Dynex Power Announces Significant First Quarter Loss

Return to Profitability Expected in Second Quarter

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, May 29, 2015 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2015.

Summary financial information for the three months ended March 31st, 2015 is as follows:

Canadian Dollars (000's)	March 31, 2015	March 31, 2014
Revenue Gross Profit/ (Loss) Other Income, Expenses and Costs Loss before Tax Income Tax Recovery Net Loss Common shares outstanding ¹ - diluted Loss per share  - diluted	9,546 (1,523) (1,855) (3,378) 597 (2,781) 80,509,047 $(0.03)	11,450 1,017 (1,651) (634) 118 (516) 80,509,047 $(0.01)

¹	Weighted average for the period

First quarter revenue of $9.5 million was 17% lower than the corresponding quarter of last year. The change was accounted for by a reduction in sales of IGBT die to the Group's parent company in China. Deliveries to China were put on hold in February, March and April whilst a technical issue was being resolved. Deliveries recommenced in May.

The Group has previously reported the cancellation of a major contract that was expected to be delivered in 2015. In response to this cancellation, the Group carried out a redundancy exercise in the first quarter which resulted in 27 employees leaving the Group. This was the first such redundancy exercise in over 10 years. The cost of these redundancies amounted to nearly $500,000 and this together with the weak revenue in the first quarter resulted in a gross loss of $1.5 million compared with a gross profit of $1 million in the corresponding quarter of last year.

The combination of other income, expenses and costs increased by $204,000 to $1.9 million. The increase reflected foreign exchange losses in the quarter. The total cost of sales and marketing, administration, research and development and finance costs fell by $186,000 compared to the corresponding quarter of last year. Because of the foreign exchange loss and the lower revenue figure in the period, other income, expenses and costs represented 19.4% of revenue in the 2015 period compared with 16.4% in the corresponding quarter of last year.

As a consequence of these results, the Company recorded a loss before tax of $3.4 million, compared to a loss before tax of $634,000 in the corresponding quarter of last year. A $597,000 recovery of UK tax reduced the net loss for the period to $2.8 million or $0.03 per share, compared with a net loss of $516,000, or $0.01 per share, in the corresponding period of last year.

Revenue for the second quarter is forecast to increase substantially and Management expects the business to return to profitability in the second quarter, although these expectations are unlikely to make the Group profitable for the first half of 2015 overall. At the present time, it is difficult to forecast performance in the second half of the year.

Dr. Paul Taylor, President and Chief Executive Officer commented, "These are poor results. At the beginning of the fourth quarter of last year, we expected very attractive financial results in Q1 of 2015. The cancellation of a major bipolar contract earlier in the year meant we have had to undertake a redundancy exercise which, of course, has resulted in extra costs in the short term, and the stop on deliveries to our parent company, which has now been lifted, meant that our revenue was lower than we would have hoped and our costs higher. The result is a very large loss for the quarter. The whole team at Dynex is working hard to overcome these setbacks and we expect a much stronger second quarter and a return to profitability. However, at the moment, the outlook for the second half of 2015 remains uncertain and continues to be affected by the bipolar cancellation. Orders have slowed and although we can see good demand it is not clear whether those orders will arrive in time to deliver products in 2015 or whether it will be 2016 before that demand turns into revenue."

Bob Lockwood, Chief Financial Officer commented, "Dynex is experiencing very difficult times at the moment. The contract cancellation and product return at the end of 2014 as well as the stop on deliveries to China earlier this year reduced revenues. High power semiconductor manufacturing is a high fixed cost business, so a reduction in revenue always has a big impact on profitability. We have taken action to reduce costs, but such action always involves a cost to the business which increases our losses in the short term. The good news is that the second quarter should be much better, but as Paul said, it is difficult to be confident about the second half of the year at the moment."

Li Donglin, the Chairman of Dynex said, "Like all the other shareholders, we are not happy with the current performance of Dynex. But we do see improvements in terms of shipments and quality of product delivered to CSR Times Electric and this now matches our expectation. We are continuing to work with management to explore opportunities so that Dynex can achieve a 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 March 31st, 2015 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 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.
Condensed Consolidated Statement of Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2015

				3 months	3 months
				Mar 31st	Mar 31st
				2015	2014
				$	$
Revenue				9,545,535	11,449,504
Cost of sales				(11,068,923)	(10,432,788)
Gross (loss)/profit				(1,523,388)	1,016,716
Other income				37,251	58,730
Sales and marketing expenses				(255,285)	(278,145)
Administration expenses				(999,109)	(934,011)
Research and development expenses				(99,848)	(377,434)
Finance costs				(207,308)	(158,284)
Other (losses)/gains				(329,985)	38,475
Loss before tax				(3,377,672)	(633,953)
Income tax recovery				596,678	118,224
Net loss				(2,780,994)	(515,729)
Other comprehensive income
Exchange differences on translation of foreign operations (net of tax of $nil)				807,170	1,526,519
Total comprehensive (loss)/income for the period				(1,973,824)	1,010,790
Loss per share
Basic				(0.03)	(0.01)
Diluted				(0.03)	(0.01)

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
As at March 31st, 2015

			Mar 31st	Dec 31st
			2015	2014
			$	$
NON-CURRENT ASSETS
Intangible assets			1,187,755	1,150,380
Property, plant & equipment			40,163,535	39,883,946
Deferred tax asset			590,931	-
Derivative financial instruments			44,706	43,624
Total non-current assets			41,986,927	41,077,950
CURRENT ASSETS
Inventories			15,159,351	14,428,876
Trade receivables			4,443,284	9,048,235
Amounts owing from parent company			2,317,635	2,764,112
Prepayments, deposits & other receivables			1,520,264	1,096,467
Tax recoverable			3,037	2,965
Cash			263,637	894,609
Total  current assets			23,707,208	28,235,264
CURRENT LIABILITIES
Trade payables			3,803,580	7,073,578
Amounts owing to parent company			1,475,223	667,817
Other payables and accruals			8,351,361	10,156,373
Borrowings			12,494,294	4,171,108
Provisions			1,601,917	1,824,060
Total current liabilities			27,726,375	23,892,936

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position (Unaudited) in Canadian Dollars (continued)
As at March 31st, 2015

			Mar 31st	Dec 31st
			2015	2014
			$	$
NON-CURRENT LIABILITIES
Borrowings			7,503,097	12,983,135
Provisions			55,524	54,180
Total non-current liabilities			7,558,621	13,037,315
NET ASSETS			30,409,139	32,382,963
EQUITY
Share capital			37,096,192	37,096,192
Accumulated deficit			(10,197,634)	(7,416,640)
Exchange fluctuation reserve			3,510,581	2,703,411
TOTAL EQUITY			30,409,139	32,382,963

DYNEX POWER INC.
Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended March 31st, 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	-	(515,729)	1,526,519	1,010,790
At March 31st, 2014	37,096,192	(2,384,552)	3,347,107	38,058,747
Total comprehensive income for the period	-	(5,032,088)	(643,696)	(5,675,784)
At December 31st, 2014	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

DYNEX POWER INC.
Condensed Consolidated Satement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended March 31st, 2015

			3 months	3 months
			Mar 31st	Mar 31st
			2015	2014
			$	$
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax			(3,377,672)	(633,953)
Finance costs recognised in loss before tax			207,308	158,284
Investment income recognised in loss before tax			-	(2,143)
Amortization of intangible assets			39,286	24,176
Depreciation of property, plant & equipment			1,284,525	1,050,132
Provision for slow moving and obsolete inventory			57,189	(11,480)
Non cash movement in provisions			-	35,705
Movements in working capital			(398,194)	1,638,988
Income taxes received/(paid)			2	143,294
Net cash used in operating activities			(2,187,556)	2,403,003
CASH FLOW FROM INVESTING ACTIVITIES
Payments for intangible assets			(18,320)	(73,750)
Payments for property, plant & equipment			(627,677)	(1,383,306)
Interest received			-	2,143
Net cash used in investing activities			(645,997)	(1,454,913)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings			7,936,782	6,716,967
Repayments of borrowings			(5,354,906)	(1,246,986)
Interest paid			(236,518)	(161,645)
Payments for other finance costs			-	(26,194)
Net cash generated by financing activities			2,345,358	5,282,142
NET DECREASE IN CASH			(488,195)	6,230,232
Cash at beginning of period			894,609	775,071
Effect of foreign currency translation on cash			(142,777)	(16,613)
CASH AT END OF PERIOD			263,637	6,988,690

SOURCE Dynex Power Inc.

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]