Dynex Power Announces Second Quarter Financial Results

Return to Profitability Expected in Second Half of Year

Listing: 

TSX Venture Exchange

Symbol:   

DNX

 

LINCOLN, England, Aug. 28, 2014 /CNW/ - Dynex Power Inc., a leading, high power semiconductor company, today announced its financial results for the second quarter and six months ended June 30th, 2014.

Summary financial information for the three and six months ended June 30th, 2014 is as follows:






Canadian Dollars (000's)

June 30, 2014

June 30, 2013

YTD 2014

YTD 2013

Revenue

10,178

9,959

21,628

16,836

Gross Profit

1,435

1,934

2,451

1,685

Other Income, Expenses and Costs

1,822

(1,328)

(3,471)

(2,481)

Profit (Loss) before Tax

(387)

608

(1,020)

(796)

Income Tax Recovery (Expense)

79

(81)

197

219

Net Profit (Loss)

(308)

527

(823)

(577)

Common shares outstanding ¹ - diluted

80,509,047

80,509,047

80,509,047

80,509,047

Earnings per share - diluted

(0.00)

$0.01

(0.01)

$(0.01)

¹ Weighted average for the period

 

The average rate of the Canadian Dollar has weakened against Sterling by approximately 16% between the second quarter of 2013 and the second quarter of 2014 and by approximately 17% between the first half of 2013 and the first half of 2014. These changes have had a significant impact on the figures presented above.

The 2.2% increase in revenue from $10.0 million in the second quarter of 2013 to $10.2 million in the second quarter of 2014 was less than might be expected given the weaker Canadian Dollar. In Sterling terms, reductions in sales of bipolar products were offset by improved sales of power assemblies; accordingly, overall sales of the Company's power semiconductor product groups were marginally increased. However, sales of integrated circuits were down significantly and, as a result, sales in Canadian Dollars did not rise by as much as might be expected.

On a year to date basis, the rise in sales was bigger than might be expected from just exchange rate movements as Dynex experienced growth, in Sterling terms, from all three semiconductor product lines partially offset by weaker sales of integrated circuits.

The gross margin of 14.1% in the second quarter of 2014 was lower than the 19.4% reported in the corresponding quarter of last year. The gross margin was below the range targeted by management and reflected weaker revenue than had been expected and continuing weak yields on new products, an issue that is being addressed by management.   For the year to date, the gross margin was 11.3% compared to 10.0% in the corresponding period last year. For both periods, the low gross profit reflects the weakness in revenue being reported.

Sales and marketing and administration expenses represented 12.3% of revenue in the second quarter and 11.4% of revenue for the year to date compared to 9.2% and 10.9% in the corresponding 2013 periods. These costs have been on a steadily reducing percentage for a number of years. The small increases in 2014 reflected a number of one-off costs including tax and grant advice and an increase in life assurance costs following a change to UK pension legislation. Dynex continues to expect these ratios to improve in the longer term.

Net expenditure on research and development rose to 3.8% of revenue in the second quarter and 3.5% in the year to date compared to 2.9% and 3.3% in the corresponding 2013 quarter and year to date. These increases are a result of a deliberate decision by management to invest significantly in research and development in order to drive the long term growth of the business. The rise in gross expenditure on research and development (which includes funding received from CSR Times Electric and Government bodies) is even larger and underlines the strategic advantages of the Company's relationship with CSR Times Electric. Gross expenditure on research and development is now running at approximately 16% of revenue.

As a consequence of these changes, Dynex reported a loss before tax in the quarter of $387,000, compared to a profit before tax of $608,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $1.0 million was recorded compared to a loss before tax of $796,000 in the corresponding period of last year. The decline in year to date performance reflects the weaker than expected revenue being reported and the problems being encountered with the yield on new products.

At the end of the second quarter, the Company's order book stood at $24.6 million, approximately 4% lower than at the end of the first quarter. The order book is expected to increase when the current yield problems are resolved.

Revenue is expected to increase in the second half of the year compared to the first half and the Company expects to return to profitability.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Our expectations for the power semiconductor market is that, following a sharp decline in 2012 and modest growth in 2013, the market will grow more rapidly in 2014. Dynex is beginning to see that recovery and indeed our power semiconductor revenue in the first half of 2014 has reached an all time high, with further growth to come.  In Q2, the benefits of that record revenue did not flow down to the bottom line due to increased costs as we continue to invest for growth and resolve on-going yield problems. New equipment is being installed to deal with the yield problem and adjustments are being made to the production processes. This work is going well."

Bob Lockwood, Chief Financial Officer commented, "Much work has been carried out to return the business to profitability and to underpin the future expansion of the business. We are beginning to see the fruits of this hard work, although it is taking longer than we had hoped to impact on the bottom line. Nevertheless, we expect to return to profitability in the second half of the year."

Li Donglin, the Chairman of Dynex said, "I am pleased to see that Dynex's results are moving in the right direction and, like all shareholders, I look forward to the Company's return to profitability. The investment in research and development and in new process equipment should help ensure the business is able to remain profitable and grow strongly in the coming years."

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.
Interim Condensed Consolidated Statements of Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2014


 3 months

3 months

 YTD

 YTD


 Jun 30th

Jun 30th

 Jun 30th

 Jun 30th


2014

2013

2014

2013


$

$

$

$






Revenue

10,178,055

9,959,051

21,627,559

16,836,150






Cost of sales

(8,743,505)

(8,025,326)

(19,176,293)

(15,151,238)






Gross profit

1,434,550

1,933,725

2,451,266

1,684,912






Other income

29,619

32,016

88,349

57,634

Sales and marketing expenses

(270,826)

(244,129)

(548,971)

(452,458)

Administration expenses

(981,749)

(672,924)

(1,915,760)

(1,382,373)

Research and development expenses

(389,026)

(293,645)

(766,460)

(550,977)

Finance costs

(179,647)

(177,333)

(337,931)

(279,865)

Other gains and (losses)

(29,553)

30,231

8,922

126,748






Loss before tax

(386,632)

607,941

(1,020,585)

(796,379)






Income tax 

79,066

(80,991)

197,290

219,877






Net loss

(307,566)

526,950

(823,295)

(576,502)






Other comprehensive income/(loss)










Items that may be reclassified subsequently to net profit/(loss):






Exchange differences on translation of foreign operations (net of tax of $nil)

(298,290)

1,236,593

1,228,229

(294,118)











Total comprehensive income/(loss) for the year

(605,856)

1,763,543

404,934

(870,620)






Loss per share





Basic

-

(0.01)

(0.01)

(0.01)

Diluted

-

(0.01)

(0.01)

(0.01)

 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
As at June 30th, 2014



 Jun 30th

 Dec 31st



2014

2013



$

$





NON-CURRENT ASSETS








Intangible assets


776,376

671,297

Property, plant & equipment


39,568,495

35,489,047





Total non-current assets


40,344,871

36,160,344





CURRENT ASSETS








Inventories


14,315,065

12,285,323

Trade receivables


7,958,560

10,239,680

Amounts owing from parent company


2,877,661

2,487,898

Prepayments, deposits & other receivables


1,118,166

589,109

Tax recoverable


17,442

139,320

Cash 


2,963,497

775,071





Total current assets


29,250,391

26,516,401





CURRENT LIABILITIES








Trade payables


1,654,328

2,788,598

Amounts owing to parent company


469,344

1,504,288

Other payables and accruals


10,713,498

2,384,332

Borrowings


5,544,810

10,450,622

Provisions


18,223

17,620





Total current liabilities


18,400,203

17,145,460

 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Financial Position (Unaudited) in Canadian Dollars (continued)
As at June 30th, 2014



Jun 30th

Dec 31st



2014

2013



$

$





NON-CURRENT LIABILITIES








Borrowings


12,543,947

7,160,584

Provisions


273,101

236,970

Derivative financial instruments


24,084

23,288

Deferred tax liabilities


901,036

1,062,486





Total non-current liabilities


13,742,168

8,483,328





NET ASSETS


37,452,891

37,047,957





EQUITY 








Share capital


37,096,192

37,096,192

Accumulated deficit 


(2,692,118)

(1,868,823)

Exchange fluctuation reserve


3,048,817

1,820,588







37,452,891

37,047,957

 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended June 30th, 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

-

(576,502)

(294,118)

(870,620)











At June 30th, 2013

37,096,192

(35,581)

(1,648,727)

35,411,884






Total comprehensive income for the period

-

(1,833,242)

3,469,315

1,636,073











At December 31st, 2013

37,096,192

(1,868,823)

1,820,588

37,047,957






Total comprehensive income for the period

-

(823,295)

1,228,229

404,934











At June 30th, 2014

37,096,192

(2,692,118)

3,048,817

37,452,891

 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2014



 YTD

 YTD



 Jun 30th

 Jun 30th



2014

2013



$

$

CASH FLOW FROM OPERATING ACTIVITIES








Loss before tax


(1,020,585)

(796,379)

Finance costs recognised in loss before tax


337,931

279,865

Investment income recognised in loss before tax


(2,400)

(174)

Amortization of intangible assets


48,397

-

Depreciation of property, plant & equipment


2,131,879

1,678,619

Loss on disposal of property, plant & equipment


-

1,506

Provision for slow moving and obsolete inventory


791,264

265,564

Non cash movement in provisions


35,705

-

Movements in working capital


5,396,406

(3,041,807)

Income taxes received/(paid)


125,852

(1,929)





Net cash generated by/(used in) operating activities


7,844,449

(1,614,735)





CASH FLOW FROM INVESTING ACTIVITIES








Payments for intangible assets


(29,147)

-

Payments for property, plant & equipment


(5,078,673)

(800,897)

Interest received


2,400

174





Net cash used in investing activities


(5,105,420)

(800,723)





CASH FLOW FROM FINANCING ACTIVITIES








Proceeds from borrowings


6,716,967

7,501,074

Repayments of borrowings


(6,842,472)

(5,703,538)

Interest paid


(331,003)

(163,888)

Payments for other finance costs


(40,824)

(94,167)





Net cash generated by financing activities


(497,332)

1,539,481





NET INCREASE/(DECREASE) IN CASH


2,241,697

(875,977)





Cash at beginning of period


775,071

2,206,430





Effect of foreign currency translation on cash 


(53,271)

(16,299)





CASH AT END OF PERIOD


2,963,497

1,314,154

 

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

LIENS CONNEXES
http://www.dynexsemi.com

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