DXN implements cost reductions, margin enhancements, and asset sale to achieve stability

SYDNEY, AUSTRALIA: DXN Limited (DXN), a leading provider of modular data centres, has announced its plans to recover from a challenging year and pursue profitable growth and cash generation in the future.

The company, which designs, engineers, manufactures and supplies customized modular data centres in Australia and the Asia Pacific region, has reported a revenue of $6.5 million and an underlying EBITDA loss of $3.1 million for the 2023 fiscal year.

DXN’s CEO Shalini Lagrutta said the company’s performance was affected by the uncertainty around the attempted third party bid by Flow Digital Infrastructure, which did not materialize due to regulatory issues.

She said the customer demand for modular data centres has been recovering in the second half of FY23 and into FY24, as the company secured 42 module sales within the last three years.

She also said the company has signed an international distribution agreement with Flow, which included licence fees and future module orders for resale by Flow into Asia Pacific.

Lagrutta said the company has been implementing four key initiatives to turn around its business and achieve stability, profitability and growth.

These include focusing on cash, generating positive cash flow and capital management; reducing costs and improving margins; exiting the Sydney data centre lease, which has been a major drag on the company’s cash and EBITDA performance; and rebuilding and growing the module business.

She also said the company is actively seeking the sale or divestment of one or more data centre assets, such as Darwin and Tasmania, that no longer fit the business model.

“We have made considerable progress in our cash management and cash flow forecasting, reducing our payables by 68% to less than $1 million and improving our project management terms on modular contracts. We have also initiated cost reductions across the group, targeting approximately $0.8 million net savings per annum.

We have agreed to exit the Sydney data centre lease by the end of February 2024, with a payment equivalent to approximately six months lease, but payable over a longer period. We have also enhanced our operational processes to track and improve our gross margins, targeting an initial 15% improvement in our manufacturing margins,” she said.

Lagrutta expressed confidence in the company’s future prospects, saying that the demand for modular cable landing stations and data centres enabling edge computing is enjoying strong structural demand and will continue to do so.

“We are excited about the opportunities ahead of us, as we continue to deliver on our vision of being a leading provider of modular data centres in Australia and the Asia Pacific region,” she said.

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