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Increased Capacity Utilization Leads to Profits for Dynex

May 22, 2017 by Jeff Shepard

Dynex Power Inc. today announced its financial results for the first quarter ended March 31st, 2017. First quarter revenue of $11.6million was 12% higher than the corresponding quarter of last year. This increase was despite a 16% strengthening of the Canadian Dollar exchange rate against Sterling. In Sterling terms, revenue had increased by 34%.

The gross margin of $2.7 million was equivalent to 23.7% of revenue. In the corresponding quarter of last year a gross profit of $1.2 million had been reported equivalent to 11.6% of revenue. The improvement in gross margin is primarily the result of increased revenues in a high fixed cost business. The gross margin reported is within the range targeted by management for the first time since the fourth quarter of 2015.

The combination of other income, expenses and costs increased by $473,000 to $2.2 million despite the 16% strengthening of the Canadian Dollar against Sterling. The increase was mainly as a result of a provision to cover the costs of a small redundancy exercise that has been carried out. The redundancy exercise was designed to rebalance resources in the business.

As a consequence of these results, the Company recorded a profit before tax of $545,000, compared to a loss before tax of $526,000 in the corresponding quarter of last year. A $139,000 tax expense reduced the net profit for the period to $406,000 or $0.01 per share, compared with a net loss of $461,000, or $0.01 per share, in the corresponding period of last year.

Management is also forecasting a profitable second quarter for Dynex, with revenue guidance in the C$10.5 -12.5 million range at current exchange rates. The outlook for the second half of the year remains somewhat less certain. The industry increasingly works on shorter lead times than in the past, so the majority of revenue for the second half of the year has yet to be backed by firm orders. Management, however, expects that the Group will be able to report a profit for the full year.

Clive Vacher, President and Chief Executive Officer commented, "I am pleased to report a strong increase in revenue for the first quarter. Indeed, this was the highest quarterly revenue reported for four years. This positive performance is partly a result of business backlog built-up from 2016 that was scheduled for delivery in 2016 and partly a result of a first quarter emphasis on marketing. I am also pleased to see the Group return to profitability and the Dynex team is determined to maintain this improvement as going forward."

Bob Lockwood, Chief Financial Officer commented, "Given the high fixed cost nature of the business, a strong increase in revenue always has a big impact on the net profit and we have seen that influence once again. We have the order cover for the second quarter to show another profit and we believe the year as a whole will also be profitable."

Liu Ke'an, the Chairman of Dynex said, "We are delighted that Clive agreed to join the business as our new chief executive at the start of the year. I have reviewed the improvement plans that he is implementing with the Dynex leadership team. I believe that these will drive exciting developments for the Group over the coming periods. I am pleased we are off to a good start and Clive has our full support for this change program."