CEO Letter

Letter to Shareholders - Clive Vacher, President and Chief Executive Officer May 1st, 2017

I would like to take this opportunity to introduce myself and set out some of my initial plans for returning the company to financial health. When the Board offered me the opportunity to become the new President and CEO, I was delighted. The company is well placed for success in a growing and dynamic marketplace.

The company is well placed for success in a growing and dynamic marketplace.  - Clive Vacher, President and Chief Executive Officer.

As you will know, the recent performance of the company has not been good enough to satisfy shareholders or management. In the three months since I joined, I have been involved with the Management Team assessing the strengths and weaknesses of the organisation. With the Management Team, we have developed a plan to build on those strengths and to eliminate the weaknesses. It is clear to me that the company has some outstanding engineering capabilities, committed management and workforce and some excellent products, both in the marketplace today and under development. The plan that we have developed will initiate major changes in five main areas.

The first relates to market focus. We are in the process of strengthening our marketing, sales and business development activities, to get closer to our customers. We will understand the marketplace better from the perspective of our customers, and build stronger partnerships with them to our mutual benefit. The future market needs of our customers will be the primary driver for our new technology development decisions.

Secondly, we will accelerate the time to market for new products. Dynex has a number of exciting innovations in the pipeline, but we have, so far, been slow in getting them into our customers’ hands. The market can expect new products from Dynex, with industry-leading performance, features and quality, before the end of 2017. In doing so, we will also build up a core competence in programme and project management within the company.

Thirdly, we have recognised that our operational performance needs to be improved. We are implementing changes to become world class in lead times, on-time delivery, manufacturing yields and customer service.

The fourth area of change is the increased focus on product and process quality. Specific workstreams will target best-in-industry product reliability, design for manufacturing, right-first-time manufacturing quality, change control, and stronger partnerships with our supply chain. Continuous improvement will be embedded in all we do, and we will ensure that the products we sell will consistently meet and exceed our customers’ expectations.

Finally, we are committed to strengthening our leadership teams and workforce. The whole organisation will be working together towards a common vision and shared, focused goals. There will be clear performance expectations at all levels of the company, and unambiguous accountability for executing the elements of the turnaround plan. In addition, we will be placing increased emphasis on leadership and talent development. We will combine the best experience from existing employees with new perspectives brought in by talent from outside the company. We have already carried out a small redundancy programme to realign our structure with the needs of the business.

The whole organisation will be working together towards a common vision and shared, focused goals. There will be clear performance expectations at all levels of the company, and unambiguous accountability for executing the elements of the turnaround plan. - Clive Vacher, President and Chief Executive Officer.

I look forward to meeting you and being able to update you on our progress in the months ahead. The necessity for these changes will be only too clear from the results we are reporting for 2016. The figures presented are greatly affected by a 9% strengthening of the Canadian Dollar against Sterling. But the simple truth is that Dynex’s sales have not grown in Sterling terms for several years. The failure to increase revenue, the delay in completing orders at the end of 2016, together with continuing quality problems and inventory write offs, resulted in the company reporting a net loss of $4.9 million for the year. I am determined to return the company to profitability in 2017. We plan to build a platform for growth and improved financial performance. I am very grateful for your patience and support.

Clive Vacher

President and Chief Executive Officer

May 1st, 2017