
0
2
/
2
1
/
1
3

0
2
0
2
/
2
1
/
1
3

1
2
0
2
/
2
1
/
1
3

2
2
0
2
/
2
1
/
1
3

Source: Reﬁnitiv Datastream

This table shows total remuneration, annual bonus outturn and long-term incentive outturn for the CEO over the same period.

2013

2014

2015

2016

2017

2018

2019

2020

2021¹

2022

CEO total remuneration
(£’000)

Annual bonus (% of
maximum)

Long-term incentives (% of
maximum)

£271

£310

£800

£531

£684

£562

£1,357

£1,211

£730

n/a

15%

27%

100%

71%

11%

98%

73%

n/a

81%

n/a

80%

81%

33%

26%

1 Data in the table is relevant to Duncan Penny up to 2020, and then Gavin Griggs from 2021.

129

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCE

REMUNERATION COMMITTEE REPORT CONTINUED

Context for Directors’ remuneration
While the Remuneration Committee has not engaged directly with employees on how Executive remuneration aligns with the wider
pay policy, the Board has engaged through employee focus groups as outlined on page 120. The Remuneration Committee Chair acts as
the designated Non-Executive Director for employee engagement and, to the extent employees wish to discuss executive pay, they are
encouraged to ask questions on this and any other topics at these focus groups.

Annual percentage change in remuneration of Directors and employees
The table below shows the percentage change in salary, taxable benefits and annual bonus earned for each Director, compared to that of the
average employee (excluding employees in China and Vietnam, where there has been significant salary inflation).

Percentage change
between 2019 and 2020

Percentage change
between 2020 and 2021

Percentage change
between 2021 and 2022

Average employee

Executive Directors
Gavin Griggs1

Oskar Zahn2

Andy Sng

Non-Executive Directors
James Peters
Jamie Pike3
Terry Twigger4
Polly Williams

Pauline Lafferty
Sandra Breene5
Amina Hamidi5

Base salary

10%

–

15%

–

25%

27%

1338%

–

Taxable
benefits

(2%)

–

(9%)

–

Annual
bonus

670%

938%

–

Base salary

57%

–

(2%)

15%

–

Taxable
benefits

139%

(22%)

–

(24%)

50%

–

Annual
bonus

(33%)

43%

–

(23%)

–

Base salary

41%

54%

13%

–

(67%)

14%

–

Taxable
benefits

19%

22%

53%

(66%)

–

Annual
bonus

(69%)

(100%)

–

1 Gavin Griggs was appointed CEO with effect from 1 January 2021. The percentage change between 2020 and 2021 compared his pay as CEO with his pay as CFO.
2 Oskar Zahn was appointed as CFO with effect from 4 May 2021, so no year-on-year comparison is possible.
3 Jamie Pike joined the Board on 1 March 2022, so no year-on-year comparison is possible.
4 Terry Twigger stepped down from the Board with effect from 29 April 2022, so no year-on-year comparison is possible between 2021 and 2022.
5 Sandra Breene and Amina Hamidi joined the Board on 11 October 2022, so no year-on-year comparison is possible.

CEO pay ratio
The table below shows the ratio of the CEO’s total remuneration to that of the lower quartile, median and upper quartile UK employee and
for the CEO.

Year

2022

2021

2020

2019

Method1

Option A

25th percentile
pay ratio

50th percentile
pay ratio

75th percentile
pay ratio

23:1

40:1

50:1

21:1

15:1

25:1

31:1

13:1

9:1

15:1

18:1

7:1

1 Option A was selected because it best reflects the underlying data. Because a large portion of the CEO’s pay is variable, the pay ratio is heavily dependent on the outcomes of

variable pay plans and, in the case of long-term share-based awards, share price movements.

The year-on-year difference in the ratio of the CEO’s pay to the pay of UK employees is principally explained by the variable pay outturns paid
in 2021, which were higher than those paid in 2022. Annual bonus and long-term incentives make up a significant proportion of Executive
remuneration while it is only a relatively low proportion of total pay for the wider workforce.

The table below shows the total pay and benefits, and the salary component for the employees who sit at each of the three quartiles in 2022.

Year

25th percentile

50th percentile

75th percentile

Chief Executive

130

Total pay and
benefits

£31,270

£50,320

£79,733

Salary
component of
total pay

£29,863

£45,000

£72,201

£730,000

£537,000

XP Power Annual Report & Accounts for the year ended 31 December 2022The ratio of the CEO’s pay to the median pay of employees in the UK is a function of XP Power’s pay, reward and progression policies for the
Company’s UK employees and for all XP Power’s employees. The Company aims to pay all employees, including the CEO, in accordance with
its values, a desire to pay for performance, internal relativities and the appropriate external market reference points.

Relative importance of spend on pay
This chart illustrates the relative importance of spend on pay compared to Shareholder dividends paid.

£100m

£75m

£50m

£25m

£0

£95.2m
(+27%)

£75.2m

£18.6m
(+2%)

£18.2m

2022
2021
Distribution to
Shareholder dividends1

2021

2022

Group employment
costs2

1 Refer to Financial Statements – Note 9 for more details.
2 Group employment costs includes Directors’ remuneration. Refer to Financial Statements – Note 5 for more details.

Advice received in the year
During the year, FIT Remuneration Consultants LLP (“FIT”) provided advice to the Company on Directors’ remuneration. From December
2022, Ellason LLP (“Ellason”) succeeded FIT as advisors to the Committee. Neither FIT or Ellason provide other services to the Remuneration
Committee, have further connection with the Company or individual Directors. FIT and Ellason are both signatories to the Remuneration
Consultants Group’s Code of Conduct. The fees paid by the Company to FIT in the year was £35,911 excluding VAT. Fees paid by the
Company to Ellason in December 2022 was £7,650 excluding VAT. On this basis, the Remuneration Committee satisfied itself that the advice
of FIT and Ellason was objective and independent.

Voting on remuneration
The table below sets out voting in respect of the approval of the Directors’ Remuneration Policy at the AGM on 21 April 2020 and the
Directors’ Remuneration Report at the AGM on 14 April 2022.

Approval of Directors’
Remuneration Policy

Approval of Directors’
Remuneration Report

Meeting

Votes for

% of votes for

Votes against

% of votes
against

Votes withheld

21 April 2020

11,125,326

79.15%

2,930,138

20.85%

299,852

14 April 2022

14,507,210

94.7%

812,231

5.3%

1,500

We continue to engage with our Shareholders on executive remuneration and seek to strike the right balance of interest among all our
Shareholders.

131

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

DIRECTOR’S REMUNERATION POLICY
The Directors’ Remuneration Policy (the “Policy”) is subject to a binding shareholder vote at XP Power’s AGM on 18 April 2023 and, if
approved, will apply from this date. The intention is that the Policy will apply for a period of at least three years.

The Policy was reviewed and approved by the Remuneration Committee. As part of the review process, the Committee sought the views of
other Board members, Executives and the external advisers, as well as our larger shareholders and shareholder advisory bodies. This feedback
was considered by the Committee, who then made decisions independently.

There are no material changes proposed in the Policy from the previous version, which was approved at the AGM in 2020.

The information in this section of the Directors’ Remuneration Report is not subject to audit.

How our remuneration policy links to the UK Corporate Governance Code
When the proposed Policy was developed, the Committee was mindful of the UK Corporate Governance Code and considers that the
executive remuneration framework continues to appropriately address the following factors:

FACTORS

Clarity

HOW THESE ARE ADDRESSED

• Our Directors’ Remuneration Policy is transparent and clearly articulated in the Annual Report. There are
no material changes from the previous version of the Policy so it is already well understood internally and
externally.

Simplicity

• The Committee believes that the executive remuneration arrangements are market standard, straightforward

and well understood by both participants and Shareholders.

Risk

• The Committee’s approach to target setting seeks to discourage inappropriate risk taking through a blend of

Shareholder return, financial and non-financial objectives.

• Our Policy contains appropriate discretion to mitigate potential risks, we operate bonus deferral and post-

cessation shareholding requirements. Malus and clawback provisions also apply to the annual bonus plan, LTIP
and RSP.

Predictability

• Executives’ incentives are subject to individual participation caps. An indication of the range of outcomes in

the packages is provided on page 121.

• Deferred bonus and LTIP awards provide alignment with the share price and their values will depend on share

price at the time of vesting.

Proportionality

• A clear link exists between individual awards, delivery of strategy and our long-term performance. Our policy

contains appropriate discretion by the Committee to not reward poor performance.

Alignment to culture

• Pay and policies cascade down the organisation to ensure they are fully aligned with the XP Power culture.

The policy table
The objectives of the Remuneration Policy are to:

• reward employees and Executives appropriately for the work they do (base salary);

• provide market competitive remuneration packages to enable retention or recruitment (base salary plus benefits);

•

incentivise the employees and Executives to perform at their best consistently (bonus/long-term incentive plan/restricted share plan);

• align Shareholders’ and senior management’s interests (bonus in shares, long-term incentive plan/restricted share plan and shareholding

guidelines); and

• retain key staff (long-term structures with delayed vesting).

132

XP Power Annual Report & Accounts for the year ended 31 December 2022The following table provides a summary of the key components of the remuneration package. Other than minor clarifications to explain the
operation of our incentives, there are no material changes to the prior policy table. We also provide more detailed disclosure around the
default leaver provisions attaching to our incentives in a new separate section following the main policy table:

PURPOSE

OPERATION

OPPORTUNITY

APPLICABLE PERFORMANCE
MEASURES

BASE SALARY

To help recruit,
retain and
motivate high-
performing
Executives.

Reflects the
individual
experience, role
and importance
of the Executive
Director to the
business.

BENEFITS

To help recruit,
retain and
motivate high-
performing
Executives.

To provide
market
competitive
benefits.

Base salaries are set by the Remuneration
Committee and normally reviewed annually.
Increases are effective from 1 April, although
increases may be awarded at other times if
the Remuneration Committee considers it
appropriate.

A market benchmarking exercise will be
undertaken periodically as determined by
the Remuneration Committee to ensure that
base salary remains around the median of the
market level for roles of a similar nature, and
to reflect the individual’s skills, experience
and performance.

Benefits are set by the Remuneration
Committee and reviewed annually.

Benefits currently received by the Directors
include:

• Paid holidays

• Life insurance

• Private medical cover

• Housing allowance

• Car allowance

Other allowances provided to the wider
workforce may also be provided.

ANNUAL BONUSES

Align interests
of Executive
Directors and
Shareholders in
the short and
medium terms.

The annual bonus scheme participation
levels (including maximum opportunities)
are determined by the Remuneration
Committee following the end of the year,
based on performance achieved against the
performance metrics set.

Awards are split equally between (i) cash and
(ii) shares vesting after two years, subject to
continued employment or good leaver status.
Amounts equivalent to any dividends or
Shareholder distributions made in respect of
awards at vesting, are paid at the discretion
of the Remuneration Committee.

The Remuneration Committee has the
power to reduce unpaid annual bonuses and
clawback bonuses already paid on a net basis
in circumstances set out below this table.

n/a

Base salaries are reviewed
annually. Increases will not
normally exceed the range of
increases awarded to other
employees within the Group.

The Remuneration Committee
may also increase a Director’s
salary if there is a change in the
scope of their role, the scale
or complexity of the business
or if significant changes to
market practice arise, which
the Remuneration Committee
believes justifies a further
increase in base salary.

The Company provides a
range of market-benchmarked
benefits. The costs of these
benefits may change year-on-
year due to external costs.

The Remuneration Committee
has flexibility to provide benefits
that would typically have
been available to an Executive
Director in an overseas
jurisdiction when recruiting from
outside of the UK.

Up to 125% of base salary for
CEO and up to 100% for other
Executive Directors. Executive
Directors will receive 25% of the
maximum award for threshold
performance and 50% for on-
target performance.

Specific targets and weightings
may vary according to strategic
priorities and may include:

• Financial performance;

• Attainment of personal,

operational, and strategic
objectives; and

• Weighting will focus on

Group financial performance.

133

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

PURPOSE

OPERATION

OPPORTUNITY

APPLICABLE PERFORMANCE
MEASURES

PENSIONS

Provide a basic
pension benefit
that would be
expected for the
position.

Percentage of base salary paid into a defined
contribution scheme.

In line with pension benefits
offered to the wider workforce
in the relevant geography, which
is currently 8% in the UK and
6% in Singapore.

n/a

SHARE-BASED INCENTIVES

The normal maximum award
level under share-based
incentive plans is 150% of base
salary or such higher amount as
the Remuneration Committee
in its absolute discretion may
determine, up to a maximum of
200% of base salary. The 200%
cap is restricted to exceptional
circumstances only.

25% of a LTIP award will vest for
threshold performance.

Up to a maximum of 15% of
base salary may be granted
as restricted shares without
performance conditions.

In calculating value against
150% of salary limit for share-
based incentives, the value of
restricted share awards will be
multiplied by two to reflect that
they do not have performance
conditions attached.

Specific targets and weightings
may vary according to strategic
priorities at the start of each
performance period and may
include:
• Financial performance (such

as EPS)

• Value creation (such as TSR)

• Strategic objectives

Weighting is expected to focus
on Group financial and value
creation performance measures.

Share-based incentives are made up of a
Long-Term Incentive Plan (LTIP) that was
approved at the 2017 AGM, and a Restricted
Share Plan (RSP) that was approved at the
2020 AGM.

Align the
interests of
Executive
Directors and
Shareholders in
the long term.

Incentivise
long-term value
creation.

LTIP awards may be made in the form of
conditional share awards, nil or nominal cost
options. The LTIP also provides for awards
to be structured as stock appreciation or
phantom rights, which may be suitable for
awards granted in overseas jurisdictions.

Performance is typically measured over
three financial years starting with the year
of date of grant, or any longer period as the
Remuneration Committee may decide.

An award will be subject to a two-year
holding period.

RSP awards may be granted without
performance conditions.

Restricted share awards normally vest five
years from the date of award.

Clawback: The Remuneration Committee
has the discretion to claw back some or
all awards granted under share-based
incentive plans by reducing unvested
awards or requiring the return of the net
value of vested awards to the Company in
circumstances set out below this table.

Amounts equivalent to any dividends or
Shareholder distributions made in respect of
awards at vesting, are paid at the discretion
of the Remuneration Committee.

134

XP Power Annual Report & Accounts for the year ended 31 December 2022PURPOSE

OPERATION

OPPORTUNITY

APPLICABLE PERFORMANCE
MEASURES

n/a

SHAREHOLDING (MINIMUM)

Align the
interests of
Executive
Directors and
Shareholders in
the long term.

To build a minimum shareholding equivalent
to two years’ salary. Directors have a
period of five years from appointment to
achieve this.

n/a

POST EMPLOYMENT SHAREHOLDING

Align the
interests of
Executive
Directors and
Shareholders in
the long term.

n/a

Post cessation, Executive Directors must
hold shares equivalent to 200% of salary
for the first year and 100% of salary for the
second year or, if their holding is lower than
this at cessation, the value of their holding at
the point of cessation. The Committee will
ensure the application of this requirement
through a signed agreement with the
Executive.

Shares that have been, or are in future,
purchased by Executives will not be subject
to restrictions on sale.

Deferred bonus shares in their deferral
period and vested LTIP awards that are still in
their holding period will be counted against
the percentage requirement on a net of
tax basis.

NON- EXECUTIVE DIRECTORS’ FEES

Fees are set
at a level that
is sufficient to
attract, motivate
and retain quality
Non- Executive
Directors.

Fees are reviewed periodically. The Board
(excluding the Non-Executive Directors)
are responsible for setting Non-Executive
Directors’ fees.

Non-Executive Directors are not entitled to
participate in the Group’s incentive plans.

n/a

The total amount of Non-
Executive Directors’ fees shall
not exceed that approved by
Shareholders at a General
Meeting (currently £600,000 in
accordance with the Articles).

Use of discretion
The Company’s incentive plans including the annual bonus scheme, share option scheme, LTIP and RSP will be operated within the rules of the
relevant scheme, together with all applicable laws and regulations. The Remuneration Committee may operate the discretion contained in the
relevant plan in order to facilitate its administration and operation. Discretion includes (but is not limited to):

• who is invited to participate or receive awards, the size and timing of awards or payments;

• the setting of appropriate performance measures and targets from year to year, and any adjustment of these considering market

conditions;

• the annual review of performance against targets for the determination of bonuses and awards;

• the determination of vesting and performance periods; and

• the treatment of leavers, and discretion when dealing with adjustments for corporate events (such as changes in control, rights issues, de-

mergers, acquisitions etc).

Annual bonus documentation and the LTIP, subject to shareholder approval, will contain provisions to give the Committee the ability to apply
discretion to adjust any formulae and workings to reduce vesting levels to ensure pay-outs fully and properly reflect overall performance and
Shareholder experience and in response to exceptional negative events.

135

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

Performance measures and targets
The Company’s incentive plans use a range of performance measures linked to the business strategy and key priorities at the time. Measures
and weightings will be described in the respective Directors’ Remuneration Report. Performance targets will be challenging yet achievable,
and will require stretching out-performance to achieve the maximum. Annual bonus targets will usually be disclosed when they are no longer
commercially sensitive. LTIP targets will usually be disclosed on a prospective basis where possible.

Malus and clawback
Annual bonus documentation, the LTIP and RSP, will contain provisions to give the Committee the ability to apply malus and clawback
provisions. These allow the Committee to determine, in its absolute discretion, that an unvested award or bonus award (or part of an award)
may not be permitted to vest or that the level of vesting is reduced in certain circumstances or payment back of some or all of an award is
required after vesting. Where the Committee acts fairly and reasonably to determine within a period not exceeding three years from the
determination of an award that:

• a serious breach of the Company’s code of ethics has arisen; or

• a serious health and safety issue has occurred; or

• the award holder has participated in or was responsible for conduct that has resulted in significant losses to the Group; or

• the award holder has failed to meet appropriate standards of fitness and propriety resulting in a material negative effect on the Group; or

• the award holder has committed material wrongdoing or has breached the terms of their employment contract in such manner as would

result in a potentially fair reason for dismissal; or

• there was a material error in determining whether an award should be made, in determining the size or nature of the award or the extent

to which it has vested,

it may require any unvested awards held by the award holder to lapse in whole or in part immediately, and/or may require the award holder to
repay the Company the after-tax value of some or all vested awards received during that period, in such form as they may determine.

Malus and clawback will continue to apply to any awards held by leavers and those vesting in connection with corporate events/changes in
control. The Committee has the right to apply the malus provision to an individual or on a collective basis. It shall also (acting reasonably and
in good faith) determine the amount or award subject to clawback.

Legacy commitments
The Committee reserves the right to honour any legacy remuneration arrangements including those made under a previously approved
Directors’ Remuneration Policy.

Approach to Executive recruitment
In the event of the recruitment of a new Executive Director, the Remuneration Committee would consider the structure and levels of the
remuneration for existing Directors and prevailing market practice, together with the skills and value it believed the new Director would
bring to the Company. It is therefore expected that a new Director’s package would include the same elements as existing Directors and
the maximum level of variable remuneration for annual bonus and LTIP would be capped as it is for existing Executive Directors. Depending
on the timing of any appointment, the performance measures and targets used for incentive purposes may differ from existing Executive
Directors for the first performance cycle. The Committee may agree to meet any relocation expenses or other benefit arrangements if
considered in the best interests of Shareholders. In addition, the Remuneration Committee will have discretion to make payments or awards
to buy out incentive arrangements forfeited on leaving a previous employer, i.e. over and above the approach outlined in the table above, and
may exercise the discretion available under Listing Rule 9.4.2R if necessary to do so. In doing so, the Remuneration Committee will seek, to
the best possible extent, to do no more than match the fair value of the awards forfeited, considering the applicable performance conditions,
likelihood of those conditions being met and proportion of the applicable vesting period remaining. Where an Executive Director appointment
is an internal candidate, the Remuneration Committee will honour any pre-existing remuneration obligations or outstanding variable
pay arrangements that relate to the individual’s previous role. The Remuneration Committee retains the discretion to offer appropriate
remuneration outside the standard policy where an interim appointment is made to fill an Executive role on a short-term basis or where
exceptional circumstances require that the Chair or a Non-Executive Director takes on an Executive function.

Executive 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’ basic pay.
Directors’ service contracts are available for inspection at the AGM of the Company. Directors can terminate the contracts giving 12 months’
notice.

The Executive Director may, at the discretion of the Committee, remain eligible to receive a bonus award for the financial year that they
cease to be an employee in, if the Committee has decided that good leaver terms should apply. Any such bonus will be determined by the
Committee considering time in employment and performance. Any deferred bonus and share-based incentives will be subject to the leaver
terms in the respective plan rules.

The Committee may determine it appropriate to provide reasonable outplacement support to a departing Executive Director, the
reimbursement of legal advice at the expense of the Company and any payments required by statute.

136

XP Power Annual Report & Accounts for the year ended 31 December 2022Leaver provisions
The table below outlines the treatment of outstanding share awards under the short and long-term incentive plans for “good” and “bad”
leavers, and in circumstances where the Company undergoes a change of control. A “good” leaver will generally mean an Executive Director
who ceases to be an employee for any of the following reasons: death, retirement, injury or disability, the employing company ceasing to be
part of the Group, redundancy, or any other reason, subject to Remuneration Committee discretion. A “bad” leaver will generally mean any
leaving scenario that is not provided for under the good leaver definition.

TYPE OF LEAVER

DBP

LTIP

RSP

Good leaver

Where a participant ceases
to be an employee before
the end of the deferral
period, awards will vest
in full on the date of
cessation.

Bad leaver

Change of control

Where a participant ceases
to be an employee before
the end of the deferral
period, awards will lapse
in full on the date of
cessation. The Committee
retains discretion to
override this rule in
whole or in part except in
circumstances where the
participant is dismissed for
reason of misconduct.

On a change of control of
the Company during the
deferral period, awards will
vest in full on the date of
the event.

Where a participant ceases to be an
employee during the first three years
of the performance period, the number
of shares vesting will be subject to
a pro-rata reduction by reference to
relevant performance achievement, and
the period elapsed between the award
date and date of cessation, unless the
Remuneration Committee determines
the reduction is not appropriate. Shares
will vest at the end of the vesting period
(five years from grant) or such earlier
date as the Remuneration Committee
determines.

Where a participant ceases employment
after the first three years of the
performance period, no pro-rating will
apply but awards will vest on the fifth
anniversary of the grant of the award
unless the Remuneration Committee
exercises its discretion to permit earlier
vesting.

Where a participant ceases to be an
employee during the first three years
of the restricted period, the number
of shares vesting will be subject to a
pro-rata reduction by reference to the
period elapsed between the award date
and the date of cessation, unless the
Remuneration Committee determines
the reduction is not appropriate. Shares
will vest at the end of the vesting period
(five years from grant) or such earlier
date as the Remuneration Committee
determines.

Where participants cease employment
after the first three years of the
restricted period, no pro-rating will
apply but awards will vest on the fifth
anniversary of the grant of the award
unless the Remuneration Committee
exercises its discretion to permit earlier
vesting.

Where a participant ceases to be an
employee during the first three years of
the performance period, all outstanding
shares will lapse immediately on
cessation.

Where a participant ceases to be an
employee during the first three years
of the restricted period, all outstanding
shares will lapse immediately on
cessation.

Where participants cease employment
after the first three years of the
performance period, awards will vest
on the fifth anniversary of the grant of
the award or such earlier date as the
Committee may determine, except in
circumstances where the participant is
dismissed.

Where participants cease employment
after the first three years of the
restricted period, awards will vest on
the fifth anniversary of the grant of
the award or such earlier date as the
Committee may determine, except in
circumstances where the participant is
dismissed.

On a change of control of the Company
prior to the vesting date of an RSP
award, an award will vest on the date of
the event over such number of shares as
the Committee determines, considering
the time elapsed since the grant date and
any other factors considered relevant.

On a change of control of the Company
prior to the vesting date of an LTIP
award (the fifth anniversary of grant), an
award will vest on the date of the event
and the Remuneration Committee has
the discretion to determine the number
of shares vesting by assessing the
achievement of the relevant performance
conditions and apply a pro-rata
reduction based on the proportion of the
performance period elapsed at the time
of the event, unless it determines a pro-
rata reduction is not appropriate.

The Remuneration Committee has the discretion to permit acceleration of vesting and to disapply pro-rating.

137

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEREMUNERATION COMMITTEE REPORT CONTINUED

Non-Executive Directors’ contracts
The Non-Executive Directors’ contracts run for an indefinite period, with the Company being able to terminate the contracts without cause
giving 12 months’ notice. If the Shareholders do not re-elect a Non-Executive Director, or they are retired from office under the Articles,
their appointment terminates automatically with immediate effect and without compensation. In accordance with the Code, Non-Executive
Directors will not serve more than nine years. Non-Executive Directors are not entitled to share-based incentives or pensions.

Shareholder consultation
The Remuneration Committee’s policy is to consult with major Shareholders on significant decisions on Executive remuneration. The
development of this Policy was subject to consultation with Shareholders and proxy agency advisers. Feedback from any engagement is
considered by the Committee on a timely basis.

More generally, the Committee is kept updated on the latest guidance from the proxy agency and major institutional Shareholders.

Statement of consideration of employment conditions elsewhere in the Company
Pay and conditions throughout the Group are considered when setting the remuneration policy. The Committee will be regularly informed of
remuneration trends and issues throughout the workforce and keeps this in mind when determining the Policy for Executive Directors.

Fixed pay is set for wider employees in a similar way to that for the Executive Directors, albeit in some locations pay is subject to local
regulatory compliance. The use of incentive pay will vary across the business and any performance measures used will reflect the nature of the
specific role and its location.

The Remuneration Committee does not consult directly with other employees when setting Executive Director remuneration. However,
the Chair of the Remuneration Committee is also the designated Non-Executive Director responsible for workforce engagement and has
conducted several activities that have included the opportunity to discuss executive remuneration with employees.

Illustration of the application of the Directors’ remuneration policy
The charts below give an indication of the level of remuneration that would be received by each Executive in accordance with the approved
Directors’ Remuneration Policy

All figures are shown in thousands.

GAVIN GRIGGS

OSKAR ZAHN

ANDY SNG

£2,310

37%

£1,990

29%

36%

31%

£1,206
12%

29%

£707

10%

£524

£2,500

£2,000

£1,500

£1,000

£500

£0

£1,590

39%

26%

£1,356

31%

£836
12%
25%

S$958

25%

S$618

10%

33%

29%

S$398

26%

90%

53%

31%

27%

90%

57%

34%

30%

88%

56%

37%

32%

10%

12%

Minimum On-target Maximum Maximum
with 50%
share price
growth

Annual bonus

Fixed

RSP

PSP

Minimum On-target Maximum Maximum
with 50%
share price
growth

S$2,000

S$1,102

S$1,500

S$1,000

S$500

S$0

The charts above illustrate the value of the remuneration package for each Executive in 2023, under four scenarios:

• Minimum: Fixed pay (consisting of base salary, benefits and pension) and full vesting under the RSP

• On-target: Fixed pay, full vesting under the RSP, on-target outturn under the annual bonus (50% of maximum) and threshold vesting under

the LTIP (25% of maximum)

• Maximum: Fixed pay, full vesting under the RSP, maximum outturn under the annual bonus and full vesting under the LTIP

• Maximum (with 50% share price growth): As shown in the “maximum” scenario, with 50% share price appreciation assumed for the RSP

and LTIP

For the purposes of the charts above, the fixed elements of remuneration are as follows (on annualised basis):

Position

Chief Executive Officer

Chief Financial Officer

Name

Gavin Griggs

Oskar Zahn

Base salary
(effective April
2023)

£570,000

£416,000

Benefits (as per
FY22)

£21,800

£22,500

Pension

Total fixed pay

£44,000

£33,300

£635,800

£471,800

Executive Vice President, Asia

Andy Sng

S$320,000

S$11,400

S$18,700

S$350,100

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XP Power Annual Report & Accounts for the year ended 31 December 2022G
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XP Power Annual Report & Accounts for the year ended 31 December 2022

139

OTHER GOVERNANCE AND
STATUTORY DISCLOSURES

Dividends
Dividends paid during the year and proposed are as follows:

Period

First quarter

Second quarter

Third quarter

Fourth quarter (proposed)

Total

Payment date

Amount

2021
comparative

14 July 2022

18.0 pence

13 October 2022

19.0 pence

18 January 2023

21.0 pence

27 April 2023

36.0 pence

94.0 pence

The Directors are recommending a final dividend of 36.0 pence per share, which would be paid on 27 April 2023 to members on the register
as at 24 March 2023. This would make the total dividend for the year at 94.0 pence (2021: 94.0 pence), which is an increase of 0%.

The trustee of the Employee Benefit Trust has waived its right to dividends paid on any ordinary shares it holds on the terms of the Employee
Benefit Trust in respect of the period covered by the financial statements and future periods. Such waivers represent less than 1% of the total
dividend payable on the Company’s ordinary shares.

Directors and directors’ interests
The Company’s Articles of Association (the “Articles”) give the
Directors power to appoint and replace Directors. Under the terms
of reference of the Nomination Committee, any appointment must
be recommended by the Nomination Committee for approval by the
Board of Directors.

There are no restrictions on the voting rights attached to the
Company’s ordinary shares or on the transfer of shares in the
Company. No Shareholder holds shares in the Company that
carry special rights or control of the Company’s share capital. The
Directors are not aware of any agreements between holders of
shares that may result in restrictions on the transfer of shares or on
voting rights.

Directors of the Company in office at 31 December 2022 and at
the date of this report, together with their biographical details,
are shown on pages 94-95. In addition, Terry Twigger served as a
Non-Executive Director until 29 April 2022. Details of the Directors’
service contracts are given in the Directors’ Remuneration Report on
page 136 and 138.

The present membership of the Board and interests of the
Directors in the shares of the Company are set out in the Directors’
Remuneration Report. No Director had any dealings in the shares
of the Company between 31 December 2022 and the date of this
report.

In line with the 2018 UK Corporate Governance Code, each relevant
Director will be standing for election or re-election, as appropriate,
at the forthcoming AGM.

Liability insurance and indemnities
The Company has agreed to indemnify, to the extent permitted by
law, each of the Company’s Directors against any liability incurred in
respect of acts or omissions arising during their office. Each Director
is covered by appropriate directors’ and officers’ liability insurance, at
the Company’s expense.

Share capital and capital structure
At the date of this report, the total share capital of the Company was
19,742,296 ordinary shares of 1 pence each, of which 7,500 were
held in treasury. Therefore, the total voting rights in the Company
are 19,734,796. Ordinary Shareholders are entitled to receive notice
of and to attend and speak at general meetings. On a show of hands,
every Shareholder present in person or by proxy (or a duly authorised
corporate representative) shall have one vote and, on a poll,
every member present in person or by proxy (or a duly authorised
corporate representative) shall have one vote for every share held
by that member. The rights and obligations attached to the ordinary
shares are governed by the Articles and prevailing legislation. There
are no other classes of share capital.

Power to issue and allot
At the 2022 AGM, authority was given to the Directors to allot
unissued shares in the Company up to a maximum amount
equivalent to approximately one-third of the issued share capital,
excluding shares held in treasury, for general purposes, plus up to a
further one-third of the Company’s issued share capital, excluding
shares held in treasury, but only in the case of a rights issue. A
further special resolution passed at that meeting granted authority
to the Directors to allot equity securities in the Company for cash up
to five per cent of the Company’s then issued ordinary share capital
without regard to the pre-emption rights. Both authorities expire on
the date of the 2023 AGM, where the Directors propose to renew
them for a further year.

Authority to purchase own shares
At the 2022 AGM, Shareholders gave the Company authority to
make market purchases of up to 10 per cent of the Company’s then
issued ordinary share capital. Any shares purchased in this way could
either be cancelled or held in treasury (or a combination of these).
No purchases have been made under this authority. The Directors
propose to seek an equivalent authority at the 2023 AGM, but have
no current intention of using this authority, if granted.

Annual General Meeting
Details of the Company’s AGM and the proposed resolutions will be
set out in a separate Notice of Meeting.

Independent auditor
Our Auditor, PwC LLP, has indicated their willingness to continue
in office, and on the recommendation of the Audit Committee,
resolutions to reappoint PwC LLP as Auditor and to authorise the
Directors to determine the Auditor’s remuneration will be proposed
at the forthcoming AGM.

140

XP Power Annual Report & Accounts for the year ended 31 December 2022Articles of association
Any amendments to the Articles of Association of the Company may
be made by special resolution of the Shareholders.

Significant contracts and
change of control
The Group has borrowing facilities that may require the immediate
repayment of all outstanding loans together with accrued interest
in the event of a change of control. The rules of the Company’s
employee share plans set out the consequences of a change in
control of the Company on participants’ rights under the plans.
Generally, such rights will vest and become exercisable on a change
of control subject to the satisfaction of performance conditions.

None of the Executive Directors’ service contracts contain provisions
that are affected by a change of control and there are no other
agreements that the Company is party to that take effect, alter or
terminate in the event of a change of control of the Company, which

are considered to be significant in terms of their potential impact
on the Group. The Company does not have any contractual or other
arrangements that are essential to the business of the Group.

Political donations
The Group did not make any political donations or incur any political
expenditure during the year.

Financial risk management
The Group’s exposure to and management of capital, liquidity, credit,
interest rate and foreign currency risks are contained in Note 31 on
pages 188-193.

Post-balance sheet events
There were no material post-balance sheet events that were
required to be disclosed.

Incorporation by reference
The Company’s business activities, together with factors that potentially affect its future development, performance or position, can be
found on pages 20-45. The Group’s key activity in R&D is discussed in the Operational Review on page 40. Details of the Company’s financial
position and cash flows are outlined in the Financial Review on pages 46-49, and the Group’s Viability Statement is on page 58.

Information required to be disclosed by Listing Rule (LR) 9.8.4R can be found in the following locations within the Annual Report:

Listing Rule
Section

Topic

Capitalised interest

Location and page

Note 6 to the Group’s Consolidated Financial Statements on
page 167. Related tax relief is insignificant.

(1)

(2)

(4)

(5) (6)

(7) (8)

(9)

(10)

(11) (14)

(12) (13)

Publication of unaudited financial information

Nothing to disclose

Details of long-term incentive plans established specifically
to recruit or retain a director

Waiver of emoluments by a director of the company

Allotments for cash of ordinary shares

Parent participation in a placing by a listed subsidiary

Contracts of significance

Controlling Shareholder disclosures

Dividend waiver

Nothing to disclose

Other disclosures on page 140

STATEMENT BY DIRECTORS

In the opinion of the Directors,

a. that the balance sheet of the Company and consolidated financial

statements of the Group, as set out on pages 149-152, are
drawn up to give a true and fair view of the state of affairs of the
Company and the Group as at 31 December 2022, 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

JAMES PETERS
NON-EXECUTIVE CHAIR

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

28 February 2023

141

XP Power Annual Report & Accounts for the year ended 31 December 2022GOVERNANCEFINANCIALS

142

XP Power Annual Report & Accounts for the year ended 31 December 2022

CONTENTS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

COMPANY BALANCE SHEET

NOTES TO THE COMPANY BALANCE SHEET

FIVE-YEAR REVIEW CONSOLIDATED INFORMATION

ADVISERS

144

149

150

151

152

153

195

196

205

206

F
I

N
A
N
C

A
L
S

XP Power Annual Report & Accounts for the year ended 31 December 2022

143

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF XP POWER LIMITED

Report on the Audit of the Financial Statements
Our opinion
In our opinion, the accompanying consolidated financial statements
of XP Power Limited (the “Company”) and its subsidiary corporations
(the “Group”) and the balance sheet of the Company are properly
drawn up in accordance with the provisions of the Singapore
Companies Act 1967 (the “Act”), Singapore Financial Reporting
Standards (International) (“SFRS(I)s”) and International Financial
Reporting Standards (“IFRSs”) as issued by the International
Accounting Standards Board (“IFRSs as issued by the IASB”), so as to
give a true and fair view of the consolidated financial position of the
Group and the financial position of the Company as at 31 December
2022, and of the consolidated financial performance, consolidated
changes in equity and consolidated cash flows of the Group for the
financial year ended on that date.

Basis for our opinion
We conducted our audit in accordance with International Standards
on Auditing (“ISAs”). Our responsibilities under those standards are
further described in the “What are we responsible for” section of our
report.

We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

Independence
We are independent of the Group in accordance with the Accounting
and Corporate Regulatory Authority’s Code of Professional Conduct
and Ethics for Public Accountants and Accounting Entities (“ACRA
Code”) together with the ethical requirements that are relevant
to our audit of the financial statements in Singapore, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements and the ACRA Code.

What we have audited
The financial statements of the Company and the Group comprise:

• The consolidated statement of comprehensive income of the

Group for the financial year ended 31 December 2022;

• The consolidated balance sheet of the Group as

at 31 December 2022;

• The balance sheet of the Company as at 31 December 2022;

• The consolidated statement of changes in equity of the Group for

the financial year then ended;

• The consolidated statement of cash flows of the Group for the

financial year then ended; and

• The notes to the financial statements, including a summary of

significant accounting policies.

Our audit approach – overview
Materiality
The overall materiality which we have used to plan our work for the Group amounted to £1.8 million.
The overall materiality applied to the audit of the Company balance sheet amounted to £1.0 million.

Materiality

Audit scope
We performed an audit of the complete financial information and of significant financial statement line
items for significant reporting units which included operations based in North America, Europe and Asia.
This accounted for approximately 91% of Group revenues and 97% of Group assets.

Key Audit Matters
We identified the following key audit matters:

• Goodwill; and

• Capitalised product development costs.

Audit Scope

Key
Audit
Matters

144

XP Power Annual Report & Accounts for the year ended 31 December 2022

How we determined materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent
of our audit procedures on the financial statement line items and
disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.

For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was £0.2 million to
£1.0 million. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.

Based on our professional judgement, we determined that the
benchmark of adjusted profit before taxation is appropriate as it
reflects the Group’s growth and investment plans. We believe this is
a key measure used by shareholders in assessing the performance of
the Group.

We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £0.2 million as well
as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.

How we tailored the audit scope
The Group operates across North America, Europe and Asia. In
establishing the overall approach to the Group audit, we determined
the type of work that needed to be performed at the local operations
by us, as the Group engagement team, or component auditors from
other PwC network firms operating under our instruction. Where
the work was performed by component auditors, we determined
the level of involvement we needed to have in the audit work at
those local operations to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our
opinion on the Group financial statements as a whole.

We designed our audit of the Group by determining materiality
and assessing the risks of material misstatement in the financial
statements. In particular, we looked at where management made
subjective judgements, for example in respect of significant
accounting estimates, that involved making assumptions and
considering future events that are inherently uncertain. As in all of
our audits, we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence
of bias by the management that represented a risk of material
misstatement due to fraud.

We tailored the scope of our audit to ensure that we performed
sufficient work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls, and the
industry in which the Group operates.

What are the key audit matters
Key audit matters are those matters that, in the auditor’s professional
judgement, were of most significance in the audit of the financial
statements of the current period. Key audit matters include the
most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which
had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and the directing of the efforts of the
engagement team. These matters, and any comments we make on
the results of our procedures thereon, were addressed in the context
of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. This is not a complete list of all risks identified by
our audit.

145

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSINDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF XP POWER LIMITED CONTINUED

KEY AUDIT MATTERS

HOW DID OUR AUDIT ADDRESS THESE

Goodwill
Refer to page 116 (Report from the Chair of the Audit Committee),
page 162 (Critical accounting estimates, assumptions and judgements
– Recoverable amount of cash-generating units for goodwill
impairment) and page 170 (Note 11 – Goodwill).

The Group has goodwill of £77.5 million at 31 December 2022
contained within three cash-generating units 'CGUs' defined by its
geographical split – North America, Europe and Asia.

We focused on this area due to the relative size of the carrying
amount of goodwill, which represents 16% of total assets, and
because of the significant judgements used to estimate key
assumptions applied in computing the recoverable amounts of
different CGUs for the purpose of impairment assessment.

Key assumptions include future revenue growth rate, terminal growth
rate and discount rate.

The Group has also assessed the impact of climate change on the
assumptions used in goodwill impairment assessment and disclosed
them in Note 11 to the financial statements.

Capitalised product development costs
Refer to page 116 (Report from the Chair of the Audit Committee),
page 162 (Critical accounting estimates, assumptions and judgements
– Capitalisation of product development costs, Recoverable amount
of capitalised product development costs, Useful lives of capitalised
product development costs) and page17(Note 12 – Intangible assets).

Part of the Group’s strategy is to invest in research and development
to create new products. As at 31 December 2022, the carrying
amount of capitalised product development costs is £30.4 million,
of which £8.1 million was capitalised in the current financial year.

We focused on the appropriateness of capitalisation of product
development costs due to the relative size of the carrying amount
of this intangible asset, which represented 6% of total assets, and
because significant judgement is involved in determining whether the
criteria to capitalise such product development costs, as set out in
IAS 38 Intangible Assets, have been fulfilled and that the capitalised
amounts are recoverable.

We also identified the useful lives of the capitalised product
development costs as an area involving significant judgement
The carrying amount of the capitalised product development costs
is heavily dependent on the useful lives of the developed products.
Management has determined the useful lives of the developed
products based on the expected life cycle of these products, taking into
consideration expected customer demand and technological innovation.

We inquired and evaluated management’s definition of CGUs.
We assessed the reasonableness of management’s assumptions
used to compute the recoverable amounts of the CGUs by:

• Reviewing historical revenue and cost trends;

•

Inquiring management’s future plans for growth and cost
optimisation;

• Benchmarking key market-related assumptions with relevant

economic and industry indicators;

• Reviewing forecasted capital expenditure to management’s

budget and plans;

• Benchmarking terminal growth rate with forecasted long-term

growth rates of each region; and

• Computing independent discount rates.

We reviewed management’s sensitivity analysis which considers
reasonably possible changes to key assumptions, including
unfavourable changes to assumptions arising from climate change.

Based on the above, no exceptions were noted.

We assessed the appropriateness of capitalisation of product
development costs by challenging management through
discussions and qualitative reviews of the products’ technical and
commercial feasibility. We also tested the accuracy and allocation
of capitalised material costs and labour costs.

We reviewed management’s impairment assessment on
capitalised product development costs and verified inputs such as
historical sales, unfulfilled customer orders and correspondences
with customers on forecasted demand and future plans. We
also reviewed the business cases of products in development
and verified that the growth assumptions applied are not
unreasonable.

We also performed a benchmarking exercise to compare the
useful lives of the capitalised product development costs against
other companies within the same industry. The useful lives as
determined by management are in line with that of the industry
and consistent with our understanding of the life cycle of the
products.

We also evaluated the appropriateness of the impairment of the
projects relating to the Comet legal case.

Based on the above, no exceptions were noted.

146

XP Power Annual Report & Accounts for the year ended 31 December 2022Information other than the Financial Statements and Auditor’s Report thereon
Going concern
Under the UK Listing Rules ('Listing Rules') we are required to review
the Directors’ statement, set out on page 141, in relation to going
concern. We have nothing to report having performed our review.

Other information
Management is responsible for the other information. The other
information comprises the “Overview” section set out on pages 02–
17, “Strategic Report” section set out on pages 20–87, “Governance”
section set out on pages 90–141, and the “Financials” section on
page 206 of the Annual Report. Other information, as defined in this
section, does not include matters that we are required to review and
report on under the Listing Rules, as described above.

The Directors’ assessment of the prospects of the
Group
Under the Listing Rules we are required to review the Directors’
statement that they have carried out a robust assessment of the
principal risks facing the Group and the Directors’ statement in
relation to the longer-term viability of the Group, set out on page
58. Our review was substantially less in scope than an audit and
only consisted of making enquiries and considering the Directors’
process supporting their statements; checking that the statements
are in alignment with the relevant provisions of the UK Corporate
Governance Code; and considering whether the statements are
consistent with the knowledge acquired by us in the course of
performing our audit. We have nothing to report having performed
our review.

Corporate governance statement
Under the Listing Rules, we are required to review the part of the
Corporate Governance Statement relating to Provisions 6 and 24
to 29 of the UK Corporate Governance Code. We have nothing to
report having performed our review.

Our opinion on the financial statements does not cover the other
information and we do not and will not express any form of
assurance conclusion thereon.

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.

147

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSINDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF XP POWER LIMITED CONTINUED

• Conclude on the appropriateness of management’s use of

Responsibilities for the financial statements and the audit
What are Management and Directors
responsible for
Management is responsible for the preparation of financial
statements that give a true and fair view in accordance with the
provisions of the Act, SFRS(I)s and IFRSs as issued by the IASB,
and for devising and maintaining a system of internal accounting
controls sufficient to provide a reasonable assurance that assets
are safeguarded against loss from unauthorised use or disposition;
and transactions are properly authorised and that they are recorded
as necessary to permit the preparation of true and fair financial
statements and to maintain accountability of assets.

the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue
as a going concern.

In preparing the financial statements, management is responsible
for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either
intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

The Directors are responsible for overseeing the Group’s financial
reporting process.

What are we responsible for
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional scepticism throughout the
audit. We also:

•

Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit
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 Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.

• Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the

financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.

We communicate with the Audit Committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.

We also provide the Audit Committee with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.

From the matters communicated with the Audit Committee, we
determine those matters that were of most significance in the audit
of the financial statements of the current year and are therefore
the key audit matters. We describe these matters in our auditor’s
report, unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.

Report on other legal and regulatory
requirements
In our opinion, 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 auditors, have been properly kept in
accordance with the provisions of the Act.

The engagement partner on the audit resulting in this independent
auditor’s report is Greg Unsworth.

PRICEWATERHOUSECOOPERS LLP
PUBLIC ACCOUNTANTS AND CHARTERED ACCOUNTANTS
SINGAPORE

28 February 2023

148

XP Power Annual Report & Accounts for the year ended 31 December 2022CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

£m

Revenue

Cost of sales

Gross profit
Other income

Expenses

Distribution and marketing

Administrative

Research and development

Operating (loss)/profit
Finance expenses

(Loss)/profit before tax
Income tax credit/(expense)

(Loss)/profit after tax

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:
Currency translation differences arising from consolidation attributable to equity holders of
the Company

Items that will not be reclassified subsequently to profit or loss:
Currency translation differences arising from consolidation attributable to non-controlling
interests

Other comprehensive income for the year, net of tax

Total comprehensive (loss)/income for the year

(Loss)/profit after tax attributable to:
Equity holders of the Company

Non-controlling interests

Total comprehensive (loss)/income attributable to:
Equity holders of the Company

Non-controlling interests

Note

2022

290.4

(169.8)

120.6

(58.2)

(58.6)

(27.9)

(24.1)

(6.1)

(30.2)

10.6

(19.6)

7.2

(12.4)

(20.0)

0.4

(19.6)

(12.8)

0.4

(12.4)

2021

240.3

(132.0)

108.3

(47.8)

(14.0)

(16.8)

29.7

(1.3)

28.4

(5.4)

23.0

0.9

23.9

22.6

0.4

23.0

23.5

0.4

23.9

(Loss)/earnings per share for (loss)/profit after tax attributable to equity holders of the
Company (pence per share)
Basic (loss)/earnings per share

Diluted (loss)/earnings per share

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

(102.0)

(101.6)

115.8

113.8

149

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSCONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2022

£m
ASSETS
Current assets
Cash and bank balances
Inventories
Trade receivables
Bond receivable
Other current assets
Derivative financial instruments
Current income tax receivable
Total current assets
Non-current assets
Cash and bank balances
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred income tax assets
ESOP loan to employees
Other investment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Current income tax liabilities
Trade and other payables
Derivative financial instruments
Lease liabilities
Accrued consideration
Provisions
Borrowings
Total current liabilities
Non-current liabilities
Accrued consideration
Borrowings
Deferred income tax liabilities
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Equity attributable to equity holders of the Company
Share capital
Merger reserve
Share-based payments reserve
Treasury shares
Translation reserve
Other reserve
Retained earnings

Non-controlling interests
TOTAL EQUITY

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

150

Note

2022

2021

16
17
18
25
19
23

16
11
12
13
14
26

20
23
22
21
24
22

21
22
26

27
27
27
27
27
27
27

22.3
114.4
42.4
37.0
8.0
*
2.5
226.6

1.1
77.5
69.9
36.6
54.9
15.1
*
*
255.1
481.7

4.8
52.6
0.1
2.4
–
46.1
0.2
106.2

1.5
174.2
10.5
0.9
48.9
236.0
342.2
139.5

27.2
0.2
2.5
*
4.2
6.1
98.4
138.6
0.9
139.5

9.0
74.0
30.8
–
5.0
*
2.9
121.7

–
52.5
56.3
30.2
8.3
3.2
*
–
150.5
272.2

2.4
44.7
0.1
1.6
*
*
0.2
49.0

1.3
33.4
9.4
0.2
6.5
50.8
99.8
172.4

27.2
0.2
5.6
*
(2.9)
4.4
137.0
171.5
0.9
172.4

XP Power Annual Report & Accounts for the year ended 31 December 2022

CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

Attributable to equity holders of the Company

Note

Share
capital

Share-
based
payments
reserve

Treasury
shares
reserve

Merger
reserve

Translation
reserve

Other
reserve

Retained
earnings

Total

Non-
controlling
interests

Total
equity

27.2

4.1

(0.1)

0.2

(3.8)

3.6

132.6

163.8

0.7

164.5

(0.5)

0.1

–

1.5

0.5

–

27.2

5.6

–

27.2

(1.8)

0.1

(1.5)

–

0.1

–

0.1

2.5

–

0.9

–

0.9

1.0

–

(0.2)

–

0.6

1.5

0.5

–

0.6

1.5

0.5

(18.2)

(0.2)

(18.4)

–

22.6

(0.2)

0.9

22.6

23.5

–

0.4

(0.2)

0.9

23.0

23.9

0.2

(2.9)

4.4

137.0

171.5

0.9

172.4

–

0.2

–

7.1

–

7.1

4.2

1.8

–

(0.1)

–

0.1

(1.5)

–

(18.6)

(0.4)

–

(0.1)

7.2

–

0.1

(1.5)

(19.0)

–

(0.1)

7.2

(20.0)

0.4

(19.6)

(20.0)

(12.8)

0.4

(12.4)

6.1

98.4

138.6

0.9

139.5

–

£m

Balance at
1 January 2021
Exercise of share-based
payment awards

Share-based payment
expenses

Tax on share-based payment
expenses

Dividends paid

Future acquisition of non-
controlling interest

Other comprehensive
income

Profit for the year

Total comprehensive income
for the year

Balance at
31 December 2021
Exercise of share-based
payment awards

Share-based payment
expenses

Tax on share-based payment
expenses

Dividends paid

Acquisition of non-
controlling interest

Future acquisition of non-
controlling interest

Other comprehensive
income

(Loss)/profit for the year

Total comprehensive
income/(loss) for the year

Balance at
31 December 2022

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

151

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSCONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

£m

Cash flows from operating activities
(Loss)/profit after tax

Adjustments for:

– Income tax (credit)/expense

– Amortisation and depreciation

– Finance expenses

– Share-based payment expenses

– Fair value (gain)/loss on derivative financial instruments

– Loss on disposal of property, plant, and equipment

– Impairment loss on intangible assets

– Unrealised currency translation gain

– Provision for doubtful debts

– Provision for legal dispute

Change in working capital, net of effects from acquisitions:

– Inventories

– Trade and other receivables and other current assets

– Trade and other payables

– Provision for liabilities and other charges

Cash generated from operations
Income tax paid, net of refund

Net cash (used in)/provided by operating activities

Cash flows from investing activities
Acquisition of subsidiaries

Purchases and construction of property, plant and equipment

Additions of product development costs

Additions of software and software under development

Purchase of bond receivable

Proceeds from disposal of property, plant and equipment

Proceeds from repayment of ESOP loans

Interest received

Payment of accrued consideration

Net cash used in investing activities

Cash flows from financing activities
Proceeds from borrowings

Repayment of borrowings

Principal payment of lease liabilities

Proceeds from exercise of share-based payment awards

Interest paid

Dividend paid to equity holders of the Company

Dividend paid to non-controlling interests

Bank deposit pledged

Net cash provided by/(used in) financing activities

Net increase/(decrease) 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

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

152

Note

2022

2021

(19.6)

(10.6)

17.6

6.1

0.1

(0.1)

7.8

(12.6)

46.9

(24.8)

(9.5)

0.2

0.6

2.1

(4.1)

(2.0)

(33.0)

(7.5)

(8.0)

(3.9)

(36.9)

23.0

5.4

13.2

1.3

1.5

0.3

–

(0.1)

–

(19.0)

(1.1)

16.1

40.6

(4.2)

36.4

–

(5.5)

(8.3)

(8.1)

–

(89.3)

(21.9)

170.3

(35.6)

(5.8)

(5.5)

(18.6)

(0.4)

(1.1)

103.3

12.0

8.8

1.3

22.1

3.7

(2.9)

(1.7)

0.6

(0.9)

(18.2)

(0.2)

–

(19.6)

(5.1)

13.9

8.8

31(d)

32(b)

XP Power Annual Report & Accounts for the year ended 31 December 2022NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

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 19 Tai Seng Avenue, #07-01, Singapore 534054.

The nature of XP Power Limited and its subsidiaries’ operations and its principal activities are set out in the “Markets and Products” sections
of the Annual Report on pages 02–03.

2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation
The consolidated financial statements of XP Power Limited and its subsidiaries (the 'Group') have been prepared in accordance with
International Financial Reporting Standards 'IFRSs' as issued by the International Accounting Standards Board (IFRSs as issued by the IASB)
and Singapore Financial Reporting Standards (International) 'SFRS(I)s'.

All references to SFRS(I)s and IFRSs are subsequently referred to as IFRS in these consolidated financial statements unless otherwise
specified.

The consolidated financial statements have been prepared on the historical cost convention except as disclosed in the accounting policies
below.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of
these accounting policies and the 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. Areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in Note 3.

Certain comparative amounts have been reclassified for consistency with the presentation of the 2022 consolidated financial statements.

A. GOING CONCERN
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
strategic report on pages 20–25. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in
the financial review on pages 46–49. The principal risks of the Group are set out on pages 51–57. The directors have considered these areas
alongside the principal risks and how they may impact going concern.

The directors reviewed budgets and forecasts to assess the cash requirements of the Group to continue in operational existence for a
minimum period of 12 months from the date of the approval of these financial statements.

The Directors also reviewed downside scenarios to the budgets and forecasts, which reflect the possible impact of risks identified in the risk
management framework. The greatest consideration was given to those risks with the highest potential impact if they occurred and those
with the highest probability of occurring. Throughout these downside scenarios, the Group continues to have significant headroom on its
financial debt covenants.

Therefore, after making the above enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group, therefore, continues to adopt the going concern basis in preparing its
consolidated financial statements.

B. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
i New and amended standards adopted by the Group
On 1 January 2022, the Group adopted the new or amended IFRS, Interpretations issued by the IFRS Interpretations Committee of the
IASB 'IFRIC' and Interpretations of SFRS(I) 'INT SFRIS(I)' (collectively referred to as 'Standards and Interpretations') that are mandatory for
application for the financial year. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional
provisions in the respective Standards and Interpretations.

The adoption of these new or amended Standards and Interpretations did not result in substantial changes to the Group’s accounting policies
and had no material effect on the amounts reported for the current or previous financial years.

ii New standards and interpretations issued not yet adopted
Certain new accounting Standards and Interpretations have been published that are not mandatory for 31 December 2022 reporting periods
and have not been early adopted by the Group. These are not expected to have a material impact on the Group in the current or future
reporting periods and on foreseeable future transactions.

153

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

2.2 Revenue recognition
A. SALES OF GOODS
The Group manufactures and sells a range of power products. Sales are recognised at a point in time when control of the products has
transferred to its customer. Transfer of control occurs when delivery to the customer takes place, depending on the delivery terms agreed with
the customer.

Power products are sometimes sold with volume discounts based on aggregate sales over a 12-month period or early payment discounts
if the customers made early repayment. Revenue from these sales is recognised based on the price specified in the contract, net of the
discounts. Accumulated experience is used to estimate and provide for the volume discounts, using the expected value method, and early
payment discounts, using most likely approach. Revenue is only recognised to the extent that it is highly probable that a significant reversal
will not occur. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market
practice. The Group will usually issue a credit note for refund for faulty products.

A receivable (financial asset) is recognised when the goods are delivered as this is the point in time that the consideration is unconditional
because only the passage of time is required before payment is due.

Volume rebates and early payment discounts are recognised when the goods are delivered and is presented as a reduction in trade and other
receivables.

The Group has elected to apply the practical expedient not to adjust the transaction price for the existence of significant financing component
when the period between the transfer of control of good or service to a customer and the payment date is one year or less.

B. INTEREST INCOME
Interest income from financial assets at amortised cost is recognised using the effective interest rate method.

2.3 Group accounting
A. SUBSIDIARIES
i Consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases.

In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment indicator of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests comprise the portion of a subsidiary’s net results of operations and its net assets, which is attributable to the
interests that are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated
statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the
non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit
balance.

ii Acquisitions
The acquisition method of accounting is used to account for business combinations entered into by the Group.

The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred also includes any contingent consideration arrangement
and any pre-existing equity interest in the subsidiary measured at their fair values at the acquisition date.

Acquisition-related cots are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at
fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

The excess of (a) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the (b) fair value of the identifiable net assets acquired is recorded as goodwill. Please refer
to Note 2.7 for the subsequent accounting policy on goodwill.

B. TRANSACTIONS WITH NON-CONTROLLING INTERESTS
Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as
transactions with equity owners of the Company. Any difference between the change in the carrying amounts of the non-controlling interest
and the fair value of the consideration paid or received is recognised within equity attributable to the equity holders of the Company.

154

XP Power Annual Report & Accounts for the year ended 31 December 20222.4 Foreign currency translation
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 consolidated financial statements are presented in Pounds Sterling, which is different
from the Company’s functional currency. The Company’s functional currency is the US Dollar.

The financial statements are 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. TRANSACTIONS AND BALANCES
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the
exchange rates at the dates of the transactions. Currency exchange differences resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are
recognised in profit or loss. Monetary items include primarily financial assets (other than equity investments), contract assets and financial
liabilities. Foreign exchange gains and losses impacting profit or loss are presented in the income statement within “operating expenses”.

Non-monetary items measured at fair value in foreign currencies are translated using the exchange rates at the date when the fair values are
determined.

C. TRANSLATION OF GROUP ENTITIES’ FINANCIAL STATEMENTS
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:

i. Assets and liabilities are translated at the closing exchange rates at the reporting date;

ii. Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative

effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the
dates of the transactions); and

iii. All resulting currency translation differences are recognised in other comprehensive income and accumulated in the currency translation
reserve. These currency translation differences are reclassified to profit or loss on disposal or partial disposal with loss of control of the
foreign operation.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign
operations and translated at the closing rates at the reporting date.

The Group has elected to treat goodwill and fair value adjustments arising on the acquisitions before the date of initial transition to IFRS as
Pounds Sterling-denominated assets and liabilities translated using the exchange rates at the dates of the acquisitions.

2.5 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted-average cost formula. The cost of
finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads (based on
normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and applicable variable selling expenses.

155

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

2.6 Property, plant and equipment
A. MEASUREMENT
i Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and
accumulated impairment losses.

ii Components of costs
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.

B. DEPRECIATION
Freehold land and asset under construction are not depreciated. Depreciation on other items of property, plant and equipment is calculated
using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:

Buildings

Plant and equipment

Motor vehicles

Building improvements

Useful lives

20–50 years

3–10 years

4–5 years

3–10 years

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 profit or loss when the changes arise.

C. SUBSEQUENT EXPENDITURE
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 entity and the cost of the item can be
measured reliably. All other repairs and maintenance expenses are recognised in profit or loss when incurred.

D. DISPOSAL
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised
in profit or loss within “operating expenses”.

2.7 Intangible assets
A. GOODWILL
Goodwill on acquisitions of subsidiaries and businesses, represents the excess of (i) the sum of consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) the fair
value of the identifiable net assets acquired. Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less
accumulated impairment losses.

B. OTHER INTANGIBLE ASSETS
Other intangible assets include internally-generated assets and acquired assets. They are initially capitalised at cost and subsequently carried
at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line
method over their estimated useful lives as follows:

Product development costs

Software

Brand

Technology

Customer relationships

Customer contracts

Useful lives

3–7 years

10 years

2–10 years

5–10 years

1–1.5 years

The amortisation period and amortisation method of intangible assets other than goodwill are reviewed at least at each balance sheet date.
The effects of any revision are recognised in profit or loss when the changes arise.

i Product development costs (internally-generated)
The Group is involved in research and development activities. Research costs are recognised as an expense when incurred. Costs directly
attributable to the development of products are capitalised as intangible assets only when technical feasibility of the project is demonstrated,
the Group has an intention and ability to complete and use the products and the costs can be measured reliably. Such costs include purchases
of materials and services and payroll-related costs of employees directly involved in the project.

ii Software (internally-generated)
The Group is involved in the implementation of an enterprise resource planning system. Costs associated with maintaining software
programmes are recognised as an expense when incurred. Costs that are directly attributable to the design and testing of identifiable and
unique software products controlled by the Group are recognised as intangible assets when the capitalisation criteria for development phase
stated in IAS 38 Intangible Assets is met. Such costs mainly include consultancy costs and payroll-related costs of employees directly involved
in the implementation.

156

XP Power Annual Report & Accounts for the year ended 31 December 20222.8 Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to
the development of internally-generated intangible assets. This includes costs on general borrowings used to finance the development of
internally-generated intangible assets. Borrowing costs on general borrowings are capitalised by applying a capitalisation rate to development
expenditures that are financed by general borrowings. Costs are capitalised during the period of time that is required to complete and prepare
the qualifying asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for
their intended use or sale.

2.9 Impairment of non-financial assets
A. GOODWILL
Goodwill recognised separately as an intangible asset is tested for impairment annually and whenever there is indication that the goodwill may
be impaired.

For the purpose of impairment testing of goodwill, 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.
The 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.

An impairment loss on goodwill is recognised as an expense is not reversed in a subsequent period.

B. INTANGIBLE ASSETS, PROPERTY, PLANT AND EQUIPMENT, RIGHT-OF-USE ASSETS
Intangible assets, property, plant and equipment and right-of-use assets are tested for impairment whenever there is any objective evidence
or indication that these assets may be impaired. For intangible assets that are not available for use, the Group tests them for impairment, at
least annually as well.

For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other
assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is
reduced to its recoverable amount.

The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss.

For an asset other than goodwill, management assesses at the end of the reporting period whether there is any indication that an impairment
recognised in prior periods may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset is
estimated and may result in a reversal of impairment loss. The carrying amount of this asset is increased to its revised recoverable amount,
provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or
depreciation) had no impairment loss been recognised for the asset in prior years.

A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss.

157

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

2.10 Financial assets
A. CLASSIFICATION AND MEASUREMENT
The Group classifies its financial assets in the following measurement categories:

• Amortised cost;

• Fair value through other comprehensive income (FVOCI); and

• Fair value through profit or loss (FVPL).

The classification depends on the Group’s business model for managing the financial assets as well as the contractual terms of the cash flows
of the financial asset.

The Group reclassifies debt instruments when and only when its business model for managing those assets changes.

i At initial recognition
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
fair value through profit or loss are expensed in profit or loss.

ii At subsequent measurement
Debt instruments
Debt instruments mainly comprise of cash and bank balances, trade receivables, other current assets (excluding prepayments, VAT receivables
and rights to returned goods) and bond receivable.

There are three subsequent measurement categories, depending on the Group’s business model for managing the asset and the cash flow
characteristics of the asset.

• Amortised cost: Debt instruments that are held for collection of contractual cash flows where those cash flows represent solely payments
of principal and interest are measured at amortised cost. A gain or loss on a debt instrument that is subsequently measured at amortised
cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income
from these financial assets is included in interest income using the effective interest rate method.

• FVOCI: Debt instruments that are held for collection of contractual cash flows and for sale, where the assets’ cash flows represent solely
payments of principal and interest, are measured at FVOCI. Movements in fair values are recognised in Other Comprehensive Income
'OCI' and accumulated in fair value reserve, except for the recognition of impairment gains or losses, interest income and foreign exchange
gains and losses, which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or loss and presented in “other income”. Interest income from these financial assets is
recognised using the effective interest rate method and presented in “interest income”.

• FVPL: Debt instruments that are held for trading as well as those that do not meet the criteria for classification as amortised cost or

FVOCI are classified as FVPL. Movement in fair values and interest income is recognised in profit or loss in the period in which it arises and
presented in “other income”.

B. IMPAIRMENT
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and
FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 50 details how the
Group determines whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.

C. RECOGNITION AND DERECOGNITION
Regular way purchases and sales of financial assets are recognised on 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 debt instrument, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any
amount previously recognised in other comprehensive income relating to that asset is reclassified to profit or loss.

2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset
and there is an intention to settle on a net basis or realise the asset and the liability simultaneously.

2.12 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid.
They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).
Otherwise, they are presented as non-current liabilities.

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method.

158

XP Power Annual Report & Accounts for the year ended 31 December 20222.13 Provisions
Provision for legal dispute is 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.

Other 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 statement of comprehensive income as finance expense.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.

2.14 Borrowings
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between
the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the
effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which it relates.

When the contractual cash flows of borrowings are modified and does not result in derecognition, differences between the recalculated
gross carrying amount and the carrying amount before modification is recognised in profit or loss as modification gain or loss, at the date of
modification.

Borrowings are derecognised when the obligation is discharged, cancelled or expired. The difference between the carrying amount and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the
balance sheet date, in which case they are presented as non-current liabilities.

2.15 Leases
When the Group is the lessee:
At the inception of the contract, the Group assesses if the contract contains a lease. A contract contains a lease if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration. Reassessment is only required when the terms
and conditions of the contract are changed.

A. RIGHT-OF-USE ASSETS
The Group recognised a right-of-use asset and lease liability at the date which the underlying asset is available for use. Right-of-use assets
are measured at cost which comprises the initial measurement of lease liabilities adjusted for any lease payments made at or before the
commencement date and lease incentive received. Any initial direct costs that would not have been incurred if the lease had not been
obtained are added to the carrying amount of the right-of-use assets.

These right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term.

B. LEASE LIABILITIES
The initial measurement of lease liability is measured at the present value of the lease payments discounted using the implicit rate in the lease,
if the rate can be readily determined. If that rate cannot be readily determined, the Group shall use its incremental borrowing rate.

Lease payments include the following:

• Fixed payment (including in-substance fixed payments), less any lease incentives receivables;

• Variable lease payment that are based on an index or rate, initially measured using the index or rate at the commencement date;

• Amount expected to be payable under residual value guarantees;

• The exercise price of a purchase option if is reasonably certain to exercise the option; and

• Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

For contract that contain both lease and non-lease components, the Group allocates the consideration to each lease component on the basis
of the relative standalone price of the lease and non-lease component. The Group has elected to not separate lease and non-lease component
for property leases and account these as one single lease component.

Lease liabilities are measured at amortised cost using the effective interest method. Lease liabilities shall be remeasured when:

• There is a change in future lease payments arising from changes in an index or rate;

• There is a change in the Group’s assessment of whether it will exercise an extension option; or

• There is a modification in the scope or the consideration of the lease that was not part of the original term.

Lease liabilities are remeasured with a corresponding adjustment to the right-of-use asset, or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.

159

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

2.15 Leases continued
C. SHORT-TERM AND LOW-VALUE LEASES
The Group has elected to not recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or
less and leases of low-value leases, except for sublease arrangements. Lease payments relating to these leases are expensed to profit or loss
on a straight-line basis over the lease term.

D. VARIABLE LEASE PAYMENTS
Variable lease payments that are not based on an index or a rate are not included as part of the measurement and initial recognition of lease
liability. The Group shall recognise those lease payments in profit or loss in the periods that triggered those lease payments.

2.16 Derivative financial instruments
A derivative financial instrument for which no hedge accounting is applied is initially recognised at its fair value on the date the contract is
entered into and is subsequently carried at its fair value. Changes in fair value are recognised in profit or loss. The Group does not apply hedge
accounting for its derivative financial instruments.

2.17 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from tax authorities, using
the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether
it is probable that a tax authority will accept an uncertain tax treatment. The Group measures its tax balances either based on the most likely
amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries except where the Group is
able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the
deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

a. at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is

settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

b. based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle

the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a
business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted
against goodwill on acquisition.

The Group accounts for investment tax credits similar to accounting for other tax credits where a deferred tax asset is recognised for unused
tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilised.

For equity-settled share-based payments, as the timing of the tax deduction and the recognition of the share-based payment expenses differs,
the Group recognises the related deferred tax asset if the deferred tax asset recognition criteria are met. If the cumulative amount of tax
deduction exceeds the tax effect of the related cumulative remuneration expense at the reporting date, the excess of the associated deferred
tax shall be recognised directly in equity.

2.18 Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits with
financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as
current borrowings on the balance sheet. For cash subjected to restriction, assessment is made on the economic substance of the restriction
and whether they meet the definition of cash and cash equivalents.

160

XP Power Annual Report & Accounts for the year ended 31 December 20222.19 Employee compensation
Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.

A. DEFINED CONTRIBUTION PLANS
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such
as the Central Provident Fund in Singapore on a mandatory, contractual or voluntary basis. The Group has no further obligations once the
contributions have been paid.

B. SHARE-BASED COMPENSATION
The Group operates an equity-settled, share-based compensation plan. The value of the employee services received in exchange for the
grant of share-based payment awards is recognised as an expense with a corresponding increase in the share-based payments reserve over
the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the share-based
payment awards granted on grant date. Non-market vesting conditions are included in the estimation of the number of shares under awards
that are expected to become exercisable on the vesting date.

At each balance sheet date, the Group revises its estimates of the number of shares under awards that are expected to become exercisable on
the vesting date and recognises the impact of the revision of the estimates in profit or loss, with a corresponding adjustment to the share-
based payments reserve over the remaining vesting period.

When the share-based payment awards are exercised, the proceeds received (net of transaction costs) and the related balance previously
recognised in the share-based payments reserve are credited to the share capital account, when new ordinary shares are issued, or to the
“treasury shares” account, when treasury shares are re-issued to the employees. Upon expiry of the share-based payment awards, the balance
previously recognised in the share-based payments reserve are credited to retained earnings.

C. PROFIT SHARING AND BONUS PLANS
The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises an accrual when it is contractually obliged to
pay or when there is a past practice that has created a constructive obligation to pay. Under some profit-sharing or deferred bonus plans,
employees receive a share of the profits or bonus only if they remain with the entity for a specified period in the future. The measurement of
such benefit reflects the possibility that some employees may leave without receiving the profits or bonus. A liability for the benefit shall be
accrued over the vesting period.

D. EMPLOYEE LEAVE ENTITLEMENTS
Employee entitlements to annual leave are recognised in profit or loss 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.

2.20 Share capital, treasury shares and other reserve
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 shares”), the carrying amount which includes the
consideration paid and any directly attributable transaction 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.

When treasury shares are subsequently sold or reissued pursuant to an equity-settled share-based payment plan, 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 other reserve.

Other reserve also comprises future transactions with the non-controlling interest. The amount that may become payable under the
agreement is initially recognised at the present value of the redemption amount within liabilities with a corresponding charge directly to
equity. The liability is subsequently accreted through equity up to the redemption amount that is payable at the date at which the agreement
first becomes exercisable.

2.21 Dividend distribution
Dividends to the Company’s shareholders are recognised when the dividends are approved for payment, or, in the case of interim dividends,
when paid.

2.22 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Makers who are
responsible for allocating resources and assessing performance of the operating segments. Segment reporting is disclosed in Note 4.

161

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

3. Critical accounting estimates, assumptions and judgements
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. CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES
i Capitalisation of product development costs
During the year, £8.1 million (2021: £8.3 million) of product development costs have been capitalised. Management has evaluated whether
a project has entered the development phase before capitalising the costs that are directly attributable to the project. The assessment is
based on information documented in business cases prepared by the engineering teams and approved by senior management. Management
has considered the capitalisation criteria stated in IAS 38 Intangible Assets which includes the technical feasibility, intention and ability to
complete the project when reviewing the business cases. The business cases also contain sales forecasts which indicate the probable future
economic benefits of the projects. All product development costs are tracked and monitored which allow management to measure reliably the
expenditure attributable to each project. Significant judgements are involved when management performs the assessment.

B. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
i Recoverable amount of capitalised product development costs
As at 31 December 2022, the net book value of capitalised product development costs amounts to £30.4 million (2021: £30.0 million). For the
purpose of impairment review, management has compared the carrying amount of the respective projects to their forecasted revenues. For
some projects, significant judgements are used to estimate the future sales and growth rates applied in computing the recoverable amounts.
In making these estimates, management has relied on performance of past projects, its communications with the intended customers and its
expectations of industry trends and market development in the respective regions where the finished products will be marketed.

ii Useful lives of capitalised product development costs
The Group estimates the useful lives of capitalised product development costs based on the period over which the assets are expected
to be available for use by the Group. Significant judgements are used by the Group in determining the useful lives of capitalised product
development costs based on the expected life cycle of these products, taking into consideration expected customer demand and
technological innovation.

iii Recoverable amount of cash-generating units for goodwill impairment assessment
The Group tests annually for impairment of goodwill, 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, revenue growth rates and terminal growth rates. 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 CGUs.

The Group prepares cash flow forecasts derived from the most recent financial results and takes into account industry growth forecasts for
the next five years and extrapolates cash flows for the following five years assuming no expansionary growth from that date. The carrying
amount of goodwill as at 31 December 2022 was £77.5 million (2021: £52.5 million) with no impairment adjustment required for 2022.

Management assessed that there are no realistic foreseeable changes that will result in impairment loss on the goodwill allocated to the North
America, Europe and Asia operating segments.

Management has also performed a sensitivity analysis on the impact of climate-related risks. The recoverable amounts remain higher than the
carrying amounts as at 31 December 2022 and no impairment loss is recognised.

162

XP Power Annual Report & Accounts for the year ended 31 December 20224. Segment and revenue information
Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision Makers 'CODM' that
are used to make strategic decisions. The CODM are the Executive Board of Directors who will review the operating results and forecasts to
make decisions about resources to be allocated to the segments and assess their performance.

The Executive Board of Directors considers and manages the business on a geographic basis. Management manages and monitors the
business based on the three primary geographic areas: North America, Europe and Asia. All geographic locations market the same class of
products to their respective customer base.

The Executive Board of Directors assesses the performance of the operating segments based on net sales and operating income. Net sales
for geographic segments are based on the location of the design win rather than where the end sale is made. The operating income for each
segment includes net sales to third parties, related cost of sales, operating expenses directly attributable to the segment, and a portion of
corporate expenses. Costs excluded from segment operating income include stock-based compensation expense, income taxes, various non-
operating charges, and other separately managed general and administrative costs.

Segment assets consist primarily of property, plant and equipment, right-of-use assets, goodwill, intangible assets, inventories, trade
receivables, cash and cash equivalents, derivative financial instruments and exclude tax assets.

Segment liabilities comprise trade and other current liabilities, derivative financial instruments, borrowings, accrued contingent consideration
and exclude tax liabilities.

(i) Revenue
The Group derives revenue from the transfer of goods at a point in time in the following major product lines and geographical regions.

The revenue by class of customer and location of the design win is as follows:

Year to 31 December 2022

Year to 31 December 2021

£m

Semiconductor
Manufacturing
Equipment

Industrial
Technology

Healthcare

Total

Europe

North
America

Asia

Total

Europe

2.7

61.3

22.5

86.5

93.8

44.5

28.9

167.2

16.9

13.8

6.0

36.7

113.4

119.6

57.4

290.4

3.0

43.7

20.6

67.3

North
America

75.2

37.1

28.9

141.2

15.1

11.2

5.5

31.8

Asia

Total

Revenues of £48.3 million (2021: £40.2 million) are derived from a single external customer. These revenues are attributable to the
semiconductor manufacturing equipment sector across all geographical regions.

The revenue by region or country where sales are generated is as follows:

£m

North America

United Kingdom

Singapore

Germany

Switzerland

France

Other countries

Total revenue

2022

167.3

25.9

36.9

40.8

1.4

3.5

14.6

290.4

93.3

92.0

55.0

240.3

2021

144.5

27.9

29.1

21.4

1.7

3.3

12.4

240.3

The majority of North America’s revenue is generated from the United States of America.

As permitted under IFRS 15 Revenue from Contracts with Customers, the aggregated transaction price allocated to unsatisfied contracts of
periods one year or less, or are billed based on time incurred, is not disclosed.

163

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

4. Segment and revenue information continued
(ii) Segment
The segment information provided to the CODM for the reportable segments for the year ended 31 December 2022 and prior year
comparatives is as follows:

Reconciliation of segment results to profit after tax:

2022

21.5

48.5

10.5

80.5

2021

20.3

46.1

10.0

76.4

(13.0)

(10.5)

(2.2)

(1.3)

(0.8)

(1.7)

(1.9)

(1.3)

(0.5)

(6.5)

(3.4)

(1.5)

(1.7)

(1.0)

42.9

(6.1)

(67.0)

(30.2)

10.6

(19.6)

(2.1)

(0.9)

(1.2)

(0.7)

(0.6)

(1.3)

(1.9)

(0.4)

(6.7)

(2.8)

(1.3)

(0.7)

(0.2)

45.1

(1.3)

(15.4)

28.4

(5.4)

23.0

£m

Europe

North America

Asia

Segment results
Research and development

– Employee compensation

– Amortisation of intangible assets

– Depreciation of property, plant and equipment

– Safety and approval

– Advertising

– Others

Manufacturing

– Employee compensation

– Cost of goods sales

– Others

Corporate cost from operating segment

– Employee compensation

– Information systems

– Consultancy fees

– Amortisation of intangible assets

– Others

Adjusted operating profit
Finance expenses

Specific items

(Loss)/profit before tax

Income tax credit/(expense)

(Loss)/profit after tax

164

XP Power Annual Report & Accounts for the year ended 31 December 20224. Segment and revenue information continued

£m

Other information
Property, plant and equipment
additions

Depreciation of property, plant
and equipment

Right-of-use assets additions

Depreciation of right-of-use
assets

Intangible assets (including
goodwill) additions

Amortisation of intangible
assets

Costs relating to legal dispute

Impairment loss on intangible
assets

Bank deposits pledged

Balance sheet

Segment assets
Unallocated deferred and
current income tax

Consolidated total assets

Segment liabilities
Unallocated deferred and
current income tax

Consolidated total liabilities

* Balance is less than £100,000.

Year to 31 December 2022

Year to 31 December 2021

Europe

North
America

Asia

Total

Europe

North
America

Asia

Total

1.4

0.4

13.8

1.1

32.4

1.5

–

3.3

2.0

33.0

1.5

3.2

4.4

52.2

7.7

1.1

3.6

2.7

3.6

0.6

8.6

3.4

–

0.1

–

8.3

5.1

50.4

3.2

44.2

9.3

52.2

7.8

1.1

0.2

0.4

0.5

–

0.2

–

3.3

1.6

0.1

0.9

4.6

4.3

–

2.0

2.2

4.5

0.4

5.5

4.0

5.0

1.8

11.8

16.4

2.9

7.4

–

85.5

237.1

141.5

464.1

26.0

145.9

94.2

266.1

(21.5)

(269.4)

(36.0)

(326.9)

(5.7)

(52.2)

(30.1)

17.6

481.7

6.1

(15.3)

(342.2)

Non-current assets, other than deferred income tax assets, by countries:

£m

North America

United Kingdom

Singapore

Germany

Switzerland

France

Other countries

Total non-current assets

* Balance is less than £100,000.

The majority of North America’s non-current assets are located in the United States of America.

2022

114.2

11.9

49.6

47.4

–

16.9

240.0

272.2

(88.0)

(11.8)

(99.8)

2021

83.3

11.6

39.0

0.5

12.9

147.3

165

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

4. Segment and revenue information continued
Reconciliation of adjusted measures
The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits, which management
believes to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings. Such items
may include, but are not limited to, costs associated with business combinations and legal dispute, gains and losses on the disposal of
businesses, fair value movements, restructuring charges, acquisition related costs and amortisation of intangible assets arising from business
combinations.

In addition, the Group presents an adjusted profit after tax measure by making adjustments for certain tax charges and credits, which
management believes to be significant by virtue of their size, nature or incidence or which have a distortive effect.

The Group uses these adjusted measures to evaluate performance and as a method to provide shareholders with clear and consistent
reporting. See below for a reconciliation of operating profit to adjusted operating profit, a reconciliation of profit before tax to adjusted profit
before tax and a reconciliation of profit after tax to adjusted profit after tax.

A. A RECONCILIATION OF OPERATING (LOSS)/PROFIT TO ADJUSTED OPERATING PROFIT IS AS FOLLOWS:

£m

Operating (loss)/profit

Adjusted for:

Acquisition costs

Foreign exchange gain on Euro-denominated loan drawn down to finance acquisition

Costs related to Enterprise Resource Planning system implementation

Amortisation of intangible assets acquired from business combinations

Costs relating to legal dispute

Impairment loss on intangible assets

Revolving credit facility fees

Restructuring costs

Fair value (gain)/loss on derivative financial instruments

Adjusted operating profit

2022

(24.1)

2.4

(3.2)

3.8

4.1

52.2

7.5

0.2

0.1

(0.1)

67.0

42.9

B. A RECONCILIATION OF (LOSS)/PROFIT BEFORE INCOME TAX TO ADJUSTED PROFIT BEFORE TAX IS AS FOLLOWS:
£m

2022

(Loss)/profit before tax

Adjusted for:

Acquisition costs

Foreign exchange gain on Euro-denominated loan drawn down to finance acquisition

Costs related to Enterprise Resource Planning system implementation

Amortisation of intangible assets acquired from business combinations

Costs relating to legal dispute

Impairment loss on intangible assets

Revolving credit facility fees

Loss on modifications of revolving credit facility

Restructuring costs

Fair value (gain)/loss on derivative financial instruments

Adjusted profit before tax

(30.2)

2.4

(3.2)

3.8

4.1

52.2

7.5

0.2

1.0

0.3

(0.1)

68.2

38.0

2021

29.7

0.1

–

2.1

2.8

10.1

–

0.3

15.4

45.1

2021

28.4

0.1

–

2.1

2.8

10.1

–

0.3

15.4

43.8

166

XP Power Annual Report & Accounts for the year ended 31 December 20224. Segment and revenue information continued
Reconciliation of adjusted measures continued
C. A RECONCILIATION OF (LOSS)/PROFIT AFTER TAX TO ADJUSTED PROFIT AFTER TAX IS AS FOLLOWS:

£m

(Loss)/profit after tax

Adjusted for:

Acquisition costs

Foreign exchange gain on Euro-denominated loan drawn down to finance acquisition

Costs related to Enterprise Resource Planning system implementation

Amortisation of intangible assets acquired from business combinations

Costs relating to legal dispute

Impairment loss on intangible assets

Revolving credit facility fees

Loss on modification of revolving credit facility

Restructuring costs

Fair value (gain)/loss on derivative financial instruments
Non-recurring tax benefits1

Adjusted profit after tax

2022

(19.6)

2.4

(3.2)

3.8

4.1

52.2

7.5

0.2

1.0

0.3

(0.1)

(16.7)

51.5

31.9

2021

23.0

0.1

–

2.1

2.8

10.1

–

0.3

(3.0)

12.4

35.4

1 Adjusted for tax on specific items relating to completed acquisitions of £0.6 million (2021: £10,058), gain on foreign exchange impact of Euro-denominated loan drawn down to
finance acquisition of £0.5 million (2021: £nil), costs related to Enterprise Resource Planning system implementation of £0.8 million (2021: £0.3 million), costs relating to legal
dispute of £13.6 million (2021: £2.6 million) ), impairment of intangible assets of £2.0 million (2021: £nil), RCF fees of £27,706 (2021: £nil), loss on modification of revolving
credit facility of £0.2 million (2021: £nil), restructuring costs of £30,117 (2021: £nil) and fair value impact of derivative financial instruments of £22,464 (2021: £0.1 million)

5. Employee compensation (including Directors)
£m

Wages and salaries

Employers’ contribution to defined contribution plans

Share-based payment expenses

Less: amount capitalised in intangible assets

Total

For further information regarding Directors’ remuneration, refer to the Directors’ Remuneration Report.

6. Finance expenses
£m

Interest income

Interest expense

Bank borrowings and overdrafts

Lease liabilities

Loss on modification of revolving credit facility

Unwinding of discount for asset retirement obligation

Unwinding of discount for accrued consideration

Less: amount capitalised in intangible assets

Amount recognised in profit or loss

* Balance is less than £100,000.

2022

85.5

9.6

0.1

95.2

(6.8)

88.4

2022

(0.1)

5.3

0.7

6.0

1.0

6.9

(0.8)

6.1

Finance expenses on general financing were capitalised at a rate of 4.8% per annum (2021: 1.1% per annum).

During the financial year ended 31 December 2022, the Group renegotiated its existing revolving credit facility. This resulted in the
recognition of a modification loss of £1.0 million in profit or loss.

2021

65.6

8.1

1.5

75.2

(7.6)

67.6

2021

1.2

0.2

1.4

–

0.1

1.5

(0.2)

1.3

167

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

7. Expenses by nature
£m

Profit after tax is after charging:
Amortisation of intangible assets (Note 12)

Depreciation of property, plant and equipment (Note 13)

Depreciation of right-of-use assets (Note 14)

Employee compensation (Note 5)

Foreign exchange gains - net

Fair value (gain)/loss on derivative financial instruments

Purchases of inventories

Changes in inventories

Fees payable to the Group’s Auditor for the audit of the Group’s accounts

Fees payable to the Group’s Auditor for non-audit services

Fees payable to other audit firm for audit related services

Tax fees payable to other firms for services provided to the Group

Lease expense (Note 14)

Recruitment

Information systems

Consultancy fees

Consultancy fees capitalised as intangible assets (Note 12)

Travel and entertainment

Advertising

Safety and approval

Costs related to Enterprise Resource Planning system implementation

Costs relating to legal dispute

Acquisition costs

Impairment loss on intangible assets (Note 12)

Revolving credit facility fees

Other expenses

2022

2021

9.3

5.1

3.2

88.4

(2.0)

(0.1)

169.6

(40.4)

0.7

0.1

0.3

0.2

1.1

4.6

5.2

(3.5)

2.0

1.1

0.9

3.8

52.2

2.4

7.8

0.2

2.3

7.4

4.0

1.8

67.6

(0.9)

0.3

125.0

(19.8)

0.5

0.2

1.3

3.5

8.9

(8.0)

0.7

0.8

1.0

2.1

10.1

0.1

–

3.8

210.6

Total cost of sales, distribution and marketing, administrative and research and development expenses

314.5

* Balance is less than £100,000.

Comet Technologies USA Inc., Comet AG, and YXLON International (collectively “Comet”) filed a lawsuit against XP Power LLC, alleging trade
secret misappropriation relating to RF match and generator technology. The Group has incurred legal costs of £52.2 million (2021: £10.1
million) related to this matter.

8. Income taxes
£m

Tax (credit)/expense attributable to (loss)/profit is made up of:

(Loss)/profit for the financial year

– Singapore

– Foreign

Current income tax

Deferred income tax

(Over)/under-provision in prior financial years

– Singapore

– Foreign

Current income tax

Deferred income tax

Withholding tax

Income tax (credit)/expense

* Balance is less than £100,000.

168

2022

2021

2.8

4.1

6.9

(17.1)

(10.2)

(0.2)

(0.8)

(1.0)

0.6

(10.6)

1.1

1.2

2.3

2.6

4.9

0.1

0.3

0.4

0.1

5.4

XP Power Annual Report & Accounts for the year ended 31 December 20228. Income taxes continued
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions at the balance sheet date.

The tax on the Group’s (loss)/profit before tax differs from the theoretical amount that would arise using the Singapore standard rate of
income tax as follows:

£m

(Loss)/profit before tax
Tax on (loss)/profit at standard Singapore tax rate of 17% (2021: 17%)

Tax incentives

Different tax rates in other countries

Tax effect of share-based payments

Expenses not deductible for tax purposes

Income not subject to tax

Deferred tax effect of change in tax rate

(Over)/under-provision of tax in prior financial years

Withholding tax

Income tax (credit)/expense

* Balance is less than £100,000.

2022

(30.2)

(5.1)

(0.5)

(4.6)

0.2

1.0

(1.0)

(0.2)

(1.0)

0.6

(10.6)

Aggregate deferred tax asset arising in the reporting period and not recognised in net profit or loss or other comprehensive income but
directly debited/(credited) to equity:

£m

Deferred tax asset – share-based payments

Total

* Balance is less than £100,000.

9. Dividends
Amounts recognised as distributions to equity holders in the period:

Prior year third quarter dividend paid

Prior year final dividend paid

First quarter dividend paid

Second quarter dividend paid

Total

* Dividends in respect of 2021 (94.0p).
^ Dividends in respect of 2022 (94.0p).

2022

1.5

2022

Pence
per share
21.0*
36.0*
18.0^
19.0^
94.0

£m

4.1

7.1

3.6

3.8

18.6

2021

Pence
per share

20.0

36.0

18.0*

19.0*

93.0

2021

28.4

4.8

(0.7)

1.1

(0.3)

0.2

(0.1)

0.4

0.1

5.4

2021

(0.5)

£m

3.9

7.1

3.5

3.7

18.2

The third quarter dividend of 21.0 pence per share was paid on 18 January 2023. The proposed final dividend of 36.0 pence per share for the
year ended 31 December 2022 is subject to approval by shareholders at the Annual General Meeting scheduled for 18 April 2023 and has not
been included as a liability in these financial statements. It is proposed that the final dividend be paid on 27 April 2023 to members on the
register as at 24 March 2023.

169

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

10. Earnings per share
The calculations of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company are based on the
following data:

£m

(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted earnings per share
(Loss)/profit after tax attributable to equity holders of the Company

(Loss)/earnings for earnings per share

Number of shares
Weighted average number of ordinary shares outstanding for basic earnings per share (thousands)

Effect of dilutive potential share awards (thousands)

Weighted average number of shares for diluted earnings per share (thousands)

(Loss)/earnings per share

Basic

Basic adjusted*

Diluted

Diluted adjusted*

* Reconciliation to compute the diluted adjusted earnings from operations is as per below:

£m

(Loss)/earnings for the purposes of basic and diluted earnings per share

(Loss)/profit after tax attributable to equity holders of the Company

Amortisation of intangible assets acquired from business combination

Acquisition costs

Foreign exchange gain on Euro-denominated loan drawn down to finance the acquisition

Non-recurring tax benefits

Costs related to Enterprise Resource Planning system implementation

Costs relating to legal dispute

Impairment loss on intangible assets

Revolving credit facilities fees

Loss on modification of revolving credit facility

Restructuring costs

Fair value (gain)/loss on derivative financial instruments

Adjusted earnings

11. Goodwill
£m

Cost and net book value

At 1 January

Accrued consideration (Note 21)

Acquisition of subsidiaries (Note 32(c))

Currency translation differences

At 31 December

2022

2021

(20.0)

19,616

19,679

(102.0)p

160.6p

(101.6)p

160.1p

22.6

19,514

344

19,858

115.8p

179.4p

113.8p

176.3p

2022

2021

(20.0)

4.1

2.4

(3.2)

(16.7)

3.8

52.2

7.5

0.2

1.0

0.3

(0.1)

31.5

22.6

2.8

0.1

–

(3.0)

2.1

10.1

–

0.3

35.0

2022

2021

52.5

21.0

4.0

77.5

52.2

0.2

–

0.1

52.5

Goodwill arises on the consolidation of business/subsidiary undertakings.

For the purpose of impairment tests for goodwill, goodwill is allocated to the cash-generating units 'CGUs' according to operating segments
identified in Note 4.

A segment-level summary of the goodwill allocation is as follows:

£m

North America

Europe

Asia

At 31 December

170

2022

43.9

32.0

1.6

77.5

2021

41.3

9.7

1.5

52.5

XP Power Annual Report & Accounts for the year ended 31 December 2022
11. Goodwill continued
The recoverable amount of the CGU is determined from value-in-use calculations. Cash flow projections used in the value-in-use calculations
were based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period were
extrapolated using the estimated growth rates stated below.

Key assumptions used for value-in-use calculations:

North America

Europe

Asia

31 December 2022

31 DECEMBER 2022

Growth rate1

Discount rate2

8.7%

5.3%

8.5%

11.8%

12.9%

12.5%

Terminal
growth rate

2.0%

Growth rate1

Discount rate2

9.9%

6.3%

11.5%

11.0%

12.3%

12.1%

Terminal
growth rate

2.0%

1 Compound annual growth rate of projected revenue over five years
2 Pre-tax discount rate applied to the pre-tax cash flow projections

A sensitivity analysis was performed for each of the CGUs or group of CGUs, management concluded that no reasonably possible change in
any of the key assumptions would result in the carrying value of the CGU to exceed its recoverable amount.

The impairment test carried out at 31 December 2022 for the North America CGU, which includes 56.6% of the goodwill recognised on the
balance sheet, has revealed that the recoverable amount of the CGU is £227.2 million or 60.2% higher than its carrying amount. A reasonably
possible change of an increase in the discount rate by 7.6% or a decrease in growth rate by 2.2% would result in the recoverable amount of
the North America CGU being equal to its carrying value.

The impairment test carried out at 31 December 2022 for the Europe CGU, which includes 41.3% of the goodwill recognised on the balance
sheet, has revealed that the recoverable amount of the CGU is £127.6 million or 193.8% higher than its carrying amount. A reasonably
possible change of an increase in the discount rate by 51.6% or a decrease in growth rate by 12.6% would result in the recoverable amount of
the Europe CGU being equal to its carrying value.

The impairment test carried out at 31 December 2022 for the Asia CGU, which includes 2.1% of the goodwill recognised on the balance
sheet, has revealed that the recoverable amount of the CGU is £299.5 million or 94.0% higher than its carrying amount. A reasonably possible
change of an increase in the discount rate by 21.9% or a decrease in growth rate by 12.7% would result in the recoverable amount of the Asia
CGU being equal to its carrying value.

The impairment test also modelled the potential impact on future cashflows due to climate change. A sensitivity analysis was performed
for each CGUs or group of CGUs to demonstrate the financial impact of the following key climate-related risks (see Climate Risks in the
Sustainability Report):

1. Storm and flood disruption – major flood or fire could cause a disruption to the manufacturing sites

2. Supply chain risks – climate change could result in disruption to our supply chain, either through supplier sites being directly affected, or

by disruption to transportation and electricity supply

3. Carbon price impacts in the value chain – the increase in carbon price may result in increased cost of goods sold and increased cost of

transportation

4. Robustness of local power supply – our energy supply may be disrupted for a prolonged period due to local supply robustness

5. Risk of not meeting net zero target – failure to meet the defined net zero targets may cause reputational damage, dissuade potential

investors, or result in greater costs due to the introduction of carbon pricing

These downside scenarios would result in 10-20% reduction of revenue and 5-10% increase of operating cost. They are considered to be
reasonable tests as it reflects the expectation that financial impacts would be time-bound and most likely to impact the organisation’s ability
to meet demand for a period. The maximum impact to headroom based on the sensitivities tested for North America, Europe and Asia is a
reduction of £5.0 million, £3.6 million and £28.4 million respectively. The impacts would still leave significant headroom and as a result no
potential indicator of impairment was identified.

171

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

12. Intangible assets

Product
Development
costs

Brand Trademarks Technology

Customer
relationships

Customer
contracts

Software

Assets under
development

£m

Cost
At 1 January 2021

Additions

Transfer

Reclassification from
property, plant and
equipment

Currency translation
differences

At 31 December 2021
Additions

Disposals

Transfers

Reclassification from
property, plant and
equipment

Acquisition of subsidiaries
(Note 32(c))

Currency translation
differences

At 31 December 2022

Accumulated amortisation
and impairment losses
At 1 January 2021

Amortisation charge

Currency translation
differences

At 31 December 2021
Amortisation charge

Impairment charge

Disposals

Reclassification from
property, plant and
equipment

Currency translation
differences

At 31 December 2022

Net book value

At 31 December 2022
At 31 December 2021

* Balance is less than £100,000.

31.9

0.6

2.7

–

0.3

35.5

0.7

–

5.3

–

2.4

43.9

23.3

3.7

0.2

27.2

3.3

–

1.5

32.0

11.9
8.3

0.9

1.1

4.9

17.2

0.6

–

0.9

1.1

4.9

–

0.7

0.2

1.8

0.3

0.1

0.4

0.2

–

0.6

1.2
0.5

–

1.1

1.0

–

1.0

–

1.0

0.1
0.1

–

2.6

0.8

8.3

2.0

0.6

(0.1)

2.5

0.9

–

0.4

3.8

4.5
2.4

–

0.2

17.4

–

6.1

2.5

26.0

6.8

2.2

0.1

9.1

2.3

–

1.3

12.7

13.3
8.3

–

0.6

–

1.9

0.2

2.7

0.6

–

0.6

0.7

–

0.1

1.4

1.3
–

8.7

0.1

–

0.1

8.9

0.3

18.0

15.7

(2.7)

–

0.4

31.4

10.9

–

11.8

(17.1)

Total

83.3

16.4

–

1.0

100.7

11.9

–

0.6

11.3

135.8

36.7

7.4

0.3

44.4

9.3

7.8

–

3.1

28.3

–

7.8

–

0.5

0.2

8.0

20.3
31.4

3.9

65.9

69.9
56.3

0.6

2.1

23.7

2.7

0.9

3.6

1.9

–

0.5

0.4

6.4

17.3
5.3

The remaining amortisation period for customer relationships ranges from one to ten years.

The Group’s trademarks used to identify and distinguish the Group’s name and logo have a carrying amount of £0.1 million (2021: £0.1
million). The Group intends to renew the trademarks continuously and evidence supports its ability to do so, based on its past experience. An
analysis of market and competitive trends provides evidence that the trademarks will generate net cash inflows for the Group for an indefinite
period. Therefore, the trademarks are carried at cost without amortisation, but is tested for impairment on an annual basis.

172

XP Power Annual Report & Accounts for the year ended 31 December 202213. Property, plant and equipment

£m

Cost
At 1 January 2021

Additions

Disposals

Transfer

Reclassification to
intangible assets

Foreign currency translation

At 31 December 2021
Acquisition of subsidiaries
(Note 32(c))

Additions

Disposals

Transfers

Reclassification to
intangible assets

Currency translation
differences

At 31 December 2022

Accumulated depreciation
At 1 January 2021

Depreciation charge

Disposals

Transfers

Reclassification to
intangible assets

Currency translation
differences

At 31 December 2021
Depreciation charge

Disposals

Transfers

Reclassification to
intangible assets

Currency translation
differences

At 31 December 2022

Net book value

At 31 December 2022
At 31 December 2021

* Balance is less than £100,000.

Freehold land

Buildings

and equipment Motor vehicles

Plant

Building
improvements

Assets under
construction

1.5

17.1

–

1.5

–

0.1

1.6

–

0.2

17.3

–

1.7

19.0

3.6

0.5

–

0.1

4.2

0.6

–

0.3

5.1

1.6
1.5

13.9
13.1

26.6

2.3

(0.3)

1.2

0.5

30.3

0.8

4.5

(0.5)

0.6

(0.6)

2.9

38.0

16.5

2.9

(0.2)

0.2

19.4

3.7

(0.5)

1.8

23.9

14.1
10.9

0.3

–

(0.1)

–

0.1

0.3

–

0.3

0.2

(0.1)

–

0.2

0.3

–

0.3

–
–

6.3

0.6

0.1

–

0.1

7.1

0.3

(0.3)

1.0

–

0.8

8.9

3.1

0.6

–

3.7

0.8

(0.3)

–

0.3

4.5

4.4
3.4

–

2.6

–

(1.3)

–

1.3

–

2.7

–

(1.6)

–

0.2

2.6

–

2.6
1.3

Assets under construction pertains to cost incurred for the renovation of the office space which is due for completion in 2023.

Total

51.8

5.5

(0.4)

–

0.9

57.8

0.8

7.5

(0.8)

–

(0.6)

5.7

70.4

23.4

4.0

(0.3)

0.5

27.6

5.1

(0.8)

(0.5)

2.4

33.8

36.6
30.2

173

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

14. Leases
Nature of the Group’s leasing activities
LEASEHOLD LAND AND BUILDINGS
The Group has made an upfront payment to secure the right-of-use of two 50-year leasehold lands, which are used in the Group’s production
operations. The Group also leases office space for the purpose of back office operations, sales activities, and warehousing activities.

During the financial year, the Group entered into a new lease for a building in North America for the purpose of back office operations, sales
and warehousing activities. The lease has a lease term of 22.5 years commencing from 1 December 2022 which includes two options to
extend, each for a period of five years.

EQUIPMENT AND MOTOR VEHICLES
The Group leases vehicles to render logistic services, and leases copier machines for back office use.

a. Right-of-use assets
Carrying amounts and depreciation charge during the year

£m

Cost
At 1 January 2021

Additions

Disposals

Depreciation charge

Currency translation differences

At 31 December 2021
Additions

Acquisition of subsidiaries (Note 32(c))

Disposals

Depreciation charge

Currency translation differences

At 31 December 2022

* Balance is less than £100,000.

b. Lease expense not capitalised in lease liabilities

£m

Lease expense – short-term leases

Lease expense – low-value leases

Total (Note 7)

* Balance is less than £100,000.

Leasehold land
and buildings

Equipment and
motor vehicles

4.8

4.7

(1.6)

7.9

38.5

11.4

(2.1)

(3.0)

1.5

54.2

0.3

(0.2)

0.4

0.5

(0.2)

0.7

2022

0.2

Total

5.1

5.0

(1.8)

8.3

39.0

11.4

(2.1)

(3.2)

1.5

54.9

2021

0.2

c. Total cash outflow for all leases in 2022 was £6.7 million (2021: £2.1 million).

d. Future cash outflows which are not capitalised in lease liabilities
Extension options
The leases for certain office spaces contain extension options, for which the related lease payments have not been included in lease liabilities
as the Group is not reasonably certain to exercise these extension options. The Group negotiates extension options to optimise operational
flexibility in terms of managing the assets used in the Group’s operations. All the extensions are exercisable by the Group and not by the
lessor.

e. Events occurring after balance sheet date
On 31 January 2023, the Group entered into a new lease for office space in the United States of America. The contractual lease payments
amount to £10.6 million which will be paid during the period May 2024 to October 2040.

174

XP Power Annual Report & Accounts for the year ended 31 December 202215. Subsidiaries
The Group has the following principal subsidiaries as at 31 December 2022 and 2021:

Country of business / incorporation

Ownership
interest
2022
(%)

Ownership
interest
2021
(%)

Name of Subsidiary

Directly owned by the Company
XP Power Plc

XP Power Singapore Holdings Pte Limited

Indirectly owned by the Company
XP PLC

XP Power Holdings Limited

XP Power AG

Powersolve Electronics Limited*

XP Power Srl

XP Power ApS

XP Power Sweden AB

XP Power GmbH

FuG Elektronik GmbH

Guth High Voltage GmbH

XP Power SA

XP Power Norway AS

XP Power International Limited

XP Power LLC

XP Power (Shanghai) Co., Limited

XP Power (Hong Kong) Limited

XP Power (Vietnam) Co., Limited

XP Power Singapore Manufacturing Pte. Ltd.

XP Power (Philippines) Inc.

XP Power (Malaysia) Sdn. Bhd.

Hanpower Co., Ltd*

* Refer to Note 21

16. Cash and bank balances
£m

Cash at bank and on hand

Short-term bank deposits

Total

Singapore

Switzerland

Italy

Denmark

Sweden

Germany

France

Norway

USA

China

Hong Kong

Vietnam

Singapore

Philippines

Malaysia

South Korea

100

90.6

100

2022

23.2

0.2

23.4

For the purpose of presenting the consolidated statement of cash flows, cash and cash equivalents comprise the following:

£m

Cash at bank balances (as above)

Less: Bank overdrafts (Note 22)

Less: Bank deposit pledged

Cash and cash equivalents per consolidated statement of cash flows

2022

23.4

(0.2)

(1.1)

22.1

Bank deposit is pledged as a collateral to obtain a letter of credit for the security deposit of a lease. The deposit is classified as a non-current
asset as it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

175

100

89.9

100

–

100

2021

8.9

0.1

9.0

2021

9.0

(0.2)

–

8.8

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

17. Inventories
£m

Finished goods

Raw materials

Work in progress

Total

2022

28.4

53.8

32.2

114.4

2021

25.5

36.3

12.2

74.0

The cost of inventories recognised as an expense and included in “cost of sales” amounts to £129.2 million (2021: £105.2 million).

18. Trade receivables
£m

Current assets

Trade receivables

Less: Loss allowance (Note 31 (d))

Total

* Balance is less than £100,000.

2022

2021

42.4

30.8

The average credit period taken on sales of goods is 53 days (2021: 47 days). No interest is charged on the outstanding receivables balance.
The carrying amounts of trade receivables approximate their fair values.

19. Other current assets
£m

Prepayments

Deposits

VAT receivables

Rights to returned goods

Other receivables

Total

Other current assets are not impaired as at 31 December 2022 and 31 December 2021.

20. Trade and other payables
£m

Trade payables

VAT payables

Withholding tax

Accruals for operating expenses

Contract liabilities

Refund liabilities

Total

2022

2021

3.3

0.9

3.1

0.5

0.2

8.0

2022

25.3

4.5

0.3

18.6

2.9

1.0

52.6

3.3

0.3

0.6

0.2

0.6

5.0

2021

26.0

1.2

0.1

15.5

1.3

0.6

44.7

The Group recognised contract liabilities for payments from customers that are received in advance of the transfer of goods. Revenue recognised
in current period that was included in the contract liabilities at the beginning of the period amounts to £1.3 million (2021: £0.2 million).

Customers have a right to return the goods to the Group within a given period. The Group recognised the refund liabilities for the amounts of
consideration received for which the Group does not expect to be entitled. The Group also recognised a right to the returned goods measured
by reference to the former carrying amounting of the goods.

176

XP Power Annual Report & Accounts for the year ended 31 December 202221. Accrued consideration
£m

At 1 January

Provision made

Payment

At 31 December

£m

Current

Non-current

At 31 December

* Balance is less than £100,000.

2022

2021

1.3

0.2

1.5

2022

–

1.5

1.0

0.3

–

1.3

2021

1.3

As at 31 December 2022, the Group owns 90.6% (2021: 89.9%) of the shares of Powersolve Electronics Limited 'Powersolve'. The Group
entered into an amended agreement on 29 October 2016 to purchase the remaining 10.1% of the shares in 2022. On 26 February 2021, the
Group entered into a deed of variation to amend the purchase of the remaining 10.1% of shares in 2022 to purchase 0.7% of the shares in
2022 and another 9.4% in 2025. In June 2022, the Group purchased 0.7% of the shares as per the deed of variation.

The Group entered into an agreement on 20 May 2015 with Hanpower Co Ltd 'Hanpower' to purchase an additional 15.0% of the shares in
2020 and another 15% of the shares in 2025. The purchase of the first additional 15% was completed in 2020 and the Group now owns 66%
(2021: 66%) of the shares of Hanpower.

The commitment to purchase the remaining ownership interests has been accounted for as accrued consideration and is calculated based
on the expected future payment which will be based on a predefined multiple of the average earnings for the past three years at the point of
payment.

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, with a corresponding
adjustment to goodwill for Powersolve. For Hanpower, the amount that is payable under the agreement is initially recognised at the present
value of the redemption amount within liabilities with a corresponding charge directly to equity. The liability is subsequently accreted through
equity up to the redemption amount that is payable in 2025.

22. Borrowings and lease liabilities
£m

Current

Bank overdrafts

Lease liabilities

Total

Non-current

Bank borrowings

Lease liabilities

Total

Undrawn borrowing facilities
£m

Expiring beyond one year

Total

2022

2021

0.2

2.4

2.6

174.2

48.9

223.1

2022

35.7

0.2

1.6

1.8

33.4

6.5

39.9

2021

77.0

The facility has no fixed repayment terms until maturity in 2026. The revolving credit facility denominated in USD is priced at LIBOR (before
May 2022)/ SOFR (from May 2022) plus a margin of 1.0%-2.0% (2021: 1.0%) for the amount that has been drawn down and a margin of 0.8%
(2021: 0.4%) for the unutilised facility. There is no impact to profit or loss arising from the change in benchmark rate.

There is drawdown on bank overdrafts denominated in GBP of £0.2 million (2021: £0.2 million) during the year.

The fair values of the Group’s bank borrowings and overdrafts approximate their carrying amounts.

177

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

22. Borrowings and lease liabilities continued
Reconciliation of liabilities arising from financing activities

£m

Bank borrowings

Lease liabilities

1 January
2022

33.4

8.1

Proceeds
from
borrowings

Principal
and interest
payments

Addition
during
the year

Disposal
during
the year

Acquisition
arising from
business
combinations

Modification
of revolving
credit facility

Interest
expense

Foreign
exchange
movement

31
December
2022

170.3

–

(40.4)

(6.5)

–

37.5

–

(1.5)

–

11.4

1.0

–

5.3

0.7

4.6

1.6

174.2

51.3

Non-cash changes

£m

Bank borrowings

Lease liabilities

1 January
2021

Proceeds from
borrowings

31.8

4.9

3.7

–

Principal
and interest
payments

(3.6)

(1.9)

Addition
during
the year

–

5.0

Disposal during
the year

Interest
expense

–

1.2

0.2

Foreign
exchange
movement

0.3

(0.1)

31 December
2021

33.4

8.1

Non-cash changes

* Balance is less than £100,000.

23. Derivative financial instruments
Currency forwards
Derivative financial instruments comprise of the USD/GBP currency forwards used to manage the exposure from issuance of dividends in GBP.

31 December 2022
£m

Currency forwards (current)

31 December 2021
£m

Currency forwards (current)

* Balance is less than £100,000.

24. Provisions (current)
£m
Current

Legal dispute (Note (a) below)

Others

Total

* Balance is less than £100,000.

(a) Legal dispute
£m

At 1 January 2022

Provision made

Currency translation differences

At 31 December 2022

Asset

Liability

Contractual
notional amount

Fair value

Contractual
notional amount

3.5

7.1

Asset

Liability

Contractual
notional amount

Fair value

Contractual
notional amount

1.0

8.0

Fair value

(0.1)

Fair value

(0.1)

2022

46.1

2022

–

46.9

(0.8)

46.1

2021

–

2021

–

In September 2020, Comet Technologies USA Inc., Comet AG, and YXLON International (collectively 'Comet') filed a lawsuit against XP Power
LLC, a wholly-owned subsidiary of the Group, alleging trade secret misappropriation relating to RF match and generator technology. On 24
March 2022, a jury in the US legal action brought by Comet found in favour of Comet and awarded damages of $40 million (£33.2 million)
against XP Power LLC. On 30 September 2022, the judge also ruled that there should be an injunction upon XP Power LLC in relation to certain
trade secrets. Since this date the Group and its appointed lawyers have been working to resolve the situation including filing motions with the
Court of the Northern District of California against the validity and level of the damages imposed. XP Power LLC has launched no products and
therefore received no orders or revenue related to the contested RF match and generator technology. Upon receipt of the ruling of motions filed,
the Board will consider next steps including potentially applying for an appeal with the Appellate Court. The Group has recognised a provision
for legal dispute which is expected to be utilised in 2023. The provision of £46.9 million includes damages and other related legal costs. In the
opinion of the Directors, after taking appropriate legal advice, the outcomes of the legal dispute are not expected to give rise to any significant
loss beyond the amounts provided at 31 December 2022. The Directors consider that disclosure of further details of this dispute will seriously
prejudice the Group’s negotiating position and accordingly, further information on the nature of the obligation has not been provided.

178

XP Power Annual Report & Accounts for the year ended 31 December 202225. Bond receivable
In November 2022, the Group purchased an appeal bond from an insurance company in preparation for a potential appeal with the Appellate
Court amounting to £36.9 million. Interest is accrued on the bond at an annual rate equivalent to the rate for the 3-month Treasury Bill as
published by the Board of Governors of the Federal Reserve System. A management fee of 0.40% of the bond is calculated on an annualised
basis. The bond receivable is restricted until the finalisation of the appeal. The carrying amount of £37.0 million as at 31 December 2022
includes interest receivable of £0.1 million.

26. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against
current income tax liabilities and when the deferred income taxes relate to the same taxation authority.

The amounts, determined after appropriate offsetting, are shown on the balance sheet as follows:

£m

Deferred tax assets

Deferred tax liabilities

Net deferred tax assets/(liabilities)

The movement in the net deferred income tax account is as follows:

£m

Beginning of financial year

Currency translation differences

Acquisition of subsidiaries (Note 32(c))

Tax credited/(charged) to
– Profit or loss (Note 8)

– Equity (Note 8)

End of financial year

2022

15.1

(10.5)

4.6

2022

(6.2)

(1.5)

(4.1)

17.9

(1.5)

4.6

The movement in deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) is as follows:

Deferred income tax assets

£m

At 1 January 2021

Credited to profit or loss

Credited to equity

At 31 December 2021
Credited/(charged) to profit or loss

Debited to equity

Currency translation differences

At 31 December 2022

Deferred income tax liabilities

£m

At 1 January 2021

Charged to profit or loss

Currency translation differences

At 31 December 2021
Acquisition of subsidiaries

Credited to profit or loss

Currency translation differences

At 31 December 2022

* Balance is less than £100,000.

Provision for
legal dispute

Share-based
payment

Tax losses

Others

–

11.5

–

11.5

2.3

0.5

2.8

(0.7)

(1.5)

–

0.6

0.4

–

0.4

1.1

–

1.5

Accelerated tax
depreciation

Intangible
assets
amortisation

(1.7)

(0.6)

(2.3)

–

0.4

(0.3)

(2.2)

(6.9)

(1.9)

(8.8)

(3.7)

3.5

(1.4)

(10.4)

2.1

(0.4)

–

1.7

–

0.2

3.6

Others

–

(0.4)

0.4

2021

3.2

(9.4)

(6.2)

2021

(3.8)

–

(2.9)

0.5

(6.2)

Total

4.8

(0.4)

0.5

4.9

13.6

(1.5)

0.2

17.2

Total

(8.6)

(2.5)

(11.1)

(4.1)

4.3

(1.7)

(12.6)

179

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

27. Share capital and reserves
a. Share capital

2022
Beginning of financial year

Shares issued

Treasury shares purchased

Treasury shares re-issued

End of financial year

2021
Beginning of financial year

Treasury shares purchased

Treasury shares re-issued

End of financial year

* Balance is less than £100,000.

No of ordinary shares

Amount

Issued share
capital

Treasury shares

Share capital
£m

Treasury shares
£m

19,642,296

(92,881)

27.2

100,000

–

(100,000)

90,795

–

19,742,296

(102,086)

27.2

19,642,296

(156,960)

–

19,642,296

(900)

64,979

(92,881)

27.2

–

27.2

–

(0.1)

All issued ordinary shares are fully paid. There is no par value for these ordinary shares. Fully paid ordinary shares carry one vote per share and
carry a right to dividends as and when declared by the Company.

In 2022, the Company issued 100,000 ordinary shares for a total consideration of £1,000 for cash to the ESOP Trust. The newly issued shares
rank pari passu in all aspects with the previously issued shares.

b. Treasury shares
Treasury shares are shares in the Company that are held by the Company’s Employee Share Ownership Plan (ESOP) Trust for the purpose of
issuing shares under the Company’s ESOP. Shares issued to employees are recognised on a first in, first out basis.

In 2022, the Company issued 100,000 ordinary shares at 1 pence per share and held under ESOP Trust.

The Company re-issued 90,795 (2021: 64,979) treasury shares during the financial year pursuant to the Company’s ESOP at the exercise price
of ranging from £0.01 to £15.43 (2021: £0.01 to £15.43). The cost of the treasury shares re-issued amounted to £11,000 (2021: £17,000).
The total consideration (net of expense) for the treasury shares issued is as follows:

£m

Exercise price paid by employees

Value of employee services

Total net consideration

* Balance is less than £100,000.

2022

1.8

2021

0.5

1.0

Accordingly, a gain on re-issue of treasury shares of £1,800,000 (2021: £1,000,000) is recognised in other reserve.

c. Share-based payments reserve
Share-based payments reserve represents the equity-settled share-based payments granted to employees. The reserve is made up of the
cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled
share-based payments and is reduced by the expiry or exercise of share-based payments.

d. Merger reserve
Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of shares of
subsidiaries acquired under common control.

e. Translation reserve
Translation reserve represents exchange differences arising from the translation of financial statements of foreign operations whose functional
currencies are different from that of the Group’s presentation currency.

f. Other reserve
Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of shares of
subsidiaries acquired under common control.

Share-based payments reserve represents the equity-settled share-based payments granted to employees. The reserve is made up of the
cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled
share-based payments and is reduced by the expiry or exercise of share-based payments.

180

XP Power Annual Report & Accounts for the year ended 31 December 202227. Share capital and reserves continued
Other reserve comprises future transactions with the non-controlling interest. The Group has an agreement with the non-controlling
shareholders of Hanpower Co. Ltd, a subsidiary, to purchase an additional 15.0% of the shares in 2025.The amount that may become payable
under the agreement is initially recognised at the present value of the redemption amount within liabilities with a corresponding change
directly to equity. The liability is subsequently accreted through finance expenses up to the redemption amount that is payable at the date at
which the agreement first becomes exercisable.

28. Cash flow from movement in working capital
The following adjustments have been made to reconcile from the movement in balance sheet heading to the amount presented in the cash
flow from the movement in working capital. This is in order to more appropriately reflect the cash impact of the underlying transactions.

2022
£m

At 31 December 2022

At 31 December 2021

Balance sheet movement

Acquisition of subsidiaries (Note 32(c))

Movement, net of effects from acquisitions

Payment of accrued consideration (Note 21)

Withholding tax payable

Provision for reinstatement costs

Provision for legal dispute

Currency translation differences

Inventories
(Note 17)

Trade
receivables
(Note 18)

Other current
assets
(Note 19)

Trade and other
payables
(Note 20)

Accrued
consideration
(Note 21)

Provisions

114.4

74.0

(40.4)

5.9

(34.5)

–

9.7

(24.8)

42.4

30.8

(11.6)

1.1

(10.5)

–

3.2

(7.3)

8.0

5.0

(3.0)

0.2

(2.8)

–

0.6

(2.2)

52.6

44.7

7.9

(2.9)

5.0

–

(0.2)

–

(4.6)

0.2

1.5

1.3

0.2

–

0.2

–

(0.2)

–

47.0

0.2

46.8

–

46.8

–

(46.9)

0.7

0.6

* Balance is less than £100,000.

2021
£m

At 31 December 2021

At 31 December 2020

Balance sheet movement

Movement in accrued consideration
(Note 21)

Interest payable

Provision for reinstatement costs

Currency translation differences

Inventories
(Note 17)

Trade and other
receivables
(Note 18)

Other current
assets
(Note 19)

Trade and other
payables
(Note 20)

Accrued
consideration
(Note 21)

Provisions

74.0

54.2

(19.8)

0.8

(19.0)

30.8

30.2

(0.6)

(0.1)

(0.7)

5.0

4.6

(0.4)

44.7

28.2

16.5

0.1

(0.5)

16.1

1.3

1.0

0.3

(0.3)

0.2

0.1

(0.1)

29. Related party transactions
As at 31 December 2022, the Company’s Employee Share Ownership Plan provided nil (2021: nil) interest-free loans to Directors for the
deferred payment share scheme. The detailed information is provided for in the Directors’ Remuneration Report on pages 118–138.

Key management personnel compensation
Key management personnel are the Directors of the Group.

£m

Short-term employee benefits

Post-employment benefits

Share-based payment expenses

Total

2022

2021

1.4

0.1

0.2

1.7

1.9

0.1

0.7

2.7

Further information about the remuneration of the individual Directors is provided in the Directors’ Remuneration Report on pages 118–138.

181

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

30. Share-based payments
The Group operates several equity-settled share-based payment plans.

a. XP Power Share Option Plan (the 'SOP')
The SOP was approved by the shareholders on 2 April 2012. A total of 345,000 options and 418,000 options were granted in 2012 and 2016
respectively under the SOP. These options vest only if certain performance conditions are met. The vesting of outstanding options is based on
Total Shareholder Return 'TSR' relative to the FTSE350 Electronic and Electric Equipment Sector. The options may only be exercised within 10
years from grant date. All options under the SOP are fully vested as at 31 December 2022.

Set out below are summaries of options granted under the plan:

At 1 January

Forfeited during the year

Exercised during the year*

At 31 December

Exercisable at 31 December

2022

2021

Weighted
average
exercise price
per share option

Number of
share options

76,885

£15.43

–

(3,208)

73,677

–

£15.43

Weighted
average
exercise price
per share option

£14.92

£15.43

£13.93

£15.43

Number of
share options

118,329

(1,592)

(39,852)

76,885

*The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2022 was £32.86 (2021: £43.12).

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

23 February 2016

Expiry date

10 December 2023

23 February 2026

Total
Weighted average remaining contractual life
of options outstanding at end of period

Exercise price

£15.43

Share options
31 December
2022

Share options
31 December
2021

34,800

38,877

73,677

34,800

42,085

76,885

2.1 years

4.1 years

b. XP Power Limited Long Term Incentive Plan 2017 (the 'XP LTIP 2017')
The XP LTIP 2017 was approved by the shareholders on 19 April 2017 and amended by the Remuneration Committee on 28 February 2020
in respect of awards made on or after that date. The only participants under the XP LTIP 2017 are the Executive Directors who are granted
Performance Share Awards. These Awards vest only if certain performance conditions are met. The vesting of outstanding Awards is based on
TSR relative to the companies in the FTSE 250 index excluding investment trusts and earnings per share growth.

Set out below are summaries of Awards granted under the plan:

At 1 January#

Granted during the year
Forfeited during the year#
Exercised during the year*

At 31 December

Exercisable at 31 December

2022

2021

Weighted
average
exercise price
per share under
award

Number of
shares under
award

Weighted
average
exercise price
per share under
award

Number of
shares under
award

86,254

30,471

(21,669)

(35,305)

59,751

£0.01

93,852

19,606

(26,349)

(855)

86,254

19,502

£0.01

#The beginning balance excludes 25,041 awards granted on 16 Mar 2019 where the EPS condition for the performance period 2019 to 2021 has not been met. This is different
from the Remuneration Committee Report which discloses the forfeiture in 2022. The forfeited awards during the year includes 18,837 awards granted on 22 Apr 2020 where
the TSR condition for the performance period 2020 to 2022 has not been met and the EPS condition was only partially met. This is different from the Remuneration Committee
Report which will disclose the forfeiture in 2023.

*The weighted average share price at the date of exercise of awards exercised during the year ended 31 December 2022 was £25.45 (2021: £56.75).

182

XP Power Annual Report & Accounts for the year ended 31 December 2022

30. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices.

Grant date
30 May 20171
1 November 20171
16 May 20181
16 March 20192
22 April 2020

22 April 2020

3 March 2021

10 May 2021

8 March 2022

Total

Expiry date

30 May 2022

31 December 2022

16 May 2023

16 March 2024

22 October 2025

22 April 2026

3 March 2027

10 May 2027

8 March 2028

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

£0.01

–

3,091

3,038

3,545

11,582

8,024

30,471

59,751

5,127

8,000

12,749

12,520

14,563

13,689

11,582

8,024

–

86,254

1 These awards are fully vested.
2 50% of the awards vested in 2022 and the remaining 50% will vest in 2023.

FAIR VALUE OF AWARDS
The fair values at grant date of awards granted during the year under the XP LTIP 2017 are determined using the valuation models below.
The model inputs are as follows:

Options granted

Fair value at grant date

Model used

Assumption used:

Share price

Exercise price

Expected volatility

Expected option life

Expected dividend yield

Risk-free interest rate

30,471

£18.83 to £30.99

Monte Carlo model and Black-Scholes model

£36.00

£0.01

40.04%

5 years

3.00%

1.44%

c. XP Power Limited Senior Managers Long Term Incentive Plan 2017
(the 'XP Senior Managers LTIP 2017')
The XP Senior Managers LTIP 2017 was approved by the shareholders on 19 April 2017 and amended by the Remuneration Committee on 28
February 2020 in respect of awards made on or after that date and introduced for non-Board members for certain grants made from 1 April
2020. The participants under the XP Senior Managers LTIP 2017 are the senior management of companies under the Group.

There are four different types of awards granted under the XP Senior Managers LTIP 2017:

1. Performance Share Awards

2. Performance Restricted Share Units 'Performance RSUs'

3. Restricted Share Awards

4. Restricted Share Units 'RSUs'

Performance RSUs and RSUs are only granted to participants in the United States and they are exercised at nil cost. Performance Share
Awards and Restricted Share Awards are granted to participants outside of the United States and they are exercised at nominal cost.

Performance Share Awards and Performance RSUs vest only if certain performance conditions are met. The vesting of outstanding Awards is
based on TSR relative to the companies in the FTSE 250 index excluding investment trusts and earnings per share growth.

For each tranche of Performance Share Awards and Performance RSUs granted in 2017, 2018 and 2019, 50% of the awards will vest after
the third year and the remaining 50% of the share awards will vest after the fourth year. For each tranche of Performance Share Awards and
Performance RSUs granted in 2020, 2021 and 2022, 100% of the awards will vest after the third year.

Restricted Share Awards and RSUs vest over the service period of three years. There is no performance condition attached.

183

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

30. Share-based payments continued
PERFORMANCE SHARE AWARDS
Set out below are summaries of Performance Share Awards granted under the plan:

At 1 January

Granted during the year

Forfeited during the year

Exercised during the year*

At 31 December

Exercisable at 31 December

2022

2021

Weighted
average
exercise price
per share under
award

Number of
shares under
award

62,781

23,339

(20,026)

(11,207)

54,887

9,515

£0.01

82,366

17,285

(29,935)

(6,935)

62,781

9,272

£0.01

*The weighted average share price at the date of exercise of awards exercised during the year ended 31 December 2022 was £30.90 (2021: £53.59).

Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date
30 May 20171
16 May 20181
4 September 20181
16 March 20192
22 April 2020

3 March 2021

8 March 2022

12 September 2022

Total

Expiry date

30 May 2022

16 May 2023

4 September 2023

16 March 2024

22 April 2024

3 March 2025

8 March 2026

12 September 2026

1 These awards are fully vested.
2 50% of the awards vested in 2022 and the remaining 50% will vest in 2023.

PERFORMANCE RSUS
Set out below are summaries of Performance RSUs granted under the plan:

At 1 January

Granted during the year

Forfeited during the year

Exercised during the year*

At 31 December

Exercisable at 31 December

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

£0.01

–

6,026

–

8,359

4,232

12,931

22,819

520

54,887

2,991

12,561

–

11,665

19,729

15,835

–

62,781

2022

2021

Weighted
average
exercise price
per share under
award

Number of
shares under
award

61,699

14,732

(18,943)

(21,611)

35,877

414

–

98,754

10,995

(34,194)

(13,856)

61,699

8,267

–

*The weighted average share price at the date of exercise of awards exercised during the year ended 31 December 2022 was £32.43 (2021: £51.62).

184

XP Power Annual Report & Accounts for the year ended 31 December 2022

30. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date
30 May 20171
12 October 20171
16 May 20181
16 March 20192
22 April 2020

3 March 2021

8 March 2022

17 August 2022

Total

Expiry date

30 May 2022

12 October 2022

16 May 2023

16 March 2024

22 April 2024

3 March 2025

8 March 2026

17 August 2026

1 These awards are fully vested.
2 50% of the awards vested in 2022 and the remaining 50% will vest in 2023.

RESTRICTED SHARE AWARDS
Set out below are summaries of Restricted Share Awards granted under the plan:

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

–

300

–

6,242

5,134

9,746

13,489

966

35,877

1,388

450

12,857

14,614

21,588

10,802

–

61,699

At 1 January

Granted during the year

Forfeited during the year

At 31 December

Exercisable at 31 December

2022

2021

Weighted
average
exercise price
per share under
award

Number of
shares under
award

Weighted
average
exercise price
per share under
award

Number of
shares under
award

3,912

6,523

(974)

9,461

–

£0.01

–

2,425

1,793

(306)

3,912

–

£0.01

–

Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

22 April 2020

3 March 2021

8 March 2022

12 September 2022

Total

Expiry date

22 April 2024

3 March 2025

8 March 2026

12 September 2026

RSUs
Set out below are summaries of RSUs granted under the plan:

At 1 January

Granted during the year

Forfeited during the year

At 31 December

Exercisable at 31 December

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

£0.01

1,639

1,299

4,701

1,822

9,461

2,324

1,588

–

3,912

2022

2021

Number of
shares under
award

1,623

23,585

(138)

25,070

–

Weighted
average
exercise price
per share under
award

Number of
shares under
award

–

1,248

577

(202)

1,623

–

185

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

30. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

22 April 2020

3 March 2021

8 March 2022

17 August 2022

21 November 2022

Total

Expiry date

22 April 2024

3 March 2025

8 March 2026

17 August 2026

21 November 2026

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

–

1,046

577

14,554

483

8,410

25,070

1,046

577

–

1,623

Fair value of awards
The fair values at grant date of awards granted during the year under the XP Senior Managers LTIP 2017 are determined using the valuation
models below. The model inputs are as follows:

Options granted

Fair value at grant date

Model used

Assumption used:

Share price

Exercise price

Expected volatility

Expected option life

Expected dividend yield

Risk-free interest rate

Performance Share Award

Performance RSU

Restricted Share
Award

23,339

14,732

6,523

RSU

23,585

£10.87 to £32.90

£10.87 to £32.90 £19.74 to £32.90 £19.74 to £32.90

Monte Carlo model and
Black-Scholes model

Black-Scholes
model

£19.20 to £36.00

£19.20 to £36.00 £21.60 to £36.00 £21.60 to £36.00

£0.01

40.04% to 42.74%

40.04% to 42.74% 40.04% to 43.34% 40.04% to 43.34%

3 years

3.00%

3 years

3.00%

3 years

1.70%

3 years

1.70%

1.44% to 3.08%

1.44% to 3.18%

186

XP Power Annual Report & Accounts for the year ended 31 December 202230. Share-based payments continued
d. XP Power Limited Restricted Share Plan 2020 (the “XP RSP 2020”)
The XP RSP 2020 was approved by the shareholders on 21 April 2020. The only participants under the XP RSP 2020 are the Executive
Directors who are granted Restricted Shares. Restricted Shares vest over the service period of five years. There is no performance condition
attached.

Set out below are summaries of Restricted Shares granted under the plan:

At 1 January

Granted during the year

Forfeited during the year

At 31 December

Exercisable at 31 December

2022

2021

Weighted
average
exercise price
per share under
award

Number of
shares under
award

Weighted
average
exercise price
per share under
award

Number of
shares under
award

6,230

4,080

(557)

9,753

–

£0.01

–

3,532

2,698

–

6,230

–

£0.01

–

£0.01

–

Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

22 April 2020

3 March 2021

10 May 2021

8 March 2022

Total

Expiry date

22 October 2025

22 April 2026

3 March 2027

10 May 2027

8 March 2028

Shares under
award 31
December 2022

Shares under
award 31
December 2021

Exercise price

£0.01

1,263

1,712

1,495

1,203

4,080

9,753

Fair value of awards
The fair value at grant date of awards granted during the year under the XP RSP 2020 is determined using the Black-Scholes model.
The model inputs are as follows:

Options granted

Fair value at grant date

Assumption used:

Share price

Exercise price
Expected volatility1
Expected option life

Expected dividend yield

Risk-free interest rate

1 Volatility was estimated based on the historical volatility of the shares over a five-year period prior to grant date.

1,820

1,712

1,495

1,203

6,230

4,080

£30.99

£36.00

£0.01

35.87%

5 years

3.00%

1.44%

187

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

31. Financial risk management
The Group’s activities expose it to capital risk, market risk (including currency risk and 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.

a. 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.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 22, cash and equity attributable to equity
holders of the Company, 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 buyback as well as the issue
of new debt or the redemption of existing debt.

b. Currency risk
The Group operates in North America, Europe and Asia. Entities in the Group regularly transact in currencies other than their respective
functional currencies (“foreign currencies”). The Group monitors and manages the currency risk 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 also manages some currency
exposure by entering into currency forwards with banks

The Group’s currency exposure based on the information provided to key management is as follows:

£m

At 31 December 2022

Financial assets
Cash and cash equivalents

Trade receivables

Bond receivables

Other current assets

ESOP loan to employees

Subtotal

Financial liabilities
Borrowings

Trade and other payables

Lease liabilities

Provisions

Other financial liabilities

Subtotal

Net financial (liabilities)/assets
Less: Currency forwards

Currency profile
Financial liabilities/(assets) denominated in the
respective entities’ functional currencies

Currency exposure of financial assets/(liabilities)

* Balance is less than £100,000.

GBP

EUR

USD

SGD

Others

Total

0.9

2.3

–

0.2

3.4

(0.2)

(3.1)

(0.6)

(0.1)

(0.9)

(4.9)

(1.5)

10.6

9.1

0.8

9.9

2.5

4.8

–

0.2

–

7.5

–

(1.5)

(13.6)

(0.1)

–

(15.2)

(7.7)

–

(7.7)

8.1

0.4

17.6

34.6

37.0

0.4

–

89.6

(174.2)

(34.1)

(33.1)

(46.7)

–

(288.1)

(198.5)

–

(198.5)

203.6

5.1

0.3

–

0.3

–

(1.2)

(4.0)

(0.1)

–

(5.3)

(5.0)

–

(5.0)

–

(5.0)

2.1

0.7

–

0.3

–

3.1

–

(5.0)

–

(0.6)

(5.6)

(2.5)

–

(2.5)

0.1

(2.4)

23.4

42.4

37.0

1.1

103.9

(174.4)

(44.9)

(51.3)

(47.0)

(1.5)

(319.1)

(215.2)

10.6

(204.6)

212.6

8.0

188

XP Power Annual Report & Accounts for the year ended 31 December 2022

31. Financial risk management continued
£m

GBP

EUR

USD

SGD

Others

Total

At 31 December 2021
Financial assets

Cash and cash equivalents

Trade receivables

Other current assets

ESOP loan to employees

Subtotal

Financial liabilities
Borrowings

Trade and other payables

Lease liabilities

Provisions

Other financial liabilities

Subtotal

Net financial (liabilities)/assets
Less: Currency forwards

Currency profile
Financial liabilities/(assets) denominated in the
respective entities’ functional currencies

Currency exposure of financial assets/(liabilities)

* Balance is less than £100,000.

1.1

2.4

0.1

3.6

(0.2)

(3.8)

(0.2)

(0.9)

(5.1)

(1.5)

9.0

7.5

0.8

8.3

0.5

2.3

–

2.8

–

(0.6)

(0.5)

–

(1.1)

1.7

–

1.7

(1.2)

0.5

5.6

25.9

0.4

–

31.9

(33.4)

(32.4)

(2.8)

–

(68.6)

(36.7)

–

(36.7)

41.9

5.2

0.1

0.2

–

0.3

–

(1.4)

(4.5)

(0.1)

–

(6.0)

(5.7)

–

(5.7)

–

(5.7)

1.7

0.2

–

2.1

–

(3.9)

(0.1)

(0.5)

(4.6)

(2.5)

–

(2.5)

(0.1)

(2.6)

9.0

30.8

0.9

–

40.7

(33.6)

(42.1)

(8.1)

(0.2)

(1.4)

(85.4)

(44.7)

9.0

(35.7)

41.4

5.7

Within the Group, the Company, with USD as its functional currency, has significant currency exposure to financial assets and liabilities
denominated in GBP and SGD. If the GBP and SGD change against USD by 10.2% and 2.8% respectively (2021: USD 7.3%, SGD 2.9%) with all
other variables, including tax rates, being held constant, the effects arising from the net financial asset/(liability) that are exposed to currency
risk will be as follows:

GBP against USD

– Strengthened

– Weakened

SGD against USD

– Strengthened

– Weakened

2022
Profit after tax

2021
Profit after tax

0.7

(0.7)

(0.1)

0.1

0.5

(0.5)

(0.1)

0.1

Another subsidiary, with EUR as its functional currency, has significant currency exposure to financial assets and liabilities denominated in
USD. If EUR change against USD by 10.7% (2021: 4.8%) with all other variables, including tax rates, being held constant, the effects arising
from the net financial asset/(liability) that are exposed to currency risk will be as follows:

USD against EUR

– Strengthened

– Weakened

* Balance is less than £100,000.

2022
Profit after tax

2021
Profit after tax

0.3

(0.3)

0.2

(0.2)

The impact of the currency risk on the other comprehensive income is not significant.

c. Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. As the Group has no significant interest-bearing assets, the Group’s income is substantially independent of changes in the market
interest rates.

All of the Group’s borrowings are at variable interest rates and are denominated in USD. If the USD interest rates on these borrowings
increased/decreased by 1.0% (2021: 1.0%) with all other variables, including tax rates, being held constant, the profit after tax will be lower/
higher by £1,131,000 (2021: £270,000) as a result of higher/lower interest expense on these borrowings.

189

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

31. Financial risk management continued
d. 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 uses a provision matrix to measure the lifetime expected credit loss allowance for trade receivables. In measuring the expected
credit loss, trade receivables are grouped based on shared credit risk characteristics and days past due.

In calculating the expected credit loss rates, the Group considers historical loss rates for each category of customers and adjusts to reflect
current and forward macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified gross
domestic product (GDP) and the public policy of the countries in which it sells goods as the most relevant factors.

Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan
with the Group. The Group considers a financial asset as in default if the counterparty fails to make contractual payments within 90 days
when they fall due and writes off the financial asset when a debtor is in significant financial difficulties and have defaulted on payment that
is usually greater than 120 days past due. Where receivables are written off, the Company continues to engage in enforcement activity to
attempt to recover the receivables due. Where recoveries are made, these are recognised in profit or loss.

Debtors separately identified as credit-impaired

£m

Gross carrying amount

Less: loss allowance

Carrying amount net of allowance

2022

2021

–

The Group’s credit risk exposure in relation to trade receivables under IFRS 9 is set out in the provision matrix as follows:

£m

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

Past due

At 31 December 2022

North America region
Expected loss rate

Trade receivables

Loss allowance

Europe region
Expected loss rate

Trade receivables

Loss allowance

Asia region
Expected loss rate

Trade receivables

Loss allowance

0.0%

20.2

–

0.0%

10.3

–

0.0%

4.3

–

0.1%

3.1

0.1%

1.7

0.0%

0.9

–

0.2%

0.5

0.2%

0.2

0.0%

0.7

–

0.2%

0.3%

0.2%

0.0%

–

Past due

0.3%

0.1

0.0%

–

0.1%

0.3

10.8%

0.1

0.0%

–

24.1

12.4

5.9

–

£m

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

At 31 December 2021

North America region
Expected loss rate

Trade receivables

Loss allowance

Europe region
Expected loss rate

Trade receivables

Loss allowance

Asia region
Expected loss rate

Trade receivables

Loss allowance

* Balance is less than £100,000.

190

0.0%

14.8

–

0.0%

7.8

–

0.0%

2.9

–

0.1%

1.7

0.1%

1.2

0.0%

0.6

–

0.2%

0.5

0.2%

0.2

0.0%

0.2

–

0.2%

0.4

0.2%

0.1

0.0%

–

0.3%

0.1

5.1%

0.2

0.3%

29.6%

0.1

0.0%

–

17.7

9.4

3.7

–

XP Power Annual Report & Accounts for the year ended 31 December 202231. Financial risk management continued
The movement in the allowance for impairment of trade receivables is as follows:

£m

Beginning of financial year
Loss allowance(a) recognised in profit or loss during the year on assets acquired/originated
Receivables written off as uncollectible

Currency translation differences

End of the financial year
(a) Loss allowance measured at lifetime ECL.
* Balance is less than £100,000.

2022

–

2021

(0.5)

0.5

e. Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding through an adequate amount of committed
credit facilities (Note 22) and the ability to close out market positions at a short notice. The Group manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows. All significant
subsidiaries prepare weekly cash forecast on a 13-weeks outlook basis and reviewed it on a weekly basis with the management.

At the balance sheet date, assets held by the Group and the Company for managing liquidity risk included cash and short-term deposits as
disclosed in Note 16.

The Group’s debt is sourced from a Revolving Credit Facility 'RCF' provided by HSBC UK Bank PLC, J.P. Morgan Securities PLC, DBS Bank
Ltd, Banco de Sabadell S.A., Commerzbank Aktiengesellschaft and Bank of China Limited. In 2022, the Group amended in respect of replacing
LIBOR with Compound Reference Rate and renewed its facility from US$150 million to US$255 million with a US$75 million accordion with
a four-year term up to June 2026 and an option to extend the bank facility for a further one year to June 2027. The facility has no fixed
repayment terms until maturity.

The main features of the RCF are as follows:

• The interest rate on the amounts drawn under the facility is determined as Secured Overnight Financing Rate (SOFR) administered by the
Federal Reserve Bank of New York plus a margin of 1.2-2.8% for the utilisation facility and a margin of 1.7% for the unutilised facility.

• Market standard financial covenants of the facility, as discussed below.

• A US$75 million accordion feature, providing the Group with additional flexibility to increase the size of the banking facility to US$330

million, subject to approval of its bank lending group.

The covenants to 31 December 2022 include:

• The ratio of net debt to consolidated EBITDA permitted under the revolving credit facility must not exceed a multiple of three times.

• Consolidated EBITDA must also cover relevant finance expenses by a minimum of four times.

For covenant testing purposes, the Group’s definition of consolidated EBITDA is adjusted to exclude specific items. Consolidated EBITDA,
for covenant test purposes, is based on the previous 12-month period, measured on the last day of each financial quarter of the Group.
Throughout the year and at 31 December 2022 both of these covenants were met.

The table below analyses non-derivative financial liabilities of the Group into relevant maturity groupings based on the remaining period from
the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows.
Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.

191

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

31. Financial risk management continued

£m

At 31 December 2022
Trade and other payables

Lease liabilities

Accrued consideration

Borrowings, including interest

Total
At 31 December 2021

Trade and other payables

Lease liabilities

Accrued consideration

Borrowings, including interest

Total

* Balance is less than £100,000.

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over

5 years

44.9

2.9

–

12.6

60.4

42.1

1.9

0.9

44.9

–

4.1

–

11.6

15.7

–

2.0

–

0.7

2.7

–

14.6

1.5

195.7

211.8

–

2.4

1.3

34.0

37.7

–

68.7

–

68.7

–

2.2

–

2.2

Total

44.9

90.3

1.5

219.9

356.6

42.1

8.5

1.3

35.6

87.5

The Group manages the liquidity risk by maintaining sufficient cash and bank facilities to enable it to meet its normal operating commitments.

f. Fair value measurements
The table below presents assets and liabilities recognised and measured at fair value and classified by level of the following fair value
measurement hierarchy:

i. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

ii. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or

indirectly (i.e. derived from prices) (Level 2); and

iii. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

As at 31 December 2022
£m

Assets
Derivative financial instruments

Liabilities
Derivative financial instruments

As at 31 December 2021
£m

Assets
Derivative financial instruments

Liabilities
Derivative financial instruments

* Balance is less than £100,000.

Level 1

Level 2

Level 3

Total

–

(0.1)

–

(0.1)

The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) are
based on quoted market prices at the balance sheet date.

The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is 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. The fair value of currency forwards is determined using quoted forward currency rates at the balance sheet date. These
derivative financial instruments are included in Level 2.

192

XP Power Annual Report & Accounts for the year ended 31 December 202231. Financial risk management continued
g. Financial instruments by category
The carrying amount of the different categories of financial instruments are as follows:

£m

Financial assets, at FVPL

Financial liabilities, at FVPL

Financial assets, at amortised cost

Financial liabilities, at amortised cost

* Balance is less than £100,000.

2022

(1.6)

103.9

(317.6)

2021

(1.5)

40.7

(83.9)

h. Offsetting financial assets and financial liabilities
The Group has no financial instruments subject to enforceable master netting arrangements.

32. Business combinations
On 31 January 2022, the Group acquired 100% equity interest in FuG Elektronik GmbH 'FuG' and Guth High Voltage GmbH 'Guth'. The
principal activity of FuG and Guth is that of development, production and sale of high voltage products, covering applications from particle
accelerators systems to laboratory power supplies. As a result of the acquisition, the Group is expected to add new and highly complementary
technical capabilities to the Group’s high voltage product portfolio.

Details of the consideration paid, the assets acquired and liabilities assumed, the effects on the cash flows of the Group, at the acquisition
date, are as follows:

(a) Purchase consideration

Cash paid

Consideration transferred for the businesses

(b) Effect on cash flows of the Group

Cash paid (as above)

Less: Cash and bank balances in subsidiaries acquired

Cash outflow on acquisition

Cash and bank balances

Property, plant and equipment (Note 13)

Brand, Trademarks, Technology, Customers relationships, Customer contracts and Software (Note 12 and Note (f) below)

Right-of-use assets (Note 14)

Inventories

Trade receivables (Note (e) below)

Other current assets (Note (e) below)

Total assets
Trade and other payables

Lease liabilities (Note 22)

Income tax payable

Deferred tax liabilities (Note 26)

Total liabilities

Total identifiable net assets
Add: Goodwill

Consideration transferred for the businesses

£m

33.2

£m

33.2

(0.2)

33.0

At fair value

0.2

0.8

11.3

11.4

5.9

1.1

0.2

30.9

(2.9)

(11.4)

(0.3)

(4.1)

(18.7)

12.2

21.0

33.2

193

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022

32. Business combinations continued
(d) Acquisition-related costs
Acquisition-related costs of £2.4 million are included in “administrative expenses” in the consolidated statement of comprehensive income
and in operating cash flows in the consolidated statement of cash flows.

(e) Acquired receivables
The fair value of trade and other receivables is £1.3 million which is the same as the gross contractual amount, all of which is expected to be
collectible.

(f) Fair values
The fair value of the acquired identifiable intangible assets of £11.3 million was finalised during the year.

(g) Goodwill
The goodwill of £21.0 million arising from the acquisition is attributable to the workforce in place, strategic value through new customers,
new technologies, an expanded presence in Germany and the synergies expected to arise from the economies of scale in combining the
operations of the Group with those of FuG and Guth. It is not deductible for tax purposes.

(h) Revenue and profit contribution
The acquired businesses contributed revenue of £16.6 million and net profit of £2.9 million to the Group from the period 1 February 2022 to
31 December 2022.

Had FuG and Guth been acquired from 1 January 2022, consolidated revenue and consolidated loss before tax for the period ended
31 December 2022 would have been £291.9 million and £29.8 million respectively.

33. Information
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of XP Power Limited on 28
February 2023.

194

XP Power Annual Report & Accounts for the year ended 31 December 2022COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2022

£‘000

ASSETS

Current assets
Cash and bank balances

Trade and other receivables

Other current assets

Derivative financial instruments

Inventories

Total current assets

Non-current assets
Investment in subsidiaries

Property, plant and equipment

Right-of-use assets

Intangible assets

Long-term receivable

Total non-current assets

Total assets

LIABILITIES

Current liabilities
Trade and other payables

Current income tax liabilities

Derivative financial instruments

Lease liabilities

Provisions

Total current liabilities

Non-current liabilities
Deferred income tax liabilities

Provisions

Lease liabilities

Total non-current liabilities

Total liabilities

NET ASSETS

EQUITY
Share capital

Share-based payments reserve

Translation reserve

Retained earnings

TOTAL EQUITY

* Balance is less than £1,000.

Note

2022

2021

9,337

91,767

3,570

15,078

119,808

49,258

2,690

3,832

36,267

7,468

99,515

3,469

45,712

1,051

11,283

61,515

43,928

1,838

4,515

27,287

6,660

84,228

219,323

145,743

112,307

3,217

129

329

50,111

1,422

129

339

–

115,993

52,001

6,085

3,703

9,884

125,877

93,446

29,775

1,377

25,358

36,936

93,446

4,458

113

4,109

8,680

60,681

85,062

29,774

951

16,386

37,951

85,062

195

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2022

34. 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 19 Tai Seng Avenue, #07-01, Singapore 534054.

The nature of the Company’s operations and its principal activities are providing power supply solutions and acting as an investment holding
company.

35. Basis of preparation
The Company applies the same principal accounting policies as the Group as set out in Note 2 under the Group Consolidated Financial
Statements, except for the following which is only applicable to the Company:

Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries are stated at cost less accumulated impairment losses in the balance sheet. On disposal of investments in
subsidiaries, the difference between net disposal proceeds and the carrying amount of the investments are recognised in profit or loss.

Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees are financial guarantees as
they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with
the terms of their borrowings. Intra-Group transactions are eliminated on consolidation.

Financial guarantee contracts are initially measured at fair values plus transaction costs and subsequently measured at the higher of:

a. premium received on initial recognition less the cumulative amount of income recognised in accordance with the principles of IFRS 15; and

b. the amount of expected loss computed using the impairment methodology under IFRS 9.

Certain comparative amounts have been reclassified for consistency with the presentation of the 2022 Company balance sheet.

A. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
i New and amended standards adopted by the Group
On 1 January 2022, the Company adopted the new or amended IFRS, Interpretations issued by the IFRS Interpretations Committee of
the IASB 'IFRIC' and Interpretations of SFRS(I) 'INT SFRIS(I)' (collectively referred to as 'Standards and Interpretations') that are mandatory
for application for the financial year. Changes to the Company’s accounting policies have been made as required, in accordance with the
transitional provisions in the respective Standards and Interpretations.

The adoption of these new or amended Standards and Interpretations did not result in substantial changes to the Company’s accounting
policies and had no material effect on the amounts reported for the current or previous financial years.

ii New standards and interpretations issued not yet adopted
Certain new accounting Standards and Interpretations have been published that are not mandatory for 31 December 2022 reporting periods
and have not been early adopted by the Company. These are not expected to have a material impact on the Company in the current or future
reporting periods and on foreseeable future transactions.

36. Investment in subsidiaries
£‘000

Cost at carrying value
At 1 January

Currency translation differences

At 31 December

Name of Subsidiary

XP Power Plc

XP Power Singapore Holdings Pte Limited

2022

2021

43,928

5,330

49,258

43,484

444

43,928

Country of business /
incorporation

Ownership
interest
2022

Ownership
interest
2021

Singapore

100

196

XP Power Annual Report & Accounts for the year ended 31 December 2022

37. Cash and bank balances
£‘000

Cash at bank

Total

The Company’s cash at bank is denominated in the following currencies:

At 31 December 2022
At 31 December 2021

GBP
£‘000

224
481

USD
£‘000

8,443
2,310

EUR
£‘000

411
579

SGD
£‘000

256
69

38. Trade and other receivables
£‘000

Trade receivables

Trade receivables from subsidiaries

Other receivables from subsidiaries

Loan receivables from a subsidiary

Total

2022

9,337

JPY
£‘000

3
30

2022

5,426

9,571

21,155

55,615

91,767

2021

3,469

TOTAL
£‘000

9,337
3,469

2021

3,705

26,221

4,553

11,233

45,712

The average credit period taken on sales of goods to third party is 54 days (2021: 46 days). No interest is charged on the outstanding
receivables balance.

The carrying amount of trade and other receivables approximates their fair value.

Loan from a subsidiary is unsecured and bears interest at LIBOR plus 1.5% per annum.

Trade and other receivables from subsidiaries are interest-free.

39. Other current assets
£‘000

Prepayments

Deposit

VAT receivables

Other receivables

Total

2022

514

3,013

3,570

2021

496

389

1,051

40. Derivative financial instruments
Currency forwards
Derivative financial instruments comprise of the USD/GBP currency forwards used to manage the exposure from issuance of dividends in
GBP. Hedge accounting has not been applied to these contracts:

The contracted notional principal amounts ad fair values of these currency forwards are as follows:

31 December 2022
£’000

Currency forwards (current)

31 December 2021
£‘000

Currency forwards (current)

* Balance is less than £1,000.

Assets

Liabilities

Contractual
notional amount

Fair value

Contractual
notional amount

3,500

7,050

Assets

Liabilities

Contractual
notional amount

Fair value

Contractual
notional amount

1,050

7,950

Fair value

(129)

Fair value

(129)

197

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALS

NOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2022

41. Inventories
£‘000

Finished goods

42. Property, plant and equipment

2022

15,078

2021

11,283

£‘000

Cost
At 1 January 2021

Additions

Currency translation differences

At 31 December 2021
Additions

Disposals

Transfer

Currency translation differences

At 31 December 2022

Accumulated depreciation
At 1 January 2021

Depreciation charge

Currency translation differences

At 31 December 2021
Depreciation charge

Disposal

Currency translation differences

At 31 December 2022

Net book value

At 31 December 2022
At 31 December 2021

Freehold land

Building

equipment Motor vehicles

Plant and

Building
improvements

Assets under
construction

213

–

215

–

242

–

1,713

–

1,731

–

210

1,941

623

681

–

823

242
215

1,118
1,050

1,637

202

1,861

458

(167)

–

248

2,400

1,429

102

1,548

158

(162)

191

1,735

665
313

–

–
–

496

511

–

(312)

650

143

992

453

491

(312)

327

665
20

(0)

238

240

415

–

(650)

(5)

–

–
240

Total

4,099

450

4,599

873

(479)

–

628

5,621

2,538

193

2,761

299

(474)

345

2,931

2,690
1,838

Assets under construction in 2021 pertains to costs incurred for the renovation of office space which was due for completion in 2022.

43. Right-of-use assets

£‘000

At 1 January 2021

Depreciation charge

Additions

Currency translation differences

At 31 December 2021
Depreciation charge

Modification of lease liability

Disposal

Currency translation differences

At 31 December 2022

198

Leasehold land
and buildings

336

(321)

4,454

4,515

(535)

(703)

(4)

559

3,832

XP Power Annual Report & Accounts for the year ended 31 December 202244. Intangible assets

£‘000

Cost
At 1 January 2021

Additions

Transfer

Currency translation differences

At 31 December 2021
Additions

Transfer

Currency translation differences

At 31 December 2022

Accumulated amortisation and impairment losses
At 1 January 2021

Amortisation charge

Currency translation differences

At 31 December 2021
Amortisation charge

Impairment charge

Currency translation differences

At 31 December 2022

Net book value

At 31 December 2022
At 31 December 2021

* Balance is less than £1,000.

Product
development
costs

Trademarks

Intangible
software

Assets under
development

14,951

301

183

15,444

402

1,760

1,880

19,486

10,657

1,988

147

12,792

1,563

–

1,594

15,949

3,537
2,652

–

95
85

6,232

–

6,371

278

11,847

1,760

20,256

722

656

1,397

1,680

–

201

3,278

7,850

11,420

(9)

315

19,576

8,052

(13,607)

1,729

15,750

–

16,978
4,974

15,657
19,576

Total

29,117

11,795

–

564

41,476

8,732

–

5,379

55,587

11,379

2,644

166

14,189

3,243

1,798

19,320

36,267
27,287

The Company’s trademarks used to identify and distinguish the Company’s name and logo have a carrying amount of £95,000
(2021: £85,000). The Company intends to renew the trademarks continuously and evidence supports its ability to do so, based on its past
experience. An analysis of market and competitive trends provides evidence that the trademarks will generate net cash inflows for the
Company for an indefinite period. Therefore, the trademarks are carried at cost without amortisation, but is tested for impairment on an
annual basis.

45. Deferred income tax liabilities
The movement in deferred income tax liabilities during the financial year is as follow:

£‘000

At 1 January 2021

(Charged)/credited to profit or loss

Currency translation differences

At 31 December 2021
Credited/(charged) to profit or loss

Currency translation differences

At 31 December 2022

Accelerated tax
depreciation

Intangible
assets
amortisation

(104)

(418)

(9)

(531)

359

(51)

(223)

(2,607)

(1,139)

(48)

(3,794)

(1,433)

(513)

(5,740)

Others

(121)

(8)

(4)

(133)

(1)

(122)

Total

(2,832)

(1,565)

(61)

(4,458)

(1,075)

(552)

(6,085)

199

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2022

46. Trade and other payables
£‘000

Trade payables

VAT payables

Withholding tax

Accruals for operating expenses

Contract liabilities

Amount payable to subsidiaries

Total

2022

2,983

3,321

241

5,459

1,434

98,869

112,307

2021

5,783

584

3,952

1,267

38,438

50,111

Amount payable to subsidiaries consists of advances from subsidiaries amounting to £6,402,000 (2021: £7,190,000) which pertain to cash
pooling arrangements and are unsecured, repayable on demand and bear interest ranging from 1.5% to 3.0% per annum.

The Company borrows from subsidiaries at an interest rate of 1.5%–2.0% above LIBOR. The borrowing is repayable on demand. The
outstanding amount as at year end is £79,160,182 (2021: £18,856,000)

47. Long-term receivable
£‘000

Loans to subsidiaries

Total

2022

7,468

2021

6,660

Loans to subsidiaries amounting to are unsecured and denominated in the USD. The loans are repayable on demand and bear interest at
LIBOR plus 2.0% per annum.

48. Current income tax liabilities
Movement in current income tax liabilities:

£‘000

At 1 January

Currency translation differences

Income tax paid (net of refund)

Tax expense

Over-provision in prior financial year

At 31 December

49. Share capital and reserves
a. Share capital

2022
Beginning of financial year

Shares issued

End of financial year

2021

Beginning and end of financial year

2022

1,422

172

(1,050)

2,861

(188)

3,217

No of
ordinary shares

19,642,296

100,000

19,742,296

2021

4,794

(4,418)

844

114

1,422

Amount
£‘000

29,774

29,775

19,642,296

29,774

200

XP Power Annual Report & Accounts for the year ended 31 December 2022
49. Share capital and reserves continued
b. Share-based payments reserve
Share-based payments reserve represents the equity-settled share-based payments granted to employees. The reserve is made up of the
cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled
share-based payments and is reduced by the expiry or exercise of share-based payments.

£‘000

Balance at 1 January

Share-based payment expenses

Currency translation differences

Balance at 31 December

2022

951

310

116

1,377

2021

565

381

951

c. Translation reserve
Translation reserve represents exchange differences arising from the translation of financial statements of foreign transactions and balances
which functional currencies are different from that of the Company’s presentation currency.

£‘000

Balance at 1 January

Currency translation differences

Balance at 31 December

d. Retained earnings
The movement in retained earnings during the financial year is as follows:

£‘000

Balance at 1 January

Dividends paid

Profit for the year

Balance at 31 December

2022

16,386

8,972

25,358

2022

37,951

(18,570)

17,555

36,936

2021

15,530

856

16,386

2021

44,171

(18,178)

11,958

37,951

50. Financial risk management
The Company’s activities expose it to capital risk, market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The Company seeks to minimise adverse effects from the unpredictability of financial markets on the Company’s financial performance.

a. Capital risk
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders
through the optimisation of the debt and equity balance.

The capital structure of the Company consists of debt, cash and equity attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in Note 49.

b. Currency risk
The Company transacts in North America, Europe and Asia. The Company monitors and manages the currency risks through internal reports
analysing major currency exposures. Where possible the Company 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 Company manages some
currency exposure by entering into currency forwards with banks.

201

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2022

50. Financial risk management continued
The Company’s currency exposure based on the information provided to key management is as follows:

EUR

USD

SGD

MYR

Others

Total

At 31 December 2022 £‘000

Financial assets
Cash and cash equivalents

Trade and other receivables

Other current assets

Long-term receivables

Subtotal

Financial liabilities
Trade and other payables

Lease liabilities

Provisions

Subtotal

Net financial (liabilities)/assets
Currency forwards

Currency profile excluding non-
financial assets and liabilities
Less: Financial assets denominated in
the entity’s functional currency

Currency exposure of financial
(liabilities)/assets

At 31 December 2021 £‘000

Financial assets
Cash and cash equivalents

Trade and other receivables

Other current assets

Long-term receivables

Subtotal

Financial liabilities
Trade and other payables

Lease liabilities

Provisions

Subtotal

Net financial (liabilities)/assets
Currency forwards

Currency profile excluding non-
financial assets and liabilities
Less: Financial assets denominated in
the entity’s functional currency

Currency exposure of financial
(liabilities)/assets

GBP

224

–

301

411

2,673

–

8,443

84,814

7,468

3,088

100,727

(12,444)

(500)

(92,771)

–

(12,444)

(12,143)

10,550

–

(500)

2,588

–

(11)

(92,782)

7,945

–

255

–

370

(1,567)

(4,032)

(96)

(5,695)

(5,325)

–

4,052

–

4,060

–

4,060

–

(1,593)

2,588

7,945

(5,325)

4,060

–

7,945

–

(1,593)

2,588

GBP

481

981

–

EUR

579

903

–

1,462

1,486

–

USD

2,310

42,098

–

6,660

51,068

(13,068)

(342)

(33,205)

–

(13,068)

(11,606)

9,000

–

(342)

1,144

–

(33,205)

17,863

–

1,659

162

–

1,890

(1,494)

(4,448)

(113)

(6,055)

(4,165)

–

(2,606)

1,144

17,863

(4,165)

–

17,863

–

(2,606)

1,144

–

(4,165)

–

9,337

91,767

7,468

108,615

(29)

(107,311)

–

(4,032)

(107)

(29)

(111,450)

–

101

(2,835)

10,550

7,715

7,945

(230)

Total

3,469

45,712

166

6,660

56,007

(64)

(48,173)

–

(4,448)

(113)

(64)

(52,734)

–

3,273

9,000

12,273

17,863

(5,590)

(5,325)

4,060

SGD

MYR

Others

If the SGD and MYR change against USD by 2.8% and 6.0% respectively (2021: SGD 2.9%, MYR 7.1%) with all other variables, including tax
rates, being held constant, the effects arising from the net financial asset/(liability) that are exposed to currency risk will be as follows:

SGD against USD

– Strengthened

– Weakened

MYR against USD

– Strengthened

– Weakened

The impact of the currency risk on the other comprehensive income is not significant.

202

2022
Profit after tax

2021
Profit after tax

(121)

121

198

(198)

(100)

100

–

XP Power Annual Report & Accounts for the year ended 31 December 2022

50. Financial risk management continued
c. Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. As the Company has no significant interest-bearing assets, the Company’s income is substantially independent of changes in the market
interest rates.

The Company borrows from subsidiaries at an interest rate of 1.5%–2.0% above LIBOR. If the average interest rates on these borrowings
increased/decreased by 4.6% (2021: 0.14%) with all other variables, including tax rates, being held constant, the profit after tax will be lower/
higher by £2,732,647 (2021: £31,958) as a result of higher/lower interest expense on these borrowings.

d. Credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the Company.
For trade receivables the Company adopts a policy of only dealing with customers of appropriate credit history or rating. For other financial
assets, the Company adopts the policy of only dealing with high credit quality counterparties.

The Company is not exposed to significant credit risk as a majority of the sales are made to the subsidiaries. Trade receivables are neither past
due nor impaired are substantially companies with a good collection track record with the Company.

The Company 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 Company applies the simplified approach by using the provision matrix to measure the lifetime expected credit loss for all trade
receivables. In measuring the expected credit losses, it is based on the Company’s two years historical credit loss experience and a provision
matrix has been set up using the amount of bad debt incurred over the carrying value of the trade receivables per ageing brackets at each
financial year end.

The Company’s credit risk exposure in relation to trade receivables are set out in the provision matrix as follows:

£‘000

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

Past due

At 31 December 2022
Expected loss rate

Trade receivables

Loss allowance

£‘000

At 31 December 2021

Expected loss rate

Trade receivables

Loss allowance

5,636

–

7,036

–

1,074

–

703

–

Past due

267

–

281

–

14,997

–

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

6,659

–

8,064

–

3,182

–

2,783

–

841

–

8,397

–

29,926

–

The Company monitors the credit risk of the related parties based on the past due information to assess if there is any significant increase in
credit risk. The related corporation has made interest payment on a timely basis and considered to have low risk of default. The loan balance
of £7,468,000 (2021: £6,660,000) is measured on 12-month expected credit losses. The credit loss is immaterial.

The Company assessed the credit risk of each intercompany loan by considering the terms of the loans, whether the loan is past due,
borrower’s cash position, revenue, profit before tax and net assets. Based on these, it was concluded that the credit risk is low and hence, the
Company compute the expected credit loss on a 12-month basis instead of a lifetime approach.

FINANCIAL ASSETS AT AMORTISED COSTS
The Company uses the following categories of internal credit risk rating for financial assets which are subject to expected credit losses under
the 3-stage general approach. These four categories reflect the respective credit risk and how the loss provision is determined for each of
those categories.

Category of internal
credit rating

Definition of category

Performing

Underperforming

Non-performing

Write off

Issuers have a low
risk of default and a
strong capacity to meet
contractual cash flows

Issuers for which there is a
significant increase in credit risk,
as significant in credit risk is
presumed if interest and/or principal
repayment are 30 days past due

Interest and/or
principal payments are
90 days past due

Basis of recognition of
expected credit loss

12-month expected
credit losses

Lifetime expected
credit losses

Interest and/or principal
repayments are 120 days
past due and there is no
reasonable expectation of
recovery

Asset is written off

203

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSNOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2022

50. Financial risk management continued
e. Liquidity risk
The table below analyses non-derivative financial liabilities of the Company into relevant maturity groupings based on the remaining period
from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.

£‘000

At 31 December 2022
Trade and other payables

Lease liabilities

Total

£‘000

At 31 December 2021

Trade and other payables

Lease liabilities

Total

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

107,311

541

107,852

–

549

–

1,682

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

48,173

353

48,526

–

794

–

1,298

Over
5 years

–

2,382

Over
5 years

–

2,003

Total

107,311

5,154

112,465

Total

48,173

4,448

52,621

The Company manages the liquidity risk by maintaining sufficient cash and bank facilities to enable it to meet its normal operating
commitments.

f. Fair value measurements
The table below presents assets and liabilities recognised and measured at fair value and classified by level of the following fair value
measurement hierarchy:

i. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

ii. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or

indirectly (i.e. derived from prices) (Level 2); and

iii. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

£‘000

As at 31 December 2022

Assets
Derivative financial instruments

Liabilities
Derivative financial instruments

As at 31 December 2021

Assets
Derivative financial instruments

Liabilities
Derivative financial instruments

* Balance is less than £1,000.

Level 1

Level 2

Level 3

Total

–

(129)

–

(129)

g. Financial instruments by category
The carrying amount of the different categories of financial instruments are as follows:

£‘000

Financial assets, at FVPL

Financial liabilities, at FVPL

Financial assets, at amortised cost

Financial liabilities, at amortised cost

* Balance is less than £1,000.

h. Offsetting financial assets and financial liabilities
The Company has no financial instruments subject to enforceable master netting arrangements.

2022

(129)

108,615

(111,450)

2021

(129)

56,007

(52,734)

204

XP Power Annual Report & Accounts for the year ended 31 December 2022FIVE-YEAR REVIEW
CONSOLIDATED INFORMATION

Results
Revenue

(Loss)/profit from operations

(Loss)/profit before tax

Assets employed
Non-current assets

Current assets

Current liabilities

Non-current liabilities

Net assets

Financed by
Equity

Non-controlling interests

Key statistics (pence)
(Loss)/earnings per share

Adjusted earnings per share

Diluted (loss)/earnings per share

Diluted adjusted earnings per share

Share price in the year (pence)
High

Low

Dividends per share (pence)

2022
£m

290.4

(24.1)

(30.2)

255.1

226.6

(106.2)

(236.0)

139.5

138.6

0.9

139.5

(102.0)

160.6

(101.6)

160.1

2021
£m

240.3

29.7

28.4

150.5

121.7

(49.0)

(50.8)

172.4

171.5

0.9

172.4

115.8

179.4

113.8

176.3

2020
£m

233.3

37.4

35.7

135.2

107.0

(34.7)

(43.0)

164.5

163.8

0.7

164.5

163.0

201.8

160.3

198.4

2019
£m

199.9

26.7

24.0

137.4

96.0

(30.4)

(64.1)

138.9

138.2

0.7

138.9

107.0

144.1

105.0

141.4

2018
£m

195.1

39.3

37.6

129.2

105.1

(26.8)

(70.1)

137.4

136.4

1.0

137.4

157.8

176.1

154.9

172.8

5,250.0

1,464.0

94.0

5,700.0

4,630.0

94.0

4,790.0

2,130.0

74.0

3,110.0

1,965.0

55.0

3,740.0

2,090.0

85.0

205

XP Power Annual Report & Accounts for the year ended 31 December 2022FINANCIALSADVISERS

Company Brokers
Investec
2 Gresham Street
London
EC2V 7QP
United Kingdom

Principal Bankers
HSBC Bank plc
Level 7
Thames Tower
Station Road
Reading
RG1 1LX
United Kingdom

Solicitors
Eversheds Sutherland
1 Wood Street
London
EC2V 7WS
United Kingdom

Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
United Kingdom

Company Secretary
M & C Services Private Limited
112 Robinson Road #05-01
The Corporate Office
Singapore 068902

Auditors
PricewaterhouseCoopers LLP
7 Straits View
Marina One, East Tower, Level 12
Singapore 018936

206

XP Power Annual Report & Accounts for the year ended 31 December 2022The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon
store, helping to reduce environmental impact as well
as creating natural havens for wildlife and people.

XP Power Limited
19 Tai Seng Avenue, #07-01, Singapore 534054
T: +65 6411 6900 F: +65 6479 6305

P O W E R I N G T H E W O R L D ’ S C R I T I C A L S Y S T E M S