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XP Power Ltd. — Audit Report / Information 2021
Mar 25, 2022
10273_10-k_2022-03-25_19b0cc4d-5702-4fee-ab65-fc87efd4f270.html
Audit Report / Information
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ANNUAL REPORT
AND ACCOUNTS
for the year ended
31 December 2021
30801-XP-Power AR21-Strategic.indd 330801-XP-Power AR21-Strategic.indd 3 08/03/2022 10:56:3608/03/2022 10:56:36
We provide our customers with solutions to
power their critical systems.
WE ARE BUILDING RESILIENCE, AND GROWING SUSTAINABLY:
SEE PAGE
FOR MORE INFORMATION
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We have delivered a robust
performance in a year of ongoing global
challenges, delivering record orders
and growing revenue, whilst continuing
to invest in the business by adding
capacity, developing new products and
increasing our global workforce.”
GAVIN GRIGGS
CHIEF EXECUTIVE
FIND US ONLINE AT
XPPOWERLTD.COM
Contents
OVERVIEW
06
08
14
16
17
STRATEGIC REPORT
30
38
50
53
56
63
71
73
GOVERNANCE
80
84
104
110
FINANCIALS
137
138
140
141
180
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SEE PAGE 05
FOR A CASE STUDY
READ MORE ABOUT
OUR CUSTOMERS'
NEEDS IN OUR
MARKETPLACE ON
PAGE
How we differentiate
XP Power designs and manufactures power control
systems, the essential hardware component in
every piece of electrical equipment that converts
power from the electricity grid into the right form
for equipment to function.
Our customers
02
XP Power Annual Report & Accounts for the year ended 31 December 2021
XP POWER AT A GLANCE:
WHAT WE DO
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Semiconductor
manufacturing equipment
EXAMPLES OF END-USER PRODUCTS:
Healthcare
EXAMPLES OF END-USER PRODUCTS:
Industrial technology
EXAMPLES OF END-USER PRODUCTS:
03
OVERVIEW
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READ MORE ABOUT
GROWING OUR
ADDRESSABLE
MARKETS ON
READ MORE ABOUT
OUR GROWTH DRIVERS
ON
NORTH AMERICA
£141.2m
TOTAL REVENUE
+8% CER COMPARED TO FY 20
EUROPE
£67.3m
OF TOTAL REVENUE
+3% COMPARED TO FY 20
04
XP Power Annual Report & Accounts for the year ended 31 December 2021
XP POWER AT A GLANCE:
THE POWER OF OUR GLOBAL REACH
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ASIA
£31.8m
OF TOTAL REVENUE
+30% CER COMPARED TO FY 20
CASE STUDY
Enabling our customers to deliver
CUSTOMER REQUIREMENT:
Priorities:
Requirement:
OUR SOLUTION:
Why we won:
Key
05
OVERVIEW
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We made further strategic
progress in 2021, delivering a
robust set of results in what
continued to be a difficult global
environment.”
JAMES PETERS
CHAIR
Our Progress in 2021
Our Board
£343.4m
ORDER INTAKE +43% CER
COMPARED TO FY 20
06
XP Power Annual Report & Accounts for the year ended 31 December 2021
CHAIR’S STATEMENT
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Our People and Our Values
Sustainability
Strategy Review
Outlook
JAMES PETERS
CHAIR
The record order book and the
positive demand backdrop across
all our sectors provides us with
confidence for our prospects.”
READ MORE ABOUT
OUR BUSINESS
STRATEGY ON
PAGE
READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGE
07
OVERVIEW
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08
XP Power Annual Report & Accounts for the year ended 31 December 2021
BUILDING RESILIENCE,
GROWING SUSTAINABLY
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HOW WE HAVE DEVELOPED OUR SUPPLY
CHAIN AND PRODUCTION FOOTPRINT
TO LIMIT ANY SUPPLY CHAIN RISKS
Our relationships with our suppliers
Our relationships with our customers
READ MORE ABOUT
OUR SUSTAINABLE
SUPPLY CHAIN ON
PAGE
READ MORE ABOUT
OUR COMMITMENT
TO REDUCING
CLIMATE CHANGE ON
PAGE
We are building resilience
across our supply chain
and continue to strengthen
relationships with our
suppliers and customers.
09
OVERVIEW
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Utilising our proven growth
model to grow our business
sustainably and create more
value for our stakeholders.
OUR PROVEN GROWTH MODEL:
GAINING MARKET SHARE IN
GROWING MARKETS
Market growth
gaining market share
operational excellence
strong balance sheet with ongoing high levels of
cash conversion
£343m
ORDER BOOK
+43% CER COMPARED TO FY 20
READ MORE ABOUT
OUR GROWING
PORTFOLIO IN
OUR STRATEGY ON
PAGE
Growing our product
portfolio
Maintaining our strong financial
position to support our growth
10
XP Power Annual Report & Accounts for the year ended 31 December 2021
BUILDING RESILIENCE,
GROWING SUSTAINABLY CONTINUED
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STRONG BALANCE
SHEET WITH
ONGOING HIGH
LEVELS OF CASH
CONVERSION
GROWING
MARKETS
OUR TRACK
RECORD OF
GAINING
MARKET SHARE
OPERATIONAL
EXCELLENCE
OVERVIEW
11
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We continue to focus on the
most important issues to us
and our stakeholders...
HEALTH AND SAFETY
OUR PEOPLE
ENVIRONMENTAL LEADERSHIP
SUSTAINABLE PRODUCTS
ETHICS AND COMPLIANCE
XP Power Annual Report & Accounts for the year ended 31 December 2021
12
BUILDING RESILIENCE,
GROWING SUSTAINABLY CONTINUED
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...and address them through our
business strategy, sustainability
strategy and business model.
READ MORE ABOUT
OUR BUSINESS
STRATEGY ON
PAGE
READ MORE ABOUT
OUR SUSTAINABILITY
STRATEGY ON
PAGE
READ MORE ABOUT
OUR BUSINESS MODEL
ON PAGE
OUR BUSINESS STRATEGY
OUR SUSTAINABILITY STRATEGY
OUR BUSINESS MODEL
13
OVERVIEW
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KnowledgeFlexibility
Customer Focus SpeedIntegrity
Our Vision
Where we want to be:
Our Strategy
How we will deliver our vision:
Our sustainability strategy
Our Core Values
Our fundamental beliefs for continued success:
14
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR PURPOSE, VISION, STRATEGY,
VALUES AND CULTURE
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Our Culture
Our Purpose
Why we exist:
Being a purpose-led business:
OVERVIEW
15
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FOR MORE
INFORMATION ON
OUR PERFORMANCE
SEE PAGE
Financial highlights
ORDER INTAKE (£M)
£343.4m
TOTAL REVENUE (£M)
£240.3m
ADJUSTED PROFIT BEFORE TAX (£M)
£43.8m
2021
2020
2019
2018
2017
343.4
258.0
214.9
198.4
184.3
2021
2020
2019
2018
2017
240.3
233.3
199.9
195.1
166.8
2021
2020
2019
2018
2017
43.8
44.3
32.3
41.2
36.1
PROFIT BEFORE TAX (£M)
£28.4m
ADJUSTED EARNINGS PER SHARE (P)
176.3p
DIVIDEND PER SHARE (P)
94p
2021
2020
2019
2018
2017
28.4
35.7
24.0
37.6
32.2
2021
2020
2019
2018
2017
176.3
198.4
141.4
172.8
147.0
2021
2020
2019
2018
2017
94
74
55
85
71
Operational highlights
16
XP Power Annual Report & Accounts for the year ended 31 December 2021
FINANCIAL AND OPERATIONAL HIGHLIGHTS
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We are a growing
business
SEE PAGES
FOR MORE INFORMATION
We operate in
growing markets
SEE PAGES
FOR MORE INFORMATION
We have a strong
financial position
SEE PAGES
FOR MORE INFORMATION
We are
differentiated and
specialists in the
power conversion
market
SEE PAGES
FOR MORE INFORMATION
We create
sustainable value
SEE PAGE
FOR MORE INFORMATION
We have built our
business to remain
agile and resilient
SEE PAGES
FOR MORE INFORMATION
17
OVERVIEW
REASONS TO INVEST
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XP Power Annual Report & Accounts for the year ended 31 December 2021
18
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CONTENTS
30
38
50
53
56
63
71
73
STRATEGIC REPORT
19
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US$ BILLIONS
ESTIMATED MARKET
LOW VOLTAGE
3.5
PROCESS POWER
2.5
TOTAL
6.0
XP POWER
ESTIMATED SHARE
LOW VOLTAGE
7.6%
PROCESS POWER
4.9%
TOTAL
5.3%
OVERVIEW
LOW VOLTAGE
$3,500m
TOTAL MARKET VALUE
OVERVIEW
OUR RESPONSE
HIGH VOLTAGE
$700m
TOTAL MARKET VALUE
OVERVIEW
OUR RESPONSE
RF POWER
$1,870m
TOTAL MARKET VALUE
OVERVIEW
OUR RESPONSE
20
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR MARKETPLACE
GROWING OUR ADDRESSABLE MARKETS
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Semiconductor
manufacturing
equipment
Industrial
technology Healthcare
XP POWER MARKET OVERVIEW
PERFORMANCE THIS YEAR
XP POWER MARKET OVERVIEW
PERFORMANCE THIS YEAR
XP POWER MARKET OVERVIEW
PERFORMANCE THIS YEAR
34%
FIVE-YEAR CAGR
1%
FIVE-YEAR CAGR
2%
FIVE-YEAR CAGR
REVENUE (£M)
39% total revenue
£93.3m
REVENUE (£M)
38% total revenue
£92.0m
REVENUE (£M)
23% total revenue
£55.0m
2021
2020
2019
2018
2017
93.3
69.6
37.4
47.4
29.1
2021
2020
2019
2018
2017
92.0
94.4
116.6
104.1
86.7
2021
2020
2019
2018
2017
55.0
69.3
45.9
43.6
51.0
21
STRATEGIC REPORT
THE MARKET SECTORS WE SERVE
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North America Europe Asia
Market overview
Performance this year
Market overview
Performance this year
Market overview
Performance this year
11%
FIVE-YEAR CAGR
4%
FIVE-YEAR CAGR
21%
FIVE-YEAR CAGR
REVENUE (£M)
59% total revenue
£141.2m
REVENUE (£M)
28% total revenue
£67.3m
REVENUE (£M)
13% total revenue
£31.8m
2021
2020
2019
2018
2017
147.2
115.5
119.1
94.4
141.2
67.3
2021
2020
2019
2018
2017
65.0
64.4
61.1
57.5
2021
2020
2019
2018
2017
21.1
20.0
14.9
14.9
31.8
22
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR MARKETPLACE
GROWING OUR ADDRESSABLE MARKETS CONTINUED
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Growth drivers and market challenges
STRATEGIC KEY
1
3
4
5
6
8
10
11
RISKS KEY
Healthcare
How we are responding
Link to
Strategy
Risks
Proliferation of
electronic devices
How we are responding
Link to
Strategy
Risks
Connectivity
and industrial
revolution 4.0
How we are responding
Link to
Strategy
Risks
23
STRATEGIC REPORT
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Customer
penetration
How we are responding
Link to
Strategy
Risks
Climate change
How we are responding
Link to
Strategy
Risks
Energy efficiency
and reliability
How we are responding
Link to
Strategy
Risks
24
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR MARKETPLACE
GROWING OUR ADDRESSABLE MARKETS CONTINUED
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Legislation
How we are responding
Link to
Strategy
Risks
Capital equipment
How we are responding
Link to
Strategy
Risks
Innovation
How we are responding
Link to
Strategy
Risks
STRATEGIC KEY
1
3
4
5
6
8
10
11
RISKS KEY
25
STRATEGIC REPORT
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Key activities
IDENTIFY
Our approach
DESIGN
Our approach
MANUFACTURE AND DISTRIBUTE
Our approach
Inputs
OUR PURPOSE AND WHY WE EXIST:
We power the world’s
critical systems
OUR VALUES:
KnowledgeFlexibility
Customer Focus SpeedIntegrity
OUR VISION AND WHERE
WE WANT TO BE:
KEY RESOURCES:
Strong relationships
Our people and leadership
Technology
Global reach and scale
26
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR BUSINESS MODEL
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Value generated for our stakeholders
OUR PEOPLE
OUR CUSTOMERS
OUR SUPPLIERS
OUR COMMUNITIES AND THE
ENVIRONMENT
OUR SHAREHOLDERS
Key activities
IDENTIFY
Our approach
DESIGN
Our approach
MANUFACTURE AND DISTRIBUTE
Our approach
4.20
EMPLOYEE
ENGAGEMENT
SCORE
LAST YEAR
130
NEW PRODUCT
FAMILIES RELEASED
OVER A FIVE-YEAR
PERIOD
21%
DIVIDEND INCREASE
OVER A FIVE-
YEAR PERIOD
27
STRATEGIC REPORT
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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
Target/goal
Target/goal
Target/goal
Target/goal
Target/goal
Target/goal
Past performance
Past performance
Past performance
Past performance
Past performance
Past performance
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Link to
KPIs
Risks
Material issues
Link to
KPIs
1
Risks
Material issues
Link to
KPIs
Risks
Material issues
Link to
KPIs
4
Risks
Material issues
Link to
KPIs
7
Risks
Material issues
Link to
KPIs
5
Risks
8
Material issues
1
3
5
KPIs KEY
28
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR STRATEGY
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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
Target/goal
Target/goal
Target/goal
Target/goal
Target/goal
Target/goal
Past performance
Past performance
Past performance
Past performance
Past performance
Past performance
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Planned future actions
Link to
KPIs
Risks
Material issues
Link to
KPIs
1
Risks
Material issues
Link to
KPIs
Risks
Material issues
Link to
KPIs
4
Risks
Material issues
Link to
KPIs
7
Risks
Material issues
Link to
KPIs
5
Risks
8
Material issues
1
4
5
7
8
10
11
1
4
5
6
7
8
10
11
RISKS KEY
MATERIAL ISSUES KEY
29
STRATEGIC REPORT
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Financials Non-Financials
REVENUE GROWTH (%)
REVENUE FROM TOP
30 CUSTOMERS (%)
ADJUSTED OPERATING CASH
CONVERSION (%)
ADJUSTED DILUTED
EARNINGS PER SHARE (EPS)
GROWTH (%)
NEW PRODUCT FAMILIES
RELEASED
EMPLOYEE ENGAGEMENT
SCORE
LIFETIME CO
2
EMISSION
SAVINGS FROM GREEN
PRODUCTS (TONNES)
Performance
2021
2020
2019
2018
2017
3
17
2
17
29
2021
2020
2019
2018
2017
58
58
49
52
50
2021
2020
2019
2018
2017
111
117
132
62
81
Definition
Target achieved
Our progress
in 2021
Our plans
for 2022
Link to
strategy
Link to core
values
Link to risk
1 4 53 6 6 7 108 11 1 4 53 6 7 108 11 1 4 53 6 7 108 6 7 108 11
Link to
remuneration
30
XP Power Annual Report & Accounts for the year ended 31 December 2021
KEY PERFORMANCE INDICATORS
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Financials Non-Financials
REVENUE GROWTH (%)
REVENUE FROM TOP
30 CUSTOMERS (%)
ADJUSTED OPERATING CASH
CONVERSION (%)
ADJUSTED DILUTED
EARNINGS PER SHARE (EPS)
GROWTH (%)
NEW PRODUCT FAMILIES
RELEASED
EMPLOYEE ENGAGEMENT
SCORE
LIFETIME CO
2
EMISSION
SAVINGS FROM GREEN
PRODUCTS (TONNES)
Performance
2021
2020
2019
2018
2017
-11
40
-16
18
27
2021
2020
2019
2018
2017
24
20
32
27
27
2021
2020
4.20
3.97
2021
2020
2019
2018
2017
128,000
117,000
108,000
108,000
134,000
Definition
Target achieved
Our progress
in 2021
Our plans
for 2022
Link to
strategy
Link to core
values
Link to risk
1 4 53 6 6 7 108 11 1 4 53 6 7 108 11 1 4 53 6 7 108 6 7 108 11
Link to
remuneration
31
STRATEGIC REPORT
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We have delivered a robust performance
in a year of ongoing global challenges as
a result of COVID-19. We continued to
invest in the business, adding capacity,
developing new products and increasing
our global workforce.”
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
Review of our year
£240.3m
TOTAL REVENUE (£M)
+10% CER
COMPARED TO FY 20
32
XP Power Annual Report & Accounts for the year ended 31 December 2021
PERFORMANCE: OPERATIONAL REVIEW
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Balance sheet and liquidity
Marketplace
Marketplace: Sector Dynamics
The highlight of the year was
our record order book, which
underlines the strength of
demand for XP Power’s products.”
READ MORE ABOUT
OUR MARKETPLACE ON
PAGE
READ MORE
ABOUT OUR
STRONG FINANCIAL
POSITION ON
PAGE
33
STRATEGIC REPORT
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Marketplace: North America
34
XP Power Annual Report & Accounts for the year ended 31 December 2021
PERFORMANCE: OPERATIONAL REVIEW CONTINUED
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Marketplace: Europe
Marketplace: Asia
Our Strategy and Value Proposition
Manufacturing
READ MORE ABOUT
STRATEGY ON
PAGE
READ MORE ABOUT
MANUFACTURING ON
35
STRATEGIC REPORT
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Research and Development
36
XP Power Annual Report & Accounts for the year ended 31 December 2021
PERFORMANCE: OPERATIONAL REVIEW CONTINUED
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Engineering Solutions
Sustainability
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
READ MORE ABOUT
HOW WE EVOLVED
FROM THAT OF
A SPECIALIST
DISTRIBUTOR, TO
DESIGNER, TO DESIGN
MANUFACTURER ON
PAGE
READ MORE ABOUT
SUSTAINABILITY
STRATEGY ON
PAGE
£43.8m
ADJUSTED PROFIT
BEFORE TAX (£M)
+7% CER COMPARED
TO FY 20
37
STRATEGIC REPORT
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Revenues were above those
achieved for 2020 and we
delivered robust profitability and
strong cash conversion despite
the difficult global backdrop.”
OSKAR ZAHN
CHIEF FINANCIAL OFFICER
Statutory Results
Adjusted Results
Revenue Performance
111%
ADJUSTED OPERATING
CASH CONVERSION
-6% COMPARED TO FY 20
38
XP Power Annual Report & Accounts for the year ended 31 December 2021
PERFORMANCE: FINANCIAL REVIEW
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Gross Profitability
Adjusted Operating Expenses and Margins
Finance Cost
Adjusted Profit Before Tax
Specific Items
Legal
Profit Before Tax
Taxation
Research and Development (R&D)
Our strong cash generation and
confidence in the Group’s long-
term prospects supported the
continuation of our progressive
dividend policy throughout 2021.”
READ MORE ABOUT
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE
INCOME ON
P
READ MORE
ABOUT SEGMENTAL
REPORTING ON
PAGES
39
STRATEGIC REPORT
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Capital Expenditure
Earnings Per Share
Cash Flow
Capital Allocation
Foreign Exchange
Outlook
OSKAR ZAHN
CHIEF FINANCIAL OFFICER
READ MORE ABOUT
CONSOLIDATED
BALANCE SHEET ON
P
READ MORE ABOUT
CONSOLIDATED
STATEMENT OF
CHANGES IN
EQUITY ON
P
40
XP Power Annual Report & Accounts for the year ended 31 December 2021
PERFORMANCE: FINANCIAL REVIEW CONTINUED
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41
STRATEGIC REPORT
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Our risk assessment
THE BOARD
AUDIT COMMITTEE AND INTERNAL AUDIT
OPERATIONAL LEVEL
TOP DOWN
BOTTOM UP
Our risk management framework
42
XP Power Annual Report & Accounts for the year ended 31 December 2021
MANAGING OUR RISKS
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Impact
Likelihood
Severe
Minor
Low High
1
2
9
3
11
4
8
5
6 10
7
1
4
5
6
8
10
11
Heat map of the identified risks
indicating the likelihood and level
of impact
Risk appetite
COVID-19
Emerging risks
43
STRATEGIC REPORT
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RISK
EXPLANATION
OF RISK
POTENTIAL
IMPACT MITIGATION
PRIORITIES FOR
2022
ASSESSED
TREND
1
An event
causes a
disruption to our
manufacturing
facilities
LINK TO
STRATEGIC PILLAR
Product recall
LINK TO
STRATEGIC PILLAR
KEY
STRATEGIC KEY
44
XP Power Annual Report & Accounts for the year ended 31 December 2021
MANAGING OUR RISKS CONTINUED
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RISK
EXPLANATION
OF RISK
POTENTIAL
IMPACT MITIGATION
PRIORITIES FOR
2022
ASSESSED
TREND
3
Competition
from new
market entrants
and new
technologies
LINK TO
STRATEGIC PILLAR
4
Fluctuations
of revenues,
expenses and
operating
results due to an
economic shock
LINK TO
STRATEGIC PILLAR
45
STRATEGIC REPORT
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RISK
EXPLANATION
OF RISK
POTENTIAL
IMPACT MITIGATION
PRIORITIES FOR
2022
ASSESSED
TREND
5
Dependence on
key customers
LINK TO
STRATEGIC PILLAR
6
Cybersecurity/
information
systems failure
LINK TO
STRATEGIC PILLAR
46
XP Power Annual Report & Accounts for the year ended 31 December 2021
MANAGING OUR RISKS CONTINUED
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RISK
EXPLANATION
OF RISK
POTENTIAL
IMPACT MITIGATION
PRIORITIES FOR
2022
ASSESSED
TREND
7
Risks relating
to regulation,
compliance and
taxation
LINK TO
STRATEGIC PILLAR
8
Strategic risk
associated
with valuing or
integrating new
acquisitions
LINK TO
STRATEGIC PILLAR
Loss of key
personnel or
failure to attract
new personnel
LINK TO
STRATEGIC PILLAR
KEY
STRATEGIC KEY
47
STRATEGIC REPORT
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RISK
EXPLANATION
OF RISK
POTENTIAL
IMPACT MITIGATION
PRIORITIES FOR
2022
ASSESSED
TREND
10
Exposure to
exchange rate
fluctuations
LINK TO
STRATEGIC PILLAR
11
Risk associated
with supply
chain
LINK TO
STRATEGIC PILLAR
KEY
STRATEGIC KEY
48
XP Power Annual Report & Accounts for the year ended 31 December 2021
MANAGING OUR RISKS CONTINUED
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49
STRATEGIC REPORT
MANAGING OUR RISKS: VIABILITY STATEMENT
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OUR PEOPLE CUSTOMERS SUPPLIERS
COMMUNITIES AND
OUR ENVIRONMENT SHAREHOLDERS
Why we engage
Why we engage
Why we engage
Why we engage
Why we engage
How we engage
How we engage
How we engage
How we engage
How we engage
Key topics discussed
Key topics discussed
Key topics discussed
Key topics discussed
Key topics discussed
How we responded
How we responded
How we responded
How we responded
How we responded
SEE PAGE 90 FOR MORE
INFORMATION ON HOW OUR BOARD
ENGAGED WITH OUR WORKFORCE
THIS YEAR
SEE FOR MORE
INFORMATION ON HOW OUR BOARD
ENGAGED WITH OUR CUSTOMERS
THIS YEAR
SEE FOR MORE INFORMATION
ON HOW OUR BOARD ENGAGED WITH
OUR SUPPLIERS THIS YEAR
SEE FOR MORE INFORMATION ON
HOW OUR BOARD ENGAGED WITH OUR
COMMUNITIES AND OUR ENVIRONMENT
THIS YEAR
SEE FOR MORE INFORMATION
ON HOW OUR BOARD ENGAGED WITH
OUR SHAREHOLDERS THIS YEAR
50
XP Power Annual Report & Accounts for the year ended 31 December 2021
SECTION 172(1) STATEMENT:
HOW WE ENGAGE WITH OUR EMPLOYEES
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OUR PEOPLE CUSTOMERS SUPPLIERS
COMMUNITIES AND
OUR ENVIRONMENT SHAREHOLDERS
Why we engage
Why we engage
Why we engage
Why we engage
Why we engage
How we engage
How we engage
How we engage
How we engage
How we engage
Key topics discussed
Key topics discussed
Key topics discussed
Key topics discussed
Key topics discussed
How we responded
How we responded
How we responded
How we responded
How we responded
SEE PAGE 90 FOR MORE
INFORMATION ON HOW OUR BOARD
ENGAGED WITH OUR WORKFORCE
THIS YEAR
SEE FOR MORE
INFORMATION ON HOW OUR BOARD
ENGAGED WITH OUR CUSTOMERS
THIS YEAR
SEE FOR MORE INFORMATION
ON HOW OUR BOARD ENGAGED WITH
OUR SUPPLIERS THIS YEAR
SEE FOR MORE INFORMATION ON
HOW OUR BOARD ENGAGED WITH OUR
COMMUNITIES AND OUR ENVIRONMENT
THIS YEAR
SEE FOR MORE INFORMATION
ON HOW OUR BOARD ENGAGED WITH
OUR SHAREHOLDERS THIS YEAR
51
STRATEGIC REPORT
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Our aim is to be an industry
leader in sustainability, with a
commitment to reach net zero
carbon by 2040.”
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
Introduction to Sustainability from the CEO
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
52
XP Power Annual Report & Accounts for the year ended 31 December 2021
SUSTAINABILITY INTRODUCTION AND
PROGRESS UPDATE
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Link to
Material issues
SEE PAGE 56 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR
Produce quality products that
are safe and solve our customers’
power problems
Link to
Material issues
SEE PAGE 59 FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR
Minimise the impact we
and our products have on
the environment and adopt
responsible sourcing practices
considering social and
environmental impacts
Link to
Material issues
SEE FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR
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
Link to
Material issues
SEE FOR OUR
PERFORMANCE AGAINST THIS
STRATEGIC PILLAR, METRICS,
TARGETS AND PRIORITIES FOR
NEXT YEAR
Uphold the highest standard of
business ethics and integrity
53
STRATEGIC REPORT
OUR SUSTAINABILITY STRATEGY
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Materiality assessment
Importance to XP Power's stakeholders
Watch list Focus area
Ongoing importance
Importance to XP Power
1
2
3
4
5
6
7
8
9
10
11
1
4
5
6
7
8
10
11
KEY
54
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY CONTINUED
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Sustainability governance
Sustainability metrics
Goals & Objecves
XP
Power
Main
Board
Execuve Team
Chaired by CEO
Monthly
Sustainability Council
Chaired by CEO
Quarterly
Programme Team
Led by Sustainability Lead
Monthly
SUSTAINABILITY ROADMAP
ACHIEVEMENTS IN PAST 12 MONTHS
PRIORITIES GOING FORWARD
55
STRATEGIC REPORT
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Estimated lifetime savings from XP Green
Power products
Boosting innovation
How this strategic
pillar links to the
UN SDGs
Business KPIs
56
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
01: SUSTAINABLE PRODUCTS
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57
STRATEGIC REPORT
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Responsible sourcing
Conflict minerals
58
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
01: SUSTAINABLE PRODUCTS CONTINUED
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How this strategic
pillar link to the
UN SDGs
Business KPIs
Managing environmental performance
Energy and greenhouse gas emissions
2021
28.9kg
TARGET FOR
2025 22.3KG
59
STRATEGIC REPORT
OUR SUSTAINABILITY STRATEGY
02: ENVIRONMENTAL LEADERSHIP
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Emissions & Energy
FY21
1.9 229.6 231.5
34 6,166.4 6,200.4 58
2.1 491 493.1
10 2 12 17
12.1 493 505.1 616
48 6889 6937 6834 6007
– – 28.9 30
– – –
0 155,906 155,906 0 0
10,672 617,896 628,568
0 374,741 374,741 0 0
10,672 1,148,543 1,159,215
10,672 1,148,543 1,159,215
– – –
23,506 37,266 60,772
135,191 10,749,647 10,884,838
158,697 10,786,913 10,945,610
23,506 37,266 60,772
145,863 11,898,190 12,044,053
169,369 11,935,456 12,104,825
15% 0% 1%
85% 100% 99%
50,374
60
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
02: ENVIRONMENTAL LEADERSHIP CONTINUED
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Third-party verification
Water
Freshwater withdrawal (m)
FY21
544.5
46.0
9,615.0
5,427.3
37,430.0
52,518.3
53,062.8
220.8
61
STRATEGIC REPORT
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Waste management
FY21
7.4
150.8
158.2
0.66
FY21
–
7.4
–
108.8
–
42.0
8.8
4.7
53.1%
1.6
108.8
7.4
42.0
49.4
158.2
FY21
314.7
62
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
02: ENVIRONMENTAL LEADERSHIP CONTINUED
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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
Response to COVID-19 (2021)
Safety first
How this strategic
pillar links to the
UN SDGs
Business KPIs
63
STRATEGIC REPORT
OUR SUSTAINABILITY STRATEGY
03: PEOPLE AND WORKPLACE
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2021
1,763
Safety performance
Health and safety incidents
2021
3 10 7 6 6
3 0 3 8
13 11 3 14 5
Global 19 22 21 17 32 13
2,229
8.5
0.76
64
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
03: PEOPLE AND WORKPLACE CONTINUED
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Health and wellbeing
Our People
Engagement
Full-time employee voluntary turnover percentage (%)
2021
1,606
602 670
37.5%
154 153 161
17 11 17
11.0%
411 408
48 56
11.7%
2,171
667 737 573
30.7%
65
STRATEGIC REPORT
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Diversity and inclusion
Number and percentage (%) of contract or temporary workers to total employees
2021
1,606
199
12.4%
154
15
9.7%
411
39
9.5%
2,171
253
11.7%
66
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
03: PEOPLE AND WORKPLACE CONTINUED
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UK Gender Pay Gap – 2021
2021
Male Female Total Male Female
11 18 29 38% 62%
10 18 28 36% 64%
19 8 27 70% 30%
23 8 31 74% 26%
Employees by gender and region as at 31 December 2021
Male Female Total
Total 1,195 1,145 2,340
Gender Diversity Statistics
Male Female Total Male Female
5 7
5 7
65 13 78
Total 1,195 1,146 2,341 51% 49%
67
STRATEGIC REPORT
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Talent and career management
68
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
03: PEOPLE AND WORKPLACE CONTINUED
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Average training time (in days) per employee
2021
1,606
14,426
9.0
1.1
154
2,101
13.6
1.7
411
747
1.8
0.2
2,171
17,274
8.0
1.0
Freedom of association
2021
1,606 (1,089)
1,063 (1,063)
66.2% (97.6%)
154 153 161
–
0.0%
411 408
–
0.0%
2,171
1,063
49.0%
69
STRATEGIC REPORT
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Community partnerships
70
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
03: PEOPLE AND WORKPLACE CONTINUED
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How this strategic
pillar links to the
UN SDGs
Business KPIs
Whistleblowing
Anti-bribery and corruption
Modern slavery
2021
99.8%
TARGET FOR
NEXT YEAR: 100%
71
STRATEGIC REPORT
OUR SUSTAINABILITY STRATEGY
04: ETHICS AND COMPLIANCE
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Human rights
Information systems and technology
Tax transparency
Government contracts
72
XP Power Annual Report & Accounts for the year ended 31 December 2021
OUR SUSTAINABILITY STRATEGY
04: ETHICS AND COMPLIANCE CONTINUED
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Governance
Risk management
73
STRATEGIC REPORT
COMMITMENT TO REDUCING CLIMATE CHANGE
TCFD REPORT
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Strategy
Risk
Storm and flood
disruption Supply chain risks Transportation cost
China’s mandated
power shutdowns
Type
Area
Primary potential
financial impact
Time horizon
Likelihood
Magnitude of impact
Opportunity Solar power
Power Purchase
agreements (PPAs)
Reduction of air
freight
Legislation on
energy efficiency
Type
Area
Primary potential
financial impact
Time horizon
Likelihood
Magnitude of impact
Opportunity Electrification
Energy and
waste savings
Type
Area
Primary potential
financial impact
Time horizon
Likelihood
Magnitude of impact
74
XP Power Annual Report & Accounts for the year ended 31 December 2021
COMMITMENT TO REDUCING CLIMATE CHANGE
TCFD REPORT CONTINUED
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Sustainable Development (SDS)*
Stated Policies (STEPS)*
RCP 8.5**
Climate-related risks
STORM AND FLOOD DISRUPTION
SUPPLY CHAIN RISKS
75
STRATEGIC REPORT
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TRANSPORTATION COST
CARBON PRICE ESTIMATES (US$/T)
Scenario – SDS 2030 2040 2050
170
30 160
40 110 160
Scenario – STEPS 2030 2040 2050
65 75
30 45 55
40 65
CHINA’S MANDATED POWER
SHUTDOWNS
76
XP Power Annual Report & Accounts for the year ended 31 December 2021
COMMITMENT TO REDUCING CLIMATE CHANGE
TCFD REPORT CONTINUED
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Climate-related opportunities
SOLAR POWER
POWER PURCHASE AGREEMENTS
REDUCTION OF AIR FREIGHT
LEGISLATION ON ENERGY EFFICIENCY
ELECTRIFICATION
ENERGY AND WASTE SAVINGS
METRICS AND TARGETS
77
STRATEGIC REPORT
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78
XP Power Annual Report & Accounts for the year ended 31 December 2021
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CONTENTS
80
84
104
110
79
GOVERNANCE
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The Board remains committed
to high standards of governance
across the Group.”
JAMES PETERS
CHAIR
Purpose and culture
COVID-19
Board composition
LETTER FROM THE CHAIR
INTRODUCTION TO GOVERNANCE
80
XP Power Annual Report & Accounts for the year ended 31 December 2021
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Division of responsibilities
Strategy
Workforce engagement
Future of XP Power
JAMES PETERS
CHAIR
Our purpose is to power the
world’s critical systems.”
READ MORE ABOUT
THE BOARD OF
DIRECTORS ON
PAGE
READ MORE ABOUT
ENGAGING WITH OUR
STAKEHOLDERS ON
PAGE
81
GOVERNANCE
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JAMES PETERS
CHAIR
GAVIN GRIGGS
CHIEF EXECUTIVE
OFFICER
OSKAR ZAHN
CHIEF FINANCIAL
OFFICER
ANDY SNG
EXECUTIVE VICE
PRESIDENT, ASIA
TERRY TWIGGER
SENIOR INDEPENDENT
DIRECTOR
POLLY WILLIAMS
INDEPENDENT
PAULINE LAFFERTY
INDEPENDENT
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
J
Skills and experience:
External Appointments:
B
82
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BOARD OF DIRECTORS
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CHANGES TO THE
BOARD DURING
2021
BOARD ROLE
JAMES PETERS
CHAIR
GAVIN GRIGGS
CHIEF EXECUTIVE
OFFICER
OSKAR ZAHN
CHIEF FINANCIAL
OFFICER
ANDY SNG
EXECUTIVE VICE
PRESIDENT, ASIA
TERRY TWIGGER
SENIOR INDEPENDENT
DIRECTOR
POLLY WILLIAMS
INDEPENDENT
PAULINE LAFFERTY
INDEPENDENT
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Date of appointment:
Executive/Non-Executive:
Committee Membership:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
Skills and experience:
External Appointments:
J
Skills and experience:
External Appointments:
B
83
GOVERNANCE
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Corporate Governance
Statement 2021
JAMES PETERS
CHAIR
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
Our approach to governance
BOARD LEADERSHIP AND COMPANY PURPOSE
A
B
C
D
E
DIVISION OF RESPONSIBILITIES
F
G
H
I
COMPOSITION, SUCCESSION AND EVALUATION
J
K
L
AUDIT, RISK AND INTERNAL CONTROL
M
N
O
REMUNERATION
P
Q
R
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84
CORPORATE GOVERNANCE REPORT
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Building resilience, growing sustainably
Developing a first-class culture
SEE PAGE 89 FOR HOW
THE BOARD MONITORS CULTURE
Engaging with our stakeholders to ensure we focus on the most
material issues to both us and them
SEE PAGE 90 FOR MORE ABOUT OUR
STAKEHOLDER ENGAGEMENT
Building resilience across the business to mitigate any risks or
market challenges
SEE PAGE 91 FOR HOW WE HAVE BUILT
RESILIENCE ACROSS OUR SUPPLY CHAIN
SEE PAGE 91 FOR HOW WE ADDRESS
SIGNIFICANT RISK MATTERS
Board changes: our new Chief Financial Officer
SEE FOR MORE ON THE
RECRUITMENT AND INDUCTION PROCESS
85
GOVERNANCE
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Board and Committee information flow
STAGE 1 STAGE 2 STAGE 3
Chair agrees agenda
with Board
Material is circulated ahead
of meetings
Board and Committee
meetings
STAGE 4 STAGE 5 STAGE 6
Minutes of meetings
Action lists
Non-formal meetings
SEE PAGE 89 FOR DETAIL ABOUT HOW
THE BOARD MONITORS CULTURE
Leadership structure
THE BOARD OF DIRECTORS
CHAIR
SENIOR INDEPENDENT
DIRECTOR
NON-EXECUTIVE
DIRECTORS
DESIGNATED
NON-EXECUTIVE DIRECTOR
AUDIT COMMITTEE
REMUNERATION COMMITTEE
NOMINATION COMMITTEE
INTERNAL AUDIT
86
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CORPORATE GOVERNANCE REPORT CONTINUED
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Board meetings and attendance
Member(s) Meetings Attendance
5/5
5/5
4/4
5/5
1/1
5/5
5/5
5/5
87
GOVERNANCE
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Board activities in 2021
STAKEHOLDER ENGAGEMENT
Key activities and discussions
Outcomes
Future priorities
STRATEGY AND OPERATIONS
Key activities and discussions
Outcomes
Future priorities
BOARD AND COMMITTEE
MATTERS
Key activities and discussions
Outcomes
Future priorities
Stakeholders considered
Stakeholders considered Stakeholders considered
FINANCIAL AND RISK
MANAGEMENT
Key activities and discussions
Outcome
Future priorities
CUSTOMERS
Key activities and discussions
Outcome
Future priorities
SUSTAINABILITY
Key activities and discussions
Outcomes
Future priorities
Stakeholders considered
Stakeholders considered Stakeholders considered
KEY
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CORPORATE GOVERNANCE REPORT CONTINUED
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Health and Safety
Developing a first-class culture
ACTION DESCRIPTION
Reviewed results and updates
from employee engagement
surveys
Engagement survey
Code of Conduct training
Senior leadership workshops
Sustainability impact
assessment
89
GOVERNANCE
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How we ensured employees voices were heard on the Board in 2021
How we uphold culture across our
workforce and encourage engagement
Engaging with our
stakeholders: our people
and our Shareholders
PAULINE LAFFERTY
FOR WORKFORCE ENGAGEMENT
Workforce engagement process
XP has so many great people, and the work is really
interesting. This is genuinely the best company I think
I have ever worked for.”
Attendee of virtual engagement session
October 2021
4.2/5
EMPLOYEE
ENGAGEMENT SCORE
LAST YEAR
(2020:3.9)
90
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CORPORATE GOVERNANCE REPORT CONTINUED
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Our Board in action: responding to COVID-19
How we mitigated supply chain issues
How we looked after our people
Fair balanced and understandable
Risk management and internal control
91
GOVERNANCE
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Shareholder communication
Constructive use of the Annual General
Meeting
Substantial Shareholders
Number of
shares
% of
voting rights
92
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CORPORATE GOVERNANCE REPORT CONTINUED
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Division of responsibilities
RESPONSIBILITIES OF THE BOARD
Chair
How our Chair promotes a culture of openness
Executive
Directors
Senior
Independent
Director
Non-Executive
Directors
Designated
Non-Executive
Director
93
GOVERNANCE
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Matters reserved for the Board
Conflicts of interest and time commitment
94
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CORPORATE GOVERNANCE REPORT CONTINUED
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Change in Directors’ responsibilities
Board independence
Anti-takeover measures
Voting
95
GOVERNANCE
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Dear Shareholder,
JAMES PETERS
CHAIR
Committee
membership
The Board has the right skills and
experience to direct the Company
in the successful execution of its
strategy.”
JAMES PETERS
NOMINATION COMMITTEE CHAIR
96
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NOMINATION COMMITTEE REPORT
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Governance
Responsibilities
97
GOVERNANCE
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Composition, succession
and evaluation
Board succession
Committee evaluation
Board diversity
Board skills and experience
98
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NOMINATION COMMITTEE REPORT CONTINUED
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Board composition
2
5
5
1
1
Male Female
3
1
1
2
1
6
<1 year
4-6 years 7+ years
Board skills matrix
Number of Directors
99
GOVERNANCE
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Appointments to
the Board and Director
re-election
Appointing our new Chief Financial Officer
OVERVIEW OF CANDIDATE
SPECIFICATION AND SEARCH CRITERIA
Developing a candidate profile
2021
January
February
- March
April
Interviews and assessments
Final decision
100
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NOMINATION COMMITTEE REPORT CONTINUED
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Board induction and training
Board training in 2021
STAGE 1
STAGE 2
STAGE 3
STAGE 4
STAGE 5
STAGE 6
Board induction process
101
GOVERNANCE
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Board evaluation
BOARD EVALUATION FINDINGS IN 2021
2020 Board evaluation progress
2020 BOARD EVALUATION FINDING 1
Actions taken this year
2020 BOARD EVALUATION FINDING 2
Actions taken this year
BOARD EVALUATION PROCESS
STAGE 1
STAGE 2
STAGE 3
STAGE 4
102
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NOMINATION COMMITTEE REPORT CONTINUED
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103
GOVERNANCE
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Dear Shareholder
TERRY TWIGGER
AUDIT COMMITTEE CHAIR
Committee
membership
The primary role of the Committee is to
assist the Board in fulfilling its oversight
responsibilities, in areas such as the integrity
of financial reporting, the effectiveness of the
risk management framework and system of
internal controls as well as consideration of
ethics and compliance matters.”
TERRY TWIGGER
AUDIT COMMITTEE CHAIR
104
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AUDIT COMMITTEE REPORT
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Governance
Committee evaluation
Responsibilities
105
GOVERNANCE
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Activities
106
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AUDIT COMMITTEE REPORT CONTINUED
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Consideration of significant financial reporting matters
SIGNIFICANT MATTERS FOR THE
YEAR ENDED 31 DECEMBER 2021
HOW THE AUDIT COMMITTEE
ADDRESSED THESE MATTERS CONCLUSION
VALUATION OF
GOODWILL
CAPITALISED
PRODUCT
DEVELOPMENT
INVENTORY
VIABILITY
STATEMENT
AND GOING
CONCERN
SPECIFIC ONE-
OFF ITEMS
AND ADJUSTED
MEASURES
107
GOVERNANCE
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Fair, balanced and understandable
Internal control
Internal audit
External audit effectiveness and independence
108
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AUDIT COMMITTEE REPORT CONTINUED
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109
GOVERNANCE
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Dear Shareholder
The context to the major decisions and
activities made in the year
Committee
membership
The Board continues to be
impressed with the resilience of the
business across the globe in what
has been another challenging year.”
PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR
110
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REMUNERATION COMMITTEE REPORT
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Key remuneration decisions for 2021
Annual bonus
The vesting of the 2019 LTIP award
The pay implications of Board changes
Decisions effective from 2022
PAULINE LAFFERTY
REMUNERATION COMMITTEE CHAIR
111
GOVERNANCE
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Context to major decisions and
activities in the year
SEE PAGE 110 FOR MORE INFORMATION
Key remuneration decisions for 2021 and 2022
SEE PAGE 111 FOR MORE INFORMATION
Total Remuneration receivable for Executive Directors (£'000)
GAVIN GRIGGS OSKAR ZAHN1 ANDY SNG
309
492
1,315
18
37
459
267
182
21
15
61
546
404
103
158
105
29
9
Pension Annual bonus Long-term incentives
112
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REMUNERATION AT A GLANCE
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ACHIEVEMENT OF PERFORMANCE CONDITIONS UNDER
THE 2021 ANNUAL BONUS
ADJUSTED OPERATING CASH CONVERSION (25%)
Threshold
100%
90%
110%
111%
105%
110%
115%
100%
95%
90%
85%
80%
On-target Maximum Actual
120%
125%
ADJUSTED PROFIT BEFORE TAX (50%)
Threshold
£44.7m
£40.2m
£49.2m
£43.8m
£55.0m
£50.0m
£45.0m
£40.0m
£35.0m
£30.0m
On-target Maximum Actual
SEE PAGE 115 FOR MORE INFORMATION
ACHIEVEMENT OF PERFORMANCE CONDITIONS
UNDER THE 2019 LONG-TERM INCENTIVE AWARDS
EPS COMPOUND ANNUAL GROWTH (67%)
Threshold
12%
6%
0.7%
15%
10%
5%
0%
Maximum Actual
TSR (33%)
Threshold
Upper
quarle
Median
95th
percenle
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Maximum Actual
SEE PAGE 117 FOR MORE INFORMATION
113
GOVERNANCE
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Annual report on remuneration
Single total figure of remuneration
£’000 Salary/fees Benefits
4
Pension
Total fixed
pay
Annual
bonus
5
Long-term
incentives
6,7
Total
variable pay Total
Executive Directors
1
18
314
11 341 434
438 4 30 441
3
303
103 404
38 10 483
Chair and Non-Executive Directors
3
48 48 48
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REMUNERATION COMMITTEE REPORT CONTINUED
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Notes to the single total figure table
BASE SALARY IN THE YEAR ENDED 31 DECEMBER 2021
Base salary from 1 April 2020 Base salary from 1 April 2021 Percentage increase
1
3
CHAIR’S AND NON-EXECUTIVE DIRECTORS’ FEES
Fee from 1 April 2021 Fee from 1 April 2022
PENSIONS IN THE YEAR ENDED 31 DECEMBER 2021
ANNUAL BONUS IN THE YEAR ENDED 31 DECEMBER 2021
Weighting
Threshold
(25%)
On-target
(50%)
Maximum
(100%) Actual % achieved
1
1
115
GOVERNANCE
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Gavin Griggs Oskar Zahn Performance assessment in 2021
116
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REMUNERATION COMMITTEE REPORT CONTINUED
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LONG-TERM INCENTIVE AWARDS VESTED OR DUE TO VEST WITH RESPECT
TO PERFORMANCE IN THE YEAR ENDED 31 DECEMBER 2021
Weighting Threshold (25%) Maximum (100%) Actual % achieved
Total
Date of
grant
Type of
award
Number of
shares
awarded % vesting
Dividend
equivalent
payments
per share¹
Number of
shares vested
or due
Value of
shares vested
or due to
vest¹
SCHEME INTERESTS AWARDED IN THE YEAR ENDED 31 DECEMBER 2021
Date of grant Plan Type of award
Face value of
award
3
Number of
shares awarded
End of
performance
period
LONG-TERM INCENTIVE MEASURES AND TARGETS
2021 award (67% EPS and 33% TSR)
Cumulative EPS over three financial years
576.7p
645.9p
Relative TSR compared with that for
the constituents of the FTSE 250 index
(excluding investment trusts)
Median (50th percentile)
Upper quintile (80th percentile)
117
GOVERNANCE
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DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS
1
Beneficially
owned shares
at 31 December
2021
2
Executive Directors
–
49,990
–
24,000
Chair and Non-Executive Directors
1,004,279
–
–
–
Interest as at
31/12/21
2017 LTIP
8,000
4,553
10,453
9,652
2020 RSP
1,307
1,206
Deferred Bonus
515
4,349
471
3,102
118
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REMUNERATION COMMITTEE REPORT CONTINUED
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Interest as at
20/04/21
2012 Share Options
39,800
2017 LTIP
5,127
10,158
19,024
14,563
2020 RSP
1,820
Deferred Bonus
3,975
6,057
657
4,256
Interest as at
31/12/21
2017 LTIP
8,024
2020 RSP
1,203
Interest as at
31/12/21
2012 Share Options
60
2017 LTIP
–
2,591
1,626
3,236
1,930
2020 RSP
405
289
Deferred Bonus
1,389
1,931
1,326
119
GOVERNANCE
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PAYMENTS TO PAST DIRECTORS
PAYMENTS FOR LOSS OF OFFICE
ASSESSING PAY AND PERFORMANCE
Total Shareholder Return, rebased to 100
at 31 December 2011
700
800
600
500
400
300
200
100
0
31/12/2011
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
Source: Refiniv Datastream
XP Power
FTSE 250 (ex ITs)
2021¹
£1,315
73%
33%
CONTEXT FOR DIRECTORS’ REMUNERATION
120
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REMUNERATION COMMITTEE REPORT CONTINUED
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ANNUAL PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS AND EMPLOYEES
Percentage change between 2020 and 2021
Base salary
Taxable
benefits Annual bonus
8% 139% (33%)
Executive Directors
1
57% (22%) 43%
(69%) (50%) (79%)
3
– – –
6% (24%) (23%)
Non-Executive
Directors
3% 50% –
7% – –
(2%) – –
15% – –
CEO PAY RATIO
Year Method
1
25th percentile pay ratio 50th percentile pay ratio 75th percentile pay ratio
Year Total pay and benefits Salary component of total pay
121
GOVERNANCE
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RELATIVE IMPORTANCE OF SPEND ON PAY
£7.3m
2020
Distribuon to
Shareholder dividends
1
Group employment
costs
2
2021 2020 2021
£18.2m
(+149%)
£70.3m
£75.2m
(+7%)
£100m
£75m
£25m
£50m
£0
ADVICE RECEIVED IN THE YEAR
VOTING ON REMUNERATION
Meeting Votes for % of votes for Votes against
% of votes
against Votes withheld
122
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HOW OUR REMUNERATION POLICY LINKS TO THE UK CORPORATE GOVERNANCE CODE
FACTORS HOW THESE ARE ADDRESSED
Clarity
Simplicity
Risk
Predictability
Proportionality
Alignment to
culture
123
GOVERNANCE
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Implementation of the Directors’ Remuneration Policy in 2022
COMPONENT SUMMARY OF POLICY OPERATION IN 2022
Base salary
Benefits
Pensions
Annual bonuses
124
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COMPONENT SUMMARY OF POLICY OPERATION IN 2022
Long-term
incentive plan
(LTIP)
Name
PSP award
(% of salary)
RSP award
(% of salary)
Cumulative diluted adjusted
EPS (67% of maximum)
TSR vs FTSE 250 ex investment
trusts (33% of maximum)
Vesting
125
GOVERNANCE
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ILLUSTRATION OF THE APPLICATION OF THE DIRECTORS’ REMUNERATION POLICY (UPDATED)
£685
£1,166
£1,922
£2,231
90% 53% 31% 27%
10% 6% 4% 5%
10%
6%
12%
4% 5%
29%
12%
36% 31%
29%
£524
£836
£1,356
£1,590
90%
57%
34% 30%
25%
31% 26%
31%
39%
S$389
S$603
S$935
S$1,075
88%
12% 8% 5% 7%
10%
56% 37% 31%
26%
33%
25%
29%
33%
37%
£2,500
£2,000
£1,500
£1,000
£500
£2,500
£2,000
£1,500
£1,000
£500
S$2,000
S$1,500
S$1,000
S$500
S$0
Minimum On-target Maximum Maximum with 50%
share price growth
Maximum with 50%
share price growth
Maximum with 50%
share price growth
Minimum On-target Maximum
Minimum On-target Maximum
GAVIN GRIGGS
OSKAR ZAHN
ANDY SNG
0
0
Fixed RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
£685
£1,166
£1,922
£2,231
90% 53% 31% 27%
10% 6% 4% 5%
10%
6%
12%
4% 5%
29%
12%
36% 31%
29%
£524
£836
£1,356
£1,590
90%
57%
34% 30%
25%
31% 26%
31%
39%
S$389
S$603
S$935
S$1,075
88%
12% 8% 5% 7%
10%
56% 37% 31%
26%
33%
25%
29%
33%
37%
£2,500
£2,000
£1,500
£1,000
£500
£2,500
£2,000
£1,500
£1,000
£500
S$2,000
S$1,500
S$1,000
S$500
S$0
Minimum On-target Maximum Maximum with 50%
share price growth
Maximum with 50%
share price growth
Maximum with 50%
share price growth
Minimum On-target Maximum
Minimum On-target Maximum
GAVIN GRIGGS
OSKAR ZAHN
ANDY SNG
0
0
Fixed RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
£685
£1,166
£1,922
£2,231
90% 53% 31% 27%
10% 6% 4% 5%
10%
6%
12%
4% 5%
29%
12%
36% 31%
29%
£524
£836
£1,356
£1,590
90%
57%
34% 30%
25%
31% 26%
31%
39%
S$389
S$603
S$935
S$1,075
88%
12% 8% 5% 7%
10%
56% 37% 31%
26%
33%
25%
29%
33%
37%
£2,500
£2,000
£1,500
£1,000
£500
£2,500
£2,000
£1,500
£1,000
£500
S$2,000
S$1,500
S$1,000
S$500
S$0
Minimum On-target Maximum Maximum with 50%
share price growth
Maximum with 50%
share price growth
Maximum with 50%
share price growth
Minimum On-target Maximum
Minimum On-target Maximum
GAVIN GRIGGS
OSKAR ZAHN
ANDY SNG
0
0
Fixed
RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
Fixed RSP Annual bonus PSP
126
XP Power Annual Report & Accounts for the year ended 31 December 2021
REMUNERATION COMMITTEE REPORT CONTINUED
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Position Name Base salary Benefits Pension Total fixed pay
DIRECTORS’ CONTRACTS
127
GOVERNANCE
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Dividends
Total 94.0 pence 74.0 pence
Directors and directors’ interests
Liability insurance and indemnities
Share capital and capital structure
Power to issue and allot
Authority to purchase own shares
Annual general meeting
Independent auditor
128
XP Power Annual Report & Accounts for the year ended 31 December 2021
OTHER GOVERNANCE AND
STATUTORY DISCLOSURES
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Articles of association
Significant contracts and change of control
Political donations
Financial risk management
Post-balance sheet events
Incorporation by reference
Listing Rule
Section Topic Location and page
JAMES PETERS
GAVIN GRIGGS
CHIEF EXECUTIVE OFFICER
129
GOVERNANCE
STATEMENT BY DIRECTORS
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130
XP Power Annual Report & Accounts for the year ended 31 December 2021
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CONTENTS
INDEPENDENT AUDITOR’S REPORT 132
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME 137
CONSOLIDATED BALANCE SHEET 138
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 139
CONSOLIDATED STATEMENT OF CASH FLOWS 140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 141
COMPANY BALANCE SHEET 179
NOTES TO THE COMPANY BALANCE SHEET 180
FIVE-YEAR REVIEW CONSOLIDATED INFORMATION 189
ADVISERS 190
131
FINANCIALS
Financials
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30801 8 March 2022 10:52 am V8
Report on 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 (“IFRS 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
2021, 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.
WHAT WE HAVE AUDITED
The financial statements of the Company and the Group comprise:
• The consolidated statement of comprehensive income of the
Group for the financial year ended 31 December 2021;
• The consolidated balance sheet of the Group as at
31 December 2021;
• The balance sheet of the Company as at 31 December 2021;
• The consolidated statement of changes in equity of the Group for
the financial year then ended;
• The consolidated statement of cash flows of the Group for the
financial year then ended; and
• The notes to the financial statements, including a summary of
significant accounting policies.
THE BASIS FOR OUR OPINION
We conducted our audit in accordance with International Standards
on Auditing (“ISAs”). Our responsibilities under those standards are
further described in the “What are we responsible for” section of our
report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
INDEPENDENCE
We are independent of the Group in accordance with the Accounting
and Corporate Regulatory Authority 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 consolidated financial statements in Singapore, and
we have fulfilled our other ethical responsibilities in accordance with
these requirements and the ACRA Code.
Our audit approach – overview
MATERIALITY
The overall materiality which we have used to plan our work for the Group amounted to £2.0 million, which
represented 7% of profit before taxation. The overall materiality applied to the audit of the Company balance
sheet amounted to £0.7 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 92% of Group revenues and 93% of Group assets.
Key Audit Matters
We identified the following key audit matters:
• Goodwill; and
• Capitalised product development.
Materiality
Audit Scope
Key
Audit
Maers
132
XP Power Annual Report & Accounts for the year ended 31 December 2021
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF XP POWER LIMITED
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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 £0.4 million to £1.9
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 profit before taxation is appropriate as it reflects
the Group’s growth and investment plans. We believe this is a key
measure used by shareholders in assessing the performance of
the Group.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £0.2 million as well
as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
HOW WE TAILORED THE AUDIT SCOPE
The Group operates across North America, Europe and Asia. In
establishing the overall approach to the Group audit, we determined
the type of work that needed to be performed at the local operations
by us, as the Group engagement team, or component auditors from
other PwC network firms operating under our instruction. Where
the work was performed by component auditors, we determined
the level of involvement we needed to have in the audit work at
those local operations to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our
opinion on the Group financial statements as a whole.
We designed our audit of the Group by determining materiality
and assessing the risks of material misstatement in the financial
statements. In particular, we looked at where management made
subjective judgements, for example in respect of significant
accounting estimates, that involved making assumptions and
considering future events that are inherently uncertain. As in all of
our audits, we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence
of bias by the management that represented a risk of material
misstatement due to fraud.
We tailored the scope of our audit to ensure that we performed
sufficient work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls, and the
industry in which the Group operates.
WHAT ARE THE KEY AUDIT MATTERS
Key audit matters are those matters that, in the auditor’s professional
judgement, were of most significance in the audit of the financial
statements of the current period. Key audit matters include the
most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which
had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and the directing of the efforts of the
engagement team. These matters, and any comments we make on
the results of our procedures thereon, were addressed in the context
of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. This is not a complete list of all risks identified by
our audit.
133
FINANCIALS
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Key audit matters How did our audit address these
Goodwill
Refer to page 106 (Report from the Chair of the Audit Committee),
page 150 (Critical accounting judgements and key sources of
estimation uncertainty – Impairment of Goodwill) and pages
157–158 (Note 11 – Goodwill).
The Group has goodwill of £52.5 million at 31 December 2021
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 represented 19% of total assets, and
because management’s assessment of the ‘value-in-use’ of the
Group’s CGUs involves significant judgements and assumptions
about the future results of the business and the discount rates
applied to future cash flow forecasts.
Key judgements and assumptions about the future results of the
business include: revenue and profit growth rates, expected changes
to overhead costs as well as risks specific to the three CGUs.
The Group’s assessment of the potential financial impacts of climate
change are disclosed in Note 11 to the financial statements.
We evaluated the suitability and appropriateness of the impairment
model as prepared by management and noted no significant
exceptions.
We assessed the reasonableness of the inputs used to derive the
discount rates. We also focused on understanding and challenging
management’s plans for future growth for each of the three CGUs.
Forecasted growth in revenue and profits are driven by constant
innovation in the development of new product families as well
as the broadening of the customer base in the three CGUs. We
benchmarked key market-related assumptions in management’s
forecasts such as revenue and profit growth rates and changes in
the overhead costs with relevant economic, industry indicators
and historical trends for revenue growth and considered that such
targets as set by management were achievable. Sensitivity analyses
were also performed on the discount rates and growth rates. We
agreed with management that no impairment was required.
We evaluated how the Group’s response to climate change had
been reflected in the impairment assessment of goodwill.
Capitalised product development
Refer to page 106 (Report from the Chair of the Audit Committee),
page 150 (Critical accounting judgements and key sources
of estimation uncertainty – Recoverability and useful lives of
Capitalised development costs) and page 159 (Note 12 – Intangible
assets).
Part of the Group’s strategy is to invest in research and development
to create new products. As at 31 December 2021, the carrying value
of product development costs capitalised as an intangible asset is
£30.0 million, of which £8.3 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 11% of total assets, and
because significant judgement is involved in determining whether
the criteria to capitalise such product development costs, as set
out in IAS 38 Intangible Assets, have been fulfilled and that the
capitalised amounts are recoverable.
We also identified the useful lives of the capitalised product
development costs as an area involving significant judgement.
The carrying value of the capitalised product development costs is
heavily dependent on the useful lives of the developed products.
Management determined the useful lives of the developed products
based on the expected life cycle of these products, taking into
consideration expected customer demand and technological
innovation.
We assessed the appropriateness of capitalisation of product
development costs by ensuring compliance with the criteria to
capitalise product development costs as set out in IAS 38, and
challenged management through discussions and qualitative
reviews of the products’ feasibility. We also tested the accuracy
and allocation of capitalised material costs and labour costs.
Management was able to support the capitalisation of product
development costs.
For selected samples of developed products, we reviewed
the actual sales during the year along with projected sales to
ensure that the capitalised development costs are supported by
demand and are recoverable. For selected samples of products in
development, we reviewed the project business case, forecasted
demand, and other supporting analysis to support the recoverability
of these products.
In the assessment of the useful lives of the capitalised product
development costs, we 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.
134
XP Power Annual Report & Accounts for the year ended 31 December 2021
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF XP POWER LIMITED
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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 129, in relation to going
concern. We have nothing to report having performed our review.
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 49.
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
02 to 17, “Strategic Report” section set out on pages 20 to
77, “Governance” section set out on pages 80 to 129, and the
“Financials” section on page 190 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 IFRS 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.
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
consolidated 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.
135
FINANCIALS
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• 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 consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated 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 consolidated financial statements of the current year and are
therefore the key audit matters. We describe these matters in our
auditor’s report, unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such
communication.
Report on other legal and regulatory requirements
In our opinion, the accounting and other records required by the Act
to be kept by the Company and by those subsidiaries incorporated in
Singapore of which we are the auditors, have been properly kept in
accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent
auditor’s report is Greg Unsworth.
PRICEWATERHOUSECOOPERS LLP
Public Accountants and Chartered Accountants
Singapore
1 March 2022
136
XP Power Annual Report & Accounts for the year ended 31 December 2021
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF XP POWER LIMITED
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£m Note 2021 2020
Revenue 4 240.3 233.3
Cost of sales 7 (132.0) (123.2)
Gross profit 108.3 110.1
Other income * 0.6
Expenses
Distribution and marketing 7 (47.8) (52.4)
Administrative 7 (14.0) (5.0)
Research and development 7 (16.8) (15.9)
Operating profit 29.7 37.4
Finance charge 6 (1.3) (1.7)
Profit before tax 28.4 35.7
Income tax expense 8 (5.4) (4.0)
Profit after tax 23.0 31.7
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 0.9 (3.6)
0.9 (3.6)
Items that will not be reclassified subsequently to profit or loss:
Currency translation differences arising from consolidation * *
Other comprehensive income/(loss) for the year, net of tax 0.9 (3.6)
Total comprehensive income for the year 23.9 28.1
Profit attributable to:
Equity holders of the Company 22.6 31.5
Non-controlling interests 0.4 0.2
23.0 31.7
Total comprehensive income attributable to:
Equity holders of the Company 23.5 27.9
Non-controlling interests 0.4 0.2
23.9 28.1
Earnings per share attributable to equity holders of the Company (pence per share)
Basic earnings per share 10 115.8 163.0
Diluted earnings per share 10 113.8 160.3
* Balance is less than £100,000.
The accompanying notes form an integral part of these financial statements.
137
FINANCIALS
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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£m Note 2021 2020
ASSETS
Current assets
Corporate tax recoverable 2.9 3.8
Cash and cash equivalents 16 9.0 13.9
Inventories 17 74.0 54.2
Trade receivables 18 30.8 30.2
Other current assets 19 5.0 4.6
Derivative financial instruments 23 * 0.3
Total current assets 121.7 107.0
Non-current assets
Goodwill 11 52.5 52.2
Intangible assets 12 56.3 46.6
Property, plant and equipment 13 30.2 28.4
Right-of-use assets 14 8.3 5.1
Deferred income tax assets 24 3.2 2.9
ESOP loan to employees * *
Total non-current assets 150.5 135.2
Total assets 272.2 242.2
LIABILITIES
Current liabilities
Current income tax liabilities 2.4 4.9
Trade and other payables 20 44.7 28.2
Derivative financial instruments 23 0.1 0.1
Lease liabilities 22 1.6 1.5
Accrued consideration 21 * –
Borrowings 22 0.2 –
Total current liabilities 49.0 34.7
Non-current liabilities
Accrued consideration 21 1.3 1.0
Borrowings 22 33.4 31.8
Deferred income tax liabilities 24 9.4 6.7
Provisions 0.2 0.1
Lease liabilities 22 6.5 3.4
Total non-current liabilities 50.8 43.0
Total liabilities 99.8 77.7
NET ASSETS 172.4 164.5
EQUITY
Equity attributable to equity holders of the Company
Share capital 25 27.2 27.2
Merger reserve 25 0.2 0.2
Share-based payment reserve 25 5.6 4.1
Treasury shares reserve 25 * (0.1)
Translation reserve 25 (2.9) (3.8)
Other reserve 25 4.4 3.6
Retained earnings 25 137.0 132.6
171.5 163.8
Non-controlling interests 0.9 0.7
TOTAL EQUITY 172.4 164.5
* Balance is less than £100,000.
The accompanying notes form an integral part of these financial statements.
138
XP Power Annual Report & Accounts for the year ended 31 December 2021
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
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Attributable to equity holders of the Company
£m Note
Share
capital
Share-
based
payment
reserve
Treasury
shares
reserve
Merger
reserve
Translation
reserve
Other
reserve
Retained
earnings Total
Non-
controlling
interests
Total
equity
Balance at
1 January 2020 27.2 3.9 (0.5) 0.2 (0.2) (0.8) 108.4 138.2 0.7 138.9
Exercise of share-based
payment awards – (1.2) 0.4 – – 4.3 – 3.5 – 3.5
Employee share-based
payment expenses – 1.5 – – – – – 1.5 – 1.5
Tax on employee share-
based payment expenses – (0.1) – – – – – (0.1) – (0.1)
Dividends paid 9 – * – – – – (7.3) (7.3) * (7.3)
Future acquisition of non-
controlling interest – – – – – (0.1) – (0.1) – (0.1)
Change in non-controlling
interest – – – – – 0.2 – 0.2 (0.2) –
Exchange difference arising
from translation of financial
statements of foreign
operations – * – – (3.6) – * (3.6) * (3.6)
Profit for the year – – – – – – 31.5 31.5 0.2 31.7
Total comprehensive income
for the year – – – – (3.6) – 31.5 27.9 0.2 28.1
Balance at
31 December 2020 27.2 4.1 (0.1) 0.2 (3.8) 3.6 132.6 163.8 0.7 164.5
Exercise of share-based
payment awards – (0.5) 0.1 – – 1.0 – 0.6 – 0.6
Employee share-based
payment expenses – 1.5 – – – – – 1.5 – 1.5
Tax on employee share-
based payment expenses – 0.5 – – – – – 0.5 – 0.5
Dividends paid 9 – – – – – – (18.2) (18.2) (0.2) (18.4)
Future acquisition of non-
controlling interest – – – – – (0.2) – (0.2) – (0.2)
Exchange difference arising
from translation of financial
statements of foreign
operations – * – – 0.9 – * 0.9 * 0.9
Profit for the year – – – – – – 22.6 22.6 0.4 23.0
Total comprehensive income
for the year – * – – 0.9 – 22.6 23.5 0.4 23.9
Balance at
31 December 2021 27.2 5.6 * 0.2 (2.9) 4.4 137.0 171.5 0.9 172.4
* Balance is less than £100,000.
The accompanying notes form an integral part of these financial statements.
139
FINANCIALS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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£m Note 2021 2020
Cash flows from operating activities
Profit after tax 23.0 31.7
Adjustments for:
– Income tax expense 8 5.4 4.0
– Amortisation and depreciation 7 13.2 14.0
– Finance charge 6 1.3 1.7
– Share-based payment expenses 5 1.5 1.5
– Fair value loss on derivative financial instruments 0.3 0.5
– Loss on disposal of property, plant, and equipment * *
– Loss on disposal of intangible assets – 1.2
– Unrealised currency translation (gain)/ loss (0.1) 0.2
– Provision for doubtful debts 29 (d) * 0.4
Change in working capital, net of effects from acquisitions:
– Inventories 26 (19.0) (12.3)
– Trade and other receivables 26 (1.1) 2.7
– Trade and other payables 26 16.1 3.3
– Provision for liabilities and other charges 26 * *
Cash generated from operations 40.6 48.9
Income tax paid, net of refund (4.2) (3.3)
Net cash provided by operating activities 36.4 45.6
Cash flows from investing activities
Purchases and construction of property, plant and equipment 13 (5.5) (4.0)
Additions of development costs 12 (8.3) (7.7)
Additions of software and software under development 12 (8.1) (3.2)
Proceeds from disposal of property, plant and equipment * 0.1
Proceeds from repayment of ESOP loans * *
Payment of accrued consideration 21 – (0.6)
Net cash used in investing activities (21.9) (15.4)
Cash flows from financing activities
Proceeds from borrowings 22 3.7 –
Repayment of borrowings 22 (2.9) (20.7)
Principal payment of lease liabilities 22 (1.7) (1.7)
Proceeds from exercise of share-based payment awards 0.6 3.5
Interest paid 22 (0.9) (1.3)
Dividend paid to equity holders of the Company 9 (18.2) (7.3)
Dividend paid to non-controlling interests (0.2) *
Net cash used in financing activities (19.6) (27.5)
Net (decrease) / increase in cash and cash equivalents (5.1) 2.7
Cash and cash equivalents at beginning of financial year 13.9 11.2
Effects of currency translation on cash and cash equivalents * *
Cash and cash equivalents at end of financial year 16 8.8 13.9
* Balance is less than £100,000.
The accompanying notes form an integral part of these financial statements.
140
XP Power Annual Report & Accounts for the year ended 31 December 2021
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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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 401 Commonwealth Drive, Lobby B, #02-02, Haw Par Technocentre, Singapore 149598. With effect from 7 February 2022,
the address of registered office has changed to 19 Tai Seng Avenue, #07-01, Singapore 534054.
The nature of XP Power Limited and its subsidiaries’ operations and its principal activities are set out in the “Markets and Products” sections of
the Annual Report on pages 02–03.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
2.1 BASIS OF PREPARATION
The consolidated financial statements of XP Power Limited and its subsidiaries (the “Group”) have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (IFRS as issued by the IASB)
and Singapore Financial Reporting Standards (International) (“SFRS(I)s”).
Adoption of IFRS as issued by the IASB
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became IFRS as adopted by the
United Kingdom, with future changes being subject to endorsement by the UK Endorsement Board.
Instead of transitioning into IFRS as adopted by the UK, XP Power Limited adopted IFRS as issued by the IASB in its consolidated financial
statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of the change in framework.
Adoption of SFRS(I)
The Group has voluntarily adopted SFRS(I)s as issued by the Accounting Standards Council on 1 January 2021. These financial statements for
the year ended 31 December 2021 are the first set of financial statements the Group prepared in accordance with SFRS(I)s and IFRS as issued
by the IASB. The Group’s previously issued financial statements for periods up to and including the financial year ended 31 December 2020
were prepared in accordance with IFRS as adopted by the EU.
In adopting SFRS(I) on 1 January 2021, the Group is required to apply all of the specific transition requirements in SFRS(I) 1 - First-time
Adoption of SFRS(I).
Under SFRS(I) 1, these financial statements are required to be prepared using accounting policies that comply with SFRS(I) effective as at
31 December 2021. The same accounting policies are applied throughout all periods presented in these financial statements, subject to the
mandatory exceptions and optional exemptions under SFRS(I) 1.
The Group’s opening balance sheet has been prepared as at 1 January 2020, which is the Group’s date of transition to SFRS(I) (“date of
transition”). There was no impact on the adoption of the new framework in the period of initial application as shown below.
£m
Balance sheet as at
31 December 2019
prepared in accordance
with IFRS as adopted by
the EU
Balance sheet as at
1 January 2020 prepared
in accordance
with SFRS(I)
Current Asset 96.0 96.0
Non-current Asset 137.4 137.4
Current liabilities 30.4 30.4
Non-current liabilities 64.1 64.1
Equity 138.9 138.9
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.
141
FINANCIALS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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2. Summary of significant accounting policies continued
a. Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
strategic report on pages 20–25. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in
the financial review on pages 38–40. The principal risks of the Group are set out on pages 43–49. The directors have considered these areas
alongside the principal risks and how they may impact going concern.
The directors reviewed budgets and forecasts to assess the cash requirements of the Group to continue in operational existence for a
minimum period of 12 months from the date of the approval of these financial statements.
The Directors also reviewed downside scenarios to the budgets and forecasts, which reflect the possible impact of risks identified in the risk
management framework. The greatest consideration was given to those risks with the highest potential impact if they occurred and those with
the highest probability of occurring. Throughout these downside scenarios, the Group continues to have significant headroom on its financial
debt covenants.
Therefore, after making the above enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group, therefore, continues to adopt the going concern basis in preparing its
consolidated financial statements.
b. Changes in accounting policy and disclosures
i New and amended standards adopted by the Group
On 1 January 2021, 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 2021 reporting periods
and have not been early adopted by the Group. These are not expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
2.2 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
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they
relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign
operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair
value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
c. Group companies
The results and financial position of all the Group’s foreign operations (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 for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
ii. Income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange
rates (unless this 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 at the dates of the transactions);
iii. All resulting exchange differences are recognised in other comprehensive income.
142
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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2. Summary of significant accounting policies continued
When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation
and translated at the closing rate.
The Group has elected to treat goodwill and fair value adjustments arising on the acquisitions before the date of initial transition to IFRS as
Pound Sterling-denominated assets and liabilities converted using the exchange rates at the dates of acquisition.
2.3 REVENUE RECOGNITION
a. Sales of goods
The Group manufactures and sells a range of power products. Sales are recognised at a point in time when control of the products has
transferred to its customer. Transfer of control occurs when delivery to the customer takes place, depending on the delivery terms agreed with
the customer.
Power products are sometimes sold with volume discounts based on aggregate sales over a 12-month period or early payment discounts if the
customers made early repayment. Revenue from these sales is recognised based on the price specified in the contract, net of the discounts.
Accumulated experience is used to estimate and provide for the volume discounts, using the expected value method, and early payment
discounts, using most likely approach. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not
occur. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice.
The Group will usually issue a credit note for refund for faulty products.
A receivable (financial asset) is recognised when the goods are delivered as this is the point in time that the consideration is unconditional
because only the passage of time is required before payment is due.
Volume rebates and early payment discounts are recognised when the goods are delivered and is presented as a reduction in trade and other
receivables.
The Group has elected to apply the practical expedient not to adjust the transaction price for the existence of significant financing component
when the period between the transfer of control of good or service to a customer and the payment date is one year or less.
b. Interest income
Interest income is recognised using the effective interest rate method.
2.4 GROUP ACCOUNTING
a. Subsidiaries
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 to direct the activities of the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another 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.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition
of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred to the former owners of the acquired business, the
equity interests issued by the Group, the fair value of any asset or liability resulting from a contingent consideration arrangement and the
fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired, liabilities and contingent liabilities assumed in a
business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquired entity, on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity and the acquisition-date fair
value of any previously held equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised
directly in profit or loss as a bargain purchase.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
Investments in subsidiaries are held at cost less accumulated impairment losses in the separate financial statements.
b. Transactions with non-controlling interests
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss,
statement of comprehensive income, statement of changes in equity and balance sheet respectively.
143
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2. Summary of significant accounting policies continued
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the
Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests
to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any
consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company.
When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the
change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting
for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that
amounts previously recognised in other comprehensive income are reclassified to profit or loss.
2.5 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. 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) but excludes borrowing costs.
Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs to make the sale.
2.6 PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment, including land and buildings, are stated at historical cost less accumulated depreciation and any
recognised impairment losses.
The historical 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.
Subsequent costs are included in the asset’s carrying amount, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit
or loss during the financial period in which they are incurred.
Freehold land and property under development are not depreciated. Depreciation on other items of property, plant and equipment is
calculated using the straight-line method to allocate their cost over their estimated useful lives as follows:
Plant and equipment – 10–33%
Motor vehicles – 20–25%
Building improvements – 10–33%
Buildings – 2–5%
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.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains or losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
2.7 INTANGIBLE ASSETS
a. Goodwill
The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity and the acquisition-date fair
value of any previously held equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as
goodwill.
Goodwill is not amortised but tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount
of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (“CGUs”) for the purpose of impairment testing. The allocation is made to those CGUs or groups
of CGUs that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at
the lowest level at which goodwill is monitored for internal management purposes, being the operating segments. The operating segments are
segregated based on three primary geographic areas, North America, Europe and Asia.
144
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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2. Summary of significant accounting policies continued
b. Internally generated intangible asset - Software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Development 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
where the following criteria are met:
• it is technically feasible to complete the software so that it will be available for use;
• management intends to complete the software and use or sell it;
• there is an ability to use or sell the software;
• it can be demonstrated how the software will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software are available; and
• the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software include consultancy costs, employee costs and other directly
attributable costs.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. Amortisation
is recognised in profit or loss on a straight-line basis over estimated useful lives of seven to ten years.
c. Internally generated intangible asset - Research and development
Research expenditure and development expenditure that do not meet the criteria in b. above are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Development costs include materials used, direct labour and other directly attributable costs to bringing the asset to the condition necessary
for it to be capable of operating in the manner intended by management.
Capitalised research and development expenditure are amortised on a straight-line basis over their useful lives, which vary between three
and seven years depending on the exact nature of the project undertaken. Amortisation commences when the product is ready and available
for sale.
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.
d. Other intangible assets
Other intangible assets that are acquired by the Group are initially recognised at cost. The cost of intangible assets acquired in a business
combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated
amortisation. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives as follows:
Brand – 10%–50%
Technology – 10%–20%
Customer relationships – 10%–20%
Customer contracts – 90%–100%
2.8 BORROWING COSTS
Borrowing costs are recognised in profit or loss using effective interest rate method except for those costs that are directly attributable to the
development of intangible assets.
Borrowing costs on general borrowings are capitalised by applying a capitalisation rate to the development expenditure that are financed by
general borrowings.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalised during the period of time that is required to complete and prepare the 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.
Other borrowing costs are expensed in the period in which they are incurred.
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2. Summary of significant accounting policies continued
2.9 IMPAIRMENT OF NON-FINANCIAL ASSETS
Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other non-financial assets are tested for impairment whenever events or changes in circumstances indicate that
the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
2.10 FINANCIAL ASSETS
a. Classification
The Group classifies its financial assets in the following measurement categories:
• Those to be measured at amortised cost; and
• Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss).
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair values, gains or losses will either be recorded in profit or loss or in other comprehensive income. For investments in
equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
b. 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 the risks and rewards of ownership.
c. Measurement
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 (FVPL), 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.
Debt instruments
Debt instruments mainly comprise of “trade receivables”, “other current assets (excluding prepayments, VAT receivables and rights to returned
goods)”, “cash and cash equivalents” and “ESOP loan to employees” in the balance sheet.
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:
• Amortised cost: Assets 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. Interest income from these financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses)
together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other
comprehensive income, 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 other
comprehensive income is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these
financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in
other gains/(losses), and impairment expenses are presented as a separate line item in the statement of profit or loss.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is
subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
146
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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2. Summary of significant accounting policies continued
d. 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.
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, Expected credit loss is assessed separately for each of the Group’s key regions and is based on each
region’s two-year historical credit loss experience.
2.11 OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset
and there is an intention to settle on a net basis or realise the asset and the liability simultaneously.
2.12 TRADE AND OTHER PAYABLES
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers.
Accounts payable 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). If not, 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 rate
method.
2.13 PROVISIONS
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and 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.
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 as a 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 recognised initially at fair value, net of transaction costs incurred. Borrowings are 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 rate 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 drawdown occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which it relates.
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the
balance sheet date, in which case they are presented as non-current liabilities.
2.15 LEASES
When the Group is the lessee:
At the inception of the contract, the Group assesses if the contract contains a lease. A contract contains a lease if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration. Reassessment is only required when the terms
and conditions of the contract are changed.
a. Right-of-use assets
The Group recognised a right-of-use asset and lease liability at the date which the underlying asset is available for use. Right-of-use assets
are measured at cost which comprises the initial measurement of lease liabilities adjusted for any lease payments made at or before the
commencement date and lease incentive received. Any initial direct costs that would not have been incurred if the lease had not been obtained
are added to the carrying amount of the right-of-use assets.
These right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term.
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2. Summary of significant 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 are based on an index or rate, initially measured using the index or rate at the commencement date;
• Amount expected to be payable under residual value guarantees;
• The exercise price of a purchase option if is reasonably certain to exercise the option; and
• Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
For contract that contain both lease and non-lease components, the Group allocates the consideration to each lease component on the basis
of the relative standalone price of the lease and non-lease component. The Group has elected to not separate lease and non-lease component
for property leases and account these as one single lease component.
Lease liability is measured at amortised cost using the effective interest rate method. Lease liability 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 modification in the scope or the consideration of the lease that was not part of the original term.
Lease liability is remeasured with a corresponding adjustment to the right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
Lease payments are presented as follows in the Group statement of cash flows:
• Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement
of the lease liabilities are presented within cash flows from operating activities;
• Payments for the interest element of recognised lease liabilities are included in ‘interest paid’ within cash flows from financing
activities; and
• Payments for the principal element of recognised lease liabilities are presented within cash flows from financing activities.
c. Short-term or low-value leases
The Group has elected to not recognised 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 at 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.
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group
periodically uses foreign exchange forward contracts to manage the foreign currency exposures.
2.17 CURRENT AND DEFERRED INCOME TAX
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the statement of
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates 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. It establishes provisions, where appropriate, on the basis of amounts expected to
be paid to the tax authorities.
148
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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2. Summary of significant accounting policies continued
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests
in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred
tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to equity in which case the deferred tax
is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
As the timing of the tax deduction and the recognition of the employee share-based payment expenses differs, IAS 12 Income Taxes requires
the recognition of the related deferred tax asset if the deferred tax asset recognition criteria are met. For an equity-settled share-based
payment, 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. All taxes related to cash-settled share-based payments
shall be recognised in profit or loss.
2.18 CASH AND CASH EQUIVALENTS
For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand and deposits with
financial institutions and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
2.19 SHARE-BASED PAYMENTS
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. The vesting conditions are service conditions
and performance conditions only. At each balance sheet date, the Group revises its estimates of the number of shares under options 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 payment reserve over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised in the share-
based payment reserve are credited to share capital account, when new ordinary shares are issued, or to the “treasury shares” account, when
treasury shares are reissued to the employees.
2.20 DEFINED CONTRIBUTION PLANS
The Group operates a few defined contribution plans under which the Group pays fixed contributions into separate entities such as Central
Provident Fund in Singapore on mandatory, contractual or voluntary basis. The Group has no further obligations once the contributions have
been paid. The Group’s contributions are recognised as employee compensation expense when they are due.
2.21 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.
2.22 SHARE CAPITAL AND TREASURY SHARES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity, net of
tax, from the proceeds.
When any entity within the Group purchases the Company’s ordinary shares (“treasury shares”), the consideration paid, including any directly
attributable incremental cost (net of income taxes), is deducted from equity attributable to the Company’s equity holders, until they are
cancelled, sold or reissued.
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2. Summary of significant accounting policies continued
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 the employee share-based payment plans, the cost of treasury shares is
reversed from the treasury share reserve 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 of the Company.
Other reserve 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.
2.23 DIVIDEND DISTRIBUTION
Dividend distributions to the Company’s Shareholders are recognised when the dividends are approved for payment or, in the case of interim
dividends, when paid.
2.24 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 judgements and key sources of estimation uncertainty
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. Recoverability of capitalised development costs
During the year £8.3 million (2020: £7.7 million) of development costs were capitalised, bringing the total carrying amount of development
costs capitalised as intangible assets as at 31 December 2021 to £30.0 million (2020: £25.1 million), net of amortisation. Management has
reviewed the balances by project, compared the carrying amount to expected future revenues and profits and is satisfied that no impairment
exists and that the costs capitalised will be fully recovered as the products are launched to market. New product projects are monitored
regularly and should the technical or market feasibility of a new product be in question, the project would be cancelled and capitalised costs to
date will be removed from the balance sheet and recognised in profit or loss. Significant judgements are used by the Group to estimate future
sales of products and expected future cash flows. In making these estimates, management has relied on past performance, its expectations of
market developments, and industry trends.
b. Useful lives of capitalised development costs
The Group estimates the useful lives of capitalised 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 development costs based on
the expected life cycle of these products, taking into consideration expected customer demand and technological innovation.
c. Impairment of goodwill
The Group tests annually for impairment of goodwill, or more frequently if there are indications that goodwill might be impaired.
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 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, growth rates and expected changes to sales and overheads during the period. 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
cash-generating units.
The Group prepares cash flow forecasts derived from the most recent financial results and takes into account industry growth forecasts for the
next five years and extrapolates cash flows for the following five years assuming no growth from that date. The carrying amount of goodwill as
at 31 December 2021 was £52.5 million (2020: £52.2 million) with no impairment adjustment required for 2021.
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.
Each CGUs or group of CGUs have been tested for impairment to demonstrate the impact of the possibility of an extreme weather even
causing a temporary closure of a manufacturing site followed by a ramp up of production back to original levels, or government restrictions on
power (see Climate Risks in the Sustainability Report) that could result in ongoing reduction of capacity. The impacts of the headroom of North
America, Europe and Asia is a reduction of £12.4 million, £12.4 million and £22.7 million respectively. The recoverable amounts exceed the
carrying values as at 31 December 2021 and no potential indicator of impairment was identified.
150
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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4. Segmented and revenue information
Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision Makers (“CODM”) that
are used to make strategic decisions. The CODM are the Executive Board of Directors who will review the operating results and forecasts to
make decisions about resources to be allocated to the segments and assess their performance.
The Executive Board of Directors considers and manages the business on a geographic basis. Management manages and monitors the business
based on the three primary geographic areas: North America, Europe and Asia. All geographic locations market the same class of products to
their respective customer base.
The Executive Board of Directors assesses the performance of the operating segments based on net sales and operating income. Net sales
for geographic segments are based on the location of the design win rather than where the end sale is made. The operating income for each
segment includes net sales to third parties, related cost of sales, operating expenses directly attributable to the segment, and a portion of
corporate expenses. Costs excluded from segment operating income include share-based payment expenses, income taxes, various non-
operating charges, and other separately managed general and administrative costs.
Segment assets consist primarily of property, plant and equipment, right-of-use assets, goodwill, intangible assets, inventories, trade
receivables, cash and cash equivalents, derivative financial instruments and exclude tax assets.
Segment liabilities comprise trade and other current liabilities, derivative financial instruments, borrowings, accrued consideration and exclude
tax liabilities.
(I) REVENUE
The Group derives revenue from the transfer of goods at a point in time in the following major product lines and geographical regions.
The revenue by class of customer and location of the design win is as follows:
Year to 31 December 2021 Year to 31 December 2020
£m Europe
North
America Asia Total Europe
North
America Asia Total
Semiconductor
Manufacturing Equipment 3.0 75.2 15.1 93.3 1.8 60.6 7.2 69.6
Industrial Technology 43.7 37.1 11.2 92.0 42.8 37.4 14.2 94.4
Healthcare 20.6 28.9 5.5 55.0 21.0 43.2 5.1 69.3
Total 67.3 141.2 31.8 240.3 65.6 141.2 26.5 233.3
Revenues of £40.2 million (2020: £32.1 million) are derived from a single external customer. These revenues are attributable to the
semiconductor manufacturing equipment sector.
The revenue by region or country where sales are generated is as follows:
£m 2021 2020
North America 144.5 134.8
United Kingdom 27.9 33.4
Singapore 29.1 31.0
Germany 21.4 14.5
Switzerland 1.7 2.6
France 3.3 3.8
Other countries 12.4 13.2
Total revenue 240.3 233.3
The majority of North America’s revenue is generated from the United States of America.
(II) SEGMENT
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.
The segment information provided to the CODM for the reportable segments for the year ended 31 December 2021 and prior year
comparatives is as follows:
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4. Segmented and revenue information continued
Reconciliation of segment results to profit after tax:
£m 2021 2020
1
Europe 20.3 18.2
North America 46.1 48.7
Asia 10.0 8.4
Segment results 76.4 75.3
Research and development (16.0) (14.9)
Manufacturing (3.6) (3.1)
Corporate cost from operating segment (11.7) (11.3)
Adjusted operating profit 45.1 46.0
Finance charge (1.3) (1.7)
Specific items (15.4) (8.6)
Profit before tax 28.4 35.7
Income tax expense (5.4) (4.0)
Profit after tax 23.0 31.7
1
Prior year comparatives were reclassified to ensure consistency with 2021 segmental presentation.
Year to 31 December 2021 Year to 31 December 2020
£m Europe
North
America Asia Total Europe
North
America Asia Total
Other information
Property, plant and equipment
additions 0.2 3.3 2.0 5.5 0.1 1.8 2.1 4.0
Depreciation of property, plant and
equipment 0.2 1.6 2.2 4.0 0.4 1.5 2.1 4.0
Right-of-use assets additions 0.4 0.1 4.5 5.0 0.4 * 0.4 0.8
Depreciation of right-of-use assets 0.5 0.9 0.4 1.8 0.5 1.1 0.3 1.9
Intangible assets additions – 4.6 11.8 16.4 * 4.4 6.5 10.9
Amortisation 0.2 4.3 2.9 7.4 0.2 4.2 3.7 8.1
Balance sheet
Segment assets 26.0 145.9 94.2 266.1 29.1 130.7 75.7 235.5
Unallocated deferred and current
income tax 6.1 6.7
Consolidated total assets 272.2 242.2
Segment liabilities (5.7) (52.2) (30.1) (88.0) (5.8) (44.8) (15.5) (66.1)
Unallocated deferred and current
income tax (11.8) (11.6)
Consolidated total liabilities (99.8) (77.7)
* Balance is less than £100,000.
Non-current assets, other than deferred income tax assets, by countries:
£m 2021 2020
North America 83.3 81.6
United Kingdom 11.6 11.8
Singapore 39.0 25.2
Germany 0.5 0.5
Switzerland * 0.1
France * *
Other countries 12.9 13.1
Total non-current assets 147.3 132.3
* Balance is less than £100,000.
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XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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4. Segmented and revenue information continued
Reconciliation of adjusted measures
The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits, which management
believes to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings. Such items
may include, but are not limited to, costs associated with business combinations, gains and losses on the disposal of businesses, fair value
movements, restructuring changes, acquisition related costs and amortisation of intangible assets arising from business combinations.
In addition, the Group presents an adjusted profit after tax measure by making adjustments for certain tax charges and credits, which
management believes to be significant by virtue of their size, nature or incidence or which have a distortive effect.
The Group uses these adjusted measures to evaluate performance and as a method to provide shareholders with clear and consistent
reporting. See below for a reconciliation of operating profit to adjusted operating profit, a reconciliation of profit before tax to adjusted profit
before tax and a reconciliation of profit after tax to adjusted profit after tax.
a. A reconciliation of operating profit to adjusted operating profit is as follows:
£m 2021 2020
Operating profit 29.7 37.4
Adjusted for:
Acquisition costs 0.1 0.3
Costs related to ERP implementation 2.1 1.9
Amortisation of intangible assets due to business combination 2.8 3.2
Legal costs 10.1 0.4
Restructuring costs – 2.3
Fair value loss on derivative financial instruments 0.3 0.5
15.4 8.6
Adjusted operating profit 45.1 46.0
b. A reconciliation of profit before income tax to adjusted profit before tax is as follows:
£m 2021 2020
Profit before tax (“PBT”) 28.4 35.7
Adjusted for:
Acquisition costs 0.1 0.3
Costs related to ERP implementation 2.1 1.9
Amortisation of intangible assets due to business combination 2.8 3.2
Legal costs 10.1 0.4
Restructuring costs – 2.3
Fair value loss on derivative financial instruments 0.3 0.5
15.4 8.6
Adjusted PBT 43.8 44.3
c. A reconciliation of profit after tax to adjusted profit after tax is as follows:
£m 2021 2020
Profit after tax (“PAT”) 23.0 31.7
Adjusted for:
Acquisition costs 0.1 0.3
Costs related to ERP implementation 2.1 1.9
Amortisation of intangible assets due to business combination 2.8 3.2
Legal costs 10.1 0.4
Restructuring costs – 2.3
Fair value loss on derivative financial instruments 0.3 0.5
Non-recurring tax benefits
1
(3.0) (1.1)
12.4 7.5
Adjusted PAT 35.4 39.2
1
Adjusted for tax on specific items relating to completed acquisitions of £10,058 (2020: £0.1 million), costs related to ERP implementation of £0.3 million (2020:
£0.3 million), legal costs of £2.6 million (2020: £0.1 million), restructuring costs of £nil (2020: £0.5 million) and fair value loss on derivative financial instruments
of £0.1 million (2020: £0.1 million)
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5. Employee compensation (including Directors)
£m 2021 2020
Wages and salaries 65.6 60.7
Employers’ contribution to defined contribution plans 8.1 8.1
Share-based payment expenses 1.5 1.5
75.2 70.3
Less: amount capitalised in intangible assets (7.6) (6.9)
Total 67.6 63.4
For further information regarding Directors’ remuneration, refer to the Directors’ Remuneration Report.
6. Finance charge
£m 2021 2020
Interest income * *
Interest expense
– Bank borrowings and overdrafts 1.2 1.5
– Lease liabilities 0.2 0.3
1.4 1.8
Unwinding of discount for asset retirement obligation * *
Unwinding of discount for accrued consideration 0.1 *
1.5 1.8
Less: amount capitalised in intangible assets (0.2) (0.1)
Amount recognised in profit or loss 1.3 1.7
* Balance is less than £100,000.
Finance expenses on general financing were capitalised at a rate of 1.1% per annum (2020: 1.2% per annum).
154
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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7. Expenses by nature
£m 2021 2020
Profit after tax is after charging:
Amortisation of intangible assets 7.4 8.1
Depreciation of property, plant and equipment 4.0 4.0
Depreciation of right-of-use assets 1.8 1.9
Employee compensation (Note 5) 67.6 63.4
Foreign exchange (gain)/loss (0.9) 1.0
Fair value loss on derivative financial instruments 0.3 0.5
Purchases of inventories 125.0 110.1
Changes in inventories (19.8) (10.1)
Fees payable to the Group’s Auditor for the audit of the Group’s accounts 0.5 0.6
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 0.2 0.2
Lease expense (Note 14) 0.2 0.2
Finance charge (Note 6) 1.3 1.7
Recruitment 1.3 1.2
Information systems 3.5 2.9
Consultancy fees 8.9 3.7
Consultancy fees capitalised as intangible assets (Note 12) (8.0) (2.9)
Travel and entertainment 0.7 0.6
Costs related to ERP implementation 2.1 1.9
Legal costs (Note 31) 10.1 0.4
Acquisition costs 0.1 –
Restructuring costs – 2.3
Other charges 5.6 6.5
Total 211.9 198.2
* Balance is less than £100,000.
8. Income taxes
£m 2021 2020
Singapore corporation tax
– current year 1.1 4.5
– under/(over) provision in prior financial year 0.1 (0.1)
Overseas corporation tax
– current year 1.2 0.5
– over provision in prior financial year * (1.4)
Withholding tax 0.1 0.1
Current income tax 2.5 3.6
Deferred income tax
– current year 2.6 (0.1)
– under provision in prior financial years 0.3 0.5
Income tax expense 5.4 4.0
* Balance is less than £100,000.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions at the balance sheet date.
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8. Income taxes continued
The differences between the total income tax expense shown above and the amount calculated by applying the standard rate of Singapore
income tax rate to the profit before income tax are as follows:
£m 2021 2020
Profit before tax 28.4 35.7
Tax on profit at standard Singapore tax rate of 17% (2020: 17%) 4.8 6.1
Tax incentives (0.7) (0.6)
Higher rates of overseas corporation tax 1.1 0.5
Tax effect of share-based payments (0.3) (1.2)
Non-deductible expenditure 0.2 0.3
Non-taxable income (0.1) (0.2)
Deferred tax effect of change in tax rate (0.1) –
Under/(over) provision of tax in prior financial years 0.4 (1.0)
Withholding tax 0.1 0.1
Income tax expense 5.4 4.0
Aggregate deferred tax asset arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly
(debited) or credited to equity:
£m 2021 2020
Deferred tax asset – share-based payments (0.5) (0.1)
Total (0.5) (0.1)
9. Dividends
Amounts recognised as distributions to equity holders in the period:
2021
2020
Pence
per share £m
Pence
per share £m
Prior year third quarter dividend paid 20.0* 3.9 20.0 3.8
Prior year final dividend paid 36.0* 7.1 – –
First quarter dividend paid 18.0^ 3.5 – –
Second quarter dividend paid 19.0^ 3.7 18.0* 3.5
Total 93.0 18.2 38.0 7.3
* Dividends in respect of 2020 (74.0p).
^ Dividends in respect of 2021 (94.0p).
The third quarter dividend of 21.0 pence per share was paid on 17 January 2022. The proposed final dividend of 36.0 pence per share for the
year ended 31 December 2021 is subject to approval by Shareholders at the Annual General Meeting scheduled for 19 April 2022 and has
not been included as a liability in these financial statements. It is proposed that the final dividend be paid on 28 April 2022 to members on the
register as at 25 March 2022. These financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an
appropriation of retained earnings in the financial year ending 31 December 2022.
156
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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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 2021 2020
Earnings
Earnings for the purposes of basic and diluted earnings per share
(profit attributable to equity holders of the Company) 22.6 31.5
Earnings for earnings per share 22.6 31.5
Number of shares
Weighted average number of shares for the purposes of basic earnings per share (thousands) 19,514 19,326
Effect of potentially dilutive share-based payment plans (thousands) 344 327
Weighted average number of shares for the purposes of dilutive earnings per share (thousands) 19,858 19,653
Earnings per share from operations
Basic 115.8p 163.0p
Basic adjusted* 179.4p 201.8p
Diluted 113.8p 160.3p
Diluted adjusted* 176.3p 198.4p
* Reconciliation to compute the diluted adjusted earnings from operations is as per below:
£m 2021 2020
Earnings for the purposes of basic and diluted earnings per share
(profit attributable to equity holders of the Company) 22.6 31.5
Amortisation of intangible assets due to business combination 2.8 3.2
Acquisition costs 0.1 0.3
Non-recurring tax benefits (3.0) (1.1)
Costs related to ERP implementation 2.1 1.9
Legal costs 10.1 0.4
Restructuring costs – 2.3
Fair value loss on derivative financial instruments 0.3 0.5
Adjusted earnings 35.0 39.0
11. Goodwill
£m 2021 2020
Cost and net book value
At 1 January 52.2 53.2
Accrued consideration (Note 21) 0.2 (0.3)
Currency translation differences 0.1 (0.7)
At 31 December 52.5 52.2
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 2021 2020
North America 41.3 41.2
Europe 9.7 9.5
Asia 1.5 1.5
At 31 December 52.5 52.2
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11. Goodwill continued
The recoverable amount of the CGU is determined from value-in-use calculations. Cash flow projections used in the value-in-use calculations
were based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period were
extrapolated using the estimated growth rates stated below.
Key assumptions used for value-in-use calculations:
31 December 2021
31 December 2020
Growth
rate
1
Discount
rate
2
Terminal
growth rate
Growth
rate
1
Discount
rate
2
Terminal
growth rate
North America 9.9% 11.0% 2.0% 5.3% 11.9% 2.0%
Europe 6.3% 12.3% 2.0% 2.4% 11.0% 2.0%
Asia 11.5% 12.1% 2.0% 7.8% 14.0% 2.0%
1
Compound annual growth rate of projected revenue over five years
2
Pre-tax discount rate applied to the pre-tax cash flow projections
A sensitivity analysis was performed for each of the CGUs or group of CGUs, management concluded that no reasonably possible change in
any of the key assumptions would result in the carrying value of the CGU to exceed its recoverable amount.
The impairment test carried out at 31 December 2021 for the North America CGU, which includes 78.7% of the goodwill recognised on the
balance sheet, has revealed that the recoverable amount of the CGU is £331.4 million or 189.2% higher than its carrying amount. A reasonably
possible change of an increase in the discount rate by 27.9% or a decrease in growth rate by 5.9% 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 2021 for the Europe CGU, which includes 18.5% of the goodwill recognised on the balance
sheet, has revealed that the recoverable amount of the CGU is £42.7 million or 101.9% higher than its carrying amount. A reasonably possible
change of an increase in the discount rate by 20.1% or a decrease in growth rate by 3.2% would result in the recoverable amount of the Europe
CGU being equal to its carrying value.
The impairment test carried out at 31 December 2021 for the Asia CGU, which includes 2.8% of the goodwill recognised on the balance sheet,
has revealed that the recoverable amount of the CGU is £223.2 million or 178.7% higher than its carrying amount. A reasonably possible
change of a decrease in growth rate by 11.1% would result in the recoverable amount of the Asia CGU being equal to its carrying value.
The impairment test also modelled the potential impact on future cashflows due to climate change. A sensitivity analysis was performed for
each CGUs or group of CGUs to demonstrate the impact of a disruption that would result in 50% reduction of revenue and profit in a given
year with 30% in the following year and 20% after that before returning to normal levels. This was considered to be a reasonable test 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. An initial 50% reduction was chosen on the basis that it reflects the possibility of an extreme weather even causing a temporary closure
of a manufacturing site followed by a ramp up of production back to original levels, or government restrictions on power (see Climate Risks in
the Sustainability Report) that could result in ongoing reduction of capacity. The impacts of the headroom of North America, Europe and Asia is
a reduction of £12.4 million, £12.4 million and £22.7 million respectively. The impacts would still leave significant headroom and as a result no
potential indicator of impairment was identified.
158
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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12. Intangible assets
£m
Development
costs Brand Trademarks Technology
Customer
relationships
Customer
contracts Software
Software
under
development Total
Cost
At 1 January 2020 43.2 1.0 1.0 4.9 17.8 0.6 7.4 – 75.9
Additions 7.7 – – – – – 0.3 2.9 10.9
Disposal (1.2) – – – – – – – (1.2)
Transfer – – – – – – 1.3 (1.3) –
Currency translation
differences (1.3) (0.1) 0.1 * (0.6) * (0.3) (0.1) (2.3)
At 31 December 2020 48.4 0.9 1.1 4.9 17.2 0.6 8.7 1.5 83.3
Additions 8.3 – – – – – 0.1 8.0 16.4
Reclassification from
property, plant and
equipment – – – – – – * – *
Currency translation
differences 0.5 * * * 0.2 * 0.1 0.2 1.0
At 31 December 2021 57.2 0.9 1.1 4.9 17.4 0.6 8.9 9.7 100.7
Accumulated amortisation
At 1 January 2020 19.8 0.2 0.9 1.4 4.7 0.6 1.9 – 29.5
Charge for the year 4.1 * – 0.6 2.5 – 0.9 – 8.1
Currency translation
differences (0.6) 0.1 0.1 * (0.4) * (0.1) – (0.9)
At 31 December 2020 23.3 0.3 1.0 2.0 6.8 0.6 2.7 – 36.7
Charge for the year 3.7 * – 0.6 2.2 – 0.9 – 7.4
Currency translation
differences 0.2 0.1 – (0.1) 0.1 * * – 0.3
At 31 December 2021 27.2 0.4 1.0 2.5 9.1 0.6 3.6 – 44.4
Carrying amount
At 31 December 2021 30.0 0.5 0.1 2.4 8.3 – 5.3 9.7 56.3
At 31 December 2020 25.1 0.6 0.1 2.9 10.4 – 6.0 1.5 46.6
* Balance is less than £100,000.
The remaining amortisation period for customer relationships ranges from one to seven years.
The Group’s trademarks used to identify and distinguish the Group’s name and logo have a cost of £0.1 million (2020: £0.1 million). The Group
intends to renew the trademarks continuously and evidence supports its ability to do so, based on its past experience. An analysis of market
and competitive trends provides evidence that the trademarks will generate net cash inflows for the Group for an indefinite period. Therefore,
the trademarks are carried at cost without amortisation, but is tested for impairment on an annual basis.
159
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13. Property, plant and equipment
£m
Freehold
land Buildings
Plant and
equipment
Motor
vehicles
Building
improvements
Asset under
construction Total
Cost
At 1 January 2020 1.6 17.3 24.5 0.4 6.1 – 49.9
Additions – * 1.9 * 0.5 1.6 4.0
Disposals – – (0.8) (0.1) * – (0.9)
Transfer – – 1.6 – – (1.6) –
Currency translation
differences (0.1) (0.2) (0.6) * (0.3) * (1.2)
At 31 December 2020 1.5 17.1 26.6 0.3 6.3 – 51.8
Additions – – 2.3 – 0.6 2.6 5.5
Disposals – – (0.3) (0.1) * – (0.4)
Transfer – – 1.2 – 0.1 (1.3) –
Reclassification to
intangible assets – – * – – – *
Currency translation
differences * 0.2 0.5 0.1 0.1 * 0.9
At 31 December 2021 1.5 17.3 30.3 0.3 7.1 1.3 57.8
Accumulated depreciation
At 1 January 2020 – 3.1 14.6 0.3 2.6 – 20.6
Charge for the year – 0.5 2.8 0.1 0.6 – 4.0
Disposals – – (0.7) (0.1) * – (0.8)
Currency translation
differences – * (0.2) (0.1) (0.1) – (0.4)
At 31 December 2020 – 3.6 16.5 0.2 3.1 – 23.4
Charge for the year – 0.5 2.9 * 0.6 – 4.0
Disposals – – (0.2) (0.1) * – (0.3)
Transfer – – * – – – *
Reclassification to
intangible assets – – * – – – *
Currency translation
differences – 0.1 0.2 0.2 – – 0.5
At 31 December 2021 – 4.2 19.4 0.3 3.7 – 27.6
Carrying amount
At 31 December 2021 1.5 13.1 10.9 – 3.4 1.3 30.2
At 31 December 2020 1.5 13.5 10.1 0.1 3.2 – 28.4
* Balance is less than £100,000.
Asset under construction pertains to cost incurred for the renovation of the office space which is due for completion in 2022.
160
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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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.
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
Leasehold land
and buildings
Equipment and
motor vehicles Total
Carrying amount
At 1 January 2020 6.3 0.3 6.6
Additions 0.5 0.3 0.8
Disposals (0.3) (0.1) (0.4)
Depreciation charge during the year (1.7) (0.2) (1.9)
Currency translation differences * * *
At 31 December 2020 4.8 0.3 5.1
Additions 4.7 0.3 5.0
Disposals * * *
Depreciation charge during the year (1.6) (0.2) (1.8)
Currency translation differences * * *
At 31 December 2021 7.9 0.4 8.3
* Balance is less than £100,000.
b. Lease expense not capitalised in lease liabilities
£m 2021 2020
Lease expense – short-term leases 0.2 0.2
Lease expense – low-value leases * *
Total (Note 7) 0.2 0.2
* Balance is less than £100,000.
c. Total cash outflow for all leases in 2021 was £2.1 million (2020: £2.2 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.
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15. Subsidiaries
The Group has the following principal subsidiaries as at 31 December 2021 and 2020:
Name of Subsidiary
Place of business /
Country of incorporation
Ownership
interest
2021
(%)
Ownership
interest
2020
(%)
Directly owned by the Company
XP Power Plc UK 100 100
XP Power Singapore Holdings Pte Limited Singapore 100 100
Indirectly owned by the Company
XP PLC UK 100 100
XP Power Holdings Limited UK 100 100
XP Power AG Switzerland 100 100
Powersolve Electronics Limited* UK 89.9 89.9
XP Power Srl Italy 100 100
XP Power ApS Denmark 100 100
XP Power Sweden AB Sweden 100 100
XP Power GmbH Germany 100 100
XP Power SA France 100 100
XP Power Norway AS Norway 100 100
XP Power International Limited UK 100 100
Forx, Inc. USA 100 100
XP Power LLC USA 100 100
XP Power (Shanghai) Co., Limited China 100 100
XP Power (Hong Kong) Limited Hong Kong 100 100
XP Power (Vietnam) Co., Limited Vietnam 100 100
XP Power Singapore Manufacturing Pte. Ltd. Singapore 100 100
XP Power (Israel) Ltd
1
Israel – 100
Hanpower Co., Ltd* South Korea 66 66
1
XP Power (Israel) Ltd was dissolved and certified on 9 December 2021.
* Refer to Note 21
16. Cash and cash equivalents
£m 2021 2020
Cash at bank and on hand 8.9 13.8
Short-term bank deposits 0.1 0.1
Total 9.0 13.9
For the purpose of presenting the consolidated statement of cash flows, cash and cash equivalents comprise the following:
£m 2021 2020
Cash at bank balances (as above) 9.0 13.9
Less: Bank overdrafts (Note 22) (0.2) –
Cash and cash equivalents per consolidated statement of cash flows 8.8 13.9
162
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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17. Inventories
£m 2021 2020
Finished goods 25.5 24.6
Raw materials 36.3 22.2
Work in progress 12.2 7.4
Total 74.0 54.2
The cost of inventories recognised as an expense and included in “cost of sales” amounts to £105.2 million (2020: £100.0 million).
18. Trade receivables
£m 2021 2020
Current assets
Trade receivables 30.8 30.7
Loss allowance (Note 29 (d)) * (0.5)
Total 30.8 30.2
* Balance is less than £100,000.
The average credit period taken on sales of goods is 47 days (2020: 47 days). No interest is charged on the outstanding receivables balance.
The carrying amounts of trade receivables approximate their fair values.
19. Other current assets
£m 2021 2020
Prepayments 3.3 3.0
Deposits 0.3 0.3
VAT receivables 0.6 0.5
Rights to returned goods 0.2 0.5
Other receivables 0.6 0.3
Total 5.0 4.6
Other current assets are not impaired as at 31 December 2021 and 31 December 2020.
20. Trade and other payables
£m 2021 2020
Trade payables 26.0 12.0
Other taxes 4.0 3.5
Other creditors and accruals 14.1 11.8
Refund liabilities 0.6 0.9
Total 44.7 28.2
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 2021 2020
At 1 January 1.0 1.7
Movement in provision during the year 0.3 (0.1)
Payment – (0.6)
At 31 December 1.3 1.0
£m 2021 2020
Current portion * –
Non-current portion 1.3 1.0
At 31 December 1.3 1.0
* Balance is less than £100,000.
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21. Accrued consideration continued
The Group owns 89.9% (2020: 89.9%) of the shares of Powersolve Electronics Limited (“Powersolve”) and 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.
The Group entered into an agreement on 20 May 2015 with Hanpower Co Ltd (“Hanpower”) to purchase an additional 15% of the shares in
2020 and another 15% of the shares in 2025. The purchase of the first additional 15% was completed in 2020 and the Group now owns 66%
(2020: 66%) of the shares of Hanpower.
The commitment to purchase the remaining ownership interests has been accounted for as accrued consideration and is calculated based on
the expected future payment which will be based on a predefined multiple of the average earnings for the most recent at the point of payment
in the past three years.
The future payment is discounted to the present value, with the discount amortised to interest expense each period as the payment draws
nearer. At each reporting period, the anticipated future payment is recalculated and an adjustment made accordingly, with a corresponding
adjustment to goodwill for Powersolve. For Hanpower, the amount that is payable under the agreement is initially recognised at the present
value of the redemption amount within liabilities with a corresponding charge directly to equity. The liability is subsequently accreted through
equity up to the redemption amount that is payable in 2025.
22. Borrowings and lease liabilities
£m 2021 2020
Current
Bank overdrafts 0.2 –
Lease liabilities 1.6 1.5
Total 1.8 1.5
Non-current
Bank borrowings 33.4 31.8
Lease liabilities 6.5 3.4
Total 39.9 35.2
UNDRAWN BORROWING FACILITIES
£m 2021 2020
Expiring beyond one year 77.0 76.9
Total 77.0 76.9
The facility has no fixed repayment terms until maturity in 2024. The revolving loan denominated in USD is priced at LIBOR plus a margin of
1.0% (2020: 1.0%-1.2%) for the utilisation facility and a margin of 0.4% (2020: 0.4%–0.5%) for the unutilised facility.
There is drawdown on bank overdrafts denominated in GBP of £0.2 million (2020: £nil) during the year.
The fair value of the Group’s bank borrowings and overdrafts approximates their carrying amount.
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
£m
1 January
2021
Proceeds
from
borrowings
Principal
and interest
payments
Non-cash changes
Addition
during
the year
Disposal
during
the year
Interest
expense
Foreign
exchange
movement
31 December
2021
Bank borrowings 31.8 3.7 (3.6) – – 1.2 0.3 33.4
Lease liabilities 4.9 – (1.9) 5.0 * 0.2 (0.1) 8.1
* Balance is less than £100,000.
£m
1 January
2020
Principal
and interest
payments
Non-cash changes
Addition
during
the year
Disposal
during
the year
Interest
expense
Foreign
exchange
movement
31 December
2020
Bank borrowings 52.5 (21.7) – – 1.5 (0.5) 31.8
Lease liabilities 6.4 (2.0) 0.7 (0.4) 0.3 (0.1) 4.9
164
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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23. Derivative financial instruments
CURRENCY FORWARDS
Derivative financial instruments comprise of the USD/GBP currency forwards used to manage the exposure from issuance of dividends in GBP.
The contracted notional principal amounts ad fair values of these currency forwards are as follows:
31 December 2021
£m
Assets Liabilities
Contractual
notional
amount Fair value
Contractual
notional
amount Fair value
Currency forwards (current) 1.0 * 8.0 (0.1)
* Balance is less than £100,000.
31 December 2020
£m
Assets Liabilities
Contractual
notional
amount Fair value
Contractual
notional
amount Fair value
Currency forwards (current) 5.8 0.3 2.4 (0.1)
24. Deferred income taxes
The movement in deferred income tax assets and liabilities during the financial year is as follows:
DEFERRED INCOME TAX ASSET
£m
Share-based
payment
Tax
losses
Other
temporary
differences Total
At 1 January 2020 1.8 – – 1.8
Credited to profit or loss 0.5 0.4 0.2 1.1
At 31 December 2020 2.3 0.4 0.2 2.9
Charged to profit or loss * * (0.2) (0.2)
Credited to equity 0.5 – – 0.5
At 31 December 2021 2.8 0.4 – 3.2
* Balance is less than £100,000.
DEFERRED INCOME TAX LIABILITIES
£m
Accelerated
tax depreciation
Intangible
asset
amortisation
Capitalised
development
costs
Other
temporary
differences Total
At 1 January 2020 (1.0) (1.1) (5.1) 1.7 (5.5)
(Charged)/credited to profit or loss (0.8) (0.3) (0.6) 0.2 (1.5)
Currency translation differences 0.1 * 0.2 * 0.3
At 31 December 2020 (1.7) (1.4) (5.5) 1.9 (6.7)
Charged to profit or loss (0.6) (0.9) (1.0) (0.2) (2.7)
Currency translation differences * * * *
At 31 December 2021 (2.3) (2.3) (6.5) 1.7 (9.4)
* Balance is less than £100,000.
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25. Share capital and reserves
A. SHARE CAPITAL
Number
of shares
Total
£m
At 31 December 2020 19,642,296 27.2
At 31 December 2021 19,642,296 27.2
All issued ordinary shares are fully paid. There is no par value for these ordinary shares. They entitle the holder to participate in dividends, and
to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands,
every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote; and, on a poll, each share is entitled to
one vote
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 share-based payment plans. Shares issued to employees are recognised on a first in, first out basis.
£m
Number
of shares
Total
£m
At 1 January 2020 (46,090) (0.5)
Acquisition of shares by the Trust (400,000) *
Employees shares purchase under the DPS held on behalf by ESOP Trust (12,500) *
Issue of shares under share-based payments 301,630 0.4
At 31 December 2020 (156,960) (0.1)
Acquisition of shares by the Trust (900) *
Issue of shares under share-based payments 64,979 *
At 31 December 2021 (92,811) *
* Balance is less than £100,000.
In 2020, the Company issued 400,000 ordinary shares at 1 pence per share and held under ESOP Trust.
The Company re-issued 64,979 (2020: 301,630) treasury shares during the financial year pursuant to the Company’s share-based payment
plans at an exercise price ranging from £0.01 to £15.43 (2020: £0.01 to £15.43). The cost of the treasury shares re-issued amounted to
£17,000 (2020: £437,000). The total consideration (net of expense) for the treasury shares issued is as follows:
£m 2021 2020
Exercise price paid by employees 0.5 3.5
Value of employee services 0.5 1.2
Total net consideration 1.0 4.7
Accordingly, a gain on re-issue of treasury shares of £1,000,000 (2020: £4,300,000) is recognised in the other reserve.
C. OTHER RESERVES
Other reserves represents merger reserve, share-based payment reserve, translation reserve and other reserve.
Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of shares of
subsidiaries acquired under common control.
Share-based payment 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.
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.
Other reserve 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 change directly to equity. The
liability is subsequently accreted through finance charges up to the redemption amount that is payable at the date at which the agreement first
becomes exercisable. 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.
166
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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26. 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.
2021
£m
Inventories
(Note 17)
Trade and other
receivables
(Note 18
and 19)
Trade
and other
payables Provisions
Total working
capital
movement
Trade and other payables (Note 20) – – (44.7) –
Accrued consideration (Note 21) – – (1.3) –
Provisions – – – (0.2)
At 31 December 2021 74.0 35.8 (46.0) (0.2)
At 31 December 2020 54.2 34.8 (29.2) (0.1)
Balance sheet movement (19.8) (1.0) 16.8 0.1 (3.9)
Provision for reinstatement costs – – – (0.1) (0.1)
Increase in interest accruals – – 0.1 – 0.1
Accrued consideration on acquisition – – (0.3) – (0.3)
Currency translations differences 0.8 (0.1) (0.5) – 0.2
Movements as shown in consolidated statement of
cash flows (19.0) (1.1) 16.1 * (4.0)
* Balance is less than £100,000.
2020
£m
Inventories
(Note 17)
Trade and other
receivables
(Note 18
and 19)
Trade
and other
payables Provisions
Total working
capital
movement
Trade and other payables (Note 20) – – (28.2) –
Accrued consideration (Note 21) – – (1.0) –
Provisions – – – (0.1)
At 31 December 2020 54.2 34.8 (29.2) (0.1)
At 31 December 2019 44.1 38.1 (26.9) (0.1)
Balance sheet movement (10.1) 3.3 2.3 * (4.5)
Increase in interest accruals – (0.4) – – (0.4)
Accrued considerations on acquisitions – – 0.6 – 0.6
Currency translations differences (2.2) (0.2) 0.4 – (2.0)
Movements as shown in consolidated statement of
cash flows (12.3) 2.7 3.3 * (6.3)
* Balance is less than £100,000.
27. Related party transactions
KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are the Directors of the Group.
£m 2021 2020
Short-term employee benefits 1.9 1.9
Post-employment benefits 0.1 0.1
Share-based payment 0.7 0.6
Total 2.7 2.6
Further information about the remuneration of the individual Directors is provided in the Directors’ Remuneration Report on pages 110–127.
167
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28. Share-based payments
The Group operates several equity-settled share-based payment plans.
A. XP POWER SHARE OPTION PLAN (THE “SOP”)
The SOP was approved by the Shareholders on 2 April 2012. A total of 345,000 options and 418,000 options were granted in 2012 and 2016
respectively under the SOP. These options vest only if certain performance conditions are met. The vesting of outstanding options is based on
Total Shareholder Return (“TSR”) relative to the FTSE350 Electronic and Electric Equipment Sector. The options may only be exercised within
10 years from grant date. All options under the SOP are fully vested as at 31 December 2021.
Set out below are summaries of options granted under the plan:
2021
2020
Number of
share options
Weighted
average
exercise price
per share option
Number of
share options
Weighted
average exercise
price per share
option
At 1 January 118,329 £14.92 389,583 £13.60
Forfeited during the year (1,592) £15.43 (1,614) £15.43
Exercised during the year* (39,852) £13.93 (269,640) £13.01
At 31 December 76,885 £15.43 118,329 £14.91
Exercisable at 31 December 76,885 £15.43 118,329 £14.91
* The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2021 was £43.12 (2020: £38.44).
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Share options
31 December
2021
Share options
31 December
2020
10 October 2012 10 October 2022 £9.46 – 10,000
23 February 2016 23 February 2026 £15.43 76,885 108,329
Total 76,885 118,329
Weighted average remaining contractual life of options outstanding
at end of period 4.1 years 4.8 years
B. XP POWER LIMITED LONG TERM INCENTIVE PLAN 2017 (THE “XP LTIP 2017”)
The XP LTIP 2017 was approved by the Shareholders on 19 April 2017 and amended by the Remuneration Committee on 28 February 2020
in respect of awards made on or after that date. The only participants under the XP LTIP 2017 are the Executive Directors who are granted
Performance Share Awards. These Awards vest only if certain performance conditions are met. The vesting of outstanding Awards is based on
TSR relative to the companies in the FTSE 250 index excluding investment trusts and earnings per share growth.
Set out below are summaries of Awards granted under the plan:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 93,852 £0.01 67,618 £0.01
Granted during the year 19,606 £0.01 28,252 £0.01
Forfeited during the year (26,349) £0.01 (1,164) £0.01
Exercised during the year (855) £0.01 (854) £0.01
At 31 December 86,254 £0.01 93,852 £0.01
Exercisable at 31 December 19,502 £0.01 6,991 £0.01
168
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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28. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
30 May 2017
1
30 May 2022 £0.01 5,127 5,982
1 November 2017
1
31 December 2022 £0.01 8,000 8,000
16 May 2018
2
16 May 2023 £0.01 12,749 14,057
16 March 2019 16 March 2024 £0.01 12,520 37,561
22 April 2020 22 April 2026 £0.01 28,252 28,252
3 March 2021 3 March 2027 £0.01 11,582 –
10 May 2021 10 May 2027 £0.01 8,024 –
Total 86,254 93,852
1
These awards are fully vested.
2
50% of the awards vested in 2021 and the remaining 50% will vest in 2022.
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 19,606
Fair value at grant date £39.87
Model used Monte Carlo model and Black–Scholes model
Assumption used:
Share price £51.00
Exercise price £0.01
Expected volatility 39.44%
Expected option life 5 years
Expected dividend yield 3.00%
Risk-free interest rate 0.79%
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 and 2021, 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.
169
FINANCIALS
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28. Share-based payments continued
Performance Share Awards
Set out below are summaries of Performance Share Awards granted under the plan:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 82,366 £0.01 69,047 £0.01
Granted during the year 17,285 £0.01 21,915 £0.01
Forfeited during the year (29,935) £0.01 (3,081) £0.01
Exercised during the year (6,935) £0.01 (5,515) £0.01
At 31 December 62,781 £0.01 82,366 £0.01
Exercisable at 31 December 9,272 £0.01 4,007 £0.01
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
30 May 2017
1
30 May 2022 £0.01 2,991 8,013
16 May 2018
2
16 May 2023 £0.01 12,561 15,574
4 September 2018
2
4 September 2023 £0.01 – 800
16 March 2019 16 March 2024 £0.01 11,665 37,441
22 April 2020 22 April 2024 £0.01 19,729 20,538
3 March 2021 3 March 2025 £0.01 15,835 –
Total 62,781 82,366
1
These awards are fully vested.
2
50% of the awards vested in 2021 and the remaining 50% will vest in 2022.
Performance RSUs
Set out below are summaries of Performance RSUs granted under the plan:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 98,754 – 90,648 –
Granted during the year 10,995 – 23,206 –
Forfeited during the year (34,194) – (8,381) –
Exercised during the year (13,856) – (6,719) –
At 31 December 61,699 – 98,754 –
Exercisable at 31 December 8,267 – 4,297 –
170
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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28. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
30 May 2017
1
30 May 2022 – 1,388 7,244
12 October 2017
1
12 October 2022 – 450 1,350
16 May 2018
2
16 May 2023 – 12,857 22,620
16 March 2019 16 March 2024 – 14,614 44,334
22 April 2020 22 April 2024 – 21,588 23,206
3 March 2021 3 March 2025 – 10,802 –
Total 61,699 98,754
1
These awards are fully vested.
2
50% of the awards vested in 2021 and the remaining 50% will vest in 2022.
Restricted Share Awards
Set out below are summaries of Restricted Share Awards granted under the plan:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 2,425 £0.01 – –
Granted during the year 1,793 £0.01 2,425 £0.01
Forfeited during the year (306) £0.01 – –
At 31 December 3,912 £0.01 2,425 £0.01
Exercisable at 31 December – – – –
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
22 April 2020 22 April 2024 £0.01 2,324 2,425
3 March 2021 3 March 2025 £0.01 1,588 –
Total 3,912 2,425
RSUs
Set out below are summaries of RSUs granted under the plan:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 1,248 – – –
Granted during the year 577 – 1,248 –
Forfeited during the year (202) – – –
At 31 December 1,623 – 1,248 –
Exercisable at 31 December – – – –
171
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28. Share-based payments continued
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
22 April 2020 22 April 2024 – 1,046 1,248
3 March 2021 3 March 2025 – 577 –
Total 1,623 1,248
Fair value of awards
The fair values at grant date of awards granted during the year under the XP Senior Managers LTIP 2017 are determined using the valuation
models below. The model inputs are as follows:
Performance
Share Award Performance RSU
Restricted
Share Award Restricted RSU
Options granted 17,285 10,995 1,793 577
Fair value at grant date £40.44 £40.44 £49.22 £49.22
Model used Monte Carlo model and
Black–Scholes model
Monte Carlo model and
Black–Scholes model
Black–Scholes
model
Black–Scholes
model
Assumption used:
Share price £51.80 £51.80 £51.80 £51.80
Exercise price £0.01 – £0.01 –
Expected volatility 39.44% 39.44% 39.13% 39.13%
Expected option life 3 years 3 years 3 years 3 years
Expected dividend yield 3.00% 3.00% 1.70% 1.70%
Risk-free interest rate 0.79% 0.79% 0.78% 0.78%
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:
2021
2020
Number of
shares under
award
Weighted
average
exercise price
per share under
award
Number of
shares under
award
Weighted
average exercise
price per share
under award
At 1 January 3,532 £0.01 – –
Granted during the year 2,698 £0.01 3,532 £0.01
At 31 December 6,230 £0.01 3,532 £0.01
Exercisable at 31 December – – – –
Awards outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date Expiry date Exercise price
Shares under
award
31 December
2021
Shares under
award
31 December
2020
22 April 2020 22 April 2026 £0.01 3,532 3,532
3 March 2021 3 March 2027 £0.01 1,495 –
10 May 2021 10 May 2027 £0.01 1,203 –
Total 6,230 3,532
172
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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28. Share-based payments continued
Fair value of awards
The fair value at grant date of awards granted during the year under the XP RSP 2020 is determined using the Black-Scholes model. The model
inputs are as follows:
Options granted 2,698
Fair value at grant date £45.50
Assumption used:
Share price £50.93
Exercise price £0.01
Expected volatility
1
34.93%
Expected option life 5 years
Expected dividend yield 1.70%
Risk-free interest rate 0.78%
1
Volatility was estimated based on the historical volatility of the shares over a five-year period prior to grant date.
29. 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 parent, comprising issued capital, reserves and retained earnings as disclosed in Note 25.
The Board reviews the capital structure of the business and considers the cost of capital and risks associated with each class of capital. The
Group aims to balance its overall capital structure through the payment of dividends, new share issues and share buyback as well as the issue
of new debt or the redemption of existing debt.
B. CURRENCY RISK
The Group operates in North America, Europe and Asia. Entities in the Group regularly transact in currencies other than their respective
functional currencies (“foreign currencies”). The Group monitors and manages the currency risk through internal reports analysing major
currency exposures. Where possible, the Group seeks to offset exposures by matching monetary asset and liability exposures in like currencies
against each other, often using its bank facilities to square off or reduce exposures. The Group also manages some currency exposure by
entering into currency forwards with banks
The Group’s currency exposure based on the information provided to key management is as follows:
£m GBP EUR USD Others Total
At 31 December 2021
Financial assets
Cash and cash equivalents 1.1 0.5 5.6 1.8 9.0
Trade receivables 2.4 2.3 25.9 0.2 30.8
Other current assets 0.1 * 0.4 0.4 0.9
ESOP loan to employees * – – – –
Subtotal 3.6 2.8 31.9 2.4 40.7
Financial liabilities
Borrowings (0.2) – (33.4) – (33.6)
Trade and other payables (3.8) (0.6) (33.6) (5.3) (43.3)
Lease liabilities (0.2) (0.5) (2.8) (4.6) (8.1)
Other financial liabilities (0.9) – – (0.7) (1.6)
Subtotal (5.1) (1.1) (69.8) (10.6) (86.6)
Net financial (liabilities)/assets (1.5) 1.7 (37.9) (8.2) (45.9)
Less: Currency forwards 9.0 – – – 9.0
Currency profile 7.5 1.7 (37.9) (8.2) (36.9)
Financial liabilities/(assets) denominated in the respective
entities’ functional currencies 0.8 (1.2) 43.2 (0.1) 42.7
Currency exposure of financial assets/(liabilities) 8.3 0.5 5.3 (8.3) 5.8
* Balance is less than £100,000.
173
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29. Financial risk management continued
£m GBP EUR USD Others Total
At 31 December 2020
Financial assets
Cash and cash equivalents 4.6 0.8 7.2 1.3 13.9
Trade receivables 1.8 2.2 25.7 0.5 30.2
Other current assets 0.1 * 0.3 0.2 0.6
ESOP loan to employees * – – – –
Subtotal 6.5 3.0 33.2 2.0 44.7
Financial liabilities
Borrowings – – (31.8) – (31.8)
Trade and other payables (4.2) (0.9) (18.9) (3.6) (27.6)
Lease liabilities (0.3) (0.5) (3.6) (0.5) (4.9)
Other financial liabilities (0.7) – – (0.4) (1.1)
Subtotal (5.2) (1.4) (54.3) (4.5) (65.4)
Net financial assets/(liabilities) 1.3 1.6 (21.1) (2.5) (20.7)
Currency forwards 8.2 – – – 8.2
Currency profile 9.5 1.6 (21.1) (2.5) (12.5)
Financial (assets)/liabilities denominated in the respective
entities’ functional currencies (2.4) (0.8) 26.8 0.1 23.7
Currency exposure of financial assets/(liabilities) 7.1 0.8 5.7 (2.4) 11.2
* Balance is less than £100,000.
If the USD and EUR change against GBP by 1.0% and 1.9% respectively (2020: USD 1%, EUR 1%) with all other variables, including tax rates,
being held constant, the effects arising from the net financial asset/(liability) that are exposed to currency risk will be as follows:
2021
Profit after tax
2020
Profit after tax
EUR against GBP
– Strengthened * *
– Weakened * *
USD against GBP
– Strengthened * *
– Weakened * *
* Balance is less than £100,000.
The impact of the currency risk on the other comprehensive income is not significant.
C. INTEREST RATE RISK
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. As the Group has no significant interest-bearing assets, the Group’s income is substantially independent of changes in the market
interest rates.
All of the Group’s borrowings are at variable interest rates and are denominated in USD. If the USD interest rates on these borrowings
increased/decreased by 1.0% (2020: 1.0%) with all other variables, including tax rates, being held constant, the profit after tax will be lower/
higher by £335,000 (2020: £318,000) as a result of higher/lower interest expense on these borrowings.
174
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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29. Financial risk management continued
D. CREDIT RISK
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the Group. For trade
receivables the Group adopts a policy of only dealing with customers of appropriate credit history or rating. For other financial assets, the
Group adopts the policy of only dealing with high credit quality counterparties.
The Group uses a provision matrix to measure the lifetime expected credit loss allowance for trade receivables. In measuring the expected
credit loss, trade receivables are grouped based on shared credit risk characteristics and days past due.
In calculating the expected credit loss rates, the Group considers historical loss rates for each category of customers and adjusts to reflect
current and forward macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified gross
domestic product (GDP) and the public policy of the countries in which it sells goods as the most relevant factors.
Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan
with the Group. The Group considers a financial asset as in default if the counterparty fails to make contractual payments within 90 days when
they fall due and writes off the financial asset when a debtor is in significant financial difficulties and have defaulted on payment that is usually
greater than 120 days past due. Where receivables are written off, the Company continues to engage in enforcement activity to attempt to
recover the receivables due. Where recoveries are made, these are recognised in profit or loss.
In 2020, management has identified a group of debtors from the North America region to be credit impaired as they experienced significant
financial difficulties or the aged balances can neither be matched nor acknowledged by the customers. Hence, management has assessed the
recoverability of the outstanding balances separately from the provision matrix.
Debtors separately identified as credit-impaired
£m 2021 2020
Gross carrying amount – 0.5
Less: loss allowance – (0.5)
Carrying amount net of allowance – –
The Group’s credit risk exposure in relation to trade receivables under IFRS 9 is set out in the provision matrix as follows:
Past due
£m Current 1–30 days 31–60 days 61–90 days 91–120 days >120 days Total
At 31 December 2021
North America region
Expected loss rate 0.0% 0.1% 0.2% 0.2% 0.3% 5.1%
Trade receivables 14.8 1.7 0.5 0.4 0.1 0.2 17.7
Loss allowance – * * * * * *
Europe region
Expected loss rate 0.0% 0.1% 0.2% 0.2% 0.3% 29.6%
Trade receivables 7.8 1.2 0.2 0.1 * 0.1 9.4
Loss allowance – * * * * * *
Asia region
Expected loss rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Trade receivables 2.9 0.6 0.2 * * * 3.7
Loss allowance – – – – – – –
* Balance is less than £100,000.
175
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29. Financial risk management continued
Past due
£m Current 1–30 days 31–60 days 61–90 days 91–120 days >120 days Total
At 31 December 2020
North America region
Expected loss rate 0.0% 0.1% 0.2% 0.2% 0.3% 37.8%
Trade receivables 15.5 1.2 0.3 0.1 0.1 * 17.2
Loss allowance – * * * * * *
Europe region
Expected loss rate 0.0% 0.1% 0.2% 0.2% 0.3% 24.0%
Trade receivables 7.0 1.4 0.3 0.2 0.1 0.1 9.1
Loss allowance – * * * * * *
Asia region
Expected loss rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Trade receivables 3.6 0.2 0.1 * * * 3.9
Loss allowance – – – – – – –
* Balance is less than £100,000.
The movement in the allowance for impairment of trade receivables is as follows:
£m 2021 2020
Beginning of financial year (0.5) (0.1)
Loss allowance
(a)
recognised in profit or loss during the year on assets acquired/originated * (0.4)
Receivables written off as uncollectible 0.5 *
Currency translation differences * *
End of the financial year * (0.5)
(a) Loss allowance measured at lifetime ECL.
* Balance is less than £100,000.
E. LIQUIDITY RISK
Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding through an adequate amount of committed
credit facilities (Note 22) and the ability to close out market positions at a short notice. The Group manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows. All significant
subsidiaries prepare weekly cash forecast on a 13-weeks outlook basis and reviewed it on a weekly basis with the management.
At the balance sheet date, assets held by the Group and the Company for managing liquidity risk included cash and short-term deposits as
disclosed in Note 16.
The Group has Revolving Credit Facility (“RCF”) which is due to mature in November 2024. The main features of the RCF are as follows:
• The interest rate on the amounts drawn under the facility is determined as USD LIBOR plus margin depending on leverage ratio .
• Market standard financial covenants of the facility, as discussed below.
• A US$30 million accordion feature, providing the Group with additional flexibility to increase the size of the banking facility to US$180
million, subject to approval of its bank lending group.
The covenants to 31 December 2021 include:
• The ratio of net debt to consolidated EBITDA permitted under the revolving credit facility must not exceed a multiple of three times.
• Consolidated EBITDA must also cover relevant finance charges by a minimum of four times.
For covenant testing purposes, the Group’s definition of consolidated EBITDA is adjusted to exclude specific items. Consolidated EBITDA,
for covenant test purposes, is based on the previous 12-month period, measured on the last day of each financial quarter of the Group.
Throughout the year and at 31 December 2021 both of these covenants were met.
176
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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29. Financial risk management continued
The table below analyses non-derivative financial liabilities of the Group into relevant maturity groupings based on the remaining period from
the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows.
Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.
£m
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years Total
Group
At 31 December 2021
Trade and other payables 43.3 – – – 43.3
Lease liabilities 1.9 2.0 2.4 2.2 8.5
Accrued consideration * – 1.3 – 1.3
Borrowings, including interest 0.9 0.7 34.0 – 35.6
Total 46.1 2.7 37.7 2.2 88.7
At 31 December 2020
Trade and other payables 27.6 – – – 27.6
Lease liabilities 1.8 1.4 2.0 0.3 5.5
Accrued consideration – 0.1 0.9 – 1.0
Borrowings, including interest 0.7 0.7 33.0 – 34.4
Total 30.1 2.2 35.9 0.3 68.5
* Balance is less than £100,000.
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 2021
£m Level 1 Level 2 Level 3 Total
Assets
Derivative financial instruments – * – *
Liabilities
Derivative financial instruments – (0.1) – (0.1)
As at 31 December 2020
£m
Assets
Derivative financial instruments – 0.3 – 0.3
Liabilities
Derivative financial instruments – (0.1) – (0.1)
* Balance is less than £100,000.
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.
177
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29. Financial risk management continued
G. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amount of the different categories of financial instruments are as follows:
£m 2021 2020
Financial assets, at FVPL * 0.3
Financial liabilities, at FVPL (1.5) (1.1)
Financial assets, at amortised cost 40.7 44.7
Financial liabilities, at amortised cost (85.1) (64.4)
* Balance is less than £100,000.
H. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group has no financial instruments subject to enforceable master netting arrangements.
30. Subsequent event
On 31 January 2022, the Group announced the acquisition of FuG Elektronik GmbH and Guth High Voltage GmbH for a cash consideration of
€39 million (circa. £32.8 million). The acquisition was funded by the Group’s existing debt facilities and is subject to customary post-completion
working capital adjustments.
31. Contingent liabilities
As reported last year, in September 2020, Comet Technologies USA Inc., Comet AG, and YXLON International (collectively “Comet”) filed
a lawsuit against XP Power LLC, alleging trade secret misappropriation relating to RF match and generator technology. The lawsuit is still
ongoing, and the Group has incurred legal costs of £10.1 million in 2021 (2020: £0.4 million). XP Power believes there is no merit to this
lawsuit and is vigorously defending claims brought against it by Comet. A jury trial for this lawsuit is currently set to begin on March 14,
2022. The Group expects to incur further legal costs until this matter is resolved, the magnitude of which cannot currently be estimated
with any certainty. No provision in relation to the dispute has been recognised as the amount of outflow of economic benefits, if any, cannot
be estimated reliably. Further information about the matter and its possible outcomes are not provided as such disclosures could prejudice
seriously the position and interests of the company in this dispute.
32. Other information
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of XP Power Limited on 1
March 2022.
178
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
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£‘000 Note 2021 2020
ASSETS
Current assets
Cash and cash equivalents 36 3,469 4,336
Trade and other receivables 37 45,712 46,132
Other current assets 38 1,051 845
Derivative financial instruments 39 * 300
Inventories 40 11,283 15,827
Total current assets 61,515 67,440
Non-current assets
Investment in subsidiaries 35 43,928 43,484
Property, plant and equipment 41 1,838 1,561
Right-of-use assets 42 4,515 336
Intangible assets 43 27,287 17,738
Long-term receivable 46 6,660 6,593
Total non-current assets 84,228 69,712
Total assets 145,743 137,152
LIABILITIES
Current liabilities
Trade and other payables 45 50,111 39,016
Current income tax liabilities 47 1,422 4,794
Derivative financial instruments 39 129 111
Lease liabilities 339 263
Total current liabilities 52,001 44,184
Non-current liabilities
Deferred income tax liabilities 44 4,458 2,832
Other long term creditors 113 –
Lease liabilities 4,109 96
Total non-current liabilities 8,680 2,928
Total liabilities 60,681 47,112
NET ASSETS 85,062 90,040
EQUITY
Share capital 48 29,774 29,774
Share-based payment reserve 48 951 565
Translation reserve 48 16,386 15,530
Retained earnings 48 37,951 44,171
TOTAL EQUITY 85,062 90,040
* Balance is less than £1,000.
179
FINANCIALS
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2021
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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 401 Commonwealth Drive, Lobby B, #02-02, Haw Par Technocentre, Singapore 149598. With effect from 7 February 2022,
the address of registered office has changed to 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 accounting policies
The Company applies the same principal accounting policies as the Group as set out in Note 2 under the Group Consolidated Financial
Statements.
On 1 January 2021, the Company adopted the new or amended IFRS and International Financial Reporting Interpretations Committee (“IFRIC”)
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 IFRS and IFRIC.
The adoption of these new or amended IFRS and IFRIC 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 except for the following:
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. Intragroup transactions are eliminated on consolidation.
Financial guarantee contracts are initially measured at fair values plus transaction costs and subsequently measured at the higher of:
(a) premium received on initial recognition less the cumulative amount of income recognised in accordance with the principles of IFRS 15; and
(b) the amount of expected loss computed using the impairment methodology under IFRS 9.
35. Investment in subsidiaries
£’000 2021 2020
Cost and carrying amount
At 1 January 43,484 44,892
Currency translation differences 444 (1,408)
At 31 December 43,928 43,484
Name of Subsidiary
Places of
business /
Country of
incorporation
Ownership
interest
2021
Ownership
interest
2020
XP Power Plc UK 100 100
XP Power Singapore Holdings Pte Limited Singapore 100 100
180
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE COMPANY
BALANCE SHEET
AS AT 31 DECEMBER 2021
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36. Cash and cash equivalents
£‘000 2021 2020
Cash at bank 3,469 4,336
Total 3,469 4,336
The Company’s cash at bank is denominated in the following currencies:
£’000 GBP USD EUR SGD JPY TOTAL
At 31 December 2021 481 2,310 579 69 30 3,469
At 31 December 2020 495 3,000 687 130 24 4,336
37. Trade and other receivables
£’000 2021 2020
Trade receivables 3,705 3,408
Trade receivables from related parties 26,221 29,100
Other receivables from related parties 4,553 6,980
Loan receivables from a related party 11,233 6,644
Total 45,712 46,132
The average credit period taken on sales of goods to third party is 46 days (2020: 40 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 related party is unsecured and bears interest at LIBOR plus 1.5% per annum.
Trade and other receivables from related parties are interest-free.
38. Other current assets
£’000 2021 2020
Prepayments 496 578
Deposit 89 72
VAT receivables 389 148
Other receivables 77 47
Total 1,051 845
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 ad fair values of these currency forwards are as follows:
31 December 2021
£’000
Assets Liabilities
Contractual
notional amount Fair value
Contractual
notional amount Fair value
Currency forwards (current) 1,050 * 7,950 (129)
31 December 2020
£’000
Assets Liabilities
Contractual
notional amount Fair value
Contractual
notional amount Fair value
Currency forwards (current) 5,800 300 2,400 (111)
* Balance is less than £1,000.
181
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40. Inventories
£’000 2021 2020
Finished goods 11,283 15,827
41. Property, plant and equipment
£‘000
Freehold
land Building
Plant and
equipment
Motor
vehicles
Building
improvements
Asset under
construction Total
Cost
At 1 January 2020 220 1,767 1,575 41 478 – 4,081
Additions – – 64 – 32 (0) 96
Disposals – – (7) – – – (7)
Transfer from related party – – 65 – – – 65
Currency translation differences (7) (54) (60) (1) (14) – (136)
At 31 December 2020 213 1,713 1,637 40 496 (0) 4,099
Additions – – 202 – 10 238 450
Currency translation differences 2 18 22 1 5 2 50
At 31 December 2021 215 1,731 1,861 41 511 240 4,599
Accumulated depreciation
At 1 January 2020 – 592 1,383 26 454 – 2,455
Additions – 55 101 9 13 – 178
Disposals – – (7) – – – (7)
Currency translation differences – (24) (48) (2) (14) – (88)
At 31 December 2020 – 623 1,429 33 453 – 2,538
Additions – 51 102 7 33 – 193
Currency translation differences – 7 17 1 5 – 30
At 31 December 2021 – 681 1,548 41 491 – 2,761
Carrying amount
At 31 December 2021 215 1,050 313 – 20 240 1,838
At 31 December 2020 213 1,090 208 7 43 (0) 1,561
Asset under construction pertains to costs incurred for the renovation of office space which is due for completion in 2022.
42. Right-of-use assets
£‘000
Leasehold land
and buildings
Carrying amount
At 1 January 2020 333
Depreciation charge during the year (224)
Additions 241
Currency translation differences (14)
At 31 December 2020 336
Depreciation charge during the year (321)
Additions 4,454
Currency translation differences 46
At 31 December 2021 4,515
182
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE COMPANY
BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2021
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43. Intangible assets
£‘000
Development
costs Trademarks
Intangible
software
Intangible
software under
development Total
Cost
At 1 January 2020 19,582 87 5,171 – 24,840
Additions 3,565 – 3 2,911 6,479
Disposals (1,180) – – – (1,180)
Transfer – – 1,252 (1,252) –
Currency translation differences (707) (3) (194) (118) (1,022)
At 31 December 2020 21,260 84 6,232 1,541 29,117
Additions 3,766 – 74 7,955 11,795
Currency translation differences 314 1 65 184 564
At 31 December 2021 25,340 85 6,371 9,680 41,476
Accumulated amortisation
At 1 January 2020 8,297 – 166 – 8,463
Charge for the year 2,805 – 598 – 3,403
Currency translation differences (445) – (42) – (487)
At 31 December 2020 10,657 – 722 – 11,379
Charge for the year 1,988 – 656 – 2,644
Currency translation differences 147 – 19 – 166
At 31 December 2021 12,792 – 1,397 – 14,189
Carrying amount
At 31 December 2021 12,548 85 4,974 9,680 27,287
At 31 December 2020 10,603 84 5,510 1,541 17,738
The Company’s trademarks used to identify and distinguish the Company’s name and logo have a cost of £85,000 (2020: £84,000). The
Company intends to renew the trademarks continuously and evidence supports its ability to do so, based on its past experience. An analysis of
market and competitive trends provides evidence that the trademarks will generate net cash inflows for the Company for an indefinite period.
Therefore, the trademarks are carried at cost without amortisation, but is tested for impairment on an annual basis.
44. Deferred income tax liabilities
The movement in deferred income tax liabilities during the financial year is as follow:
£‘000
Accelerated tax
depreciation
Capitalised
development
costs
Intangible
assets
amortisation
Other
temporary
differences Total
At 1 January 2020 23 (1,918) (487) (97) (2,479)
(Charged)/credited to profit or loss (135) 60 (356) (29) (460)
Currency translation differences 8 56 38 5 107
At 31 December 2020 (104) (1,802) (805) (121) (2,832)
Charged to profit or loss (418) (306) (833) (8) (1,565)
Currency translation differences (9) (24) (24) (4) (61)
At 31 December 2021 (531) (2,132) (1,662) (133) (4,458)
45. Trade and other payables
£‘000 2021 2020
Trade payables and other creditors 11,673 6,480
Amount payable to related parties 38,438 32,536
Total 50,111 39,016
Amount payable to related parties consists of advances from related parties amounting to £7,190,000 (2020: nil) which pertain to cash pooling
arrangements and are unsecured, repayable on demand and bear interest ranging from 1.5% to 3.0% per annum.
The Company borrows from subsidiaries at an interest rate of 1.5%–2.0% above LIBOR. The borrowing is repayable on demand. The
outstanding amount as at year end is £25,443,000 (2020: £26,518,000)
183
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46. Long-term receivable
£‘000 2021 2020
Loans to subsidiaries 6,660 6,593
Total 6,660 6,593
Loans to subsidiaries amounting to are unsecured and denominated in the USD. The loans are repayable on demand and bear interest at LIBOR
plus 2.0% per annum.
47. Current income tax liabilities
Movement in current income tax liabilities:
£‘000 2021 2020
At 1 January 4,794 2,449
Currency translation differences 88 (339)
Income tax paid (net of refund) (4,418) (1,648)
Current year tax expense 844 4,332
Under provision in prior financial year 114 –
At 31 December 1,422 4,794
48. Share capital and reserves
A. SHARE CAPITAL
The Company’s share capital comprises fully paid up 19,242,296 (2020: 19,242,296) ordinary shares with no par value, amounting to
£29,774,000 (2020: £29,774,000). The movement in 2021 relates to transaction costs incurred in anticipation of an equity issuance.
B. SHARE-BASED PAYMENT 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 2021 2020
At 1 January 565 404
Share-based payment expenses 381 174
Currency translation differences 5 (13)
At 31 December 951 565
C. TRANSLATION RESERVE
Translation reserve represents exchange differences arising from the translation of financial statements of foreign transactions and balances
which functional currencies are different from that of the Company’s presentation currency.
£‘000 2021 2020
At 1 January 15,530 18,868
Currency translation differences 856 (3,338)
At 31 December 16,386 15,530
D. RETAINED EARNINGS
The movement in retained earnings during the financial year is as follow:
£‘000 2021 2020
At 1 January 44,171 28,814
Dividends paid (18,178) (7,360)
Profit for the year 11,958 22,717
At 31 December 37,951 44,171
184
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE COMPANY
BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2021
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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 based on the information provided to key management is as follows:
At 31 December 2021
£‘000 GBP EUR USD Others Total
Financial assets
Cash and cash equivalents 481 579 2,310 99 3,469
Trade and other receivables 981 903 42,098 1,730 45,712
Other current assets – 4 – 162 166
Long-term receivables – 6,660 – 6,660
Subtotal 1,462 1,486 51,068 1,991 56,007
Financial liabilities
Trade and other payables (13,068) (342) (34,498) (1,532) (49,440)
Lease liabilities – – – (4,448) (4,448)
Other financial liabilities – – – (113) (113)
Subtotal (13,068) (342) (34,498) (6,093) (54,001)
Net financial (liabilities)/assets (11,606) 1,144 16,570 (4,102) 2,006
Currency forwards 9,000 – – – 9,000
Currency profile excluding non-financial assets and liabilities (2,606) 1,144 16,570 (4,102) 11,006
Less: Financial assets denominated in the entity’s
functional currency – – 16,570 – 16,570
Currency exposure of financial (liabilities)/assets (2,606) 1,144 – (4,102) (5,564)
At 31 December 2020
£‘000 GBP EUR USD Others Total
Financial assets
Cash and cash equivalents 495 687 2,999 155 4,336
Trade and other receivables 866 357 43,655 1,254 46,132
Other current assets – – 47 72 119
Long-term receivables – – 6,593 – 6,593
Subtotal 1,361 1,044 53,294 1,481 57,180
Financial liabilities
Trade and other payables (10,208) (232) (28,006) (474) (38,920)
Lease liabilities – – – (359) (359)
Subtotal (10,208) (232) (28,006) (833) (39,279)
Net financial (liabilities)/assets (8,847) 812 25,288 648 17,901
Currency forwards 8,200 – – – 8,200
Currency profile excluding non-financial assets and liabilities (647) 812 25,288 648 26,101
Less: Financial assets denominated in the entity’s
functional currency – – 25,288 – 25,288
Currency exposure of financial (liabilities)/assets (647) 812 – 648 813
185
FINANCIALS
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49. Financial risk management continued
C. INTEREST RATE RISK
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. As the Company has no significant interest-bearing assets, the Company’s income is substantially independent of changes in the market
interest rates.
The Company borrows from subsidiaries at an interest rate of 1.5%–2.0% above LIBOR. If the average interest rates on these borrowings
increased/decreased by 0.14% (2020: 1.45%) with all other variables, including tax rates, being held constant, the profit after tax will be lower/
higher by £31,958 (2020: £394,140) as a result of higher/lower interest expense on these borrowings.
D. CREDIT RISK
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the Company. For
trade receivables the Company adopts a policy of only dealing with customers of appropriate credit history or rating. For other financial assets,
the Company adopts the policy of only dealing with high credit quality counterparties.
The Company is not exposed to significant credit risk as a majority of the sales are made to the subsidiaries. Trade receivables are neither past
due nor impaired are substantially companies with a good collection track record with the Company.
The Company does not hold any collateral and the maximum exposure to credit risk for each class of financial instruments is the carrying
amount of that class of financial instruments on the balance sheet.
The Company applies the simplified approach by using the provision matrix to measure the lifetime expected credit loss for all trade
receivables. In measuring the expected credit losses, it is based on the Company’s two years historical credit loss experience and a provision
matrix has been set up using the amount of bad debt incurred over the carrying value of the trade receivables per ageing brackets at each
financial year end.
The Company’s credit risk exposure in relation to trade receivables are set out in the provision matrix as follows:
Past due
£‘000 Current 1–30 days 31–60 days 61–90 days 91–120 days >120 days Total
At 31 December 2021
Expected loss rate 0% 0% 0% 0% 0% 0%
Trade receivables 6,659 8,064 3,182 2,783 841 8,397 29,926
Loss allowance – – – – – – –
Past due
£‘000 Current 1–30 days 31–60 days 61–90 days 91–120 days >120 days Total
At 31 December 2020
Expected loss rate 0% 0% 0% 0% 0% 0%
Trade receivables 7,637 2,969 3,385 4,188 4,413 9,916 32,508
Loss allowance – – – – – – –
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
£6,660,000 (2020: £6,593,000) is measured on 12-month expected credit losses. The credit loss is immaterial.
186
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE COMPANY
BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2021
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30801 8 March 2022 10:52 am V8
49. Financial risk management continued
Financial assets at amortised costs
The Company uses the following categories of internal credit risk rating for financial assets which are subject to expected credit losses under
the 3-stage general approach. These four categories reflect the respective credit risk and how the loss provision is determined for each of
those categories.
Category of internal
credit rating Performing Underperforming Non-performing Write off
Definition of category Issuers have a low
risk of default and a
strong capacity to meet
contractual cash flows
Issuers for which there is
a significant increase in
credit risk, as significant
in credit risk is presumed
if interest and/or
principal repayment are
30 days past due
Interest and/or principal
payments are 90 days
past due
Interest and/or principal
repayments are 120 days
past due and there is no
reasonable expectation of
recovery
Basis of recognition of
expected credit loss
12-month expected
credit losses
Lifetime expected credit
losses
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
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years Total
At 31 December 2021
Trade and other payables 49,440 – – – 49,440
Lease liabilities 353 794 1,298 2,003 4,448
Total 49,793 794 1,298 2,003 53,888
£‘000
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years Total
At 31 December 2020
Trade and other payables 38,920 – – – 38,920
Lease liabilities 275 89 – – 364
Total 39,195 89 – – 39,284
The Company manages the liquidity risk by maintaining sufficient cash and bank facilities to enable it to meet its normal operating
commitments.
187
FINANCIALS
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30801 8 March 2022 10:52 am V8
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 Level 1 Level 2 Level 3 Total
At 31 December 2021
Assets
Derivative financial instruments – * – *
Liabilities
Derivative financial instruments – (129) – (129)
At 31 December 2020
Assets
Derivative financial instruments – 300 – 300
Liabilities
Derivative financial instruments – (111) – (111)
* Balance is less than £1,000.
G. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amount of the different categories of financial instruments are as follows:
£‘000 2021 2020
Financial assets, at FVPL * 300
Financial liabilities, at FVPL (129) (111)
Financial assets, at amortised cost 56,007 57,180
Financial liabilities, at amortised cost (54,001) (39,278)
* Balance is less than £1,000.
H. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Company has no financial instruments subject to enforceable master netting arrangements.
188
XP Power Annual Report & Accounts for the year ended 31 December 2021
NOTES TO THE COMPANY
BALANCE SHEET CONTINUED
AS AT 31 DECEMBER 2021
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30801 8 March 2022 10:52 am V8
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Results
Revenue 240.3 233.3 199.9 195.1 166.8
Profit from operations 29.7 37.4 26.7 39.3 32.5
Profit before tax 28.4 35.7 24.0 37.6 32.2
Assets employed
Non-current assets 150.5 135.2 137.4 129.2 88.1
Current assets 121.7 107.0 96.0 105.1 83.5
Current liabilities (49.0) (34.7) (30.4) (26.8) (25.1)
Non-current liabilities (50.8) (43.0) (64.1) (70.1) (29.6)
Net assets 172.4 164.5 138.9 137.4 116.9
Financed by
Equity 171.5 163.8 138.2 136.4 116.0
Non-controlling interests 0.9 0.7 0.7 1.0 0.9
172.4 164.5 138.9 137.4 116.9
Key statistics (pence)
Earnings per share 115.8 163.0 107.0 157.8 148.3
Adjusted earnings per share 179.4 201.8 144.1 176.1 149.4
Diluted earnings per share 113.8 160.3 105.0 154.9 146.0
Diluted adjusted earnings per share 176.3 198.4 141.4 172.8 147.0
Share price in the year
High 5,700.0 4,790.0 3,110.0 3,740.0 3,626.0
Low 4,630.0 2,130.0 1,965.0 2,090.0 1,725.0
Dividends per share 94.0 74.0 55.0 85.0 78.0
189
FINANCIALS
FIVE-YEAR REVIEW
CONSOLIDATED INFORMATION
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30801 8 March 2022 10:52 am V8
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
190
XP Power Annual Report & Accounts for the year ended 31 December 2021
ADVISERS
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30801 8 March 2022 10:52 am V8
This document is printed on Revive Silk 100 which is made from 100%
FSC
®
Recycled pulp and post-consumer waste paper. This reduces waste
sent to landfill, greenhouse gas emissions, as well as the amount of water
and energy consumed.
The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions
through the purchase and preservation of high conservation value land. Through protecting standing forests, under
threat of clearance, carbon is locked in that would otherwise be released. These protected forests are then able to
continue absorbing carbon from the atmosphere,referred to as REDD (Reduced Emissions from Deforestation and
forest Degradation). This is now recognised as one of the most cost-effective and swiftest ways to arrest the rise in
atmospheric CO₂ and global warming effects. Additional to the carbon benefits is the flora and fauna this land preserves,
including a number of species identified at risk of extinction on the IUCN Red List of Threatened Species.
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POWERING THE WORLD’S CRITICAL SYSTEMS
XP Power Limited
19 Tai Seng Avenue
07-01
Singapore 534054
T: +65 6411 6900
F: +65 6479 6305
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