While previously reported issues with an ERP upgrade limited the amount of product XP could ship in Q419, revenues for FY19 came in ahead of our forecast and XP closed the year with a strong order book after an acceleration in demand across all markets in December. We have revised our forecasts to reflect both factors, with normalised EPS upgrades of 4.3% in FY19 and 1.5% in FY20.
XP has reported Q419 revenue of £47.7m (-3% y-o-y, -5% constant currency), resulting in FY19 revenue of £200.4m (+3% y-o-y, -1% cc, -4% like-for-like), well head of our £194.8m forecast. Q4 bookings of £58.6m were 30% higher year-onyear and 29% higher on a constant currency basis. Combined with the previously announced delay in shipments, this resulted in a book-to-bill of 1.23x for Q4. The company noted that its ERP system is now working well and shipments have been at normal or higher rates since mid-November. Year-end net debt stood at £41.5m, well below our £54.2m forecast. The company highlighted that US-denominated debt benefited from stronger sterling while working capital requirements were lower than expected. During Q4, XP increased its debt facility from $105m to $120m and added a $60m accordion facility. XP expects to announce a Q4 dividend of at least 36p, bringing the full-year dividend to at least 91p (our forecast was 88p).
Management pointed to an acceleration in bookings during December (XP had previously reported that bookings in the first two months of Q4 were 20% higher year-on-year) and noted that strength was across all sectors. We have revised our forecasts to reflect the stronger revenue performance and higher than expected bookings intake in Q4 as well as the higher dividend and better cash position. We have also reflected a slightly higher US$/£ rate in FY20 (1.31 vs 1.30). This results in a normalised EPS upgrade of 4.3% in FY19 and 1.5% in FY20.
The stock is up 43% over the last year and on an FY20e P/E basis, it trades at a small discount versus UK electronics peers. It continues to trade at a larger discount to international power converter peers. XP has taken steps to mitigate the impact of trade tariffs between China and the US as well as preparing for Brexit; evidence that this is helping margins should support upside to the stock. A sustained return to order growth from the semiconductor equipment sector would be a further trigger for upside.