Dynex Power Announces Second Quarter Financial Results

Losses Reduced but Second Half Year Will Remain Difficult

Listing: TSX Venture Exchange
Symbol: DNX

Lincoln, ENGLAND, Aug. 27, 2015 /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, 2015.

Summary financial information for the three and six months ended June 30th, 2015 is as follows:

 






Canadian Dollars (000's)

June 30, 2015

June 30, 2014

YTD 2015

YTD 2014

Revenue

11,994

10,178

21,540

21,628

Gross Profit

756

1,435

(767)

2,451

Other Income, Expenses and Costs 

1,276

1,822

(3,130)

(3,471)

Loss before Tax 

(520)

(387)

(3,897)

(1,020)

Income Tax Recovery 

100

79

697

197

Net Loss 

(419)

(308)

(3,200)

(823)

Common shares outstanding ¹ - diluted 

80,509,047

80,509,047

80,509,047

80,509,047

Earnings per share - diluted 

(0.01)

(0.00)

(0.04)

(0.01)






¹ Weighted average for the period





 

Revenue in the second quarter of 2015 was $1.8 million or 17.8% higher than in the corresponding quarter of last year. The increase was a result of very strong power assembly revenue in the quarter partially offset by weak IGBT and bipolar revenues. For the year to date, revenue was $88,000 or 1% lower than in the first half of 2014. Power assembly revenue was slightly higher than in 2014, with modest reductions recorded in bipolar and IGBT revenues.

The gross margin of 6.3% in the second quarter of 2015 was lower than the 14.1% 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 additional manufacturing costs due to unexpected technical issues.   For the year to date, the gross margin was 3.6% compared to 11.3% in the corresponding period last year. This is significantly below the range being targeted by management and again reflects the lower level of revenue being reported compared to management's expectations and additional manufacturing costs due to unexpected technical issues as well as the cost of redundancies in the first quarter.

Sales and marketing and administration expenses represented 11.7% of revenue in the second quarter and 12.4% of revenue for the year to date compared to 12.3% and 11.4% in the corresponding 2014 periods. These costs have been on a steadily reducing percentage for a number of years. The small increases in year to date figure reflected the poor level of revenue reported in the first quarter. Dynex continues to expect these ratios to improve in the longer term. However, in the near term, one of the Company's main objectives is to recover lost revenue and as a consequence there is no intention to reduce sales and marketing expenses.

There was no net cost to R&D expenditure in the quarter with net expenditure for the year to date being approximately 0.5% of revenue compared to 3.8% and 3.5% in the corresponding quarter and year to date of the preceding year. However, gross expenditure on research and development (which is calculated before taking account of the contribution received from CSR Times Electric and the grants from Government bodies) is higher than last year both in the current quarter and the year to date and the reduction in net expenditure reflects the Group's success in attracting grants and funding for this work together with additional tax relief available to the Group for research and development which, following changes in the way this relief operates,  is now accounted for as a reduction in R&D costs rather than as part of the tax charge. Gross expenditure is currently running at 17.9% of revenue in the year to date.

As a consequence of these changes, Dynex reported a loss before tax in the quarter of $520,000, compared to a loss before tax of $387,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $3.9 million was recorded compared to a loss before tax of $1.0 million in the corresponding period of last year. The decline in year to date performance reflects the weaker than expected revenue reported in Q1 and additional manufacturing costs due to unexpected technical issues.

At the end of the second quarter, the Company's order book stood at $14.5 million, approximately 5% lower than at the end of the first quarter. The order book is weaker than management is used to seeing and reflects a challenging marketplace and a move towards customers ordering later with shorter delivery times.

Revenue is expected to be slightly lower in the second half of the year compared to the first half and the Company expects to record losses in the second half of the year, albeit lower than those reported in the first half.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Although our revenues for the second quarter were above those reported in the second quarter of last year and for the year to date are comparable with those reported last year, it is still below the level management expected to reach. This, together with technical issues which resulted in lower margins, meant that we recorded a loss for the second quarter. Although power assembly and bipolar revenues are in line with management expectations, competition in these markets remains strong and that, together with the on-going effects of the contract cancellation reported at the end of 2014, means that margins are under pressure. Revenue from IGBT products is dependent on design ins and customer qualification of the new products and this is taking longer than expected. "

Bob Lockwood, Chief Financial Officer commented, "Second quarter results are disappointing, albeit they show a significant reduction in the loss reported in the first quarter. However, the general market demand for our products remains subdued reflecting a tight market and stiff competition in all sectors. Our order book remains weak and a return to profitability in the second half looks unlikely".

Li Donglin, the Chairman of Dynex said, "Like all shareholders, CSR Times Electric is disappointed with the continuing losses at Dynex and we will be working hard with Dynex to ensure we return the business to profitability as soon as possible. In the meantime, the business needs to invest in new products and technologies and we are pleased with the progress being made in these areas."

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 (Loss) (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2015



 3 months 

3 months

 YTD 

 YTD 


 Jun 30th 

Jun 30th

 Jun 30th 

 Jun 30th 


2015

2014

2015

2014


$

$

$

$






Revenue

11,994,138

10,178,055

21,539,673

21,627,559






Cost of sales

(11,238,062)

(8,743,505)

(22,306,985)

(19,176,293)






Gross profit

756,076

1,434,550

(767,312)

2,451,266






Other income

6,269

29,619

43,520

88,349

Sales and marketing expenses

(330,565)

(270,826)

(585,850)

(548,971)

Administration expenses

(1,075,301)

(981,749)

(2,074,410)

(1,915,760)

Research and development expenses

1,511

(389,026)

(98,337)

(766,460)

Finance costs

(137,981)

(179,647)

(345,289)

(337,931)

Other gains and (losses)

260,159

(29,553)

(69,826)

8,922






Loss before tax

(519,832)

(386,632)

(3,897,504)

(1,020,585)






Income tax recovery

100,342

79,066

697,020

197,290






Net loss

(419,490)

(307,566)

(3,200,484)

(823,295)











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)

1,440,028

(298,290)

2,247,198

1,228,229











Total comprehensive income/(loss)

1,020,538

(605,856)

(953,286)

404,934






Loss per share





Basic

(0.01)

(0.00)

(0.04)

(0.01)

Diluted

(0.01)

(0.00)

(0.04)

(0.01)






 


DYNEX POWER INC.
Interim Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars

As at June 30th, 2015



 Jun 30th 

 Dec 31st 


2015

2014


$

$

NON-CURRENT ASSETS






Intangible assets

1,259,962

1,150,380

Property, plant & equipment

41,820,879

39,883,946

Deferred tax asset

723,429

-




Total non-current assets

43,804,270

41,034,326




CURRENT ASSETS






Inventories

14,067,580

14,428,876

Trade receivables

6,471,544

9,048,235

Amounts owing from parent company

1,381,639

2,764,112

Prepayments, deposits & other receivables

1,658,576

1,096,467

Tax recoverable

3,188

2,965

Derivative financial instrument

46,904

43,624

Cash 

2,141,616

894,609




Total  current assets

25,771,047

28,278,888




CURRENT LIABILITIES






Trade payables

3,780,702

7,073,578

Amounts owing to parent company

1,974,482

667,817

Other payables and accruals

9,832,591

10,156,373

Borrowings

14,237,736

4,171,108

Provisions

1,203,071

1,824,060




Total current liabilities

31,028,582

23,892,936




NON-CURRENT LIABILITIES






Borrowings

7,058,804

12,983,135

Provisions

58,254

54,180




Total non-current liabilities

7,117,058

13,037,315




NET ASSETS

31,429,677

32,382,963










EQUITY 






Share capital

37,096,192

37,096,192

Accumulated deficit 

(10,617,124)

(7,416,640)

Exchange fluctuation reserve

4,950,609

2,703,411





31,429,677

32,382,963

 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars

Six Months Ended June 30th, 2015





 Foreign 





 Currency 



 Share 


 Translation 

 Total 


 Capital 

 Deficit 

 Reserve 

 Equity 


$

$

$

$
















At January 1st, 2014

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






Total comprehensive loss for the period

-

(4,724,522)

(345,406)

(5,069,928)











At December 31st, 2014

37,096,192

(7,416,640)

2,703,411

32,382,963






Total comprehensiveloss for the period

-

(3,200,484)

2,247,198

(953,286)











At June 30th, 2015

37,096,192

(10,617,124)

4,950,609

31,429,677






 

DYNEX POWER INC.
Interim Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars

Six Months Ended June 30th, 2015


 YTD 

 YTD 


 Jun 30th 

 Jun 30th 


2015

2014


$

$

CASH FLOW FROM OPERATING ACTIVITIES






Loss before tax

(3,897,504)

(1,020,585)

Finance costs recognised in loss before tax

345,289

337,931

Investment income recognised in loss before tax

-

(2,400)

Amortization of intangible assets

78,885

48,397

Depreciation of property, plant & equipment

2,568,730

2,131,879

Provision for slow moving and obsolete inventory

80,828

791,264

Non cash movement in provisions

-

35,705

Movements in working capital

1,324,769

5,396,406

Income taxes received/(paid)

-

125,852




Net cash generated by operating activities

500,997

7,844,449




CASH FLOW FROM INVESTING ACTIVITIES






Payments for intangible assets

(97,083)

(29,147)

Payments for property, plant & equipment

(1,573,862)

(5,078,673)

Interest received

-

2,400




Net cash used in investing activities

(1,670,945)

(5,105,420)




CASH FLOW FROM FINANCING ACTIVITIES






Proceeds from borrowings

17,570,499

6,716,967

Repayments of borrowings

(14,387,173)

(6,842,472)

Interest paid

(334,910)

(331,003)

Payments for other finance costs

-

(40,824)




Net cash generated by/(used in) financing activities

2,848,416

(497,332)




NET INCREASE IN CASH

1,678,468

2,241,697




Cash at beginning of period

894,609

775,071




Effect of foreign currency translation on cash 

(431,461)

(53,271)




CASH AT END OF PERIOD

2,141,616

2,963,497

 

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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