In March 2017, we learned that Dynamic EMS reported a 6% increase in revenue from their previous year-end. Today, we fast-forward six months, to learn if the company is on-track to witness year-on-year growth.
By John Watt, Financial Director, Dynamic EMS
In the past six months, the regional manufacturing landscape has changed, which has presented Dynamic EMS with opportunity. We have seen another Tier I Electronic Manufacturing Service Provider (EMS) – Jabil exit the UK. This departure was only a short period after Plexus announcing the closure of their manufacturing facility. I believe that this shift is a result of two forces:
- The growing EMS markets all share unique characteristics, such as high complexity and configurability, suitable only for low-to-medium volume production environment. Whilst the Tier I and Tier II EMS providers promise that they can service these markets, with the best of intentions, the sheer scale, and operational scope ultimately distracts them from adequately servicing a lower volume line of businesses with complex, customised needs at speed.
- Coupled with the fact, that in reality, the decision-making for large corporations resides overseas, not in the UK. Dynamic EMS are privately owned, we are led by our customers’ and industry trends, not the stock market.
With regards to our financial reporting, financial year, 17’ looks to be flat in comparison with FY 16, if not actually retracting slightly as we witness some of our Original Equipment Manufacturing (OEM) customers experience a shortfall in their own end-market and some of our new business engagements experiencing a lack of traction in revenue growth. This being said our outlook is predictable when you consider all forces within the macroeconomic environment that we operate in.
Dynamic EMS continues to align both its Capital Expenditure (CAPEX) investment and our Human Resources (HR) strategic objectives. We made a significant investment in technology by purchasing a new Hi-Res Inline Camera Optical Inspection Equipment (AOI) to complement and increase our current AOI capability. We also made a series of investment as per our customers’ manufacturing requirements into bespoke equipment to enable production efficiency.
Aligning ourselves to our HR goals Dynamic EMS have continued to invest in our ‘Workforce for Tomorrow’ initiative with our apprenticeship scheme and our continued efforts to engage with the next generation to educate and inform them that a career in manufacturing is a rewarding one. We do this through our ‘Career Ready’ program, highlighting our employment incentives.
As I look at what the next six months will bring, the challenges that we face are industry-wide. The shrinking margins that all EMS companies are feeling the impact of, combined with currency fluctuations. This has a direct impact on our material costs and in turn our Gross Margin. One of our key differentiators is how we mitigate risk by working effortlessly with our Supply Chain Partners to reduce the impact of this and to increase our collaborative efforts with our OEM customers’. We expect to see a continuation in the consolidation of distributors through their Merger and Acquisition (M&A) strategies, and again, this may directly impact us as product lines go onto allocation and extended lead-times. For Dynamic EMS though, our supply chain partner agreements put us into the valuable position of having a higher degree of visibility, thus we can work with our customers to keep them informed and build a robust production schedule to accommodate fluctuation.