Revenue Growth Returns but Margins Compressed by Near-term Market Conditions
Turnaround Expected in the Second Quarter of 2013
Listing: TSX Venture Exchange
Symbol: DNX
LINCOLN, England, April 26, 2013 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the year ended December 31st, 2012.
Summary financial information for the twelve months ended December 31st, 2012 is as follows:
Dollars (000's) | Dec. 31, 2012 | Dec. 31, 2011 |
Revenue | 39,615 | 36,082 |
Gross profit | 6,732 | 8,616 |
Expenses | (5,499) | (5,158) |
Profit before tax | 1,233 | 3,458 |
Income tax expense | (167) | (748) |
Net profit | 1,066 | 2,710 |
Common shares outstanding ¹ - diluted | 80,526,550 | 80,574,194 |
Earnings per share - diluted | $0.01 | $0.03 |
¹ Weighted average for the period |
Although the year started with a strong order book that led to a good first half performance, management's guidance that the second half of the year would be more challenging, with delays to high speed rail projects in China and a weak economic environment in Europe, proved well founded.
Revenue for the year of $39.6 million showed 10% growth over the preceding year, driven by strong growth in power modules and service revenue and a smaller increase in bipolar discrete revenue, while partially offset by declines in power assemblies and integrated circuit revenues. Revenue for the Power Module Group increased 63%, establishing another record. This Group now accounts for 38% of total revenues. Revenue from Services, which relates to advice and assistance provided primarily to CSR Times Electric, increased fivefold, albeit from a low starting point. Revenue for the Bipolar Discrete Group grew by 5%. This Group remains the largest single group, accounting for 47% of total revenue. Revenue for the Power Assemblies Group declined by 36%, reflecting the poor economic conditions in Europe. Revenue for Integrated Circuits declined by 83% as remaining stocks of the main products were depleted, in line with Dynex's strategic direction.
The gross margin in 2012 was 17.0%, compared to 23.9% last year. The decrease reflected a shift towards lower margin products and intense price pressure, both characteristic of the very competitive near-term marketplace. The business is still building for sustained long-term growth and a decision was taken to protect the production, engineering and operational resources to support this expected future growth, rather than to make short term cuts in these costs. This decision has an adverse impact on the gross margin in the short-term but leaves the Group better positioned to generate enhanced returns when market conditions improve.
Apart from maintaining headcount levels, controllable expenses were kept under tight control, increasing by 7% compared to 2011, much lower than the increase in revenue. Expenses in 2012 represented 13.9% of revenue, compared to 14.3% last year. Excluding the cost of research and development, which management regards as investment in the future of the business, expenses fell from 13.2% of revenue in 2011 to 11.1% of revenue in 2012.
Dynex generated profit before tax of $1.2 million, down from $3.5 million in 2011. The reduction reflected the decision to maintain sales momentum at the expense of near-term margins. As a result of the lower profit before tax and the company's success in claiming additional tax deductions in the UK, the tax charge fell by 78% to $167,000. The rate of tax paid on profit before tax fell from 21.6% to 13.6%. As a result, the Company generated a net profit in 2012 of $1.1 million, down from the $2.7 million reported in the previous year.
New orders received in 2012 totalled $38.4 million, resulting in a book to bill ratio of 1.0 times. The order book rose slightly from $19.7 million at the end of 2011 to $20.4 million at the end of 2012. Most of this increase results from a weakening in the value of the Canadian Dollar against Sterling. The order book at the end of 2012 represented 27 weeks of sales at the current revenue levels.
Dr. Paul Taylor, President and Chief Executive Officer commented, "The past year has been the most challenging during my tenure. A strong order book at the end of 2011 ensured that the year started well. But the well publicized delays in the high speed rail projects in China and the continuing poor economic situation in Europe meant that new orders were slow to arrive. We achieved 10% revenue growth over 2011 but the trend was not as good as we would have wanted, and, as a result, annual revenue was below the level that the business is now positioned to deliver. Management remains confident in the medium and long term future of the business and so took a decision not to make short term cuts to the production, engineering and operational resources of the business. In a press release issued on February 20th, 2013, we indicated that these difficulties were continuing into the first quarter of 2013 and that we expected to operate below break-even during that period. However, we also stated that we saw a strong recovery starting in the second quarter of 2013. Our view has not changed."
Bob Lockwood, Chief Financial Officer commented, "As Paul has indicated, 2012 started well but became more challenging as the year developed. This adverse trend continued in the first quarter of 2013, but we do see it as being the turning point. We received a high level of orders in the last three quarters of 2012 and this has continued so far in 2013. Delays in the start of some of these orders means that it will be the second quarter of 2013 before we see a return to growth in profitability. The overall result in 2013 is likely to be much the same as in 2012, but the rising trend in results provides a much better environment to that experienced in 2012, while boding well for 2014 and beyond."
Mr Li, Chairman of Dynex and General Manager of CSR Times Electric concluded, "The past year has been a frustrating one for Dynex, reflecting the tough and very competitive markets being faced in many parts of the world. It will be good to see quarterly growth returning in 2013. I remain confident in the medium and long term future of the business."
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 September 30th, 2012 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 are available 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.
Consolidated Statement of Comprehensive Income in Canadian Dollars
Year Ended December 31st, 2012
2012 | 2011 | |
$ | $ | |
Revenue | 39,614,604 | 36,081,802 |
Cost of sales | (32,882,715) | (27,465,405) |
Gross profit | 6,731,889 | 8,616,397 |
Other income | 78,918 | 120,308 |
Sales and marketing expenses | (850,212) | (885,999) |
Administration expenses | (2,963,990) | (2,798,010) |
Research and development expenses | (1,274,940) | (1,161,371) |
Finance costs | (357,959) | (237,873) |
Other gains and (losses) | (131,084) | (195,272) |
Profit before Tax | 1,232,622 | 3,458,180 |
Income tax expense | (167,086) | (748,634) |
Net Profit | 1,065,536 | 2,709,546 |
Other Comprehensive Income | ||
Exchange differences on translation of foreign operations (net of tax of $nil) | 562,770 | 502,008 |
Total Comprehensive Income for the year | 1,628,306 | 3,211,554 |
Earnings per share | ||
Basic | 0.01 | 0.03 |
Diluted | 0.01 | 0.03 |
DYNEX POWER INC.
Consolidated Statement of Financial Position in Canadian Dollars
Year Ended December 31st, 2012
2012 | 2011 | |
$ | $ | |
NON-CURRENT ASSETS | ||
Property, plant & equipment | 33,706,294 | 30,623,600 |
Derivative financial instruments | 2,228 | - |
Total non-current assets | 33,708,522 | 30,623,600 |
CURRENT ASSETS | ||
Inventories | 10,954,012 | 10,890,917 |
Trade receivables | 5,297,728 | 4,275,915 |
Amounts owing from parent company | 2,776,110 | 2,369,749 |
Prepayments, deposits & other receivables | 255,847 | 458,665 |
Tax recoverable | 124,292 | 298,301 |
Cash | 2,206,430 | 3,028,599 |
Total current assets | 21,614,419 | 21,322,146 |
CURRENT LIABILITIES | ||
Trade payables | 1,151,054 | 1,142,246 |
Amounts owing to parent company | 267,349 | 312,284 |
Other payables and accruals | 3,171,809 | 3,946,048 |
Borrowings | 6,547,631 | 514,102 |
Provisions | 237,548 | 186,077 |
Total current liabilities | 11,375,391 | 6,100,757 |
NET CURRENT ASSETS | 10,239,028 | 15,221,389 |
NON-CURRENT LIABILITIES | ||
Borrowings | 5,512,391 | 9,238,920 |
Provisions | 212,804 | 212,704 |
Deferred tax liabilities | 1,939,851 | 1,739,167 |
Total non-current liabilities | 7,665,046 | 11,190,791 |
NET ASSETS | 36,282,504 | 34,654,198 |
EQUITY | ||
Share capital | 37,096,192 | 37,096,192 |
Retained profit/(accumulated deficit) | 540,921 | (524,615) |
Exchange fluctuation reserve | (1,354,609) | (1,917,379) |
36,282,504 | 34,654,198 |
DYNEX POWER INC.
Consolidated Statement of Changes in Equity in Canadian Dollars
Year Ended December 31st, 2012
|
Share Capital |
Retained Profit/ (Deficit) |
Foreign Currency Translation Reserve |
Total Equity |
$ | $ | $ | $ | |
At January 1st, 2011 | 37,096,192 | (3,234,161) | (2,419,387) | 31,442,644 |
Total comprehensive income for the period | - | 2,709,546 | 502,008 | 3,211,554 |
At December 31st, 2011 | 37,096,192 | (524,615) | (1,917,379) | 34,654,198 |
Total comprehensive income for the period | - | 1,065,536 | 562,770 | 1,628,306 |
At December 31st, 2012 | 37,096,192 | 540,921 | (1,354,609) | 36,282,504 |
DYNEX POWER INC.
Consolidated Statement of Cash Flows in Canadian Dollars
Year Ended December 31st, 2012
2012 | 2011 | |
$ | $ | |
CASH FLOW FROM OPERATING ACTIVITIES | ||
Profit before tax | 1,232,622 | 3,458,180 |
Finance costs recognised in profit before tax | 357,959 | 237,873 |
Investment income recognised in profit before tax | (1,091) | (796) |
Non cash interest on derivative financial instrument | (4,850) | - |
Depreciation of property, plant & equipment | 2,968,982 | 2,382,343 |
Loss on disposal of property, plant & equipment | 24,070 | 7,823 |
Provision for slow moving and obsolete inventory | (272,587) | (1,903,587) |
Non cash movement in other payables and accruals | (235,558) | - |
Non cash movement in provisions | 57,973 | (291,200) |
Movements in working capital | (1,447,594) | (2,415,788) |
Cash generated by operating activities before income taxes | 2,679,926 | 1,474,848 |
Income taxes received/(paid) | 174,208 | (250,124) |
Net cash generated by operating activities | 2,854,134 | 1,224,724 |
CASH FLOW FROM INVESTING ACTIVITIES | ||
Payments for property, plant & equipment | (5,440,790) | (10,328,352) |
Proceeds on disposal of property, plant & equipment | - | 27,228 |
Interest received | 1,091 | 796 |
Net cash used in investing activities | (5,439,699) | (10,300,328) |
CASH FLOW FROM FINANCING ACTIVITIES | ||
Proceeds from borrowings | 2,244,134 | 10,032,524 |
Repayments of borrowings | (123,673) | (771,019) |
Interest paid | (317,679) | (143,097) |
Payments for other finance costs | (30,359) | (71,744) |
Net cash generated by financing activities | 1,772,423 | 9,046,664 |
NET DECREASE IN CASH | (813,142) | (28,940) |
Cash at beginning of period | 3,028,599 | 3,094,626 |
Effect of foreign currency translation on cash | (9,027) | (37,087) |
CASH AT END OF PERIOD | 2,206,430 | 3,028,599 |
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: +44 1522 500 500
Email: [email protected]
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