XP Power's move into manufacturing in 2006 has been instrumental in enabling
the Group to win approved and preferred supplier status with new Blue Chip
customers, who demand that their suppliers have complete control over their
supply chain and product manufacture to ensure the highest levels of quality.
In June 2009, production commenced at our first manufacturing facility at
Kunshan, close to Shanghai, China. The facility, which is certified under
the ISO14001 Environmental Management Standard, delivers manufacturing
capabilities which match or exceed the best of our competitors. The number
of customer audits from key accounts has steadily increased over recent
years and all of these audits have been successful.
Our Vietnamese manufacturing facility, located in Ho Chi Minh City, began
production of its first magnetic components during March 2012 and is currently
producing approximately half of the monthly requirement for magnetic components
at our Chinese factory. The quality of the Vietnamese output has been very
pleasing surpassing that of our third party suppliers.
Producing our own magnetic components in Vietnam is helping us mitigate the
continued rise of Chinese labour costs and the appreciation of the Chinese
Renminbi. In addition, extending vertical integration to the critical magnetic
components used in power converters is seen as an additional value proposition
by many of our customers, notably in the healthcare and high reliability
Since April 2010 the Company has been making quarterly dividend payments. Our
strong cash flow and confidence in the Group's prospects have enabled us to
increase total dividends for the first half by 10% to 23.0 pence per share
(2012: 21.0 pence per share).
The first quarterly payment of 11 pence per share was made on 10 July 2013. A
second quarterly dividend of 12 pence per share will be paid on 10 October 2013
to shareholders on the register at 6 September 2013.
Dividend growth over the past ten years has exceeded a compound average growth
rate of 15%.
Environmental Impact and "Green XP Power" products
XP Power has placed improved environmental performance at the heart of its
operations both in terms of minimising the impact its activities have on the
environment and, as importantly, in its product development strategy. These
practices and initiatives not only resonate with our customers and employees;
they also make significant commercial sense as countries legislate to reduce
power wastage, improve recyclability of manufactured goods and ban the use of
We have developed a class leading portfolio of green products with efficiencies
up to 95% and many of these products also have low stand-by power (a feature to
reduce the power consumed while the end equipment is not operational but in
stand-by mode). We now apply our own "Green XP Power" logo to the products we
designate ultra-high efficiency. During the first half of 2013, 11% of our
revenues were generated by "Green XP Power" products compared to 6% in 2012, 5%
in 2011 and 3% in 2010. At present, the uptake of these products by customers
is primarily driven by their improved reliability and the ability to dispense
with mechanical fans to dissipate waste heat, rather than the fact that they
consume less energy in operation. However, we expect this to change as lower
energy consumption becomes a higher priority to end users of capital equipment
and more legislation is introduced.