Solution Dynamics Interim Results

Media release

16 February 2017

UK GROWTH DRIVES DOUBLE-DIGIT GAIN FOR SOLUTION DYNAMICS

SDL Interim Results to 30 December 2016

Customer communications solutions provider Solution Dynamics Limited (NZX:SDL) posted a 20% lift in net profit for the six months to December 2016, to $704,000, on the back of strong growth in its UK and European markets.

The company reiterated its forecast for a June 2017 full-year net profit 25% above last year’s $1.02 million.

Chief Executive Nelson Siva said SDL’s strategy to profitably capture the migration from print to digital customer communication was delivering sound results.

“In a reflationary environment, companies of all sizes are looking for ways to save on the costs of doing business. Solutions that can deliver immediate cost savings, while ensuring better, more personalised customer interactions, are getting strong interest.”

Total revenue for the group increased by 31.3% to $10.19 million (HY16: $7.76 million), with SDL’s Software & Technology division generating a 18.9% increase in revenue to $2.42 million (HY16: $2.04 million).

Nelson said: “Our growth is coming from the development of digital solutions that help our clients to optimise their customer communications. In particular, the efficiency and effectiveness of our web-based hybrid mail software, DéjarMail, and our Bremy marketing communications software are gaining recognition among customers in the UK, Europe and in our home market, New Zealand.

“Our UK revenues continue to build, with two large mail resellers signing up to use our DéjarMail software, in addition to the reseller which is already bundling it into its own software for dental practices in the UK. The UK market offers significant opportunity for SDL and we have invested into supporting channels and new customers as well as adding additional sales resource to help service our growing business there and in Europe.”

Revenue from SDL’s traditional Digital Print and Document Handling Services division rose by 10% on the December 2015 first half. Revenue from the electronic delivery of documents grew by more than 50% year-on-year, and incoming mail revenues grew by more than 70%.

“While print volumes continue to shrink around the world, printed documents and communication remain important and we are gaining market share in terms of the volume of lodged mail with NZ Post, with market share almost doubling over the past two years. The first customer under the Fuji Xerox DMS agreement commenced trial printing late in the first half and is expected to progressively move to full production volumes from early in the second half of FY2017.”

The balance sheet remains very strong, with net cash on hand of $1.86 million as at 31 December 2016 and modest near-term capital expenditure requirement.

The company will pay an interim dividend of 3.5 cents a share, up 0.5 cents from the same period a year ago.

Highlights for the Six Months to 31 December 2016:

• Net profit after tax lifted 20% to $0.704 million

• In line with the company’s focus on digital opportunities, Software & Technology revenues grew 19% to $2.4 million

• Pleasing growth generated by the company’s traditional Digital Print and Document Handling division

• EBITDA of $1.08 million, an increase of 16%

• Cash flow from operations increased by $0.260 million to $0.954 million

• Interim dividend 3.5 cents per share (up 0.5 cents)

• Demand for SDL’s web based, hybrid mail software offering (DejarMail) continues to grow

• Expanded range of customers, with growing international demand as SDL focuses on the opportunity in the UK and Europe

• FY2017 net profit growth of around 25% expected.

ENDS

About Solution Dynamics

SDL operates in the Customer Communications market (essential mail, interactive marketing communications and on-demand communications). The Company’s products and services are represented by two revenue streams, Services (itself separated into digital print & document handling services and outsourced services) and Software.

Services includes digital print and mail house processing for mail items such as invoices, statements and promotional material. These are then distributed predominantly though NZ Post’s mail delivery system. A number of the components included in this service, such as envelopes and postage, form part of outsourced service revenues. This service differs from traditional printing in that each document printed is typically personalised and unique.

The second stream, Software & Technology, develops and markets its own software products related to a) multi-channel marketing communications, which includes digital asset management, communication templates and campaign management, b) document archiving, c) document composition and d) desktop mail solutions. A range of further technology services are offered relating to SDL’s own software and the management of client data around the formatting, electronic output and archiving of customer communications.

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