Solutions Dynamics Posts Strong Sales, Profit Lift for FY 16

9 August 2016

Solutions Dynamics Posts Strong Sales, Profit Lift for FY 2016

Listed mailhouse and technology solutions provider, Solution Dynamics Ltd (“SDL”), has continued its turnaround success, reporting 24% higher revenues and a 26% lift in profit for the June 2016 financial year.

The company is benefitting from growing demand for its innovative software, particularly from international clients, and continues to buck trends in the traditional print industry, reporting higher revenues on increasing market share.

As well as traditional print and mailing services, the company offers a suite of software technology related to desktop mail (hybrid mail), digital asset management and document creation, management, storage and retrieval. The growing demand for its digital offer, from both domestic and international clients, is more than offsetting the industry decline in mail volumes.

Net profit after tax for FY 2016 was $1.02 million, up from $807,000 a year earlier, despite the company moving to a full tax-paying position. On a pre-tax basis, earnings rose 74% to $1.44 million.

The company posted strong sales growth for both of its operating divisions.

The SDL Services division, which predominantly provides mail house operations to high-volume postal mail users, delivered a 23.5% sales lift to $11.8 million. Modest growth in the traditional digital print and document handling operation was boosted by the strong performance of outsourced services.

The Software & Technology division delivered a 26.9% increase in sale to $4.5 million, as it continued its successful expansion into the UK market.

SDL will pay a final dividend of 2.25 cents a share, taking the payout for the full financial year to 5.25 cents a share, up from 1.5 cents a share in the 2015 financial year.

SDL’s financial position improved with cash from operations rising by 39% to $1.36 million. As at balance date, the company had net cash of $1.42 million.

Chief Executive Nelson Siva said: “We are very pleased with this year’s financial result, particularly the strong performance from our software and technology division with a number of large and small clients adopting our digital communications solutions.

“Our ability to offer an integrated solution incorporating both physical print and digital technology is what sets us apart from our competitors and acceptance of our innovative software by international clients continues to be very encouraging.” 2

Operational performance

Despite the industry-wide decline in general mail volumes, SDL continued to buck trends and increase its market share. Mail volumes and digital print volumes rose over the year.

Customers continued to move from print to electronic delivery, and this transition is likely to be accelerated by New Zealand Post’s increase in postage costs and reduction in the number of delivery days per week in major towns and cities to three from July 2016. SDL is well-positioned to capitalise on this, given its breadth of digital communications solutions, especially its desk top mail solution which substantially reduces the cost of mailings for both SMEs and large organisations.

SDL’s print and related document handling capacity has expanded significantly following the installation of a high-speed, continuous-sheet laser printer, in line with its accreditation as a Document Management Solutions partner to Fuji Xerox New Zealand Limited. This should provide further revenue opportunities for SDL going forward.

The Software & Technology division achieved a major expansion of its operations in international markets and continues to refocus its technology operations from primarily license to an SaaS revenue model.

In addition to New Zealand and Australia, SDL’s suite of software solutions are sold in the UK, Europe and other markets. During 2016, the DejarMail software was adopted by a US software company operating in the UK dental practice sector. SDL believes this market has several years of solid growth available as the number of practices using DejarMail increases.

SDL’s Bremy publishing and distribution solution is also in the early days of rollout to UK dental practices. The solution allows practices to run individual marketing campaigns and should add growth for several years before levelling into a steady earnings stream.

In addition, a new print procurement module is in use with a major customer of Fuji Xerox New Zealand, and Fuji Xerox Document Management Solutions in Australia, and may be rolled out further during FY2017.

Outlook

Solution Dynamics will continue to innovate and develop its software offerings in order to deliver its clients a communication channel solution that best allows them to communicate with their customers.

While the company will continue to target those areas of the “old economy” print and mail house market that show resilience, its emphasis is on new economy document management businesses.

Nelson Siva said: “Following this year’s strong result, we expect that several contracts now in place should provide the basis for ongoing revenue and earnings growth. Along with the expected contribution from the Fuji Xerox DMS agreement and increasing use of our software in the dental practice market, our outlook for FY 2017 is very positive. 3

“We are expecting further improvement with growth of around 25% in net profit after tax for the FY 2017 year.”

SDL this year celebrates 20 years in business, from its origins in 1996 as Marketing Data Services, to the SDL formation in 2001, to flotation on the NZAX market in 2004.

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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