In-house designs boost margins at XP Power

The power controller manufacturer, XP Power, said record levels of new product investment and product launches in 2011 are starting to pay dividends.

The company has announced a 25% increase in its final dividend on the back of a rise in profits before tax of 30% in full year 2011. The full year dividend rises from 33p in 2010 to 45p.

Revenues at the firm, which designs solutions for the industrial, healthcare and technology sectors, rose 13% compared to 2010, to £103.6m from £91.8m the year before.

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Adjusted profit before tax climbed to £24.3m from £18.7m in 2010.

XP launched 38 new products during 2011 and also completed the building of a new manufacturing site in Vietnam, where operations have now started.

The company's Executive Chairman, Larry Tracey, highlighted the development of new products as key to growing market share, earnings and dividends over the next five years.

XPP said products of its own design now account for 57% of total revenues, up from 48% the year before, and this contributed to an improvement in gross margins in 2011 to 49.1% from 2010's 48.0%.

Net debt at the year end was £18.6m compared to £18.4m at the end of 2010. Operating cash flow was £16.0m, versus £10.3m in 2010, representing 63% of 2011's operating income.

While feeling pretty pleased with itself on the whole, the company did strike a note of caution, observing that bookings in the last quarter of 2011 from existing programmes were soft, and there is evidence of customers delaying orders.

"We remain confident about the fundamental medium term growth drivers which

underpin the markets in which we operate. With the successful transition of

its business model to higher margin, own IP [intellectual property] product sales and the continued development of a state of the art independent manufacturing capability and further vertical integration, XP Power remains in a strong position to capitalise on its growth ambitions," claimed Duncan Penny, Chief Executive of XPP.

The stock had gained 3.4% by 11.43am. Over the last year XP shares have fallen 31%.

BS