XP Power Annual Report 2023

FY2023 Annual Report · XP Power

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POWERING
THE WORLD’S
CRITICAL
SYSTEMS

ANNUAL REPORT & ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2023

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.

Strategic progress in a challenging year:
Revenue growth was a robust 9% with strong growth in Industrial
Technology and Healthcare, offset in part by a cyclical slowdown in
Semiconductor Manufacturing Equipment. There was a slower order intake
due to a normalisation after two years of unprecedented activity and the
semiconductor slowdown. A Funding Plan was implemented to strengthen
the balance sheet and manage the cost base, leading to a significant net
debt reduction. Progress was made in key strategic areas – new product
launches and growth in key areas; improved project bidding activity and
growth in new business wins; supply chain performance improved and
inventory reduced; and, Net Zero Transition Plan launched and significant
reduction in emissions delivered.

2023 was a year of mixed fortunes. Good positions in
attractive markets and improved supply chain performance
supported a year of strong revenue growth. Any satisfaction
with this growth and the progress on key strategic initiatives
was tempered by challenges and required actions in the
second half of the year. Difficult decisions were taken
impacting our stakeholders but were in the long-term
interest of the Company.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

FIND US ONLINE AT XPPOWER.COM

CONTENTS

OVERVIEW

XP POWER AT A GLANCE

CHAIR’S STATEMENT

FINANCIAL AND OPERATIONAL HIGHLIGHTS

REASONS TO INVEST
OUR PURPOSE, VISION, STRATEGY, VALUES
AND CULTURE

STRATEGIC REPORT

OUR MARKETPLACE

OUR BUSINESS MODEL

OUR STRATEGY

SUSTAINABILITY REPORT AND TRANSITION PLAN

CHIEF EXECUTIVE OFFICER’S REVIEW

KEY PERFORMANCE INDICATORS

CHIEF FINANCIAL OFFICER’S REVIEW

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

OUR GOVERNANCE

GOVERNANCE AT A GLANCE

BOARD AND COMMITTEE ATTENDANCE

INTRODUCTION TO GOVERNANCE

BOARD OF DIRECTORS

CORPORATE GOVERNANCE REPORT

NOMINATION COMMITTEE REPORT

AUDIT COMMITTEE REPORT

REMUNERATION COMMITTEE REPORT

DIRECTORS’ REPORT

DIRECTORS’ RESPONSIBILITIES STATEMENT

OUR FINANCIALS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED INCOME STATEMENT
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

110

116

122

145

149

152

157

157
158

159

160

161
210

211

223

224

OVERVIEWSTRATEGIC REPORT OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023
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 power control systems design manufacturing.

Focusing on key sectors

SEMICONDUCTOR
MANUFACTURING EQUIPMENT
Examples of end-user products:

• Deposition

• Etch

•

Ion implantation

• Lithography

• Wafer cleaning

• Test and inspection

HEALTHCARE
Examples of end-user products:

• Surgical tools

• Patient monitoring

•

Imaging and diagnostics

• Clinical lab instruments

• Home healthcare

• Patient treatment

INDUSTRIAL TECHNOLOGY
Examples of end-user products:

• Analytical instrumentation

• Test and measurement

• Robotics

•

Industrial printing

• Additive manufacturing

• Process control and automation

Power control systems are the essential
hardware component in every piece of electrical
equipment, converting power from the electricity
grid into the right form for the equipment to
function. We focus on sectors where power
is mission-critical, and failure is not an option,
making us stand apart from others.

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 power converter
solutions providers, we ensure that critical
electrical and electronic equipment is powered as
safely, reliably, and efficiently as possible.

Our customers provide mission-critical systems,
servicing their relevant market 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 industry product offering.

Our global network provides a strong
competitive advantage over our smaller
competitors (who lack the scale and geographical
reach to serve global customers), and our
larger competitors (who lack the operational
flexibility to provide the excellent service that
customers seek).

As electronic device capabilities evolve, so too do
system complexities. Instead of trying to deliver
expensive, time-consuming power solutions from
scratch, our engineers often transform existing
portfolio products and technologies.

READ MORE ABOUT
OUR CUSTOMERS ON
PAGES 17–19

Our customers come to us because they know
our solutions are of the highest quality, but
also because they know we’ll work together
to overcome their specific and challenging
power problems.

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

We however, do, and assist our customers to
design-in a suitable power supply from our
extensive product range that meet customer
cost and technical requirements. Technical
requirements often involve helping customers
to meet equipment safety standards for
their industry, such as relevant medical or
electrical 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,
solving power problems and helping them get to
market as fast as possible.

02
02

XP Power Annual Report & Accounts for the year ended 31 December 2023

OVERVIEWSTRATEGIC REPORT OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023
XP POWER AT A GLANCE CONTINUED
OUR GLOBAL REACH

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 customers locally.

North America
The North American network consists of 11 sales
offices, design centres and production facilities in
Massachusetts, New Jersey and Southern California,
and an engineering solutions group in Silicon Valley.
This network provides major customers local,
face-to-face support and rapid response times.

Europe
The European network consists of nine direct sales
offices and an effective distribution network. In
addition, Germany and the UK house engineering
solutions centres, and, since January 2022,
the German design and production facilities of
FuG Elektronik GmbH and Guth High Voltage GmbH.
We have operational flexibility to provide high
quality, rapid services due to this good coverage.
We maintain a small UK production facility for
customer modifications.

Asia
Operating from Singapore, we have four direct
sales offices, where we also manage a network
of seven distributors serving the region. To
complement our customer offering, we have
design engineering solutions capability in
Singapore and South Korea. We have production
facilities in China and Vietnam, with a third being
built in Malaysia to serve customers globally.

£184.5m

OF TOTAL REVENUE
+11%1 COMPARED TO FY 22

£97.8m

OF TOTAL REVENUE
+13%1 COMPARED TO FY 22

£34.1m

OF TOTAL REVENUE
-6%1 COMPARED TO FY 22

Key:

Manufacturing

Warehouse

In constant currency.

Sales offices

Head offices

Our market sectors
Semiconductor Manufacturing Equipment
From wearable technology that monitors real-time patient
health, to in-vehicle devices that can help regulate dangerous
driving habits, semiconductors are everywhere, and their
applications are transforming the way we live – connected
devices are becoming increasingly prevalent.

We’re one of few worldwide companies able to provide the
complete power solutions spectrum that semiconductor
equipment manufacturers demand.

Healthcare
We’re an attractive healthcare partner as our engineers
understand the nuanced power needs of a wide range of
medical applications required in healthcare environments, from
operating theatres to intensive care units.

We are one of the world’s largest providers of medical power
conversion products, with a portfolio that’s capable of meeting
the specific high safety standards understandably demanded in
the sector.

We’re helping our customers usher in a new generation of
increasingly connected, effective medical devices.

Industrial Technology
We focus on power solutions for sectors with high-growth
potential. Our engineers envision how future industrial
technologies need to be powered and deliver solutions that
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.

XP Power Annual Report & Accounts for the year ended 31 December 2023

0505

2023 was a year in which
the Group faced unexpected
challenges but delivered some
encouraging progress in key
strategic areas.

JAMIE PIKE
CHAIR

06
06

XP Power Annual Report & Accounts for the year ended 31 December 2023

Strategic progress in a
challenging year
The Group entered 2023 with elevated
borrowing due to various one-off factors,
including payment of damages in respect of the
Comet legal case and investment in inventory
to maintain customer service levels during the
period of exceptional supply chain disruption
in 2022. Strong cash generation has been a
hallmark of the Group’s historic performance
and the Board expected borrowings to reduce
during the year. However, an industry-wide
slowdown in the Semiconductor Manufacturing
Equipment market, combined with the Group’s
extra spending on key capex projects, made
this challenging. In October the Board acted to
safeguard the Group’s balance sheet position
by implementing a funding plan, which included
cost and capex reductions, suspension of
the dividend, an issuance of new shares and
the renegotiation of our banking facilities.
Suspension of the dividend was not a decision
the Board took lightly, but it was appropriate in
the circumstances. In combination, this materially
reduced our borrowing and leverage by year-end.
The Board’s priority is to further reduce net debt
leverage into the Group’s previously stated range
of 1–2x Adjusted EBITDA and then in the longer-
term operate in the 0–1x range.

The disappointing end to the year masked some
more encouraging signs. Growth for the year
as a whole was healthy. We saw double-digit
growth within the Healthcare and Industrial
Technology sectors, aided by an improved supply
chain performance which allowed backlog to
be delivered. Demand from the Semiconductor
Manufacturing Equipment sector moderated
as the year progressed, after two very strong
years, albeit with some sub-sectors showing
continued strength.

We continue to enjoy leading positions in
attractive markets with structural growth
characteristics. They have underpinned our
historic revenue growth, which has averaged
12% p.a. over the last ten years, and I am
confident they will continue to do so for the
longer term.

We successfully protected our gross margins from
input cost inflation which continued to work its
way through our supply chain in 2023. Our ability
to pass through inflation underlines the strength
of our brands and our market position.

Our growth in 2023 was weighted toward higher
power and more technologically sophisticated
products, which, in line with our strategy, are
becoming an increasingly important part of our
portfolio. We deepened our relationships with
key customers by cross-selling them a wider
range of products and have a growing pipeline
of new products and customer projects to drive
long-term growth. We also delivered a record
level of new business wins which will support
our growth in the medium-term. Our supply
chain performance improved notably, with both
delivery lead times and inventory levels reducing
materially. We made solid progress with the
transfer of production from facilities in the West
to Asia, with more to come in 2024. While we
were forced to re-locate two key sites within
the USA in early 2024, both moves are now
complete and will help to support our long-term
growth. The Group extended its customer reach
in Europe by entering into a continent-wide
agreement with a leading distributor. We also
delivered against our recently launched
Sustainability Strategy and invested in
our people.

Whilst the second half of the year was
challenging, I remain focused on, and excited
by, our long-term growth opportunities, which
I believe we are well positioned to seize.

Our Board
I was honoured to succeed James Peters as
Chair in April 2023. I would like to take this
opportunity to thank James for an immeasurable
contribution to the Group over his 35 years of
service and as founder.

After a detailed search process as set out in the
Nomination Committee Report, Matt Webb was
appointed as the Group’s Chief Financial Officer
in September 2023. Whilst still relatively new to
his role, Matt has contributed significantly, and
I have no doubt will continue to do so. I would
like to thank David Stibbs for fulfilling the CFO
role on an interim basis whilst the search process
was completed, and I am delighted he remains
with us.

I am continually impressed by the skill,
experience and enthusiasm of members
of the XP team, which only increases my
confidence in our long-term prospects
and potential.

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 bring new
talent and capabilities into the business to help
underpin our growth ambitions.

As previously announced, the Group restructured
its cost base in the second half of the year in
response to weakening demand. Restructuring
actions were taken promptly to safeguard the
future progress of the Group, whilst dealing
compassionately and openly with those
impacted. I would like to thank our employees
for all their hard work throughout the year,
but particularly for their support and forbearance
whilst the restructuring plan was implemented.

As I travel across the Group, I am continually
impressed by the skill, experience and
enthusiasm of members of the XP team, which
only increases my confidence in our long-term
prospects and potential.

JAMIE PIKE
CHAIR

4 March 2024

READ MORE ABOUT OUR
BUSINESS STRATEGY ON
PAGES 22–23

READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGES 26–33

OVERVIEWSTRATEGIC REPORT OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023

FINANCIAL AND OPERATIONAL HIGHLIGHTS

REASONS TO INVEST

Financial highlights

ORDER INTAKE (£m)

TOTAL REVENUE (£m)

ADJUSTED PROFIT BEFORE
TAX (£m)

£208.8m

£316.4m

£26.6m

2023

2022

2021

2020

2019

362.9

343.4

208.8

258.0

214.9

2023

2022

2021

2020

2019

316.4

290.4

240.3

233.3

199.9

2023

2022

2021

2020

2019

26.6

38.0

43.8

44.3

32.3

PROFIT/(LOSS) BEFORE TAX (£m)

ADJUSTED DILUTED EARNINGS
PER SHARE (p)

DIVIDEND PER SHARE (p)

£11.2m

2023

11.2

2022

(30.2)

2021

2020

2019

81.8p

75p

2023

2022

2021

2020

2019

81.8

160.1

176.3

198.4

141.4

2023

2022

2021

2020

2019

28.4

35.7

24.0

Operational highlights
Progress in key strategic areas

READ MORE ABOUT
OUR PERFORMANCE ON
PAGES 34–39

• Product development: 11 new products

launched and strong growth delivered within
strategic areas, such as high-voltage/power
categories

• Customer development: Improvement in

project bidding activity during the year and
growth in new business wins

• Supply chain performance: significant

increase in manufacturing output, reduction
in delivery lead times, and lower inventory

• Sustainability: Net Zero Transition Plan
launched, targets approved by SBTi,
significant reduction in emissions

• FuG business, acquired in

2022, is performing well with clear
growth potential

Despite the challenges faced in 2023, we remain confident in our ability to deliver
sustainable profitable growth and to create long-term value for all stakeholders.
We have a clear ESG framework and strategy, 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 giving us flexible manufacturing capacity
and the ability to engineer close to our customers.

READ MORE ABOUT OUR MARKETPLACE ON PAGES 14–19

READ MORE ABOUT OUR GLOBAL REACH ON PAGES 04–05

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

Capital structure policy
Our financial framework is based on a leverage of
1.0–2.0x in the near term, reducing to 0–1.0x in the
medium-term, allowing for a progressive dividend,
and continued investment in capability and capacity.

READ OUR CHIEF FINANCIAL OFFICER’S REVIEW ON
PAGES 44–50

Long-term customer relationships
Once our power converters are approved for use in
our customer’s end equipment, XP Power receives
revenue annuity for 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 17–19 FOR MORE INFORMATION

SEE SUSTAINABILITY ON PAGES 26–33

XP Power Annual Report & Accounts for the year ended 31 December 2023

0909

OVERVIEWSTRATEGIC REPORT OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023

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 customer value, helping them get
to market quickly with complete power solutions.
Our people understand how we create customer value.

Our vision
Where we want to be:
To be the first-choice power solutions provider, delivering
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 time.

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

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 success.

Integrity

Knowledge

Flexibility

Our culture
Our culture places our people and our customers at the
heart of the business. Most importantly, it is driven by a
mindset across XP that focuses on empowering our people
to deliver long-term sustainable value, with talent and
product development at its core.

Speed

Customer
Focus

Our purposeOur visionOur strategyOur core valuesOur cultureOVERVIEWSTRATEGIC REPORT OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW

OUR GOVERNANCE

OUR FINANCIALS

STRATEGIC REPORT

OUR MARKETPLACE

OUR BUSINESS MODEL

OUR STRATEGY

SUSTAINABILITY REPORT AND TRANSITION PLAN

CHIEF EXECUTIVE OFFICER’S REVIEW

KEY PERFORMANCE INDICATORS

CHIEF FINANCIAL OFFICER’S REVIEW

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

STRATEGIC
REPORT

12
12

XP Power Annual Report & Accounts for the year ended 31 December 2023

13
13

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023STRATEGIC REPORTOUR MARKETPLACE
GROWING OUR ADDRESSABLE MARKETS

THE MARKET SECTORS WE SERVE

US$ billion
Estimated market

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

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 plasma
generation 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 competitor having a dominant
share. We have strong relationships with the
leading customers in higher growth market
niches, which allows us to continue to grow our
market share. This is particularly true in process
power where our share is currently low.

High voltage

US$0.7 billion

Total market value

Overview

High voltage is an attractive market where,
since acquiring the product range, we are
finding new opportunities.

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.

Low voltage

RF Power

US$3.7 billion

Total market value

US$2.1 billion

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 application ranges.

The RF Power market is substantial and has
attractive growth prospects. The semiconductor
equipment manufacturers are significant users
of this product but it 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.

Low voltage

3.7

Process power

Total

2.8
6.5

XP Power
Estimated market

Low voltage

8.8%

Process power

Total

2.4%
6.1%

Source: Microtech
Consultants
and XP Power
management
estimates

Our products serve markets in multiple sectors across our three geographic regions.

Semiconductor
Manufacturing Equipment

Industrial
Technology

Healthcare

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

XP Power market overview
We focus on fast growing niches in
this market, such as robotics, test and
measurement, 3D printing and additive
manufacturing, smart grid, and
analytical instruments.

Performance this year
Sales to the Industrial Technology market
continued to grow through 2023. Increased
manufacturing output allowed us to clear
order backlog and restock the sales channel.

We have a broad medical power converter
offering with full traceability of components
and high-quality in-house manufacturing.

XP Power 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
Activity levels in Healthcare recovered
significantly in 2023, resulting in strong
revenue growth. Order intake slowed as
the year progressed with some customers
reporting excess inventories as the
year ended.

The Semiconductor Manufacturing
Equipment market softened during 2023
due to a market-wide cyclical downturn.
However, we still see this as an attractive
long-term growth sector as semiconductor
device demand is driven by multiple factors
such as pace of innovation, global shortage
of semiconductors driving investment in
capacity, artificial intelligence, big data, smart
technology, and autonomous vehicles.

XP Power market overview
We are one of few worldwide companies
that can offer the whole spectrum of
power and voltage products required for
semiconductor manufacture and have the
capability to combine these into a complete
power solution. This is particularly 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
Our sales to this market declined by 10% in
the year, but there were pockets of continued
strength, particularly in high-voltage,
high-power applications.

29%

Five-year CAGR

Revenue (£m)

32% total revenue

Five-year CAGR

Revenue (£m)

43% total revenue

£102.2m

£136.3m

14%

Five-year CAGR

Revenue (£m)

25% total revenue

£77.9m

2023

2022

2021

2020

2019

102.2

113.4

93.3

2023

2022

2021

2020

2019

69.6

37.4

136.3

119.6

92.0

94.4

116.6

2023

2022

2021

2020

2019

77.9

57.4

55.0

69.3

45.9

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR MARKETPLACE CONTINUED
THE MARKET SECTORS WE SERVE

Key:

Manufacturing

Warehouse

Sales offices

Head offices

GROWTH DRIVERS AND MARKET CHALLENGES

North America

Europe

Asia

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

North America is a significant power
electronics market with many large
customers, particularly in Healthcare and
Semiconductor Manufacturing Equipment.

Market overview
In general, our North American customers 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 delivered double-digit sales
growth in 2023. There was strong growth
within the Healthcare sector, whilst sales to
the semiconductor market normalised after
two strong years.

The European market is much more
fragmented than North America or Asia,
as it contains numerous smaller Industrial
Technology companies, as well as 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 all three
market sectors.

FuG and Guth delivered record sales in 2023
and they are being supported by the wider
XP sales team to increase their global reach.

Although Asia is a large market, much of it is
unavailable 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 significantly
faster than in Europe. Although many
applications are not attractive to us, there
are many attractive areas that we can service
with our more complex high-power and
high-voltage products.

Performance this year
Asia sales declined in total compared to
2022, largely due to reduced demand from
the Asian Semiconductor Manufacturing
Equipment market, which was largely due
to permitting issues experienced by one
Chinese customer.

12%

Five-year CAGR

11%

Five-year CAGR

14%

Five-year CAGR

Revenue (£m)

58% total revenue

£184.5m

Revenue (£m)

31% total revenue

£97.8m

Revenue (£m)

11% total revenue

£34.1m

Healthcare

A global population that is both
increasing and ageing, coupled with
diagnostic technology advances and
innovations in patient treatments,
is driving the demand for more
sophisticated healthcare devices.
This makes healthcare an excellent
investment sector.

The customers making this equipment
value our proposition as they demand
ultimate quality, reliability, and support.
COVID-19 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 develop. This trend
is accelerating, driven by multiple
factors such as pace of innovation,
generative AI, big data, smart
technology, AR/VR autonomous
vehicles and electric vehicles.

These technologies all run on
semiconductors, which are in high
demand and drive investment in
capacity to make them. This results
in the demand for semiconductor
manufacturing equipment, which is a
key area of focus for us.

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
more connected, enabling the
industrial revolution 4.0. Demand for
communication between the 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 to and from the
customer’s application, using firmware
and software and, where required,
internet connection.

Link to

Strategy

Key:

Risks

3, 4, 9

Link to

Strategy

Risks key

Risks

3, 4, 9

Link to

Strategy

Risks

3, 4, 9

Develop a market-leading range of
competitive products

01 Disruption to manufacturing

Funding/treasury

Target accounts where we can add value

Supply chain risks

Legal and regulatory

Vertical penetration of focus accounts

03 Market/customer-related risks

08 M&A

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

Lead our industry on environmental
matters

Make selective acquisitions

04 Product-related risks

09 People-related risks

IT/data

10 Climate-related risks

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

OUR MARKETPLACE CONTINUED
GROWTH DRIVERS AND MARKET CHALLENGES

Customer penetration

Climate change

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

We have gained corporate approval at
many blue-chip companies in recent
years. We are now capitalising on these
to win a larger share of the available
business to those customers by
expanding our product offering.

How we are responding

RF and high-voltage power solutions
from our previous acquisitions have
helped to increase our available market
to US$6.0 billion.

Climate change and emission of
greenhouse gases is becoming an
increasingly significant issue as
emerging countries develop and
urbanise. We have taken 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 one of
the most environmentally friendly
manufacturing facilities 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 together with reliability for critical
applications as ultra-high efficiency
products do not require relatively
unreliable 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 the subject
of 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 complying with this legislation is
notable. We are of a size where we can
dedicate significant resources to this
area, yet be agile 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 power
capital equipment, so are subject to
the 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
that the medium and long-term
opportunities remain positive for capital
equipment, particularly 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 have also targeted newer and
faster growth industrial sectors such
as additive manufacturing, analytical
instrumentation and robotics.

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 offering a diverse
range of products and added new
capability through the acquisition of
FuG and Guth.

Link to

Strategy

Risks

4, 9

Link to

Strategy

Risks

1, 2, 3, 7, 10

Link to

Strategy

Risks

1, 7, 9, 10

Link to

Strategy

Risks

3, 7, 9

Link to

Strategy

Risks

2, 3, 4

Link to

Strategy

Risks

4, 8, 9

Key:

Risks key

Develop a market-leading range of
competitive products

01 Disruption to manufacturing

Funding/treasury

Target accounts where we can add value

Supply chain risks

Legal and regulatory

Vertical penetration of focus accounts

03 Market/customer-related risks

08 M&A

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

Lead our industry on environmental
matters

Make selective acquisitions

04 Product-related risks

09 People-related risks

IT/data

10 Climate-related risks

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

OUR BUSINESS MODEL

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

Inputs

Key activities

Our purpose and why we exist:
WE POWER THE WORLD’S
CRITICAL SYSTEMS

Identify

Our values:

Integrity

Knowledge

Flexibility

Speed

Customer
Focus

Our vision:
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.

Design

Manufacture
and
distribute

We offer excellent service and support combined
with class-leading products, selling to customers
when we can add genuine value and collaborating
on requirements. Our customers are at the heart of
what we do.

We have carved out a leading position in our industry
through our up-to-date, high-efficiency product
offering, which is delivered to our customers by
the largest and most technically competent sales
engineering team. This is backed up by high-skilled
power systems engineers, combined with the safety
and reliability benefits of world-class manufacturing,
providing 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, growing
revenues and margins.

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

We have design engineering teams on three continents,
allowing us to release many 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 customers. Additional engineering service teams
in Germany, North America, Singapore, and the UK
can provide value-added services close to our key
customers.

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

Therefore, we need excellent suppliers with high-
quality standards. Our rigorous approval process
analyses all aspects of a supplier before engagement.
This includes a review of prospective suppliers’
quality systems and standards, their financial viability,
environmental performance, and treatment of
their people.

Our global footprint and 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 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.

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 are usually unaware of
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.

Value generated for our stakeholders
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.

Our customers

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

3.99

Employee
engagement score
last year

102

New product
families released
over a five-year
period

Our suppliers

Our approach
We manufacture most of our
own products, allowing us to
ensure excellent quality, and
opearte an agile supply chain
to meet customers’ needs.

Our communities
and the
environment

We behave ethically and build 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 the same
from our suppliers.

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 to the communities we
operate in.

Our shareholders We execute our published strategy on
a consistent basis which we believe will
generate long-term value for shareholders.
We allocate our capital appropriately and
maintain a dividend policy.

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

OUR STRATEGY

We have a clear and consistent strategy of moving up 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

Target accounts where we can
add value

Vertical penetration of
focus accounts

We need a market-leading range of products
to be attractive to our customers. This range
must be broad due to the fragmented nature
of the markets we serve, which have diverse
product requirements. The broader and
more relevant our product range, the more
likely we are to have a product that meets a
customer’s needs.

Target/goal
To release sufficient products to achieve at
least a 10% organic revenue growth through
the market cycle.

Past performance
Recently, 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 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 where they face a power problem
due to either heat dissipation or electrical
noise. These are our target customers.

Target/goal
Organic revenue growth of more than 10%
through the market cycle.

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

Planned future actions
We are prioritising our resource on the
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 and
reliability, or engineering support during the
design phase.

We still have a relatively small share of the
available business in some of the accounts
we call on. We are continuing to expand our
product portfolio so we can address more
opportunities that are available to grow our
revenues.

Target/goal
Organic revenue growth of more than 10%
through the market cycle.

Past performance
We have spent recent years gaining approved
or preferred supplier status with the key
healthcare, industrial technology, and
semiconductor manufacturing equipment
sector customers. We are focused on this
existing customer base to grow
our revenues.

Planned future actions
As we expand our product offering through
continued product development augmented
by acquisitions, we aim to address an
increasing proportion of our customers’
requirements with our excellent service
and support.

Link to

Material issues

KPIs

Risks

Material issues

KPIs

Risks

Material issues

KPIs

Risks

1, 3, 8

A, D, E

3, 4

1, 3, 8, 9, 11

A, B, C, D

3, 7, 8

A, B, C

1, 2, 3

Material issues key:

KPI key:

Product responsibility (safety and quality)

Responsible supply chain

Ethical conduct and compliance

Energy efficiency

Product solutions and innovation

09 Waste management

Revenue growth

Revenue from top 30 customers

Adjusted operating cash conversion

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,
together with our product portfolio and
excellent customer service, has allowed us
to consistently take market share and grow
significantly. As the Company grows, we
need to upgrade our systems and processes,
especially supply chain processes, to sustain
our growth.

Target/goal
Reduction in manufacturing costs, freight and
logistics, alongside consistent improvement
in lead and delivery times.

Past performance
We have evolved from a distributor to
a manufacturer, with 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 is helping the Company to scale more
effectively.

Planned future actions
Continue to support and optimise the ERP
implementation across the Group.

Our new Malaysian facility is expected to
be operational in 2026 and will complement
both Vietnam and our original China plant to
meet the demand across the world, allowing
for further expansion. Our overall objective
is to provide a resilient and flexible supply
chain, manufacturing most products in Asia.

Lead our industry on
environmental matters

Make selective acquisitions of
complementary businesses to
expand our offering

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.

Our cash-generative business model allows
the capacity to pursue complementary
business acquisitions subject to the
application of our borrowing leverage policy.
This is another avenue to expand our product
offering and addressable market.

Target/goal
Bolt-on acquisitions driving inorganic
revenue growth.

Past performance
Through our recent acquisitions, we have
added both RF Power and high power/
high voltage to our product range, including
through the 2022 acquisition of FuG
and Guth.

Planned future actions
We will continue to integrate recent
acquisitions into our global supply chain,
product development and sales structures to
maximise growth opportunities.

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
important ethical and environmental matters,
which we strongly endorse.

Our near and long-term targets with the
Science Based Target initiative (SBTi) have
recently been approved.

We have established a Sustainability Council
to meet regularly, ensuring our sustainability
targets are met.

We are committed to achieving Net Zero
by 2040.

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

Risks

Material issues

KPIs

Risks

Material issues

KPIs

Risks

1, 2, 7, 8, 11

A, C, G

2, 3, 7

1, 2, 3, 8, 11

F, G

1, 3, 9, 10

3, 4

A, B, C, F

Risks key:

04 Attracting retaining and rewarding talent

10 Diversity and equal opportunity

D Adjusted diluted earnings per share growth

01 Disruption to manufacturing

IT/data

08 M&A

Employee welfare

Emissions

06 Health and safety (inc. occupational)

New product families released

Employee engagement score

Supply chain risks

03 Market/customer-related risks

Funding/treasury

Legal and regulatory

People-related risks

10 Climate-related risks

G Lifetime CO2 emission savings from products

Product-related risks

The keystone of our strategy is to develop a market-leading range of easily
modified, competitive platform products, aimed at solving critical power
challenges for our customers in our key sectors and expand our portfolio
of leading efficiency products.

• Develop a market-leading range of competitive products.

• Vertical penetration of focus accounts.

• Lead our industry on environmental matters.

• Target accounts where we can add value.

The market for high power, open-frame/
enclosed products is expected to grow
faster than other power ratings, with
a five-year CAGR of c.13% in revenue
and CAGR of c.18% for unit shipments,
reaching US$1.4 billion in size and
5.3 million units in 2027.

The CT-Scanner, a medical imaging
product, has higher power AC-DC
requirements for multiple applications.

What we’ve done this year
In December 2023, we launched our latest digital high-power
portfolio product, the HPF3K0.

This new addition enables us to expand our reach in key
sectors and focus customers.

The product is fully digital making it configurable and
extremely flexible, enabling customers to match future energy
efficiency and data/AI requirements.

The product has gained the approvals necessary for use in
semiconductor, medical and industrial safety applications,
making the HPF3K0 a perfect solution for critical end markets
such as semiconductor manufacturing, medical imaging,
medical robotics and renewables.

The HPF series – scalable, digital, configurable
Key features:

Key competitive advantages:

• More accessible, single-phase input

• Medical safety approvals.

for higher power product.

• Digital, configurable, scalable

platform.

• Ease-of-use optimised design.

• Expanded configuration capabilities.

• Class B conducted emissions.

• Digital and control features.

• Higher efficiency.

2024 plan
The high powers portfolio gives
us the platform and ability to
solve critical future challenges.
In 2024, we will continue our
strategy to focus on customers
where these product capabilities
add value in solving critical real-
world challenges and enable
sustainable growth.

OUR SUSTAINABILITY STRATEGY IS TO:

Whether it is through the way we
run our operations or the products
we develop and bring to market,
sustainability is, and will remain, an
integral part of our strategy.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

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 are proud to report that both our
near and long-term targets have been validated
by the Science Based Target initiative (SBTi) and
that we have further improved our CDP Climate
Change score to an overall B rating. 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. A summary of our Net Zero
Transition Plan is included in the following pages,
and we have already made progress in reducing
emissions in the first year of the plan.

XP Power has a strong history of innovation
and engineering excellence in creating highly
efficient products. These provide an ongoing
commercial opportunity, while progressing
our own sustainability 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 is
helping to embed sustainability into the everyday
operational fabric of our business, influencing all
our decisions and actions across the Group. All
our colleagues 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

4 March 2024

READ MORE ABOUT
OUR MARKETPLACE ON
PAGES 14–19

READ MORE ABOUT OUR
FINANCIAL POSITION ON
PAGES 44–50

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.

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.

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

1, 3

Link to

Material issues

8, 9, 11

Link to

Material issues

4, 5, 6, 10

Link to

Material issues

2, 7

SEE PAGES 64–66 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR

SEE PAGES 67–72 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR

SEE PAGES 73–79 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR

SEE PAGES 80–81 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR

Material issues key:

01 Product responsibility (safety and quality)

Employee welfare

09 Waste management

02 Responsible supply chain

06 Health and safety (inc. occupational)

10 Diversity and equal opportunity

03 Product solutions and innovation

04 Attracting retaining and rewarding talent

Ethical conduct and compliance

Emissions

Energy efficiency

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

OUR SUSTAINABILITY REPORT 2023 CONTINUED
OUR SUSTAINABILITY STRATEGY

We have used our materiality analysis results from 2021,
(see page 54 of our 2021 Annual Report) 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. 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. The Working Group has more of an operational
remit, managing and tracking the progress of specific
sustainability projects. This year, the Group has also appointed
site representatives for key sites, responsible for regular
monitoring and reporting of site-specific sustainability metrics
and risks, as well as being responsible for the implementation
of corporate projects at the site level. Full details of our
sustainability governance model and its responsibilities
are outlined in the Task Force on Climate-related Financial
Disclosure (TCFD) Report (pages 82–89).

ACHIEVEMENTS IN PAST 12 MONTHS

PRIORITIES FOR 2024

• Our emissions targets have been approved by the SBTi. This covers
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.

• Established representatives for key sites, responsible for regular
monitoring and reporting of site-specific sustainability metrics
and risks, as well as being responsible for the implementation of
corporate projects at the site level.

• Creation of Group Product Responsibility Policy.

• Published our Net Zero Transition Report.

• Develop and start to implement site-specific

plans to reduce emissions in our own operations.

• Further embed sustainability throughout the

Group’s strategic decisions.

• Continue to enhance the Group’s ISO 14001

coverage at further sites.

• Analyse results of initial supplier surveys on

climate change, and sustainability more widely,
and develop action plans for key suppliers as
appropriate.

• Achieved a B grade in CDP Climate Change (2022: grade C).

• Updating how we define and classify our

XP Power Green Power Products to specify a
detailed hierarchy related to efficiency levels
in our products, providing a more precise
stratification of our product suite by use
phase efficiency.

• Purchase of Renewable Energy Certificates (RECs) that covers

c.98% of our Scope 2 emissions.

•

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

• Enhanced our reporting against the TCFD by starting to internally
quantify the internal financial impact of potential climate-related
risks and opportunities.

• Shipped XP Green Power products resulting in minimum lifetime

CO2 emission savings of 140,300 tonnes.

• Creation of a new supplier survey, covering a range of ESG topics,

which has been rolled out to our tier 1 suppliers.

• Launched the XP Power Women Employee Resource Group

(WERG) to support women by providing them a platform to share
their experiences, network and develop their skills.

XP Power Annual Report & Accounts for the year ended 31 December 2023

OUR GOVERNANCEOUR FINANCIALSOVERVIEWSTRATEGIC REPORTXP POWER
TRANSITION PLAN

NET
ZERO
PLAN

Objectives and targets
Sustainability is integral to our strategy with our 2040 net zero
commitment a key element. Based on our emissions exposures,
we have formulated a Group-level net zero transition plan to
meet this commitment. Our plan encompasses the actions
we must take, as well as supplier and value chain inputs to
lower emissions from the production and use of our products.
These actions will allow targets to be met at the required pace
to reduce emissions in line with the Paris Agreement goals,
ensuring our contribution to the UK’s commitment to reaching
net zero by 2050.

Our aim is to be net zero across Scopes 1, 2 and 3 by 2040
with minimal use of offsets. Our absolute emissions reduction
targets, which have been approved by the Science Based Targets
initiative (SBTi), are to:

• Reduce absolute Scope 1 and 2 GHG emissions 42% by

2030 from a 2022 base year.

• Reduce absolute Scope 3 GHG emissions 25% by 2030 from

a 2022 base year.

• Reach net zero GHG emissions across the value chain

by 2040.

By 2030

Reduce absolute
Scope 1 and 2
GHG emissions

42%

Reduce absolute
Scope 3
GHG emissions

25%

OVERVIEW

OUR GOVERNANCE

OUR FINANCIALS

By 2040

Reduce absolute Scopes 1,
2 and 3 GHG emissions by

90%

XP Power Annual Report & Accounts for the year ended 31 December 2023

31
31

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

XP POWER
TRANSITION PLAN CONTINUED

Our plan – Scope 1 and 2 emissions
Although only approximately 1% of our overall footprint is from Scopes 1
and 2, we believe it is still necessary to decarbonise anything within our
full control.

As our operations are not particularly carbon intensive, most improvements
will come from a variety of small, site-based improvements. For Scope 1,
we currently use natural gas, or in some sites LPG heating, which we are
looking to move to electrical heating over time. The only carbon intensity
asset we operate are back-up generators, used at a couple of sites to ensure
production continuity throughout grid outage periods. More recently,
our need for generators has decreased materially and we will decide, in
the medium term, whether to retire or replace them with low carbon
alternatives. For the long term, we will transition our air conditioning units
away from high global warming potential HFCs, as and when refrigerant
technology allows. Finally, we anticipate ongoing efficiencies as we
make upgrades and process changes across a range of equipment and
business processes.

In addition to these site-based activities to improve efficiency, we are also
pursuing renewable electricity opportunities. Some sites currently have
solar panels, and we will look to expand this, maximising what is possible
on our sites. However, time is needed to implement this, and even then it
will not provide all our electricity needs, so as an interim measure, we have
purchased renewable electricity generated off-site, via energy attribute
certificates. These were purchased to cover 2023 electricity emissions
across the Group, which covers c.98% of our Scope 2 emissions. This has
reduced our market-based Scope 2 emissions.

Drivers of Scope 1 and 2 emissions reduction by 2040

SCOPE 1 & 2

CO2e T 000s

2022

Growth

Operating
eﬃciencies

Heating

Cooling

Onsite
renewables

Oﬀsite
renewables

Business model implications
Our overall business strategy, designed to
produce sustained significant growth for the
future through continued innovation and product
quality across our markets, already integrates
emission reduction activities within it.

Nevertheless, we recognise that our ambition
and pace for operational, and value chain
emissions reduction needs to increase.
We plan to accommodate these changes,
especially near-term science-based target
requirements, through business-as-usual process
enhancements, and existing asset replacement
and product upgrade cycles. Consequently,
we cannot foresee any material changes to
our resource allocation or operational and
capital expenditure.

To meet our plan, our team have begun to
scope out Group and site-level projects and
initiatives. Our Sustainability Council, who
have responsibility over net zero delivery
plans, monitor our project list. This list contains
already assessed, and potential projects based
on existing technology. A summary of our
focus areas and key decarbonisation levers is
shown opposite.

We have started working collaboratively with our main
suppliers to achieve carbon reductions, and we expect our
suppliers to be making efficiency improvements to their
operations. Typically, improvements are around 2% p.a. from
a combination of upgrading equipment, electrification of
heating, and other operational efficiency actions. This year, we
initiated our supplier engagement process, both for third-party
product suppliers and component suppliers. We are currently
reviewing the initial phase feedback and this analysis will
determine our approach going forward, and likely timescales.

Transport-related emissions is another activity category. Most
of our products are shipped by sea, however, some are by air
owing to customer demands for short lead times. Recently,
air freight has increased as a proportion due to supply chain
issues felt by the whole electronics industry. Some changes
have already been made in 2023 as we look to redress this
balance, however, rather than acting unilaterally, we are
mindful of customer needs, therefore, this may take time.
We are also looking at how we package and ship our products
to highlight opportunities for reducing the overall emissions
footprint associated with product logistics.

Finally, we are continuing to seek reduction opportunities
from business travel and employee commuting, making
full use of technology to reduce the need for travel and
encouraging low carbon options such as public transport and
EV cars. Although each of these areas is small in overall terms
compared with the impacts of our products in use, we believe
it is important to work to the principle of “every kg of carbon
counts” and reduce wherever possible.

Our progress on these initiatives can be monitored through
our Annual Report and our CDP Climate Change disclosures.

We have started with an overall emission reduction in 2023
versus 2022 that is ahead of our planned pathway mainly as
a result of business mix change and reduction of inventory
affecting purchases (further detail can be found later in the
Sustainability section). There will inevitably be year-to-year
variation, but we have seen an encouraging start to our net
zero ambition.

Our plan – Scope 3 emissions
Scope 3, or value chain emissions, dominates our total
emissions footprint accounting for 99% of our total emissions.
Our biggest emission impacts are from our products in use,
so the more efficient we can make our products, the lower
these lifetime emissions will be.

As a result, our major area of focus is our product innovation
process where we can influence emissions by designing for
low carbon. From analysing our products’ carbon footprint,
we can better understand impact areas and identify
improvement opportunities. By increasing overall product
efficiency, reducing the number of components in a product,
and selecting lower carbon intensive components, we can
significantly reduce both the upstream and downstream
impacts of our product range. We have introduced these
factors into our new product processes for both internally, and
third-party manufactured, products.

The phase-in of improvements in our product cycle will take
time. Aside from our own internal product development
process, our products have a long market lifetime. Additionally,
due to the critical nature of our power supplies in our
customers’ equipment, stringent regulations and customer
approval processes need to be accommodated. As such, short-
term reduction impacts are unlikely, with the majority coming
into the long-term horizon. However, if customers begin to
focus on improving their own operating efficiency, the pace of
product replacement may increase.

Driver of Scope 3 emissions reduction by 2040

SCOPE 3

CO2e T 000s

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

2022

Growth

Product
improvements

Supplier
eﬃciencies

Grid
decarbonisation

Transport
changes

Regardless, the single biggest factor in our ability to hit
net zero by 2040 is the decarbonisation of electricity grids
globally, which will impact the lifetime emissions from
our products in use by our customers. We clearly cannot
directly influence this but rely on governments to implement
appropriate policies to achieve this, and historic progress has
been positive. Further significant improvements are projected,
without which, we cannot be a net zero company. As outlined
in our TCFD Report, we use the IEA’s NZE scenario to factor in
our expectations in this area.

2023 was a challenging year for
the Group, but we are confident
our market positions remain
strong and we are well positioned
as our key markets return
to growth.

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

34
34

XP Power Annual Report & Accounts for the year ended 31 December 2023

Review of our year
The Group delivered revenue of £316.4 million
in 2023, 9% higher than prior year in constant
currency. Over the last ten years, revenue
growth has been consistently strong, averaging
12% p.a., as we have amassed a growing share
of attractive markets with healthy, long-term
growth attributes.

Revenue growth was strongest in the first half
of 2023, at 24% in constant currency, as an
improved supply chain performance allowed
us to deliver our order backlog. Revenue grew
significantly in all three of our market sectors
in this period: Semiconductor Manufacturing
Equipment, Industrial Technology and Healthcare.

The pace of progress moderated as the year
progressed. Second half revenue was 2% lower
than prior year in constant currency as we faced
tougher comparatives and began to experience
the impact of the industry-wide slowdown in
demand from the semiconductor equipment
market after three strong years. Slower market
conditions prompted some semiconductor
customers to cancel or defer deliveries at the
start of the second half, but delivery schedules
have remained firm since. Sales to Industrial
Technology and Healthcare customers continued
to grow, albeit at a reduced pace.

We started 2023 with an elevated order
book of £308.4 million, reflecting both
strong demand and a supply chain limited by
component shortages in previous years. Our
order intake reduced to £208.8 million in 2023
(2022: £362.9 million) following two years of
unprecedented activity levels in the aftermath
of COVID-19, representing a book-to-bill of
0.66x. This reflected the slowdown in the
Semiconductor Manufacturing Equipment
market and growing confidence in supply chain
performance, allowing customers to place orders
later, remove buffer inventory and reduce safety
stocks of our products. However, the slowdown
in order intake had very little impact on our 2023
revenue, which continued to be supported by
the delivery of the backlog brought into the year.
It is encouraging to see that our design wins
continued and we achieved a record level, 7%
ahead of the previous record year. This combined
with continued strong sampling rates supports
our medium-term outlook.

The slowdown in sales in the second half of
the year, combined with unexpected additional
investment in the relocation of two key US
sites, initially left our net debt materially above
our target leverage range of 1–2x Adjusted
EBITDA with insufficient borrowing headroom
versus our banking covenants. We responded
by implementing a comprehensive funding plan
in October 2023, described in more detail in
the Chief Financial Officer’s Review. I believe
the plan was appropriate to the circumstances
and in the Company’s best long-term interests.
The plan had materially lowered our borrowing
and leverage by year-end and we are continuing
to prioritise debt reduction in 2024. We should
have been better prepared to withstand the
trading challenges we have faced and I am
therefore focused on taking the steps necessary
to navigate this challenging period and build
greater operational resilience. In the longer term,
we aim to reduce our leverage range to 0–1x
Adjusted EBITDA.

The reduction in borrowing and leverage
delivered in the second half was supported by
strong operating cash generation, with operating
cash conversion of 218% in H2 and 173% for the

Progress had been made against our strategic
priorities of Product, Customer and Supply
Chain Development and Sustainability.

year as a whole. The strong progress towards the
end of the year was aided by inventory reduction,
which was particularly pleasing to see given it is
an important element of our debt reduction plan.

Sales toward the end of 2023 were slightly above
our expectations, due largely to our decision
to reschedule the relocation of our facility in
California from December 2023 to January 2024,
which had the effect of bringing forward some
deliveries into late 2023.

Following a thorough review, we identified
some capitalised product development costs
that needed to be amortised or impaired, adding
a non-cash charge of £4.0 million to costs.
These costs are discussed in more detail in the
Chief Financial Officer’s Review. This left full
year Adjusted operating profit at £38.1 million.
These costs had no impact on cash or borrowing
leverage ratios.

Revenue by market
Group revenue grew by 9.0% to £316.4 million, including constant currency growth of 9.3%,
and (0.3)% from currency movements.

The breakdown of revenue growth by sector was as follows:

Semiconductor Manufacturing Equipment
Industrial Technology
Healthcare
Total – In constant currency
Currency movements
Total

% of Group
revenue

Revenue
growth/(decline) %

32%
43%
25%
100%

(9.7%)
13.8%
37.2%
9.3%
(0.3%)
9.0%

READ MORE ABOUT OUR
BUSINESS STRATEGY ON
PAGES 22–23

READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGES 26–33

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

CHIEF EXECUTIVE
OFFICER’S REVIEW CONTINUED

Revenue growth was driven by Industrial
Technology and Healthcare markets,
partly offset by the cyclical slowdown in
Semiconductor Manufacturing Equipment.

Semiconductor Manufacturing
Equipment
Sales to the Semiconductor Manufacturing
Equipment sector grew by 5% in constant
currency in the first half of the year as we
delivered a backlog of orders built up in the
preceding two years. Sales declined by 22%
year-on-year in the second half against a tough
comparative, reflecting the cyclical slowdown
in semiconductor investment spending, leaving
revenue 9.7% lower for the full year. Our
performance was helped by our over-weight
positions in more resilient sub-sectors such
as deposition, etch and trailing edge chip
manufacture which were less impacted by the
slowdown. Order intake in the year totalled
£59.4 million and book-to-bill was 0.58x.

Whilst the overall market softened, there were
pockets of continued strength. We increased
production of our high voltage high power range
by nearly 50% to meet high demand, with a
further increase planned for 2024.

The US and Chinese governments tightened
controls over the export of semiconductor
manufacturing equipment in the year. Whilst
very few of our sales are directly impacted by
these controls, their introduction did disrupt
the production of one of our key customers in
China, with sales slowing whilst the necessary
permits were sought. The ongoing uncertainty
is an issue the Group will seek to navigate but
it will limit expansion in China for some of our
product portfolio.

The prospects for this sector are very attractive
and we continue to expect long-term market
growth averaging 10% p.a., underpinned by the
manufacturing expansion required to keep pace
with future demand for technologies such as
AI, IoT and electrified transportation. Given our
customer exposure, we expect to grow ahead
of the market. Whilst sales into this sector are
likely to remain subdued in the first half of 2024,
we continue to expect to see an improvement
in order intake in the second half and a stronger
performance in 2025.

Industrial Technology
Sales to the Industrial Technology sector grew by
26% in constant currency in the first half of the
year and 4% in the second half.

Increased manufacturing output allowed us to
clear order backlog and restock the sales channel,
supporting revenue throughout the year. Order
intake in the year was £92.4 million and the
book-to-bill was 0.68x following a slowdown in
intake during the second half.

During the year, we signed a sales agreement
with a leading, pan-European “design in”
distributor, simplifying our European distribution
arrangements and increasing our ability to bid
on small to medium-sized customer projects,
to allow our own sales team to focus on larger
accounts. With the new structure in place,
we now have the right platform for long-
term growth, particularly within the Industrial
Technology sector.

Healthcare
The Healthcare sector saw a reset in 2022
after two preceding years of strong demand
for products used in the treatment of critical
illnesses particularly COVID-19 during the
pandemic. We were therefore pleased to see
activity levels recover strongly in 2023, with a
more normal mix of end uses. This resulted in
revenue growth of 37% for the year in constant
currency, the highest of any sector. Activity
remained strong throughout the year.

Progress was strongest in North America
as we switched more of our manufacturing
capacity toward the fulfilment of orders from
the Healthcare sector as the semiconductor
equipment market cooled. Order intake for the
year was £57.0 million and the book-to-bill was
0.73x. Order intake slowed toward the end
of the year, with customers reporting excess
inventories in early 2024. As global supply chains
have normalised for the first time post-COVID,
customers are now focused on reducing their
inventory levels.

Regional performance
Sales to North America totalled £184.5 million, up 11% in
constant currency. The region saw strong growth within
the Healthcare sector, with sales to customers in the
semiconductor market slowing after two strong years,
particularly within low voltage product categories.

Sales to Europe totalled £97.8 million, up 13% in constant
currency, with all three market sectors growing. This included
record sales from FuG, a business acquired by the Group
in 2022. As highlighted at the time of acquisition, we are
supporting the future progress of this business by using our
sales team to increase its global reach.

Sales to Asia totalled £34.1 million, down 6% in constant
currency due largely to reduced demand from the Asian
Semiconductor Manufacturing Equipment market. This was
largely attributable to permitting issues experienced by
one Chinese customer, which we hope will be resolved in
due course.

Delivery of our strategy in the year
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 provide our customers
with a broader offering to meet their power needs. We have
added high voltage and radio frequency (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
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 attractive
partner to our key customers and is a key driver of our market
share gains.

Our strategy is summarised as follows:

• Product development: Continually develop our market
leading range of competitive products, both organically
and through selective acquisitions;

• Customer development: Target customer accounts where
we can add value and increase our penetration of those
target customers;

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

• Sustainability: Lead our industry on environmental

responsibility.

We made progress with our strategic priorities during the year
and remain well-positioned to benefit as demand improves.
Our progress in the year is summarised below.

Product development
Product development is a key source of our competitive
advantage. The XP brand is synonymous with high quality,
high functioning and reliable power solutions. It is important
that we continually invest to ensure we are offering a broad,
up-to-date range of power supplies that meet our customers’
demanding performance requirements. We work closely with
them to ensure our power supply is “designed in” at an early
stage of their own product development cycle, with high
re-engineering and re-certification costs providing a natural
barrier to competition thereafter. The “designed in” nature of
the sale results in an annuity revenue stream throughout our
customer’s product life cycle, which is typically five to seven
years but can be much longer.

Our product development capabilities include Engineering
Services teams, most notably in North America and Asia.
Located close to the customer, these teams enable the rapid
deployment of customised power solutions for individual
customers to speed up their own product development
process. This a high margin, high growth proposition.

A key aspect of our product strategy over recent years
has been to expand into higher power and higher voltage
supply categories through selective bolt-on acquisitions, to
complement our heritage in lower power areas. The most
recent example is the acquisition of FuG, which performed
well during 2023.

Our progress in the year can be summarised as follows:

• We launched 11 new products. These included a

programmable 3kW power supply series which brings
high power with digital control to demanding medical and
industrial applications.

• Our Engineering Services group delivered 39 new

customised products to customers. Our Engineering
Services team in the USA was relocated to a larger, state of
the art facility to support future growth.

• Sales of high voltage, high power and RF products grew by

19%, faster than the Group average.

• FuG and Guth delivered record revenue, 6.4% higher than

2022 after adjusting for our period of ownership.

• The pipeline for new products is strong and we expect to

bring new platform products to market across our portfolio
in the next 12–18 months.

Whilst reductions were made during the year in certain
overhead functions, as discussed in detail in the Chief
Financial Officer’s Review, we were careful to maintain our
investment in product development to support future growth.

Customer development
We work with leading OEMs in each of the three market
sectors we serve. Relationships are deep and enduring and
our customers recognise us for our superior quality, reliability,
responsiveness and flexibility. Our sales teams are tasked with
identifying new customers who would benefit from our unique
business model and maximising our share of each customers’
product power needs.

Our progress on customer development in the year can be
summarised as follows:

• The value of new projects won grew by 7% year-on-year

to a record level, which will translate into growth over the
medium term as these products enter production.

• Sampling, a key stage in the new design win process,
remains strong for the third year in a row following
a dip during the pandemic. Customers resumed new
product development work after a period in which their
engineering efforts were focused on redesigning existing
products to combat component shortages.

• We invested in digital marketing by re-platforming our
website and improving our presence in online search.

• As referred to above, we signed a new European

distribution agreement.

Supply chain development
After two challenging years, our supply chain performance
improved considerably in 2023, in terms of service, resilience
and efficiency.

Our order book reduced by £116.4 million in the year to
£192.0 million. While our order backlog reduced considerably
during 2023 it remains above pre-COVID levels. We expect
our order book to return to historic norms by the end of the
first half of 2024.

Delivery lead times reduced considerably during the year,
improving customer service. Shorter manufacturing lead times
reduced the need for air freight, reducing costs and minimising
environmental impact.

We added resilience to our supply chain by increasing
production flexibility. 71% of the products we manufacture
in Asia can now be made in either our China or Vietnam
factories. We now have multiple sourcing options for more
of our critical components and more of our components can
be sourced on a returnable basis should demand change
unexpectedly.

We improved efficiency in terms of capital intensity.
It was pleasing to see inventory reduce by £22.8 million to
£91.6 million in the year, with progress weighted towards
the fourth quarter. We also saw a reduction in both raw
materials and work in progress, as expected. Reductions in
finished goods should follow as the benefits flow through
our supply chain, subject of course to demand. The progress
we have made in this area was aided by recent investments
in our Enterprise Resource Planning system, which provides
end-to-end visibility of demand to enable us to plan our supply
requirements more efficiently. We have also renegotiated
better supplier terms where appropriate, in terms of both
pricing and payment, preserving cash.

Slower demand allowed us to defer construction of our
new facility in Malaysia by one year, preserving cash, with
commissioning now expected by the end of 2025. We expect
our existing manufacturing sites to have sufficient capacity to
meet demand in the meantime.

Higher raw material prices gradually worked their way into
our finished goods inventory, increasing our cost of goods
sold. We successfully passed this inflation through, protecting
margins, with roughly half of our revenue increase attributable
to price. We have seen lower component prices in the last six
months, which should support margins going forward.

We are monitoring events in the Red Sea closely. The impact
on freight costs has been very modest so far, given that this
route is less important to the Group than deliveries across
the Pacific. We have sufficient finished goods inventory
to accommodate longer transit times if deliveries route via
southern Africa and a proven ability to re-price quickly should
freight costs increase sustainably.

Sustainability
Sustainability is a key part of our strategy and has been since
2009, when the Group first formed its Sustainability Council.
We realised early how important this would be over time to
our customers, investors and people.

We set out and publish our priorities in our annual
Sustainability Report. We delivered as follows against these
priorities in 2023:

• We published our Net Zero Transition Plan.

• Our emission reduction targets were recently approved by

the Science Based Targets Initiative (SBTi).

• We significantly reduced our Scope 2 Greenhouse Gas

emissions in the year by acquiring rights to locally sourced
renewable electricity.

• We introduced 10 XP Green Power product families in
2023. XP Green Power products generated revenues
of £67.1 million in 2023, 13% higher than last year.
The estimated lifetime savings from the XP Green Power
products shipped in 2023 is 140,300 tonnes of CO2.

Our progress has not gone unrecognised. In 2022 we were
delighted to receive the first ESG award from Lam Research,
a leading global supplier of semiconductor manufacturing
equipment and one of our largest customers, recognising
us 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.

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.

Litigation update
As previously reported, in March 2022, an award for damages
was made against XP for a total of $40 million in respect of
a US legal action brought by Comet Technologies USA Inc.,
Comet AG, and YXLON International (Comet).

Our appeal against the original ruling, which we believe
to be well founded, was filed with the Appellate Court in
August 2023 and we have been responding in line with the
Appellate Court’s timeline. We expect the appeal to be heard
during 2024.

Judgement has yet to be received in respect of Comet’s
claim for legal fees and interest associated with the case. It is
expected soon.

We incurred legal fees of £2.1 million in 2023 and these are
reported as an Adjusting item per Note 2 to the consolidated
financial statements.

While we believe we have provided for the worst-case
situation, with the pending judgements and future appeals
there remain a broad range of potential outcomes.
Further updates will be provided as and when the current
position changes.

Outlook
We expect activity levels to reduce in 2024 after our record
revenue performance in 2023 and have recently taken further
actions to lower our cost base accordingly. The reduction
in revenue is largely attributable to a normalising order
book, with backlogs now largely cleared, the tail end of the
semiconductor downcycle and destocking by Healthcare and
Industrial Technology customers as they respond to greater
resilience in the global supply chain.

We expect trading to improve as 2024 progresses, creating a
second half weighting to performance as channel stock levels
reach equilibrium and demand returns to the Semiconductor
Manufacturing Equipment market, though it is difficult to
be precise about the timing of the improvement. We will
continue to take decisive action to manage our costs and
maximise cash generation during this slower trading period,
prioritising debt reduction, whilst preserving our sources of
long-term competitive advantage. We are confident that our
market positions remain strong and that the Group remains
well positioned to prosper as our key markets resume their
trajectory of healthy long-term growth.

Strategic Report
The Strategic Report, comprising the information on
pages 12–89, was approved by the Board of Directors on
4 March 2024 and signed on its behalf by:

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

4 March 2024

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

Core values key:

Risks key:

Knowledge

Flexibility

Customer Focus

Integrity

Speed

01 Disruption to manufacturing

Funding/treasury

Supply chain risks

Legal and regulatory

03 Market/customer-related risks

08 M&A

Product-related risks

People-related risks

IT/data

10 Climate-related risks

Financial KPIs

Revenue growth
(%)

2023

2022

2021

2020

2019

Definition

We target revenue growth of 10% p.a., measured at actual
exchange rates. Our achievement can depend on market
cyclicality and exchange rates.

Target achieved

2023 Progress

• Revenue growth was 9% with Europe and North America
delivering growth ahead of and close to the 10% target,
but a decline in Asia.

2024 Plans

Target achieved

2023 Progress

• This metric decreased to 54% in 2023 (PY: 58%)

due primarily to a decline on some Semiconductor
Manufacturing Equipment accounts.

2024 Plans

• Refocus efforts on key accounts to grow share of our

• Utilise our broad product offering through all sales regions.

large customers.

• Provide increasing customer support through our

engineering solutions group.

Link to strategy

• Target accounts where we can add value.

Link to strategy

• Vertical penetration of focus accounts.

Revenue from top 30 customers
(%)

Adjusted operating cash conversion
(%)

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

2023

2022

2021

2020

2019

Definition

2023

2022

2021

2020

2019

111

117

132

173

2023

(49)

2022

2021

2020

2019

(9)

(11)

(16)

Definition

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

We target adjusted operating cash conversion of 100%
or more.

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

Target achieved

Yes

2023 Progress

Target achieved

2023 Progress

• Good cash conversion performance due to reduced

• Revenue grew and gross margin percentage was

working capital.

• Working capital reduction largely drive by more efficient

maintained but additional operating expense and increased
net finance costs meant a reduction in diluted EPS.

inventory holding.

2024 Plans

• EPS growth will be dependent on revenue and cost

• Seek opportunities to reduce working capital by reducing

lead times and improved inventory management.

management in 2024.

Link to strategy

• Target accounts where we can add value.

• Build a global supply chain that balances high efficiency

• Vertical penetration of focus accounts.

with market-leading customer responsiveness.

Link to core values

Link to risks

1, 2, 3, 4, 9

Link to risks

1, 3, 4

Link to remuneration

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

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).

Link to risks

1, 2, 3, 4, 5

Link to remuneration

Link to risks

1, 2, 3, 4, 5, 6, 7, 9

Link to remuneration

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

Growth in Adjusted EPS is a performance condition in
our LTIP.

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

OUR KEY PERFORMANCE INDICATORS CONTINUED

Non-financial KPIs

New product families released

Employee engagement score

2023

2022

2021

2020

2019

2023

2022

2021

2020

2019

Definition

3.99

3.83

4.20

3.97

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

Target achieved

Yes

2023 Progress

In assessing new product opportunities, we consider the
potential revenue from a new product family as well as the
absolute number of new product introductions. We target 30
new releases p.a..

Target achieved

2023 Progress

• We released 11 new product families in 2023
(2022: 15), ten of which can be classified as
XP Green Power products.

2024 Plans

• We are focusing our design engineering on producing
product platforms that can more easily be shared and
reused over numerous applications and sectors.

Link to strategy

• Develop a broad range of competitive products.

Lifetime CO2 emission savings from
green products (tonnes)

2023

2022

2021

2020

2019

140,300

134,000

128,000

117,000

108,000

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

Target achieved

2023 Progress

Core values key

Knowledge

Flexibility

Customer Focus

Integrity

Speed

Risks key

01 Disruption to manufacturing

Supply chain risks

03 Market/customer-related risks

Product-related risks

IT/data

Funding/treasury

Legal and regulatory

08 M&A

People-related risks

10 Climate-related risks

• We continue to undertake an annual employee

• Lifetime emission savings in 2023 were 4.7%, marginally

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

2024 Plans

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

Link to strategy

• Supports all aspects of our strategy.

below the 5% target.

2024 Plans

• Continue to release products with class-leading efficiency.

• Continue to promote environmental awareness and adopt

environmentally friendly practices.

Link to strategy

• Leading our industry regarding sustainability matters.

Link to core values

Link to risks

3, 4

Link to risks

5, 7, 9

Link to risks

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

CHIEF FINANCIAL
OFFICER’S REVIEW

Elevated leverage and a market
slowdown in the second half
necessitated a comprehensive
funding plan – management
actions on costs and cash,
amendments to the Group’s
borrowing facility and a share
placing – all successfully
implemented.

MATT WEBB
CHIEF FINANCIAL OFFICER

44
44

XP Power Annual Report & Accounts for the year ended 31 December 2023

Statutory results
The statutory operating profit was £24.5 million,
compared with a loss of £24.1 million in the prior
year, with the 2022 loss primarily driven by the
damages and legal costs from the Comet case.

Net finance expense was £13.3 million (2022:
£6.1 million), resulting in a profit before tax of
£11.2 million (2022: loss of £30.2 million). The
higher net finance expense reflects the higher
average debt and increased interest rates. This
resulted in an income tax charge of £20.2 million
compared to a £10.6 million credit in 2022.
The basic loss per share was 45.4 pence whereas
in 2022 the Group had a loss per share of
102.0 pence.

Adjusted results
As in prior years, Adjusted and other alternative
performance measures are used in this
announcement to describe the Group’s results.
These are not recognised under International
Financial Reporting Standards (IFRS) or other
generally accepted accounting principles (GAAP).

Adjustments are items included within our
statutory results that are deemed by the Board
to be unusual by virtue of their size or incidence.
Our Adjusted measures are calculated by
removing such Adjustments from our statutory
results. The Board believes Adjusted measures
help the reader to understand XP Power’s
underlying results and are used by the Board
and management team to interpret Group
performance. Note 2 to the consolidated
financial statements includes reconciliations
of statutory metrics to their Adjusted
equivalent and provides a breakdown of the
Adjustments made.

Revenue
Revenue grew by 9.0% to £316.4 million (2022:
£290.4 million).

Growth consisted of constant currency growth
of 9.3% and an adverse currency movement
of 0.3%.

The year started strongly, with constant currency growth of 24% in the first half thanks to an improved
supply chain performance which allowed us to reduce our order backlog and restock the sales channel.
It moderated as the year progressed, with second half revenue 2% lower than prior year in constant
currency, as we reached robust comparatives and as sales into the Semiconductor Manufacturing
Equipment market inevitably cooled after two years of strong demand. Sales into Industrial Technology
and Healthcare sectors grew throughout the year.

The Group’s revenue by region and by sector for 2023 is set out in the table below:

North America
Semiconductor Manufacturing Equipment
Industrial Technology
Healthcare
Total
Europe
Semiconductor Manufacturing Equipment
Industrial Technology
Healthcare
Total
Asia
Semiconductor Manufacturing Equipment
Industrial Technology
Healthcare
Total

2023
£ million

% change in constant
currency

86.0
54.0
44.5
184.5

3.4
67.6
26.8
97.8

12.8
14.7
6.6
34.1

(8.2%)
20.8%
56.6%
10.7%

25.9%
10.3%
19.1%
13.1%

(23.7%)
7.0%
12.2%
(6.2%)

North America and Asia were both impacted by the slowdown in Semiconductor Manufacturing
Equipment demand. The impact in Asia was greater as a key customer experienced manufacturing
delays whilst it adapted to industrywide export controls. The impact in North America was largely
confined to low voltage categories, with sales of high voltage and RF products continuing to grow,
which is encouraging given their strategic importance.

North America was able to more than offset the impact of the semiconductor downcycle with very
strong growth in Industrial Technology and Healthcare sales, to deliver double-digit revenue growth
overall. This included some deliveries brought forward into 2023 from January 2024 to maintain
continuity of service whilst we relocated our California facility at the end of its lease.

Europe delivered strong growth in each market sector, particularly in the Industrial Technology sector
aided by healthy sales into our distributors as they restocked their networks.

Order intake
Order intake was £208.8 million, 43% lower than last year in constant currency. Book-to-bill in 2023
was 0.66x.

Order intake by quarter 2023
£ million

Order intake

61.2

54.4

44.2

49.0

Full Year

208.8

READ MORE ABOUT OUR
CONSOLIDATED INCOME
STATEMENT ON PAGE 157

Order intake within the Semiconductor Manufacturing Equipment sector was relatively slow
throughout the year and was the largest contributor to the Group’s overall year-on-year reduction.
Order intake within this sector increased in the fourth quarter due to large orders for high voltage high
power products on longer lead times, for which demand remains strong.

READ MORE ABOUT
OUR SEGMENTAL
REPORTING ON
PAGES 174–178

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT

CHIEF FINANCIAL
OFFICER’S REVIEW CONTINUED

Order intake within the Healthcare and Industrial Technology
sectors started 2023 strongly but moderated later in the year.
We initially attributed this moderation to shorter delivery lead
times, which were allowing customers to raise orders later,
slowing their rate of order placement. We expected order
intake to improve in early 2024 as delivery lead times reached
a minimum. This has not been seen to date because customers
are also placing fewer orders to reduce their overall inventory
of our products, which will hold back our activity levels
temporarily in 2024 whilst the extra inventory is utilised.

Order book
Our order book reduced by £116.4 million in the year to
£192.0 million at 31 December 2023 as backlog was shipped
and delivery lead times reduced.

Gross margin
Gross margin was maintained at 41.5% (2022: 41.5%).
In 2023, we sold finished goods that were sourced and
manufactured when global supply chain disruption pushed
input prices to a peak. Products were appropriately re-priced
in response, protecting our margins from inflation. We have
seen reductions in input costs over recent months, which
should support margins going forward.

Freight costs halved as sea container prices returned to
historic norms and shorter manufacturing lead times reduced
the need for air freight.

Production output increased. In our Asian plants, this
resulted in improved cost efficiency. In our smaller facilities
in the United States, the need for greatly increased output
introduced some inefficiency which we are addressing by
transferring some production to Asia where manufacturing
capacity is greater and costs are lower.

Operating expenses
Statutory operating expenses reduced by £37.9 million to
£106.8 million due largely to lower costs in respect of the
Comet legal case, which have been treated as an Adjustment.

Adjusted operating expenses increased by £15.5 million to
£93.2 million.

The increase comprised the following main items:

• c.£2.0 million of cost inflation

• £3.1 million of increased variable pay, including share-

based payment accounting charges

• £3.0 million of adverse currency movements

• £6.1 million of increased product development costs,

which are discussed in more detail below

The cost base was restructured in the second half following
a slowdown in demand, as part of the wider funding plan
described below. Whilst 2024 will bring inflationary increases
and an extra depreciation on-cost associated with the
relocation of two leased premises in the US, we still expect our
restructuring plans to drive a material reduction in overheads
year-on-year.

Operating profit
Statutory operating profit increased by £48.6 million
to £24.5 million due largely to items considered to be
Adjustments, as set out later in this Review.

Adjusted operating profit reduced by £4.8 million to
£38.1 million and is bridged as follows:

Adjusted £ million

Revenue
Revenue growth %
Cost of sales
Gross margin
Gross margin %
Operating expenses
Operating profit
Operating margin %

2022

290.4

(169.8)
120.6
41.5%
(77.7)
42.9
14.8%

Currency
impact

Constant
currency

(1.1)
(0.3)%
0.6
(0.5)
–
(3.0)
(3.5)
(1.2)%

27.1
9.3%
(15.9)
11.2
–
(12.5)
(1.3)
(1.6)%

2023

316.4
9.0%
(185.1)
131.3
41.5%
(93.2)
38.1
12.0%

The impact of currency movements on profit is largely
translational rather than transactional and reflects unusually
large movements in the value of Sterling versus the US dollar
over the last two years. Steps were taken in late 2023 to
reduce this impact going forward.

to the restructuring actions referenced above. The result was
also impacted by the product development cost increase
described below. We will continue to keep our overhead
base under close review, to ensure it is both affordable in the
short-term and sufficient to drive our long-term progress.

Whilst the impact of the FuG and Guth businesses acquired in
2022 has not been separately reported as they were owned
for almost all of 2022, it is worth noting that on a comparative
basis they grew at a healthy rate, with some of the proceeds
from this growth reinvested in the cost base to sustain
progress into 2024. Both businesses have leading product
portfolios and a well-earned reputation for expertise and
quality. We are confident we can sustain their progress as they
increasingly leverage the wider Group’s resources.

Product development costs
Product development is central to the Group’s long-term
strategy. The Chief Executive Officer’s Review sets out the
progress made in the year.

Our accounting policy is to capitalise product development
costs where they meet criteria prescribed by International
Financial Reporting Standards, then start to amortise the
capitalised costs when development activity is complete.

Profit declined modestly in constant currency. A slowdown in
activity levels in the second half meant that growth did not
fully support overhead investments previously made, leading

The following table summarises the accounting entries for
product development costs recorded in the year:

Adjusted costs £ million

Gross product development costs
Of which: capitalised in the year1
Amortisation of capitalised costs
Impairment of capitalised costs
Net product development costs charged to Adjusted operating profit

2023

27.3
(7.8)
5.0
1.9
26.4

2022

24.3
(7.3)
3.3
–
20.3

Change vs
2022

3.0
(0.5)
1.7
1.9
6.1

1 Excluding capitalised interest costs

The Group’s development activities divide into two areas: i)
traditional development of new products for the mass market
and ii) Engineering Services work, where customised products
are developed for a specific customer.

Our gross spending on product development activities
increased by £3.0 million to £27.3 million in the year.

Our rate of capitalisation was broadly unchanged in the year at
£7.8 million. We take a conservative approach to capitalising,
only doing so when we are certain exploratory work has
transitioned to become a technically and commercially viable
development project.

Following a review, a non-cash charge of £1.9 million was
recorded to impair previously capitalised development costs.
This relates to certain Engineering Services projects where
the value deemed to be recoverable from future sales to the
customer does not support the carrying amount. This impacts
a small number of projects in an otherwise commercially
successful area.

The same review recommended a change to the way in which
we judge when amortisation should start. Some Engineering
Services projects follow an iterative development process,
in which the customer requests rolling design changes
to launched products, making it harder to judge when
development has ended, commercial sales have started, and
therefore when amortisation should commence – our new
approach makes this clearer. The year-on-year increase in
amortisation is £1.7 million and we expect this increased run-
rate for amortisation to continue in future years.

Neither the impairment nor the increase in amortisation has
any impact on cash, EBITDA or leverage calculations.

Adjusted net finance expense
Adjusted net finance expense increased to £11.5 million
(2022: £4.9 million) as a result of higher levels of average debt
and a rising Fed Funds rate.

Cash on deposit across the Group reduced materially in the
year to minimise borrowing costs.

To manage interest rate risk, we recently capped the interest
rate applicable to the majority of our borrowings at a rate
slightly above current SOFR.

XP Power Annual Report & Accounts for the year ended 31 December 2023

Tax and earnings per share
The effective tax rate applicable to Adjusted profit before tax
was 37%, higher than prior year.

The rate increase included a one-off element and was caused
by challenges in obtaining full benefit from available tax losses
and credits in our US business, which resulted in a write down
to deferred tax assets. We aim to make changes to our tax
structure to improve this situation and therefore the future
tax rate.

Adjustments
In 2023, the Group incurred costs of £15.4 million (2022:
costs of £68.2 million) which we consider to be Adjustments
and have therefore excluded them when calculating Adjusted
profit before tax. These are summarised below:

Restructuring costs of £2.7 million include severance
payments of £1.8 million, product development write-offs of
£0.4 million and a provision of £0.5 million for IT licences that
will no longer be used as a result of our restructuring.

Adjusted basic and Adjusted diluted earnings per share
decreased by 49% to 81.9 pence and 49% to 81.8 pence
respectively (2022: 160.6 pence and 160.1 pence).

Income / (cost) impact by Income Statement
line £ million

Operating
profit

Net finance
expense

Profit before
tax

Operating
profit

Net finance
expense

Profit before
tax

2023

2022

Restructuring costs
Site double running costs
Supply chain transformation
Comet legal case
Amortisation of acquired intangibles
ERP implementation
Acquisition costs
Other
Total

(2.7)
(2.6)
(2.7)
(2.1)
(3.2)
(0.3)
(0.1)
0.1
(13.6)

–
(2.4)
–
–
–
–
–
0.6
(1.8)

(2.7)
(5.0)
(2.7)
(2.1)
(3.2)
(0.3)
(0.1)
0.7
(15.4)

–
–
–
(59.7)
(4.1)
(3.8)
(2.4)
3.0
(67.0)

–
–
–
–
–
–
–
(1.2)
(1.2)

–
–
–
(59.7)
(4.1)
(3.8)
(2.4)
1.8
(68.2)

Site double running costs totalling £5.0 million arose from
the relocation of two leased facilities in California. The lease
cost of the new facilities, which under IFRS are accounted
for as depreciation and interest, were treated as Adjustments
from the start of the lease to the date of initial occupation.
The interest element of the lease cost was £2.4 million with
the depreciation and other double running costs totalling
£2.6 million. Both facilities are now occupied.

Adjusting items also includes a tax charge of £10.4 million.
This includes a £3.2 million tax credit in respect of the costs
above plus a £13.6 million charge relating to the Comet legal
case. The latter entry reverses a tax credit of £13.6 million
booked in the prior year. In 2022, we assumed we would be
able to deduct the Comet legal settlement cost from taxable
profit in the US. We now recognise this will be challenging for
the reasons set out in the previous section.

In the Notes to the consolidated financial statements,
restructuring costs and site double running costs have
been aggregated as a total of £7.7 million, with £5.3 million
impacting Operating Profit and an additional £2.4 million
impacting Net finance expenses.

Supply chain transformation costs of £2.7 million relate to
initial design work for our planned factory in Malaysia and
temporary engineering resources employed to transfer
manufacturing from the West to Asia.

The Chief Executive Officer’s Review provides an update on
the Comet legal proceedings. The cost of £2.1 million in 2023
largely relates to legal fees incurred in filing our appeal in the
case. This is significantly lower than the £59.7 million charged
in 2022, which comprised £52.2 million of costs directly
relating to the dispute and an associated intangible asset
impairment of £7.5 million.

Other items include a £0.1 million charge relating to fair
value gain on derivative financial instruments (2022:
£0.1 million charge) impacting operating profit. In addition,
there is a £0.6 million gain (2022: £1.0 million loss) relating
to modification of Revolving Credit Facility impacting net
finance expense. In 2022, there was also a £3.2 million foreign
exchange gain on the Euro-denominated loan relating to the
FuG and Guth acquisitions.

We challenge ourselves to keep the list of Adjustments to an
appropriate minimum. It is very important that we continue to
do such that the gap between Adjusted and Reported results
is as narrow as possible going forward.

Free Cash Flow

Reported £ million

Operating profit/(loss)
Depreciation, amortisation and impairment
EBITDA
Change in working capital
Provision for Comet legal case
Other items
Operating cash flow
Net capital expenditure – Product development costs
Net capital expenditure – Other assets
Purchase of bond receivable for Comet legal case
Net interest paid
Tax paid
Other items
Free cash flow

2023

24.5
22.6
47.1
14.0
–
1.3
62.4
(9.5)
(30.5)
–
(11.9)
(4.9)
(2.3)
3.3

2022

(24.1)
25.4
1.3
(33.5)
46.9
(12.6)
2.1
(8.0)
(11.4)
(36.9)
(5.5)
(4.1)
(5.8)
(69.6)

Cash generated from operations increased significantly in
the year, particularly in the second half. This arose almost
exclusively from working capital. Working capital reduced by
£1.2 million in the first half and £12.8 million in the second
half, reflecting efforts to reduce raw material inventory and
work in progress. Stock levels reduced by £22.8 million in the
year to £91.6 million, with the closing balance representing
181 inventory days. Further optimisation is expected.

The additional operating cash flow was absorbed by increased
capital expenditure and debt interest payments.

Capital expenditure on property, plant, equipment and
software totalled £30.5 million (2022: £11.4 million). This
included investment in two new sites in California and
construction of a new factory in Malaysia. The leases for the
previous sites in California expired and we were not able to
extend them, necessitating relocating to new leased premises,
with associated refurbishment and fit out. The total capex
cost of these new sites is expected to be £24.2 million, with
£16.6 million spent in 2023 and the balance due in 2024. The
Malaysia site remains an important long-term investment to
provide flexible low-cost manufacturing capacity. Construction
of the facility was suspended in late 2023. Total spend in 2023
was £6.0 million, with a residual amount of £3.0 million to be
paid in early 2024 for contracted work up until the point of
suspension. Minimal capex spend is expected on the project
thereafter until early 2025. Residual payments from 2023’s
major projects are expected to result in capital expenditure
of approximately £25 million in 2024, including capitalised
product development costs.

Funding plan
The Group started 2023 with relatively high borrowing,
with net debt equalling 2.7x Adjusted EBITDA. The market
slowdown in the second half, combined with spending on
major projects above, made it challenging for the Group
to de-lever. We responded in late 2023 by implementing a
comprehensive funding plan. This consisted of three elements:
management actions, amendments to the Group’s borrowing
facility and a share placing.

Management actions
Management actions consisted of:

• Headcount reductions and restrictions on discretionary
spend, with an expected full year benefit to EBITDA of
£8–10 million.

• Expected inventory reduction of £10–20 million by the

end of 2025

• Standardisation of supplier payment terms

• Capex reduction to discretionary levels

• Dividend suspension

Cost reduction actions have now been taken and the benefit is
tracking in the middle of the expected range. Further actions
being taken at the time of this report are expected to lower
the cost base by a further c.£3 million annually.

The reduction in inventory is ahead of schedule, as
explained above.

XP Power Annual Report & Accounts for the year ended 31 December 2023

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOVERVIEW

OUR GOVERNANCE

OUR FINANCIALS

CHIEF FINANCIAL
OFFICER’S REVIEW CONTINUED

The Director’s assessment of going concern has involved
consideration of the Group’s forecast covenant position
in both a base case and a severe but plausible downside
case. The Group is forecast to remain in compliance with its
covenants in both the base and downside cases, albeit with
relatively modest additional headroom in the case of the latter.
The Group has ample borrowing liquidity in either scenario.
Further details can be found in Note 1 of the consolidated
financial statements. The Viability Statement is set out in the
2023 Annual Report and Accounts.

Dividends and capital allocation
In late 2023, the Board took the difficult decision to suspend
dividend payments as part of the funding plan described
above. Therefore, no final dividend is proposed for the fourth
quarter of 2023. Dividends previously declared for 2023 are
18.0 pence (2022: 94.0 pence).

Dividends remain an important part of the Group’s long-term
capital allocation strategy. However, the Board believes it is
in the long-term interests of shareholders for debt reduction
to be prioritised over shareholder distributions until net debt
returns sustainably to our target range of 1–2x Adjusted
EBITDA.

Our long-term aim is to operate in a range of 0–1x
Adjusted EBITDA.

MATT WEBB
CHIEF FINANCIAL OFFICER

4 March 2024

Standardisation of supplier payment terms is underway.
We have identified c.50 suppliers, with whom we spend
c.$30m annually, whose terms need standardisation. Terms
have been extended with suppliers representing 15% of
this spend. We expect progress to accelerate in the first half
of 2024.

Capex spend for 2024 has been reduced to maintenance
levels beyond the residual spend on major projects as
explained above.

Amendments to the Group’s borrowing facility
In October 2023, we received unanimous support from our
banking syndicate for the following amendments to the terms
of our Revolving Credit Facility:

• Leverage ratio: Net debt to Adjusted EBITDA covenant

limit increased to 3.5x until 31 December 2024, returning
to 3.0x thereafter

•

Interest cover: Adjusted EBITDA to Adjusted Net
Finance Expense covenant floor reduced to 3.0x until
30 September 2025, returning to 4.0x thereafter.

Share placing
During the year the Group generated net proceeds of
£44.0 million from issuing additional shares equal to 20% of
the share capital of the Company. The shares were issued
at a premium to the then prevailing market price and were
over-subscribed.

Funding position at year-end
Following implementation of the funding plan, net debt at
31 December 2023 was £112.7 million (31 December 2022:
£151.0 million). Our gross cash balance was £13.5 million
(31 December 2022: £23.4 million).

Key financing ratios at 31 December 2023 were as follows:

• Leverage ratio: Net Debt to Adjusted EBITDA of 2.0x

(2022: 2.7x)

•

Interest cover: Adjusted EBITDA to Adjusted Net Finance
Expense of 4.8x (2022: 16.8x),

• £73.1 million of undrawn headroom within the Group’s
committed bank facility. The facility matures in June
2026 with a one-year extension option (subject to
lender consent).

Therefore, at 31 December 2023 the Group was comfortably
in compliance with its banking covenants and had ample
funding liquidity. At this date, it would have required:

• an increase in Net Debt of £81 million (or 72%) or a

reduction in Adjusted EBITDA of £23 million (or 42%) to
breach the leverage ratio

• a reduction in EBITDA of £21 million (38%) or an increase
in Net Finance Costs of £7 million (61%) to breach the
interest cover covenant.

XP Power Annual Report & Accounts for the year ended 31 December 2023

XP Power Annual Report & Accounts for the year ended 31 December 2023STRATEGIC REPORTMANAGING OUR RISKS

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 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 greater attention.

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

• The assessment of their impact level 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 becoming more or less
likely to occur, or whether the risk of occurrence remains
unchanged.

Our risk management framework

Although risk identity attributes 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 of risks identified and considered
but does include all risks, which are assessed as having a
severe or moderate impact to the business if they occurred.

Top down
Existing and
emerging
macroeconomic and
business risks that
could seriously affect
performance, future
growth or reputation
are assessed by the
Board to ensure 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.

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

• 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
Group company managers. These include:

• Authority matrices to clearly define who

can authorise transactions, transfer funds,
commit Company resources and enter
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.

• Business continuity and disaster recovery
plans are in place for all key facilities,
documented and communicated to key
personnel to help cope with unexpected
material events.

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

Severe

IMPACT

Minor

Low

LIKELIHOOD

High

1 Disruption to manufacturing

Supply chain risks

3 Market/customer-related risks

Product-related risks

IT/data

Funding/treasury

Legal & Regulatory

8 M&A
9 People-related risks
10 Climate-related risks

Risk appetite
The Board determines the amount and types
of risk that the Company is willing to take to
achieve its strategic and operational objectives,
with a risk appetite rating applied to each risk.

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

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

In light of the unpredictable market conditions
that gave rise to the need for our Funding Plan
in late 2023, the Board is prioritising continued
deleveraging of the Group’s balance sheet until
net debt to EBITDA is within the Group’s policy
range of 1–2x.

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
geopolitical events and pressures that impact
cross-border trading, are closely monitored 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 of our Chinese or Vietnamese
facilities, to reduce dependency on single sources
or regions. The Group’s borrowings are expected
to be greater than 1–2x Adjusted EBITDA in
2024. The Board will continue to monitor our
leverage position, prioritising debt reduction until
leverage returns to our near-term target range of
1–2x Adjusted EBITDA.

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

5353

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2024

LINK TO
STRATEGIC
PILLAR

LINK
TO KPI

ASSESSED
TREND

1 Disruption to manufacturing

An event that results in the temporary or
permanent loss of a manufacturing facility
could result in the Group being unable to sell
products to customers.

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

As the Group manufactures 80% of
revenues, this would cause a short-term
loss of revenues and profits, and disruption
to our customers, which would risk
reputational damage.

2 Supply chain risks

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

As the Group makes significant use of its
Asian manufacturing footprint to supply US
and European markets, it is exposed to any
risks relating to threats to global shipping.

3 Market/customer-related

risks

The semiconductor market represents a
significant percentage of Group revenue and
is inherently cyclical.

A material proportion of the Group’s
revenue is derived from its largest
customers. Demand for our products may be
impacted by gains or losses of business with
them, or changes in their inventory levels of
our products.

We make most of the products we sell, but
are reliant on third party suppliers for a
minority of the products we well.

While global supply chains progressively
normalised in 2023, some key product
components remain on relatively long lead
times, increasing the risk of shortages at the
point of manufacture.

While alternative routes by sea or air freight
can be used, these would come with a time
or cost impact.

A significant downturn in the Semiconductor
Manufacturing Equipment market could
have a material adverse impact on the
Group’s revenue, profitability and financial
condition.

If the Group lost some of its key customers,
this could have a material impact on its
performance. However, for the year ended
31 December 2023, no single customer
accounted for more than 18% of revenue,
and that revenue was spread over a large
number of individual programmes.

A, B,
C, D

A, B,
C, D, E

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

• Plan for the recommencement of

construction of a new manufacturing
facility in Malaysia.

• We have disaster recovery plans in place for

• Continue transfer of products from

both facilities.

• We have undertaken 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.

• We own key facilities or have on long-term

leases.

• We have business interruption insurance

in place.

China to Vietnam and from North
America.

• Maintain and review list of leased
facilities with maturity dates.

• Review business interruption

insurance to ensure cover adapts to
evolving risks.

• Components are dual sourced wherever

• We will continue to design new

possible.

• We conduct regular audits of our key

suppliers.

• Appropriate amounts of safety inventory of

key components are held and these levels are
regularly reviewed with reference to demand
and lead times.

• We monitor risks to our established transport
routes, developing contingency plans and
ensuring our customers are kept aware of
issues and implications.

products with multiple sources of
components where possible.

• We will continue to diversify and

localise our supply chains.

• We will conduct a review of all

approaches to inventory management
to optimise inventory levels, whilst
ensuring overall supply chain
effectiveness.

• We will develop outsourced resource

for various subassemblies and
finished goods as appropriate.

• Staying close to our key customers and

• Robust forecasting process at

understanding the end-market to provide
visibility of likely market movements.

• The Group mitigates this risk by providing

appropriate level of market/customer
detail to ensure best possible view on
future orders and revenue.

excellent service. Customer complaints and
non-conformances are reviewed monthly by
members of the Executive Leadership team.

• Operate with conservative borrowing
levels to accommodate potential
demand cyclicality.

• Whilst visibility of customer inventory levels

is naturally limited, our sales teams discuss
this with customers wherever possible and
reflect it in our revenue projections.

• Given that a key tenant of the
Group’s 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 and these 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.

Strategic key:

Develop a market-leading range of
competitive products

Target accounts where we can add value

Vertical penetration of focus accounts

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

Lead our industry on environmental
matters

Make selective acquisitions of
complementary businesses to expand our
offering

Links to KPIs:

A Revenue growth

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

Trend key:

No change to risk

Increase to risk

Decrease to risk

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2024

4 Product-related risks

A product recall due to a quality or
safety issue.

Failure to develop new products or to
not respond to new disruptive products/
technologies.

A major product recall could have serious
repercussions to the business in terms of
potential cost and reputational damage as a
supplier to critical systems.

Third-party introduced new products or
technologies could adversely impact the
Group’s revenue.

5 IT/data

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
its ability to operate.

6 Funding/treasury

The Group is reliant on external bank
funding and needs to comply with the
related covenants.

The Group could find itself in breach of
banking covenants and lose access to its
funding.

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

Changes in interest rates impact interest
payments and charges.

The majority of the Group’s sales and
material purchases are in US dollars, creating
a natural transactional hedge. However, a
minority of sales and costs are denominated
in other currencies, exposing the Group to
some transactional currency risks.

The Group faces translation currency risk
from reporting in sterling.

• We perform 100% functional testing on all

• Continue to enhance our product

design processes.

• Prioritise investment to ensure

existing portfolio meets new industry
standards as they are launched.

• Expand supplier quality capabilities.

LINK TO
STRATEGIC
PILLAR

LINK
TO KPI

ASSESSED
TREND

A, B,
C, D

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 that 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.

• We prioritise investment and work closely
with our customers to ensure that our
product offering remains market leading.

• 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 backup process in place, and
a robust anti-malware solution on our
networks.

•

Internally produced training materials are
used to educate users regarding 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.

• Set a clear and conservative leverage policy
and perform detailed and regular cash
forecasting to ensure the leverage targets
are met.

• 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 enhance our

A, D, F

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

• Continued improvement in quality
and Group-wide consistency of
Mater Data.

•

Increased use of BI tools and speed of
data delivery.

• Regular and detailed review of

A, C, D

forecast and actual results to ensure
maximum visibility of profit, interest
and net debt figures to ensure
compliance with bank covenants,
identifying any potential exposures
and implementing actions to mitigate.

• Continue to take action to improve

the funding position as necessary
through the review of costs and
maximisation of cash generation.

• The Group hedges interest rate risk
on the majority of its borrowings.

Strategic key:

Develop a market-leading range of
competitive products

Target accounts where we can add value

Vertical penetration of focus accounts

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

Lead our industry on environmental
matters

Make selective acquisitions of
complementary businesses to expand our
offering

Links to KPIs:

A Revenue growth

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

Trend key:

No change to risk

Increase to risk

Decrease to risk

RISK

EXPLANATION OF RISK

POTENTIAL IMPACT

MITIGATION

PRIORITIES FOR 2024

7 Legal & regulatory

8 M&A

9 People-related

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

Intellectual property in terms of product
design is an important feature of the power
converter industry.

The Group ships products internationally,
both in terms of the internal supply chain,
and from third-party suppliers and to end
customers, and also transfers manufacturing
from North America to Asia locations.
Compliance with export laws is critical.

Failing to comply with local law and
regulations could impact the profits and
reputation of the Group and its ability to
conduct business.

The effective tax rate of the Group
is affected by where its profits fall
geographically. The Group’s effective tax
rate could, therefore, fluctuate over time and
have an impact on earnings and potentially
its share price. It could also fluctuate if
an efficient Group tax structure is not
maintained.

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.
These can influence the Group’s revenues,
operations and financial performance.

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

10 Climate-related

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

Severe weather affecting our own locations
or the supply chain.

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

LINK TO
STRATEGIC
PILLAR

LINK
TO KPI

ASSESSED
TREND

A, D,
E, F

• The Group hires employees with relevant

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

• Export compliance software in place to

monitor customers and sales.

• An outsourced internal audit function

• Use of third-party experts to review
current export compliance processes.

• We will continue to ensure we stay

current with the latest legislation and
will ensure we have the necessary
contemporaneous documentation for
compliance purposes.

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

• The Group establishes a clear Health and

Safety Policy and procedures.

• We will continue to focus on
wellbeing of employees.

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

• Post-acquisition reviews are performed to

extract “lessons learned”.

• Continue to deliver synergy’s from

A, D

recent acquisitions.

• The Group undertakes performance

• We will continue to focus on

A, D, F

evaluations and reviews to help it stay close
to its key personnel. Where appropriate, the
Group also makes use of financial retention
tools such as share-based compensation.

• Ensure we maintain as flexible a

manufacturing footprint as possible to allow
us to respond to any single-site disruption.

• We look to have dual sourced supplies for
material purchases and conduct regular
reviews of safety inventories to ensure we
have sufficient stocks.

• We put relevant policies and KPIs in place to
ensure environmental targets are deliverable.

people management and leadership
development.

• A review of the organisation structure

and the incentives plans will be
performed to ensure they support the
long-term strategy of the Group.

• We will continue to review and
respond to areas of single point
exposure in terms of manufacturing
capability and material sourcing.

• We will set up a working group

to ensure the entire organisation
is engaged to meet our 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

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

Lead our industry on environmental
matters

Make selective acquisitions of
complementary businesses to expand our
offering

Links to KPIs:

A Revenue growth

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

Trend key:

No change to risk

Increase to risk

Decrease to risk

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORT
OVERVIEW

OUR GOVERNANCE

OUR FINANCIALS

VIABILITY STATEMENT

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.

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. Each risk scenario occurring in isolation
did not breach the Group’s borrowing facility headroom or
either of its financial covenants. The most severe threats
occurring in isolation were found to be a prolonged closure of
a manufacturing facility, or a significant delay in the expected
market recovery, particularly the semiconductor market that is
the Group’s largest and most volatile market.

Not surprisingly, in the event that multiple risks were to
crystallise at the same time, then breaches would occur,
but when applying a “probability and impact” approach, no
breaches are identified. In the event that results started to
trend significantly below those in the forecast, additional
mitigation actions have been identified that would be
implemented, which are not factored into the current scenario
analyses. These include a reduction of non-critical capital
expenditure and a reduction of discretionary spend. Within
the Viability Statement timeframe, the current bank facility
would need to be renewed, but there is nothing currently to
indicate that this would not be achieved.

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 2026.

In making this assessment, the Directors considered the
Group’s current financial position, its recent and historic
financial performance and forecasts, strategy (pages 22–23),
and business model (pages 20–21), and the principal risks and
uncertainties (pages 52–59).

The Directors have determined the three-year period to
December 2026 to be an appropriate period over which 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. The Directors also considered
a three-year financial model using the latest available financial
forecasts for the Group.

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 Group’s long-term viability.

In performing their review, 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, which consists of a revolving credit facility of
US$255 million, maturing in June 2026 with an option of a
further year to June 2027 (subject to lender consent).

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. The Directors
considered the impact that reduced market demand could
have on the Group’s funding position in the next 12 months.
This work is set out within the going concern assessment
described in Note 2 of the Financial Statements. In conclusion,
the Group expects to maintain liquidity and in compliance
with its banking covenants in either a base or severe but
plausible downside scenarios, albeit with modest headroom in
the case of the latter. The primary financial risks arise from a
downturn in revenue, either due to general market weakness
or the loss of a major customer, or operational disruption,
due to temporary loss of a facility or significant supply
chain disruption.

XP Power Annual Report & Accounts for the year ended 31 December 2023

XP Power Annual Report & Accounts for the year ended 31 December 2023STRATEGIC REPORTSECTION 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 a company’s
directors 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

the need to act fairly between
members of the company.

In the key decision-making
process, the Board and
management ensure they
take action in line with our
strategic aims, best positioning
XP for the long term. Careful
consideration is given to likely
impacted stakeholders.

The Board sets the Company
cultures tone ensuring high
business standards by setting the
Code of Conduct framework that
all employees and key suppliers
sign up to. Our Code of Conduct
covers stakeholder expectations
on business ethics, responsible
environmental behaviour, health
and safety, and treatment
of people.

Our people

Why we engage

Our workforce is our most valuable asset, and their
health, safety and wellbeing are of paramount
importance. Having engaged teams, who bring
a diverse range of talents and perspectives, is
important to our success, we want our colleagues
to be committed to our vision.
How we engage
Communication is key, we produce periodic
newsletters and hold regular town halls with
senior management, who work to ensure
messages are cascaded and discussed among
their teams, including through regional
employee updates. We track performance
with all-employee surveys and our designated
Non-Executive Director visited sites in Singapore
and Vietnam gaining views from across different
roles in the workforce.

The Audit Committee receives updates on any
whistleblowing matters.
Key topics discussed
• Health and safety.
• Diversity, including women in engineering

•

initiatives.
Internal communications and annual
Group-wide engagement survey results.

• Business performance.
• Relocation of West Coast sites.
• Onboarding Philippines team.
How we responded
• Established Health and Safety Council

with regional champions to ensure a global
approach.

• Cascaded engagement survey results,
regional townhalls and employee
newsletters. We know our colleagues are
happy working at XP and would recommend
it as a great place to work.

• Relocated two US sites putting in place

growth infrastructure.

• Bringing on board the Philippines team to

work as part of XP.

READ MORE ABOUT OUR ESG SOCIAL SECTION ON

PAGES 73–79

Category

1.
2.
3.
(not included in Scope 1 or 2)
4.
5.
6.
7.
8.
Total Upstream Scope 3
9.
10.
11.
12.
13.
14.
15.
Total Downstream Scope 3
Total Scope 3

Downstream transportation and distribution Not relevant, not applicable
Processing of sold products
Use of sold products
End-of-life treatment of sold products
Downstream leased assets
Franchises
Investments

Not relevant, immaterial
Relevant, calculated
Not relevant, immaterial
Not relevant, not applicable
Not relevant, not applicable
Not relevant, not applicable

2022 tCO2e

167,275
n/a

2,190
6,254
n/a
517
2,694
n/a
178,930
n/a
n/a
496,038
n/a
n/a
n/a
n/a
496,038
674,968

2023 tCO2e
90,564
n/a

1,547
4,243
n/a
716
3,324
n/a
100,394
n/a
n/a
480,487
n/a
n/a
n/a
n/a
480,487
580,881

Energy efficiency initiatives
Throughout the year, a range of initiatives reduced our carbon footprint and energy consumption. These are listed below.

• Additional installation of 50 LED lights at our Kushan site and further installation of LEDs in Vietnam.

• Continued replacement of older air conditioning with newer power saving units, which reduce energy consumption 20% per

new conditioner installed.

• We continued to utilise the solar rooftop capacity of 70 kWh per day at our Vietnam site and are exploring options to expand

capacity in 2024 and 2025.

• To increase the efficiency of our manufacturing processes, our production line continued to review product burn-in time with

certain product lines halving this time, resulting in reduced energy consumption.

• We continued to encourage our colleagues to reduce their energy consumption, while working by turning off lighting and

altering air conditioning running.

Water
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, water management
is considered throughout Group activities as we try to limit water use, employing best practices to
reduce its usage in all our facilities. At our Vietnam facility, this includes rainwater capture, installing
water-saving appliances and deployment of reduced flush toilets throughout our facilities. Water
withdrawal is a key environmental metric and is tracked 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 stress1. Our Southern Californian design centre is the
only facility located in an area of extremely high-water stress, but as an R&D-focused facility, water
requirements are minimal.

Our Water Policy is to:

• Employ best practices to maximise efficient water use 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, encouraging their participation in responsible water management best

practices.

• 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.

Freshwater withdrawal (m3)

UK
Germany
China
USA
Vietnam
Singapore
Global (excl UK)
Group total
Water intensity ratio (per Group turnover) £m
Water intensity ratio (per employee)

2023

1,369
2,233
14,619
5,361
35,386
2,385
59,984
61,353
193.9
22.9

2022

1,025
2,269
12,785
6,529
35,887
2,085
59,555
60,580
208.6
23.4

2021

545
46
9,615
5,427
37,430
–
52,518
53,063
220.8
23.8

The table above outlines freshwater withdrawal from all XP Power sites. Over time, we aim to
reduce water withdrawal per employee, and this year overall freshwater withdrawal per employee
decreased 2%.

Waste management
Our manufacturing processes produce relatively little waste, but we are committed to reducing
both non-hazardous and hazardous waste where possible across our operations. We have a specific
Waste Management Procedure, outlining risk prevention measures, how waste should be classified,
handled, collected, stored and disposed. In case of waste-related emergencies, employees follow the
“Emergency Preparedness and Response Control Procedure”. Additionally, any employees involved in
hazardous waste disposal have the appropriate personal protective equipment to avoid environmental
and health and safety accidents. Our HR department supervises training on waste management,
ensuring training occurs yearly, with prompt additional training if procedure or personnel changes.
Training includes waste management proficiency, including handling measures in emergency situations
and enhancing environmental awareness.

1 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.

OUR SUSTAINABILITY STRATEGY
3. PEOPLE AND WORKPLACE

As part of our RBA compliance, our facilities receive customer managed audits, which involves a facility assessment overseen
by one of the facilities customers. These audits include environmental aspects that relate to issues such as waste, air emissions
and water.

One major source of waste is the excess solder from the wave solder machines, so-called “solder dross”, which is recycled into
new solder and reused in our operations. In 2023, we sent 16.9 tonnes of solder dross for recycling, receiving 13.1 tonnes of
recycled solder back. This is a 78% recovery rate. We use activated carbon, and certain chemicals to clean flux from printed
circuit boards. These chemicals, and their containers, are safely disposed of through a certified, licensed third-party professional.
In 2023, we had zero reportable spills.

The following tables outline waste generation and treatment from all our sites. The increase in total waste generated and waste
treated is a result of increased coverage of reporting across the Group. Previously, we had only reported our Chinese and
Vietnamese sites.

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 disposed1
Total waste recycled
Total waste incinerated
Total waste sent to landfill
Total waste non-recycled
Total waste

1 Transferred to treatment contractor for recycling.

2023

15
577
592
1.8

2022

7
151
158
0.02

2023

2022

14
6
–
158
93
223
17
13
78%
2
172
99
223
322
494

–
7
–
90
–
61
12
9
72%
2
90
7
61
68
158

2021

7
151
158
0.03

2021

–
7
–
109
–
42
9
5
53%
2
109
7
42
49
158

Biodiversity
We understand the importance of, and are committed to, protecting the natural environment, preserving biodiversity, and
wherever possible, minimising the potential negative impact that our business may have on the 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 can contribute to these negative effects. Our Biodiversity Policy is also available at
corporate.xppower.com/sustainability/environment.

As a responsible employer, health and safety is of paramount importance to us. Whether working
on site, or from home, we strive to safeguard the health, safety and wellbeing of all our people
(including contractors). Our health and safety programme is driven from the top, with the Board having
ultimate responsibility, while benefiting from shared experiences, health and safety is coordinated
globally and managed locally. Our corporate health and safety framework defines those responsible
and accountable at each of our key sites, while the procedure also defines the minimum standards
required. These 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 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.

• 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 maintaining 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, keeping 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 2023 are:

Europe
Asia
US
Global

2023

139
1,899
486
2,524

2022

268
2,030
232
2,530

2021

82
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”.

Safety 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 ultimate goal is to have zero injuries.

There is nothing more important than the safety of our employees. We intend to do all that we can to protect everyone who
works for XP Power. As such, we have established safety policies to ensure we have effective systems to control hazards and
achieve our ultimate goal of zero injuries. This year, we have restated our health and safety statistics to align with global metrics
such as Lost Time Incident Rate (LTIR) and Total Recordable Incident Rate (TRIR). Globally, we have updated several of our H&S
processes, including a centralised health and safety reporting system that encourages the reporting of all health and safety
incidents, including medical injuries, lost time, and near misses. We are focusing on correcting the root cause of injuries and
near misses and preventing the potential for more serious incidents. Our objective is to learn from incidents and near misses so
we can promote safe practices and correct unsafe behaviours. As a result, we are starting to see an increase in the number of
non-medical incidents reported, such as near misses but expect the impact to be fully felt in 2024.

Our H&S statistics are reported below. 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% of employees
and contractors.

Health and safety LTIR1 and TRIR2 table

LTIR
TRIR

2023

0.23
0.35

2022

0.22
0.35

2021

0.13
0.45

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.

2 Total Recordable Incident Rate (TRIR) is defined as total number of medical injuries, divided by the total number of hours worked, multiplied by 200,000.

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), shower facilities on site, and group events
(e.g. softball leagues and yoga sessions). The wellbeing of our people is something that is vital to us at XP. We started, three
years ago, to offer all employees a wellbeing day – an additional day of paid leave following the COVID-19 period – to focus
on something that specifically supports people’s personal wellbeing and health. In 2023, we continued the practice in many
countries including in our large manufacturing sites in Kunshan, China and Ho Chi Minh, Vietnam.

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

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. We are currently developing a new Human Resources
dashboard, which will enable us to track key people metrics such as age and gender at a site level across our global operations.

Engagement
Our vision is to deliver the ultimate experience for our stakeholders. Through workforce engagement,
employee views are heard at a Board level and are considered in 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, first conducted in 2020 and used to drive further employee programmes and enhancements to
our engagement and retention. Participation rates were again excellent in 2023, at 89% (2022: 92%).
This year, our engagement score was 3.99 out of 5.00 (2022: 3.83), putting us at the 41st percentile
in the Gallup database1. Comparing our year-on-year results we can observe significant improvements
of our people’s level of engagement in the organisation, which is encouraging considering the market
environment. We are actively pursuing our goal to offer a consistent employee experience globally
and observe the current spread in results. To further engage our employees and keep them informed
of our progress and sustainability-related information, such as plastic reduction initiatives, we plan to
distribute newsletters, townhalls and update the intranet.

Full-time employee voluntary turnover percentage (%)

Europe Average number of employees

Asia

Voluntary leavers
Voluntary turnover
Average number of employees
Voluntary leavers
Voluntary turnover
Average number of employees
Voluntary leavers
Voluntary turnover

Global Average number of employees

Voluntary leavers
Voluntary turnover

2023

344
44
13%
1,825
880
48%
500
63
13%
2,669
987
37%

2022

338
27
8.0%
1,781
811
46%
472
91
19%
2,590
929
36%

2021

154
17
11%
1,606
602
38%
411
48
12%
2,171
667
31%

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

1 Results exclude Vietnam
and China employees.

Diversity and equality
Becoming a truly diverse and inclusive company is not only the right thing to do but is also crucial to helping us grow our
business, innovate, attract and retain talent, and engage our customers. Different experiences, views and opinions allow us to
explore options and decisions more widely, which we believe generates better outcomes for the business and stakeholders.
We also recognise the cultural differences that may exist in our global operations, while also acknowledging that a diverse
workforce reflects our markets and will aid us in succeeding. 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 Code of Conduct
aspect. When hiring, promoting or considering business partners, 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. During the year, we have launched the XP Power Women Employee
Resource Group (ERG) to support women by providing them a platform to share their experiences, network and develop their
skills. In 2023, the focus of the Women ERG included getting buy-in from the Executive Leadership with a sponsor from within
the Executive Leadership Team and recruiting a diverse group of members and committee members representative of the
diversity of women at XP Power. In 2024, the Women ERG group will focus on promoting women in the entire organisation and
developing opportunities for networking and professional development. 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.

We 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.

• 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 customer requirements. Many of our temporary staff choose to become permanent employees.

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

Europe Average number of employees

Asia

Average number of temporary or contract employees
Percentage of temporary or contract employees to permanent
Average number of employees
Average number of temporary or contract employees
Percentage of temporary or contract employees to permanent
Average number of employees
Average number of temporary or contract employees
Percentage of temporary or contract employees to permanent

Global Average number of employees

Average number of temporary or contract employees
Percentage of temporary or contract employees to permanent

2023

344
10
3%
1,825
653
36%
500
79
16%
2,669
742
28%

2022

338
38
11%
1,781
925
52%
472
52
11%
2,590
1,015
39%

2021

154
15
10%
1,606
731
46%
411
39
10%
2,171
785
36%

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. For 2023, our mean gender pay gap is 39.9% and median gender pay gap is 41.2%. We
take a zero tolerance approach to any form of discrimination.

UK gender pay gap – April 2023

Lower quartile pay band
Lower middle quartile pay band
Upper middle quartile pay band
Upper quartile pay band
Total

Employee numbers

Male
(Hourly Pay)

Female (Hourly
Pay)

Total Male %

Female %

12
12
19
25
68

19
19
11
6
55

31
31
30
31
123

39%
39%
63%
81%
55%

61%
61%
37%
19%
45%

Employees by gender and region as of 31 December 20231

109

165

881

Europe
340

198

North
America
503

Asia
1,584

316

701

Male

Female

Gender diversity statistics1

Board
Executive Management
Management
All other
Total

Male

4
5
73
1,137
1,219

Female

4
2
20
1,133
1,159

Total

8
7
98
2,322
2,435

Male

50%
71%
74%
49%
50%

Female

50%
29%
20%
49%
48%

1 There are a total of 57 undisclosed employees, 5 of which are in management layer and remaining 52 in “All other” layer.

XP Power is committed to meeting the recommendations of the FTSE Women Leaders and Parker Review. Of our Board, 50%
are now women, including in 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).

Talent 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
high potential employees, creating development opportunities 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.

It is our aspiration that all XP Power employees can receive regular feedback on their performance. This feedback co-exists
alongside our formal performance review process, where objectives are set, aligned and measured against our core value and
key business priorities. We operate various bonus schemes and all non-sales commissioned employees are eligible to participate
in our general or executive bonus scheme. The overall bonus pools are determined by the level of adjusted profit before tax
and operating cash conversion, with individual bonuses allocated based on individual performance. We also have several spot
recognition award schemes, which are occasionally given to teams to recognise and promote collaboration. Healthcare benefits
and life assurance are also provided according to the customs in the regions we operate.

In 2023, we had 22 apprenticeships and 26 interns, and ran programmes in areas such as finance, human resources, information
technology and logistics.

Average training time (in days) per employee

Europe

Asia

Global

Average number of employees
Total hours
Hours per employee
Days per employee
Average number of employees
Total hours
Hours per employee
Days per employee
Average number of employees
Total hours
Hours per employee
Days per employee
Average number of employees
Total hours
Hours per employee
Days per employee

2023

344
4,476
13
1.6
1,825
17,623
10
1.2
500
8,049
16
2.0
2,669
30,148
11
1.4

2022

338
8,192
24
3.0
1,781
25,292
14
1.8
472
10,319
22
2.7
2,590
43,802
17
2.1

2021

154
2,101
14
1.7
1,606
14,426
9
1.1
411
747
2
0.2
2,171
17,273
8
1.0

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:

Europe Average number of employees

Asia

Average number of employees covered by collective agreements
Percentage of employees covered by collective agreements
Average number of employees
Average number of employees covered by collective agreements
Percentage of employees covered by collective agreements
Average number of employees
Average number of employees covered by collective agreements
Percentage of employees covered by collective agreements

Global Average number of employees

Average number of employees covered by collective agreements
Percentage of employees covered by collective agreements

2023

344
–
0%
1,825
1,390
76%
500
–
0%
2,669
1,390
52%

2022

338
–
0%
1,781
1,406
79%
472
–
0%
2,590
1,406
54%

2021

154
–
0%
1,606
1,063
66%
411
–
0%
2,171
1,063
49%

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 local environmental and community activities and every employee is able to take a day’s paid
leave to contribute to a charitable or worthy cause in the community.

Our activities in 2023 included:

• Several of our US sites, including Sunnyvale and Tustin, participated in Toy Drives to collect Christmas presents for children

in need partnered with Joey’s Toy Drive who is dedicated to bringing Christmas cheer to underprivileged children in San Jose
and northern California for families who might not be able to afford Christmas gifts.

• Our Gloucester site partnered with Open-Door Food Pantry to participate in a Food Drive, while our Singapore employees

delivered more than 200 bags of groceries to nearby low-income households in need.

• Several of our UK employees volunteered with Greenshoots, a local charity that provide horticultural therapy for adults with

disabilities.

• Our site in Singapore also partnered with the National Environmental Agency where employees and their families contributed

towards a beach clean.

The Group and our employees made donations to local charities totalling £15,339 in 2023 (2022: £8,563).

How this strategic
pillar links to the
UN SDGs

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

It is Company policy to conduct all business in
an honest and ethical manner. The first of our
five core values is “Integrity”, and is, therefore,
embedded into our culture, as well as our
Code of Conduct and the policies outlined in
the following sub-sections. To ensure Code of
Conduct awareness and understanding, we use
our learning management system to monitor
all employees on their annual Code of Conduct
training. Employee compliance with the annual
Code of Conduct training is 61% for 2023.
This figure is lower than previous years due to
a reduced completion rate within our Vietnam
site. However, we began running a campaign
at the end of the year in Vietnam to have the
Code of Conduct re-trained. This campaign is
still running throughout January and completion
results will, therefore, be reflected in the 2024
Annual Report.

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.

Whistleblowing
We are 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, as embedded in 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 each operational
country, and in their chosen language. This
guarantees that employees’ experiences of legal
or ethical misconduct, such as discrimination,
will be heard and acted upon quickly wherever
it occurs. Concerns can be raised online or by
phone, on an anonymous basis and in any chosen
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.

•

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

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 2023, there were
no whistleblowing reports, with one report
in 2022.

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, enforcing
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. Our Code of
Conduct’s section on bribery and corruption is
detailed and includes numerous examples, to
aid understanding of what is acceptable and
unacceptable. The requirements of our Code
of Conduct are communicated to our suppliers,
who are required to comply with its provisions.

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 tax reporting. 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 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 of 14 February 2024), apart from
Vietnam, where our site is based due to availability of suitable
labour and not located for 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, reporting to the 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.

There were no instances of bribery or corruption in 2023 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/corporategovernance.

Any abuse of human rights will be acted upon immediately
and appropriate action taken. All employees are trained on
our Modern Slavery Policy through annual Code of Conduct
training.

Human rights
Human rights are at the heart of sustainable business. We
are committed to respecting human rights in accordance
with international 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. Training is included in our annual Code of
Conduct training. 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/
corporategovernance.

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 penetration testing, data back-up and recovery
processes in place and there are various processes, software
and hardware ready 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 Group
policy to not engage in any aggressive tax planning or tax
avoidance schemes.

This report, in conjunction with, and aligned to, our net
zero ambition 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. Details of our pathway to Net Zero
are outlined in our Transition Plan on pages 30–33.

Our report meets climate-related financial disclosure requirements under the Companies (Strategic
Report) (Climate-related Financial Disclosure) Regulations 2022, as well as being 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 the additional guidance set out in the TCFD 2021 Annex, “Implementing the
Recommendations of the Task Force on Climate-related Financial Disclosures”.

Recommendation

Recommended disclosures

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

Risk management

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

Metrics and targets

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

READ MORE ABOUT
OUR GROUP’S RISK
MANAGEMENT PROCESS
ON PAGES 52–59

Reference

Page 83

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

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

Page 83

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

Pages 84–89

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

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

Pages 84–89

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

Page 84

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

Page 84

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

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 84

Page 89

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

Pages 68–70

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

Page 89

Governance
XP Power has a robust governance structure to manage our
climate-related risks and opportunities. 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.

The flow of information regarding climate-related issues
occurs within both the strategic and risk functions of the
Group. The Board monitors the Group’s sustainability strategy,
progress against key initiatives and performance in relation
to the net zero plan, as well as our sustainability scorecard.
This ensures climate-related issues are considered within
strategy, budgets, major capital expenditures and business.
Senior Independent Director and Audit Committee Chair,
Polly Williams, supports the Board in this function. In the risk
function, the Audit Committee ensures climate-related issues
are integrated into the Group’s risk management process and
are responsible for approving the Group’s TCFD disclosure.

At the management level, the Executive Leadership Team (ELT)
meets monthly to monitor progress and key sustainability
strategy actions, reporting to the Board. The Sustainability
Council supports the ELT with the Group’s sustainability
objectives. The Sustainability Council is a cross-functional
team, chaired by the CEO, that meets quarterly, tasked with
the formation and successful delivery of our sustainability
action plan (including the net zero plan). The Council
monitors policies, processes, objectives, targets and
KPIs of our sustainability issues. Through reviewing our
sustainability scorecard, the Council also determines progress
against our plan, resolves issues, mitigates plan risks, and
generates actions to the ELT, senior management, and site
representatives. In relation to Net Zero, the sustainability
scorecard tracks our Scope 1, 2 and 3 emissions, renewable
electricity roll out, low carbon product introduction, waste
reduction, and supply chain initiatives.

Sitting below the Sustainability Council, the Sustainable
Development Working Group (led by the Group’s
Sustainability Lead), meets monthly. The Working Group has
more of an operational remit, managing and tracking the
progress of specific sustainability projects. This year, the Group
has appointed site representatives for key sites, responsible for
regular monitoring and reporting of site-specific sustainability
metrics and risks, while also being responsible for the
implementation of site-level corporate projects.

Board
Overall
Climate Change
Responsibility

Board Level

r
i

Polly Williams
Board Sponsor
for Climate Change

Audit Committee
Reviews risk register
three times a year

Sustainability Council
Cross-functional committee tasked with
delivery of net zero action plan

Sustainable Development Working Group
Monitors climate-related risks

Site representatives
Responsible for the monitoring risks and implementing projects at the site level

Management Level

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TCFD REPORT CONTINUED

Risk management
External consultants, CEN-ESG, helped to identify
climate-related risks and opportunities, which were refined
through Sustainability Council consultation. XP Power
considers climate-related risks and opportunities in all physical
and transition risk categories (current and emerging) whether
they occur within our operations, upstream, or downstream
of the Group. Risks are assessed within our short, medium, or
long-term strategic planning horizons. Typically, transition risks
occur top down and are considered at Group level. As part of
operational risk assessments, the Group undertakes site level
environmental risk assessments. This year we enhanced the
level of analysis of physical climate risks at our sites using a
natural hazard risk analysis tool, which enhanced the depth of
insight to our global operations.

The management of climate-related risks is integrated into the
XP Power risk management framework, with risks assessed
in the same manner as other Group risks, so 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), to ensure 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 four-monthly scheduled meetings 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 aids in
determining each risks treatment, (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
The identification of climate-related risks and opportunities
underpins our net zero strategy and the management of these
dovetails with our net zero transition plan; the mitigation of
climate-related risks and the development of opportunities are
effectively integrated into our strategic planning. The analysis
has helped focus our strategy towards managing these issues.

The time horizons for our assessment of climate-related risks
and opportunities considers: our commitment to net zero by
2040 and our net zero transition plan targets, that the Group
owns some of its key operating sites, the timeframes required
for climate change impacts to manifest and 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

As part of our assessment of climate-related risks and
opportunities, we have conducted climate scenario analysis
to assess the resilience of the Group’s business model and
strategy to climate-change under different scenarios. We
have used different scenarios for both physical and transition
risks and opportunities. Scenarios have been selected as they
provide comparisons of ambitious, baseline and optimistic
climate scenarios, which are appropriate for the nature of our
business and our operating environment. Scenarios used are
outlined below, according to physical and transition elements.

In aggregate, our risk assessment and scenario analysis has
shown that our overall climate risk exposure is moderate.
The Group is financially resilient and strategically robust to
climate change. Our current understanding is that, considering
our existing and planned mitigation strategies, and net zero
action plan, any asset impacts are limited, and risks can
be accommodated in our business-as-usual activities. We
do not foresee any additional fundamental changes to our
business strategy or capital expenditure envelopes resulting
from climate change or net zero for the foreseeable future.
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, 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 Company
strategy and objectives.

Physical climate-related risks
This year, we used a natural hazards software tool to conduct
a more thorough physical risk analysis, allowing us to better
understand the exposure of our sites and develop further
mitigation efforts. The risk assessment looked at site-specific
exposure to natural hazards, and the evolution of climate risks
under the scenarios for global temperature rise. The scenarios
embedded in the physical risks tool are:

RCP 4.51: an intermediate scenario, more likely than not
to result in global temperature rise between 2°C and 3°C,
by 2100.

RCP 8.51: a bad case scenario where global temperatures
rise between 4.1–4.8°C by 2100.

1 www.ipcc.ch/report/ar5/syr/

Our physical climate-related risk analysis covered all 12 Group
sites, including our site under construction in Bota, Malaysia.
Our sites have varying levels of risk exposure depending on
their location. Our most material physical risk exposure is
flood risk (see below). Our Gloucester, MA site is at risk from
tropical cyclones, but we view this exposure as manageable.
Some identified climate-related risks, such as heat stress,
water stress, and wildfire risk have been determined
immaterial due to: the sites size and strategic importance,
the sites position within its geographical location, the nature
of our processes and operations, and existing mitigation
strategies already in place. There was no material increase
in site risk exposure under the different scenarios and time
horizons analysed.

We use an approximate revenue contribution to determine
site size, business importance, and physical risk implications in
our analysis.

Flood risk
Our site at Kunshan, China (~15% revenue contribution) is
at risk from river flooding and coastal inundation, and FuG,
Germany (~5% revenue contribution), is at risk from river
flooding. Flood risk modelling forecasts that potential flooding
in Kunshan would cover a large geographical area, disrupting
local infrastructure and employees, whereas at FuG, flood risks
are localised to the river, thus making flood impacts potentially
more meaningful at Kunshan. Our analysis highlights potential
operational disruption caused by floods that could lead to
loss of output. However, we do not forecast any asset or
material financial risk due to the following reasons: The Group
has appropriate insurance policies in place to protect against
business disruption, the Group operates a flexible model,
allowing production to be moved to different sites, although
relocation time would incur a loss of output. Short-term
interruptions can also be overcome with working pattern
changes to compensate for temporary loss of output. The
construction of our third major site in Malaysia will provide
further manufacturing flexibility and reduce reliance on the
Kunshan site.

Supply chain risks
Physical climate-related impacts could also result in supply
chain disruptions, either through supplier sites being directly
affected, or by disruption to transportation and energy
supply. Our supply of metals and fabricated items is flexible,
however, some electronic components are specialised and
cannot be easily switched out for alternatives. Individual
supplier exposure is reduced as we source components from
several suppliers and distributors. Our ongoing strategic
supplier reviews incorporates analysis of our critical supplier
relationships and options for switching to alternatives. Our
recent supplier engagement survey, which incorporates
engagement on our upstream emissions, will help assess our

suppliers’ exposures and we can use these results to plan
further engagement.

The following table provides a high-level summary of the
primary acute physical climate-related risks that could have an
impact on the Group.

Risk

Type

Area

Flood risk

Supply chain risks

Physical (Acute)

Own operations

Upstream

Primary potential
financial impact

Lost production
and revenue

Time horizon

Medium-term

Likelihood

Medium

Medium–High

Magnitude of
impact

Location or
service most
impacted

Metric tracked

Moderate

Major

China, Germany
(FuG)

Group

Approximate
revenue
contribution

n/a

Transition risks and opportunities
We have assessed the risks and opportunities in a transition
to a low carbon economy that may have a material impact
on the Group. Risks may either carry financial, legal and/or
reputational impacts to the Group. Our Net Zero Transition
Plan helps mitigate transition-related risks.

We have used the following two International Energy Agency’s
(IEA) scenarios to perform scenario analysis for our transition
risks and opportunities.

Net Zero 2050 (NZE)2: a narrow but achievable pathway for
the global energy sector to achieve net zero CO2 emissions
by 2050. This scenario meets the requirement for a “below
2°C” scenario and is used as a positive climate pathway.
NZE also informs the decarbonisation pathways used by the
Science Based Targets initiative (SBTi).

Stated Policies Scenario (STEPS)2: representing projections
based on the current policy landscape and is used as a base/
low case pathway. Global temperatures rise by around 2.5°C
by 2100 from pre-industrial levels, with a 50% probability.

iea.org/reports/global-energy-and-climate-model

Carbon price impacts in the value chain
Our Scope 1 and 2 exposure is low and planned mitigation
will further limit potential carbon price impacts on our direct
operations. However, the Group is exposed to potential
carbon price impacts within the upstream value chain, which
may result in increased cost of transportation and goods
sold. We have analysed our exposure to potential carbon
pricing mechanisms using our projected emissions under our
Transition Plan. Under the NZE and STEPS scenarios, carbon
prices are projected to increase, but whether and how carbon
prices are applied to purchased goods and transport, and our
ability to pass on cost increases is very uncertain.

As part of our net zero plan, we are aiming for a 25% reduction
in Scope 3 by 2030 and net zero across the value chain by
2040, thereby mitigating the impacts of carbon pricing on
our value chain. We have identified our carbon intensive
inputs within our purchased goods and services (16% Scope 3
emissions). Mitigating embedded carbon comes from both our
product and supplier strategy. Our innovation has a specific
focus on improving our products in use efficiency, and we
have introduced criteria to reduce component count in our
product development process. Additionally, feedback from
our first round supplier engagement will help inform how
our suppliers are expecting to decarbonise their operations.
The impacts of global grid decarbonisation are also factored
into our upstream expectations. The Group is also exposed
to potential carbon costs within transportation (1% Scope 3
emissions). We have reduced air freight during 2023 to 29%
of shipping by weight (previously 47%). We remain committed
to investigating opportunities within our logistics strategy
to bring this down further, cognisant that customer service
remains an important consideration.

Risk of not meeting our net zero target
The ability to deliver on our net zero target and Transition
Plan is partially reliant on third parties and/or technologies
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 sustained
cost impacts from any introduction of carbon pricing. As part
of our risk analysis we have considered potential sales impacts
resulting from not meeting our net zero target.

Our ability to decarbonise our operations is dependent on
grid decarbonisation and renewable energy availability in the
countries that XP Power operates in. Near term, the Group is
purchasing renewable Energy Attribution Certificates (EACs)
as an interim tool to reduce Scope 2 emissions, while we
investigate measures to reduce energy consumption, improve
energy efficiency and invest in onsite renewable installations.
There may be uncertainties in the availability of, and/or cost of
renewable energy contracts as global pressures to reach net
zero increase the demand for renewable energy.

Decarbonisation of our value chain is largely dependent
on product use and, to a lesser extent, transportation.
Downstream product use emissions are 83% of our Scope
3 emissions, and consequently, are a key factor in our
ability to reach net zero. Our ability to reduce use phase
emissions is heavily reliant on grid decarbonisation in the
countries where our customers operate, where we have no
influence. Nonetheless, we are taking action to reduce use
phase emissions through the product development process,
see our Transition Plan and Sustainable Products sections
(pages 30–33 and 64–66). Transportation-related emissions
reductions are also reliant on global transportation and freight
decarbonisation. We are also taking action to reduce emissions
in this area through switching the mode of our freight, the
reduction of business travel, and encouraging lower carbon
commuting patterns for our employees.

The following table summarises the two key transition risks identified that may have a material impact on the Group.

Risk

Type

Area

Carbon price impacts
in the value chain

Risk of not meeting our
net zero target

Transition (Policy and Legal)

Transition (Market and Reputation)

Upstream/Own operations

Full value chain

Primary potential financial impact

Higher cost of inputs

Lower profit margins through
increased costs and lower revenue

Time horizon

Likelihood

Magnitude of impact

Medium-term

Medium

Moderate

Location or service most impacted

Transport, Purchased Goods and Services,
Energy use

Long-term

Low

Major

Group

Metric tracked

Scope 1 and 2 emissions and Upstream Scope 3

Scope 1, 2, 3 emissions

Climate-related opportunities
Solar power
The Group is pursuing solar self-generation wherever
practically possible and economically viable as part of our
Transition Plan. Some sites already have solar panels, and
we plan to install more in due course. Solar installations will
reduce reliance on local grids, reduce our emissions and
carbon tax exposure and can provide operating cost savings.
Scaling of global solar capacity is likely to reduce the cost
of adoption and allow us to increase potential renewable
generation capacity. Global solar PV capacity, under a STEPS
scenario, is expected to double by 2030, rising four-fold under
the NZE scenario. Implementing solar generation at our sites
in Vietnam and China would have the most significant impact
on the Group’s energy use and Scope 2 emissions. At these
sites, energy use accounts for c.77% of total energy use and
draw from grids with the highest emissions intensity, thereby
accounting for 87% of the Group’s Scope 2 emissions. We
have scoped installation of new solar panels across the entire
roof at our Vietnam site, which will cover c.25% of the site’s
electricity needs. We are assessing this project against other
Group requirements.

Purchased renewable energy
Energy Attribution Certificates (EAC’s) such as Renewable
Energy Certificates (REC’s) allow us to reduce our
market-based Scope 2 emissions without capital spend. We
have secured EAC’s that cover c.98% of our Scope 2 emissions
for FY 23. From 2024, all of our sites will be covered by EAC’s.
Purchased Power Agreements (PPA’s) provide better certainty
of renewable supply and additionality of renewables into the
grid. However, we are small electricity users, and therefore,
not well placed to secure high-demand PPA supply contracts
today. We assume the ability to find EAC’s at our European
and US sites (c.11% of the Group’s Scope 2 emissions
combined) in the future will be high, while we expect greater
uncertainty in the availability of renewable energy at our sites
in Asia in the near term.

Reduction of air freight
Shifting from air to sea freight provides both cost and
emissions reductions for the Group. We have analysed
both operating cost savings and the reduction of upstream
transportation carbon pricing exposure through transport
modal shift. While operating cost savings are more significant
than carbon pricing implications, the reduced emissions from
the mode shift are crucial to our strategy of reducing carbon
where possible. 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. Customer service remains imperative
to our strategy, and freight model changes will only occur
where we can ensure supply to customers is not impacted
or where engagement with suppliers assists with lead times.

We successfully reduced air freight as a proportion of total
freight during FY 23 and will continue to actively look for
reduction opportunities.

Innovation for lower carbon products
The full analysis of the carbon footprint of our products has
enabled us to better understand impact areas and identify
improvement opportunities. The Group’s NPI process now
includes goals to develop lower carbon products, through
increasing use phase efficiency and lowering component
count. Internal targets in this area will be set this year. We
have also analysed the impacts of this opportunity through
reduced exposure of our upstream supply chain to carbon
pricing mechanisms. Product innovation and current product
use cycles mean significant value chain emissions reductions
from these actions will only manifest in the medium to long
term. Further details can be found in the Sustainable Products
section (pages 64–66).

We expect a range of market and policy factors to support
the uptake of our low carbon innovation outputs and increase
the rate of diffusion. For example, policy mechanisms such as
increasing scope on legislation for the efficiency requirements
for power conversion; the Group expects current standards
to be extended to cover industrial and healthcare applications
in time. Within the NZE scenario, 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. Alongside legislation, general
concerns over climate change should lead to an increasing
emphasis on energy and carbon efficiency.

Electrification
Electrification represents a global megatrend that presents
potential new opportunities for the Group within existing
and new markets. It is a critical element in the transition to a
zero-carbon economy as it reduces the reliance upon fossil
fuel-based systems. We have assessed the potential impacts
of this opportunity through increases in sales attributable to
electrification. In the 2023 IEA NZE scenario, electrification
plays an even more prominent role than in previous iterations.
This is primarily driven by increased uptake of electric mobility
and heating technologies as well as rising market confidence
in newer technology. The share of electricity in total final
consumption rises to 30% by 2030 under the NZE scenario,
exceeding 50% by 2050. Under STEPS, electrification evolves
at a slower rate reaching 30% by 2050. To capitalise on
electrification opportunities, the Group monitors interest
areas, such as wind turbines, 5G infrastructure and mobile
network densification, which could provide new opportunities
for the Group.

Energy and waste savings
Actions to improve energy efficiency and reduce energy
consumption will provide incremental improvements to our
emissions profile at limited costs, with certain behaviour
and process changes being achieved at zero cost. We have
outlined various site-level efficiency projects within the
Transition Plan depending on each site’s requirements and
opportunities, as well as having Group-wide initiatives,
such as packaging reductions. These will be multi-year
implementations and further details are included within our
Transition Plan.

Supplier efficiencies
Our suppliers are critical to our ability to deliver our product
base. We are committed to maintaining ambitious supplier
standards to reduce operational risks and foster long-term
partnership success. We have started the process of engaging
with key suppliers to drive material and energy efficiencies,
as well as collaboratively develop value-adding products.
The initial results from our engagement will form the basis of
future engagement. We believe in the quality of our suppliers
and our alignment on decarbonisation. As such, we anticipate
our suppliers to be receptive to discussions around enhancing
efficiencies. A NZE scenario will likely place more regulatory
and market pressure on suppliers to decarbonise. In this
scenario, suppliers are likely to be more willing to engage and
drive efficiencies. Further details on our supplier engagement
in this area can be found in our Transition Plan.

The following table summarises the seven key climate-related opportunities that the group has identified.

Opportunity

Solar power

Energy Source and
Resilience

Type

Area

Primary potential
financial impact

Purchased
renewable electricity

Reduction of
air freight

Energy Source

Transportation

Innovation for lower
carbon products

Products and Services,
Market

Downstream

Own Operations

Upstream and
Downstream

Reduced direct cost

Reduced direct costs

Reduced costs

Higher revenue

Time horizon

Short to medium-term Short to medium-term

Short to medium-term

Long-term

Likelihood

Magnitude of
impact

Location or service
most applicable

Metric tracked

Medium

Minor

High

Minor

Medium–high

Major

China, Vietnam

Group

High

Minor

Group

Scope 2 emissions,
% of renewable from
total electricity

Scope 2 emissions, %
of renewable from total
electricity

Scope 3 emissions –
upstream transportation
and distribution

Scope 3 emissions –
use of sold products,
purchased goods and
services

Opportunity

Electrification

Energy and waste savings

Supplier efficiencies

Type

Area

Primary potential
financial impact

Time horizon

Likelihood

Magnitude of impact

Location or service most
applicable

Market

Material Efficiency

Material Efficiency, products
and services

Downstream

Own Operations

Upstream

Higher revenue

Reduced costs

Medium to long-term

Medium-term

High

Major

Medium-high

Minor

China, Vietnam

High

Moderate

Group

Metric tracked

Revenue Growth Rate

Energy use, Scope 1, Scope 2
emissions (Location-based),
Waste generation

Scope 3 emissions – Purchased
goods and services

Metrics and targets
We report on our Scope 1, 2 and 3 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.
We measure all greenhouse gases as relevant and our targets
cover CO2, CH4, N2O and HFC’s.

Our Scope 1 and 2 GHG emissions are derived from measured
data sources with no estimates used.

Most of our emissions are represented by our Scope 3
emissions (99% of footprint) and within that our downstream
Scope 3 emissions associated with the use phase of our
products (82%). We calculated all applicable Scope 3
categories for our 2023 carbon footprint. Five categories of
Scope 3 are not applicable to our business. Four categories
of Scope 3 (Capital goods, Waste generated in operations,
Processing of sold products and End of life treatment of
sold products), are excluded from our reporting and our
science-based targets as they are negligible and collectively
account for under c.0.5% of our Scope 3 inventory.

For more information on our emissions, see Energy and
Greenhouse Gas Emissions (pages 67–70).

Additional environmental metrics we monitor include
emissions intensity, energy use, energy intensity, renewable
solar energy generation, freshwater withdrawal, and waste
management, as reported on pages 71–72 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 – reported on pages 64–66 Sustainable Products.

Targets
Our science-based, net zero targets will ensure that we
are aligned to the UK Government’s Net Zero Strategy,
setting out a pathway to reaching net zero greenhouse gas
emissions ahead of 2050. Our science-based targets have
been approved by the Science Based Targets initiative (SBTi)
in February 2024.

See XP Power Transition Plan pages 30–33 for further details
on our science-based targets and Transition Plan.

In line with SBTi, our targets and Transition Plan do not
include the use of carbon credits. While no such action
is planned currently, we may consider using offsets as
an option for additional emission reductions beyond the
science-based targets.

OUR GOVERNANCEOUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOVERVIEW

STRATEGIC REPORT

OUR FINANCIALS

OUR GOVERNANCE

GOVERNANCE AT A GLANCE

BOARD AND COMMITTEE ATTENDANCE

INTRODUCTION TO GOVERNANCE

BOARD OF DIRECTORS

CORPORATE GOVERNANCE REPORT

NOMINATION COMMITTEE REPORT

AUDIT COMMITTEE REPORT

REMUNERATION COMMITTEE REPORT

DIRECTORS’ REPORT

DIRECTORS’ RESPONSIBILITIES STATEMENT

110

116

122

145

149

OUR
GOVERNANCE

90
90

XP Power Annual Report & Accounts for the year ended 31 December 2023

91
91

OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORTGOVERNANCE AT A GLANCE

BOARD AND COMMITTEE ATTENDANCE

Our Board
How our Board are purposed to deliver long-term sustainable value for us
and our stakeholders.

Board gender profile

Ethnicity

Board tenure

Board age profile

< 1 year

1–3 years

4–6 years

7+ years

Male

Female

White

Asian

North African

45–50

51–55

56+

During 2023, the Board met five times (excluding Committee meetings), and all Directors attended
every possible meeting. In addition, meetings with management were conducted to receive
operational presentations on the Vietnam manufacturing site, and Asia management team discussions
around their markets, product development and projects. The Board also received externally presented
updates on the global and regional economic outlook in China and Asia and on sustainability,
covering macro trends, stakeholder responses, the ESG Report and implications for XP Power.

Key areas and activities covered by the Board during the year are detailed on pages 102–103.

Members

Jamie Pike

Gavin Griggs

Matt Webb1

Andy Sng

Pauline Lafferty

Polly Williams

Sandra Breene

Amina Hamidi

James Peters2

Oskar Zahn3

1 Appointed to the Board on 5 October 2023.

2 Retired from the Board on 18 April 2023.

3 Stepped down from the Board on 31 March 2023.

Meetings

Attendance

5/5

2/2

5/5

1/1

Board member skills

Power electronics

Risk management

Electronics and industrial tech

Strategic human resource
management

Business development and
managing growth

Prior public company experience

Investor relations

Financial

ESG and climate experience

Gavin
Griggs

Matt
Webb

Andy
Sng

Jamie
Pike

Polly
Williams

Pauline
Lafferty

Sandra
Breene

Amina
Hamidi Total

XP Power Annual Report & Accounts for the year ended 31 December 2023

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OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORT

LETTER FROM THE CHAIR
INTRODUCTION TO GOVERNANCE

The Board believes XP Power
has a positive longer-term
outlook and, with the ongoing
commitment of our colleagues,
we are working to ensure that
the Group is positioned to
realise its potential when market
conditions improve.

JAMIE PIKE
BOARD CHAIR

I am pleased to introduce my first Governance
Report as Chair for the financial year ended
31 December 2023. I would like to thank James
Peters for his dedication to XP and for the smooth
transition as I moved into the role of Board Chair
during the year. This report details how the Group
is managed and the governance, culture and
framework under which XP Power operates.

The Board continue to drive high standards of
governance across the Group. Our Governance
Report, along with the information in the
Strategic and Committee Reports, explain 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 2023,
except for the independence of the Chair for part
of the year, which we explain on page 109.

Market conditions and our
stakeholders
In response to a challenging second half of the
year, the Board and management made some
difficult decisions, starting with issuing a Trading
Update in October, which set the backdrop for
further actions to lower net debt in the business,
including renegotiating covenant terms relating
to our borrowing facilities, approving cost
reduction plans and enacting our authority to
issue shares on a non-pre-emptive basis.

This recent activity has required the Board
to carefully consider the impacts on each of
its stakeholder groups, with whom we had to
engage with speed and integrity. We appreciate
the open conversations that we were able to
have with our lenders, shareholders, customers,
suppliers and especially our people, following
the announcement of our Trading Update and
Funding Plan. Our people have shown great
commitment and resilience through supporting
the needs of the business and helping implement
some difficult decisions as part of our cost
reduction programme.

In early November, after considering the views
expressed by the Company’s major shareholders,
the Board made the decision to cancel the
second-quarter dividend, worth approximately
£3.75 million of cash spend. This was in addition
to the Board’s announcement that no further
dividends will be paid in respect of the 2023
financial year. The importance of dividends
to shareholders is recognised and the Group
will recommence paying dividends as soon
as appropriate.

We have proceeded with new product
development to position XP Power for the
future and to support our customers’ needs.

READ MORE ABOUT THE
BOARD OF DIRECTORS
ON PAGES 96–97

READ MORE ABOUT
ENGAGING WITH OUR
STAKEHOLDERS ON
PAGES 105–107

Sustainability and strategy
We have maintained our focus on sustainability
this year, seeing a significant reduction in
Scope 2 emissions, publishing our Net Zero
Transition Plan in August and obtaining
approval for our near and long-term targets
for Company-wide emissions reductions
with the SBTi, in support of our aim to be net
zero by 2040. Our Sustainability Council, led
by the CEO, has kept the Board updated on
activities throughout the year, as detailed in our
Sustainability Report on pages 26–29.

We have proceeded with new product
development to position XP Power for the future
and to support our customers’ needs, and put
in place the infrastructure for our long-term
growth by investing in the relocation of our
Californian sites. To assist with the stabilisation
of our funding position, our longer-term plans
were reviewed, with the decision made to pause
further construction at our new Malaysian site,
while acknowledging that it remains part of our
future production plans.

Notwithstanding short-term challenges, the
Board believes XP Power has a positive longer-
term outlook and, with the ongoing commitment
of our colleagues, we are working to ensure that
the Group is positioned to realise its potential
when market conditions improve.

JAMIE PIKE
CHAIR

4 March 2024

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 our core values, which shape
our culture, these 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.

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 2023.

After Oskar Zahn stepped down as CFO on
31 March 2023, the Board was pleased to
appoint Matt Webb who joined the Company
on 4 September 2023, and was appointed
to the Board on 5 October 2023. Matt is
an experienced CFO with a track record of
bringing strategic, operational and financial
improvements to global businesses. Full details of
the recruitment process and our commitment to
diversity, and succession and transition planning
is outlined in the Nomination Committee Report
on pages 110–115.

Board effectiveness
This year, the Board undertook an internal
evaluation of its own performance and
effectiveness, following an externally facilitated
review in 2022. An explanation of the process
and findings are outlined in the Nomination
Committee Report on pages 114–115. The
evaluation confirmed that we continue to
operate as an effective Board in accordance with
good corporate governance principles. My role as
Chair includes promoting a culture of openness
and ensuring constructive relations between
Board members, and I am pleased to see this
in action.

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OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORT

BOARD OF DIRECTORS

Board changes during 2023
• James Peters retired from the Board on 18 April 2023 and Jamie Pike was appointed Chair.
• Oskar Zahn stepped down as CFO on 31 March 2023.
• Matt Webb was appointed CFO on 4 September 2023 and became a Board member on 5 October 2023.

Jamie Pike
Chair

Gavin Griggs
Chief Executive Officer

Matt Webb
Chief Financial Officer

Andy Sng
Executive Vice President,
Asia

Polly Williams
Senior
Independent Director

Pauline Lafferty
Independent
Non-Executive Director

Sandra Breene
Independent
Non-Executive Director

Amina Hamidi
Independent
Non-Executive Director

Appointment date:

1 March 2022

31 October 2017 as CFO.

5 October 2023

24 April 2007

1 January 2016

3 December 2019

11 October 2022

Executive/Non-Executive:

Non-Executive

Appointed CEO from
1 January 2021

Executive/Non-Executive:

Executive

Non-Executive

Committee membership:

Executive/Non-Executive:

Committee membership:

Nomination (Chair),
Remuneration

Executive

None

Committee membership:

Skills and experience:

None

• 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 at Spirax-Sarco
Engineering plc.

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.

• Matt is a chartered

accountant and holds a
degree in Engineering
from Oxford University.

• He has a broad strategic
and operational skillset,
with over 25 years’
experience within
international businesses at
group and divisional level.

• Held strategic and

financial roles at BPB
plc, Saint-Gobain and
Ferguson plc, including
finance director for
Ferguson’s largest US
division. He served as
CFO at Luceco plc a FTSE
Main Market designer
and manufacturer of
LED lighting, EV charging
equipment and electrical
wiring devices, from
February 2018 until
April 2023.

External appointments:

None.

• Andy has over 22 years’
experience in the power
converter industry.

• He 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, Andy
held technical and
commercial roles
with Silicon Systems
(Singapore) and
Advanced Micro Devices
(Singapore).

External appointments:

None.

Committee membership:

Audit (Chair), Nomination,
Remuneration, Board
representative for ESG

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.

• She formerly acted
as non-executive
director for Jupiter
Fund Management plc
between 2015 to 2022.

External appointments:

Polly is currently a
non-executive director
at Royal Bank of Canada
Europe Ltd, senior
independent director and
audit committee chair at The
Rugby Football Union and
chair of the board for RBC
Brewin Dolphin Limited.

Remuneration (Chair), Audit,
Nomination, designated
NED for employee
engagement

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, she worked
in supply chain roles
for Digital Equipment
Corporation and
Motorola.

• Pauline previously

acted as chair of the
remuneration committee
at Scottish Event
Campus Limited.

External appointments:

Pauline is currently a
non-executive director and
remuneration committee
chair at Breedon Group plc.

Audit, Nomination

Remuneration, Nomination

Skills and experience:

• Sandra is currently

• Amina is currently

president of consumer
care at Croda.

• Prior to this, she spent

three years as president
of regional delivery and
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, and
spent five years living and
working in Asia, providing
her with valuable insight
into emerging markets
and cultural differences.

External appointments:

Sandra is currently a
trustee director at Edukos
Education Trust.

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
from INPL, France.

External appointments:

None.

Our approach to governance

BOARD LEADERSHIP AND
COMPANY PURPOSE
A Effective Board (pages 96–97)

B Purposes, values and culture (page 104)

DIVISION OF RESPONSIBILITIES
F Board roles (page 108)

Independence (page 109)

H External commitments and conflicts of interest

C Governance framework and Board resources

(pages 92 and 96–97)

(pages 99–101)

D Stakeholder engagement (pages 105–107)

E Workforce policies and practices (page 105)

I Key activities of the Board in 2023

(pages 102–103)

COMPOSITION, SUCCESSION
AND EVALUATION
J Appointments to the Board (page 113)

K Board skills, experience and knowledge

(pages 92 and 96–97)

L Annual Board evaluation (pages 114–115)

AUDIT, RISK AND INTERNAL
CONTROL
M Financial reporting (pages 118–120); External
Auditor and Internal Audit (pages 120–121)

N Review of the 2023 Annual Report

(pages 118–121)

O Internal financial controls (page 120)

REMUNERATION
P Linking remuneration with purpose and strategy

(pages 122–123)

Q Remuneration Policy (pages 137–144)

R Performance outcomes in 2023 and strategic

targets (pages 128–129)

Corporate Governance Statement 2023
The Board of Directors’ primary remit is to provide direction to
shape the Group’s strategy and ensure this is being effectively
executed 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 was incorporated and is domiciled in
Singapore; under the Singapore Companies Act 1967 (the
Act). We are not required to follow the Singapore Code of
Corporate Governance. The Company is listed on the London
Stock Exchange and reports against the application of the
principles of corporate governance contained in the UK
Corporate Governance Code 2018 (the Code).

We have clearly laid out how the principles of the Code have
been applied under the areas of:

1. Board leadership and Company purpose;

2. Division of responsibilities;

3. Composition, succession and evaluation;

4. Audit, risk and internal control; and

5. Remuneration.

JAMIE PIKE
CHAIR

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

4 March 2024

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 across the
business, so they can reinforce its importance and values.

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 stakeholders to ensure priorities and key issues
are addressed.

SEE PAGE 104 FOR HOW THE BOARD MONITORS CULTURE

SEE PAGES 105–107 FOR MORE ABOUT OUR STAKEHOLDER
ENGAGEMENT

Our Board in action
The Group’s response to the impact from the cyclical nature
of the semiconductor market, increased borrowing, continued
impact of critical component shortages and inflationary
pressures on our supply chain demonstrates flexibility and
resilience as important cultural characteristics at XP Power.

Board changes: our new Chair
and CFO
Jamie Pike became Chair at the AGM on 18 April 2023. Matt
Webb joined the Company on 4 September 2023 as our CFO
and became an Executive Director on 5 October 2023.

SEE PAGE 106 FOR MORE EXAMPLES OF OUR BOARD IN ACTION

SEE PAGES 113–114 FOR MORE ON THE RECRUITMENT AND
INDUCTION PROCESS

SEE PAGES 106–107 FOR HOW WE ADDRESS SIGNIFICANT RISK MATTERS

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CORPORATE GOVERNANCE REPORT CONTINUED

Board and Committee information flow

Stage 01

Stage 02

Stage 03

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.

Materials are circulated before meetings
Board papers are distributed via a secure portal, with clearly identified
actions requested for the agenda item, as necessary

Board and Committee meetings
Board and Committee meetings are arranged to occur at appropriate
times to support decisions that need to be made throughout the year.

Stage 04

Minutes of meetings
Minutes of each meeting are prepared and circulated to attendees.

Stage 05

Stage 06

Action lists
Action lists are monitored and updated to follow key actions to
timely completion.

Non-formal meetings
Where appropriate, informal discussions take place, with updates and
progress reports circulated between meetings.

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

Challenge and support
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
decision making

AUDIT COMMITTEE

CHAIR: POLLY WILLIAMS

REMUNERATION
COMMITTEE

NOMINATION COMMITTEE

CHAIR: JAMIE PIKE

Provides oversight of the
financial reporting, audit process,
Company’s system of internal
controls and compliance with
laws and regulations

CHAIR: PAULINE LAFFERTY

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

CHIEF EXECUTIVE OFFICER

EXECUTIVE DIRECTORS

Manages the overall operations and resources
of the Company in accordance with the
Board-approved strategy

Design, develop and implement strategic plans and
provides leadership to the organisation

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XP Power Annual Report & Accounts for the year ended 31 December 2023

101101

Board activities in 2023

Stakeholder
engagement

Key activities and
discussions

• Reviewed results of

employee and stakeholder
surveys, and shareholder
feedback

• Considered European
distribution options

• Communicated and

appropriately engaged
with stakeholders around
the Funding Plan

• Board visits to Singapore

and Vietnam sites

Outcomes

Future priorities

• Encouraged employee
engagement to be
developed with the
right supporting
resource available

• Review the results
of 2024 employee
engagement survey, any
resulting actions and
progress

• Launched a strategic

• Review the results of

distribution partnership
with Avnet Abacus
to improve value
and satisfaction for
customers

stakeholder surveys and
any resulting actions

• Continue to consult

with shareholders on
remuneration matters

• Gained support from
stakeholders on
executing activities
under the Funding Plan

Strategy and
operations

• Reviewed business

performance and strategic
priorities at each Board
meeting

• Monitored the

• Updated the market
on our Funding
Plan and internal
decisions to defer the
Malaysian build

development of
improvements to our
Group-wide health and
safety strategy

• Rolled out an improved
dashboard for health
and safety reporting and
activity understanding

• Continue to monitor the
progress against strategic
priorities at each Board
meeting

• Further strategy reviews
with senior managers
below Board level

Board and
Committee
matters

• Transitioned the position
of Chair of the Board

• Reviewed the composition
of Board Committees

• Recruited the new CFO

• Retendered for the
external audit

• Appointed Jamie Pike as

• Succession planning for

Chair in April 2023

the SID role

• Updated the

• Talent management

• Board development

membership of
Committees

• Appointed Matt
Webb as CFO in
September 2023

• Reappointed PwC as

Auditor

Financial
and risk
management

• Supported supply,
inventory and cost
management following
a change in trading
conditions and rise in
borrowing leverage

• Cancelled the dividend

• Managed cash and

liquidity during slower
market conditions

• Oversaw the approach to

cybersecurity

• Amended our Funding
Plan to include placing
of new ordinary shares,
raising gross proceeds
of £45.4 million, cost
reduction measures and
a pause to the payment
of dividends

• Continue with

management actions
under the Funding Plan
to reduce borrowing to
target levels

• Resume dividend

payments as soon as
appropriate

• Delivered training

sessions across the
Group to improve
security awareness

Stakeholders
considered

Key activities and
discussions

Outcomes

Future priorities

Stakeholders
considered

• Plan to maintain flexibility
to effectively support
demand from an upturn in
the semiconductor market

• Seek growth and

product development
opportunities

• Maintain the safety and
wellbeing of our people

• Develop our sustainability

strategy across our
supply chain

Improved
communication with
customers and a
reduction in lead time
for our products

• Moved two key US

facilities, located close
to our customers, to
support future growth

• Continued to transfer

production from North
America to Asia to
support future growth

• Obtained approval for
our emission reduction
targets from the
SBTi to support our
sustainability strategy

• Delivered a significant
reduction in Scope
2 Greenhouse Gas
emissions

• Offered employees the
opportunity to attend
wellbeing and resilience
workshops

• Launched a new

supplier survey, which
covers a range of ESG
topics, to develop a
baseline understanding
of suppliers’
sustainability maturity

Customers

• Monitored actions taken
to support the delivery of
supply chain strategy

•

• Diversified the

geographical supply chain
to strengthen resilience

Sustainability

• Monitored sustainability

strategy, including
finalising SBTi-based
targets

• Ensured the health,

safety and wellbeing of
our people

• Engaged with

stakeholders to
understand their
sustainability issues to
enhance our strategy

Key:

People

Customers

Investors

Suppliers

Communities

The environment

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CORPORATE GOVERNANCE REPORT CONTINUED

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, education and training activities and an update on the global agenda for health and safety matters.
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 – who 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, health and
safety audit findings and the alignment of health and safety standards across the Group.

Developing a first-class culture
The Board is responsible for setting the tone 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 the culture to ensure we are emulating desired beliefs
and behaviours inside and outside of the boardroom. The Board continues to help influence the right culture throughout the
Company, as set out below.

Action

Description

Review results and
updates from employee
engagement surveys

The Board has continued to review the results of cultural and engagement surveys. Trends
in employee satisfaction were monitored throughout the business to understand how the
Company’s core values have been embraced.

Engagement survey

Gallup engagement surveys have continued to inform the Board on employee engagement.
Engagement surveys will continue to be used to assess our employees’ views.

Code of Conduct training

Our Code of Conduct has had its annual review. Code of Conduct training is required by all
employees to ensure governance is understood as well as our core values reinforced.

Senior leadership
communication

The Executive Leadership team held regular global updates, which covered strategy and
upcoming priorities. Attendees then cascaded the key themes from these sessions to their
teams.

Sustainability impact
assessment

The Sustainability Working Group includes representatives from all regions and key business
functions. As a forum, its role is to identify and monitor areas for focus across our sustainability
agenda as we drive towards our goal of net zero carbon by 2040.

Cultural alignment
To ensure our 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.
The Company operates a whistleblowing hotline enabling employees to raise any concerns. Any potential misalignments to our
desired culture are explored to understand how to address these.

During the year, the Board visited factory and office locations in Vietnam and Singapore. The visits allowed the Board to have
more informal discussions with key employees, receive updates from management teams and see the business in operation.

During the Board’s visit to Vietnam and
Singapore in 2023, I had the opportunity
to have face-to-face interactions with a
diverse cross-section of our workforce
from different roles.

PAULINE LAFFERTY
DESIGNATED NON-EXECUTIVE DIRECTOR
FOR WORKFORCE ENGAGEMENT

3.99/5

Employee engagement
score last year*

(2022: 3.83)

* result does not include
employees located in
Vietnam and China.

How we ensured employees’
voices were heard by the
Board in 2023
During the Board’s visit to Vietnam and
Singapore in 2023, I had the opportunity to
have face-to-face interactions with a diverse
cross-section of our workforce from different
roles. The relaxed environment, which was
created by a buffet-style dinner with the
Singapore office team, encouraged an open
exchange and provided them the opportunity
to share their views and ask any questions they
have, including on topics such as executive
remuneration and the wider pay policy.
I am grateful for our employees’ continued
open engagement.

The output and observations from these visits,
along with submissions from the anonymous
employee surveys, internal communications and
building the foundations of performance culture
were discussed at subsequent Board meetings.

How we uphold culture across
our workforce and encourage
engagement
We have several processes to ensure the views
of employees are solicited and monitored.
Employees complete the Gallup Q12 survey
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. For areas
of the organisation where variable employee
engagement has been identified, part of our
strategy is to facilitate learning from our
most engaged teams and their line managers,
alongside coaching those at the mid–lower end,
through storytelling and case studies. We will
also specifically introduce one personal objective
on people management in 2024 for employees in
senior leadership roles.

To facilitate engagement, a quarterly newsletter
was launched in January 2023 with the aim to
spread internal news across the Group. The
newsletter is available in English, German,
Chinese and Vietnamese, and readership has
steadily increased throughout the year. Calls
with our Senior Leadership team help build
direct communication, especially following our
Funding Plan announcement in November,
which required the support of our teams to assist
with identifying focus areas to support the cost
reduction programme.

104

105

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

Our Board in action:
Leveraging strategic partnerships
As part of our supply chain strategy, we entered into a
strategic distribution partnership agreement with Avnet
Abacus, a leading European interconnect, passive, electro-
mechanical and power distributor. Under the agreement,
Avnet Abacus will distribute XP Power’s products in EMEA
markets and offer in-depth technical, supply chain and
logistical support to customers. The aim of joining forces is
to streamline and enhance the availability of our products
to a wider audience of design engineers and manufacturers.
Avnet Abacus’s extensive distribution network and deep
understanding of EMEA markets, coupled with its technical
proficiency and exceptional customer support, will drive
increased value and satisfaction for our customers.

Positioning our US business for the future
Our US business, serving the North American market, is the
largest and most profitable part of the XP Group. It drives
continued business development with design centres and an
engineering solutions group. In planning for the lease expiry of
two key facilities, and to support future strategic growth, we
secured and made significant investment in two new facilities.
These will support the business with the infrastructure to
deliver against future opportunities.

Risk management and
internal control
The Board is responsible 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 52–59. 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.
The need to take action in the second half of the year to
improve the Group’s funding position was a reminder to have
appropriate focus on downside scenario modelling during
uncertain market conditions.

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 for ongoing processes
include:

• using authority matrices 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 key facilities, which are documented and
communicated to key personnel to deal with unexpected
events; and

• 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 120. During the year, no
significant internal control issues were identified.

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. The Group uses its website
(corporate.xppower.com) to give private investors access
to the same information that institutional investors receive,
including investor presentations and video interviews with
the CEO and CFO on the morning of the publishing of the
interim and annual results. The Company has information on
its website, which covers products, markets, strategy, business
model, growth drivers and its investment proposition.

Interested parties can register for the Group’s email alert
service on this website to receive timely announcements and
other published information from time to time.

The Chair and Senior Independent Director make themselves
available to meet shareholders as required, to understand
their views on governance and business performance. Board
members receive feedback from our brokers and financial
PR company following meetings with shareholders, to stay
connected with their opinions.

The Remuneration Committee Chair consults with major
shareholders regarding significant decisions on Executive
remuneration, including any proposals to update the Directors'
Remuneration Policy, which was last approved by shareholders
at the April 2023 AGM.

Constructive use of the AGM
Certain Directors are available at the Annual General Meeting
(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.

Our CEO and CFO are 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.

As at 31 December 2023, 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:

Number
of voting
rights

% of
voting
rights

1,207,299

6.12

Montanaro Investment
Managers

Kempen Capital Management

1,190,000

Odyssean Investment Trust
PLC

1,050,000

Amerprise Financial

1,038,846

Janus Henderson Group plc

989,741

6.03

5.32

5.26

5.02

The following changes in the interests disclosed to the
Company have been notified between 31 December 2023
and 1 March 2024:

• On 1 February 2024, BlackRock, Inc. disclosed that

their percentage interest in the ordinary share capital
of the Company had increased to 5.11% (1,214,851
voting rights).

Division of responsibilities
The Chair leads the Board and should demonstrate objective
judgement throughout their tenure, promoting a culture
of openness and debate to ensure all views are heard and
considered. In addition, the Chair facilitates constructive Board
relations including an appropriate level of challenge and the
effective contribution of all Non-Executive Directors. The CEO
and CFO ensure that Directors receive accurate, timely and
clear information to discharge their duties.

The roles of Chair, Senior Independent Director and CEO are
formalised, with a clear division of responsibility between their
roles. The Chair is responsible for the management of the
Board and its overall effectiveness in directing the Company.
The Senior Independent Director is responsible for providing
support for the role of Chair and leading the succession
process for the Chair’s appointment. The CEO is responsible
for the day-to-day running of the Company and execution of
our strategy.

106

107

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.

RESPONSIBILITIES OF THE BOARD

Chair

The Chair sets the calendar and agenda of the Board and facilitates these discussions. The Chair
also initiates and co-ordinates the processes defined below, which evaluate the effectiveness of the
Board and of 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. The 2023 review was supported by a third party using anonymous online questionnaires,
following the full independent evaluation that was conducted 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 (SID)

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

Designated
Non-Executive
Director

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.

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 Board representative for ESG matters.

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 interim and 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.

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 2023.

No Directors had any significant changes to their outside
commitments during 2023, 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 became Chair at the
AGM on 18 April 2023 as part of the planned succession
following the retirement of James Peters.

Matt Webb was appointed CFO on 4 September 2023
and became an Executive Director on 5 October 2023.
Oskar Zahn, the previous CFO, stepped down from the Board
on 31 March 2023.

Further to these changes, Amina Hamidi was appointed to the
Remuneration and Nomination Committees in May 2023, and
Sandra Breene was appointed to the Nomination Committee
at the same time.

Board independence
The Board consists of five Non-Executive Directors, including
the Chair, and three Executive Directors. All Non-Executive
Directors are considered to be 100% independent. There is
a clear division of responsibilities between the Executive and
Non-Executive Directors.

The previous Chair, James Peters, was not considered
independent, based on provision 10 of the Code. However,
the Board’s view was that his material shareholding in the
Company, while he was Chair, aligned his interests closely with
shareholders as a whole. This, combined with his knowledge
of the business and industry, and the governance of clear
divisions of responsibilities between the Chair and CEO, led
the Board to be comfortable with the position. James retired
from the Board at the conclusion of the 2023 AGM in April
and was succeeded by Jamie Pike, who is considered to be
independent based on provision 10 of the Code.

Details of the beneficially owned ordinary shares in the
Company held by the Non-Executive Directors are detailed in
the Remuneration Committee Report on page 131.

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
ordinary share.

108

109

We continue to review the Board and
senior management’s strength and depth
of talent.

JAMIE PIKE
NOMINATION COMMITTEE CHAIR

Board succession discussions are ongoing
to ensure proactive management going
forward. The Committee reviewed senior
management succession plans throughout 2023,
including immediate and emergency cover for
business-critical roles. Our 2024 focus will be
planning a smooth succession for the Audit Chair
and Senior Independent Director roles, currently
fulfilled by Polly Williams, ensuring we consider
independence among our Non-Executive
Directors, given she has achieved eight years as
an XP Power Non-Executive Director.

We continue to review the Board and senior
management’s strength and depth of talent,
ensuring we recruit, retain, and develop relevant
business strategy support capabilities.

JAMIE PIKE
NOMINATION COMMITTEE CHAIR

4 March 2024

COMMITTEE
MEMBERSHIP

Jamie
Pike
Chair

Polly
Williams

Pauline
Lafferty

Sandra
Breene1

Amina
Hamidi1

1 From 18 May 2023.

Dear shareholder,
I am pleased to present my first Nomination
Committee Report as Chair for 2023, which I
commenced at the conclusion of the April AGM,
as part of the planned succession following
James Peters’ retirement. The first notable,
Committee-led activity this year was a CFO
search, as Oskar Zahn stepped down from the
role in March. Matt Webb joined the Company as
CFO on 4 September 2023, following a rigorous
executive search process, being appointed to the
Board on 5 October 2023.

In May, in line with the Code, the Committee led
a full review of the composition of the Board’s
Committees considering Board members’
skills and expertise. This review resulted in
Amina Hamidi’s appointment to the Nomination
and Remuneration Committees, and Sandra
Breene, already an Audit Committee member,
being appointed to the Nomination Committee.

Board Diversity and Inclusion Policy targets
were also considered during the year, ensuring
we maintain the new Listing Rules requirements
pertaining to diversity. We are pleased to
have 50% female Board representation. The
Committee received a Group diversity and
inclusion activity update and are delighted that
a Women in Engineering employee resource
group has been created. The group aims, through
mentorship, to embrace workforce diversity and
inclusivity and help women at XP Power realise
their full potential as career engineers.

Governance
The Nomination Committee consists of Jamie Pike (Chair),
Pauline Lafferty, Polly Williams, Sandra Breene and
Amina Hamidi, 100% of the Committee are independent
Non-Executive Directors. James Peters retired as Committee
Chair at the conclusion of the last AGM.

Committee evaluation
As with other Board Committees, we performed a third-party
anonymous online evaluation survey to gain feedback on
the Committee’s effectiveness. The results were positive,
indicating effective Committee operation, with no significant
issues identified.

Board diversity
The Committee considers Board and Company diversity and
inclusion to not only be the right thing to do; but is crucial
to growing our business, innovating, attracting, and retaining
talent, and engaging customers. We operate globally and
recognise cultural differences may exist in countries we
operate in. We acknowledge that a diverse workforce reflects
our markets, helping us to succeed in them. We will not
tolerate any form of discrimination at XP Power.

We are committed to equal opportunities in all employment
practices, procedures, and policies. When hiring and
promoting, we choose the best candidate irrespective of age,
disability, gender reassignment, marriage and civil partnership,
maternity, pregnancy, race, country of origin, nationality,
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 and its Committees.

Our Board Diversity and Inclusion Policy was reviewed during
the year and measurable objectives, which maintain the Listing
Rules diversity guidance, were monitored. 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 balanced shortlists are reached.

Where appropriate, the CEO will attend meetings (on request)
to present to, or consult for, the Committee.

The Committee assesses new Director appointments, and all
Non-Executive Directors are involved in the appointment of
proposed candidates. New Director appointments are voted
on by the whole Board.

The Committee met formally three times during the year:

Members

Jamie Pike (Chair)
Pauline Lafferty
Polly Williams
James Peters*
Amina Hamidi**
Sandra Breene**

Attendance

3/3
3/3
3/3
1/1
1/1
1/1

* James Peters retired as Committee Chair on 18 April 2023, and was replaced

by Jamie Pike, who was already a Committee member.

** Amina Hamidi and Sandra Breene were appointed to the Committee on 18

May 2023.

Responsibilities
The Committee’s main responsibilities are to:

•

review the Board’s structure, size and composition
including skills, knowledge, capabilities, experience, and
diversity;

review Director, and other senior executives, succession
planning considering future skills and expertise needed on
the Board;

• be responsible for identifying and nominating candidates

to fill Board vacancies;

•

review the organisation’s leadership needs, both Executive
and Non-Executive, to ensure the organisation’s ability to
effectively compete in the marketplace; and

review the Board performance evaluation process results
that relate to Board composition and succession planning.

The Nomination Committee’s Terms of Reference are available
on the Company’s website at corporate.xppower.com.

110

111

The Committee is pleased to report that the Board currently
comprises eight members: four are women (50%) and two are
ethnically diverse. The spread of nationalities is six British, one
Singaporean and one French and Algerian.

Our Senior Independent Director is also female. At the end of
the year, the Board was fully compliant with the Listing Rules
diversity guidance.

On the Board Committees, female representation is:

Remuneration Committee

Audit Committee

Nomination Committee

25%

20%

Male

Female

75%

100%

80%

XP Power, as an international business, understands and meets the aspiration for a diverse leadership group. Full details of
gender and ethnic representation as prescribed by Listing Rule 9.8.6 are set out in the following tables. The Board and the
Executive Leadership team members completed a diversity disclosure to confirm which of the categories in the following
table they identify with.

Gender representation as at 31 December 2023

Men
Women
Not specified/prefer not to say

Number
of Board
members

4
4
–

% of the
Board

50%
50%
–

Number of senior
Board positions
(CEO, CFO, SID,
Chair)

Number in
Executive
management*

% of Executive
management

3
1
–

8
3
–

73%
27%
–

Ethnic representation as at 31 December 2023

White British or other White (including
minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say

Number
of Board
members

% of the
Board

Number of senior
Board positions
(CEO, CFO, SID,
Chair)

Number in
Executive
management*

% of Executive
management

6
–
1
–
1
–

75%
–
13%
–
13%
–

4
–
–
–
–
–

9
–
2
–
–
–

82%
–
18%
–
–
–

* The Executive Members of the Board are included in both the Board and Executive management figures.

Our Board and Company Diversity and Inclusion policies are available on our website at corporate.xppower.com.

Board skills, experience, and composition
We are committed to having the right blend of skills,
expertise, commitment, and experience when selecting
suitable candidates.

The Board’s size, structure, and composition is regularly
reviewed to ensure its effectiveness at executing our strategy.
Updating Board composition, with the new CFO appointment,
provided the opportunity to target, and benefit from,
additional skills, expertise, and experience.

The Committee assess the Board’s collective skillset using a
matrix, which includes relevant skills held by our Directors.
Regular reviews of this matrix help to identify gaps, which
can be addressed through future appointments or additional
Board education and updates. Skills include industry-specific,
as well as non-specific industry skills, such as strategic human
resource management, business development, and ESG and
climate experience.

We consider the Board’s structure and balance of skills and
diversity to be appropriate, demonstrated in the charts and
matrix on page 92. Individual Director skills and experience are
set out in their biography on pages 96–97.

Appointments to the Board and
Director re-election
Each relevant Director offers themselves for re-election each
year. A simple AGM majority vote is required for Director
re-election. Matt Webb (CFO, appointed 5 October 2023) will
offer himself for re-election at the forthcoming AGM.

Board development in 2023
During 2023, the Board visited its Vietnamese manufacturing
and distribution site, receiving a site tour and presentations
from the management teams. The Board then went on to visit
the office and warehouse in Singapore, where they met with,
and received updates from, the management team.

Members from the Executive Leadership team presented to
the Board around new product development and strategy.

Development talks by outside parties formed part of the
Board’s continuing development, on the regional economic
outlook of China, ASEAN-6, and India against the current
global backdrop and on sustainability, including macro
trends, stakeholder responses, ESG reporting updates and
implications.

Appointing our new Chief Financial Officer
Overview of candidate specification and search criteria

The Committee engaged executive search firm
Odgers Berndtson, to lead the new Chief Financial Officer
search following Oskar Zahn’s resignation in March 2023.
Odgers Berndtson are independent of, and have no other
connection with, the Company and its Directors. A candidate
specification was developed encompassing the desired
experience and expertise, leadership capabilities and cultural
fit. The initial long list was selected from a diverse range
of potential candidates, which ensured our diversity policy
was considered from the outset. The shortlisted candidates
were interviewed by the CEO and the Board, and the Non-
Executive Directors were kept well informed and consulted
with throughout the process.

2023

March/April

May/June

Developing a
candidate profile

Candidate profile
developed in collaboration
with executive search
firm, Odgers Berndtson.
Search strategy agreed
and candidate long
list compiled.

Interviews
and assessments

Shortlist of four
candidates compiled
and interviewed by the
CEO. Shortlist reduced
to two candidates, both
met with the Chair and
Non-Executive Directors.

July

Final
decision

After interviews of final candidates, the Nomination
Committee was unanimous in its final selection and
recommendation to the Board that Matt Webb be
appointed as Chief Financial Officer. The Remuneration
Committee considered and approved the terms and
conditions relating to remuneration arrangements for
the role. Matt Webb’s appointment as Chief Financial
Officer was approved by the Board and took effect on
4 September 2023 ahead of him joining the Board on
5 October 2023.

112

113

From the 2022 Board evaluation, the Board addressed
the need to assess leadership capabilities among senior
management. The Committee reviewed succession among the
Executive Leadership and for critical roles, both for emergency
cover and in terms of identifying high potential individuals
that, with the right development plan, could act as a successor
to the current post holder. Steps were also undertaken to
optimise the structure and content of Board papers during
the year, this included feedback from the Board to identify
the areas in need of focus. It is recognised that this will be
developed further with input from the new CFO.

Overall, the Company achieved an average favourable
score of 90% across all areas (based on Directors’ individual
perceptions of Board effectiveness), acknowledging that the
Board is operating effectively and in accordance with good
corporate governance principles. There is a high degree
of open and transparent information sharing and great
relationships between Board members. The review highlighted
the importance of allocating time to strategic and mid to
long-term planning as well as increasing external input on
hot topics, with linked updates from internal teams as to how
these subjects are being integrated into planning.

The Board’s committee evaluation formed part of the Board
evaluation process, using online questionnaires to assess the
Audit, Remuneration and Nomination Committees. The results
were fed back to the respective Committee Chair and were in
turn reviewed and discussed by each Committee.

The Chair and Non-Executive Directors regularly meet
without the Executive Directors present, to ensure that
potentially sensitive matters can be discussed. At least
annually, the Senior Independent Director meets with the
Non-Executive Directors, excluding the Chair, to evaluate the
Chair’s performance.

NOMINATION COMMITTEE REPORT CONTINUED

Board induction and training
Directors receive an induction programme tailored to their
individual needs, which typically begins with meeting the
Executive Leadership team, and product and market training.
Matt Webb (CFO) has over 25 years’ experience of working
within international listed businesses at Group and Divisional
level across distribution and manufacturing, the tailored part
of his induction has been focused on getting to know his
team and the business, which to date, has also included a
site visit to FuG in Germany, allowing time to interact with
management team members face to face. Matt has also had a
good level of interaction with our broker, corporate lawyers,
internal Auditor, and PwC as our external Auditor to build
these working relationships.

An example of a Board induction process is outlined in the
infographic below.

Board effectiveness
The Corporate Governance Code discusses the need for Board
evaluation, covering Board composition and diversity, and how
effectively members collaborate to achieve objectives.

Each year, the Board conducts an evaluation of its own
performance and effectiveness, and that of its Committees,
completing an externally facilitated evaluation every third year,
as it did in 2022. For 2023, the review was conducted using
an anonymous third-party online questionnaire, which covers
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, start and continue doing. A “Board
Dynamics” component based on personality preferences was
also updated to include all current Directors to give visibility
over the Board’s characteristics.

Board induction process

Board evaluation process

Stage 01

Includes an overview of the structure,
history, strategy, Board procedures,
listing requirements and governance.

Stage 01

Questions were reviewed and agreed
by the Chair, Company Secretary and
Committee Chairs.

Stage 02

Meeting members of the Executive
Leadership team, and external brokers
and advisers as required.

Stage 02

Directors complete an anonymous
online questionnaire. This includes
questions such as whether the
Directors operate with independent
judgement.

Stage 03

The results of the questionnaire are
collated by an external consultant, who
reviews the results and produces a
summary report for the Board.

Stage 04

The results of the evaluation report
are discussed by the Board and
improvement actions are determined.

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.

114

115

During the year, the Audit Committee
oversaw the Audit retender process
and assisted the Board in fulfilling its
oversight responsibilities.

POLLY WILLIAMS
AUDIT COMMITTEE CHAIR

COMMITTEE
MEMBERSHIP

Polly
Williams
Chair

Pauline
Lafferty

Sandra
Breene

Dear shareholder,
I am pleased to present the 2023 Audit
Committee Report, providing you with an insight
into our work, the matters handled and the focus
of our deliberations during 2023.

During the year, the Committee oversaw the
Audit retender process and assisted the Board
in fulfilling its oversight responsibilities, in areas
such as the integrity of financial reporting, risk
management framework effectiveness, and our
system of internal controls, while considering
ethics and compliance matters.

As detailed throughout the Annual Report, 2023
has seen another year of robust revenue growth,
as well as some Company-specific challenges
relating to the Group’s funding position, which
resulted in the difficult decision to pause
dividend payments and defer construction of
the Malaysia factory. Following implementation
of these actions, the Committee and Board
reflected on the events that led to these
decisions and the process changes required to
avoid such circumstances recurring.

The Committee, with support from our people
travelling to overseas sites, maintained good
oversight of the Group’s internal controls, risk
management framework and financial reporting.
The Committee continues to scrutinise the
Group’s internal control framework, maintaining a
focus on optimising the internal audit agenda.

This report will 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 current areas of focus;

• discussions and actions with the external
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.

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 sufficiently
planned and resourced to confirm this.

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 monitoring, and contributing to,
ongoing initiatives.

The 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 us in this resolution.

POLLY WILLIAMS
AUDIT COMMITTEE CHAIR

4 March 2024

Governance
The current Audit Committee members are all independent
Non-Executive Directors with 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 2023:

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

Members

Polly Williams (Committee Chair)
Pauline Lafferty
Sandra Breene

Attendance

standards;

4/4
4/4
4/4

• 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 reviewed
annually and are available in the Corporate Governance
section of the Company’s investor relations website
corporate.xppower.com.

Regular attendees at Committee meetings included: the CEO,
CFO, Group Financial Controller, Group Supply Chain and
Asia Finance Director, Company Secretary, and external and
internal Auditor representatives. The Committee also regularly
met with management and with the external and internal
Auditors without management present.

Committee evaluation
During the year, as part of the Board’s evaluation process,
the Committee reviewed its performance. This was facilitated
by an anonymous, third-party managed, online survey and
resulting actions included a greater focus on evaluating
emerging issues, and providing ongoing development
opportunities around technical aspects of accounting rules
and practices.

The Committee believes it has adequate qualifications and
skills to perform its responsibilities, particularly through
Polly Williams’ financial and audit experience.

Overall, the Committee concluded that its performance was
effective in 2023, fulfilling its role in accordance with its
Terms of Reference.

116

117

Activities
The Audit Committee carried out its functions in accordance
with Section 201B(5) of the Singapore Companies Act
1967 and consideration was given to the FRC’s new
Minimum Standard for Audit Committees. In 2023, the Audit
Committee’s activities included:

• Examining the Annual Report, 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 for
Board approval.

• Reviewing the balance sheet of the Company, consolidated
financial statements of the Group and the independent
Auditor’s Report before their submission to the Board.

• Receiving reports from management and the external

Auditor on key accounting issues and areas of significant
judgement, reviewing and challenging these areas and the
disclosure level. See “Consideration of significant financial
reporting matters” for the principal matters discussed.

• Reviewing how the Company’s management assisted the

external Auditor.

• Challenging management’s assumptions and analysis
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, assumptions and adjustments
made, including those related to goodwill and capitalised
product development. In light of the actions taken in
late 2023 to improve the Group’s funding position, the
Committee will place appropriate additional emphasis
on its review of management’s severe but plausible
downside modelling going forward, to ensure the Group’s
capital structure can withstand unforeseen changes in
circumstances, while borrowing levels remain relatively
elevated. The Committee will also ensure the details of
such modelling are appropriately disclosed.

• Reviewing and recommending the viability statement and

going concern statement to the Board.

• Reviewing any dividend flows across Group entities.

• Reviewing and approving the use of alternative

performance measures (APMs) in the Annual Report.

• 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.

• Overseeing the external Auditor retender process.

• Managing and reviewing the external audit plan, including

receiving plan delivery updates.

• Reviewing reports from the external Auditor on the

Group’s financial reporting and their observations on the
internal financial control environment.

• Reviewing the effectiveness of the Group’s internal

controls and disclosures made in the Annual Report and
Financial Statements.

• Reviewing the 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.

Fair, balanced and understandable
At its February 2024 meeting, the Committee reviewed, at
the Board’s request, the 2023 Annual Report and Accounts
content. Following review and incorporation of its comments,
the Committee confirmed that the document was true and
fair, that the external Auditor’s work was effective, and
that the process supporting the viability statement was
robust. The Committee considered that the 2023 Annual
Report and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s position, performance,
business model and strategy.

To assist in the assessment process, the Committee
considered:

• external Auditor comments as part of their review of

narrative reporting;

•

reviews of the monthly management accounts, enabling
trends to be monitored through the year;

the Group’s use of APMs, including the appropriateness of
their current use and disclosure in the Financial Statements
and Strategic Report;

• evidence around the content and process for preparing
the 2023 Annual Report and Accounts provided by
management;

•

reviews of the Annual Report undertaken at different levels
of the Group, with an opinion that the reporting meets the
required standards confirmed to the Committee; and

reviews of the narrative reporting by all Directors prior
to formal consideration of the draft Annual Report by
the Board.

Application of accounting policies
The Group’s accounting policies are set out in Note 2 to the
Financial Statements on pages 161–172. The Committee have
reviewed these policies to ensure that they are appropriate
and have been properly disclosed and applied.

Consideration of significant financial reporting matters
In relation to the 31 December 2023 Financial Statements (pages 157–209), 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 Committee questioned the judgements and estimates made on each significant matter, resolving that they were
appropriate and acceptable.

Conclusion

Impairment
calculations indicated
that there remains
adequate 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
the carrying value of
capitalised product
development at
year-end.

Significant matters for the year ended
31 December 2023

How the Audit Committee addressed
these matters

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.

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.

Capitalised
product
development

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 the
capitalisation, amortisation
and recoverability of these
products.

The Committee reviewed three key aspects of this accounting:
appropriateness of capitalisation, timing and quantum of
amortisation, and recoverability of the capitalised amount.

Capitalisation
The Committee reviewed rates of capitalisation relative to gross
spend and assessed whether the approach was consistent with
relevant accounting standards and with prior years.

Amortisation
The Committee reviewed rates of amortisation relative to
prior years and assessed whether the useful lives applied were
consistent with the Group’s published policies.

Recoverability
The Committee reviewed revenue streams for capitalised
products that have been released for sale, as 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.

Conclusion
At its February 2024 meeting, the Committee considered a
paper from management, which recommended the impairment
of certain Engineering Services costs, as well as a revised
approach to judging when the amortisation of capitalised
costs should commence. Further details are provided in the
Chief Financial Officer’s Review. The recommendations were
supported by the Committee and are reflected in these financial
statements.

118

119

Significant matters for the year ended
31 December 2023

How the Audit Committee addressed
these matters

Conclusion

Inventory

Even though inventory levels
decreased during the year
as supply chain disruption
eased, the balance remains
significant.

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.

The Committee
was satisfied
that the counts
were conducted
appropriately.

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.

Viability
statement
and going
concern

Adjusting
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 items deemed to
be unusual by virtue of their
size or incidence.

Inventory counts and valuations were reviewed by management
and the external Auditor, and the results reported to the
Committee.

The Committee reviewed management’s inventory obsolescence
provision, reviewing it for consistency with the Group’s
accounting policy.

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.

The Committee reflected on the events that led to the Group
implementing its Funding Plan in late 2023, as well as the impact
of the Funding Plan itself, to ensure scenario modelling took
account of these factors.

The Committee will place additional emphasis on its review of
management’s severe but plausible downside scenario whilst
funding levels remain relatively elevated.

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 60.

The classification of adjusting 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
adjusting items was
appropriate.

The Committee reviewed items to be included throughout the
year to confirm appropriateness.

Internal control
The Board is ultimately responsible for the Group’s system of
internal controls and their ongoing assessment. See our Risk
Management Framework on page 52 for further detail.

In 2023, the Committee, on behalf of the Board and with
assistance of the internal audit function, monitored, reviewed
and assessed the Group’s internal control systems and
principal financial risks effectiveness. The Committee regularly
reviewed the outcome of the key financial controls audits
included in the internal audit programme. Management also
regularly provided the Committee with key accounting issues
and financial controls updates.

The Committee considered its approach to controls, risk and
assurance in light of the updated requirements on the areas
of internal control and Company reporting timelines, and will

continue to oversee management’s response plans to the
revised UK Corporate Governance Code in 2024.

The Audit Committee is satisfied that the Company has
maintained adequate risk management and internal controls
throughout the year.

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 in areas prescribed by an audit plan
agreed with the Committee. The effectiveness of their service
is assessed annually through an online survey, the results
address the quality, experience and expertise of the internal
audit service, with which the Committee is satisfied.

During 2023, the Committee reviewed internal audit plan
updates, ensuring that the internal audit framework remains
appropriate in combination with the Board’s risk monitoring
process, used to identify areas for risk assurance work and
internal audits to be performed.

This included an evaluation of XP’s processes and systems
for ensuring critical IT systems and data availability in the
event of a disaster, an assessment of Board-level governance
arrangements, a review of the use of SAP S/4 HANA in
managing production across multiple XP Power locations, and a
review of the design and operating effectiveness of key financial
controls across two US sites. The Group has continued with the
controls self-assessments programme covering all sites.

The recommendations and control observations from the reviews
are rated and presented to the Committee for comment or
further action and are assessed by management and addressed
within an agreed timeline. The internal Auditor regularly follows
up these actions, sharing progress with the Committee.

In early 2024, the Committee reviewed the scope and planned
activity of internal audit work to be performed by Deloitte LLP,
as part of finalising the Internal Audit Plan for the year ahead.

External audit effectiveness
and independence
The Committee assesses audit effectiveness throughout the
financial year using questionnaire responses to form the basis
of discussion. This includes reviewing the detailed audit plan
and key audit risks included in it, the amount and composition
of resources on the audit, and where appropriate, the use of
specialists. The Committee reviewed and agreed issues that
arose during the audit, and resolutions with the external Auditor.

The Committee also received management feedback
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, and the Committee, concluded that
the external Auditor relationship and audit process continued
to be effective, with audit teams providing challenge.

During 2023, the Committee oversaw the retender process for
the external Auditor. The tender process sought to identify an
audit firm that would provide a high-quality audit. The Big 4
audit firms were all invited to tender. A decision was taken to
not include firms below this level based on an initial screening
against objective assessment criteria agreed by the Committee
that confirmed they did not meet the Group’s requirements
for relevant audit experience in specific locations to ensure a
seamless global service. As part of the request for proposal,
success factors included: geographical coverage, sector and
industry experience, integrity, objectivity and independence, as
well as an understanding of XP’s business. Following reviews
and meetings between audit partners from each of the Big
4, the Audit Committee Chair and senior management, the

Committee considered feedback and written proposals received
and made a recommendation to the Board. The Board approved
the reappointment of PwC as the external Auditor.

In line with the UK Corporate Governance Code requirements
to rotate the statutory auditor after 20 years, XP recognises that
it will need a new auditor for the accounts in 2027 as PwC were
appointed in 2007. Therefore, a tender process will be conducted
in 2026, ahead of which the business will seek to manage
relationships with its advisers to ensure the independence of
audit firms that may be considered. In accordance with best
practice, the audit partner will rotate after five years, meaning
Lee Chian Yorn will replace Greg Unsworth (audit partner since
2019), from the commencement of the 2024 audit. To build
business knowledge and gain understanding, Lee Chian Yorn
has shadowed Greg Unsworth throughout the 2023 audit
process. The Committee has reported to the Board that PwC’s
reappointment should be proposed at the forthcoming AGM.

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 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.

Under its formal policy, the Committee continues to operate
an approved set of procedures regarding the external Auditors
appointment to conduct audit and non-audit work. Areas
covered by the policy include:

•

the award of audit-related services to the Auditor over
£50,000 must be approved by the Audit Committee
Chair, who, in their approval, 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 accounting policies advice;
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 Audit
Committee Chair; and
the award of other non-audit-related services to the
Auditor over £20,000 must first be approved by the Audit
Committee Chair.

During the year, non-audit fees of £0.02 million, representing
3.0% of total audit fees (2022: £0.02 million, representing
2.7% of total audit fees) were paid to the Auditor for review of
the 30 June 2023 interim financial statements.

120

121

It has been a challenging year for the
Company, which we have taken into
account in decision-making while
recognising the significant contribution
made by our people in 2023.

PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR

COMMITTEE
MEMBERSHIP

Pauline
Lafferty
Chair

Polly
Williams

Jamie
Pike

Amina
Hamidi1

1 From 18 May 2023.

Dear shareholder,
This report sets out details of the Directors’
remuneration in 2023 and how the
Remuneration Committee anticipates operating
the Directors’ Remuneration Policy in 2024.

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
Amina Hamidi*
* Amina Hamidi was appointed to the Committee on

4/4
4/4
4/4
2/2

18 May 2023.

Performance context
2023 was a year of contrasting fortunes for
the Group.

The Group grew its revenue by 9.3% in the
year, due largely to an improved supply chain
performance, which allowed backorders to be
delivered. Progress was also made strategically,
by selling more technologically complex products
and achieving an increase in new business wins.
Management also made progress toward the
end of the year with reducing inventory cover,
although there is much more still to do.

As welcome as this progress was, it was
inevitably overshadowed by the significant
challenges faced by the business in the second
half of the year. A slowdown in activity levels and
greater than expected expenditure on long-term
investment projects left the balance sheet too
leveraged. The Board responded by taking the
steps necessary to improve the funding position.

In deciding remuneration outcomes for 2023,
the Committee has given due consideration to
the full context of 2023, including the challenges
described, management’s preparation for, and
response to them, as well as the diminution in
value experienced by shareholders during this
difficult period.

Key remuneration decisions
for 2023
Recruitment of Chief Financial
Officer
The Committee determined the remuneration
package for Matt Webb, as the new CFO, and
granted LTIP awards to him shortly following
his appointment, in line with the Directors’
Remuneration Policy (the Policy). The Committee
also approved the leaver treatment of the
outgoing CFO, Oskar Zahn, and a statement was
published on the Company’s website describing
our approach and confirming compliance with
the Policy.

Annual bonus
The 2023 annual bonus 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 their achievement
is shown on page 128. The Committee also reviewed
the outcomes in the context of the Group’s underlying
performance, the challenges faced during the year and
management’s preparation and response to them. Taken in the
round, the Committee concluded that no discretion needed to
be applied to the bonus outcome, 50% of which is delivered
in shares to ensure continued alignment of management and
shareholder interests over the deferral period.

Bonus payments for 2023, as a percentage of maximum, were
45%, 50% and 42.5% for Gavin Griggs, Matt Webb and Andy
Sng, respectively. Matt’s annual bonus was pro-rated for the
period of the year he was employed by XP Power. Half the
bonuses earned by the Executive Directors are deferred into a
two-year share-based award.

Vesting of the 2021 LTIP award
Long-Term Incentive Plan (LTIP) awards granted in 2021 were
assessed based on three-year performance through to the
end of 2023, with vesting based on three-year cumulative
adjusted EPS growth (for 67% of the award) and relative Total
Shareholder Return (33%).

• The EPS target range was 576.7p to 645.9p, with an actual
EPS outcome of 418.2p, resulting in zero 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.

Given neither performance condition was achieved, the award
will lapse in full.

Review of Share Ownership Policy
The Committee adopted a new internal Share Ownership
Policy during the year, to provide greater clarity and formalise
the arrangements already in place, namely, that Executive
Directors are required to retain shares that vest (on a net of tax
basis) under the operation of the Company’s incentive plans
to build a minimum shareholding equivalent to 200% of base
salary within five years of appointment to their Board role, 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 two-year share-based award.

How we ensured employees’ voices
were heard at Board level in 2023
During the year, I engaged with a diverse employee group
from across the Company’s key locations, in my capacity as
both Remuneration Committee Chair and designated NED for
employee engagement.

The Board trip to our Vietnam and Singapore factory and
office locations facilitated an opportunity for employees
in these regions to share their views and ask face-to-face
questions.

This feedback, along with anonymous employee surveys, were
discussed at subsequent Board meetings. Employees are able
to ask questions or share perspectives on remuneration and,
while no specific feedback was received in 2023, these would
be considered by the Remuneration Committee and inform its
decision making around executive pay.

Remuneration in 2024
The Committee has proactively tracked wage inflation in
each of our operating markets throughout 2023; and used
this to inform salary increase proposals in April 2024 for
all employees. In this context, an average budget range of
3–3.5% has been agreed, within which higher increases will be
awarded to employees who have fallen behind market levels,
and those who are considered critical or high potential talent.
The Committee reviewed Executive Director base salaries
and, taking into account the challenges faced in 2023 and the
experience of stakeholders, concluded that no annual salary
increase would be awarded to Executive Directors and other
senior executives in 2024.

The structure of the bonus scorecard for 2024 remains
unchanged from 2023 and aligns with our short-term strategic
and financial priorities, to comprise: Adjusted PBT (weighted
50%), Adjusted operating cash conversion (30%) and strategic
objectives (20%).

In 2024, the Committee intends to grant performance shares
with face values of 100% of salary to Gavin Griggs and Matt
Webb, and 75% to Andy Sng; vesting will continue to be
subject to appropriately stretching EPS and relative TSR
conditions, but with these measures equally weighted for
the 2024 cycle. Consistent with the Policy, restricted shares
will also be granted with face values of 12.5% of salary to
Gavin Griggs and Matt Webb, and 15% to Andy Sng. 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 align
the award levels with those in recent years, which are lower
than the maximum permitted in the Policy, but will assess at
vesting the extent to which this results in any windfall gains
arising (and use its discretion to adjust if necessary).

The views of our shareholders are important to us, and I hope
that you will support the Directors’ Remuneration Report.
If you have any questions or comments, I can be reached at
remcomchair@xppower.com.

PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR

4 March 2024

122

123

REMUNERATION AT A GLANCE

Context to major decisions

•

Improved supply chain performance
required to offset prior disruption and
exceed customer expectations

• Strong operating cash flow required to
provide funding for capital projects and
reduce leverage

• Further progress required with strategic

priorities

• Response required to cyclical slowdown
in the semiconductor manufacturing
equipment industry during the second half
of the year

Achievements
during the year

Key remuneration decisions
for 2023 and 2024

• Robust revenue growth, focused

• 2023 bonus outcomes of 45%,

on strategic areas

•

Improved supply chain
performance and improved
customer service

• Strong operating cash conversion

• Launch of Funding Plan to tackle

increased indebtedness

50% and 42.5% of maximum for
the CEO, CFO and EVP Asia

• Zero vesting under the 2021 LTIP

• No change to the base salaries
for Executive Directors in 2024

SEE PAGE 122
FOR MORE INFORMATION

SEE PAGES 122–123
FOR MORE INFORMATION

Total remuneration receivable for Executive Directors (£’000)

Gavin Griggs

321

Total
1,026

565

Matt Webb

Total
226

105

Andy Sng

Total
322

190

Base salary Pension Benefits Annual Bonus Long-term incentives

Achievement of financial performance conditions under the 2023 annual bonus

Adjusted operating cash conversion (30%)

Adjusted profit before tax (50%)

Threshold

85%

On-target

100%

Maximum

115%

Threshold

On-target

Maximum

£34.0m

£40.0m

£44.0m

Actual

178%

Actual

£26.6m

Andy’s 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.

SEE PAGE 128 FOR MORE INFORMATION

124

This table summarises the key components of the Directors’ Remuneration Policy set out on pages 137–144, which was
approved by shareholders at the AGM on 18 April 2023, and how the Committee intends to implement the Policy in 2024.

Component

Summary of policy

Operation in 2024

The Remuneration Committee undertook its regular review of
Executive Directors’ base salaries, and determined that these
should remain unchanged for the year from 1 April 2024.

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.

Benefits

Pensions

Benefits are set by the Remuneration
Committee and reviewed annually.

Benefits include life insurance, private medical cover and car
allowance.

Executive Directors’ pension contributions
are in line with pension benefits offered
to the wider workforce in the relevant
geography, which is currently 8% of salary
in the UK.

Gavin Griggs and Matt Webb receive a pension contribution of
8% of base salary. Andy Sng receives a pension contribution in
line with Singaporean employees’ pension benefits.

Annual
bonuses

The maximum bonus opportunity is 125%
of base salary for the CEO and 100% for
other Executive Directors.

For 2024, 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.

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

• Attainment of personal and strategic

objectives.

Bonuses will continue to be based on 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 conversion (30%); and

• Strategic objectives (20%).

Andy Sng’s performance objectives are set with reference to
divisional performance in Asia, with his strategic objectives
largely reflecting the priorities set out for Gavin Griggs and
Matt Webb.

125

OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORT

REMUNERATION COMMITTEE REPORT CONTINUED

Component

Summary of policy

Operation in 2024

Share-based
incentives

Share-based incentives are made up of
a Long-Term Incentive Plan (LTIP) and a
Restricted Share Plan (RSP).

In 2024, the Remuneration Committee anticipates granting the
following awards:

Annual report on remuneration
Single total figure of remuneration
The table below shows the total remuneration receivable for each Executive Director for the year ended 31 December 2023
and 2022, respectively.

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.

Name
Gavin Griggs
Matt Webb
Andy Sng

LTIP award
(% of salary)
100%
100%
75%

RSP award
(% of salary)
12.5%
12.5%
15%

LTIP awards will vest based 50% on 2026 Adjusted EPS and
50% on TSR vs the FTSE 250 (excluding investment trusts)
measured over three financial years. The targets for each
element are as below:

2026 Adjusted EPS
(50% of maximum)
100.0 pence per share or above
At or below 70.1 pence per share

Vesting
Maximum (100%)
Threshold (0%)

TSR vs FTSE 250 excl. investment trusts
(50% of maximum)
Upper quintile (80th percentile) or above
Median (50th percentile)
Below median

Vesting
Maximum (100%)
Threshold (25%)
No vesting

Vesting between threshold and maximum will be measured on
a straight-line basis.

Non-Executive Director fees were reviewed by the Board
Chair and the Executive Directors in February 2024 and it
was determined, with effect from 1 April 2024, that the base
fee and additional fee for chairing Remuneration and Audit
committees, and for acting as Senior Independent Director, will
be increased to better reflect the time commitment of these
roles. These fees have been unchanged since 2020. The Chair’s
fee was reviewed by the Committee, and no change will be
made for 2024. 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.

Chair’s fee
Base fee
Additional fee for Audit or
Remuneration Committee Chair
Additional fee for acting as
Senior Independent Director
Additional fee for extra
responsibility*

Fee from
1 April 2023

Fee from
1 April 2024

£220,000
£50,000

£220,000
£53,000

£5,000

£10,000

£5,000

£10,000

£5,000

* Extra responsibilities include acting as designated NED for workforce
engagement or as Board representative on an executive committee.

Salary/fees

Benefits3

Pension

Total fixed
pay

Annual
bonus4

Share-based
incentives5

Total variable
pay

£’000
Executive Directors
Gavin Griggs

Andy Sng

Matt Webb1

Oskar Zahn2

2023
2022
2023
2022
2023
2022
2023
2022

565
537
105
–
104
412
190
179
Chair and Non-Executive Directors
Jamie Pike6
170
42
60
59
60
57
50
11
50
11
18
60

2023
2022
Pauline Lafferty 2023
2022
2023
2022
2023
2022
2023
2022
2023
2022

Sandra Breene

Polly Williams

Amina Hamidi

James Peters7

24
22
5
–
5
23
11
10

–
–
–
–
–
–
–
–
–
–
3
3

45
43
8
–
8
33
10
10

–
–
–
–
–
–
–
–
–
–
–
–

634
602
118
–
117
468
211
199

170
42
60
59
60
57
50
11
50
11
21
63

321
–
53
–
–
–
82
–

–
–
–
–
–
–
–
–
–
–
–
–

71
128
55
–
–
44
29
45

–
–
–
–
–
–
–
–
–
–
–
–

392
128
108
–
–
44
111
45

–
–
–
–
–
–
–
–
–
–
–
–

Total

1,026
730
226
–
117
512
322
244

170
42
60
59
60
57
50
11
50
11
21
63

1 Matt Webb was appointed CFO on 4 September 2023 and to the Board with effect from 5 October 2023. 2023 remuneration for Matt reflects the portion of the

year that he was an Executive Director.

2 Oskar Zahn stepped down from the Board effective 31 March 2023. 2023 remuneration reflects the portion of the year that he was an Executive Director.

3 Benefits include life insurance, private medical cover and car allowance.

4 The annual bonus value represents performance over the relevant financial year: 50% of the pay-out is deferred into shares. Further 2023 annual bonus details,

including performance measures, actual performance and bonus payouts, can be found on pages 128–129.

5 The value of share-based incentives for 2023 represents:

i. for Gavin Griggs and Andy Sng, the value at grant of the restricted share awards granted on 17 March 2023 based on a £21.48 share price. No value is recorded

for the vesting of 2021 LTIP awards as the performance conditions were not achieved and these awards will lapse in full.

ii. for Matt Webb, the value at grant of the restricted share awards granted on 14 September 2023 based on a share price of £21.97.

Further LTIP details, including performance measures, actual performance and vesting can be found on page 130. Further details of the 2023 RSP can be found
on page 131.

6 Jamie Pike was appointed Chair at the agreed revised fee of £220,000 with effect from 18 April 2023.

7 James Peters retired as Chair effective 18 April 2023. James’ 2023 remuneration reflects the portion of the year that he was in office.

126

127

Notes to the single total figure table
Base salary in the year ended 31 December 2023
Executive Directors’ base salaries are reviewed by the Committee with effect from 1 April each year and when an individual
changes position or responsibility. Executive Director base salary changes during the year were:

The Committee assessed the Executive Director strategic objectives against the targets set at the start of the year and assessed
these as summarised below for Gavin Griggs and Matt Webb. Andy Sng’s objectives are set largely to reflect these priorities
but with reference to divisional performance in Asia. These are commercially sensitive and not disclosed in detail in the
following table.

Gavin Griggs Matt Webb

Performance assessment in 2023

Gavin Griggs
Matt Webb1
Oskar Zahn2
Andy Sng

Base salary from
1 April 2022

Base salary from
1 April 2023

£550,000
–
£416,000
S$312,000

£570,000
£440,000
–
S$320,000

Increase

+3.6%
–
–
+2.6%

1 Matt Webb was appointed CFO with effect from 4 September 2023, with a base salary of £440,000.

2 Oskar Zahn resigned effective 31 March 2023.

Pensions in the year ended 31 December 2023
Executive Directors’ pension contributions are aligned to those offered to all employees in their respective countries of
employment, and are 8% of base salary for UK Executive Directors and equivalent to c.5% of base salary for Andy Sng, who is
based in Singapore.

Annual bonus in the year ended 31 December 2023
The maximum annual bonus opportunity in 2023 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 Committee
for the year.

Adjusted profit before tax1
Adjusted operating cash conversion2
Strategic objectives

Weighting

50%
30%
20%

Threshold
(25%)

£34.0m
85%

On-target
(50%)

£40.0m
100%
See below

Maximum
(100%)

£44.0m
115%

Actual

% achieved

£26.6m
178%

0%
100%
See below

1 Andy Sng’s adjusted profit before tax targets are set with reference to divisional performance, and are commercially sensitive. Performance against these targets

resulted in 0% of maximum becoming payable for this annual bonus element.

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 ensures cash conversion is an ongoing focus throughout the year. The full-year Adjusted operating cash conversion was 173%.

To deliver the Group plan
the right way, beyond
financial metrics

Setting the long-term
direction

Global Supply Chain
management to effectively
support customer demand

People, strength and
capability of ELT, Senior
management team and
key talent

n/a

Progress made on our ESG priorities, with a number of
agreed initiatives successfully implemented to further
embed this agenda in XP’s culture. Achieved some of
the milestones set for the year, including: sign-off of
XP’s Net Zero Plan; filing targets for SBTi approval; and
leading a Groupwide initiative on elimination of single
use plastics. Significant further progress also made on
health and safety focus.

Progressed execution of strategy (in particular the first
phase of Supply Chain Transformation) in line with
expectations, despite business and sector challenges
faced in the year.

Matt Webb’s score recognises his significant
contribution in executing the Funding Plan.

Met objectives agreed by the Board for increasing
capacity in all sites, and improving strength of
relationships with key customers.

A key focus for 2023. Successfully recruited a number
of high potential individuals into key roles to add to
capability strength and breadth of the leadership team,
despite the challenges faced. Also drove continued
focus on engagement across the Group, resulting in
improved employee survey scores.

Exceeded

Met

Partially met

The Committee assessed the CEO’s performance against each objective set at the start of the year, as set out above, and
reviewed the resulting payout warranted under this element in the additional context of the challenges faced in the second half.
In approving the payment of 75% of the maximum opportunity for the strategic element of the bonus, the Committee concluded
that this outcome appropriately balanced recognition of the CEO’s leadership and contribution to managing the challenges of
2023 with the stakeholder impact of these (which are also reflected in the outcome under the PBT element of the bonus and also
the 2021 LTIP). The overall CEO bonus outcome for 2023 was approved at 45% of the maximum opportunity.

Matt Webb joined XP Power as CFO in September 2023, and was appointed to the Board in October. He quickly established
himself as a key Board and Leadership team member, leading the critical execution of our Funding Plan and establishing
credibility with investors. Overall, his contribution during his tenure to date has been excellent notwithstanding difficult
circumstances and the Committee determined the payment of 100% of the maximum opportunity for this bonus element,
prorated for the period worked. The overall CFO bonus outcome for 2023 was 50% of maximum.

Andy Sng’s strategic performance objectives are partially set with reference to divisional performance. While these remain
considered to be commercially sensitive, they are set to align and support the priorities set out for Gavin Griggs. The Committee
acknowledges Andy’s leadership of the Asia business during a challenging year, particularly his contribution to strengthening
customer relationships and the sales pipeline. However, certain objectives set at the start of the year were not met, resulting in
an overall assessment by the Committee warranting the payout of 62.5% of the maximum opportunity for this bonus element
and an overall bonus outcome for 2023 of 42.5% of maximum.

The Committee carefully considered whether those outturns were appropriate and, reflecting on performance achieved in the
year, no discretion to amend the formulaic outputs in the year was applied. Half of the 2023 annual bonuses for Executive
Directors are deferred into shares, vesting after two years.

128

129

OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORT

REMUNERATION COMMITTEE REPORT CONTINUED

Long-term incentive awards vested or due to vest with respect to performance
in the year ended 31 December 2023

Long-term incentive measures and targets
The performance targets for the 2023 LTIP awards are:

2021 LTIP awards
LTIP awards were granted on 3 March 2021, the vesting of which was based two-thirds on cumulative EPS and one-third on
TSR vs the FTSE 250 index excluding investment trusts over the three financial years ended 31 December 2023. The table below
summarises performance against the targets.

Cumulative EPS
TSR
Total

Weighting

67%
33%

Threshold (25%
vesting)

Maximum (100%
vesting)

Actual

% achieved

576.7p
Median

645.9p

418.2p
Upper quintile Below median

–
–
–

Shares under this award, with performance measured over the three financial years ended 31 December 2023, will lapse in full.

Date of grant

Type of award

Gavin Griggs 3 March 2021 Nominal-cost options
3 March 2021 Nominal-cost options
Andy Sng

Number
of shares
awarded

9,652
1,930

Dividend
equivalent
payments per
share

Number of
shares vested
or due

Value of
shares vested
or due to vest

–
–

% vesting

–
–

Scheme interests awarded in the year ended 31 December 2023
LTIP and RSP awards were granted to Executive Directors in 2023 equal in value to 100% of salary (LTIP) and 12.5% of salary
(RSP) for each of Gavin Griggs and Matt Webb, and 75% of salary (LTIP) and 15% of salary (RSP) for Andy Sng, as follows:

Gavin Griggs

Matt Webb

Andy Sng

Date of grant

Plan1, 2

Type of award

17 March 2023
17 March 2023
14 September 2023
14 September 2023
17 March 2023
17 March 2023

LTIP 2017 Nominal-cost options
RSP 2020 Nominal-cost options
LTIP 2017 Nominal-cost options
RSP 2020 Nominal-cost options
LTIP 2017 Nominal-cost options
RSP 2020 Nominal-cost options

Face value of
award

£569,993
£71,249
£439,993
£54,991
£147,030
£29,406

Number
of shares
awarded

End of
performance
period

26,536
3,317
20,027
2,503
6,845
1,369

31/12/2025
n/a
31/12/2025
n/a
31/12/2025
n/a

1 Awards granted on 17 March 2023 were based on the five-day average mid-market share price over 10–16 March 2023, being £21.48.

2 Awards granted on 14 September 2023 were based on the five-day average mid-market share price over 7–13 September 2023, being £21.97.

Earnings per
share

Total
shareholder
return

2023 award (67% EPS and 33% TSR)

Operation

Cumulative Adjusted EPS over three financial years

Threshold (0% vest)

480.0p

Maximum (100% vest)

602.0p

Operation

Relative TSR compared with that for the constituents of the FTSE 250 index
(excluding investment trusts)

Threshold (25% vest)

Median (50th percentile)

Maximum (100% vest)

Upper quintile (80th percentile)

The EPS range for the 2023 awards also included a ‘mid-point’ of 541p at which 50% of awards would vest.

Awards of restricted shares granted to Executive Directors in 2023 are not subject to performance conditions on vesting.

Directors’ shareholding and share interests
A shareholding guideline applies to Executive Directors, requiring 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
2022

Beneficially
owned
shares at 31
December
2023

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

Shareholding
guideline
(% of salary)

Shareholding
guideline met?

12,599
12,173
–
30,723

8,252
–
–
30,723

Executive Directors
Gavin Griggs
Matt Webb1
Oskar Zahn2
Andy Sng
Chair and Non-Executive Directors
James Peters3
Jamie Pike
Polly Williams
Pauline Lafferty
Sandra Breene
Amina Hamidi

1,004,279
3,838
–
–
–
–

1,004,279
12,533
4,347
1,739
2,391
–

6,371
–
–
1,460

10,447
2,503
–
3,629

41,813
20,027
–
10,484

5,379
–
–
2,200

–
–
–
–
–
–

200%
200%
n/a
200%

n/a
n/a
n/a
n/a
n/a
n/a

Building
Building
n/a
Met

n/a
n/a
n/a
n/a
n/a
n/a

130

131

1 Matt Webb joined the Board on 5 October 2023.

2 Oskar Zahn stepped down from the Board with effect from 31 March 2023. The beneficially owned shares shown for Oskar represent his share awards interests as
at 31 March 2023. As Oskar’s share awards lapsed after he stepped down, and he had no beneficially owned shares, no post-cessation shareholding requirement
applies.

3 James Peters retired from the Board with effect from 18 April 2023. The beneficially owned shares shown for James represent his shareholding as at 18 April 2023.

The table below summarises Gavin Griggs’ outstanding share awards:

Interest as at
31/12/22

Granted in
the year

Forfeited in
the year

Exercised in
the year

Interest as at
31/12/23

Vesting date1

Expiry date

Andy Sng’s outstanding share awards are:

REMUNERATION COMMITTEE REPORT CONTINUED

Date of grant

2017 LTIP
16/03/2019
22/04/2020
03/03/2021
08/03/2022
17/03/2023
2020 RSP
22/04/2020
03/03/2021
08/03/2022
17/03/2023
Deferred Bonus
04/03/2021
08/03/2022

£0.01
£0.01
£0.01
£0.01
£0.01

£0.01
£0.01
£0.01
£0.01

–
–

2,277
10,453
9,652
15,277
–

1,307
1,206
1,909
–

3,102
6,371

–
–
–
–
26,536

–
–
–
3,317

–
–

–
(7,745)
–
–
–

–
–
–
–

–
–

–
–
–
–
–

–
–
–
–

–
–

2,277
2,708
9,652
15,277
26,536

1,307
1,206
1,909
3,317

16/03/2022 16/03/2024
22/04/2025 22/04/2026
03/03/2026 03/03/2027
08/03/2027 08/03/2028
17/03/2028 17/03/2029

22/04/2025 22/04/2026
03/03/2026 03/03/2027
08/03/2027 08/03/2028
17/03/2028 17/03/2029

3,102
6,371

26/02/2023
28/02/2024

–
–

1 LTIP awards granted in 2019 vest 50% after three years, and 50% after four years; the vesting date shown reflects the first vest date.

Matt Webb’s outstanding share awards are:

Date of grant

2017 LTIP
14/09/2023
2020 RSP
14/09/2023

Exercise
price

Interest as
at date of
joining

Granted in
the year

Forfeited in
the year

Exercised in
the year

Interest as at
31/12/23

Vesting date

Expiry date

£0.01

–

20,027

2,503

–

20,027

14/09/2028 14/09/2029

2,503

14/09/2028 14/09/2029

Oskar Zahn’s outstanding share awards are:

Date of grant

2017 LTIP
10/05/2021
08/03/2022
2020 RSP
10/05/2021
08/03/2022
Deferred Bonus
08/03/2022

Exercise
price

Interest as at
31/12/22

Granted in
the year

Forfeited in
the year

Exercised in
the year

Interest as at
31/12/23

Vesting date

Expiry date

£0.01
£0.01

8,024
11,555

1,203
1,444

–

2,529

–
–

–

(8,024)
(11,555)

(1,203)
(1,444)

(2,529)

–
–

–

–
–

–

10/05/2026 10/05/2027
08/03/2027 08/03/2028

28/02/2024

–

Date of grant
2012 Share Options
23/02/2016
2017 LTIP
16/03/2019
22/04/2020
03/03/2021
08/03/2022
17/03/2023
2020 RSP
22/04/2020
03/03/2021
08/03/2022
17/03/2023
Deferred Bonus
04/03/2021
08/03/2022

Exercise
price

Interest as at
31/12/22

Granted in
the year

Forfeited in
the year

Exercised in
the year

Interest as at
31/12/23

Vesting date1

Expiry date

£15.43

–

£0.01
£0.01
£0.01
£0.01
£0.01

£0.01
£0.01
£0.01
£0.01

814
3,236
1,930
3,639
–

405
289
727
–

–
–

1,326
1,460

–
–
–
–
6,845

–
–
–
1,369

–
–

–
(2,397)
–
–
–

–
–
–
–

–
–

–

–
–
–
–
–

–
–
–
–

–
–

23/02/2020

23/02/2026

16/03/2022
814
839 22/04/2025
03/03/2026
1,930
08/03/2027
3,639
6,845 17/03/2028

16/03/2024
22/04/2026
03/03/2027
08/03/2028
17/03/2029

405
289
727

22/04/2025
03/03/2026
08/03/2027
1,369 17/03/2028

22/04/2026
03/03/2027
08/03/2028
17/03/2029

1,326
1,460

26/02/2023
28/02/2024

–
–

1 LTIP awards granted in 2019 vest 50% after three years and 50% after four years; the vesting date shown reflects the first vest date.

The closing share price of the Company’s shares at 31 December 2023 was £13.56 (31 December 2022: £20.35) and the price
range fluctuated between £7.76 and £26.80 over the financial year.

Payments for past Directors
No payments were made to former Directors in the year.

Payments for loss of office
There were no payments for loss of office.

Oskar Zahn stepped down as CFO, resigning from the Board on 31 March 2023. In line with the respective plan rules, all
unvested share awards lapsed in full on 31 March 2023, this included all unvested deferred share awards. Oskar had no vested
awards outstanding and was not entitled to any bonus for the financial year ended 31 December 2023. No payments, other than
those for the period of service to 31 March 2023 disclosed in the single figure table on page 127, were made to Oskar Zahn.

Assessing pay and performance
This chart shows XP Power’s total shareholder return since 31 December 2013 compared with that of the FTSE 250 (excluding
investment trusts), rebased at 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

)

(

3
1
0
2
r
e
b
m
e
c
e
D
1
3
t
a

500

400

300

200

100

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

3
2
0
2
/
2
1
/
1
3

XP Power Ltd

FTSE Mid 250
Excluding Investment Trust Index

132

133

OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORT

REMUNERATION COMMITTEE REPORT CONTINUED

Total remuneration, annual bonus outturn and long-term incentive outturn for the CEO over the same period is shown below.

CEO total remuneration (£’000)
Annual bonus (% of maximum)
Long-term incentives (% of maximum)

2014

£271
0%
n/a

2015

£310
15%
n/a

2016

2017

£531
£800
27% 100%
n/a
81%

2018

£684
71%
n/a

2019

2020

2021¹

£562 £1,357 £1,211
73%
98%
11%
33%
81%
80%

2022
2023
£730 £1,026
45%
0%

0%
26%

1 Data in the table is relevant to Duncan Penny up to 2020, and Gavin Griggs from 2021.

Context for Directors’ remuneration
While the Committee has not engaged directly with employees on Executive remuneration alignment with the wider pay
policy, the Board has engaged the workforce through site visits (see page 123). The 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. Any feedback from employees is then shared with the Board (or
relevant Board Committee) and forms a valuable input to decision making.

Annual percentage change in Director and employee remuneration
The table below shows the percentage change (on a full-time equivalent basis, so as to permit meaningful comparison) in salary,
taxable benefits and annual bonus earned by each Director serving in 2023, compared to the average employee (excluding
Chinese and Vietnamese employees, where there has been significant salary inflation). Similar information for former Directors is
published in the relevant Annual Report.

Percentage change between
2019 and 2020

Percentage change between
2020 and 2021

Percentage change between
2021 and 2022

Percentage change between
2022 and 2023

Base
salary

Taxable
benefits

Annual
bonus

Base
salary

Taxable
benefits

Annual
bonus

Base
salary

Taxable
benefits

Annual
bonus

Base
salary

Taxable
benefits

Annual
bonus⁸

10%
–
–
1%

Average employee
Executive Directors
Gavin Griggs1
Matt Webb2
Oskar Zahn3
Andy Sng
Non-Executive Directors
James Peters4
Jamie Pike5
Polly Williams
Pauline Lafferty
Sandra Breene6
Amina Hamidi⁷

15%
–
27%
20%
–
–

3% 670%

139% (33%)

41%

19% (69%)

5% 270%

(2%) 938% 57%
–
–
6%

–
–
(9%)

–
–
6%

(22%)
–
–
(24%)

43%
–
–
(23%)

9%
–
3%
13%

22% (100%)
–
–
1% (100%)
(100%)

(66%)

5%
–
1%
6%

1%
–
–
–
–
–

–
–
–
–
–
–

3%
–
(2%)
15%
–
–

50%
–
–
–
–
–

–
–
–
–
–
–

0%
–
14%
7%
–
–

0%
–
–
–
–
–

–
0%
– 239%
–
6%
–
2%
–
0%
–
0%

6%
–
(1%)
7%

17%
–
–
–
–
–

n/a
–
n/a
n/a

–
–
–
–
–
–

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 CFO pay.

2 Matt Webb was appointed as CFO with effect from 4 September 2023; no year-on-year comparison is possible.

3 Oskar Zahn stepped down from the Board effective 31 March 2023. The percentage change between 2022 and 2023 is based on a full-time equivalent for 2023.

4 James Peters retired from the Board effective 18 April 2023. The percentage change between 2022 and 2023 is based on a full-time equivalent for 2023.

5 Jamie Pike joined the Board on 1 March 2022, becoming Chair on 18 April 2023. The percentage change between 2022 and 2023 reflects this change in role and

assumes a full-time equivalent for 2022.

6 Sandra Breene joined the Board on 11 October 2022, the percentage change between 2022 and 2023 is based on a full-time equivalent for 2022.

7 Amina Hamidi joined the Board on 11 October 2022, the percentage change between 2022 and 2023 is based on a full-time equivalent for 2022.

8 A percentage change in Executive Directors’ annual bonus outcomes between 2022 and 2023 is not meaningful as a result of no bonus having been paid for 2022.

CEO pay ratio
In line with UK remuneration reporting regulations, the table below shows the ratio of the CEO’s total remuneration to that of
the lower quartile, median and upper quartile UK employees.

Year

2023
2022
2021
2020
2019

Method1

Option A
Option A
Option A
Option A
Option A

25th percentile pay
ratio

50th percentile pay
ratio

75th percentile pay
ratio

30:1
23:1
40:1
50:1
21:1

18:1
15:1
25:1
31:1
13:1

12:1
9:1
15:1
18:1
7:1

1 Methods of calculation are set out in The Companies (Miscellaneous Reporting) Regulations 2018. Option A was selected as it best reflects the underlying data. As
a large portion of the CEO’s pay is variable, the pay ratio is heavily dependent on variable pay plan outcomes and, for long-term share-based awards, share price
movements.

The year-on-year difference in the CEO pay ratio can be principally explained by the change in variable pay outturns for
2023 compared with those for 2022. Annual bonus and long-term incentives make up a significant proportion of Executive
remuneration, while it is a relatively low proportion of wider workforce total pay. Accordingly, the Committee anticipates greater
volatility in the reported pay ratio in years in which incentive outcomes are higher.

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 2023.

Year

25th percentile
50th percentile
75th percentile
Chief Executive

Total pay and benefits

Salary component of
total pay

£34,490
£56,237
£87,488
£1,026,000

£31,376
£52,250
£82,350
£565,000

The CEO’s pay ratio to the median pay of UK employees is a function of our pay, reward, and progression policies for the
Company’s UK employees and all XP 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.

£120m

£100m

£80m

£60m

£40m

£20m

£0m

£109.7m
(+15%)

£95.2m

£18.6m

£14.8m
(-20%)

2022

2023

Distribution to
Shareholder dividends1

2022

2023

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.

134

135

Remuneration Committee information
Responsibilities
The Committee is responsible for the remuneration arrangements for Executive Directors and members of the Executive
Leadership team and for providing general guidance on aspects of remuneration policy throughout the Group. The Committee
Terms of Reference are reviewed annually and are available in the Corporate Governance section of the Company’s investor
relations website corporate.xppower.com.

Committee evaluation
During the year, the Remuneration Committee reviewed its performance facilitated by an anonymous online survey managed by
an independent third party as part of the Board’s evaluation process. The Committee concluded its performance was effective in
2023 and that it fulfilled its role in accordance with its Terms of Reference.

Advice received in the year
During the year, Ellason LLP (Ellason) provided remuneration advice to the Company. Ellason provides no other services to the
Committee and has no further connection with the Company or individual Directors. Ellason is a signatory to the Remuneration
Consultants Group’s Code of Conduct. On this basis, the Committee satisfied itself that Ellason’s advice was objective and
independent. The fees paid to Ellason in the year were £117,984 excluding VAT.

Voting on remuneration
The table below sets out voting in respect of the approval of the Directors’ Remuneration Policy and the Directors’ Remuneration
Report at the 18 April 2023 AGM.

Meeting

Votes for % of votes for Votes against

% of votes
against

Votes
withheld

Approval of Directors’
Remuneration Policy
Approval of Directors’
Remuneration Report

We continue to engage on Executive remuneration, seeking to strike the right balance of interest among all shareholders.

18 April 2023 14,727,185

97.52%

375,228

2.48%

61,265

18 April 2023 14,041,945

92.61%

1,120,232

7.39%

1,501

depend on share price at the time of vesting.

Directors’ Remuneration Policy
The current Directors’ Remuneration Policy, set out in this section of the Remuneration Committee Report, was approved
by shareholders at the AGM on 18 April 2023. A copy of the Policy is available in the Corporate Governance section of the
Company’s investor relations website corporate.xppower.com. The information in this section is not subject to audit.

Any change to the Policy will be subject to a binding shareholder vote at a general meeting.

How our Remuneration Policy links to the UK Corporate Governance Code
When the current Policy was developed, the Committee was mindful of the UK Corporate Governance Code, ensuring that the
Executive Director remuneration framework continues to appropriately address the following factors:

Factors

Clarity

How these are addressed

• Our Directors’ Remuneration Policy, approved by shareholders in April 2023, is transparent and

clearly articulated in the Annual Report.

Simplicity

• The Committee believes that the Executive Director remuneration arrangements are market standard,

straightforward and well understood by both participants and shareholders.

Risk

• The Committee’s target setting approach 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

• Executive Directors’ incentives are subject to individual participation caps. An indication of the range

of outcomes in the packages is provided on page 144.

• Deferred bonus, RSP and LTIP awards provide alignment with the share price and their values will

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 Executive Directors appropriately for the work they do (base salary);

• provide market competitive remuneration packages to enable retention or recruitment (base salary plus benefits);

•

incentivise employees and Executive Directors 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).

136

137

The Directors’ Remuneration Policy approved by shareholders at the 2023 AGM is set out in full below:

Purpose

Operation

Opportunity

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.

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 Executive
Directors include:

• Paid holidays
• Life insurance
• Private medical cover
• Housing allowance
• Car allowance

Other allowances provided to the wider
workforce may also be provided.

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 following this table.

Percentage of base salary paid into a defined
contribution scheme.

Benefits

To help recruit,
retain and motivate
high-performing
Executives.

To provide market
competitive benefits.

Annual bonuses

Align interests of
Executive Directors
and shareholders
in the short and
medium terms.

Pensions

Provide a basic
pension benefit that
would be expected
for the position.

138

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.

Applicable
performance
measures

n/a

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.

n/a

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.

Purpose

Operation

Opportunity

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.

Share-based
incentives

Align the interests
of Executive
Directors and
shareholders in the
long term.

Incentivise
long-term value
creation.

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.

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.

Applicable performance
measures

n/a

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.

RSP awards may be granted without
performance conditions.

Restricted share awards normally vest
five years from the date of award.

Up to a maximum of 15% of
base salary may be granted
as restricted shares without
performance conditions.

n/a

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.

n/a

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
following 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.

139

Applicable
performance
measures

n/a

Purpose

Operation

Opportunity

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.

Post-employment
shareholding

Align the interests of
Executive Directors and
shareholders in the long term.

Non-Executive Directors’
fees

Fees are set at a level that
is sufficient to attract,
motivate and retain quality
Non-Executive Directors.

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.

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.

Performance measures and targets
The Company’s incentive plans use a range of performance measures linked to business strategy and current key priorities.
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 enabling the Committee 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
it 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 previous table, 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.

140

141

Executive Directors’ contracts
The Executive Directors’ contracts run for an indefinite period, with the Company 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 Company’s AGM. 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.

Leaver 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 Deferred Bonus Plan

Long-Term Incentive Plan

Restricted Share Plan

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.

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
award grant 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.

Type of leaver Deferred Bonus Plan

Long-Term Incentive Plan

Restricted Share Plan

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,
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.

Non-Executive Directors’ contracts
The Non-Executive Directors’ contracts run for an indefinite period, with the Company being able to terminate 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 typically 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 Executive remuneration decisions.
The development of this Policy was subject to shareholders and proxy agency adviser consultations. 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, keeping this in mind when determining the Policy for
Executive Directors.

142

143

DIRECTORS’ REPORT

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 Remuneration Committee Chair 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

Matt Webb

Andy Sng

£2500

£2000

£1500

£1000

£500

£0

£2,314

37%

£1,993

29%

36%

31%

£1,209
12%

29%

£711

10%

£550

£1,678

39%

£1,430

31%

26%

£880
13%
25%

10%

S$1,107

S$963

25%

33%

29%

S$1200

S$1000

S$800

S$600

S$623

10%

26%

12%

S$400

S$403

90%

53%

31%

27%

90%

56%

34%

30%

88%

56%

37%

31%

Minimum

On-target

Maximum

Maximum
with 50%
share price
growth

Minimum

On-target

Maximum

Maximum
with 50%
share price
growth

Minimum

On-target

Maximum

Maximum
with 50%
share price
growth

Fixed RSP Annual bonus LTIP

The charts above illustrate the value of the remuneration package for each Executive in 2024, 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
Executive Vice President, Asia

Name

Gavin Griggs
Matt Webb
Andy Sng

Base salary
(effective April 2024)

Benefits
(as per FY23)

£570,000
£440,000
S$320,000

£23,700
£20,000
S$17,700

Pension Total fixed pay

£45,600
£35,200
S$17,340

£639,300
£495,200
S$355,040

The Directors present their report and audited financial
statements for the year ended 31 December 2023 (Directors’
Report). Certain disclosure requirements for inclusion in
the Directors’ Report have been incorporated by way of
cross-reference to content elsewhere in the Annual Report
and referenced below. In addition, this report should be read
in conjunction with:

• Greenhouse Gas emissions reported information –

Sustainability Report, pages 67–70.

• Energy consumption information – Sustainability Report,

page 69.

• Gas emissions, energy consumption and energy efficiency
(other disclosures) – Sustainability Report, pages 67–70.

• For the purposes of Listing Rule (LR) 9.8.6R(8), information
on climate-related financial disclosures consistent with
the TCFD recommendation and the TCFD recommended
disclosure – pages 82–89.

• Further details of the actions that the Group is taking to

reduce emissions – Sustainability Report, pages 26–33.

• Group employees reported information – Sustainability

Report, pages 73–79.

•

Information concerning employee share schemes –
Note 30, pages 196–202.

• Corporate Governance Report – pages 98–109.

• The Group’s key activity in R&D – Chief Executive Officer’s

Review, page 37.

The Company’s business activities, together with factors that
potentially affect its future development, performance, or
position, can be found in the Strategic Report on pages 12–89.

Details of the Company’s financial position and its cash
flows are outlined in the Chief Financial Officer’s Review on
pages 44–50.

The Long-term Viability Statement, and information on the
appropriateness of adopting the going concern basis of the
accounts, can be found on page 60.

Our approach to risk management is outlined on pages 52–59.

Information required to be disclosed by Listing Rule (LR) 9.8.4R can be found in the following Annual Report locations:

(1)

(2)

(4)

(5) (6)

(7) (8)

(9)

(10)

(11) (14)

(12) (13)

Location and page

Note 6 to the Group’s Consolidated Financial
Statements on page 179. Related tax relief is not
material.

Publication of unaudited financial information

Nothing to disclose

Details of long-term incentive plans established
specifically to recruit or retain a director

Nothing to disclose

Waiver of emoluments by a director of the company Nothing to disclose

Allotments for cash of ordinary shares

Note 27 to the Group’s Consolidated Financial
Statements on pages 193–194 and Note 48 to
the Company Balance Sheet on page 217. Other
disclosures on pages 50 and 147

Parent participation in a placing by a listed
subsidiary

Nothing to disclose

Contracts of significance

Nothing to disclose

Controlling shareholder disclosures

Nothing to disclose

Dividend waiver

Directors’ Report on page 146

S$200

S$0

Listing Rule
Section

Topic

Capitalised interest

144

145

Other statutory disclosures

Areas for disclosure

(1) Directors

Location of details
in the Annual Report and Accounts

Director Biographies on pages 96–97

Nomination Committee Report on
pages 110–115

Employee engagement and business relationships

Pages 73–79

(2)

(3)

(4)

Financial risks

Future developments

(5) Greenhouse gas emissions

(6)

(7)

Post balance sheet events

Reporting under Section 172 Companies Act and engagement with
stakeholders

(8) Viability Statement

Note 31, pages 203–209

Strategic Report on pages 12–89

Sustainability Report on pages 68–69

N/A

Pages 62–63

Page 60

Dividends
XP Power previously had a policy of declaring quarterly
dividends. A first-quarter dividend of 18.0p per share was paid
on 13 July 2023 to shareholders on the register at 16 June
2023. In the announcement made on 6 October 2023, the
second-quarter dividend was cancelled and it was confirmed
that the Board intends that no further dividends would be
paid in respect of the 2023 financial year. The importance
of dividends is recognised, and the Group will recommence
paying dividends as soon as appropriate.

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 Nomination Committee’s Terms of Reference,
any appointment must be recommended by the Nomination
Committee for Board approval. Shareholders may by
ordinary resolution of which special notice has been given in
accordance with section 152 of the Act remove any Director
before the expiration of their period of office.

Directors of the Company in office at 31 December 2023,
and at the date of this report, together with their biographical
details, are shown on pages 96–97. In addition, James Peters
served as Chair until his retirement at the AGM on 18 April

2023 and Oskar Zahn served as CFO until 31 March 2023.
Details of the Directors’ service contracts are given in the
Directors’ Remuneration Report on page 142 and 143.

The present Board membership 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 2023 and the
date of this report.

In line with the 2018 UK Corporate Governance Code,
each Director will be standing for re-election at the
forthcoming AGM.

The Company business, including in relation to the allotment
and issuance of ordinary shares, is managed by the Board,
which may exercise all the powers of the Company subject to
the Company’s Articles, any directions given by the Company
by special resolution and any relevant statutes and regulations.
A summary of Matters reserved for the Board are details on
page 109 of the Corporate Governance Report.

Liability insurance and indemnities
The Company has agreed to indemnify, to the extent
permitted by law, each Director 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 23,689,254 ordinary shares, of which 7,500
were held in treasury. Therefore, the total voting rights in
the Company are 23,681,754. 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.

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.

Power to issue and allot
At the AGM held on 18 April 2023, Directors were given
authority 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.

Directors were also granted additional powers at the 2023
AGM to allot new shares in the Company for cash (i) up to an
aggregate nominal value of £19,734.79 (being approximately
10% of the Company’s then issued ordinary share capital); and
(ii) up to a further aggregate nominal value of £19,734.79, in
each case without regard to the pre-emption rights, provided
that the authority under (ii) can only be used in connection
with of acquisitions or capital investments.

These authorities expire on the date of the 2024 AGM, where
the Directors propose to renew them for a further year.
The Directors have no current intention of exercising these
authorities, if granted, other than to satisfy the exercise of
options or vesting of awards under the Company’s employee
share schemes.

On 6 November 2023, the Company announced a
non-pre-emptive placing (the Placing) and a separate retail
offer (the Retail Offer) (together the Fundraise) at a fixed
price of 1,150p per new ordinary share, which represented
a premium of approximately 6.1% to the closing middle
market price on 3 November 2023, being the last practicable
date prior to the publication of the announcement of the
Fundraise. The results of the Fundraise were announced on
7 November 2023, and the Company issued and allotted a
total of 3,946,958 ordinary shares, comprising 3,816,524
new ordinary shares as part of the Placing and 130,434 new
ordinary shares as part of the Retail Offer (together the Offer
Shares), which represented approximately 19.99% of the
Company’s issued ordinary share capital. Settlement for the
Offer Shares and Admission to trading on the main market for
listed securities of the London Stock Exchange took place on
9 November 2023. In aggregate, the Fundraise raised gross
proceeds of approximately £45.4 million and net proceeds of
approximately £44.0 million.

Soft pre-emption (which seeks where possible to replicate the
existing shareholder base) was adhered to in the allocations
process for the Placing. Management was involved in the
allocations process, which was carried out in compliance with
the MiFID II Allocation requirements. Allocations made outside
of soft pre-emption were preferentially directed towards
existing shareholders in excess of their pro rata interests,
and wall-crossed accounts. The Fundraise included the Retail
Offer, for a total of 130,434 Retail Offer Shares, via the
PrimaryBid platform, alongside the Placing. Retail investors,
who participated in the Retail Offer, were able to do so at the
same Placing Price as all other investors participating in the
Fundraise. The Retail Offer was made available to existing
shareholders and new retail investors in the UK. Investors
were able to participate through PrimaryBid’s platform via its
partner network (covering 60+ FCA registered intermediaries)
and through PrimaryBid’s free-to-use direct channel. Investors
had the ability to participate in this transaction through ISAs
and SIPPs, as well as General Investment Accounts (GIAs).
This combination of participation routes meant that, to the
extent practicable on the transaction timetable, eligible UK
retail investors had the opportunity to participate alongside
institutional investors. Allocations in the Retail Offer were
preferentially directed towards existing shareholders in
keeping with the principle of soft pre-emption.

146

147

DIRECTORS’ RESPONSIBILITIES STATEMENT

Political and charitable donations
The Group did not make any political donations or incur
any political expenditure during the year. See page 79 for
charitable donations information.

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 203–209.

Mandatory XBRL tagging
The Board reviewed the process developed to ensure that the
primary financial statements and the notes to the financial
statements, had been tagged in line with required taxonomy.

Post-balance sheet events
There were no material post-balance sheet events that were
required to be disclosed.

Signed on behalf of the Board by:

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

4 March 2024

XP Power Limited
19 Tai Seng Avenue
#07-01
Singapore 534054

Company Registration Number: 200702520N,
registered in Singapore.

Authority to purchase own shares
At the 2023 AGM, shareholders gave the Company authority
to make market purchases of up to 10% 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 2024 AGM, but, if granted, have no current
intention of using this authority.

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 Audit Committee recommendation,
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.

Articles 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 change in
control consequences of the Company on participants’ rights
under the plans. Awards may vest, becoming exercisable on a
change of control subject to the satisfaction of performance
conditions and in accordance with the rules of the plan.

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.

Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements

The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulation.

Company law requires the Directors to prepare Group
Financial Statements and a Parent Company balance sheet
for each financial year. Under that law, the Directors have
prepared the Group Financial Statements in accordance
with International Accounting Standards and the Parent
Company balance sheet in accordance with Singapore
Financial Reporting Standards (International) ‘SFRS(I)s and
applicable law.

The Group has also prepared Financial Statements in
accordance with International Financial Reporting Standards.

Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and Parent
Company, and of the profit or loss of the Group for that
period. In preparing the Group and Parent Company balance
sheet, the Directors are required to:

• Select suitable accounting policies and then apply them

consistently.

• State whether applicable International Accounting
Standards and International Financial Reporting
Standards have been followed for the Group Financial
Statements and Singapore Financial Reporting Standards
(International) “SFRS(I)s” have been followed for the Parent
Company balance sheet, subject to any material departures
disclosed and explained in the Financial Statements.

• Make judgements and accounting estimates that are

reasonable and prudent.

• Prepare the Financial Statements on the going concern

basis unless it is inappropriate to presume that the Group
and Parent Company will continue in business.

The Directors are responsible for safeguarding Group and
Parent Company assets, and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.

The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group’s and Parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and Parent Company, enabling them to ensure that the
Financial Statements and the Directors’ Remuneration Report
comply with relevant legislation.

The Directors are responsible for the maintenance and
integrity of the Company’s website.

Singapore legislation governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.

Fair, balanced and understandable
The Directors consider the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the
Group’s position, performance, business model and strategy.
For details of the process followed to enable the Board to
make this statement, please refer to the Audit Committee
report on page 118.

Responsibility statement of
the Directors in respect of the
Annual Financial Report
Each of the Directors, whose names and functions are listed in
the Annual Report and the Financial Statements confirm that,
to the best of their knowledge:

•

that the balance sheet of the Company and consolidated
financial statements of the Group, as set out on
pages 157–222, are drawn up in accordance with the
applicable set of accounting standards, to give a true and
fair view of the assets, liabilities, financial position and
profit or loss of the Group for the financial year ended
31 December 2023; and

the Annual Report includes a fair review of the
development and performance of the business and the
financial position of the Group and the Company, together
with a description of the principle risks and uncertainties
they face.

The Directors’ Report, together with the Strategic Report on
pages 12–89, which forms the Management Report for the
purposes of Financial Conduct Authority Disclosure Guidance
and Transparency Rules (DTR 4.1.8), was approved by the
Board on 4 March 2024 and is signed on its behalf by:

JAMIE PIKE
CHAIR

GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER

4 March 2024

148

149

OUR FINANCIALSXP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEW OUR GOVERNANCESTRATEGIC REPORTOVERVIEW

STRATEGIC REPORT

OUR GOVERNANCE

OUR FINANCIALS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED INCOME STATEMENT
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

152

157

157
158

159

160

161

210

211

223

224

OUR
FINANCIALS

150
150

XP Power Annual Report & Accounts for the year ended 31 December 2023

151
151

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCEINDEPENDENT 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
2023, 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 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 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 income statement of the Group for the

financial year ended 31 December 2023;

• The consolidated statement of comprehensive income of

the Group for the financial year ended 31 December 2023;

• The consolidated balance sheet of the Group as at

31 December 2023;

• The balance sheet of the Company as at

31 December 2023;

• 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 material

accounting policy information.

Materiality

Audit Scope

Key
Audit
Matters

Our audit approach – overview
Materiality
The overall materiality which we have used to plan our work for the Group amounted to £1.1 million.
The overall materiality applied to the audit of the Company balance sheet amounted to £0.8 million.

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 84% of Group revenues and 97% of Group assets.

Key Audit Matters
We identified the following key audit matters:

• Goodwill; and

• Capitalised product development costs.

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.

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 £0.1 million to £0.9 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
£0.1 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.

152

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XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF XP POWER LIMITED CONTINUED

Key audit matters

Goodwill

Refer to page 119 (Audit Committee Report), page 174 (Critical
accounting estimates, assumptions and judgements – Recoverable
amount of cash-generating units for goodwill impairment
assessment) and pages 182-183 (Note 11 – Goodwill).

The Group has goodwill of £75.6 million at 31 December 2023
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 17% 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.

How did our audit address these

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.

Capitalised product development costs

Refer to page 119 (Audit Committee Report), page 173 (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 start date for amortisation) and page 184
(Note 12 – Intangible assets).

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.

Part of the Group’s strategy is to invest in research and development
to create new products. As at 31 December 2023, the carrying
amount of capitalised product development costs is £30.6 million, of
which £9.4 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 7% 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 and start date for amortisation as areas involving
significant judgement. The carrying amount of the capitalised
product development costs is heavily dependent on the useful
lives of the developed products and start date of amortisation.
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. Management takes the view that amortisation should
start when product is capable of operation in a manner intended by
management, with the use of established principals.

154

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 assessed the appropriateness of the start date
for amortisation by challenging management through
discussions and quantitative review of the products’
historical sales.

Based on the above, no exceptions were noted.

Information 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 149, in
relation to going concern.

Our evaluation of the directors’ assessment of the Group’s and
the Company’s ability to continue to adopt the going concern
basis of accounting included:

• Evaluation of management’s base case and downside
scenarios, understanding and evaluating the key
assumptions;

• Assessment of the historical accuracy and reasonableness

of management’s forecasting;

• Consideration of the Group’s available financing and debt

maturity profile;

• Testing of the mathematical integrity of management’s

liquidity headroom, sensitivity and stress testing
calculations; and

• Review of the disclosures in the Annual Report in relation

to going concern.

Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on
the Group’s and the Company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.

In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.

However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.

In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
Directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going
concern basis of accounting.

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 60. 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.

Other information
Management is responsible for the other information. The
other information comprises the “Overview” section set out
on pages 1 to 11, “Strategic Report” section set out on pages
12 to 89, “Governance” section set out on pages 90 to 149,
and the “Financials” section on page 224 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.

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.

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.

155

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023

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.

• Conclude on the appropriateness of management’s use of
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,

156

future events or conditions may cause the Group to cease
to continue as a going concern.

• 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 Gregory Andrew Unsworth.

PRICEWATERHOUSECOOPERS LLP
PUBLIC ACCOUNTANTS AND CHARTERED
ACCOUNTANTS

4 March 2024

Singapore

£ m

Note

Adjusted

Adjustments
(see Note 4)

2023

Adjusted

Adjustments
(see Note 4)

Revenue
Cost of sales
Gross profit
Other Income
Expenses
Distribution and marketing
Administrative
Research and development
Operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Attributable to:
Equity shareholders
Non-controlling interests
Loss for the year

4
7

7
7
7

316.4
(185.1)
131.3
–

(63.5)
(3.3)
(26.4)
38.1
(11.5)
26.6
(9.8)
16.8

–
*
*
–

(6.1)
(7.4)
(0.1)
(13.6)
(1.8)
(15.4)
(10.4)
(25.8)

290.4
(169.8)
120.6
–

(54.1)
(3.3)
(20.3)
42.9
(4.9)
38.0
(6.1)
31.9

–
–
–
–

(4.1)
(55.3)
(7.6)
(67.0)
(1.2)
(68.2)
16.7
(51.5)

316.4
(185.1)
131.3
–

(69.6)
(10.7)
(26.5)
24.5
(13.3)
11.2
(20.2)
(9.0)

(9.2)
0.2
(9.0)

2022

290.4
(169.8)
120.6
*

(58.2)
(58.6)
(27.9)
(24.1)
(6.1)
(30.2)
10.6
(19.6)

(20.0)
0.4
(19.6)

Earnings per share (pence):
Basic earnings/(loss) per share
Diluted earnings/(loss) per
share

81.9

81.8

(127.3)

(45.4)

160.6

(262.6)

(102.0)

(127.1)

(45.3)

160.1

(261.7)

(101.6)

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

Loss for the year

Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations

Items that will not be reclassified subsequently to profit or loss:
Currency translation differences arising from consolidation
Other comprehensive (loss)/profit for the year, net of tax
Total comprehensive loss for the year

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

2023

(9.0)

(5.3)
(5.3)

*
(5.3)
(14.3)

2022

(19.6)

7.2
7.2

*
7.2
(12.4)

157

CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

£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
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.

Note

2023

2022

Attributable to equity holders of the Company

16
17
18
25
19
23

16
11
12
13
14
26

20
23
22
24
22

21
22
26

27
27
27
27
27
27

12.0
91.6
43.1
36.7
8.1
–
0.5
192.0

1.4
75.6
63.1
59.5
54.0
0.7
*
*
254.3
446.3

5.0
48.3
–
1.4
44.9
0.4
100.0

1.7
125.7
9.3
1.0
53.3
191.0
291.0
155.3

71.2
0.2
2.1
*
(0.9)
7.6
74.4
154.6
0.7
155.3

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

Share-
based
payments
reserve

Treasury
shares
reserve

Share
capital

Note

Merger
reserve

Translation
reserve

Other
reserve

Retained
earnings

Total

Non-
controlling
interests

Total
equity

27.2

5.6

–

–
–

–

–
–

–

27.2

–

–
44.0
–

–

–
–

–

(1.8)

0.1

(1.5)
–

–

0.1
–

0.1

2.5

(1.2)

1.1

(0.2)
–
–

–

(0.1)
–

(0.1)

71.2

2.1

–

–
–

–

–
–

–

–
–
–

–

–
–

–

0.2

(2.9)

4.4

137.0

171.5

0.9

172.4

–

–
–

–

–
–

–

–
–

–

7.1
–

7.1

1.8

–

–
–

(0.1)

–
–

–

0.1

–

0.1

–
(18.6)

(1.5)
(18.6)

–
(0.4)

(1.5)
(19.0)

–

(0.1)

–

(0.1)

–
(20.0)

7.2
(20.0)

*
0.4

7.2
(19.6)

(20.0)

(12.8)

0.4

(12.4)

0.2

4.2

6.1

98.4

138.6

0.9

139.5

–

–
–
–

–

–
–

–

–
–
–

–

1.6

–

–
–
–

–

0.4

1.1

–

–
–
(14.8)

(0.2)
44.0
(14.8)

–
–
(0.3)

0.4

1.1

(0.2)
44.0
(15.1)

(0.1)

–

(0.1)

–

(0.1)

(5.1)
–

(5.1)

–
–

–

*
(9.2)

(5.2)
(9.2)

(0.1)
0.2

(5.3)
(9.0)

(9.2)

(14.4)

0.1

(14.3)

0.2

(0.9)

7.6

74.4

154.6

0.7

155.3

£m

Balance at
1 January 2022
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
Exchange difference
arising from translation
of financial statements of
foreign operations
(Loss)/profit for the year
Total comprehensive
income/(loss) for the year
Balance at
31 December 2022
Exercise of share-based
payment awards
Share-based payment
expenses
Tax on share-based
payment expenses
Issuance of shares
Dividends paid
Future acquisition of non-
controlling interest
Exchange difference
arising from translation
of financial statements of
foreign operations
(Loss)/profit for the year
Total comprehensive
(loss)/income for the year
Balance at
31 December 2023

* Balance is less than £100,000.

The accompanying notes form an integral part of these financial statements.

158

159

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

£m

Note

2023

2022

Cash flows from operating activities
Loss for the year
Adjustments for:
– Taxation
– Amortisation and depreciation
– Net finance expense
– Share-based payment expenses
– Fair value gain on derivative financial instruments
– Loss/(gain) on disposal of property, plant, and equipment
– Impairment loss on intangible assets
– Gain on disposal on rights-of-use of assets
– Unrealised currency translation loss/(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 provided by/(used in) 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 issuance of new ordinary shares
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 (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of currency translation on cash and cash equivalents
Cash and cash equivalents at end of financial year

* Balance is less than £100,000.

(9.0)

(19.6)

20.2
20.1
13.3
1.1
(0.1)
*
2.5
(0.1)
0.3
0.1
–

17.4
(3.1)
(1.8)
1.5
62.4
(4.9)
57.5

–
(30.6)
(9.5)
*
–
0.1
–
0.1
–
(39.9)

44.0
14.5
(55.7)
(2.7)
0.4
(12.0)
(14.8)
(0.3)
(0.4)
(27.0)
(9.4)
22.1
(0.7)
12.0

(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)
*
*
*
*
(89.3)

–
170.3
(35.6)
(5.8)
*
(5.5)
(18.6)
(0.4)
(1.1)
103.3
12.0
8.8
1.3
22.1

8
7
6
5
7

31(d)
24

28
28
28
28

13
12
12
25

27(a)
22
22
22

22
9

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 material 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.

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 34–39. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the financial review on pages 44–50. The principal risks of the Group are set out on pages 52–59.
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 Group has available to it a US $ denominated Revolving Credit Facility (RCF) of $255 million (£200 million). The facility
matures in June 2026 and therefore is committed throughout the minimum period for which going concern is assessed, which is
12 months from the date of signing these financial statements.

At 31 December 2023, the Group had drawn down $162 million (£127 million) against this, leaving undrawn facility headroom of
more than £73 million.

In late 2023, financial covenants within the RCF agreement were amended as follows as part of the Funding Plan described in the
Chief Financial Officer’s Review:

• Leverage ratio: Net Debt to Adjusted EBITDA of not more than 3.5x until 31 December 2024, and not more than 3.0x

thereafter

•

Interest cover: Adjusted EBITDA to Adjusted Net Finance Expense to not less than 3.0x until 30 September 2025, and not
less than 4.0x thereafter

Both covenants are tested quarterly.

As part of its going concern review, the Group developed base and severe but plausible downside scenarios, assessing forecast
liquidity and covenant compliance in each case.

The accompanying notes form an integral part of these financial statements.

160

161

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
The key assumption in both forecast scenarios is revenue, particularly revenue beyond the initial six-month period for which
the business already has visibility via existing sales orders. Revenue in this period, H2 2024 in this case, will be determined by,
amongst other things, the assumed timing of the semiconductor equipment market upcycle and when any overstocking in the
sales channel will be cleared. Other key assumptions relate to the impact of available mitigating actions and future interest rates.

Given that the Group’s borrowings are US $ denominated, net debt and therefore the leverage ratio can be impacted by future
movements in the US $ exchange rate. In both Cases below, the US $ exchange rate is assumed to be $1.26.

The Group’s Base Case scenario is that the slowdown in revenue that commenced in mid-2023 will continue until mid-2024
before recovering thereafter as excess channel inventory is cleared and demand returns to the Semiconductor Manufacturing
Equipment market. This results in a 14% decline in revenue between 2023 and 2024 in total.

The impact of this is mitigated by management actions to reduce costs, as set out in the Chief Financial Officer’s Review.

The Base Case assumes SOFR reduces gradually to 4.25% by 31 December 2024, in line with current market expectations,
lowering interest costs. The Group has capped the variable interest rate applicable to the majority of its borrowings at a rate
slightly above the current SOFR.

In the Base Case, the Group remains in full compliance with its financial covenants and with ample liquidity throughout the going
concern assessment period.

The lowest point of headroom in the Leverage Ratio covenant is at 30 September 2024. EBITDA would need to fall c.32% short
of expectations in the period 1 January to 30 September 2024 for a breach to occur. Note that the current order book covers
nearly all of the first half’s revenue.

The lowest point of headroom in the Interest Cover covenant is at 30 September 2024. EBITDA would need to fall c.24% short
of expectations in the period 1 January to 30 September 2024 for a breach to occur.

In the severe but plausible downside scenario, the slowdown in revenue that commenced in mid-2023 continues throughout
2024 with no recovery. This results in a 18% decline in revenue between 2023 and 2024 in total, with the additional 4% decline
versus the Base Case arising in H2 2024.

This case assumes a £5.0 million reduction in annualised overheads, implemented from the start of H2 2024, which reduces
overheads for 2024 by 3.0%, in addition to the reductions assumed in the Base Case.

The interest rate assumption is the same as the Base Case.

In the Downside Case, the Group remains compliant with its financial covenants, albeit with lower headroom, and with ample
liquidity throughout the going concern assessment period.

The lowest point of headroom in the Leverage Ratio covenant is 31 December 2024. EBITDA would need to fall c.18% short of
expectations in 2024 for a breach to occur.

The lowest point of headroom in the Interest Cover covenant is 31 December 2024. EBITDA would need to fall c.4% short of
expectations in 2024 for a breach to occur.

The Group’s funding position has improved considerably due to the Funding Plan implemented in late 2023. New funds have
been raised from a share Placing, covenant terms were amended with the support of all the Group’s lenders, and actions were
taken to preserve cash and reduce costs. Actions taken to reduce cost illustrate the Group’s ability to respond to changed
circumstances robustly and the benefit of these actions is now coming through.

The Directors are confident that the Base Case and Downside Cases, including the benefit of the Funding Plan, provides an
appropriate basis for the going concern assumption to be applied in preparing the financial statements, whilst recognising lower
headroom in the Downside Case.

Therefore, 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.

162

b. Changes in accounting policy and disclosures
i New and amended standards adopted by the Group

On 1 January 2023, 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 2023
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.

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 to
60 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 are 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 are 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 income statement, 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.

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XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
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 costs 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.

2.4 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”.

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.

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.

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.

d. Disposal

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.

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”.

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FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
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

5–7 years

10 years

2–10 years

5–10 years

1–3 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.

2.8 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 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.

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.

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FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
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 31 details how the Group determines whether there has been a significant increase in credit risk.

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 the 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.

2.13 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 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 do not result in derecognition, differences between the
recalculated gross carrying amount and the carrying amount before modification are 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.

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.

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.

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.

2.15 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 recognises 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.

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FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
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 is 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 it 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 contracts 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 components 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 are recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to zero.

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 that 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.

2.19 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 is credited to retained earnings.

170

171

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2. Summary of material accounting policies CONTINUED
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.

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, £9.4 million (2022: £8.1 million) of product development costs have been capitalised, including capitalised
interest. 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 allows management to measure reliably the
expenditure attributable to each project. Significant judgements are involved when management performs the assessment.

ii Going concern

Paragraph 2.1 A confirms that these financial statements have been prepared on a going concern basis and explains the basis for
the Directors’ conclusion that a going concern basis is appropriate.

In determining whether the Group’s accounts should be prepared on a going concern basis, the Directors considered the
Group’s business activities, its current liquidity position and banking covenants and factors likely to affect its future performance
and financial position, including the principal risks as set out on pages 52–59. This assessment is considered to be a critical
accounting judgement.

In performing this assessment, the Directors prepared both base and downside scenarios. The key variables and sensitivities in
these scenarios are the timing of the recovery of revenue and interest costs. Judgements have been made in determining when
the Semiconductor Manufacturing Equipment market recovers and when excess channel inventory clears and on the SOFR
interest rate. Further details are set out in paragraph 2.1.

Under both the base and downside scenarios, the Group has liquidity headroom and is in compliance with its banking covenants
for the period under review. Inevitably if market condition were to be worse than we have modelled or if more severe risks were
to crystallise then the Group would seek to identify and implement additional operational and financial measures to ensure
ongoing compliance with covenants and adequate liquidity.

b. Critical accounting estimates and assumptions
i Recoverable amount of capitalised product development costs

As at 31 December 2023, the net book value of capitalised product development costs amounts to £30.6 million (2022:
£30.4 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 and start date for amortisation

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. During the year, the minimum useful life for product development costs was
increased from three years to five years.

The Group also takes a view on when amortisation should start and expense capitalisation should cease based on when the product
is considered to be capable of operating in a manner intended by management. Significant judgement is required in determining this
date as some projects follow an iterative design process and so it is hard to determine when development has ended and commercial
sales have begun. The principals for determining this date were reviewed during the year and new, cleared principals introduced.

The impact of the change in minimum useful life reduced the amortisation charge in the year by £0.9 million and the change
in amortisation start date lead to an increase in the amortisation charge of £2.6 million – a combined effect of an increase in
amortisation charge of £1.7 million. Estimating the effect of the change in estimates on future years is impracticable.

172

173

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

3. Critical accounting estimates, assumptions and judgements CONTINUED
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 with a terminal growth rate of 2% after
this. The carrying amount of goodwill as at 31 December 2023 was £75.6 million (2022: £77.5 million) with no impairment
adjustment required for 2023.

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 2023 and no impairment loss is recognised.

4. 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. As set out in (ii) below, costs excluded from segment operating
income include centrally managed general and administrative costs, share-based payment expense, various non-operating
charges, income taxes and Adjusting items as they do not relate to the underlying cost base of the segment.

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 market sectors and geographical regions.

The revenue by market and location of the design win is as follows:

£m

Semiconductor
Manufacturing Equipment
Industrial Technology
Healthcare
Total

2023

Europe

North
America

Asia

Total

Europe

2022

North
America

3.4
67.6
26.8
97.8

86.0
54.0
44.5
184.5

12.8
14.7
6.6
34.1

102.2
136.3
77.9
316.4

2.7
61.3
22.5
86.5

93.8
44.5
28.9
167.2

Asia

Total

16.9
13.8
6.0
36.7

113.4
119.6
57.4
290.4

Revenue of £56.6 million (2022: £48.3 million) is derived from a single external customer. This is attributable to the
Semiconductor Manufacturing Equipment sector across all geographical regions.

174

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

2023

176.3
25.3
45.7
48.0
2.0
4.4
14.7
316.4

2022

167.3
25.9
36.9
40.8
1.4
3.5
14.6
290.4

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.

ii Segment

The segment information provided to the CODM for the reportable segments for the year ended 31 December 2023 and prior
year comparatives is as follows:

Reconciliation of segment results to loss for the year:

£m

Europe
North America
Asia
Segment results
Costs excluded from operating segments
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 sold
– Others
Corporate cost
– Employee compensation
– Information systems
– Consultancy fees
– Amortisation of intangible assets
– Others
Adjusted operating profit
Net finance expense
Adjustments
Profit/(Loss) before tax
Taxation
Loss for the year

2023

24.2
55.1
11.9
91.2

(14.5)
(2.4)
(1.2)
(1.1)
(0.8)
(1.9)

(1.9)
(8.8)
(0.8)

(9.5)
(3.5)
(1.7)
(2.1)
(2.9)
38.1
(13.3)
(13.6)
11.2
(20.2)
(9.0)

2022

21.5
48.5
10.5
80.5

(13.0)
(2.2)
(1.3)
(0.8)
(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)

175

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

4. 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.

2023

Europe

North
America

Asia

Total

Europe

2022

North
America

Asia

Total

0.6

0.5

0.9

1.3

1.4

–

–
–

20.5

2.0

6.3

2.7

3.5

3.8

2.1

–
0.3

9.5

2.6

0.1

0.5

6.0

5.3

–

1.9
–

30.6

5.1

7.3

4.5

9.5

10.5

2.1

1.9
0.3

1.4

0.4

3.3

2.0

13.8

33.0

1.1

32.4

1.5

–

–
–

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

79.2

245.9

120.0

445.1

85.5

237.1

141.5

464.1

(21.2)

(227.2)

(28.3)

1.2
446.3
(276.7)

(14.3)
(291.0)

(21.5)

(269.4)

(36.0)

Non-current assets, other than deferred income tax assets, by region or country:

£m

North America
United Kingdom
Singapore
Germany
Malaysia
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.

2023

129.1
11.4
45.2
45.3
10.5
12.1
253.6

176

17.6
481.7
(326.9)

(15.3)
(342.2)

2022

114.2
11.9
49.6
47.4
3.5
13.4
240.0

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 costs, 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/(loss) to Adjusted operating profit, a reconciliation of
profit/(loss) before tax to Adjusted profit before tax and a reconciliation of loss after tax to Adjusted profit after tax.

a. A reconciliation of operating profit/(loss) to Adjusted operating profit is as follows:

£m

Operating profit/(loss)
Adjusted for:
Restructuring costs
Global supply chain transformation
Costs relating to legal dispute
Impairment loss on intangible assets
Amortisation of intangible assets acquired from business combinations
Costs related to Enterprise Resource Planning system implementation
Acquisition costs
Foreign exchange gain on euro-denominated loan drawn down to finance acquisition
Revolving credit facility fees
Fair value gain on derivative financial instruments

Adjusted operating profit

b. A reconciliation of profit/(loss) before tax to Adjusted profit before tax is as follows:

£m

Profit/(Loss) before tax
Adjusted for:
Restructuring costs
Global supply chain transformation
Costs relating to legal dispute
Impairment loss on intangible assets
Amortisation of intangible assets acquired from business combinations
Costs related to Enterprise Resource Planning system implementation
Acquisition costs
Foreign exchange gain on euro-denominated loan drawn down to finance acquisition
Revolving credit facility fees
(Gain)/loss on modifications of revolving credit facility
Fair value gain on derivative financial instruments

Adjusted profit before tax

2023

24.5

5.3
2.7
2.1
*
3.2
0.3
0.1
–
*
(0.1)
13.6
38.1

2023

11.2

7.7
2.7
2.1
*
3.2
0.3
0.1
–
*
(0.6)
(0.1)
15.4
26.6

2022

(24.1)

0.1
–
52.2
7.5
4.1
3.8
2.4
(3.2)
0.2
(0.1)
67.0
42.9

2022

(30.2)

0.3
–
52.2
7.5
4.1
3.8
2.4
(3.2)
0.2
1.0
(0.1)
68.2
38.0

177

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

4. Segment and revenue information CONTINUED
c. Impact of Adjusted items on the relevant lines in the Income Statement provided below:

£m

Restructruing costs
Global supply chain transformation
Costs realting to legal dispute
Amortisation of intangible assets acquired from
business combinations
Costs relating to Enterprise Resource Planning
systems implementation
Acquisition costs
Gain on modifications of revolving credit facility
Fair value gain on derivative financial instruments

£m

Restructuring costs
Costs relating to legal dispute
Impairment of intangible assets
Amortisation of intangible assets acquired from business
combinations
Costs relating to Enterprise Resource Planning systems
implementation
Acquisition costs
Foreign exchange gain on euro-denominated loan drawn
down to finance acquisition
Revolving credit facility fees
Loss on modifications of revolving credit facility
Fair value gain on derivative financial instruments

Distribution and
marketing

Administrative

Research and
development

Net finance
expense

2023

1.7
1.5

3.0

(0.1)
6.1

3.6
1.2
2.0

0.2

0.3
0.1

7.4

0.1

2022

2.4

(0.6)

1.8

Distribution and
marketing

Administrative

Research and
development

Net finance
expense

0.1

4.1

(0.1)
4.1

52.1

0.1
7.5

3.8
2.4

(3.2)
0.2

55.3

7.6

0.2

1.0

1.2

7.7
2.7
2.1

3.2

0.3
0.1
(0.6)
(0.1)
15.4

0.3
52.2
7.5

4.1

3.8
2.4

(3.2)
0.2
1.0
(0.1)
68.2

d. A reconciliation of loss for the year to Adjusted profit for the year is as follows:

£m

Loss for the year
Adjusted for:
Restructuring costs
Global supply chain transformation
Costs relating to legal dispute
Impairment loss on intangible assets
Amortisation of intangible assets acquired from business combinations
Costs related to Enterprise Resource Planning system implementation
Acquisition costs
Foreign exchange gain on euro-denominated loan drawn down to finance acquisition
Revolving credit facility fees
(Gain)/loss on modification of revolving credit facility
Fair value gain on derivative financial instruments
Non-recurring tax expense/(credit)1

Adjusted profit for the year

2023

(9.0)

7.7
2.7
2.1
*
3.2
0.3
0.1
–
*
(0.6)
(0.1)
10.4
25.8
16.8

2022

(19.6)

0.3
–
52.2
7.5
4.1
3.8
2.4
(3.2)
0.2
1.0
(0.1)
(16.7)
51.5
31.9

1 Adjusted for tax on specific items relating to completed acquisitions of £16,526 (2022: £0.6 million), gain on foreign exchange impact of euro-denominated loan
drawn down to finance acquisition of £nil (2022: £0.5 million), costs related to Enterprise Resource Planning system implementation of £49,878 (2022: £0.8
million), costs relating to legal dispute of £0.5 million (2022: £13.6 million) ), impairment of intangible assets of £5,272 (2022: £2.0 million), revolving credit facility
fees of £2,113 (2022: £27,706), gain on modification of revolving credit facility of £0.1 million (2022: loss of £ 0.2 million), restructuring cost of £1.9 million (2022:
£30,117), global supply chain transformation £0.7 million (2022: £nil), and gain on fair value impact on derivative financial instruments of £15,775 (2021: £22,462)
and tax loss relating to legal claim £13.6 million (2022: £nil).

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 and property, plant and equipment
Total

For further information regarding Directors’ remuneration, refer to the Directors’ Remuneration Report.

6. Net finance expense
£m

Interest income
Interest expense
Bank borrowings and overdrafts
Lease liabilities

(Gain)/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 and property, plant and equipment – see below
Amount recognised in income statement

* Balance is less than £100,000.

Finance expenses on general financing were capitalised at a rate of 8.1% p.a. (2022: 4.8% p.a.).

2023

97.9
10.7
1.1
109.7
(7.6)
102.1

2023

(1.5)

13.8
3.1
16.9
(0.6)
*
0.1
14.9
(1.6)
13.3

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

Of the amount capitalised, £1.2 million (2022: £0.6 million) was capitalised to Product Development costs, £0.2 million (2022:
£nil) to buildings costs and £0.2 million (2022: £0.2 million) to software. During the financial year ended 31 December 2023,
the Group renegotiated its existing revolving credit facility. This resulted in the recognition of a modification gain of £0.6 million
(2022: loss of £1.0 million).

178

179

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

7. Expenses by nature
£m

2023

2022

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:

Loss for the year is after charging:
Amortisation of intangible assets (Note 12)
Depreciation of property, plant and equipment (Note 13)
Depreciation of right-of-use assets1 (Note 14)
Employee compensation (Note 5)
Foreign exchange losses/(gains) – net
Fair value gain 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
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 assets2
Revolving credit facility fees
Restructuring costs
Global supply chain transformation
Other expenses
Total cost of sales, distribution and marketing, administrative and research and development expenses

* Balance is less than £100,000.

10.5
5.1
2.9
102.1
0.9
(0.1)
115.5
22.8
0.7
–
0.1
0.4
0.2
0.9
4.4
2.6
–
1.9
1.0
1.2
0.3
2.1
0.1
1.9
*
5.3
2.7
6.4
291.9

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
314.5

1 £1.6 million of depreciation of right-of-use assets related to lease for office space in the United States of America was reclassified to disclose under

restructuring costs.

2 £0.6 million of impairment of intangible assets was reclassified to disclose under restructuring costs.
8. Taxation
£m

Tax expense/(credit) attributable to (loss)/profit is made up of:
Tax on profit /(loss) for the financial year
– Singapore
– Foreign
Current income tax
Deferred income tax

Over provision in prior financial years
– Singapore
– Foreign
Current income tax
Deferred income tax

Withholding tax
Income tax expense/(credit)

2023

2022

3.6
3.3
6.9
13.7
20.6

(0.3)
*
(0.3)
(0.7)
(1.0)
0.6
20.2

2.8
4.1
6.9
(17.1)
(10.2)

(0.2)
*
(0.2)
(0.8)
(1.0)
0.6
(10.6)

£m

Profit/(loss) before tax
Tax on profit/(loss) at standard Singapore tax rate of 17% (2022: 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 provision of tax in prior financial years
Deferred tax asset on tax losses and wear and tear allowances not provided for
Withholding tax
Deferred tax expense arising from the write-down of deferred tax asset
Income tax expense/(credit)

2023

11.2
1.9
(0.9)
(0.9)
*
1.1
(0.2)
0.4
(1.0)
5.8
0.6
13.4
20.2

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 2022 (94.0p).

^ Dividends in respect of 2023 (18.0p).

No further dividends are proposed in respect of the 2023 financial year.

2023

0.2
0.2

2022

1.5
1.5

2023

Pence
per share

21.0*
36.0*
18.0^
–
75.0

2022

Pence
per share

21.0
36.0
18.0*
19.0*
94.0

£m

4.1
7.1
3.6
–
14.8

£m

4.1
7.1
3.6
3.8
18.6

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions at the balance sheet date.

180

181

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

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
Loss for the purposes of basic and diluted earnings per share
Loss for the year attributable to equity holders of the Company
Loss 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 for the purposes of basic and diluted earnings per share
Loss for the year attributable to equity holders of the Company
Restructuring costs
Global supply chain transformation
Costs relating to legal dispute
Impairment loss on intangible assets
Amortisation of intangible assets acquired from business combination
Costs related to Enterprise Resource Planning system implementation
Acquisition costs
Foreign exchange gain on euro-denominated loan drawn down to finance the acquisition
Revolving credit facilities fees
(Gain)/loss on modification of revolving credit facility
Fair value gain on derivative financial instruments
Non-recurring tax expense/(credit)
Adjusted earnings

* Balance is less than £100,000.

11. Goodwill

£m

Cost and net book value
At 1 January
Accrued consideration (Note 21)
Acquisition of subsidiaries
Currency translation differences
At 31 December

* Balance is less than £100,000.

2023

2022

(9.2)
(9.2)

(20.0)
(20.0)

20,281
23
20,304

(45.4)p
81.9p
(45.3)p
81.8p

19,616
63
19,679

(102.0)p
160.6p
(101.6)p
160.1p

2023

2022

(9.2)
7.7
2.7
2.1
*
3.2
0.3
0.1
–
*
(0.6)
(0.1)
10.4
16.6

(20.0)
0.3
–
52.2
7.5
4.1
3.8
2.4
(3.2)
0.2
1.0
(0.1)
(16.7)
31.5

2023

2022

77.5
*
–
(1.9)
75.6

52.5
*
21.0
4.0
77.5

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

2023

42.7
31.4
1.5
75.6

2022

43.9
32.0
1.6
77.5

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

2023

2022

Growth
rate1

Discount
rate2

Terminal
growth rate

Growth
rate

Discount
rate2

Terminal
growth rate

5.0%
3.5%
7.7%

10.2%
12.4%
15.1%

2.0%
2.0%
2.0%

8.7%
5.3%
8.5%

11.8%
12.9%
12.5%

2.0%
2.0%
2.0%

1 Compound annual growth rate of projected revenue over 2024-2028.

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 exceeding its recoverable amount.

The impairment test carried out at 31 December 2023 for the North America CGU, which includes 56.5% of the goodwill
recognised on the balance sheet, has revealed that the recoverable amount of the CGU is £202.2 million or 47.8% higher than its
carrying amount. A reasonably possible change of an increase in the discount rate by 3.5% or a decrease in growth rate by 7.5%
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 2023 for the Europe CGU, which includes 41.5% of the goodwill recognised
on the balance sheet, has revealed that the recoverable amount of the CGU is £64.3 million or 71.9% higher than its carrying
amount. A reasonably possible change of an increase in the discount rate by 7.4% or a decrease in growth rate by 7.3% would
result in the recoverable amount of the Europe CGU being equal to its carrying value.

The impairment test carried out at 31 December 2023 for the Asia CGU, which includes 2.0% of the goodwill recognised on the
balance sheet, has revealed that the recoverable amount of the CGU is £129.7 million or 14.6% higher than its carrying amount.
A reasonably possible change of an increase in the discount rate by 1.6% or a decrease in growth rate by 7.8% 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 cash flows due to climate change. A sensitivity analysis was
performed for each CGU or group of CGUs to demonstrate the financial impact of the following key climate-related risks (see
Climate Risks in the Sustainability Report):

1. Flood risk – major flood could cause a disruption to the manufacturing sites.

2. Supply chain risks – physical climate-related impacts could also result in supply chain disruptions, either through supplier sites

being directly affected, or by disruption to transportation and energy 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. 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 sustained cost impacts from any introduction of carbon pricing.

These downside scenarios would result in 5-6% reduction of revenue and 5-10% increase in operating costs. 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 £3.7 million, £2.1 million and £4.7 million, respectively. The impacts would still leave
significant headroom and as a result no potential indicator of impairment was identified.

182

183

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

12. Intangible assets

13. Property, plant and equipment

£m

Cost
At 1 January 2022
Additions
Disposals
Transfers
Reclassification from
property, plant and
equipment
Acquisition of subsidiaries
Currency translation
differences
At 31 December 2022
Additions
Disposals
Transfers
Currency translation
differences
At 31 December 2023
Accumulated amortisation
and impairment losses
At 1 January 2022
Amortisation charge
Impairment charge
Disposals
Reclassification from
property, plant and
equipment
Currency translation
differences
At 31 December 2022
Amortisation charge
Impairment charge
Currency translation
differences
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022

* Balance is less than £100,000.

Product
Development
costs

Brand Trademarks Technology

Customer
relationships

Customer
contracts Software

Assets under
development

Total

35.5
0.7
–
5.3

–
–

2.4
43.9
0.3
–
8.5

(1.7)
51.0

27.2
3.3
–
–

0.9
–
–
–

–
0.7

0.2
1.8
–
–
–

*
1.8

0.4
0.2
–
–

–

1.5
32.0
5.0
*

(1.1)
35.9

15.1
11.9

*
0.6
0.2
–

–
0.8

1.0
1.2

1.1
*
–
–

–
*

*
1.1
–
–
–

*
1.1

1.0
–
–
–

–

*
1.0
*
–

*
1.0

0.1
0.1

4.9
–
–
–

–
2.6

0.8
8.3
–
–
–

(0.4)
7.9

2.5
0.9
–
–

–

0.4
3.8
0.8
–

(0.2)
4.4

3.5
4.5

17.4
–
–
–

–
6.1

2.5
26.0
–
–
–

(1.2)
24.8

9.1
2.3
–
–

0.6
–
–
–

–
1.9

0.2
2.7
–
–
–

(0.1)
2.6

0.6
0.7
–
–

–

1.3
12.7
1.6
–

(0.7)
13.6

11.2
13.3

0.1
1.4
0.6
–

(0.1)
1.9

0.7
1.3

8.9
0.3
*
11.8

0.6
*

2.1
23.7
*
(0.2)
1.9

(1.2)
24.2

3.6
1.9
–
*

0.5

0.4
6.4
2.3
–

(0.4)
8.3

15.9
17.3

31.4 100.7
11.9
10.9
*
–
–
(17.1)

–
–

0.6
11.3

3.1

11.3
28.3 135.8
9.5
(0.2)
–

9.2
–
(10.4)

(1.5)
(6.1)
25.6 139.0

–
–
7.8
–

44.4
9.3
7.8
*

–

0.5

0.2
8.0
–
2.5

3.9
65.9
10.5
2.5

(0.5)
10.0

(3.0)
75.9

15.6
20.3

63.1
69.9

£m

Cost
At 1 January 2022
Acquisition of
subsidiaries
Additions
Disposals
Transfers
Reclassification to
intangible assets
Currency translation
differences
At 31 December 2022
Additions
Disposals
Transfers
Currency translation
differences
At 31 December 2023
Accumulated
depreciation
At 1 January 2022
Depreciation charge
Disposals
Transfers
Reclassification to
intangible assets
Currency translation
differences
At 31 December 2022
Depreciation charge
Disposals
Currency translation
differences
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022

* Balance is less than £100,000.

Freehold
land

Buildings

Plant and
equipment

Motor
vehicles

Building
improvements

Assets under
construction

1.5

17.3

30.3

0.3

–
–
–
–

–

0.1
1.6
–
–
–

(0.1)
1.5

–
–
–
–

–

–
–
–
–

–
–

1.5
1.6

*
*
*
–

–

1.7
19.0
0.2
–
–

(1.0)
18.2

4.2
0.6
–
–

–

0.3
5.1
0.5
–

(0.3)
5.3

12.9
13.9

0.8
4.5
(0.5)
0.6

(0.6)

2.9
38.0
3.3
(3.5)
2.4

(2.1)
38.1

19.4
3.7
(0.5)
*

(0.5)

1.8
23.9
3.7
(3.4)

(1.3)
22.9

15.2
14.1

*
–
*
*

–

*
0.3
*
(0.1)
–

*
0.2

0.3
*
*
–

–

*
0.3
*
(0.1)

*
0.2

–
–

7.1

*
0.3
(0.3)
1.0

–

0.8
8.9
0.2
(0.6)
19.2

(0.8)
26.9

3.7
0.8
(0.3)
–

–

0.3
4.5
0.9
(0.6)

(0.2)
4.6

22.3
4.4

1.3

–
2.7
–
(1.6)

–

0.2
2.6
26.9
–
(21.6)

(0.3)
7.6

–
–
–
–

–

–
–
–
–

–
–

7.6
2.6

Total

57.8

0.8
7.5
(0.8)
–

(0.6)

5.7
70.4
30.6
(4.2)
–

(4.3)
92.5

27.6
5.1
(0.8)
*

(0.5)

2.4
33.8
5.1
(4.1)

(1.8)
33.0

59.5
36.6

Assets under construction pertains to cost incurred for the building of Malaysia factory of £7.1 million and renovation of the
office space in North America which is due for completion in 2024 of £0.5 million.

The remaining amortisation period for customer relationships ranges from four to nine years.

The Group’s trademarks used to identify and distinguish the Group’s name and logo have a carrying amount of £0.1 million
(2022: £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 are
tested for impairment on an annual basis.

184

185

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

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 and product development uses. The lease has a lease term of 12 years commencing from 1 April 2023 which includes
options to extend 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 2022
Additions
Acquisition of subsidiaries
Disposals
Depreciation charge
Currency translation differences
At 31 December 2022
Additions
Disposals
Depreciation charge
Currency translation differences
At 31 December 2023

* 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

7.9
38.5
11.4
(2.1)
(3.0)
1.5
54.2
7.1
(0.8)
(4.3)
(2.9)
53.3

0.4
0.5
*
*
(0.2)
*
0.7
0.2
*
(0.2)
*
0.7

Total

8.3
39.0
11.4
(2.1)
(3.2)
1.5
54.9
7.3
(0.8)
(4.5)
(2.9)
54.0

2023

2022

0.2
*
0.2

c. Total cash outflow for all leases in 2023 was £3.6 million (2022: £6.7 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.

15. Subsidiaries
The Group has the following principal subsidiaries as at 31 December 2023 and 2022:

Name of Subsidiary

Country of business/incorporation

Ownership
interest
2023
(%)

Ownership
interest
2022
(%)

UK
Singapore

UK
UK
Switzerland
UK
Italy
Denmark
Sweden
Germany
Germany
Germany
France
Norway
UK
USA
China
Hong Kong
Vietnam
Singapore
Philippines
Malaysia
South Korea
India

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*
XP Power (India) Pte. Ltd.

* Refer to Note 21.

16. Cash and bank balances

£m

Cash at bank and on hand
Short-term bank deposits
Total

100
100

100
100
100
90.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100

2023

13.3
0.1
13.4

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

2023

13.4
–
(1.4)
12.0

100
100

100
100
100
90.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
–

2022

23.2
0.2
23.4

2022

23.4
(0.2)
(1.1)
22.1

186

187

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.

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

17. Inventories

£m

Finished goods
Raw materials
Work in progress
Total

2023

31.3
44.2
16.1
91.6

2022

28.4
53.8
32.2
114.4

The cost of inventories recognised as an expense and included in “cost of sales” amounts to £138.3 million (2022: £129.2 million).

18. Trade receivables

£m

Current assets
Trade receivables
Less: Loss allowance (Note 31(d))
Total

* Balance is less than £100,000.

2023

2022

43.2
(0.1)
43.1

42.4
*
42.4

The average credit period taken on sales of goods is 50 days (2022: 53 days). No interest is charged on the outstanding
receivables balance. The carrying amounts of trade receivables approximates to 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 2023 and 31 December 2022.

20. Trade and other payables

£m

Trade payables
VAT payables
Withholding tax
Accruals for operating expenses
Contract liabilities
Refund liabilities
Total

2023

2022

3.0
0.7
0.6
0.3
3.5
8.1

2023

18.5
1.4
0.1
24.3
3.4
0.6
48.3

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

The Group recognised contract liabilities for payments from customers that are received in advance of the transfer of goods.
Revenue recognised in the current period that was included in the contract liabilities at the beginning of the period amounts to
£2.5 million (2022: £1.3 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.

21. Accrued consideration

£m

At 1 January
Provision made
Payment
At 31 December

* Balance is less than £100,000.

£m

Current
Non-current
At 31 December

2023

2022

1.5
0.2
–
1.7

1.3
0.2
*
1.5

2023

2022

–
1.7
1.7

–
1.5
1.5

As at 31 December 2023, the Group owns 90.6% (2022: 90.6%) of the shares of Powersolve Electronics Limited (“Powersolve”).
In February 2017, the Group acquired 89.9% of the shares in 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.

As at 31 December 2023, the Group owns 66% (2022: 66%) of the shares of Hanpower Co Ltd (“Hanpower”). The Group
acquired an initial 51% of the shares in Hanpower in May 2015 and the Group entered into an agreement on 20 May 2015 with
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.

The commitments 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.

188

189

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

22. Borrowings and lease liabilities

£m

Current
Bank overdrafts
Bank borrowings
Lease liabilities
Total

Non-current
Bank borrowings
Lease liabilities
Total

Undrawn borrowing facilities

£m

Expiring beyond one year
Total

2023

2022

–
0.4
1.4
1.8

125.7
53.3
179.0

2023

73.1
73.1

0.2
–
2.4
2.6

174.2
48.9
223.1

2022

35.7
35.7

The facility has no fixed repayment terms until maturity in 2026. The revolving credit facility denominated in US dollar is priced at
SOFR plus a margin of 1.5%-3.25%, depending on leverage, (2022: 1.2%-2.8%) for the amount that has been drawn down and an
amount of 40% of the margin for the unutilised facility.

There is no drawdown on bank overdrafts denominated in GBP (2022: £0.2 million) during the year.

The fair values of the Group’s bank borrowings and overdrafts approximate to their carrying amounts.

Reconciliation of liabilities arising from financing activities

Non-cash changes

1 January
2023

Proceeds
from
borrowings

Principal
and
interest
payments

Addition
during
the year

Modification
of lease
liability

Disposal
during
the year

Acquisition
arising from
business
combinations

Modification
of revolving
credit facility

Net
interest
expense

Foreign
exchange
movement

31
December
2023

£m

Bank borrowings
Lease liabilities

174.2
51.3

14.5
–

(67.0)
(3.4)

–
6.8

–
(0.6)

–
–

(0.6)
–

12.2
3.1

(7.2)
(2.5)

126.1
54.7

1 January
2022

Proceeds
from
borrowings

Principal
and
interest
payments

Addition
during
the year

Modification
of lease
liability

Disposal
during
the year

Acquisition
arising from
business
combinations

Modification
of revolving
credit facility

Net
interest
expense

Foreign
exchange
movement

31
December
2022

£m

Bank borrowings
Lease liabilities

33.4
8.1

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

23. Derivative financial instruments
Currency forwards
At 31 December 2022, derivative financial instruments comprised the USD/GBP currency forwards used to manage the
exposure from issuance of dividends in GBP. There were no such forwards in place at 31 December 2023.

31 December 2023
£m

Currency forwards (current)

31 December 2022
£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.

Asset

Liability

Contractual
notional
amount

Fair value

–

Fair value

–

Contractual
notional
amount

Fair value

Liability

Contractual
notional
amount

Fair value

–

Asset

3.5

7.1

(0.1)

2023

43.6
1.3
44.9

2022

46.1
*
46.1

As part of the Funding Plan Actions identified in the Chief Financial Officer’s Review, the construction of the new site in Malaysia
has been delayed. Agreement has been reached with the main contractor for the payment of prolongation costs in respect of this
delay. Based on the expected delay and related costs, a provision of £1.1 million has been made in these financial statements and
the charge has been reported as part of Global supply chain transformation in Adjusting terms per Note 4.

a. Legal dispute

£m

At 1 January
Provision made
Currency translation differences
At 31 December 2023

2023

46.1
–
(2.5)
43.6

2022

–
46.9
(0.8)
46.1

As reported in the 2022 Annual Report and Accounts, in March 2022, an award for damages was made against XP for a total
of $40 million in respect of a US legal action brought by Comet Technologies USA Inc., Comet AG, and YXLON International
(“Comet”). Our appeal against the original ruling, which we believe to be well founded, was filed with the Appellate Court in
August 2023 and we have been responding in line with the Appellate Court’s timeline. We expect the appeal to be heard during
2024. Judgement has yet to be received in respect of Comet’s claim for legal fees and interest associated with the case. It is
expected soon. We incurred legal fees of £2.1 million in 2023 and these are reported as an Adjusting item per Note 4. While we
believe we have provided for the worst-case situation, with the pending judgements and future appeals there remain a broad
range of potential outcomes. Further updates will be provided as and when the current position changes.

190

191

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

25. 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
three-month Treasury Bill as published by the Board of Governors of the Federal Reserve System. A management fee of 0.4% of
the bond is calculated on an annualised basis. The bond receivable is restricted until the finalisation of the appeal. The carrying
amount of £36.7 million as at 31 December 2023 is comprises the initial bond value of £34.6 million, plus bond premium of
£0.4 million, interest receivable of £1.8 million less the management fees paid 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 (liabilities)/assets

The movement in the net deferred income tax account is as follows:

£m

Beginning of financial year
Currency translation differences
Acquisition of subsidiaries
Tax (charged)/credited to:
– Profit or loss (Note 8)
– Equity (Note 8)
End of financial year

2023

0.7
(9.3)
(8.6)

2023

4.6
–
–

(13.0)
(0.2)
(8.6)

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 2022
Acquisition of subsidiary
Credited/(charged) to income statement
Debited to equity
Currency translation differences
At 31 December 2022
Charged to income statement
Debited to equity
Currency translation differences
At 31 December 2023

Provision for
legal dispute

Share-based
payment

Tax losses

Lease
liabilities

Others

–
–
11.5
–
*
11.5
(11.0)
–
(0.4)
0.1

2.8
–
(0.7)
(1.5)
–
0.6
*
(0.2)
–
0.4

0.4
–
1.1
–
*
1.5
(1.2)
–
*
0.3

1.8
3.2
7.8
–
0.4
13.2
(8.3)
–
(0.4)
4.5

1.7
–
1.7
–
0.2
3.6
(3.5)
–
(0.1)
–

Total

6.7
3.2
21.4
(1.5)
0.6
30.4
(24.0)
(0.2)
(0.9)
5.3

At 31 December 2023, the Group has unutilised tax losses and other credits of £67.2 million for which no deferred tax benefit
is recognised in the balance sheet due to the current uncertainty as to the Group’s ability to utilise these losses. These tax losses
and capital allowances can be carried forward and used to offset against future taxable income subject to meeting certain
local statutory requirements. Tax losses amounting to £11.0 million can be carried forward indefinitely, losses amounting to
£52.7 million begin to expire in 2029 and losses amounting to £3.5 million begin to expire in 2034.

Deferred income tax liabilities

£m

At 1 January 2022
Acquisition of subsidiaries
Credited/(charged) to income statement
Currency translation differences
At 31 December 2022
Credited/(charged) to income statement
Currency translation differences
At 31 December 2023

* Balance is less than £100,000.

27. Share capital and reserves
a. Share capital

2023
Beginning of financial year
Shares issued
Treasury shares purchased
Treasury shares re-issued
End of financial year

2022
Beginning of financial year
Shares issued
Treasury shares purchased
Treasury shares re-issued
End of financial year

* Balance is less than £100,000.

Accelerated
tax
depreciation

Intangible
assets
amortisation

Lease assets

Others

(2.3)
–
0.4
(0.3)
(2.2)
1.3
0.1
(0.8)

(8.8)
(3.7)
3.5
(1.4)
(10.4)
1.5
0.4
(8.5)

(1.8)
(3.2)
(7.8)
(0.4)
(13.2)
8.3
0.4
(4.5)

–
(0.4)
0.4
*
*
(0.1)
*
(0.1)

Total

(12.9)
(7.3)
(3.5)
(2.1)
(25.8)
11.0
0.9
(13.9)

No. of ordinary shares

Amount

Issued share
capital

Treasury
shares

Share
capital
£m

Treasury
shares
£m

19,742,296
3,946,958
–
–
23,689,254

19,642,296
100,000
–
–
19,742,296

(102,086)
–
(979)
54,182
(48,883)

(92,881)
–
(100,000)
90,795
(102,086)

27.2
44.0
–
–
71.2

27.2
*
–
–
27.2

*
–
*
*
*

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 2023, the Company issued 3,946,958 ordinary shares for a net consideration of £44 million. The newly issued shares rank pari
passu in all aspects with the previously issued shares.

192

193

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

27. Share capital and reserves CONTINUED
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 2023, the Company purchased 979 ordinary shares at 1 pence per share and held under ESOP Trust.

The Company re-issued 54,182 (2022: 90,795) treasury shares during the financial year pursuant to the Company’s ESOP at the
exercise price of ranging from £0.01 to £15.43 (2022: £0.01 to £15.43). The cost of the treasury shares re-issued amounted to
£6,000 (2022: £11,000). 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.

2023

2022

0.4
1.2
1.6

*
1.8
1.8

Accordingly, a gain on re-issue of treasury shares of £1,600,000 (2022: £1,800,000) 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
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, and

•

the value relating to the exercise of share-based payment awards.

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.

2023
£m

At 31 December 2023
At 31 December 2022
Balance sheet movement
Accrued consideration on acquisition
Provision for doubtful debt
Withholding tax payable
Interest accrual movement
Provision for reinstatement costs
Currency translation differences

2022
£m

At 31 December 2022
At 31 December 2021
Balance sheet movement
Acquisition of subsidiaries
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

* Balance is less than £100,000.

Inventories
(Note 17)

Trade
receivables
(Note 18)

Other current
assets
(Note 19)

Trade and
other payables
(Note 20)

Accrued
consideration
(Note 21)

Provisions

91.6
114.4
22.8
–
–
–
–
–
(5.4)
17.4

43.1
42.4
(0.7)
–
*
–
–
–
(1.8)
(2.5)

Trade
and other
receivables
(Note 18)

42.4
30.8
(11.6)
1.1

Inventories
(Note 17)

114.4
74.0
(40.4)
5.9

(34.5)

(10.5)

–
–
–
–
9.7
(24.8)

–
–
–
–
3.2
(7.3)

8.1
8.0
(0.1)
–
–
–
–
–
(0.5)
(0.6)

48.3
52.6
(4.3)
–
–
0.1
–
(0.2)
2.6
(1.8)

1.7
1.5
0.2
(0.1)
–
–
(0.1)
–
*
*

45.9
47.0
(1.1)
–
–
–
–
0.1
2.5
1.5

Other current
assets
(Note 19)

Trade and
other payables
(Note 20)

Accrued
consideration
(Note 21)

Provisions

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

29. Related-party transactions
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

2023

2022

1.9
0.1
0.6
2.6

1.4
0.1
0.2
1.7

Further information about the remuneration of the individual Directors is provided in the Directors’ Remuneration Report on
pages 122–144.

194

195

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

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 ten years from grant date. All options under the SOP are fully vested as at
31 December 2023.

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

2023

2022

Weighted
average
exercise price
per share
option

£15.43
£15.43
£15.43
£15.43
£15.43

Number of
share options

73,677
(10,000)
(25,000)
38,677
38,677

Weighted
average
exercise price
per share
option

£15.43
–
£15.43
£15.43
£15.43

Number of
share options

76,885
–
(3,208)
73,677
73,677

*The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2023 was £23.75 (2022: £32.86).

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

23 February 2016
23 February 2016
Total
Weighted average remaining contractual life of options
outstanding at end of period

Expiry date

Exercise price

10 December 2023
23 February 2026

£15.43
£15.43

Share options
31 December
2023

Share options
31 December
2022

–
38,677
38,677

34,800
38,877
73,677

2.2 year

2.1 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.

196

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

2023

2022

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

59,754
53,408
(31,161)
–
82,001
3,091

£0.01
£0.01
£0.01
–
£0.01
£0.01

86,254
30,471
(21,666)
(35,305)
59,754
3,091

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

# The beginning balance excludes 18,834 awards granted on 22 April 2020 where the EPS condition for the performance period 2020 to 2022 was only partially met
and TSR condition for the performance period from 2020 to 2022 has not been met. This is different from the Remuneration Committee Report, which discloses the
forfeiture in 2023. The forfeited awards during the year include 11,582 awards granted on 3 March 2021 where both the TSR and performance condition for the
performance period 2021 to 2023 has not been 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.

Awards outstanding at the end of the year have the following expiry dates and exercise prices.

Grant date

16 March 20191
22 April 2020
22 April 2020
3 March 2021
10 May 2021
8 March 2022
17 March 2023
14 September 2023
Total

Expiry date

Exercise price

16 March 2024
22 October 2025
22 April 2026
3 March 2027
10 May 2027
8 March 2028
17 March 2029
14 September 2029

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

Shares under
award
31 December
2023

Shares under
award
31 December
2022

3,091
3,039
3,547
–
–
18,916
33,381
20,027
82,001

3,091
3,039
3,547
11,582
8,024
30,471
–
–
59,754

1 50% of the awards vested in 2023 and the remaining 50% will vest in 2024.

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
Assumptions used:
Share price
Exercise price
Expected volatility
Expected option life
Expected dividend yield
Risk-free interest rate

53,408
£11.96 to £18.91
Monte Carlo model and Black–Scholes model

£21.66
£0.01
40.04% to 40.68%
5 years
3.00%
3.28% to 4.28%

197

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

30. Share-based payments CONTINUED
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, 2022 and 2023, 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.

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

2023

2022

Weighted
average
exercise price
per share
under award

Number of
shares under
award

54,887
56,788
(18,744)
(13,272)
79,659
3,657

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

62,781
23,339
(20,026)
(11,207)
54,887
9,515

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

* The weighted average share price at the date of exercise of awards exercised during the year ended 31 December 2023 was £21.78 (2022: £30.90).

Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

16 May 20181
16 March 20192
22 April 2020
3 March 2021
8 March 2022
12 September 2022
13 June 2023
14 September 2023
Total

Expiry date

Exercise price

16 May 2023
16 March 2024
22 April 2024
3 March 2025
8 March 2026
12 September 2026
13 June 2027
14 September 2027

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

Shares under
award
31 December
2023

Shares under
award
31 December
2022

–
2,273
2,769
–
21,710
–
44,942
7,965
79,659

6,026
8,359
4,232
12,931
22,819
520
–
–
54,887

1 These awards are fully vested.

2 50% of the awards vested in 2023 and the remaining 50% will vest in 2024.

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

2023

2022

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

35,877
27,878
(16,902)
(10,406)
36,447
–

–
–
–
–
–
–

61,699
14,732
(18,943)
(21,611)
35,877
414

–
–
–
–
–
–

* The weighted average share price at the date of exercise of awards exercised during the year ended 31 December 2023 was £21.19 (2022: £32.43).

Awards outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date

12 October 2017
16 March 2019
22 April 2020
3 March 2021
8 March 2022
17 August 2022
13 June 2023
14 September 2023
Total

Expiry date

Exercise price

12 October 2022
16 March 2024
22 April 2024
3 March 2025
8 March 2026
17 August 2026
13 June 2027
14 September 2027

–
–
–
–
–
–
–
–

Shares under
award
31 December
2023

Shares under
award
31 December
2022

–
–
–
–
10,937
966
23,341
1,203
36,447

300
6,242
5,134
9,746
13,489
966
–
–
35,877

198

199

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

30. Share-based payments CONTINUED
Restricted Share Awards

Set out below are summaries of Restricted 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

2023

2022

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

9,461
24,438
(1,834)
(202)
31,863
–

£0.01
£0.01
£0.01
£0.01
£0.01
–

3,912
6,523
(974)
–
9,461
–

£0.01
£0.01
£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
8 March 2022
12 September 2022
13 June 2023
14 September 2023
Total

RSUs

Expiry date

Exercise price

Shares under
award
31 December
2023

Shares under
award
31 December
2022

22 April 2024
3 March 2025
8 March 2026
12 September 2026
13 June 2027
14 September 2027

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

1,376
1,299
4,701
1,302
17,496
5,689
31,863

1,639
1,299
4,701
1,822
–
–
9,461

Set out below are summaries of 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

2023

2022

Weighted
average
exercise price
per share
under award

Number of
shares under
award

28,227
32,942
(12,616)
(1,046)
47,507
–

–
–
–
–
–
–

1,623
26,742
(138)
–
28,227
–

–
–
–
–
–
–

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
26 August 2022
12 September 2022
21 November 2022
13 June 2023
14 September 2023
Total

Fair value of awards

Expiry date

Exercise price

22 April 2024
3 March 2025
8 March 2026
17 August 2026
26 August 2026
12 September 2026
21 November 2026
13 June 2027
14 September 2027

–
–
–
–
–
–
–
–
–

Shares under
award
31 December
2023

Shares under
award
31 December
2022

–
433
10,698
483
2,116
1,041
6,463
25,654
619
47,507

1,046
577
14,554
483
2,116
1,041
8,410
–
–
28,227

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

Assumptions 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

RSU

56,788
£12.50 to £20.08
Monte Carlo model and
Black–Scholes model

27,878
£12.50 to £20.08
Monte Carlo model and
Black–Scholes model

24,438
£18.49 to £21.24

32,942
£18.49 to £21.24
Black–Scholes model Black–Scholes model

£21.89 to £21.97
£0.01
39.4% to 68.85%
3 years
3.00%
4.28% to 4.43%

£21.89 to £21.97
–
39.4% to 68.85%
3 years
3.00%
4.28% to 4.43%

£20.01 to £21.32
£0.01
38.99% to 45.34%
3 years
3.00%
4.28% to 4.43%

£20.01 to £21.32
–
38.99% to 45.34%
3 years
3.00%
4.28% to 4.43%

200

201

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

30. 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

2023

2022

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

9,753
7,189
(2,647)
14,295
–

£0.01
£0.01
£0.01
£0.01
–

6,230
4,080
(557)
9,753
–

£0.01
£0.01
£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
22 April 2020
3 March 2021
10 May 2021
8 March 2022
17 March 2023
14 September 2023
Total

Fair value of awards

Expiry date

Exercise price

Shares under
award
31 December
2023

Shares under
award
31 December
2022

22 October 2025
22 April 2026
3 March 2027
10 May 2027
8 March 2028
17 March 2029
14 September 2029

£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01

1,263
1,712
1,495
–
2,636
4,686
2,503
14,295

1,263
1,712
1,495
1,203
4,080
–
–
9,753

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
Assumptions 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.

7,189
£18.49 to £18.91

£21.48 to £21.97
£0.01
40.05% to 40.68%
5 years
3.00%
3.28% to 4.28%

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 is as follows:

£m

GBP

EUR

USD

SGD

Others

Total

At 31 December 2023
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
Accrued consideration
Subtotal
Net financial assets/(liabilities)
Currency profile
Financial (assets)/liabilities denominated
in the respective entities’ functional
currencies
Currency exposure of financial
(liabilities)/assets

* Balance is less than £100,000.

2.1
2.0
–
*
*
4.1

*
(2.5)
(0.4)
*
(0.9)
(3.8)
0.3
0.3

(0.5)

(0.2)

1.7
4.3
–
0.3
–
6.3

–
(2.1)
(13.3)
(0.2)
–
(15.6)
(9.3)
(9.3)

9.8

0.5

8.2
36.6
36.7
3.7
–
85.2

(126.1)
(35.1)
(37.3)
(44.5)
–
(243.0)
(157.8)
(157.8)

0.3
*
–
*
–
0.3

–
*
(3.6)
(0.1)
–
(3.7)
(3.4)
(3.4)

1.1
0.2
–
0.2
–
1.5

–
(3.7)
(0.1)
(1.1)
(0.8)
(5.7)
(4.2)
(4.2)

13.4
43.1
36.7
4.2
*
97.4

(126.1)
(43.4)
(54.7)
(45.9)
(1.7)
(271.8)
(174.4)
(174.4)

162.6

–

2.9

174.8

4.8

(3.4)

(1.3)

0.4

202

203

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

31. Financial risk management CONTINUED

£m

GBP

EUR

USD

SGD

Others

Total

Another subsidiary, with EUR as its functional currency, has significant currency exposure to financial assets and liabilities
denominated in USD. If EUR changes against USD by 2.0% (2022: 10.7%) 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:

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
Accrued consideration
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.

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

Within the Group, the Company, with US dollar as its functional currency, has significant currency exposure to financial assets
and liabilities denominated in sterling and SG dollar. If the sterling and SG dollar change against US dollar by 0.5% and 2.7%
respectively (2022: sterling 10.2%, SG dollar 2.8%) 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:

2023
Profit
after tax

2022
Profit
after tax

*
*

0.1
(0.1)

0.7
(0.7)

(0.1)
0.1

GBP against USD
– Strengthened
– Weakened
SGD against USD
– Strengthened
– Weakened

204

USD against EUR
– Strengthened
– Weakened

* Balance is less than £100,000.

2023
Profit
for the year

2022
Profit
for the year

(0.1)
0.1

0.3
(0.3)

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 US dollar. The SOFR rate as of
31 December 2023 was 5.3%. In January 2024, the Group purchased an interest rate cap such that the interest payable on
100 million sterling of the Group’s borrowing is capped at 5.5%, effective 2 April 2024. If the US dollar interest rates on the
year end borrowings decreased by 1.0% (2022: 1.0%) with all other variables, including tax rates, being held constant, the profit
for the year will be higher by £1.0 million (2022: £1.1 million) as a result of lower interest expense on these borrowings. If the
US dollar interest rates on the year end borrowings increased by 1.0% (2022: 1.0%) with all other variables, including tax rates,
being held constant, the profit for the year will be lower by £0.4 million (2022: £1.1 million) as a result of lower interest expense
on these borrowings and the impact of the cap purchased.

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 has 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

2023

0.1
(0.1)
–

2022

*
*
–

205

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

31. Financial risk management CONTINUED
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 2023
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%
18.7
–

0.0%
8.0
–

0.0%
4.9
–

0.1%
6.9
*

0.1%
2.0
*

0.0%
1.0
–

0.2%
0.8
*

0.2%
0.1
*

0.0%
0.4
–

0.2%
*
*

0.2%
0.1
*

0.0%
*
–

0.3%
*
*

0.0%
*
–

2.2%
0.2
*

3.7%
0.1
*

0.0%
*
–

26.6
*

10.3
*

6.3
–

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 forecasts on a 20 weeks outlook basis and review them on a
weekly basis with management.

At the balance sheet date, assets held by the Group and the Company for managing liquidity risk included cash and short-term
deposits are 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. The current facility has
not changed during 2023 and remains at US$255 million. The RCF facility is in place up to June 2026 and there is an option to
extend for a further one year to June 2027 subject to lender consent. The facility has no fixed repayment terms until maturity.
The revolving loan is priced based on the Secured Overnight Financing Rate (SOFR) administered by the Federal Reserve Bank
of New York plus a margin. The current margins for the utilisation facility range from 1.5–3.25%, depending on the Net Debt:
Adjusted EBITDA ratio for the previous quarter and a margin of 40% of the utilisation facility margin for the unutilised facility.

The main features of the RCF are as follows:

• The interest rate on the amounts drawn under the facility is determined as USD SOFR plus margin depending on

leverage ratio.

£m

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

The covenants to 31 December 2023 include:

Past due

• Market standard financial covenants of the facility, as discussed below.

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

* Balance is less than £100,000.

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%
*
*

0.0%
*
–

0.3%
*
*

0.3%
0.1
*

0.0%
–
–

0.1%
0.3
*

10.8%
0.1
*

0.0%
*
–

24.1
*

12.4
*

5.9
–

The movement in the allowance for impairment of trade receivables is as follows:

£m

At 1 January
Loss allowance(a) recognised in profit or loss during the year on assets acquired/originated
Receivables written off as uncollectible
Currency translation differences
At 31 December

(a) Loss allowance measured at lifetime ECL.

* Balance is less than £100,000.

2023

2022

*
(0.1)
*
*
(0.1)

*
*
–
*
*

• The ratio of net debt to consolidated EBITDA permitted under the revolving credit facility must not exceed a multiple of 3.5x

until 31 December 2024, returning to a multiple of 3x thereafter.

• Consolidated EBITDA must also cover relevant finance charges by a minimum of 3x until 30 September 2025, returning to a

multiple of 4x thereafter.

For covenant testing purposes, the Group’s definition of consolidated EBITDA is adjusted to exclude certain items as detailed in
Note 4. 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 2023 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 cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is
not significant.

206

207

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

31. Financial risk management CONTINUED

£m

Group
At 31 December 2023
Trade and other payables
Lease liabilities
Accrued consideration
Borrowings, including interest
Total
At 31 December 2022
Trade and other payables
Lease liabilities
Accrued consideration
Borrowings, including interest
Total

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over
5 years

43.4
4.7
–
11.9
60.0

44.9
2.9
–
12.6
60.4

–
5.8
1.7
11.0
18.5

–
4.1
–
11.6
15.7

–
13.8
–
136.6
150.4

–
14.6
1.5
195.7
211.8

–
83.0
–
–
83.0

–
68.7
–
–
68.7

Total

43.4
107.3
1.7
159.5
311.9

44.9
90.3
1.5
219.9
356.6

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 2023
£m

Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
As at 31 December 2022
£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.

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.

2023

–
(1.7)
97.4
(270.1)

2022

*
(1.6)
103.9
(317.5)

h. Offsetting financial assets and financial liabilities
The Group has no financial instruments subject to enforceable master netting arrangements.

32. Information
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of XP Power
Limited on 4 March 2024.

208

209

NOTES TO THE COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023

£’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
Other reserve
Retained earnings
TOTAL EQUITY

* Balance is less than £1,000.

Note

2023

2022

36
37
38
39
40

35
41
42
43
46

45
47
39

48
48
48

3,264
89,728
849
–
16,188
110,029

46,630
2,308
3,235
33,167
7,070
92,410
202,439

43,094
3,472
–
341
–
46,907

5,760
295
3,220
9,275
56,182
146,257

73,778
512
17,931
899
53,137
146,257

9,337
91,767
3,570
56
15,078
119,808

49,258
2,690
3,832
36,267
7,468
99,515
219,323

112,307
3,217
129
329
11
115,993

6,085
96
3,703
9,884
125,877
93,446

29,775
1,377
25,358
–
36,936
93,446

33. 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.

34. 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.

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.

a. Changes in accounting policy and disclosures
i New and amended standards adopted by the Group

On 1 January 2023, 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 2023
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.

210

211

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

35. 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

36. Cash and bank balances

£’000

Cash at bank
Total

Places of
business/
country of
incorporation

UK
Singapore

The Company’s cash at bank is denominated in the following currencies:

At 31 December 2023
At 31 December 2022

GBP
£’000

381
224

USD
£’000

1,784
8,443

EUR
£’000

838
411

SGD
£’000

258
256

37. Trade and other receivables

£’000

Trade receivables
Trade receivables from subsidiaries
Other receivables from subsidiaries
Loan receivables from a subsidiary
Total

2023

2022

49,258
(2,628)
46,630

43,928
5,330
49,258

Ownership
interest
2023
%

Ownership
interest
2022
%

100
100

2023

3,264
3,264

JPY
£’000

3
3

2023

6,295
6,135
22,467
54,831
89,728

100
100

2022

9,337
9,337

TOTAL
£’000

3,264
9,337

2022

5,426
9,571
21,155
55,615
91,767

The average credit period taken on sales of goods to third party is 50 days (2022: 54 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 SOFR plus 2.0% p.a.

Trade and other receivables from subsidiaries are interest free.

38. Other current assets

£’000

Prepayments
Deposit
VAT receivables
Other receivables
Total

2023

360
18
437
34
849

2022

514
33
3,013
10
3,570

39. 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 and fair values of these currency forwards are as follows:

31 December 2023
£’000

Currency forwards (current)

31 December 2022
£’000

Currency forwards (current)

40. Inventories

£’000

Finished goods

Assets

Liabilities

Contractual
notional
amount

Fair value

–

Fair value

–

Assets

Liabilities

Contractual
notional
amount

Fair value

3,500

7,050

(129)

2023

16,188

2022

15,078

212

213

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

41. Property, plant and equipment

43. Intangible assets

£’000

Cost
At 1 January 2022
Additions
Disposals
Transfer
Currency translation differences
At 31 December 2022
Additions
Disposals
Transfer
Currency translation differences
At 31 December 2023
Accumulated depreciation
At 1 January 2022
Depreciation charge
Disposal
Currency translation differences
At 31 December 2022
Depreciation charge
Disposal
Currency translation differences
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022

Freehold
land

Building

Plant and
equipment

Motor
vehicles

Building
improvements

Assets under
construction

215
–
–
–
27
242
–
–
–
(13)
229

–
–
–
–
–
–
–
–
–

1,731
–
–
–
210
1,941
–
–
–
(104)
1,837

681
57
–
85
823
57
–
(45)
835

229
242

1,002
1,118

1,861
458
(167)
–
248
2,400
67
(44)
–
(129)
2,294

1,548
158
(162)
191
1,735
189
(44)
(97)
1,783

511
665

41
–
–
–
5
46
–
–
–
(3)
43

41
–
–
5
46
–
–
(3)
43

–
–

511
–
(312)
650
143
992
–
–
5
(52)
945

491
84
(312)
64
327
71
–
(19)
379

566
665

240
415
–
(650)
(5)
–
5
–
(5)
–
–

–
–
–
–
–
–
–
–
–

–
–

Total

4,599
873
(479)
–
628
5,621
72
(44)
–
(301)
5,348

2,761
299
(474)
345
2,931
317
(44)
(164)
3,040

2,308
2,690

Assets under construction in 2022 pertains to costs incurred for the renovation of office space which was completed in 2023.

42. Right-of-use assets

£’000

At 1 January 2022
Depreciation charge
Modification of lease liability
Disposal
Currency translation differences
At 31 December 2022
Depreciation charge
Modification of lease liability
Disposal
Currency translation differences
At 31 December 2023

214

Leasehold
land and
buildings

4,515
(535)
(703)
(4)
559
3,832
(402)
–
–
(195)
3,235

£’000

Cost
At 1 January 2022
Additions
Transfer
Currency translation differences
At 31 December 2022
Additions
Disposal
Transfer
Currency translation differences
At 31 December 2023
Accumulated amortisation and impairment losses
At 1 January 2022
Amortisation charge
Impairment charge
Currency translation differences
At 31 December 2022
Amortisation charge
Impairment charge
Currency translation differences
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022

Product
development
costs

Trademarks

Intangible
software

Assets under
development

15,444
402
1,760
1,880
19,486
83
–
7,399
(1,205)
25,763

12,792
1,563
–
1,594
15,949
3,061
–
(906)
18,104

7,659
3,537

85
–
–
10
95
–
–
–
(5)
90

–
–
–
–
–
–
–
–
–

6,371
278
11,847
1,760
20,256
(84)
(158)
1,903
(1,126)
20,791

1,397
1,680
–
201
3,278
2,077
–
(223)
5,132

19,576
8,052
(13,607)
1,729
15,750
6,068
–
(9,302)
(765)
11,751

–
–
90
3
93
–
1,935
(36)
1,992

90
95

15,659
16,978

9,759
15,657

Total

41,476
8,732
–
5,379
55,587
6,067
(158)
–
(3,101)
58,395

14,189
3,243
90
1,798
19,320
5,138
1,935
(1,165)
25,228

33,167
36,267

The Company’s trademarks used to identify and distinguish the Company’s name and logo have a carrying amount of £90,000
(2022: £95,000). 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 are
tested for impairment on an annual basis.

44. Deferred income tax liabilities
The movement in deferred income tax liabilities during the financial year is as follow:

£’000

At 1 January 2022
Credited/(charged) to profit or loss
Currency translation differences
At 31 December 2022
(Charged)/credited to profit or loss
Currency translation differences
At 31 December 2023

Accelerated
tax
depreciation

Intangible
assets
amortisation

(531)
359
(51)
(223)
(17)
12
(228)

(3,794)
(1,433)
(513)
(5,740)
38
306
(5,396)

Others

(133)
(1)
12
(122)
(17)
3
(136)

Total

(4,458)
(1,075)
(552)
(6,085)
4
321
(5,760)

215

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

45. Trade and other payables

£’000

Trade payables
VAT payables
Withholding tax
Accruals for operating expenses
Contract liabilities
Amount payable to subsidiaries
Total

2023

1,534
622
41
5,454
944
34,499
43,094

2022

2,983
3,321
241
5,459
1,434
98,869
112,307

Amount payable to subsidiaries includes advances from subsidiaries amounting to £7,096,000 (2022: £6,402,000), which pertain
to cash pooling arrangements and are unsecured, repayable on demand and bear interest ranging from 1.5% to 3.0% p.a.

The Company borrows from subsidiaries at an interest rate of 1.5%–2.3% above SONIA or 2.3% above ESTR. The borrowing is
repayable on demand. The outstanding amount as at year end is £4,512,000 (2022: £79,160,182).

46. Long-term receivable

£’000

Loans to subsidiaries
Total

2023

7,070
7,070

2022

7,468
7,468

Loans to subsidiaries are unsecured and denominated in the USD. The loans are repayable on demand and bear interest at SOFR
plus 2.3% p.a.

47. 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

2023

3,217
(284)
(2,724)
3,585
(322)
3,472

2022

1,422
172
(1,050)
2,861
(188)
3,217

48. Share capital and reserves
a. Share capital

2023

Beginning of financial year
Shares issued
End of financial year

2022
Beginning of financial year
Shares issued
End of financial year

No of
ordinary
shares

19,742,296
3,946,958
23,689,254

19,642,296
100,000
19,742,296

Amount
£’000

29,775
44,003
73,778

29,774
1
29,775

In 2023, the Company issued 3,946,958 ordinary shares for a net consideration of £44,003,000. The newly issued shares rank
pari passu in all aspects with the previously issued shares.

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
Share options exercised
Currency translation differences
Balance at 31 December

2023

1,377
96
(899)
(62)
512

2022

951
310
–
116
1,377

c. Translation reserve
Translation reserve represents exchange differences arising from the translation of financial statements of foreign transactions
and balances whose 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

2023

25,358
(7,427)
17,931

2022

16,386
8,972
25,358

2023

36,936
(14,812)
31,013
53,137

2022

37,951
(18,570)
17,555
36,936

216

217

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE
NOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

49. 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 48.

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.

The Company’s currency exposure is as follows:

GBP

EUR

USD

SGD

MYR

Others

Total

381
13,365
–
–
13,746

(17,707)
–
–
(17,707)
(3,961)
–

838
1,095
–
–
1,933

(4,703)
–
–
(4,703)
(2,770)
–

1,785
71,412
37
7,070
80,304

(18,336)
–
(198)
(18,534)
61,770
–

258
94
7
–
359

(632)
(3,561)
(97)
(4,290)
(3,931)
–

–
3,686
8
–
3,694

(17)
–
–
(17)
3,677
–

2
76
–
–
78

(92)
–
–
(92)
(14)
–

3,264
89,728
52
7,070
100,114

(41,487)
(3,561)
(295)
(45,343)
54,771
–

At 31 December 2023
£’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 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

GBP

EUR

USD

SGD

MYR

Others

Total

224
77
–

301

(12,444)
–
–
(12,444)
(12,143)
10,550

411
2,673
4
–
3,088

(500)
–
–
(500)
2,588
–

8,443
84,814
2
7,468
100,727

(92,771)
–
(11)
(92,782)
7,945
–

255
86
29
–
370

(1,567)
(4,032)
(96)
(5,695)
(5,325)
–

–
4,052
8
–
4,060

–
–
–
–
4,060
–

(1,593)

2,588

7,945

(5,325)

4,060

–

7,945

–

(1,593)

2,588

–

(5,325)

4,060

4
65
–
–
69

(29)
–
–
(29)
40
–

–

9,337
91,767
43
7,468
108,615

(107,311)
(4,032)
(107)
(111,450)
(2,835)
10,550

7,715

7,945

(230)

If the SG dollar and Malaysian ringgit change against US dollar by 2.7% and 3.5% respectively (2022: SG dollar 2.8% and 6.0%)
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

2023
Profit
after tax

2022
Profit
after tax

(94)
94

117
(117)

(121)
121

198
(198)

(3,961)

(2,770)

61,770

(3,931)

3,677

(14)

54,771

The impact of the currency risk on the other comprehensive income is not significant.

–

61,770

–

61,770

(3,961)

(2,770)

–

(3,931)

3,677

(14)

(6,999)

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.

The Company lends to subsidiaries at SOFR plus 2-2.3%. If the average interest rate on this loan increased/decreased by 1%
with all other variables, including tax rates, being held constant, the profit for the year will be higher/lower by £548,000 (2022:
£556,000) as a result of higher/lower interest income on this loan.

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%–2.3% above SONIA for one loan and 2.3% above ESTR
for another loan. If the average interest rates on these borrowings increased/decreased by 0.87% (2022: 4.6%) with all other
variables, including tax rates, being held constant, the profit for the year will be lower/higher by £442,232 (2022: £2,732,647)
as a result of higher/lower interest expense on these borrowings.

218

219

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCE

NOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

49. 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
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 and are substantially with companies with a good payment track record.

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 is 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

At 31 December 2023
Expected loss rate
Trade receivables
Loss allowance

0%
4,889
–

0%
4,015
–

0%
2,622
–

0%
417
–

0%
363
–

0%
124
–

12,430
–

Past due

£’000

Current

1–30 days

31–60 days

61–90 days

91–120 days

>120 days

Total

At 31 December 2022
Expected loss rate
Trade receivables
Loss allowance

0%
5,636
–

0%
7,036
–

0%
1,074
–

0%
703
–

0%
267
–

0%
281
–

14,997
–

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 £7,070,000 (2022: £7,468,000) 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 computes 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 three-stage general approach. These four categories reflect the respective credit risk and how the loss provision
is determined for each of those categories.

Performing

Underperforming

Non-performing

Write off

Category of internal
credit rating

Definition of category

Issuers have a low
risk of default and a
strong capacity to meet
contractual cash flows

Basis of recognition of
expected credit loss

12-month expected
credit losses

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
Lifetime expected
credit losses

Interest and/or principal
payments are 90 days
past due

Interest and/or principal
repayments are 120 days
past due and there is no
reasonable expectation
of recovery

Lifetime expected
credit losses

Asset is written off

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 2023
Trade and other payables
Lease liabilities
Total

£’000

At 31 December 2022
Trade and other payables
Lease liabilities
Total

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over
5 years

41,487
527
42,014

–
537
537

–
1,616
1,616

–
1,754
1,754

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over
5 years

107,311
541
107,852

–
549
549

–
1,682
1,682

–
2,382
2,382

Total

41,487
4,434
45,921

Total

107,311
5,154
112,465

The Company manages the liquidity risk by maintaining sufficient cash and bank facilities to enable it to meet its normal
operating commitments.

220

221

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCENOTES TO THE COMPANY BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2023

FIVE-YEAR REVIEW
CONSOLIDATED INFORMATION

49. Financial risk management CONTINUED
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 2023
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
As at 31 December 2022
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments

Level 1

Level 2

Level 3

Total

–

(129)

–

(129)

g. Financial instruments by category
The carrying amount of the different categories of financial instruments is as follows:

£’000

Financial assets, at FVPL
Financial liabilities, at FVPL
Financial assets, at amortised cost
Financial liabilities, at amortised cost

h. Offsetting financial assets and financial liabilities
The Company has no financial instruments subject to enforceable master netting arrangements.

2023

2022

–
–
100,114
(45,343)

56
(129)
108,615
(111,450)

Results
Revenue
Profit/(loss)from operations
Profit/(loss) 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)

2023
£m

316.4
24.5
11.2

254.3
192.0
(100.0)
(191.0)
155.3

154.6
0.7
155.3

(45.4)
81.9
(45.3)
81.8

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

2,680.0
776.0
18.0

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

222

223

XP Power Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCEADVISERS

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

224

The 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.

The 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 Annual Report & Accounts for the year ended 31 December 2023XP Power Annual Report & Accounts for the year ended 31 December 2023OVERVIEWSTRATEGIC REPORTOUR FINANCIALS OUR GOVERNANCEXP POWER LIMITED
19 Tai Seng Avenue, #07-01, Singapore 534054
T: +65 6411 6900 F: +65 6479 6305