2018 was another year of significant progress. We have achieved a third successive year of record revenues and earnings per share demonstrating the strength of our business model and successful execution of our strategy.
Our progress in 2018
2018 was another year of significant progress. We have achieved a third successive year of record revenues and earnings per share demonstrating the strength of our business model and successful execution of our strategy. Significantly, we completed the acquisition of Glassman High Voltage which expands our addressable market by an estimated $500 million and gives us a foothold in an exciting new product segment. In addition, we completed construction of our second manufacturing facility in Vietnam which will start production in Q2 2019.
Results
Our financial performance in the year was good. Revenues were £195.1 million, exceeding the prior year total of £166.8 million. This was an increase of 21% in constant currency or an increase of 11% on a like-for-like basis, excluding the acquisitions of Comdel in September 2017 and Glassman in May 2018. Order intake also set a new record of £198.4 million, exceeding the £184.3 million achieved in 2017, and representing a 12% increase in constant currency. On a like-for-like basis after excluding the acquisitions of Comdel and Glassman, the increase in order intake was 5%. We grew across all our regions and sectors however we did see a slowdown in the semiconductor manufacturing sector in the fourth quarter in line with the wider market and as outlined in our January Trading Update.
Reported profit before tax was £37.6 million (2017: £32.2 million). After adding back acquisition costs, both completed and aborted, of £0.6 million (2017: £3.3 million), costs related to ERP implementation of £0.2 million (2017: £nil) and amortisation of intangible assets due to business combination of £2.8 million (2017: £0.6 million), adjusted profit before tax was £41.2 million (2017: £36.1 million), an increase of 14% over that reported in 2017. Basic earnings per share increased by 6% to 157.8 pence (2017:148.3 pence). Diluted adjusted earnings per share increased by 18% to 172.8 pence (2017: 147.0 pence).
Strategy review
The key essence of the Group's strategy has remained consistent for a significant period of time and is built on the development of a market-leading range of competitive products, either organically or by acquisition, to enable further penetration of our existing target accounts where we still have relatively low market shares. This approach has served the Group well and our conclusion is that we can still continue to grow and take market share by executing this strategy.
During the year the Board completed a review of the Group's strategic progress. It was determined that our strategy was working effectively to grow the Group's revenues, market share in our target sectors and customers and our brand strength as demonstrated by the 18% revenue growth compound annual growth rate performance from 2014 to 2018 whilst building the processes to operate a global supply chain which balances high efficiency with market-leading customer responsiveness. We continue to drive improvements in engineering, the supply chain and manufacturing to support the sales growth we are generating. This includes a project to upgrade our ERP system to the latest version of SAP S/4 Hana across the Group.
Record order intake, revenues and earnings achieved
Our board
Mike Laver, currently an executive director, will not be standing for re-election to the Board at this year's Annual General Meeting. On stepping down from the Board, Mike will retain his operational role as President, Corporate Development.
Peter Bucher, Non-Executive Director retired from the Board on 31 December 2018. I would like to thank Peter for his contribution to the development of the Group since joining the Board in 2014 and wish him a happy retirement.
Under the new UK Corporate Governance Code that came into effect in 2019, public companies are required to have at least an equal number of non-executive directors to executive directors, excluding the Chairman. To address this requirement, we are actively searching for a replacement for Peter.
For more information please see the
Chairman's Introduction to Governance
Our people and our values
The success of an organisation is dependent on its culture and the people and talent within it. The DNA of our business is built around our core values of Integrity, Knowledge, Flexibility, Speed and Customer Focus. We have significant strength and depth within our Company, with the majority of our executives boasting long tenures with XP Power. We have conducted annual employee engagement surveys since 2015 and I am pleased that we have shown strong scores each time we repeat the survey, having taken actions to address any issues arising from the results of the prior survey. One of the main findings from these employee surveys was that our employees are proud to be part of our Company, highlighting the significant engagement we have between the business and our people. Our cultural survey score is one of our non-financial key performance indicators.
As the Group has grown, we have consistently added more talent across the business to build even greater strength and depth and we hired more people in 2018 than in any year in our history. A key focus is engineering where we will continue to add talent to partner effectively with our customers and address all the opportunities we see before us.
Dividend
Our continued strong financial performance and confidence in the Group's long-term prospects have enabled us to increase dividends consistently since listing in 2000. The Board is recommending a final dividend of 33 pence per share for the fourth quarter of 2018. This dividend will be payable to members on the register on 22 March 2019 and will be paid on 23 April 2019. When combined with the interim dividends for the previous quarters, the total dividend for the year will be 85 pence per share (2017: 78 pence), an increase of 9%.
The compound average growth rate of our dividend has been 15% over the last ten years, demonstrating the Board's commitment to our progressive dividend policy.
The compound annual growth rate of our dividend has been 15% over the last ten years.
Sustainability
We are committed to the long-term sustainable success of XP Power in all its aspects. We have helped lead the industry in developing "green" products which consume less energy while powering the application or in standby mode. These products reduce CO2 emissions year over year and are by far the biggest positive impact we can make on the environment.
Sustainability also resonates with our employees. We have adopted energy and water saving practices throughout the Group and have a network of passionate environmental representatives who promote best practice and raise awareness regarding sustainability across our global workforce.
For more information please see
Our commitments to sustainability
Outlook
The new financial year has begun against a background of ongoing macroeconomic uncertainty. While we are not immune from the impact of external events, we are encouraged by our start to 2019 in terms of order intake and our healthy order book. On this basis, and with the benefit of the Glassman acquisition, we expect further revenue growth in 2019 but this will be weighted to the second half of the year.
James Peters
Chairman