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While data centre giants such as NEXTDC (ASX: NXT) and AirTrunk are making multibillion-dollar investments in support of the information technology (IT) sector, Sydney-based DXN Limited (ASX: DXN) is tapping into growing demand for smaller-scale data storage facilities that the company says are meeting the needs of blue-chip customers, including global internet companies.
The Sydney-based DXN, which designs, builds, owns and operates modular data centres, has announced a 56 per cent increase in gross profit to $5.85 million in FY24, buoyed by a 63.5 per cent increase in group revenue to $10.75 million.
The growth comes amid a rise in demand for data centres globally with the agile nature of modular data centres expected to play a key role in the future of IT infrastructure.
DXN, which exited its loss-making data centre at Sydney’s Olympic Park in April, has subsequently renewed its focus on its core business activities which includes the modular manufacturing division where it has secured big wins in the resources sector and undersea cable market.
DXN announced in May that it had signed a $5.7 million contract to deliver four cable landing stations for the East Micronesia Cable System in its largest contract to date.
The contract, scheduled for delivery between January and March next year, is expected to benefit up to 100,000 people across the Federated States of Micronesia, Kiribati and Nauru.
“FY24 was a transformational year for DXN,” says Shalini Lagrutta, the CEO of DXN.
“The catalyst of change was exiting Sydney data centre, which was a non-profitable asset, allowing the DXN team to focus on the core business of manufacturing prefabricated modular data centres offering world-class solutions for our global customer base.
“With our new board members who have ASX experience and technology entrepreneurial skills, DXN is well positioned for growth in the data centre market where DXN have proven our ability to repeatedly generate revenue and deliver solutions to customers.
“To date the team has successfully deployed over 80 modules globally.”
DXN, the Asia-Pacific region’s only vertically integrated manufacturer and operator of modular data centres, announced changes to its board in May following the resignation of chairman Peter McGrath and non-executive director Tim Hannon.
Company CEO Lagrutta stepped in to also take on the managing director’s role while the company announced in June that Laila Green had been appointed interim CFO.
DXN says it continues to pursue opportunities for growth from industries such as mining, gas, energy, subsea, telecommunications and government citing their need for Edge AI (artificial intelligence) with high power density requirements, which DXN can provide.
The company says it is also contracting directly with global internet companies who require prefabricated modular data centres and cable landing stations across the region.
The jump in group revenue in FY24 was largely driven by growth in DXN’s modular manufacturing division, which experienced a 202 per cent increase on FY23.
The company reported Underlying EBITDA of $1.2 million for FY24, after removing one-off restructuring costs, while statutory EBITDA was $644,000 making it the first positive result on this metric for the company.
While DXN exited its Sydney data centre this year, the company still operates data centres in Darwin and Hobart, which are profitable and are currently being streamlined.
“Efficiencies are being implemented through improved processes as well as new product offerings to customers,” says DXN.
“Both Darwin and Hobart continued to perform in FY24 and, as customer demand grows, DXN will continue to invest in these assets.”
The two data centres deliver DXN more than $2 million in recurring revenue annually.
DXN is forecasting continued growth in FY25 with $8.9 million in modular manufacturing contracts in hand, along with more than $1 million worth of new contracts secured this financial year.
“As the demand for digital infrastructure grows globally, and the needs of the networks continue to evolve, the opportunity for prefabricated modular data centres continues to grow,” says the company.
DXN anticipates that AI and machine learning will grow demand further.
“Customers are demanding high quality quick deployments, in contrast to the long lead times for bricks and mortar alternatives,” the company says.
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