Dynex Power Announces Third Quarter Results

Transcription

1 PRESS RELEASE For more information: Clive Vacher President and Chief Executive Officer Alan Lyons Chief Financial Officer Dynex Power Inc. Tel: FOR IMMEDIATE RELEASE Listing: TSX Venture Exchange Symbol: DNX Dynex Power Announces Third Quarter Results Record Quarterly Revenues; Break-Even; Strong Operational Cash Flow Lincoln, England, November 14, 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, Summary financial information for these periods is as follows: Canadian Dollars (000 s) September 30, 2017 September 30, 2016 YTD 2017 YTD 2016 Revenue Gross Profit/(Loss) Other Income, Expenses and Costs Profit / (Loss) before Tax Income Tax (expense) / Recovery Net Profit / (Loss) Common shares outstanding¹-diluted Profit (Loss) per share in Canadian Dollars - diluted 13,119 1,534 (1,503) 31 (20) 11 80,509, ,079 2,071 (1,719) 352 (116) ,509, ,218 5,263 (5,822) (559) 32 (527) 80,509,047 (0.01) 30,474 3,141 (5,413) (2,273) 318 (1,955) 80,509,047 (0.02) ¹ Weighted average for the period 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.

2 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 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 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 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 3 rd quarter 2017 (just the right side of break-even) is, in fact, considerably better than the equivalent period last year, as quarters 3 and 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 to achieving this. However, we are confident to predict fourth quarter revenues in the $ 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.

3 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, 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. Press announcements and other information about Dynex are available at Further information on CRRC Times Electric can be found at 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.

4 Interim Condensed Consolidated Statements of Comprehensive Income (unaudited) in Canadian Dollars Quarter Ended September 30th, months 3 months YTD YTD Sept 30th Sept 30th Sept 30th Sept 30th $ $ $ $ Revenue 13,119,281 11,079,036 36,218,391 30,474,329 Cost of sales (11,585,733) (9,008,230) (30,954,533) (27,332,962) Gross profit 1,533,548 2,070,806 5,263,858 3,141,367 Other income 526,425 9, ,826 38,954 Sales and marketing expenses (370,911) (365,794) (1,068,538) (1,084,349) Administration expenses (885,946) (967,489) (3,257,383) (2,946,099) Research and development expenses (496,741) (265,680) (1,416,739) (1,048,923) Finance costs (150,189) (188,567) (473,521) (555,144) Other (losses)/gains (125,161) 59,358 (219,556) 181,642 Profit/(loss) before tax 31, ,393 (559,053) (2,272,552) Income tax (expense)/recovery (20,394) (116,559) 31, ,085 Net profit/(loss) 10, ,834 (527,178) (1,954,467) Other comprehensive (loss)/income Exchange differences on translation of foreign operations (net of tax of $nil) (191,189) (629,240) 456,947 (6,410,162) Total comprehensive (loss)/income for the period (180,558) (393,406) (70,231) (8,364,629) Earnings/(loss) per share Basic (0.01) (0.02) Diluted (0.01) (0.02)

5 Interim Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars As at September 30th, 2017 Sept 30th Dec 31st $ $ NON-CURRENT ASSETS Intangible assets 1,413,600 1,524,346 Property, plant & equipment 29,999,091 31,565,940 Derivative financial instruments - - Deferred tax asset 1,268,363 1,127,322 Total non-current assets 32,681,054 34,217,608 CURRENT ASSETS Inventories 10,854,828 11,854,067 Trade receivables 6,672,398 4,035,481 Amounts owing from group undertakings 7,148,246 3,573,709 Prepayments, deposits & other receivables 1,767,081 2,297,786 Tax recoverable Cash 2,291, ,855 Total current assets 28,734,123 22,660,580 CURRENT LIABILITIES Trade payables 2,141,737 3,010,756 Amounts owing to group undertakings 6,719,660 2,103,917 Other payables and accruals 3,725,905 3,290,095 Borrowings 17,415,156 16,380,290 Tax payable - - Provisions 988, ,773 Total current liabilities 30,990,609 25,241,831

6 Interim Condensed Consolidated Statement of Financial Position (Unaudited) in Canadian Dollars (continued) As at September 30th, 2017 Sep 30th Dec 31st $ $ NON-CURRENT LIABILITIES Borrowings 4,135,690 5,141,190 Provisions 50, ,337 Derivative financial instruments - - Deferred tax liabilities - - Total non-current liabilities 4,185,970 5,327,527 NET ASSETS 26,238,598 26,308,830 EQUITY Share capital 37,096,192 37,096,192 Accumulated deficit (11,055,404) (10,528,225) Exchange fluctuation reserve 197,810 (259,137) TOTAL EQUITY 26,238,598 26,308,830

7 Interim Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars Quarter Ended September 30th, 2017 Foreign Currency Share Translation Total Capital Deficit Reserve Equity $ $ $ $ At January 1st, ,096,192 (5,609,101) 7,019,514 38,506,605 Total comprehensive loss for the period - (1,954,467) (6,410,162) (8,364,629) At September 30th, ,096,192 (7,563,568) 609,352 30,141,976 Total comprehensive loss for the period - (2,964,657) (868,489) (3,833,146) At December 31st, ,096,192 (10,528,225) (259,137) 26,308,830 Total comprehensive income/(loss) for the period - (527,179) 456,947 (70,232) At September 30th, ,096,192 (11,055,404) 197,810 26,238,598

8 Interim Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars Quarter Ended September 30th, 2017 YTD YTD Sept 30th Sept 30th $ $ CASH FLOW FROM OPERATING ACTIVITIES Loss before tax (559,054) (2,272,552) Finance costs recognised in loss before tax 473, ,144 Investment income recognised in loss before tax 518 (844) Non cash interest on derivative financial instrument - - Amortization of intangible assets 144, ,886 Depreciation of property, plant & equipment 3,428,972 3,773,372 Loss/(gain) on disposal of property, plant & equipment - - Shares and options issued for services - - Non cash FI derivative - - Amortization of deferred finance charges - - Provision for slow moving and obsolete inventory (3,188,558) 440,500 Non cash movement in other payables and accruals - - Non cash movement in provisions 42,294 - Movements in working capital 3,067,615 (2,995,584) Income taxes paid (96,228) (66,545) Net cash generated by/(used in) operating activities 3,313,757 (408,623) CASH FLOW FROM INVESTING ACTIVITIES Payments for intangible assets (9,522) (54,685) Payments for property, plant & equipment (1,352,617) (1,350,943) Proceeds on disposal of property, plant & equipment - - Interest received (518) 844 Net cash used in investing activities (1,362,657) (1,404,784) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of equity shares - - Payment for share issue costs - - Proceeds from borrowings 1,382,927 2,821,288 Repayments of borrowings (1,702,462) (1,573,144) Interest paid (206,399) (260,445) Payments for other finance costs (14,465) - Net cash generated by financing activities (540,399) 987,699 NET INCREASE/(DECREASE) IN CASH 1,410,701 (825,708) Cash at beginning of period 898,855 1,410,547 Effect of foreign currency translation on cash (17,986) (79,422) CASH AT END OF PERIOD 2,291, ,417

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