Dynex Power Announces Second Quarter Results

Strong Revenue up 27% vs Q2 2016; but weak Gross Profit Margins

Listing:            TSX Venture Exchange
S
ymbol:           DNX

LINCOLN, England, Aug. 29, 2017 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the second quarter and six months ended June 30th, 2017.

Summary financial information for the three months and six months ended June 30th, 2017 is as follows:

 






Canadian Dollars (000's)

June 30, 2017

June 30, 2016

YTD 2017

YTD 2016

Revenue

Gross Profit/(Loss)

Other Income, Expenses and Costs

Loss before Tax

Income Tax Recovery

Net Loss

Common shares outstanding¹- diluted

Loss per share in Canadian Dollars - diluted

11,546

998

(2,133)

(1,135)

191

(944)

80,509,047

(0.01)

9,123

(117)

(1,982)

(2,099)

370

(1,729)

80,509,047

(0.02)

23,099

3,730

(4,320)

(590)

52

(538)

80,509,047

(0.01)

19,395

1,071

(3,696)

(2,625)

435

(2,190)

80,509,047

(0.03)


¹ Weighted average for the period

 

Second quarter revenue of $11.5 million was 27% higher than the corresponding quarter of last year. This increase was despite an 8% strengthening of the Canadian Dollar exchange rate against Sterling. In Sterling terms, revenue increased by 38%. For the year to date, revenue was $3.7 million or 19% higher than in the first half of 2016 (36% higher in Sterling terms). This reflected significant increases in bipolar sales and services, which more than offset smaller reductions in sales of IGBT modules, die and power assemblies.

The gross margin was 8.6% of revenue in the second quarter of 2017 compared to a negative gross margin of 1.3% of revenue in the second quarter of 2016. For the year to date, gross margin was 16.1% compared to 5.5% in the corresponding period of last year. The improvement in gross margin in 2017 reflects increased revenues in a high fixed cost business; however it remains below the range targeted by management.

The combination of other income, expenses and costs represented 18.5% of revenue in the second quarter and 18.7% of revenue for the year to date compared to 21.7% and 19.1% in the corresponding periods in 2016. The absolute level of such expenditure increased by $151,000 in the second quarter and $624,000 for the year to date compared to the corresponding periods of last year, reflecting changes to the management team, increased research and development costs and the cost of a small redundancy exercise to rebalance resources in the business.

As a consequence of these results, the Company recorded a loss before tax of $1.1 million compared to a loss before tax of $2.1 million in the corresponding quarter of last year. For the year to date, a loss before tax of $590,000 was recorded compared to a loss before tax of $2.6 million for the corresponding period of last year.  Tax recoveries reduced the net loss for the second quarter to $944,000 or $0.01 per share, compared with a net loss of $1.7 million, or $0.02 per share, in the same period of last year. For the year to date the net loss was $538,000 or $0.01 per share compared to $2.2 million or $0.03 per share, a reduction of 75%.

Clive Vacher, President and Chief Executive Officer commented, "We are pleased by the revenue growth. We have demonstrated that with hard work, the revenue opportunities are there.

"At the same time, we are not happy with the loss. The product mix demand from our customers resulted in a low gross margin, at 8.6%. In addition, the close-out of some power assemblies projects with budget overruns, together with higher R&D expense, negatively impacted the quarter.

"Despite these constraints, Dynex has demonstrated strong first-half revenue growth of 19% over 2016, which was even stronger - a 36% increase - on a constant-currency basis, as we place more focus on commercial results and operational execution. Losses have been cut by over 75% in the same period. But we won't be satisfied until we produce consistent profits.

"We are, however, happy with the progress of our turnaround plan. We have five workstreams and each is showing improvements, thanks to the commitment and hard work of all our employees. We have launched some new market-leading products, with more new products on their way in the second half of the year. Operational and quality performance continues to improve, and the company is aligned around a clear strategy. While there is a lot more work to do, the direction of travel is good."

Liu Ke'an, the Chairman of Dynex, said, "The loss in the second quarter was not what had been expected, but the numbers show considerable improvement in the performance of the business. The team at Dynex is strongly focused on the goal of sustained profitability, and I am confident the detailed plans are being executed efficiently to achieve this. I remain fully behind the change programme at Dynex and look forward to positive developments going forward."

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 June 30th , 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.







Interim Condensed Consolidated Statements of Comprehensive Income (unaudited) in Canadian Dollars

Quarter Ended June 30th, 2017



 3 months 

 3 months 

 YTD 

 YTD 



 Jun 30th 

 Jun 30th 

 Jun 30th 

 Jun 30th 



2017

2016

2017

2016


 Note 

$

$

$

$







Revenue

5, 6

11,546,462

9,122,739

23,099,110

19,395,293







Cost of sales


(10,548,470)

(9,239,972)

(19,368,800)

(18,324,732)







Gross profit/(loss)


997,992

(117,233)

3,730,310

1,070,561







Other income

6

48,038

6,800

86,401

29,195

Sales and marketing expenses


(391,691)

(391,313)

(697,628)

(718,555)

Administration expenses


(839,787)

(918,060)

(2,371,437)

(1,978,610)

Research and development expenses

7

(725,618)

(483,282)

(919,998)

(783,243)

Finance costs


(182,738)

(187,961)

(323,332)

(366,577)

Other (losses)/gains


(41,600)

(7,527)

(94,395)

122,284







Loss before tax

7

(1,135,404)

(2,098,576)

(590,079)

(2,624,945)







Income tax recovery


191,795

369,445

52,269

434,644







Net loss


(943,609)

(1,729,131)

(537,810)

(2,190,301)













Other comprehensive income/(loss)












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


461,726

(2,191,861)

648,136

(5,780,922)







Total comprehensive income/(loss) for the period

(481,883)

(3,920,992)

110,326

(7,971,223)







Loss per share






Basic

8

(0.01)

(0.02)

(0.01)

(0.03)

Diluted

8

(0.01)

(0.02)

(0.01)

(0.03)







All results are derived from continuing operations.

 

DYNEX POWER INC.


Interim Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars

As at June 30th, 2017




 Jun 30th 

 Dec 31st 




2017

2016



 Note 

$

$






NON-CURRENT ASSETS










Intangible assets


9

1,466,425

1,524,346

Property, plant & equipment


9

31,013,993

31,565,940

Deferred tax asset



1,266,374

1,127,322






Total non-current assets



33,746,792

34,217,608






CURRENT ASSETS










Inventories



11,957,383

11,854,067

Trade receivables



6,545,013

4,035,481

Amounts owing from group undertakings


13

6,669,196

3,573,709

Prepayments, deposits & other receivables



2,082,558

2,297,786

Tax recoverable



-

682

Cash 



2,040,453

898,855






Total  current assets



29,294,603

22,660,580






CURRENT LIABILITIES










Trade payables



3,177,185

3,010,756

Amounts owing to group undertakings


13

5,042,335

2,103,917

Other payables and accruals



5,246,310

3,290,095

Borrowings


10

18,028,478

16,380,290

Provisions



887,037

456,773






Total current liabilities



32,381,345

25,241,831






NON-CURRENT LIABILITIES










Borrowings


10

4,190,247

5,141,190

Provisions



50,647

186,337






Total non-current liabilities



4,240,894

5,327,527






NET ASSETS



26,419,156

26,308,830






EQUITY 










Share capital


11

37,096,192

37,096,192

Accumulated deficit



(11,066,035)

(10,528,225)

Exchange fluctuation reserve



388,999

(259,137)






TOTAL EQUITY



26,419,156

26,308,830

 


DYNEX POWER INC.


Interim Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars

Quarter Ended June 30th 2017




 Foreign 





 Currency 



 Share 


 Translation 

 Total 


 Capital 

 Deficit 

 Reserve 

 Equity 


$

$

$

$
















At January 1st, 2016

37,096,192

(5,609,101)

7,019,514

38,506,605






Total comprehensive loss for the period

-

(2,190,301)

(5,780,922)

(7,971,223)











At June 30th, 2016

37,096,192

(7,799,402)

1,238,592

30,535,382






Total comprehensive loss for the period

-

(2,728,823)

(1,497,729)

(4,226,552)











At December 31st, 2016

37,096,192

(10,528,225)

(259,137)

26,308,830






Total comprehensive income/(loss) for the period

-

(537,810)

648,136

110,326











At June 30th, 2017

37,096,192

(11,066,035)

388,999

26,419,156






 

DYNEX POWER INC.


Interim Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars

Quarter Ended June 30th, 2017




 YTD 

 YTD 




 Jun 30th 

 Jun 30th 




2017

2016



 Note 

$

$

CASH FLOW FROM OPERATING ACTIVITIES





Loss before tax



(590,079)

(2,624,945)

Finance costs recognised in loss before tax



323,332

366,577

Investment income recognised in loss before tax



542

(844)

Amortization of intangible assets



103,079

110,262

Depreciation of property, plant & equipment



2,309,759

2,616,831

Provision for slow moving and obsolete inventory


(3,179,780)

440,500

Non cash movement in provisions



42,294

-

Movements in working capital


12

3,211,927

(1,321,970)

Income taxes paid



(64,859)

(45,069)






Net cash generated by/(used in) operating activities


2,156,215

(458,658)






CASH FLOW FROM INVESTING ACTIVITIES





Payments for intangible assets



(9,522)

(18,079)

Payments for property, plant & equipment



(1,012,384)

(920,488)

Interest received



(542)

844






Net cash used in investing activities



(1,022,448)

(937,723)






CASH FLOW FROM FINANCING ACTIVITIES





Proceeds from borrowings



1,382,927

2,821,288

Repayments of borrowings



(1,202,716)

(1,827,120)

Interest paid



(148,176)

(164,742)

Payments for other finance costs



(14,465)

-






Net cash generated by financing activities



17,570

829,426






NET INCREASE/(DECREASE) IN CASH



1,151,337

(566,955)






Cash at beginning of period



898,855

1,410,547

Effect of foreign currency translation on cash 



(9,739)

(76,247)






CASH AT END OF PERIOD



2,040,453

767,345


All operating cash flows are derived from continuing operations

 

SOURCE Dynex Power Inc.

For further information: Clive Vacher, President and Chief Executive Officer, Dynex Power Inc., Tel: +44 1522 500 500, Email: investorrelations@dynexsemi.com

RELATED LINKS
http://www.dynexsemi.com

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