Dynex Power Inc. announced its financial results for the year ended December 31st, 2013. The year was characterized by a slow start and difficulties in new product development. A strong backlog at the end of the year supports the company’s anticipation of returning growth and profitability in 2014. Revenue for 2013 of $39.2 million was 1% lower than in the preceding year. Significant increases in revenue from power assemblies and integrated circuits and smaller increases in bipolar discrete products and services were offset by a reduction in power module revenue. The company recorded a 2013 loss before tax of $3.4 million, compared to a profit before tax of $1.2 million in 2012. The reduction reflected the reduction in gross profit referred to above, in part attributable to the Q4 write off and provision. As a result of the loss before tax and a reduction in UK statutory tax rates, Dynex was able to release $984,000 from its tax provision, leaving a loss after tax of $2.4 million compared to a profit after tax of $1.1 million in the preceding year.
Revenue for the Bipolar Discrete Product Group, the company’s largest single product group, grew by 5%, and accounted for 49% of total revenue. Revenue for the Power Module Product Group decreased by 45% from the record level recorded last year. This product group accounted for 21% of total revenues. Revenue for the Power Assemblies Product Group increased by 92%, establishing a new record for this product group, and accounted for 20% of total revenue. Revenue for Integrated Circuits increased nearly fourfold over the preceding year and accounted for 5% of total revenue; but with few remaining stocks of the main products, this level of revenue will not be maintained in the future. Revenue from Services, which relates to advice and assistance provided primarily to CSR Times Electric, increased by 18% and accounted for 5% of total revenue.
The gross margin in 2013 was 5.0%, compared to 17.0% last year. This figure includes the non-cash inventory write off and provision taken in the fourth quarter, relating to a fall-off in yields on new products. Excluding this charge, the gross margin would have been approximately 10.7%. This is below the range of gross profit that management normally expects and reflects the low level of IGBT sales, which is a high fixed cost business, delays in timing of orders from European bipolar customers and the very competitive market conditions.
Expenses were kept under tight control for the year, declining from $5.5 million last year to $5.3 million in 2013. Expenses in 2013 represented 13.9% of revenue, compared to 13.6% last year. Excluding the cost of research and development, which management regards as investment in the future of the business, expenses fell from 10.7% of revenue in 2012 to 10.3% in 2013.
New orders received in 2013 totaled $45.3 million, resulting in a book to bill ratio of 1.2 times. The order book rose 50% from $20.4 million at the end of 2012 to $30.5 million at the end of 2013. Approximately one quarter of this increase results from a weakening in the value of the Canadian Dollar against Sterling. The order book at the end of 2013 represented 32 weeks of sales in a normalized market environment.
Dr. Paul Taylor, President and Chief Executive Officer commented, “The past year proved to be a challenging one, resulting in weak financial performance. Revenue was similar to the preceding year, but profits were adversely affected by the one-off costs associated with the ramp up of new IGBT products for Chinese rail applications, by customer reschedules and price erosion in the aftermath of six years of European economic uncertainty and by the inventory write off and provision in the fourth quarter. However, management remains confident in the medium and long term future of the business, attributable in part to our strong order book and pent-up demand in Europe for our products.
"CSR Times Electric continues to provide tangible support to the company. Specifically, since the year-end, CSR Times Electric has provided a $5.5 million loan to the company, enabling Dynex to purchase new manufacturing equipment that will provide better process control capability and increased capacity in power modules. CSR Times Electric has also signed a new R&D contract with Dynex to provide continuing support to its R&D activities, and a Technical Support Agreement that will provide Dynex with a continuing revenue stream. Both agreements included advance payments to Dynex.”
Bob Lockwood, Chief Financial Officer commented, “Dynex’s financial performance in 2013 was extremely disappointing: a shortage of orders and push back in delivery schedules by customers in the first part of the year followed by a fall in yields and an inventory write off and provision in the last quarter resulted in a loss for the year. January of 2014 remained weak, but since then stronger orders from our parent company and a recovery in yields has supported a return to break-even in February and March. Management expects revenue growth and a return to profitability for the year as a whole. Subsequent to year-end, Dynex’s UK subsidiary has secured support of approximately $1.8 million from the UK Government’s Regional Growth Fund, linked to safeguarding existing jobs and creating 27 new positions over the next five years at the company’s R&D Centre in Lincoln, England.”
Mr Li, Chairman of Dynex and General Manager of CSR Times Electric concluded, “2013 has not been a good year for the shareholders of Dynex. But I have confidence that through their efforts our management team will return our business back to normal in 2014 and I remain confident in the medium and long term future of the business.”