Dynex Power Announces Third Quarter Financial Results

Return To Profitability

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, Nov. 28, 2016 /CNW/ - Dynex Power Inc., a leading, high power semiconductor company, today announced its financial results for the third quarter and nine months ended September 30th, 2016.

Summary financial information for the three and nine months ended September 30th, 2016 is as follows:

Canadian Dollars (000's)	Sept 30, 2016	Sept 30, 2015	YTD 2016	YTD 2015
Revenue	11,079	12,254	30,474	33,794
Gross Profit	2,071	1,081	3,141	314
Other Income, Expenses and Costs	(1,719)	(478)	(5,413)	(3,608)
Profit/(Loss) before Tax	352	603	(2,272)	(3,294)
Income Tax (Expense)/Recovery	(116)	(120)	318	577
Net Profit/(Loss)	236	483	(1,954)	(2,717)
Common shares outstanding¹-diluted	80,509,047	80,509,047	80,509,047	80,509,047
Earnings per share - diluted	0.00	0.01	(0.02)	(0.03)
¹ Weighted average for the period

                     

Revenue in the third quarter of 2016 was $1.2 million or 10% lower than in the corresponding quarter of last year. The whole of this reduction was as a result of the strengthening of the Canadian Dollar against Sterling. In the UK operating company, revenue in Sterling had risen by approximately 5% with a significant increase in service revenue being partially offset by a reduction in bipolar revenue. For the year to date, revenue was $3.3 million or 10% lower than in the corresponding period of last year.  Approximately 60% of the reduction was as a result of the strengthening of the Canadian Dollar against Sterling. The rest of the reduction was as a result of a significant fall in bipolar revenue partially offset by stronger service revenue.

The gross margin was 18.7% of revenue in the third quarter of 2016 compared to a gross margin of 8.8% of revenue in the third quarter of 2015. For the year to date, the gross margin was 10.3% compared to 0.1% in the corresponding period of last year. Despite the strong improvement, gross margin for the year to date is still below the level targeted by management.

Sales and marketing and administration expenses represented 12.0% of revenue in the third quarter and 13.2% of revenue for the year to date compared to 7.4% and 10.5% in the corresponding periods in 2015. The increase reflected a conscious decision by management to strengthen the sales team and a lower cross charge to R&D in the quarter.

The net expenditure on research and development for the third quarter of 2016 was $266,000. In the corresponding quarter of last year, there had been a surplus from research and development of $198,000. For the year to date, net expenditure was $1.0 million compared to a credit of $100,000 in the corresponding period of last year. The increase in the cost to the Group reflected the increase in R&D work being undertaken whilst third party support had not risen as quickly.

As a consequence of these changes, Dynex reported a profit before tax in the quarter of $352,000 compared to a profit before tax of $603,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $2.3 million was recorded compared to a loss before tax of $3.3 million in the corresponding period of last year.

At the end of the third quarter, the Company's order book stood at $17.2 million, approximately 22% higher than at the end of the second quarter. At the end of 2015, the order book had stood at $15.2 million.

Revenue is expected to be rise in the fourth quarter and management expects to remain profitable.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Market conditions remain tough. Our customers remain cautious but we have managed to increase revenue in the third quarter and to return to profitability and we expect to increase revenue further and remain profitable in the fourth quarter."

Bob Lockwood, Chief Financial Officer commented, "Third quarter results show an improvement and we are pleased to be back in profit. But management is clear that we need to make further improvements in order to reach the levels of profitability that we are targeting."

Liu Ke'an, the Chairman of Dynex said, "I am pleased to be able to report a net profit for the quarter. We are determined that we should remain profitable going forward and management is clear about the improvements that need to be made.."

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 , 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 sale 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 September 30th, 2016
	3 months	3 months	YTD	YTD
	Sept 30th	Sept 30th	Sept 30th	Sept 30th
	2016	2015	2016	2015
	$	$	$	$
Revenue	11,079,036	12,254,372	30,474,329	33,794,045
Cost of sales	(9,008,230)	(11,173,043)	(27,332,962)	(33,480,028)
Gross profit	2,070,806	1,081,329	3,141,367	314,017
Other income	9,759	29,873	38,954	73,393
Sales and marketing expenses	(365,794)	(267,635)	(1,084,349)	(853,485)
Administration expenses	(967,489)	(634,796)	(2,946,099)	(2,709,206)
Research and development expenses	(265,680)	198,425	(1,048,923)	100,087
Finance costs	(188,567)	(187,137)	(555,144)	(532,426)
Other gains/(losses)	59,358	383,231	181,642	313,405
Profit/(loss) before tax	352,393	603,290	(2,272,552)	(3,294,215)
Income tax (expense)/recovery	(116,559)	(120,185)	318,085	576,835
Net profit/(loss)	235,834	483,105	(1,954,467)	(2,717,380)
Other comprehensive income
Exchange differences on translation of foreign operations (net of tax of $nil)	(629,240)	1,420,660	(6,410,162)	3,667,858
Total comprehensive (loss)/income	(393,406)	1,903,765	(8,364,629)	950,478
Loss per share
Basic	0.00	0.01	(0.02)	(0.03)
Diluted	0.00	0.01	(0.02)	(0.03)

DYNEX POWER INC. Interim Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars As at September 30th, 2016
	Sep 30th	Dec 31st
	2016	2015
	$	$
NON-CURRENT ASSETS
Intangible assets	1,229,872	1,594,142
Property, plant & equipment	33,655,798	43,447,376
Deferred tax asset	388,819	57,838
Total non-current assets	35,274,489	45,099,356
CURRENT ASSETS
Inventories	13,303,943	15,215,237
Trade receivables	5,013,152	6,334,417
Amounts owing from group undertakings	3,814,410	5,445,377
Prepayments, deposits & other receivables	1,541,475	1,236,102
Tax recoverable	702	3,382
Cash	505,417	1,410,547
Total  current assets	24,179,099	29,645,062
CURRENT LIABILITIES
Trade payables	2,003,131	2,371,233
Amounts owing to group undertakings	1,247,729	760,062
Other payables and accruals	4,795,334	8,695,638
Borrowings	11,972,609	15,423,684
Provisions	17,000	20,599
Total current liabilities	20,035,803	27,271,216
NON-CURRENT LIABILITIES
Borrowings	9,224,809	8,904,800
Provisions	51,000	61,797
Total non-current liabilities	9,275,809	8,966,597
NET ASSETS	30,141,976	38,506,605
EQUITY
Share capital	37,096,192	37,096,192
Accumulated deficit	(7,563,568)	(5,609,101)
Foreign currency translation reserve	609,352	7,019,514
TOTAL EQUITY	30,141,976	38,506,605

DYNEX POWER INC. Interim Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars Quarter Ended September 30th, 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	-	(2,717,380)	3,667,858	950,478
At September 30th, 2015	37,096,192	(10,134,020)	6,371,269	33,333,441
Total comprehensive income for the period	-	2,883,544	648,245	3,531,789
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	-	(1,954,467)	(6,410,162)	(8,364,629)
At September 30th 2016	37,096,192	(7,563,568)	609,352	30,141,976

DYNEX POWER INC. Interim Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars Quarter Ended September 30th, 2016
	YTD	YTD
	Sept 30th	Sept 30th
	2016	2015
	$	$
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax	(2,272,552)	(3,294,215)
Finance costs recognised in loss before tax	555,143	532,426
Investment income recognised in loss before tax	(844)	-
Amortization of intangible assets	157,886	121,162
Depreciation of property, plant & equipment	3,773,372	3,919,523
Provision for slow moving and obsolete inventory	440,500	(41,191)
Movements in working capital	(2,790,706)	(4,131,890)
Income taxes paid	(66,545)	201
Net cash generated(used) by operating activities	(203,746)	(2,893,984)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for intangible assets	(54,685)	(127,878)
Payments for property, plant & equipment	(1,350,943)	(2,795,671)
Interest received	844	-
Net cash used in investing activities	(1,404,784)	(2,923,549)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings	2,821,288	38,687,049
Repayments of borrowings	(1,573,144)	(31,807,568)
Interest paid	(465,323)	(650,199)
Net cash generated by financing activities	782,821	6,229,282
NET (DECREASE)/INCREASE IN CASH	(825,709)	411,749
Cash at beginning of period	1,410,547	894,609
Effect of foreign currency translation on cash	(79,422)	(625,811)
CASH AT END OF PERIOD	505,416	680,547

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]