Dynex Power Announces Results for 2014

Listing: TSX Venture Exchange
Symbol: DNX

Major Contract Cancellation Results in Significant Loss for 2014 Impacting on Profitability and Cash Flow in 2015

LINCOLN, England, April 30, 2015 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the year ended December 31st, 2014.

Summary financial information for the twelve months ended December 31st, 2014 is as follows:




Dollars (000's)

Dec. 31, 2014

Dec. 31, 2013

Revenue

42,166

39,234

Gross (loss)/profit

(441)

1,945

Expenses

(6,077)

(5,339)

Loss before tax

(6,518)

(3,394)

Income tax recovery

970

984

Net loss

(5,548)

(2,410)

Common shares outstanding ¹ - diluted

80,509,047

80,509,047

Earnings per share - diluted

$(0.07)

$(0.03)


¹ Weighted average for the period



 

As reported in a press release issued on February 2nd, 2015, the Company experienced the cancellation of a major contract by a customer and the return of product which had a major impact on the Company's results for 2014. As a result of the cancellation, the Company reduced revenue earned in 2014 by approximately $5.0 million and increased cost of sales by approximately $1.9 million. Following these changes, the Company was able to record a reduction in its deferred tax liability of approximately $1.2 million. A second contract from the same customer in the amount of $6.3 million for delivery in 2015 was cancelled at the same time.

Revenue for the year of $42.1 million was 7% higher than in the preceding year. The increase was a result of a weakening of the Canadian Dollar against Sterling. In Sterling terms revenue had fallen by approximately 4%. The decrease was a result of the contract cancellation referred to above. For the year, there was a significant increase in revenue from modules and power assemblies and a small increase in services, but these increases were partially offset by the reduction in integrated circuit revenue and a small decline in bipolar revenue.

The Group reported a gross loss of $441,000 for the year equivalent to 1% of revenue. Without the contract cancellation referred to above, a gross profit of $6.5 million equivalent to 13.7% of revenue would have been reported compared to 5% in the previous year.

Expenses rose from $5.3 million in 2013 to $6.1 million in 2014. The increase was more than accounted for by a 12% fall in the Canadian Dollar against Sterling. The increase included a switch from a $137,000 exchange gain in 2013 to an exchange loss of $394,000 in 2014. A considerable reduction in research and development expenses had been achieved as a result of support from the UK's Regional Growth Fund.

Dynex recorded a 2014 loss before tax of $6.5 million, compared to a loss before tax of $3.4 million in 2013. Without the contract cancellation referred to above, the Company would have reported a small profit before tax.

As a result of the loss before tax, the Company was able to release $970,000 from its tax provision, leaving a loss after tax of $5.5 million compared to a loss after tax of $2.4 million in the preceding year.

New orders received in 2013 totalled $37.4 million before the contract cancellation referred to above. However, after deducting the contract cancellation, including the cancellation of the order for delivery in 2015, net new orders for the year were $26.2 million resulting in a book to bill ratio of 0.6 times. The order book fell from $30.5 million at the end of 2013 to $16.2 million at the end of 2014. The order book at the end of 2013 represented approximately 18 weeks of sales in a normalized market environment.

Dr. Paul Taylor, President and Chief Executive Officer commented, "After fighting through more than five years of European economic uncertainty Dynex entered 2014 with a strong order book, more optimism about the market situation, an expectation of increased revenue and a return to profitability. The year largely proceeded as expected. Indeed there was much improvement, significantly in the performance of the Power Assembly and the IGBT product sectors that together show growth in Sterling of 18% year on year. However in our bipolar group, a major cancellation and customer return at the end of the year completely overshadowed our financial results. As a consequence, whereas we would have been reporting significant revenue growth and a small net profit, reflecting the year on year improvement from a net loss in the preceding year of $2.4 million, we now report a significant net loss of $5.5 million.

"Despite this major problem", Dr Taylor continued, "Dynex and the affected customer have maintained a strong relationship, and Dynex continues trade with them, providing both product and services, into an important and growing market sector".

Dr Taylor continued, "Throughout 2014, CSR Times Electric has continued to provide tangible support to the Company. They provided a $5.5 million loan, enabling Dynex to purchase new IGBT manufacturing equipment that is now providing better process control capability and increased capacity. They also signed a new three year R&D contract with Dynex to provide continuing support to its R&D activities, and a Technical Support Agreement that will provide Dynex with a continuing revenue stream.

Management very much regret the adverse impact of the order cancellation on 2014 results, and the consequential effect on 2015. Other than that, performance was much improved over the previous year. Today we are in the process of strengthening our production and quality management functions, improving efficiency, and in planning to expand and further develop our IGBT and Power Assembly product groups, whilst sustaining our bipolar activities.

In terms of performance outlook, we are not planning revenue growth in 2015, although we have that capacity, and our profitability will be adversely affected by the cancellation and the consequential loss of revenue. Our prime focus will be to recover from the impact of the bipolar cancellation and product return, work hard to reduce our production costs, and set the business onto a stronger foundation for the future".

Bob Lockwood, Chief Financial Officer commented, "The contract cancellation referred to above had a major impact on our 2014 financial statements. In addition to the product return, the customer also cancelled a second major order for delivery in 2015 which will impact our revenue and profitability going forward. Management is now working hard to minimise the impact of these cancellations on our future profitability and cash flow. We are receiving great assistance and support from CSR Times Electric and with that support we are confident that we will soon return to profitability."

Mr Li, Chairman of Dynex and General Manager of CSR Times Electric concluded, "Like all of Dynex's other shareholders, we were surprised and disappointed by the adverse events at the end of 2014.  Although we were not expecting a great profit in 2014, we were expecting the Company to at least break even. We are now working with the Management to strengthen the business and to ensure that it is able to return to profitability as soon as possible."

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 are available 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.

Consolidated Statement of Comprehensive Income in Canadian Dollars

Year Ended December 31st, 2014





2014

2013


$

$




Revenue

42,166,004

39,233,990




Cost of Sales

(42,607,212)

(37,288,693)




Gross Profit

(441,208)

1,945,297




Other income

133,146

72,003

Sales and marketing expenses

(1,208,148)

(920,737)

Administration expenses

(3,778,654)

(2,798,394)

Research and development expenses

(97,598)

(1,293,518)

Finance costs

(726,127)

(515,515)

Other (losses) and gains

(399,303)

116,893




Loss before tax

(6,517,892)

(3,393,971)




Income tax recovery

970,075

984,227




Net loss

(5,547,817)

(2,409,744)




Other Comprehensive Income



Items that may be reclassified subsequently to net profit/loss



Exchange differences on translation of foreign

operations (net of tax of $nil)

882,823

3,175,197







Total Comprehensive (Loss)/ Income for the year

(4,664,994)

765,453




Loss per share



Basic

(0.07)

(0.03)

Diluted

(0.07)

(0.03)

 

DYNEX POWER INC.

Consolidated Statement of Financial Position in Canadian Dollars

Year Ended December 31st, 2014





2014

2013


$

$




NON-CURRENT ASSETS






Intangible assets

1,150,380

671,297

Property, plant and equipment

39,883,946

35,489,047

Derivative financial instruments

43,624

-




Total non-current assets

41,077,950

36,160,344




CURRENT ASSETS






Inventories

14,428,876

12,285,323

Trade receivables

9,048,235

10,239,680

Amounts owing from parent companies

2,764,112

2,487,898

Prepayments, deposits and other receivables

1,096,467

589,109

Tax recoverable

2,965

139,320

Cash

894,609

775,071




Total current assets

28,235,264

26,516,401




CURRENT LIABILITIES






Trade payables

7,073,578

2,788,598

Amounts owing to parent company

667,817

1,504,288

Other payables and accruals

10,156,373

2,384,332

Borrowings

4,171,108

10,450,622

Provisions

1,824,060

17,620




Total current liabilities

23,892,936

17,145,460







NON-CURRENT LIABILITIES






Borrowings

12,983,135

7,160,584

Provisions

54,180

236,970

Derivative financial instruments

-

23,288

Deferred tax liabilities

-

1,062,486




Total non-current liabilities

13,037,315

8,483,328




NET ASSETS

32,382,963

37,047,957




EQUITY






Share capital

37,096,192

37,096,192

Accumulated deficit

(7,416,640)

(1,868,823)

Foreign currency translation reserve

2,703,411

1,820,588




TOTAL EQUITY

32,382,963

37,047,957




 

DYNEX POWER INC.

Consolidated Statement of Changes in Equity in Canadian Dollars

Year Ended December 31st, 2014







Share

Capital

Retained

Profit/

(Deficit)

Foreign 

Currency

Translation

Reserve

Total

Equity


$

$

$

$











At January 1st, 2013

37,096,192

540,921

(1,354,609)

36,282,504






Total comprehensive income for the year

-

(2,409,744)

3,175,197

765,453











At December 31st, 2013

37,096,192

(1,868,823)

1,820,588

37,047,957






Total comprehensive loss for the year

-

(5,547,817)

882,823

(4,664,994)











At December 31st, 2014

37,096,192

(7,416,640)

2,703,411

32,382,963

 

DYNEX POWER INC.

Consolidated Statement of Cash Flows in Canadian Dollars

Year Ended December 31st, 2014





2014

2013


$

$

CASH FLOW FROM OPERATING ACTIVITIES






Loss before tax

(6,517,892)

(3,393,971)

Finance costs recognised in loss before tax

726,127

515,515

Investment income recognised in loss before tax

(2,444)

(174)

Amortization of intangible assets

120,546

12,361

Depreciation of property, plant and equipment

4,380,245

3,515,541

Loss on disposal of property, plant and equipment

5,710

19,955

Provision for slow moving and obsolete inventory

4,903,255

947,311

Non cash movement in provisions

35,705

(51,258)

Movements in working capital

6,787,902

(3,640,327)

Income taxes received/(paid)

23,402

(3,919)




Net cash generated/(used) by operating activities

10,462,556

(2,078,966)




CASH FLOW FROM INVESTING ACTIVITIES






Payments for intangible assets and property, plant & equipment

(8,635,658)

(2,872,469)

Interest received

2,444

174




Net cash used in investing activities

(8,633,214)

(2,872,295)




CASH FLOW FROM FINANCING ACTIVITIES






Proceeds from borrowings

10,950,723

10,965,878

Repayments of borrowings

(11,934,564)

(6,901,437)

Interest paid

(689,889)

(379,640)

Payments for other finance costs

(40,824)

(96,833)




Net cash (used)/generated by financing activities

(1,714,554)

3,587,968




NET INCREASE/(DECREASE) IN CASH

114,788

(1,363,293)




Cash at beginning of year

775,071

2,206,430




Effect of foreign currency translation on cash 

4,750

(68,066)




CASH AT END OF YEAR

894,609

775,071

 

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

RELATED LINKS
http://www.dynexsemi.com

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