XP Power warns of tough conditions, shores up balance sheet

(Sharecast News) - XP Power warned on Tuesday that US trade restrictions were likely to weigh heavily on trading, prompting it to raise fresh funds. The firm, which develops power control solutions for highly specialised sectors, raised £40m through a share placing. It is also seeking to raise a further £2m through a retail offer.

Proceeds will be used to both build and fit out XP Power's Malaysia facility and to help shore up the balance sheet.

Gavin Griggs, chief executive, said: "We are seeing continued challenging market conditions, and recent US trade restrictions are causing headwinds for sales to semiconductor manufacturing equipment customers in China, which we expect to result in a sequentially weaker first half.

"We expect demand to improve as the year progresses, but the timing and scale of recovery remains hard to predict.

"The relative lack of visibility has led the board to prudently strengthen the balance sheet with a £40m share placing, providing additional financial headroom while the timing of the market recovery remains uncertain."

The placing came as XP Power posted numbers year to December end. They showed a 10% fall in orders on a constant currency basis, to £181.6m, while revenues were 20% lower at £247.3m.

Pre-tax profits slumped 46% at £13.8m.

Orders in the semiconductor manufacturing equipment sector performed well, rising 37%.

However, destocking continued in the industrial technology and healthcare sectors, although XP Power noted that channel inventory was now moving "closer to equilibrium".

Griggs said: "2024 was a mixed year. Importantly, our execution significantly improved, delivering greater operational efficiency, an upgraded supply chain capability, lower costs and substantial cash generation primarily driven by a reduction in working capital."

But he conceded: "Market conditions were more challenging than expected."

As at 1315 GMT, shares in XP Power were down 7% at 954p.