Powering Theworld

XP POWER ANNUAL REPORT & ACCOUNTS for the year ended 31 December 2020 ended 31 December year the for ACCOUNTS & REPORT ANNUAL POWER XP ANNUAL REPORT & ACCOUNTS for the year ended 31 December 2020 POWERING THE WORLD’S CRITICAL SYSTEMS DRIVING SUSTAINABLE GROWTH 30019-XPPower-AR2020.indd 3 09/03/2021 16:59:53 30019 9 March 2021 4:59 pm V2 WE PROVIDE OUR CUSTOMERS WITH SOLUTIONS TO POWER THEIR CRITICAL SYSTEMS. We have moved steadily up the value chain from a specialist distributor, to designer, to design manufacturer. WE ARE DRIVING SUSTAINABLE GROWTH We have performed extremely well in a period of unprecedented difficulty throughout the COVID-19 pandemic demonstrating the resilience of our business model. 01 READ ABOUT OUR PURPOSE AND VISION ON PAGE 9 Our people Ensuring safety and wellbeing of our people above all else, who in turn, look after our customers Ensuring that our customers Prioritising our with product and service customers have been supplied during the COVID-19 05 pandemic 02 WE ARE our cash BUILDING A Maintaining a SUSTAINABLE, Managing and preserving MARKET-LEADING strong cash position BUSINESS THROUGH: productGrowing portfolio our Maintaining investment in our product development Strengthening our supply chain Expanding our Vietnamese manufacturing capacity and 04 recruiting supply 03chain talent 30019-XPPower-AR2020.indd 3 09/03/2021 16:59:56 30019 9 March 2021 4:59 pm V2 OVERVIEW Contents OVERVIEW INTRODUCTION IFC DRIVING SUSTAINABLE GROWTH 2 OUR PURPOSE, VISION, STRATEGY, VALUES AND CULTURE 8 FINANCIAL AND OPERATIONAL HIGHLIGHTS 10 REASONS TO INVEST 11 XP POWER AT A GLANCE 12 CHAIRMAN’S STATEMENT 16 STRATEGIC REPORT CHIEF EXECUTIVE OFFICER SUCCESSION 20 OUR MARKETPLACE 22 OUR MARKETPLACE: OUR GROWTH DRIVERS 26 OUR BUSINESS MODEL 28 POWERING LONG-TERM VALUE 31 OUR STRATEGY 32 OUR STRATEGY IN ACTION 36 OUR RESPONSE TO COVID-19 39 OUR KEY PERFORMANCE INDICATORS 40 PERFORMANCE: OPERATIONAL REVIEW 42 PERFORMANCE: FINANCIAL REVIEW 48 MANAGING OUR RISKS 52 SECTION 172(1) STATEMENT 61 SUSTAINABILITY 62 “ I am pleased that we have once again SECTION 1: EMBEDDING SUSTAINABILITY 62 demonstrated the resiliency of our business SECTION 2: HEALTH AND SAFETY 67 SECTION 3: OUR PEOPLE 71 and have been able to meet the demands SECTION 4: ENVIRONMENTAL LEADERSHIP 75 of our customers in the most challenging SECTION 5: SUSTAINABLE PRODUCTS 79 environment of the COVID-19 pandemic, SECTION 6: ETHICS AND COMPLIANCE 81 whilst producing an excellent financial GOVERNANCE CHAIRMAN’S INTRODUCTION TO performance for our Shareholders. This is all GOVERNANCE 86 down to the hard work and commitment of BOARD OF DIRECTORS 88 the XP team globally.” CORPORATE GOVERNANCE REPORT 90 NOMINATION COMMITTEE REPORT 102 AUDIT COMMITTEE REPORT 110 Gavin Griggs Chief Executive Officer REMUNERATION COMMITTEE REPORT 116 REMUNERATION REPORT – ANNUAL REPORT 119 2 March 2021 REMUNERATION POLICY 127 OTHER GOVERNANCE AND STATUTORY DISCLOSURES 132 STATEMENT BY DIRECTORS 133 FINANCIALS INDEPENDENT AUDITOR’S REPORT 136 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 141 CONSOLIDATED BALANCE SHEET 142 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 143 CONSOLIDATED STATEMENT OF CASH FLOWS 144 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 145 COMPANY BALANCE SHEET 180 NOTES TO THE COMPANY BALANCE SHEET 181 FIVE YEAR REVIEW CONSOLIDATED FIND US ONLINE AT INFORMATION 191 XPPOWER.COM ADVISERS 192 XP Power Annual Report & Accounts for the year ended 31 December 2020 01 30019-XPPower-AR2020.indd 1 11/03/2021 09:54:15 30019 11 March 2021 9:53 am V2 DRIVING SUSTAINABLE GROWTH 01 OUR PEOPLE ENSURING SAFETY AND WELLBEING Over 2,000 Employees across 14 countries Throughout the COVID-19 pandemic, we have placed the safety and wellbeing READ MORE ABOUT OUR UNIQUE of our people as our top priority. We CULTURE ON PAGE 8 have followed all the recommended epidemic prevention and control measures in all of our facilities around the world, enabling them to stay open and keep product flowing to our customers. STAYING CONNECTED READ MORE ABOUT OUR INNOVATIONS ON PAGE 46 We were able to stay close to our colleagues throughout the epidemic by frequent all-hands video conferences and tailored employee surveys while the majority of our people worked from home. READ MORE ABOUT HOW WE OPERATE ON PAGE 29 02 30019-XPPower-AR2020.indd 2 09/03/2021 17:00:02 30019 9 March 2021 4:59 pm Shell OVERVIEW 02 PRIORITISING OUR CUSTOMERS POWERING THE WORLD’S CRITICAL SYSTEMS Over 4,500 Direct customers Our customers provide mission critical systems to service the Healthcare, Industrial Technology READ MORE and Semiconductor Manufacturing ON PAGE 24 Equipment markets. Our Healthcare customers saw unprecedented demand due to the COVID-19 pandemic. We were proud to support them to expedite shipments and provide the power for the critical care equipment required to treat COVID-19. READ MORE ON PAGE 24 Keeping our customers RELENTLESS CUSTOMER supplied with product FOCUS We are designed into numerous ventilator products and other While our Healthcare customers critical care devices such as drug delivery systems, patient monitors, experienced unprecedented demand, specialist ultrasound and X-ray equipment. our customers making Semiconductor Manufacturing Equipment also saw significant demand. This was due to the READ MORE acceleration of technological changes ON PAGE 39 due to COVID-19, and advancements in semiconductor manufacturing technology, which we were able to support in the most challenging environment. XP Power Annual Report & Accounts for the year ended 31 December 2020 03 30019-XPPower-AR2020.indd 3 09/03/2021 17:00:06 30019 9 March 2021 4:59 pm V2 DRIVING SUSTAINABLE GROWTH CONTINUED 03 STRENGTHENING OUR SUPPLY CHAIN CONTINUING TO SUPPLY OUR CUSTOMERS DURING Over 3,000 COVID-19 Products now approved for manufacture in Vietnam Our Vietnamese facility was able to keep product flowing to customers, READ MORE while China was shut down in the early ON PAGE 37 stages of the COVID-19 pandemic. Our supply chain team expedited component deliveries and rapidly expanded capacity to respond to the worldwide crisis and support our customers. READ MORE ON PAGE 39 Our low-cost manufacturing TALENT AND EXPANSION We have strengthened our supply in both China and Vietnam chain talent in 2020 with a number of key hires. We have expanded our provides the supply chain Vietnamese capacity and have closed our facility in Minden, Nevada, and resiliency our customers value successfully transferred production to Vietnam. This has resulted in significant cost savings for 2021. Over 2,000 Products capable of manufacture in China READ MORE ON PAGE 45 04 30019-XPPower-AR2020.indd 4 09/03/2021 17:00:35 30019 9 March 2021 4:59 pm V2 OVERVIEW 04 GROWING OUR PRODUCT PORTFOLIO ENGINEERING NEW 2021 PRODUCTS Next-generation high-power platforms Throughout the COVID-19 pandemic, scheduled for launch we have been able to continue to maintain our product development and invest in new products. 2019 5kW high-power PRODUCT FAMILIES product line released Over the years, we have built a broad product portfolio of over 250 product families to give us the broadest product 2018 offering in the industry. Added high voltage/high power through the acquisition of Glassman High Voltage YEAR FAMILIES 2020 +20 2019 +32 2018 +27 2017 2017 +27 Added RF Power through the 2016 +47 acquisition of Comdel 2015 +22 2014 +26 2013 +31 2012 +19 2015 2011 +38 Added high voltage DC-DC Modules through 2010 +31 the acquisition of EMCO High Voltage XP Power Annual Report & Accounts for the year ended 31 December 2020 05 30019-XPPower-AR2020.indd 5 09/03/2021 17:00:39 30019 9 March 2021 4:59 pm V2 DRIVING SUSTAINABLE GROWTH CONTINUED 05 MAINTAINING A STRONG CASH POSITION PRESERVING OUR CASH Early in the COVID-19 pandemic, 117% we took swift action to ensure we preserved cash in the face of worldwide Adjusted Operating Cash Conversion uncertainty. We focused on early collection of receivables and prudent READ MORE management of inventory in the face ON PAGE 50 of unprecedented demand from our Healthcare customers. We took the difficult decision to cancel the 2019 final dividend and did not declare a dividend for the first quarter of 2020. OPERATING CASH FLOW We were able to resume The actions we took and prudent management resulted in strong dividend payments from the operating cash conversion. Strong performance allowed us to resume second quarter of 2020 dividend payments with effect from the second quarter of 2020. 74 pence Dividend of 74 pence per share (2019: 55 pence per share) READ MORE ON PAGE 51 06 30019-XPPower-AR2020.indd 6 09/03/2021 17:00:44 30019 9 March 2021 4:59 pm V2 OVERVIEW MAINTAINING A STRONG CASH POSITION XP Power Annual Report & Accounts for the year ended 31 December 2020 07 30019-XPPower-AR2020.indd 7 09/03/2021 17:00:51 30019 9 March 2021 4:59 pm V2 OUR PURPOSE, VISION, STRATEGY, VALUES AND CULTURE We link our purpose, vision, strategy, OUR CULT values and culture to clearly communicate URE to our colleagues and drive our business forward. This alignment ensures we can create sustainable value today and into the future for the benefit of our stakeholders. OUR CORE VALUES E R U OUR T L VISION U C OUR R PURPOSE U O O U R C U L T U R E OUR OUR CULTURE STRATEGY Our unique character and ecosystem: We place our people and customers at the heart of everything we do. We understand that if we provide our people with the ultimate experience they will provide the ultimate experience to our customers. FOR MORE INFORMATION ABOUT HOW THE BOARD MONITORS CULTURE, SEE PAGE 95 08 30019-XPPower-AR2020.indd 8 09/03/2021 17:00:52 30019 9 March 2021 4:59 pm V2 OVERVIEW OUR CULT URE OUR PURPOSE Why we exist: We power the world’s critical systems.

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