Dynex Power Announces Strong Year End Results for 2011
Order Book Solid for First Half of 2012 but Management Remains Cautious About Longer-term Economic Outlook
Lincoln, England, April 12th, 2012 – Dynex Power Inc. (TSXV:DNX), a leading, high power semiconductor company, today announced its financial results for the year ended December 31st, 2011.
Summary financial information for the twelve months ended December 31st, 2011 is as follows:
The summary financial information presented above has been taken from financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). This is the first time that the Company has presented summary annual figures using IFRS. Consequently, the comparative figures for 2010 vary slightly from the summary figures that were reported last year.
The last year was eventful for Dynex: the two new 6-inch IGBT wafer fabrication lines were installed and ramped-up, the freehold of the Doddington Road site was repurchased and the R&D Centre was established and is now flourishing. In addition, construction work began on the new building to house the increased R&D team and to provide additional office accommodation. Each of these developments is important to Dynex's long-term success.
Full-year 2011 revenue remained essentially level in a challenging market environment, with a decline of less than one-quarter of 1%, which was fully attributable to a strengthening of the Canadian Dollar. In Sterling terms, the UK operating business recorded growth of slightly less than 1%. Management were pleased with this modest level of growth in a year characterized by weak trading conditions in Europe and the previously reported reduction in Chinese rail investment. Revenue for the Power Module Product Group, which now includes sales of IGBT die to CSR Times Electric, grew by 155% establishing a record for the group. This group accounted for 25% of all revenue in 2011, and its contribution is expected to increase further in the coming years. Revenue from the Bipolar Discrete Group declined by 27%. Historically, the Bipolar Discrete Group has been Dynex's mainstay, the strongest and most reliable revenue generator. Last year, its markets were heavily affected by the tough economic conditions in Europe. Bipolar discrete products accounted for 49% of revenue in 2011, the first time it has been less than half of total revenue. The Power Electronic Assemblies Group saw revenue decline by 4% from the record level reported last year. Here again, the tough economic conditions in Europe, which is the Power Electronic Assembly Product Group's main market, was the principal factor. The Integrated Circuits Product Group enjoyed a successful year with revenue more than three times the level reported last year. As has previously been announced, management no longer regard integrated circuits as a core business.
The 2011 gross margin was 23.9%, ahead of the 19.1% reported last year. However, the gross margin was affected by two one-off items during the fourth quarter of 2011: poor yield variances during the ramp-up of the new IGBT fabrication lines; and a change to the accounting estimate of inventory obsolescence. Without these two items, gross margin for the year would have been approximately 21.9%.
Expenses increased by 5% compared to 2010. Expenses represented 14.3% of revenue, compared to 13.6% last year. The increase reflected the Company's preparation for growth in revenue. Currently, management is more cautious managing its expense base.
The Company generated profit before tax of $3.5 million, 73% higher than the figure reported in 2010. Without the two one-off items referred to above, profit before tax would have been approximately $2.8 million, or 40% higher than last year's level.
The Company's tax charge rose by 15% to $749,000. However, the rate of tax paid on profit before tax fell from 32.6% to 21.6%. The fall in rate reflected a reduction in the rate of corporation tax payable in the UK and some additional tax allowances that the Company has been able to claim in the UK.
The Company generated a net profit of $2.7 million, which is twice that reported in the previous year. Without the two one-off items referred to above, net profit would have been approximately $2 million, 49% higher than last year.
New orders received in 2011 totalled $38.9 million, resulting in a book to bill ratio of 1.1. As a result, the order book has risen from $16.8 million at the end of 2010 to $19.7 million at the end of 2011. This represented 28 weeks of sales at the current revenue levels. However, the book to bill ratio was below 1.0 for the second half of 2011 and has remained below 1.0 for the first three months of 2012. Management believes that this reflects the challenging economic conditions in many of the Company's major markets. The lead time for orders has shortened significantly, with many customers operating in a naturally defensive way in respect of their capital expenditure plans. The current order book gives confidence in the outlook for the next two quarters. However, results for the second half of 2012 and beyond are difficult to predict at the moment.
Dr. Paul Taylor, President and Chief Executive Officer commented, "The performance of the business has shown strong improvement in 2011. We also achieved solid progress across many areas which lay the foundations for an even more successful future. I have no doubt that the coming year will again be very challenging. We will be working hard to improve the yields from the new lines, to complete and move into the new R&D Centre and to qualify our products for a number of new non-rail applications in China."
Bob Lockwood, Chief Financial Officer commented, "Given the current state of world economies and the slowdown in rail investment in China, we are pleased with our financial results and the improvements reported over 2010. The strength of our order book at the end of 2011 gives us confidence for the first half of 2012 and we are already seeing improvements in the yields from the new lines. But the outlook for the second half of 2012 and beyond is currently uncertain and we will continue to be cautious until we see signs of a pick-up in demand from the market."
Mr Li, Chairman of Dynex and General Manager of CSR Times Electric concluded, "CSR Times Electric is pleased with Dynex's operating and financial results in 2011. The Company's management team has delivered another excellent set of results, particularly in light of the challenging operating environment. We will be working closely with Dynex to develop more non-rail opportunities for the Company in China and hope to see growth in revenue and continuing growth in net profit in 2012."
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, 2011 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.
For more information:
Dr. Paul Taylor
President and Chief Executive Officer
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: UK +44 1522 500 500