Special Report: The Victoria-based engineering firm has built up an impressive client base of multinational customers, with plenty of upside ahead after doubling annual revenues.

Advanced engineering firm Hydrix (ASX:HYD) is beginning to see material revenue growth from its multi-channel approach to client services. Hydrix and it’s 65+ specialist engineers work with its clients to develop and commercialise different technologies.

And for a mid-size specialist engineering firm based just outside of Melbourne, the company is packing some pretty serious clout in the global marketplace.

Its recipe for success began with a focus on recruiting top talent and bedding down in-house operational functions, following a company restructure in 2017. Hydrix serves a bluechip global client base and a number of listed and unlisted companies in the medtech space.

Now, the management team is focused on driving revenue growth across three core channels – medical technology, consumer & industrials, and defence & aerospace.

 

Plenty of upside

Speaking with Stockhead, Hydrix chairman Gavin Coote said the company was now at an “inflection point” as it looks to continue its current path of growth.

“We’ve put a priority on investing in our business development team, and the result has been improved productivity and billable utilisation as a result of having more work to do,” he said.

Hydrix booked $14.23m of revenue in the 2019 financial year (up from $5.7m the prior year). It’s now well on track to meet its forecast of at least 15 per cent growth in FY20, having reported another $4.1m of revenue in the September quarter.

The company issued similar guidance the previous year and ended up more than doubling its revenue guidance. For Coote, it’s about getting runs on the board and building a track record that investors can rely on.

“We easily eclipsed the previous year’s guidance, but what we’re doing today is establishing increased transparency and viability around project pipelines and quality of our workforce, which means investors can have confidence in the outlook,” he said.

In its latest investor presentation, Hydrix flagged potential revenues from its current multi-year contracted project pipeline of around $30m. And further to that, has a healthy growing pipeline of new multi-million dollar, multi-stage engineering projects its business development team is busily converting.

Hydrix undertakes significant work with clients in the med-tech space – including a US cardiac device company for which it signed a multi-year services contract for up to $3m in July.

Under a broad commercial arrangement, Hydrix has entered into an agreement to acquire the Asian Pacific distribution rights to the product, adding an additional — and potentially significant — revenue stream.

In addition, the transaction contemplates Hydrix taking a small equity stake to increase the potential upside.

This is a great example of how the leadership team is leveraging the power of Hydrix’s unique track record technology commercialisation to buy, build and invest in recurring product revenue streams for accelerated growth.

Having laid the groundwork as well as recently undertaking a $7.6m fundraising, the company is now at an inflection point in its turnaround strategy, with a well-funded balance sheet and plenty of revenue upside as it looks to book its first full-year cash operating profit in the 2020 financial year.

This story was developed in collaboration with Hydrix, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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