Adverse Exchange Rates Reduce Results at Dynex
Dynex Power Inc., announced its financial results for the third quarter and nine months ended September 30th, 2016. Revenue in the third quarter of 2016 was $1.2 million or 10% lower than in the corresponding quarter of last year. The whole of this reduction was as a result of the strengthening of the Canadian Dollar against Sterling. In the UK operating company, revenue in Sterling had risen by approximately 5% with a significant increase in service revenue being partially offset by a reduction in bipolar revenue. For the year to date, revenue was $3.3 million or 10% lower than in the corresponding period of last year.
Approximately 60% of the reduction was as a result of the strengthening of the Canadian Dollar against Sterling. The rest of the reduction was as a result of a significant fall in bipolar revenue partially offset by stronger service revenue. Revenue is expected to be rise in the fourth quarter and management expects to remain profitable.
The gross margin was 18.7% of revenue in the third quarter of 2016 compared to a gross margin of 8.8% of revenue in the third quarter of 2015. For the year to date, the gross margin was 10.3% compared to 0.1% in the corresponding period of last year. Despite the strong improvement, gross margin for the year to date is still below the level targeted by management.
Sales and marketing and administration expenses represented 12.0% of revenue in the third quarter and 13.2% of revenue for the year to date compared to 7.4% and 10.5% in the corresponding periods in 2015. The increase reflected a conscious decision by management to strengthen the sales team and a lower cross charge to R&D in the quarter.
The net expenditure on research and development for the third quarter of 2016 was $266,000. In the corresponding quarter of last year, there had been a surplus from research and development of $198,000. For the year to date, net expenditure was $1.0 million compared to a credit of $100,000 in the corresponding period of last year. The increase in the cost to the Group reflected the increase in R&D work being undertaken whilst third party support had not risen as quickly.
As a consequence of these changes, Dynex reported a profit before tax in the quarter of $352,000 compared to a profit before tax of $603,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $2.3 million was recorded compared to a loss before tax of $3.3 million in the corresponding period of last year.
At the end of the third quarter, the Company's order book stood at $17.2 million, approximately 22% higher than at the end of the second quarter. At the end of 2015, the order book had stood at $15.2 million.
Dr. Paul Taylor, President and Chief Executive Officer commented, "Market conditions remain tough. Our customers remain cautious but we have managed to increase revenue in the third quarter and to return to profitability and we expect to increase revenue further and remain profitable in the fourth quarter."
Bob Lockwood, Chief Financial Officer commented, "Third quarter results show an improvement and we are pleased to be back in profit. But management is clear that we need to make further improvements in order to reach the levels of profitability that we are targeting."
Liu Ke'an, the Chairman of Dynex said, "I am pleased to be able to report a net profit for the quarter. We are determined that we should remain profitable going forward and management is clear about the improvements that need to be made."