XP’s Q1 revenues reflect varying performance by end-market: encouraging growth from industrial, healthcare and technology customers was offset by the expected decline in demand from the semiconductor sector. Order intake was higher on a year-on-year and quarter-on-quarter basis, resulting in a book-to-bill of 1.16x for the quarter. With management’s full-year expectations unchanged, we maintain our forecasts.
XP reported Q119 revenues of £46.9m, 1% higher than a year ago. On a constant currency basis, revenues declined 5% and like-for-like revenues (excluding Glassman) declined 12% y-o-y. XP had already flagged weaker demand from the semiconductor sector and this continued through Q1. The other markets (industrial, healthcare, technology) that make up c 75% of revenues saw good demand in the quarter. The company announced a 17p quarterly dividend, in line with our forecast, which will be paid on 11 July to shareholders as at 14 June. Net debt reduced from £52.0m at the end of FY18 to £49.1m by the end of Q119.
XP received orders worth £54.6m in Q1, 7% higher than a year ago and 21% ahead of last quarter. Constant currency orders were flat and like-for-like orders were down 4% y-o-y. This resulted in a book-to-bill of 1.16x for the quarter. Management continues to expect a year of revenue growth, with growth weighted to the second half, and maintains expectations for the year. We leave our estimates unchanged.
Since the company reported FY18 results in March, the stock has gained 28%. Despite the discount narrowing, XP still trades at a more than 20% discount to both power converter and UK electronics peers on a P/E basis, and has a dividend yield at the top end of the range. With a broad product portfolio focused on structural growth markets, local customer support, control over the manufacturing process and strong cash generation, we view the company as well positioned to grow market share while maintaining high operating margins. Evidence of order growth in the semiconductor equipment sector is likely to be the key trigger for share price upside from this point.