XP Power (LON:XPP) said it entered 2025 expecting soft end markets, particularly in the first half, but saw customer order intake improve as the year progressed. Management highlighted a second-half recovery in activity levels, stronger profitability versus the first half, and continued strong cash conversion, while also outlining near-term headwinds from export license expiries and the planned exit from its RF business.
Order intake improved while full-year revenue declined
The company reported full-year order intake of GBP 225.9 million, up 28% in constant currency, with growth described as consistently strong through the year and broadly based across its three market sectors. Revenue for the year was GBP 230.1 million, down 4% in constant currency, with an additional 3% decline from currency movements, particularly due to a weaker U.S. dollar.
Profitability improved sharply in the second half
Adjusted gross margin expanded 170 basis points year-on-year to 42.7%. Management said expanding gross margin during a year of revenue decline helped protect profitability and supported confidence in returning to a mid-40% gross margin range as revenue recovers.
Adjusted operating profit for the full year was GBP 17.3 million, which the company said was in line with expectations. The company emphasized the step-up between halves, with operating profit rising from GBP 4.8 million in the first half to GBP 12.5 million in the second half, aided by cost actions and easing foreign exchange headwinds. In the second half, adjusted gross margin reached 43.9%, up 250 basis points from the first half, while operating expenses fell 3% sequentially to GBP 39.8 million.
For the full year, operating expenses increased 6% to GBP 80.9 million, driven by non-discretionary items. The company attributed the increase to foreign exchange movements, accounting entries related to capitalization and amortization of product development, and inflation, while stating discretionary spending remained tightly controlled and cost efficiencies helped offset inflation.
Adjusted EPS was 22.5p, which management said was generated almost entirely in the second half. Finance costs declined to GBP 7.8 million due to lower borrowings and a lower Fed funds rate, while the effective tax rate came in higher than expected because lower group profits increased the risk of unrelieved tax losses in individual jurisdictions. Management said it expects the effective tax rate to move back toward the low-20% range as profits recover.
Cash conversion remained strong; leverage declined
XP Power highlighted strong cash discipline, reporting operating cash conversion of 225%. Management said it converted GBP 17.3 million of operating profit into nearly GBP 39 million of operating cash, with inventory management a key driver. Inventory fell 20% to GBP 57 million, which the company said is now optimized for current activity levels and should be expected to rise as markets recover.
Net debt ended the year at GBP 41.5 million, or 1.2x EBITDA. The company said operating cash generation and a share placing in March reduced leverage from 2.3x to 1.2x EBITDA.
Capital spending on physical assets totaled GBP 7.3 million, including GBP 6.3 million related to construction of the Malaysia manufacturing facility, which is now complete. A final building payment of GBP 7 million is expected in the first half of 2026. XP Power also said it received GBP 1.5 million in U.S. CHIPS Act funding for its Silicon Valley Innovation Center.
End-market commentary: semiconductors, industrial tech, and healthcare
Management said order growth was strongest in industrial technology and healthcare as customers prepared to end destocking. Order intake from semiconductor manufacturing equipment customers rose (management described growth of about 2%–10%), with strengthening from the first half to the second half amid signs of a recovery in the semiconductor market.
- Semiconductors: Sales to semiconductor customers fell 7% year-on-year, which management said reflected a tough comparison tied to backlog clearance within the company’s high voltage, high power (HVHP) business. XP Power pointed to forecasts for wafer fabrication equipment to rise 10%–20% in 2026, and said it is seeing increasing orders for existing and new projects, expecting improvement through 2026 and into 2027. Lead times in the semiconductor market were described as roughly 10 to 12 weeks, with customers providing longer indications.
- Industrial technology: The company said industrial technology represented 38% of group revenue in 2025. Revenue in the segment declined 5%, driven by lower OEM demand due to ongoing destocking, partly offset by increased distributor sales as distributor destocking neared completion, particularly in the U.S. Management said 2025 orders in industrial technology were up 34% and indicated recovery is underway.
- Healthcare: Healthcare revenue grew slightly despite continued destocking in the first half, which management attributed to innovation-driven demand from U.S. medical technology customers. The company cited applications such as pulsed field ablation and said it believes channel inventory is approaching normalized levels and underlying demand remains strong. Management also stated order intake was 48% higher in 2024.
Portfolio actions, Malaysia ramp, and 2026 outlook
The company reiterated its focus on low- and high-voltage markets and said it will exit the RF market following U.S. export controls announced in late 2024 that reduced the RF division’s financial contribution. Management characterized RF as having lower margins and returns than the group average and said it will exit over the next roughly three years while fulfilling customers’ final delivery requirements.
XP Power also said it completed construction of the Malaysia manufacturing facility and closed the Kunshan, China site. Executives described Malaysia as a purpose-built facility and said the location improves the ability to serve the U.S. market, noting some U.S. customers would not accept products made in China. Equipment and inventory from China have already been shipped, according to management.
On the Malaysia timeline, management said it expects to start production at the beginning of the second half of 2026, with sample activity in the third quarter and first revenue beginning in the fourth quarter. The company noted that Malaysia is not essential to delivering the current year’s revenue expectations and is more strategically important longer term, adding that it plans additional capacity in Vietnam in 2026.
For 2026, management said it expects profit growth with progress weighted to the second half, citing two main factors: a first-half headwind from the expiry of export licenses preventing further sales to China semiconductor customers, and a second-half tailwind from improving markets, particularly broader semiconductor demand. Sales to China semiconductor customers totaled GBP 6.2 million in 2025 and will not continue in 2026.
Management provided several modeling assumptions for 2026, including:
- Operating expenses expected to grow around 5%, including 2% from normalized variable pay as performance improves
- Effective tax rate expected to reduce to around 25%
- Cash conversion expected to remain above 100%
- Total CapEx expected to be around GBP 20 million, including product development and final Malaysia building payments plus initial fit-out
In the Q&A, management indicated a “normal” working capital to sales ratio of roughly 30% going forward, after reducing buffer inventory built during and after COVID. On dividends, executives said they would consider the policy and approach during 2026 and update the market as it gets closer to potential distributions.
About XP Power (LON:XPP)
XP Power Limited, an investment holding company, designs, manufactures, and sells power supply solutions in Europe, North America, and Asia. The company offers AC-DC power supplies, DC-DC converters, high voltage AC-DC power supplies, high voltage DC-DC converters, RF power systems, EMI filters, custom power supplies, and 3 phase power supplies. It also provides engineering services. The company serves healthcare, industrial technology, and semiconductor equipment manufacturing industries. XP Power Limited was founded in 1988 and is based in Singapore.
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