Dynex Power Announces First Quarter Results

Return to Profitability Expected in Second Half

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, May 27, 2016 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2016.

Summary financial information for the three months ended March 31st, 2016 is as follows:

Canadian Dollars (000's)	March 31, 2016	March 31, 2015
Revenue	10,273	9,546
Gross Profit/ (Loss)	1,188	(1,523)
Other Income, Expenses and Costs	(1,714)	(1,855)
Loss before Tax	(526)	(3,378)
Income Tax Recovery	65	597
Net Loss	(461)	(2,781)
Common shares outstanding ¹ - diluted	80,509,047	80,509,047
Loss per share  - diluted	$(0.01)	$(0.03)

¹ Weighted average for the period

First quarter revenue of $10.3 million was 8% higher than the corresponding quarter of last year. Approximately two thirds of the increase was accounted for by the weakness of the Canadian Dollar in 2016 compared to 2015. The rest of the increase came from stronger sales of power assemblies and modules partially offset by weaker bipolar revenue.

The gross margin of $1.2 million was equivalent to 11.6% of revenue. In the corresponding quarter of last year a gross loss of $1.5 million had been reported arising from weak revenue in the quarter following a contract cancellation and the cost of a redundancy exercise.

The combination of other income, expenses and costs decreased by $141,000 to $1.7 million despite a 5% weakening of the Canadian Dollar against Sterling. The decrease was brought about by a shift from a foreign exchange loss in 2015 to a foreign exchange gain in 2016. Because of the foreign exchange gain and the higher revenue figure in the period, other income, expenses and costs represented 16.7% of revenue in the 2016 period compared with 19.4% in the corresponding quarter of last year.

As a consequence of these results, the Company recorded a loss before tax of $526,000, compared to a loss before tax of $3.4 million in the corresponding quarter of last year. A $65,000 recovery of UK tax reduced the net loss for the period to $461,000 or $0.01 per share, compared with a net loss of $2.8 million, or $0.03 per share, in the corresponding period of last year.

Revenue and net loss for the second quarter is forecast to be similar to that reported in the first. Revenue is expected to increase in the second half of the year and management is still targeting a small profit for the year.

Dr. Paul Taylor, President and Chief Executive Officer commented, "The level of revenue in the first quarter of 2016 was disappointing but it reflects the very tough market conditions we are facing at the moment. Although we remain confident of the long term growth in our target markets, customers are being slow to place orders at the current time and this has a direct impact on our results. We are seeing some very early signs of a pick-up in our order in-take and we are hopeful this will turn into stronger revenue in the second half of 2016 and a return to profitability."

Dr Taylor also said that he would like "to thank our current Chairman, Li Donglin, for his support and encouragement over the last six years. Li Donglin has recently been promoted to become General Manager of CRRC Zhuzhou Institute, the majority shareholder of CRRC Times Electric, and would not be standing for re-election to the Board of Dynex at this year's annual general meeting".

Bob Lockwood, Chief Financial Officer commented, "As I have commented before, high power semiconductor manufacturing is a high fixed cost business, so a small weakening in orders always has a big impact on profitability. But we are sensing the start of a recovery in our in-take of orders and that gives us a belief that revenues will rise in the second half of this year which will allow us to return to profitability".

Li Donglin, the Chairman of Dynex said, "Having recently changed roles within the CRRC Group in China, I will not be standing for re-election to the Board of Dynex at this year's annual general meeting. I have thoroughly enjoyed my time as Chairman of the company and will continue to follow its progress in the years to come. Whilst I am disappointed with the recent financial results of the company, I believe the company is well placed to move forward in the future and I believe and hope it will achieve great success in the coming years. "

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 March 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, 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. The Company's 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. 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.
Condensed Consolidated Statement of Profit (Loss) and Other Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2016

		3 months	3 months
		Mar 31st	Mar 31st
		2016	2015
		$	$
Revenue		10,272,554	9,545,535
Cost of sales		(9,084,760)	(11,068,923)
Gross (loss)/profit		1,187,794	(1,523,388)
Other income		22,395	37,251
Sales and marketing expenses		(327,242)	(255,285)
Administration expenses		(1,060,550)	(999,109)
Research and development expenses		(299,961)	(99,848)
Finance costs		(178,616)	(207,308)
Other (losses)/gains		129,811	(329,985)
Loss before tax		(526,369)	(3,377,672)
Income tax recovery		65,199	596,678
Net loss		(461,170)	(2,780,994)
Other comprehensive income
Exchange differences on translation of foreign operations (net of tax of $nil)		(3,589,061)	807,170
Total comprehensive (loss)/income for the period		(4,050,231)	(1,973,824)
Loss per share
Basic		(0.01)	(0.03)
Diluted		(0.01)	(0.03)

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
As at March 31st, 2016

		Mar 31st	Dec 31st
		2016	2015
		$	$
NON-CURRENT ASSETS
Intangible assets		1,389,714	1,594,142
Property, plant & equipment		38,406,862	43,447,376
Deferred tax asset		114,243	57,838
Total non-current assets		39,910,819	45,099,356
CURRENT ASSETS
Inventories		14,238,783	15,215,237
Trade receivables		6,568,739	6,334,417
Amounts owing from parent company		1,745,082	5,445,377
Prepayments, deposits & other receivables		1,832,554	1,236,102
Tax recoverable		3,059	3,382
Cash		1,519,703	1,410,547
Total  current assets		25,907,920	29,645,062
CURRENT LIABILITIES
Trade payables		2,351,695	2,371,233
Amounts owing to parent company		919,664	760,062
Other payables and accruals		5,211,329	8,695,638
Borrowings		14,810,404	15,423,684
Provisions		18,631	20,599
Total current liabilities		23,311,723	27,271,216
NON-CURRENT LIABILITIES
Borrowings		7,994,749	8,904,800
Provisions		55,893	61,797
Total non-current liabilities		8,050,642	8,966,597
NET ASSETS		34,456,374	38,506,605
EQUITY
Share capital		37,096,192	37,096,192
Accumulated deficit		(6,070,271)	(5,609,101)
Exchange fluctuation reserve		3,430,453	7,019,514
TOTAL EQUITY		34,456,374	38,506,605

DYNEX POWER INC.
Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2016

			Foreign
			Currency
	Share		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 period	-	(2,780,994)	807,170	(1,973,824)
At March 31st, 2015	37,096,192	(10,197,634)	3,510,581	30,409,139
Total comprehensive income for the period	-	2,947,158	3,508,933	6,456,091
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 income for the period	-	(461,170)	(3,589,061)	(4,050,231)
At March 31st, 2016	37,096,192	(6,070,271)	3,430,453	34,456,374

DYNEX POWER INC.
Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2016

		3 months	3 months
		Mar 31st	Mar 31st
		2016	2015
		$	$
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax		(526,369)	(3,377,672)
Finance costs recognised in loss before tax		178,616	207,308
Amortization of intangible assets		57,063	39,286
Depreciation of property, plant & equipment		1,343,479	1,284,525
Provision for slow moving and obsolete inventory		-	57,189
Movements in working capital		(1,034,054)	(398,194)
Income taxes received/(paid)		-	2
Net cash generated/(used) used in operating activities		18,735	(2,187,556)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for intangible assets		(2,188)	(18,320)
Payments for property, plant & equipment		(406,934)	(627,677)
Net cash used in investing activities		(409,122)	(645,997)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings		949,988	7,936,782
Repayments of borrowings		(113,142)	(5,354,906)
Interest paid		(280,025)	(236,518)
Net cash generated by financing activities		556,821	2,345,358
NET INCREASE/(DECREASE) IN CASH		166,434	(488,195)
Cash at beginning of period		1,410,547	894,609
Effect of foreign currency translation on cash		(57,278)	(142,777)
CASH AT END OF PERIOD		1,519,703	263,637

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: [phone], Email: [email protected]