Dynex Power Announces Results for 2016

Delays to Customer Deliveries and Inventory Write-Offs Negatively Impact 2016 Results

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, May 1, 2017 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the year ended December 31st, 2016.

Summary financial information for the twelve months ended December 31st, 2016 is as follows:




Dollars (000's)

Dec. 31, 2016

Dec. 31, 2015

Revenue

Gross profit

Expenses

Loss/(profit) before tax

Income tax recovery/ (expense)

Net (loss)/profit

Common shares outstanding ¹ - diluted

Earnings per share  - diluted 

40,519

2,090

(8,041)

(5,951)

1,031

(4,919)

80,509,047

(0.06)

46,512

4,683

(4,413)

270

(104)

166

80,509,047

0.00

¹ Weighted average for the period

 

Revenue for the year of $40.5 million was 13% lower than in the preceding year. Two thirds of this decrease was a result of a strengthening of the Canadian Dollar against Sterling. In Sterling terms revenue had fallen by approximately 5%. The fall in Sterling revenue reflected a number of customer orders that had been expected to be met before the year end but which the Company had been unable to ship in December.

The Group reported a gross profit of $2.1 million for the year equivalent to 5.2% of revenue compared to a gross profit of $4.7 million, equivalent to 10.1% of revenue, last year. The fall in gross profit margin reflected the failure of goods to be shipped before the year end and an inventory write off of approximately $2 million. Write offs related to the last of the integrated circuit inventory, where the Company does not see any prospect of future sales, and to IGBT die types for which the Company no longer believes there is any demand.

Expenses increased from $4.4 million in 2015 to $8.0 million in 2016. The largest element of this increase related to net research and development costs which rose by $ 2.1 million. Because of the cost sharing agreement with the majority shareholder and some additional support from the UK Government, research and development had generated a net surplus in 2015. This was a one-off situation that was not expected to continue. Approximately $800,000 of the increase related to additional staff costs. Additional staff had been required to support the implementation of a new business ERP system and additional staff had been taken on to strengthen the sales and marketing function. Some reductions in staff costs will take place in the administration area following the successful go-live of the new system early in 2017. A further $600,000 of the increase related to executive recruitment and termination costs of senior executives.

Dynex recorded a loss before tax of $6.0 million in 2016 compared to a profit before tax of $270,000 in 2015. The Company accounted for a tax recovery of $1.0 million, leaving a loss after tax of $4.9 million compared to a profit after tax of $166,000 in the preceding year.

New orders received in 2016 totalled $37.4 million resulting in a book to bill ratio of 0.9 times. The order book rose from $13.4 million at the end of 2015 to $14.0 million at the end of 2016. The order book at the end of 2015 represented approximately 18 weeks of sales.

Clive Vacher, the newly appointed President and Chief Executive Officer commented, "The performance of the Company in 2016 was not where it needs to be to satisfy stakeholders. In the three months since I joined the Company, I have been involved with the Management Team in assessing the strengths and weaknesses of the organisation and developing a plan to build on those strengths and eliminate the weaknesses. The plan initiates changes in five main areas and these changes are more fully set out in my letter to shareholders attached to the annual financial results. I am determined to return the Company to profitability in 2017 and to build a platform for growth and improved financial performance."

Bob Lockwood, Chief Financial Officer commented, "The results for 2016 are deeply disappointing. The failure to deliver customer orders on time, the write-off of inventories and the increase in the net cost of research and development all contributed to the poor result. But the continued support from CRRC Times Electric and the recovery plan set out by our new CEO gives me great confidence that the business will return to profitability in 2017 and will flourish in the years to come. "

Mr Liu Ke'an, Chairman of Dynex and General Manager of CRRC Times Electric, commented "The recent performance of Dynex has been unacceptable. I am delighted to have seen the plan Clive and the Management Team have put forward to return the business to profitability and he has the full backing of the Board for this plan."

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 year ended December 31st , 2016 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; 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 and die and high power electronic assemblies. 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. 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.  In 2008, a majority of the shares of Dynex were acquired by Zhuzhou CSR Times Electric Co., Ltd. In April 2016 this company changed its name to Zhuzhou CRRC Times Electric Co., Ltd.

Zhuzhou CRRC 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. CRRC 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, CRRC 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.dynexpower.com.

Further information on CRRC 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 Profit (Loss) and Other Comprehensive Income in Canadian Dollars

Year Ended December 31st, 2016









2016

2015




$

$






Revenue



40,519,413

46,512,345






Cost of Sales



(38,429,715)

(41,829,244)






Gross Profit



2,089,698

4,683,101






Other income



47,288

81,043

Sales and marketing expenses



(1,429,127)

(1,169,003)

Administration expenses



(4,409,051)

(3,270,465)

Research and development (expenses)/surplus



(1,733,689)

313,235

Finance costs



(730,669)

(776,920)

Other gains and (losses)



214,933

408,747






Profit/(Loss) before Tax



(5,950,617)

269,738






Income tax recovery/(expense)



1,031,493

(103,574)






Net Profit/(Loss)



(4,919,124)

166,164











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)



(7,278,651)

4,316,103











Total Comprehensive Income/(Loss) for the Year



(12,197,775)

4,482,267






Profit/(Loss) per Share





Basic



(0.06)

0.00

Diluted



(0.06)

0.00

 

DYNEX POWER INC.

Consolidated Statement of Financial Position in Canadian Dollars

As at December 31st, 2016









2016

2015




$

$






NON-CURRENT ASSETS










Intangible assets



1,524,346

1,594,142

Property, plant and equipment



31,565,940

43,447,376

Deferred tax asset



1,127,322

57,838






Total non-current assets



34,217,608

45,099,356






CURRENT ASSETS










Inventories



11,854,067

15,215,237

Trade receivables



4,035,481

6,334,417

Amounts owing from parent company



3,573,709

5,445,377

Prepayments, deposits and other receivables



2,297,786

1,236,102

Tax recoverable



682

3,382

Cash 



898,855

1,410,547






Total  current assets



22,660,580

29,645,062






CURRENT LIABILITIES










Trade payables



3,010,756

2,371,233

Amounts owing to parent company



2,103,917

760,062

Other payables and accruals



3,290,095

8,695,638

Borrowings



16,380,290

15,423,684

Provisions



456,773

20,599

Tax payable



-

-






Total current liabilities



25,241,831

27,271,216

 

DYNEX POWER INC.

Consolidated Statement of Financial Position in Canadian Dollars (continued)

As at December 31st, 2016









2016

2015




$

$






NON-CURRENT LIABILITIES










Borrowings



5,141,190

8,904,800

Provisions



186,337

61,797






Total non-current liabilities



5,327,527

8,966,597






NET ASSETS



26,308,830

38,506,605





















EQUITY 










Share capital



37,096,192

37,096,192

Accumulated deficit



(10,528,225)

(5,609,101)

Foreign currency translation reserve



(259,137)

7,019,514






TOTAL EQUITY



26,308,830

38,506,605

 

DYNEX POWER INC.

Consolidated Statement of Changes in Equity in Canadian Dollars

Year Ended December 31st, 2016









Foreign




Retained

Currency



Share

Profit/

Translation

Total


Capital

(Deficit)

Reserve

Equity


$

$

$

$











At January 1st, 2015

37,096,192

(7,416,640)

2,703,411

32,382,963






Total comprehensive income for the year

-

166,164

4,316,103

4,482,267






Capital contribution

-

1,641,375

-

1,641,375











At December 31st, 2015

37,096,192

(5,609,101)

7,019,514

38,506,605






Total comprehensive loss for the year

-

(4,919,124)

(7,278,651)

(12,197,775)
















At December 31st, 2016

37,096,192

(10,528,225)

(259,137)

26,308,830

 

DYNEX POWER INC.

Consolidated Statement of Cash Flows in Canadian Dollars

Year Ended December 31st, 2016









2016

2015




$

$

CASH FLOW FROM OPERATING ACTIVITIES










Profit/(loss) before tax



(5,950,617)

269,738

Finance costs recognised in loss before tax



730,669

776,920

Investment income recognised in loss before tax



(844)

-

Amortization of intangible assets



206,087

169,288

Depreciation of property, plant and equipment



4,897,300

5,282,462

(Gain) Loss on disposal of property, plant and equipment



(5,348)

(3,361)

Provision for slow moving and obsolete inventory



1,841,951

(424,680)

Movements in working capital



(2,109,223)

(6,742,646)

Income taxes (paid)/received



(110,675)

(102,545)






Net cash generated/(used) by operating activities



(500,700)

(774,824)






CASH FLOW FROM INVESTING ACTIVITIES










Payments for intangible assets



(437,513)

(443,438)

Payments for property, plant & equipment



(1,385,381)

(3,558,443)

Interest received



844

-

Proceeds from the sale of fixed assets



6,656

5,167






Net cash used in investing activities



(1,815,394)

(3,996,714)






CASH FLOW FROM FINANCING ACTIVITIES










Capital contribution



-

1,641,375

Proceeds from borrowings



2,821,288

38,484,089

Repayments of borrowings



(603,728)

(33,352,566)

Interest paid



(324,668)

(866,577)






Net cash generated/(used) by financing activities



1,892,892

5,906,321






NET (DECREASE)/INCREASE IN CASH



(423,202)

1,134,783






Cash at beginning of year



1,410,547

894,609






Effect of foreign currency translation on cash 



(88,490)

(618,845)






CASH AT END OF YEAR



898,855

1,410,547

 

SOURCE Dynex Power Inc.

For further information: Clive Vacher, President and Chief Executive Officer or Bob Lockwood, 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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