Dynex Power Announces First Quarter Loss

Return to Profitability Expected in Third Quarter

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, May 30, 2014 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2014.

Summary financial information for the three months ended March 31st, 2014 is as follows:

     
Canadian Dollars (000's) March 31, 2014 March 31, 2013
Revenue
Gross Profit/ (Loss)
Other Income, Expenses and Costs
Loss before Tax
Income Tax Recovery
Net Loss
Common shares outstanding ¹ - diluted
Loss per share  - diluted
11,450
1,017
(1,651)
(634)
118
(516)
80,509,047
$(0.01)
6,877
(249)
(1,155)
(1,404)
301
(1,103)
80,542,859
$(0.01)

¹  Weighted average for the period

First quarter revenue of $11.4 million was 66% higher than the corresponding quarter of last year. Approximately one third of this increase was as a result of the weakening of the Canadian Dollar against Sterling. The rest of the change comprised a major increase in the sales of power modules and die and bipolar devices partially offset by small reductions in sales of power assemblies and services.

A gross profit of $1.0 million was made in the quarter. A small gross loss of $249,000 was made in the corresponding quarter of last year. The gross margin of 8.8% was significantly below the range targeted by management.

Other income, expenses and costs increased by $496,000 to $1.7 million. Approximately half this increase was as a result of the weakening of the Canadian Dollar against Sterling. The rest of the change related to an increase in research and development activity and some staff increases in the areas of administration  and health and safety. Because of the large increase in revenue in the period, other income, expenses and costs represented 16.4% of revenue in the 2014 period compared with 16.8% in the corresponding quarter of last year.

As a consequence of these changes, the Company recorded a loss before tax of $516,000, compared to a loss before tax of $1.4 million in the corresponding quarter of last year. The loss was primarily due to continuing problems with the yield on new products. A $118,000 recovery of UK tax resulted in a net loss for the period of $516,000 or $0.01 per share, compared with a net loss of $1.4 million, or $0.01 per share, in the corresponding period of last year.

Unfortunately, the yield issue referred to above will continue to depress revenue in the second quarter. Second quarter revenue is now forecast to be slightly below that reported in the first quarter and a further loss is anticipated. New equipment which is currently being installed is expected to enable yields to recover early in the third quarter and the level of demand from CSR Times Electric is sufficient to return Dynex to profitability for the remainder of the year.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Although revenue showed a significant increase over the corresponding quarter of last year, we were unable to return to profitability. The problem with yields on new products that had affected our results for the fourth quarter of 2013 will continue until the new equipment is operational. We have ordered and are currently installing this equipment. The cost of the new equipment is $5.1 million. We are fortunate that CSR Times Electric is lending us the money to purchase this equipment."

Dr. Paul Taylor continued, "Despite this poor start to the year, management still expects to show revenue growth and a return to profitability in 2014. The most important comment I would make is that no one is happy with the current results and we are committed to significant improvement."

Bob Lockwood, Chief Financial Officer commented, "Whilst revenue and the operating result both improved in the first quarter of 2014 compared to the corresponding quarter of 2013, the change from the results reported in the last quarter of 2013 is more complex. As expected, revenue did show a decline but nevertheless there was a significant reduction in the net loss for the quarter. A further loss is expected in the second quarter. Whilst this is disappointing, the order book for the third quarter and the demand for die from CSR Times Electric are sufficient for us to return to profitability for the second half of the year and to give us confidence that we will be able to report revenue growth for 2014 overall."

Li Donglin, the Chairman of Dynex said, "Whilst there has been some improvement in performance in the first quarter of 2014, further improvement is required. The recovery in most of Dynex's markets is slower than expected but there are significant opportunities for Dynex in the Chinese railway and urban mass transit sectors. We do, therefore, expect to see growth and a return to profitability in 2014."

Forward-looking Statements
In commenting on its expectations, the Company cautioned existing and potential shareholders about relying on the Company's expectations in that the Company's expectations contain forward looking statements and assumptions which are subject to the risks and uncertainties of the markets and the future, which could cause actual results to differ materially from expectations, and which are each difficult and subjective to forecast. Certain of those risks and uncertainties are discussed in the Management's Discussion and Analysis for the quarter ended September 30th, 2012 and include, among other things, risks and uncertainties relating to: the level of worldwide demand for power semiconductors and power semiconductor assemblies; the level of investment in power electronic equipment, electrification of transport systems, alternative power generation and high quality power transmission and distribution; the worldwide demand for and supply of silicon; and fluctuations in exchange rates between Canadian Dollars, Sterling, US dollars and Euros. As a consequence of these and other risks and uncertainties, shareholders and potential investors must make their own independent judgments about the accuracy and reliability of the Company's expectations. Dynex disclaims any intention or obligation to update or revise any forward looking statement whether as a result of new information, future events or otherwise.

About the Company
Dynex designs and manufactures high power bipolar semiconductors, high power insulated gate bipolar transistor (IGBT) modules, high power electronic assemblies and radiation hard silicon-on-sapphire integrated circuits (SOS IC's). The company's power products are used worldwide in power electronic applications including electric power transmission and distribution, renewable and distributed energy, marine and rail traction motor drives, aerospace, electric vehicles, industrial automation and controls and power supplies. Our IC products are used in demanding applications in the aerospace industry. Dynex Semiconductor Ltd is its only operating business and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations.  Dynex is majority owned by Zhuzhou CSR Times Electric Co., Ltd.

Zhuzhou CSR Times Electric Co., Ltd. is based in Hunan Province in the People's Republic of China. It is listed on the Hong Kong Stock Exchange. CSR Times Electric is mainly engaged in the research, development, manufacture and sales of locomotive train power converters, control systems and other train-borne electrical systems, as well as the development, manufacturing and sales of urban railway train electrical systems. In addition, CSR Times Electric is also engaged in the design, manufacturing and sales of electric components including power semiconductor devices for the railway industry, urban railway industry and non-railway purposes.

Press announcements and other information about Dynex Power Inc are available at www.dynexpower.com.

Information about Dynex Semiconductor Ltd and its products can be found at www.dynexsemi.com.

Further information on CSR Times Electric can be found at www.timeselectric.cn/en

All monetary values expressed in this release are in Canadian Dollars unless stated otherwise.

The TSX Venture Exchange has neither approved nor disapproved of the information in this press release.

DYNEX POWER INC.
Condensed Consolidated Statement of Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2014 

    3 months   3 months
    Mar 31st   Mar 31st
    2014   2013
    $   $
         
Revenue   11,449,504   6,877,099
         
Cost of sales   (10,432,788)   (7,125,912)
         
Gross profit/(loss)   1,016,716   (248,813)
         
Other income   58,730   25,618
Sales and marketing expenses   (278,145)   (208,329)
Administration expenses   (934,011)   (709,449)
Research and development expenses   (377,434)   (257,332)
Finance costs   (158,284)   (102,532)
Other gains and (losses)   38,475   96,517
         
Loss before tax   (633,953)   (1,404,320)
         
Income tax income   118,224   300,868
         
Net loss   (515,729)   (1,103,452)
         
Other comprehensive income/(loss)        
         
Exchange differences on translation of foreign operations (net of tax of $nil)   1,526,519   (1,530,711)
         
Total comprehensive income/(loss) for the year   1,010,790   (2,634,163)
         
Loss per share        
Basic   (0.01)   (0.01)
Diluted   (0.01)   (0.01)

 

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
As at March 31st, 2014

    Mar 31st   Dec 31st
    2014   2013
    $   $
         
NON-CURRENT ASSETS        
         
Intangible assets   749,840   671,297
Property, plant & equipment   37,339,005   35,489,047
         
Total non-current assets   38,088,845   36,160,344
         
CURRENT ASSETS        
         
Inventories   12,690,422   12,285,323
Trade receivables   8,110,597   10,239,680
Amounts owing from parent company   11,090,166   2,487,898
Prepayments, deposits & other receivables   1,058,430   589,109
Tax recoverable   1,003   139,320
Cash   6,988,690   775,071
         
Total  current assets   39,939,308   26,516,401
         
CURRENT LIABILITIES        
         
Trade payables   2,951,454   2,788,598
Amounts owing to parent company   1,222,833   1,504,288
Other payables and accruals   10,648,102   2,384,332
Borrowings   10,951,312   10,450,622
Provisions   18,372   17,620
         
Total current liabilities   25,792,073   17,145,460
         
NON-CURRENT LIABILITIES        
         
Borrowings   12,881,190   7,160,584
Provisions   283,019   236,970
Derivative financial instruments   24,280   23,288
Deferred tax liabilities   988,844   1,062,486
         
Total non-current liabilities   14,177,333   8,483,328
         
NET ASSETS   38,058,747   37,047,957
         
EQUITY        
         
Share capital   37,096,192   37,096,192
Accumulated deficit   (2,384,552)   (1,868,823)
Exchange fluctuation reserve   3,347,107   1,820,588
         
    38,058,747   37,047,957

DYNEX POWER INC.
Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2014

            Foreign    
    Share   Retained   Currency   Total
    Capital   Profit/   Translation   Equity
        (Deficit)   Reserve    
    $   $   $   $
                 
At January 1st, 2013   37,096,192   540,921   (1,354,609)   36,282,504
                 
Total comprehensive income for the period   -   (1,103,452)   (1,530,711)   (2,634,163)
                 
At March 31st, 2013   37,096,192   (562,531)   (2,885,320)   33,648,341
                 
Total comprehensive income for the period   -   (1,306,292)   4,705,908   3,399,616
                 
At December 31st, 2013   37,096,192   (1,868,823)   1,820,588   37,047,957
                 
Total comprehensive income for the period   -   (515,729)   1,526,519   1,010,790
                 
At March 31st, 2014   37,096,192   (2,384,552)   3,347,107   38,058,747

DYNEX POWER INC.
Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2014

    3 months   3 months
    Mar 31st   Mar 31st
    2014   2013
    $   $
CASH FLOW FROM OPERATING ACTIVITIES        
         
Loss before tax   (633,953)   (1,404,320)
Finance costs recognised in loss before tax   158,284   102,532
Investment income recognised in loss before tax   (2,143)   (91)
Amortization of intangible assets   24,176   -
Depreciation of property, plant & equipment   1,050,132   834,279
Provision for slow moving and obsolete inventory   (11,480)   68,137
Non cash movement in provisions   35,705   -
Movements in working capital   1,638,988   (2,049,198)
Income taxes received/(paid)   143,294   (1,929)
         
Net cash generated by/(used in) operating activities   2,403,003   (2,450,590)
         
CASH FLOW FROM INVESTING ACTIVITIES        
         
Payments for intangible assets   (73,750)   -
Payments for property, plant & equipment   (1,383,306)   (477,418)
Interest received   2,143   91
         
Net cash used in investing activities   (1,454,913)   (477,327)
         
CASH FLOW FROM FINANCING ACTIVITIES        
         
Proceeds from borrowings   6,716,967   1,837,077
Repayments of borrowings   (1,246,986)   (419,889)
Interest paid   (161,645)   (79,467)
Payments for other finance costs   (26,194)   (15,747)
         
Net cash generated by financing activities   5,282,142   1,321,974
         
NET INCREASE/(DECREASE) IN CASH   6,230,232   (1,605,943)
         
Cash at beginning of period   775,071   2,206,430
         
Effect of foreign currency translation on cash   (16,613)   (2,735)
         
CASH AT END OF PERIOD   6,988,690   597,752

SOURCE: Dynex Power Inc.

For further information:

Dr. Paul Taylor
President and Chief Executive Officer
or
Bob Lockwood
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: +44 1522 500 500
Email: investorrelations@dynexsemi.com


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