Dynex Power Announces Third Quarter Results
Record Quarterly Revenues; Break-Even; Strong Operational Cash Flow
Lincoln, England, November 14, 2017 - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announces its financial results for the third quarter and nine months ended September 30, 2017.
Summary financial information for these periods is as follows:
Third quarter revenue of $13.1 million was 18% higher than the corresponding quarter of last year and represents the highest quarterly revenue in the history of the company. This increase was despite a 4% strengthening of the Canadian Dollar exchange rate against Sterling. In Sterling terms, revenue increased by 23%. For the year to date, revenue was $5.7 million or 19% higher than in the first nine months of 2016 (32% higher on a constant currency basis). This reflected significant increases in bipolar sales and services which more than offset smaller reductions in sales of power assemblies. IGBT sales are similar to last year.
Operating cash flow for the first 9 months of 2017 was strong. The company generated positive operating cash of $3.3 million in this period, versus negative cash of $0.4 million in the equivalent period in 2016. This represents significantly improved income performance, together with improved management of working capital, consistent with the overall business turnaround plan.
The gross margin was 11.6% of revenue in the third quarter of 2017, compared to a gross margin of 18.7% of revenue in the third quarter of 2016. For the year to date, gross margin was 14.5%, compared to 10.3% 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, in part due to the closeout this year of a number of loss-making contracts, particularly in the Power Assemblies business unit. Going forward, the development of a core competence in program management will ensure a more efficient execution of contracts; this, coupled with a review of our bidding and pricing strategy, will largely eliminate loss-making and low-margin business.
The combination of other income, expenses and costs represented 11.5% of revenue in the third quarter and 16.1% of revenue for the year to date compared to 15.5% and 17.8% in the corresponding periods in 2016. The absolute level of such expenditure decreased by $215,000 in the third quarter and increased by $409,000 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 quarter 3 profit before tax of $31,000 compared to a profit before tax of $352,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $559,000 was recorded compared to a loss before tax of $2.3 million for the corresponding period of last year. The net profit after tax for the third quarter was $11,000 or $0.00 per share, compared with a net profit of $236,000, or $0.00 per share, in the corresponding period of last year. For the year to date, the net loss was $527,000 or $0.01 per share compared to $2.0 million or $0.02 per share, a loss reduction of 73%.
Clive Vacher, President and Chief Executive Officer, commented, “The record quarterly revenue has contributed to greater than 30% increase in year-to-date revenue versus 2016, on a constant-currency basis. This, coupled with a year-to-date reduction in losses of 73%, and strong positive operating cash flow of $3.3 million, are encouraging signs that the business turnaround plan is yielding positive results.
“We have a considerable amount of work still to do, however, to improve margins and show an acceptable return to our shareholders. The underlying margin performance in the 3rd quarter 2017 (just the right side of break-even) is, in fact, considerably better than the equivalent period last year, as quarters 3 and 4 2016 showed some positive one-time items. We continue to work a number of initiatives to improve our return on sales, including improved yields, more targeted R&D spend, a review of pricing strategy leading to an increase in higher-margin work, and greater control of costs.
“Looking ahead to the fourth quarter, our target is to make up the year-to-date loss, to show a modest profit for the year. Based on the current order backlog, there is some risk of achieving this. However, we are confident to predict fourth quarter revenues in the $10.5-12.5 million range at current exchange rates, bringing full-year predicted revenues to between $46.7-$48.7 million.”
Liu Ke’an, the Chairman of Dynex, added, “I am pleased to see that the revenues, margins and cash generation at Dynex in 2017 represent a step-change in performance versus recent prior years, demonstrating that the actions taken by the leadership team are, indeed, turning the business around. The goal of sustained profitability remains challenging and will take some further time to realise. The team has my full support to continue the improvements, as we bring the year to a close.”
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 , 2017 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.
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.